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 Department of Health and Human Services Centers for Medicare & Medicaid Services 42 CFR Parts 411, 412, 413, and 489
[CMS–1533–FC]
RIN 0938–AO70
 AGENCY: Centers for Medicare and Medicaid Services (CMS), HHS.
 ACTION: Final rule with comment period.
 SUMMARY: We are revising the Medicare hospital inpatient prospective payment systems (IPPS) for operating and capital-related costs to implement changes arising from our continuing experience with these systems, and to implement certain provisions made by the Deficit Reduction Act of 2005 (Pub. L. 109–171), the Medicare Improvements and Extension Act under Division B, Title I of the Tax Relief and Health Care Act of 2006 (Pub. L. 109–432), and the Pandemic and All Hazards Preparedness Act (Pub. L. 109–417). In addition, in the Addendum to this final rule with comment period, we describe the changes to the amounts and factors used to determine the rates for Medicare hospital inpatient services for operating costs and capital-related costs. We also are setting forth the rate of increase limits for certain hospitals and hospital units excluded from the IPPS that are paid on a reasonable cost basis subject to these limits, or that have a portion of a prospective payment system payment based on reasonable cost principles. These changes are applicable to discharges occurring on or after October 1, 2007. In this final rule with comment period, as part of our efforts to further refine the diagnosis related group (DRG) system under the IPPS to better recognize severity of illness among patients, for FY 2008, we are adopting a Medicare Severity DRG (MS DRG) classification system for the IPPS. We are also adopting the structure of the MS–DRG system for the LTCH prospective payment system (referred to as MS–LTC–DRGs) for FY 2008. Among the other policy decisions and changes that we are making, we are making changes related to: limited revisions of the reclassification of cases to MS–DRGs, the relative weights for the MS–LTC–DRGs; applications for new technologies and medical services add-on payments; the wage data, including the occupational mix data, used to compute the FY 2008 wage indices; payments to hospitals for the indirect costs of graduate medical education; submission of hospital quality data; provisions governing the application of sanctions relating to the Emergency Medical Treatment and Labor Act of 1986 (EMTALA); provisions governing the disclosure of physician ownership in hospitals and patient safety measures; and provisions relating to services furnished to beneficiaries in custody of penal authorities.
 DATES: *Effective Date:*
                             This final rule with comment period is effective October 1, 2007 and applies to discharges occurring on or after that date. *Comment Date:*
                             We will consider public comments only on the provisions of section V., Changes to the IPPS for Capital Related Costs, of the preamble of this final rule with comment period, if we receive them at one of the addresses provided below, no later than 5 p.m. on November 20, 2007.
 ADDRESSES: In commenting on the provisions of section V. of the preamble of this final rule with comment period, please refer to file code CMS–1533–FC. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission. You may submit comments in one of three ways (no duplicates, please): 1. 
                            *Electronically.*
                             You may submit electronic comments on specific issues in this regulation to 
                            *http://www.cms.hhs.gov/​eRulemaking.*
                             Click on the link “Submit electronic comments on CMS regulations with an open comment period”. (Attachments should be in Microsoft Word, WordPerfect, or Excel; however, we prefer Microsoft Word.) 2. 
                            *By regular mail.*
                             You may mail written comments (one original and two copies) to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS–1533–FC, P.O. Box 8011, Baltimore, MD 21244–1850. Please allow sufficient time for mailed comments to be received before the close of the comment period. 3. 
                            *By express or overnight mail.*
                             You may send written comments (one original and two copies) to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS–1533–FC, Mail Stop C4–26–05, 7500 Security Boulevard, Baltimore, MD 21244–1850. 4. 
                            *By hand or courier.*
                             If you prefer, you may deliver (by hand or courier) your written comments (one original and two copies) before the close of the comment period to one of the following addresses. If you intend to deliver your comments to the Baltimore address, please call telephone number (410) 786–7195 in advance to schedule your arrival with one of our staff members. Room 445–G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201, or 7500 Security Boulevard, Baltimore, MD 21244–1850. (Because access to the interior of the Hubert H. Humphrey Building is not readily available to persons without Federal Government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-in clock is available for persons wishing to retain proof of filing by stamping in and retaining an extra copy of the comments being filed.) Comments mailed to the addresses indicated as appropriately for hand or courier delivery may be delayed and received after the comment period. *Submitting Comments:*
                             You can assist us by referencing the file code CMS–1533–FC and the specific “issue identifier” that precedes section V., Changes to the IPPS for Capital Related Costs. *Inspection of Public Comments:*
                             All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following Web site as soon as possible after they have been received: 
                            *http://www.cms.hhs.gov/​eRulemaking.*
                             Click on the link “Electronic Comments on CMS Regulations” on that Web site to view public comments. Comments received timely will also be available for public inspection, generally beginning approximately 3 weeks after publication of a document, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4:00 p.m. To schedule an appointment to view public comments, phone 1–800–743–3951.
 FOR FURTHER INFORMATION CONTACT: Marc Hartstein, (410) 786–4548, Operating Prospective Payment, Diagnosis Related Groups (DRGs), Wage Index, New Medical Services and Technology Add-On Payments, and Hospital Geographic Reclassifications Issues. 
                            ( print page 47131) Tzvi Hefter, (410) 786–4487, Capital Prospective Payment, Excluded Hospitals, Graduate Medical Education, Critical Access Hospitals, and Long-Term Care (LTC)-DRG Issues. Siddhartha Mazumdar, (410) 786–6673, Rural Community Hospital Demonstration Issues. Sheila Blackstock, (410) 786–3502, Quality Data for Annual Payment Update Issues. Thomas Valuck, (410) 786–7479, Hospital Value-Based Purchasing Issues. Jacqueline Proctor, (410) 786–8852, Disclosure of Physician Ownership in Hospitals. Marilyn Dahl, (410) 786–8665, Patient Safety Measures Issues. Fred Grabau, (410) 786–0206, Services to Beneficiaries in Custody of Penal Authorities Issues.


SUPPLEMENTARY INFORMATION: Electronic Access This 
                        **Federal Register**
                         document is also available from the 
                        **Federal Register**
                         online database through GPO Access, a service of the U.S. Government Printing Office. Free public access is available on a Wide Area Information Server (WAIS) through the Internet and via asynchronous dial-in. Internet users can access the database by using the World Wide Web; the Superintendent of Documents' home page address is 
                        *http://www.gpoaccess.gov/​*, by using local WAIS client software, or by telnet to swais.access.gpo.gov, then login as guest (no password required). Dial-in users should use communications software and modem to call (202) 512–1661; type swais, then login as guest (no password required). Acronyms ACGME—Accreditation Council for Graduate Medical Education AMGA—American Medical Group Association AHA—American Hospital Association AHIMA—American Health Information Management Association AHRQ—Agency for Health Care Research and Quality AMI—Acute myocardial infarction AOA—American Osteopathic Association APR DRG—All Patient Refined Diagnosis Related Group System ASC—Ambulatory surgical center ASP—Average sales price AWP—Average wholesale price BBA—Balanced Budget Act of 1997, Pub. L. 105–33 BBRA—Medicare, Medicaid, and SCHIP [State Children's Health Insurance Program] Balanced Budget Refinement Act of 1999, Pub. L. 106–113 BIPA—Medicare, Medicaid, and SCHIP [State Children's Health Insurance Program] Benefits Improvement and Protection Act of 2000, Pub. L. 106–554 BLS—Bureau of Labor Statistics CAH—Critical access hospital CART—CMS Abstraction & Reporting Tool CBSAs—Core-based statistical areas CC—Complication or comorbidity CCR—Cost-to-charge ratio CDAC—Clinical Data Abstraction Center CIPI—Capital input price index CPI—Consumer price index CMI—Case-mix index CMS—Centers for Medicare & Medicaid Services CMSA—Consolidated Metropolitan Statistical Area COBRA—Consolidated Omnibus Reconciliation Act of 1985, Pub. L. 99–272 CoP—[Hospital] Condition of participation CPI—Consumer price index CY—Calendar year DRA—Deficit Reduction Act of 2005, Pub. L. 109–171 DRG—Diagnosis-related group DSH—Disproportionate share hospital ECI—Employment cost index EMR—Electronic medical record EMTALA—Emergency Medical Treatment and Labor Act of 1986, Pub. L. 99–272 FDA—Food and Drug Administration FIPS—Federal information processing standards FQHC—Federally qualified health center FTE—Full-time equivalent FY—Fiscal year GAAP—Generally Accepted Accounting Principles GAF—Geographic Adjustment Factor GME—Graduate medical education GMEC—Graduate Medical Education Committee HCAHPS—Hospital Consumer Assessment of Healthcare Providers and Systems HCFA—Health Care Financing Administration HCRIS—Hospital Cost Report Information System HHA—Home health agency HHS—Department of Health and Human Services HIC—Health insurance card HIPAA—Health Insurance Portability and Accountability Act of 1996, Pub. L. 104–191 HIPC—Health Information Policy Council HIS—Health information system HIT—Health information technology HMO—Health maintenance organization HSA—Health savings account HSCRC—Maryland Health Services Cost Review Commission HSRV—Hospital-specific relative value HSRVcc—Hospital-specific relative value cost center HQA—Hospital Quality Alliance HQI—Hospital Quality Initiative ICD–9–CM—International Classification of Diseases, Ninth Revision, Clinical Modification ICD–10–PCS—International Classification of Diseases, Tenth Edition, Procedure Coding System IHS—Indian Health Service IME—Indirect medical education IOM—Institute of Medicine IPF—Inpatient psychiatric facility IPPS—Acute care hospital inpatient prospective payment system IRF—Inpatient rehabilitation facility JCAHO—Joint Commission on Accreditation of Healthcare Organizations LAMCs—Large area metropolitan counties LTC–DRG—Long-term care diagnosis-related group LTCH—Long-term care hospital MAC—Medicare Administrative Contractor MCC—Major complication or comorbidity MCE—Medicare Code Editor MCO—Managed care organization MCV—Major cardiovascular condition MDC—Major diagnostic category MDH—Medicare-dependent, small rural hospital MedPAC—Medicare Payment Advisory Commission MedPAR—Medicare Provider Analysis and Review File MEI—Medicare Economic Index MGCRB—Medicare Geographic Classification Review Board MIEA-TRHCA—Medicare Improvements and Extension Act, Division B of the Tax Relief and Health Care Act of 2006, Pub. L. 109–432 MMA—Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. 108–173 MPN—Medicare provider number MRHFP—Medicare Rural Hospital Flexibility Program MSA—Metropolitan Statistical Area NAICS—North American Industrial Classification System NCD—National coverage determination NCHS—National Center for Health Statistics NCQA—National Committee for Quality Assurance NCVHS—National Committee on Vital and Health Statistics NECMA—New England County Metropolitan Areas NQF—National Quality Forum NTIS—National Technical Information Service NVHRI—National Voluntary Hospital Reporting Initiative OES—Occupational employment statistics OIG—Office of the Inspector General OMB—Executive Office of Management and Budget O.R.—Operating room OSCAR—Online Survey Certification and Reporting (System) PMSAs—Primary metropolitan statistical areas PPI—Producer price index PPS—Prospective payment system PRA—Per resident amount PRM—Provider Reimbursement Manual ProPAC—Prospective Payment Assessment Commission PRRB—Provider Reimbursement Review Board PSF—Provider Specific File PS&R—Provider Statistical and Reimbursement (System) QIG—Quality Improvement Group, CMS QIO—Quality Improvement Organization RCE—Reasonable compensation equivalent RHC—Rural health clinic RHQDAPU—Reporting hospital quality data for annual payment update RNHCI—Religious nonmedical health care institution 
                            ( print page 47132) RRC—Rural referral center RUCAs—Rural-urban commuting area codes RY—Rate year SAF—Standard Analytic File SCH—Sole community hospital SFY—State fiscal year SIC—Standard Industrial Classification SNF—Skilled nursing facility SOCs—Standard occupational classifications SOM—State Operations Manual SSA—Social Security Administration SSI—Supplemental Security Income TEFRA—Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. 97–248 UHDDS—Uniform hospital discharge data set VBP—Value-based purchasing Table of Contents I. Background A. Summary 1. Acute Care Hospital Inpatient Prospective Payment System (IPPS) 2. Hospitals and Hospital Units Excluded from the IPPS a. Inpatient Rehabilitation Facilities (IRFs) b. Long-Term Care Hospitals (LTCHs) c. Inpatient Psychiatric Facilities (IPFs) 3. Critical Access Hospitals (CAHs) 4. Payments for Graduate Medical Education (GME) B. Provisions of the Deficit Reduction Act of 2005 (DRA) C. Provisions of the Medicare Improvements and Extension Act under Division B, Title I of the Tax Relief and Health Care Act of 2006 D. Provisions of the Pandemic and All-Hazards Preparedness Act E. Issuance of a Notice of Proposed Rulemaking 1. DRG Reclassifications and Recalibrations of Relative Weights 2. Proposed Changes to the Hospital Wage Index 3. Other Decisions and Proposed Changes to the IPPS for Operating Costs and GME Costs 4. Proposed Changes to the IPPS for Capital-Related Costs 5. Proposed Changes to the Payment Rates for Excluded Hospitals and Hospital Units: Rate-of-Increase Percentages 6. Services Furnished to Beneficiaries in Custody of Penal Authorities 7. Determining Proposed Prospective Payment Operating and Capital Rates and Rate of Increase Limits 8. Impact Analysis 9. Recommendation of Update Factors for Operating Cost Rates of Payment for Inpatient Hospital Services 10. Discussion of Medicare Payment Advisory Commission Recommendations F. Public Comments Received on the Proposed Rule II. Changes to DRG Classifications and Relative Weights A. Background B. DRG Reclassifications 1. General 2. Yearly Review for Making DRG Changes C. MedPAC Recommendations for Revisions to the IPPS DRG System D. Refinement of DRGs Based on Severity of Illness 1. Evaluation of Alternative Severity-Adjusted DRG Systems a. Overview of Alternative DRG Classification Systems b. Comparative Performance in Explaining Variation in Resource Use c. Payment Accuracy and Case-Mix Impact d. Other Issues for Consideration 2. Development of the Medicare Severity DRGs (MS DRGs) a. Comprehensive Review of the CC List b. Chronic Diagnosis Codes c. Acute Diagnosis Codes d. Prior Research on Subdivisions of CCs into Multiple Categories e. Medicare Severity DRGs (MS-DRGs) 3. Dividing MS DRGs on the Basis of the CCs and MCCs 4. Conclusion 5. Impact of the MS-DRGs 6. Changes to Case-Mix Index (CMI) from the MS–DRGs 7. Effect of the MS-DRGs on the Outlier Threshold 8. Effect of the MS-DRGs on the Postacute Care Transfer Policy E. Refinement of the Relative Weight Calculation 1. Summary of RTI's Report on Charge Compression 2. RTI Recommendations a. Short-Term Recommendations b. Medium-Term Recommendations c. Long-Term Recommendations F. Hospital-Acquired Conditions, Including Infections 1. General 2. Legislative Requirement 3. Public Input 4. Collaborative Effort 5. Criteria for Selection of the Hospital-Acquired Conditions 6. Selection of Hospital-Acquired Conditions 7. Other Issues G. Changes to Specific DRG Classifications 1. Pre-MDCs: Intestinal Transplantation 2. MDC 1 (Diseases and Disorders of the Nervous System) a. Implantable Neurostimulators b. Intracranial Stents 3. MDC 3 (Diseases and Disorders of the Ear, Nose, Mouth, and Throat)—Cochlear Implants 4. MDC 8 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue) a. Hip and Knee Replacements b. Spinal Fusions c. Spinal Disc Devices d. Other Spinal DRGs 5. MDC 17 (Myeloproliferative Diseases and Disorders, Poorly Differentiated Neoplasm): Endoscopic Procedures 6. Medicare Code Editor (MCE) Changes a. Non-Covered Procedure Edit: Code 00.62 (Percutaneous angioplasty or atherectomy of intracranial vessel(s)) b. Non-Specific Principal Diagnosis Edit 7 and Non-Specific O.R. Procedures Edit 10 c. Limited Coverage Edit 17 d. Revision to Part 1, Pancreas Transplant Edit A 7. Surgical Hierarchies 8. CC Exclusions List a. Background b. CC Exclusions List for FY 2008 9. Review of Procedure Codes in CMS DRGs 468, 476, and 477 a. Moving Procedure Codes from CMS DRG 468 (MS-DRGs 981 through 983) or CMS DRG 477 (MS-DRGs 987 through 989) to MDCs b. Reassignment of Procedures Among CMS DRGs 468, 476, and 477 (MS-DRGs 981 through 983, 984 through 986, and 987 through 989) c. Adding Diagnosis or Procedure Codes to MDCs 10. Changes to the ICD–9–CM Coding System 11. Other DRG Issues Addressed in the FY 2008 IPPS Proposed Rule a. Seizures and Headaches b. Devices That are Replaced Without Cost or Where Credit for a Replaced Device is Furnished to the Hospital 12. Other MS-DRG Issues Raised in the Public Comments on the Proposed Rule a. Heart Transplants or Implants of Heart Assist System and Liver Transplants (Pre-MDC) b. Gliadel® Wafer (MDC 1) c. Myasthenia Gravis and Acute and Chronic Inflammatory Demyelinating Neuropathies (AIDP-CIDP) (MDC 1) d. Peripheral and Spinal Neurostimulators (MDC 1 and MDC 8) e. Stroke and Administration of Tissue Plasminogen Activator (tPA) (MDC 1) f. Gliasite® Radiation Therapy System (RTS) (MDC 1) g. Noninvasive Ventilation (MDC 4) h. Heart Assist Devices (MDC 5) i. Automatic Implantable Cardioverter-Defibrillators (ACID) Lead and Generator Procedures (MDC 5) j. Artificial Heart (MDC 5) k. Vascular Procedures (MDC 5) l. Coronary Artery Stents (MDC 5) m. Endovascular Repair of Aortic and Thoracic Aneurysms (MDC 5) n. O.R. Procedures for Obesity (MDC 10) o. Penile Restorative Procedures (MDC 12) p. Female Reproductive System Reconstruction Procedures (MDC 13) q. Urological and Gynecological Disorders with Grafts or Prosthesis (MDCs 13 and 14) r. High Dose Interleukin-2 (HD-IL–2) (MDC 17) s. Computer Assisted Surgery 13. Changes to MS-DRG Logic As a Result of Public Comments H. Recalibration of DRG Weights I. MS-LTC-DRG Reclassifications and Relative Weights for LTCHs for FY 2008 1. Background 2. Changes in the LTC-DRG Classifications a. Background b. Patient Classifications into DRGs 3. Development of the FY 2008 MS-LTC-DRG Relative Weights a. General Overview of Development of the MS-LTC-DRG Relative Weights b. Data c. Hospital-Specific Relative Value Methodology d. Treatment of Severity Levels in Developing Relative Weights e. Low-Volume MS-LTC-DRGs 4. Steps for Determining the FY 2008 MS-LTC-DRG Relative Weights 
                            ( print page 47133) J. Add-On Payments for New Services and Technologies 1. Background 2. Public Input Before Publication of a Notice of Proposed Rulemaking on Add-On Payments 3. FY 2008 Status of Technologies Approved for FY 2007 Add-On Payments a. Endovascular Graft Repair of the Thoracic Aorta b. Restore® Rechargeable Implantable Neurostimulators c. X STOP Interspinous Process Decompression System 4. FY 2008 Application for New Technology Add-On Payments 5. Technical Correction III. Changes to the Hospital Wage Index A. Background B. Core-Based Statistical Areas for the Hospital Wage Index C. Occupational Mix Adjustment to the FY 2008 Wage Index 1. Development of Data for the FY 2008 Occupational Mix Adjustment 2. Timeline for the Collection, Review, and Correction of the Occupational Mix Data 3. Calculation of the Occupational Mix Adjustment for FY 2008 4. 2007–2008 Occupational Mix Survey for the FY 2010 Wage Index D. Worksheet S–3 Wage Data for the FY 2008 Wage Index 1. Included Categories of Costs 2. Contract Labor for Indirect Patient Care Services 3. Excluded Categories of Costs 4. Use of Wage Index Data by Providers Other Than Acute Care Hospitals under the IPPS E. Verification of Worksheet S–3 Wage Data F. Wage Index for Multicampus Hospitals G. Computation of the FY 2008 Unadjusted Wage Index 1. Method for Computing the FY 2008 Unadjusted Wage Index 2. Expiration of the Imputed Floor 3. CAHs Reverting Back to IPPS Hospitals and Raising the Rural Floor 4. Application of Rural Floor Budget Neutrality H. Analysis and Implementation of the Occupational Mix Adjustment and the FY 2008 Occupational Mix Adjusted Wage Index I. Revisions to the Wage Index Based on Hospital Redesignations 1. General 2. Effects of Reclassification/Redesignation 3. FY 2008 MGCRB Reclassifications 4. Hospitals That Applied for Reclassification Effective in FY 2008 and Reinstating Reclassifications in FY 2008 5. Clarification of Policy on Reinstating Reclassifications 6. “Fallback” Reclassifications 7. Geographic Reclassification Issues for Multicampus Hospitals 8. Redesignations of Hospitals under Section 1886(d)(8)(B) of the Act 9. Reclassifications under Section 1886(d)(8)(B) of the Act 10. New England Deemed Counties 11. Reclassifications under Section 508 of Pub. L. 108–173 12. Other Issues J. FY 2008 Wage Index Adjustment Based on Commuting Patterns of Hospital Employees K. Process for Requests for Wage Index Data Corrections L. Labor-Related Share for the Wage Index for FY 2008 M. Wage Index Study Required under Pub. L. 109–432 N. Proxy for the Hospital Market Basket IV. Other Decisions and Changes to the IPPS for Operating Costs and GME Costs A. Reporting of Hospital Quality Data for Annual Hospital Payment Update 1. Background 2. FY 2008 Quality Measures 3. New Quality Measures and Program Requirements for FY 2009 and Subsequent Years a. New Quality Measures for FY 2009 and Subsequent Years b. Data Submission 4. Retiring or Replacing RHQDAPU Program Quality Measures 5. Procedures for the RHQDAPU Program for FY 2008 and FY 2009 a. Procedures for Participating in the RHQDAPU Program b. Procedures for Participating in the RHQDAPU Program for FY 2009 c. Chart Validation Requirements d. Data Validation and Attestation e. Public Display f. Reconsideration and Appeal Procedures g. RHQDAPU Program Withdrawal Requirements 6. Electronic Medical Records 7. New Hospitals B. Development of the Medicare Hospital Value-Based Purchasing Plan C. Rural Referral Centers (RRCs) 1. Annual Update of RRC Status Criteria a. Case-Mix Index b. Discharges 2. Acquired Rural Status of RRCs D. Indirect Medical Education (IME) Adjustment 1. Background 2. IME Adjustment Factor for FY 2008 3. Time Spent by Residents on Vacation or Sick Leave and in Orientation a. Background b. Vacation and Sick Leave Time c. Orientation Activities d. Regulation Changes E. Payments to Disproportionate Share Hospitals (DSHs): Technical Correction 1. Background 2. Technical Correction: Inclusion of Medicare Advantage Days in the Medicare Fraction of the Medicare DSH Calculation F. Hospital Emergency Services under EMTALA 1. Background 2. Recent Legislation Affecting EMTALA Implementation a. Secretary's Authority to Waive Requirements During National Emergencies b. Provisions of the Pandemic and All-Hazards Preparedness Act c. Revisions to the EMTALA Regulations G. Disclosure of Physician Ownership in Hospitals and Patient Safety Measures 1. Disclosure of Physician Ownership in Hospitals 2. Patient Safety Measures H. Rural Community Hospital Demonstration Program V. Changes to the IPPS for Capital-Related Costs A. Background B. Policy Change VI. Changes for Hospitals and Hospital Units Excluded from the IPPS A. Payments to Existing and New Excluded Hospitals and Hospital Units B. Separate PPS for IRFs C. Separate PPS for LTCHs D. Separate PPS for IPFs E. Determining LTCH Cost-to-Charge Ratios (CCRs) under the LTCH PPS F. Report of Adjustment (Exceptions) Payments VII. Services Furnished to Beneficiaries in Custody of Penal Authorities VIII. MedPAC Recommendations IX. Other Required Information A. Requests for Data from the Public B. Collection of Information Requirements C. Waiver of Notice of Proposed Rulemaking Regulation Text Addendum—Schedule of Standardized Amounts, Update Factors, and Rate-of-Increase Percentages Effective With Cost Reporting Periods Beginning On or After October 1, 2007 I. Summary and Background II. Changes to the Prospective Payment Rates for Hospital Inpatient Operating Costs for FY 2008 A. Calculation of the Adjusted Standardized Amount 1. Standardization of Base-Year Costs or Target Amounts 2. Computing the Average Standardized Amount 3. Updating the Average Standardized Amount 4. Other Adjustments to the Average Standardized Amount a. Recalibration of DRG Weights and Updated Wage Index Budget Neutrality Adjustment b. Reclassified Hospitals—Budget Neutrality Adjustment c. Imputed Rural Floor—Budget Neutrality Adjustment d. Case-Mix Budget Neutrality Adjustment e. Outliers f. Rural Community Hospital Demonstration Program Adjustment (Section 410A of Pub. L. 108–173) 5. FY 2008 Standardized Amount B. Adjustments for Area Wage Levels and Cost-of-Living 1. Adjustment for Area Wage Levels 2. Adjustment for Cost-of-Living in Alaska and Hawaii C. DRG Relative Weights D. Calculation of the Prospective Payment Rates 1. Federal Rate 2. Hospital Specific Rate (Applicable Only to SCHs and MDHs) a. Calculation of Hospital Specific Rate
                            ( print page 47134) b. Updating the FY 1982, FY 1987, FY 1996, and FY 2002 Hospital Specific Rates for FY 2008 3. General Formula for Calculation of Prospective Payment Rates for Hospitals Located in Puerto Rico Beginning On or After October 1, 2007 and Before October 1, 200 a. Puerto Rico Rate b. National Rate III. Changes to Payment Rates for Acute Care Hospital Inpatient Capital-Related Costs for FY 2008 A. Determination of Federal Hospital Inpatient Capital Related Prospective Payment Rate Update 1. Projected Capital Standard Federal Rate Update a. Description of the Update Framework b. MedPAC Update Recommendation 2. Outlier Payment Adjustment Factor 3. Budget Neutrality Adjustment Factor for Changes in DRG Classifications and Weights and the GAF 4. Exceptions Payment Adjustment Factor 5. Capital Standard Federal Rate for FY 2008 6. Special Capital Rate for Puerto Rico Hospitals B. Calculation of the Inpatient Capital-Related Prospective Payments for FY 2008 C. Capital Input Price Index 1. Background 2. Forecast of the CIPI for FY 2008 IV. Changes to Payment Rates for Excluded Hospitals and Hospital Units: Rate-of-Increase Percentages V. Tables Table 1A—National Adjusted Operating Standardized Amounts, Labor/Nonlabor (69.7 Percent Labor Share/30.3 Percent Nonlabor Share If Wage Index Is Greater Than 1) Table 1B—National Adjusted Operating Standardized Amounts, Labor/Nonlabor (62 Percent Labor Share/38 Percent Nonlabor Share If Wage Index Is Less Than or Equal to 1) Table 1C—Adjusted Operating Standardized Amounts for Puerto Rico, Labor/Nonlabor Table 1D—Capital Standard Federal Payment Rate Table 2—Hospital Case-Mix Indexes for Discharges Occurring in Federal Fiscal Year 2006; Hospital Wage Indexes for Federal Fiscal Year 2008; Hospital Average Hourly Wages for Federal Fiscal Years 2006 (2002 Wage Data), 2007 (2003 Wage Data), and 2008 (2004 Wage Data); and 3-Year Average of Hospital Average Hourly Wages Table 3A—FY 2008 and 3-Year Average Hourly Wage for Urban Areas by CBSA Table 3B—FY 2008 and 3-Year Average Hourly Wage for Rural Areas by CBSA Table 4A—Wage Index and Capital Geographic Adjustment Factor (GAF) for Urban Areas by CBSA—FY 2008 Table 4B—Wage Index and Capital Geographic Adjustment Factor (GAF) for Rural Areas by CBSA—FY 2008 Table 4C—Wage Index and Capital Geographic Adjustment Factor (GAF) for Hospitals That Are Reclassified by CBSA—FY 2008 Table 4F—Puerto Rico Wage Index and Capital Geographic Adjustment Factor (GAF) by CBSA—FY 2008 Table 4J—Out-Migration Wage Adjustment—FY 2008 Table 5—List of Medicare Severity Diagnosis-Related Groups (MS-DRGs), Relative Weighting Factors, and Geometric and Arithmetic Mean Length of Stay Table 6A—New Diagnosis Codes Table 6B—New Procedure Codes Table 6C—Invalid Diagnosis Codes Table 6D—Invalid Procedure Codes Table 6E—Revised Diagnosis Code Titles Table 6F—Revised Procedure Code Titles Table 6G—Additions to the CC Exclusions List Table 6H—Deletions from the CC Exclusions List Table 6I—Complete List of Complication and Comorbidity (CC) Exclusions (Available only through the Internet on the CMS Web site at: 
                            *http://www.cms.hhs.gov/​AcuteInpatientPPS/​*) Table 7A—Medicare Prospective Payment System Selected Percentile Lengths of Stay: FY 2006 MedPAR Update—March 2007 GROUPER V24.0 CMS DRGs Table 7B—Medicare Prospective Payment System Selected Percentile Lengths of Stay: FY 2006 MedPAR Update—March 2007 GROUPER V25.0 CMS DRGs Table 8A—Statewide Average Operating Cost-to-Charge Ratios—July 2007 Table 8B—Statewide Average Capital Cost-to-Charge Ratios—July 2007 Table 8C—Statewide Average Total Cost-to-Charge Ratios for LTCHs—July 2007 Table 9A—Hospital Reclassifications and Redesignations—FY 2008 Table 9C—Hospitals Redesignated as Rural under Section 1886(d)(8)(E) of the Act—FY 2008 Table 10—Geometric Mean Plus the Lesser of .75 of the National Adjusted Operating Standardized Payment Amount (Increased to Reflect the Difference Between Costs and Charges) or .75 of One Standard Deviation of Mean Charges by Medicare Severity Diagnosis-Related Groups (MS-DRGs)—July 2007 Table 11—FY 2008 MS–LTC–DRGs, Relative Weights, Geometric Average Length of Stay, Short-Stay Outlier Threshold, and IPPS Comparable Threshold Appendix A—Regulatory Impact Analysis I. Overall Impact II. Objectives III. Limitations on Our Analysis IV. Hospitals Included In and Excluded From the IPPS V. Effects on Excluded Hospitals and Hospital Units VI. Quantitative Effects of the Policy Changes Under the IPPS for Operating Costs A. Basis and Methodology of Estimates B. Analysis of Table I C. Effects of the Changes to the DRG Reclassifications and Relative Cost-Based Weights (Column 2) D. Effects of Wage Index Changes (Column 3) E. Combined Effects of DRG and Wage Index Changes (Column 4) F. Effects of the Expiration of the 3-Year Provision Allowing Urban Hospitals That Were Converted to Rural as a Result of the FY 2005 Labor Market Area Changes to Maintain the Wage Index of the Urban Labor Market Area in Which They Were Formerly Located (Column 5) G. Effects of MGCRB Reclassifications (Column 6) H. Effects of the Adjustment to the Application of the Rural Floor (Column 7) I. Effects of Application of the Imputed Floor (Column 8) J. Effects of the Expiration of Section 508 of Pub. L. 108–173 (Column 9) K. Effects of the Wage Index Adjustment for Out-Migration (Column 10) L. Effects of All Changes with CMI Adjustment Prior to Estimated Growth (Column 11) M. Effects of All Changes with CMI Adjustment and Assumed Estimated (Column 12) N. Effects of Policy on Payment Adjustments for Low-Volume Hospitals O. Impact Analysis of Table II VII. Effects of Other Policy Changes A. Effects of Policy on Hospital-Acquired Conditions, Including Infections B. Effects of MS–LTC–DRG Reclassifications and Relative Weights for LTCHs C. Effects of New Technology Add-On Payments D. Effects of Requirements for Hospital Reporting of Quality Data for Annual Hospital Payment Update E. Effects of Policy on Cancellation of Classification of Acquired Rural Status and Rural Referral Centers F. Effects of Policy Change on Payment for IME and Direct GME G. Effects of Policy Changes Relating to Emergency Services under EMTALA During an Emergency Period H. Effects of Policy on Disclosure of Physician Ownership in Hospitals and Patient Safety Measures I. Effects of Implementation of the Rural Community Hospital Demonstration Program J. Effects of Policy Changes on Services Furnished to Beneficiaries in Custody of Penal Authorities VIII. Impact of Changes in the Capital IPPS A. General Considerations B. Results IX. Alternatives Considered X. Overall Conclusion XI. Accounting Statement XII. Executive Order 12866 Appendix B—Recommendation of Update Factors for Operating Cost Rates of Payment for Inpatient Hospital Services I. Background II. Inpatient Hospital Update for FY 2008 III. Secretary's Final Recommendation IV. MedPAC Recommendation for Assessing Payment Adequacy and Updating Payments in Traditional Medicare 
 
 I. Background A. Summary 1. Acute Care Hospital Inpatient Prospective Payment System (IPPS) Section 1886(d) of the Social Security Act (the Act) sets forth a system of payment for the operating costs of acute care hospital inpatient stays under Medicare Part A (Hospital Insurance) based on prospectively set rates. Section 1886(g) of the Act requires the Secretary to pay for the capital-related costs of hospital inpatient stays under a prospective payment system (PPS). Under these PPSs, Medicare payment for hospital inpatient operating and capital-related costs is made at predetermined, specific rates for each hospital discharge. Discharges are classified according to a list of diagnosis-related groups (DRGs). The base payment rate is comprised of a standardized amount that is divided into a labor-related share and a nonlabor-related share. The labor-related share is adjusted by the wage index applicable to the area where the hospital is located; and if the hospital is located in Alaska or Hawaii, the nonlabor-related share is adjusted by a cost-of-living adjustment factor. This base payment rate is multiplied by the DRG relative weight. If the hospital treats a high percentage of low-income patients, it receives a percentage add-on payment applied to the DRG-adjusted base payment rate. This add-on payment, known as the disproportionate share hospital (DSH) adjustment, provides for a percentage increase in Medicare payments to hospitals that qualify under either of two statutory formulas designed to identify hospitals that serve a disproportionate share of low-income patients. For qualifying hospitals, the amount of this adjustment may vary based on the outcome of the statutory calculations. If the hospital is an approved teaching hospital, it receives a percentage add-on payment for each case paid under the IPPS, known as the indirect medical education (IME) adjustment. This percentage varies, depending on the ratio of residents to beds. Additional payments may be made for cases that involve new technologies or medical services that have been approved for special add-on payments. To qualify, a new technology or medical service must demonstrate that it is a substantial clinical improvement over technologies or services otherwise available, and that, absent an add-on payment, it would be inadequately paid under the regular DRG payment. The costs incurred by the hospital for a case are evaluated to determine whether the hospital is eligible for an additional payment as an outlier case. This additional payment is designed to protect the hospital from large financial losses due to unusually expensive cases. Any outlier payment due is added to the DRG-adjusted base payment rate, plus any DSH, IME, and new technology or medical service add-on adjustments. Although payments to most hospitals under the IPPS are made on the basis of the standardized amounts, some categories of hospitals are paid the higher of a hospital-specific rate based on their costs in a base year (the higher of FY 1982, FY 1987, FY 1996, or FY 2002) or the IPPS rate based on the standardized amount. For example, sole community hospitals (SCHs) are the sole source of care in their areas, and Medicare-dependent, small rural hospitals (MDHs) are a major source of care for Medicare beneficiaries in their areas. Both of these categories of hospitals are afforded this special payment protection in order to maintain access to services for beneficiaries. (Until FY 2007, an MDH has received the IPPS rate plus 50 percent of the difference between the IPPS rate and its hospital-specific rate if the hospital-specific rate is higher than the IPPS rate. In addition, an MDH does not have the option of using FY 1996 as the base year for its hospital-specific rate. As discussed below, for discharges occurring on or after October 1, 2007, but before October 1, 2011, an MDH will receive the IPPS rate plus 75 percent of the difference between the IPPS rate and its hospital-specific rate, if the hospital-specific rate is higher than the IPPS rate.) Section 1886(g) of the Act requires the Secretary to pay for the capital-related costs of inpatient hospital services “in accordance with a prospective payment system established by the Secretary.” The basic methodology for determining capital prospective payments is set forth in our regulations at 42 CFR 412.308 and 412.312. Under the capital IPPS, payments are adjusted by the same DRG for the case as they are under the operating IPPS. Capital IPPS payments are also adjusted for IME and DSH, similar to the adjustments made under the operating IPPS. In addition, hospitals may receive outlier payments for those cases that have unusually high costs. The existing regulations governing payments to hospitals under the IPPS are located in 42 CFR Part 412, Subparts A through M. 2. Hospitals and Hospital Units Excluded from the IPPS Under section 1886(d)(1)(B) of the Act, as amended, certain specialty hospitals and hospital units are excluded from the IPPS. These hospitals and units are: rehabilitation hospitals and units; long-term care hospitals (LTCHs); psychiatric hospitals and units; children's hospitals; and cancer hospitals. Religious nonmedical health care institutions (RNHCIs) are also excluded from the IPPS. Various sections of the Balanced Budget Act of 1997 (Pub. L. 105–33), the Medicare, Medicaid and SCHIP [State Children's Health Insurance Program] Balanced Budget Refinement Act of 1999 (Pub. L. 106–113), and the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (Pub. L. 106–554) provide for the implementation of PPSs for rehabilitation hospitals and units (referred to as inpatient rehabilitation facilities (IRFs)), LTCHs, and psychiatric hospitals and units (referred to as inpatient psychiatric facilities (IPFs)), as discussed below. Children's hospitals, cancer hospitals, and RNHCIs continue to be paid solely under a reasonable cost-based system. The existing regulations governing payments to excluded hospitals and hospital units are located in 42 CFR Parts 412 and 413. a. Inpatient Rehabilitation Facilities (IRFs) Under section 1886(j) of the Act, as amended, rehabilitation hospitals and units (IRFs) have been transitioned from payment based on a blend of reasonable cost reimbursement subject to a hospital-specific annual limit under section 1886(b) of the Act and the adjusted facility Federal prospective payment rate for cost reporting periods beginning on or after January 1, 2002 through September 30, 2002, to payment at 100 percent of the Federal rate effective for cost reporting periods beginning on or after October 1, 2002. IRFs subject to the blend were also permitted to elect payment based on 100 percent of the Federal rate. The existing regulations governing payments under the IRF PPS are located in 42 CFR Part 412, Subpart P. b. Long-Term Care Hospitals (LTCHs) Under the authority of sections 123(a) and (c) of Pub. L. 106–113 and section 307(b)(1) of Pub. L. 106–554, the LTCH PPS was effective for a LTCH's first cost reporting period beginning on or after October 1, 2002. LTCHs that do not meet the definition of “new” under § 412.23(e)(4) are paid, during a 5-year 
                        ( print page 47136)
                        transition period, a LTCH prospective payment that is comprised of an increasing proportion of the LTCH Federal rate and a decreasing proportion based on reasonable cost principles. Those LTCHs that did not meet the definition of “new” under § 412.23(e)(4) could elect to be paid based on 100 percent of the Federal prospective payment rate instead of a blended payment in any year during the 5-year transition. For cost reporting periods beginning on or after October 1, 2006, all LTCHs are paid 100 percent of the Federal rate. The existing regulations governing payment under the LTCH PPS are located in 42 CFR Part 412, Subpart O. c. Inpatient Psychiatric Facilities (IPFs) Under the authority of sections 124(a) and (c) of Pub. L. 106–113, inpatient psychiatric facilities (IPFs) (formerly psychiatric hospitals and psychiatric units of acute care hospitals) are paid under the IPF PPS. Under the IPF PPS, some IPFs are transitioning from being paid for inpatient hospital services based on a blend of reasonable cost-based payment and a Federal per diem payment rate, effective for cost reporting periods beginning on or after January 1, 2005. For cost reporting periods beginning on or after January 1, 2008, all IPFs will be paid 100 percent of the Federal per diem payment amount. The existing regulations governing payment under the IPF PPS are located in 42 CFR 412, Subpart N. 3. Critical Access Hospitals (CAHs) Under sections 1814, 1820, and 1834(g) of the Act, payments are made to critical access hospitals (CAHs) (that is, rural hospitals or facilities that meet certain statutory requirements) for inpatient and outpatient services based on 101 percent of reasonable cost. Reasonable cost is determined under the provisions of section 1861(v)(1)(A) of the Act and existing regulations under 42 CFR Parts 413 and 415. 4. Payments for Graduate Medical Education (GME) Under section 1886(a)(4) of the Act, costs of approved educational activities are excluded from the operating costs of inpatient hospital services. Hospitals with approved graduate medical education (GME) programs are paid for the direct costs of GME in accordance with section 1886(h) of the Act; the amount of payment for direct GME costs for a cost reporting period is based on the hospital's number of residents in that period and the hospital's costs per resident in a base year. The existing regulations governing payments to the various types of hospitals are located in 42 CFR Part 413. B. Provisions of the Deficit Reduction Act of 2005 (DRA) The Deficit Reduction Act of 2005 (DRA), Pub. L. 109–171, made a number of changes to the Act relating to prospective payments to hospitals and other providers for inpatient services. The final rule implements amendments made by (1) section 5001(a), which, effective for FY 2007 and subsequent years, expands the requirements for hospital quality data reporting; and (2) section 5001(c), which requires the Secretary to select, by October 1, 2007, at least two hospital-acquired conditions that meet certain specified criteria that will be subject to a quality adjustment in DRG payments during FY 2008. In this final rule with comment period, we also discuss our development of a plan to implement, beginning with FY 2009, a value-based purchasing plan for section 1886(d) hospitals, in accordance with the requirements of section 5001(b) of Pub. L. 109–171. C. Provisions of the Medicare Improvements and Extension Act under Division B, Title I of the Tax Relief and Health Care Act of 2006 In this final rule with comment period, we discuss the provisions of section 106(b)(1) of the Medicare Improvements and Extensions Act under Division B, Title I of the Tax Relief and Health Care Act of 2006 (MIEA–TRHCA), Pub. L. 109–432, which requires MedPAC to submit to Congress, not later than June 30, 2007, a report on the Medicare wage index classification system applied under the Medicare Prospective Payment System. Section 106(b) of the MIEA–TRHCA requires the report to include any alternatives that MedPAC recommends to the method to compute the wage index under section 1886(d)(3)(E) of the Act. In addition, we discuss the provisions of section 106(b)(2) of the MIEA–TRHCA, which instructs the Secretary of Health and Human Services, taking into account MedPAC's recommendations on the Medicare wage index classification system, to include in the FY 2009 IPPS proposed rule one or more proposals to revise the wage index adjustment applied under section 1886(d)(3)(E) of the Act for purposes of the IPPS. We note that we published a notice in the 
                        **Federal Register**
                         on March 23, 2007 (72 FR 13799) that addressed the provisions of section 106(a) of the MIEA–TRHCA relating to the extension of geographic reclassifications of hospitals under section 508 of Pub. L. 108–173 (that expired on March 31, 2007) through September 30, 2007. D. Provisions of the Pandemic and All-Hazards Preparedness Act On December 19, 2006, Congress enacted the Pandemic and All-Hazards Preparedness Act, Pub. L. 109–417. Section 302(b) of Pub. L. 109–417 makes two specific changes that affect EMTALA implementation in emergency areas during an emergency period. Specifically section 302(b)(1)(A) of Pub. L. 109–417 amended section 1135(b)(3)(B) of the Act to state that sanctions may be waived for the direction or relocation of an individual for screening where, in the case of a public health emergency that involves a pandemic infectious disease, that direction or relocation occurs pursuant to a State pandemic preparedness plan. In addition, sections 302(b)(1)(B) and (b)(1)(C) of Pub. L. 109–417 amended section 1135(b)(3)(B) of the Act to state that, if a public health emergency involves a pandemic infectious disease (such as pandemic influenza) the duration of a waiver or modification under section 1135(b)(3) of the Act (relating to EMTALA) shall be determined in accordance with section 1135(e) of the Act as that subsection applies to public health emergencies. In this final rule with comment period, we are making changes to the EMTALA regulations to conform them to the sanction waiver provisions of section 302(b) of Pub. L. 109–417. E. Issuance of a Notice of Proposed Rulemaking On May 3, 2007, we issued in the 
                        **Federal Register**
                         (72 FR 24680) a notice of proposed rulemaking that set forth proposed changes to the Medicare IPPS for operating costs and for capital-related costs in FY 2008. We also set forth proposed changes relating to payments for GME and IME costs and payments to certain hospitals and units that continue to be excluded from the IPPS and paid on a reasonable cost basis that would be effective for discharges occurring on or after October 1, 2007. Below is a summary of the major changes that we proposed to make: 1. DRG Reclassifications and Recalibrations of Relative Weights We proposed to adopt a Medicare Severity DRG (MS–DRG) classification system for the IPPS to better recognize severity of illness. We presented the methodology we used to establish the MS–DRGs and discussed our efforts to 
                        ( print page 47137)
                        further analyze alternative severity-adjusted DRG systems and to refine the relative weight calculations for DRGs. We presented a proposed listing and discussion of hospital-acquired conditions, including infections, which were evaluated and proposed to be subject to the statutorily required quality adjustment in DRG payments for FY 2008. We proposed limited annual revisions to the DRG classification system in the following areas: Intestinal transplants, neurostimulators, intracranial stents, cochlear implants, knee and hip replacements, spinal fusions and spinal disc devices, and endoscopic procedures. We presented our reevaluation of certain FY 2007 applicants for add-on payments for high-cost new medical services and technologies, and our analysis of the FY 2008 applicant (including public input, as directed by Pub. L. 108–173, obtained in a town hall meeting). We proposed the annual update of the long-term care diagnosis-related group (LTC–DRG) classifications and relative weights for use under the LTCH PPS for FY 2008. We proposed that the LTC–DRGs would be revised to mirror the proposed MS–DRGs for the IPPS. 2. Proposed Changes to the Hospital Wage Index In section III. of the preamble to the proposed rule, we proposed revisions to the wage index and the annual update of the wage data. Specific issues addressed included the following: The FY 2008 wage index update, using wage data from cost reporting periods that began during FY 2004.
                    Analysis and implementation of the proposed FY 2008 occupational mix adjustment to the wage index.
                    Proposed changes relating to expiration of the imputed rural floor for the wage index and application of budget neutrality for the rural floor.
                    Proposed changes in the determination of the wage index for multicampus hospitals.
                    The proposed revisions to the wage index based on hospital redesignations and reclassifications, including reclassifications for multicampus hospitals.
                    The proposed adjustment to the wage index for FY 2008 based on commuting patterns of hospital employees who reside in a county and work in a different area with a higher wage index.
                    The timetable for reviewing and verifying the wage data that were in effect for the FY 2008 wage index.
                    The labor-related share for the FY 2008 wage index, including the labor-related share for Puerto Rico. 3. Other Decisions and Proposed Changes to the IPPS for Operating Costs and GME Costs In section IV. of the preamble to the proposed rule, we discussed a number of the provisions of the regulations in 42 CFR Parts 412, 413, and 489, including the following: The reporting of hospital quality data as a condition for receiving the full annual payment update increase.
                    Development of the Medicare value-based purchasing plan and reports on the “listening sessions” held.
                    The proposed updated national and regional case-mix values and discharges for purposes of determining RRC status and a proposed policy change relating to the acquired rural status of RRCs.
                    The statutorily-required IME adjustment factor for FY 2008 and a proposed policy change relating to determining counts of residents on vacation or sick leave and in orientation for IME and direct GME purposes.
                    Proposed changes relating to the waiver of sanctions for requirements for emergency services for hospitals under EMTALA during national emergencies.
                    Proposed policy changes relating to the disclosure to patients of physician ownership of hospitals and patient safety measures.
                    Discussion of the fourth year of implementation of the Rural Community Hospital Demonstration Program. 4. Proposed Changes to the IPPS for Capital-Related Costs In section V. of the preamble to the proposed rule, we discussed the payment policy requirements for capital-related costs and capital payments to hospitals and proposed changes relating to adjustments to the Federal capital rate to address continuous large positive margins. 5. Proposed Changes to the Payment Rates for Excluded Hospitals and Hospital Units: Rate-of-Increase Percentages In section VI. of the preamble to the proposed rule, we discussed payments to excluded hospitals and hospital units, and proposed changes for determining LTCH CCRs under the LTCH PPS. 6. Services Furnished to Beneficiaries in Custody of Penal Authorities In section VII. of the preamble to the proposed rule, we clarified when individuals are considered to be in “custody” for purposes of Medicare payment for services furnished to beneficiaries who are under penal authorities. 7. Determining Proposed Prospective Payment Operating and Capital Rates and Rate-of-Increase Limits In the Addendum to the proposed rule, we set forth proposed changes to the amounts and factors for determining the FY 2008 prospective payment rates for operating costs and capital-related costs. We also established the proposed threshold amounts for outlier cases. In addition, we addressed the proposed update factors for determining the rate-of-increase limits for cost reporting periods beginning in FY 2008 for hospitals and hospital units excluded from the PPS. 8. Impact Analysis In Appendix A of the proposed rule, we set forth an analysis of the impact that the proposed changes would have on affected hospitals. 9. Recommendation of Update Factors for Operating Cost Rates of Payment for Inpatient Hospital Services In Appendix B of the proposed rule, as required by sections 1886(e)(4) and (e)(5) of the Act, we provided our recommendations of the appropriate percentage changes for FY 2008 for the following: A single average standardized amount for all areas for hospital inpatient services paid under the IPPS for operating costs (and hospital-specific rates applicable to SCHs and MDHs).
                    Target rate-of-increase limits to the allowable operating costs of hospital inpatient services furnished by hospitals and hospital units excluded from the IPPS. 10. Discussion of Medicare Payment Advisory Commission Recommendations Under section 1805(b) of the Act, MedPAC is required to submit a report to Congress, no later than March 1 of each year, in which MedPAC reviews and makes recommendations on Medicare payment policies. MedPAC's March 2007 recommendations concerning hospital inpatient payment policies addressed the update factor for inpatient hospital operating costs and capital-related costs under the IPPS and for hospitals and distinct part hospital units excluded from the IPPS. We addressed these recommendations in Appendix B of the proposed rule. For further information relating specifically to the MedPAC March 2007 reports or to obtain a copy of the reports, contact 
                        ( print page 47138)
                        MedPAC at (202) 220–3700 or visit MedPAC's Web site at: 
                        *www.medpac.gov.* F. Public Comments Received on the Proposed Rule We received approximately 900 timely pieces of correspondence in response to the FY 2008 IPPS proposed rule issued in the 
                        **Federal Register**
                         on May 3, 2007. These public comments addressed issues on multiple topics in the proposed rule. We present a summary of the public comments and our responses to them in the applicable subject matter sections of this final rule with comment period. II. Changes to DRG Classifications and Relative Weights A. Background Section 1886(d) of the Act specifies that the Secretary shall establish a classification system (referred to as DRGs) for inpatient discharges and adjust payments under the IPPS based on appropriate weighting factors assigned to each DRG. Therefore, under the IPPS, we pay for inpatient hospital services on a rate per discharge basis that varies according to the DRG to which a beneficiary's stay is assigned. The formula used to calculate payment for a specific case multiplies an individual hospital's payment rate per case by the weight of the DRG to which the case is assigned. Each DRG weight represents the average resources required to care for cases in that particular DRG, relative to the average resources used to treat cases in all DRGs. Congress recognized that it would be necessary to recalculate the DRG relative weights periodically to account for changes in resource consumption. Accordingly, section 1886(d)(4)(C) of the Act requires that the Secretary adjust the DRG classifications and relative weights at least annually. These adjustments are made to reflect changes in treatment patterns, technology, and any other factors that may change the relative use of hospital resources. B. DRG Reclassifications 1. General As discussed in the preamble to the FY 2007 IPPS final rule (71 FR 47881 through 47971), we are focusing our efforts in FY 2008 on making significant reforms to the IPPS consistent with the recommendations made by MedPAC in its “Report to the Congress, Physician-Owned Specialty Hospitals” in March 2005. MedPAC recommended that the Secretary refine the entire DRG system by taking into account severity of illness and applying hospital-specific relative value (HSRV) weights to DRGs.[1]
                        
                         We began this reform process by adopting cost-based weights over a 3-year transition period beginning in FY 2007 and making interim changes to the DRG system for FY 2007 by creating 20 new CMS DRGs and modifying 32 others across 13 different clinical areas involving nearly 1.7 million cases. As described below in more detail, these refinements were intermediate steps towards comprehensive reform of both the relative weights and the DRG system that is occurring as we undertook further study. Currently, cases are classified into CMS DRGs for payment under the IPPS based on the principal diagnosis, up to eight additional diagnoses, and up to six procedures performed during the stay. In a small number of DRGs, classification is also based on the age, sex, and discharge status of the patient. The diagnosis and procedure information is reported by the hospital using codes from the International Classification of Diseases, Ninth Revision, Clinical Modification (ICD–9–CM). The process of forming the DRGs was begun by dividing all possible principal diagnoses into mutually exclusive principal diagnosis areas, referred to as Major Diagnostic Categories (MDCs). The MDCs were formed by physician panels to ensure that the DRGs would be clinically coherent. The diagnoses in each MDC correspond to a single organ system or etiology and, in general, are associated with a particular medical specialty. Thus, in order to maintain the requirement of clinical coherence, no final DRG could contain patients in different MDCs. Most MDCs are based on a particular organ system of the body. For example, MDC 6 is Diseases and Disorders of the Digestive System. This approach is used because clinical care is generally organized in accordance with the organ system affected. However, some MDCs are not constructed on this basis because they involve multiple organ systems (for example, MDC 22 (Burns)). For FY 2007, cases are assigned to one of 538 DRGs in 25 MDCs. The table below lists the 25 MDCs. Major Diagnostic Categories
[MDCs]
1
Diseases and Disorders of the Nervous System.2
Diseases and Disorders of the Eye.3
Diseases and Disorders of the Ear, Nose, Mouth, and Throat.4
Diseases and Disorders of the Respiratory System.5
Diseases and Disorders of the Circulatory System.6
Diseases and Disorders of the Digestive System.7
Diseases and Disorders of the Hepatobiliary System and Pancreas.8
Diseases and Disorders of the Musculoskeletal System and Connective Tissue.9
Diseases and Disorders of the Skin, Subcutaneous Tissue and Breast.10
Endocrine, Nutritional and Metabolic Diseases and Disorders.11
Diseases and Disorders of the Kidney and Urinary Tract.12
Diseases and Disorders of the Male Reproductive System.13
Diseases and Disorders of the Female Reproductive System.14
Pregnancy, Childbirth, and the Puerperium.15
Newborns and Other Neonates with Conditions Originating in the Perinatal Period.16
Diseases and Disorders of the Blood and Blood Forming Organs and Immunological Disorders.17
Myeloproliferative Diseases and Disorders and Poorly Differentiated Neoplasms.18
Infectious and Parasitic Diseases (Systemic or Unspecified Sites).19
Mental Diseases and Disorders.20
Alcohol/Drug Use and Alcohol/Drug Induced Organic Mental Disorders.( print page 47139)21
Injuries, Poisonings, and Toxic Effects of Drugs.22
Burns.23
Factors Influencing Health Status and Other Contacts with Health Services.24
Multiple Significant Trauma.25
Human Immunodeficiency Virus Infections.
 In general, cases are assigned to an MDC based on the patient's principal diagnosis before assignment to a DRG. However, under the most recent version of the CMS GROUPER (Version 24.0), there are 9 DRGs to which cases are directly assigned on the basis of ICD–9–CM procedure codes. These DRGs are for heart transplant or implant of heart assist systems, liver and/or intestinal transplants, bone marrow transplants, lung transplants, simultaneous pancreas/kidney transplants, pancreas transplants, and for tracheostomies. Cases are assigned to these DRGs before they are classified to an MDC. The table below lists the nine current pre-MDCs. Pre-Major Diagnostic Categories
[Pre-MDCs]
DRG 103
Heart Transplant or Implant of Heart Assist System.DRG 480
Liver Transplant and/or Intestinal Transplant.DRG 481
Bone Marrow Transplant.DRG 482
Tracheostomy for Face, Mouth, and Neck Diagnoses.DRG 495
Lung Transplant.DRG 512
Simultaneous Pancreas/Kidney Transplant.DRG 513
Pancreas Transplant.DRG 541
ECMO or Tracheostomy with Mechanical Ventilation 96+ Hours or Principal Diagnosis Except for Face, Mouth, and Neck Diagnosis with Major O.R.DRG 542
Tracheostomy with Mechanical Ventilation 96+ Hours or Principal Diagnosis Except for Face, Mouth, and Neck Diagnosis without Major O.R.
 Once the MDCs were defined, each MDC was evaluated to identify those additional patient characteristics that would have a consistent effect on the consumption of hospital resources. Because the presence of a surgical procedure that required the use of the operating room would have a significant effect on the type of hospital resources used by a patient, most MDCs were initially divided into surgical DRGs and medical DRGs. Surgical DRGs are based on a hierarchy that orders operating room (O.R.) procedures or groups of O.R. procedures by resource intensity. Medical DRGs generally are differentiated on the basis of diagnosis and age (0 to 17 years of age or greater than 17 years of age). Some surgical and medical DRGs are further differentiated based on the presence or absence of a complication or comorbidity (CC). Generally, nonsurgical procedures and minor surgical procedures that are not usually performed in an operating room are not treated as O.R. procedures. However, there are a few non-O.R. procedures that do affect DRG assignment for certain principal diagnoses. An example is extracorporeal shock wave lithotripsy for patients with a principal diagnosis of urinary stones. Once the medical and surgical classes for an MDC were formed, each diagnosis class was evaluated to determine if complications, comorbidities, or the patient's age would consistently affect the consumption of hospital resources. Physician panels classified each diagnosis code based on whether the diagnosis, when present as a secondary condition, would be considered a substantial CC. A substantial CC was defined as a condition which, because of its presence with a specific principal diagnosis, would cause an increase in the length of stay by at least one day in at least 75 percent of the patients. Each medical and surgical class within an MDC was tested to determine if the presence of any substantial CC would consistently affect the consumption of hospital resources. A patient's diagnosis, procedure, discharge status, and demographic information is entered into the Medicare claims processing systems and subjected to a series of automated screens called the Medicare Code Editor (MCE). The MCE screens are designed to identify cases that require further review before classification into a DRG. After patient information is screened through the MCE and any further development of the claim is conducted, the cases are classified into the appropriate DRG by the Medicare GROUPER software program. The GROUPER program was developed as a means of classifying each case into a DRG on the basis of the diagnosis and procedure codes and, for a limited number of DRGs, demographic information (that is, sex, age, and discharge status). After cases are screened through the MCE and assigned to a DRG by the GROUPER, the PRICER software calculates a base DRG payment. The PRICER calculates the payment for each case covered by the IPPS based on the DRG relative weight and additional factors associated with each hospital, such as IME and DSH payment adjustments. These additional factors increase the payment amount to hospitals above the base DRG payment. The records for all Medicare hospital inpatient discharges are maintained in the Medicare Provider Analysis and Review (MedPAR) file. The data in this file are used to evaluate possible DRG classification changes and to recalibrate the DRG weights. However, in the FY 2000 IPPS final rule (64 FR 41500), we discussed a process for considering non-MedPAR data in the recalibration process. In order for us to consider using particular non-MedPAR data, we must have sufficient time to evaluate and test the data. The time necessary to do so depends upon the nature and quality of the non-MedPAR data submitted. Generally, however, a significant sample of the non-MedPAR data should be submitted by mid-october for consideration in conjunction with the next year's proposed rule. This 
                        ( print page 47140)
                        date allows us time to test the data and make a preliminary assessment as to the feasibility of using the data. Subsequently, a complete database should be submitted by early December for consideration in conjunction with the next year's proposed rule. As we proposed in the FY 2008 IPPS proposed rule, for FY 2008, we are adopting significant changes to the current DRGs. As described in detail below, we proposed significant improvement in the DRG system to recognize severity of illness and resource usage by proposing to adopt Medicare Severity DRGs (MS–DRGs). The changes we proposed (and are adopting in this final rule with comment period) will be reflected in the FY 2008 GROUPER, Version 25.0, and will be effective for discharges occurring on or after October 1, 2007. As noted in the proposed rule, our DRG analysis was based on data from the December 2006 update of the FY 2006 MedPAR file, which contained hospital bills received through December 31, 2006, for discharges occurring in FY 2006. For this final rule with comment period, our analysis is based on more recent data from the March 2007 update of the FY 2006 MedPAR file, which contains hospital bills received through March 31, 2007, for discharges occurring in FY 2006. 2. Yearly Review for Making DRG Changes Many of the changes to the DRG classifications we make annually are the result of specific issues brought to our attention by interested parties. As we indicated in the proposed rule, we encourage individuals with concerns about DRG classifications to bring those concerns to our attention in a timely manner so they can be carefully considered for possible inclusion in the annual proposed rule and, if included, may be subjected to public review and comment. Therefore, similar to the timetable for interested parties to submit non MedPAR data for consideration in the DRG recalibration process, concerns about DRG classification issues should be brought to our attention no later than early December in order to be considered and possibly included in the next annual proposed rule updating the IPPS. The actual process of forming the DRGs was, and will likely continue to be, highly iterative, involving a combination of statistical results from test data combined with clinical judgment. We describe in detail below the process we used to develop the MS–DRGs that we proposed and are adopting in this final rule with comment period. In addition, in deciding whether to make further modification to the MS–DRGs for particular circumstances brought to our attention, we considered whether the resource consumption and clinical characteristics of the patients with a given set of conditions are significantly different than the remaining patients in the MS–DRG. We evaluated patient care costs using average charges and lengths of stay as proxies for costs and relied on the judgment of our medical advisors to decide whether patients are clinically distinct or similar to other patients in the MS–DRG. In evaluating resource costs, we considered both the absolute and percentage differences in average charges between the cases we selected for review and the remainder of cases in the MS–DRG. We also considered variation in charges within these groups; that is, whether observed average differences were consistent across patients or attributable to cases that were extreme in terms of charges or length of stay, or both. Further, we considered the number of patients who will have a given set of characteristics and generally preferred not to create a new DRG unless it would include a substantial number of cases. C. MedPAC Recommendations for Revisions to the IPPS DRG System In the FY 2006 and FY 2007 IPPS final rules, we discussed a number of recommendations made by MedPAC regarding revisions to the DRG system used under the IPPS (70 FR 47473 through 47482 and 71 FR 47881 through 47939). In Recommendations 1–3 in the 2005 Report to Congress on Physician Owned Specialty Hospitals, MedPAC recommended that CMS: Refine the current DRGs to more fully capture differences in severity of illness among patients.
                    Base the DRG relative weights on the estimated cost of providing care.
                    Base the weights on the national average of the hospital-specific relative values (HSRVs) for each DRG (using hospital-specific costs to derive the HSRVs).
                    Adjust the DRG relative weights to account for differences in the prevalence of high-cost outlier cases.
                    Implement the case-mix measurement and outlier policies over a transitional period. As we noted in the FY 2006 IPPS final rule, we had insufficient time to complete a thorough evaluation of these recommendations for full implementation in FY 2006. However, we did adopt severity-weighted cardiac DRGs in FY 2006 to address public comments on this issue and the specific concerns of MedPAC regarding cardiac surgery DRGs. We also indicated that we planned to further consider all of MedPAC's recommendations and thoroughly analyze options and their impacts on the various types of hospitals in the FY 2007 IPPS proposed rule. For FY 2007, we began this process. In the FY 2007 IPPS proposed rule, we proposed to adopt Consolidated Severity DRGs (CS DRGs) for FY 2008 (if not earlier). However, based on public comments received on the FY 2007 IPPS proposed rule, we decided not to adopt the CS DRGs. Rather, we decided to make interim changes to the existing DRGs for FY 2007 by creating 20 new DRGs involving 13 different clinical areas that would significantly improve the CMS DRG system's recognition of severity of illness. We also modified 32 DRGs to better capture differences in severity. The new and revised DRGs were selected from 40 existing CMS DRGs that contained 1,666,476 cases and represent a number of body systems. In creating these 20 new DRGs, we deleted 8 and modified 32 existing DRGs. We indicated that these interim steps for FY 2007 were being taken as a prelude to more comprehensive changes to better account for severity in the DRG system by FY 2008. In the FY 2007 IPPS final rule, we indicated our intent to pursue further DRG reform through two initiatives. First, we announced that we were in the process of engaging a contractor to assist us with evaluating alternative DRG systems that were raised as potential alternatives to the CS DRGs in the public comments. Second, we indicated our intent to review over 13,000 ICD–9–CM diagnosis codes as part of making further refinements to the current CMS DRGs to better recognize severity of illness based on the work that CMS (then HCFA) did in the mid-1990's to adopt severity DRGs. We describe in detail below the progress we have made on these two initiatives, our actions for FY 2008, and our plans for continued analysis of reform of the DRG system for FY 2009. We note that revising the DRGs to better recognize severity of illness has implications for the outlier threshold, the application of the postacute care transfer policy, the measurement of real case-mix versus apparent case-mix, and the IME and DSH payment adjustments. We discuss these implications in more detail in the following sections. In the FY 2007 IPPS proposed rule, we discussed MedPAC's recommendations to move to a cost-based HSRV weighting methodology beginning with the FY 2007 IPPS 
                        ( print page 47141)
                        proposed rule. Although we proposed to adopt HSRV weights for FY 2007, we decided not to adopt the proposed methodology in the final rule after considering the public comments we received on the proposal. Instead, in the FY 2007 IPPS final rule, we adopted a cost-based weighting methodology without the hospital-specific portion of the methodology. The cost-based weights are being adopted over a 3-year transition period in 
                        1/3
                         increments between FY 2007 and FY 2009. In addition, in the FY 2007 IPPS final rule, we indicated our intent to further study the hospital-specific methodology as well as other issues brought to our attention with respect to the cost-based weights. There was significant concern in the public comments that we account for charge compression—the practice of applying a higher charge markup over costs to lower cost than higher cost items and services—if we are to develop relative weights based on cost. Further, public commenters expressed concern about potential inconsistencies between how costs and charges are reported on the Medicare cost reports and charges on the Medicare claims. In the FY 2007 IPPS final rule, we used costs and charges from the cost report to determine departmental level cost-to-charge ratios (CCRs) to apply to charges on the Medicare claims to determine the cost-based weights. The commenters were concerned about potential distortions to the cost-based weights that would result from inconsistent reporting between the cost reports and the Medicare claims. After publication of the FY 2007 IPPS final rule, we entered into a contract with RTI International to study both charge compression and to what extent our methodology for calculating DRG relative weights is affected by inconsistencies between how hospitals report costs and charges on the cost report and how hospitals report charges on individual claims. Further, as part of its study of alternative DRG systems, the RAND Corporation is analyzing the HSRV cost-weighting methodology. As we present below, we believe that revisions to the DRG system to better recognize severity of illness and changes to the relative weights based on costs rather than charges are improving the accuracy of the payment rates in the IPPS. We agree with MedPAC that these refinements should be pursued. Although we continue to caution that any system that groups cases will always present some opportunities for providers to specialize in cases they believe to have higher margins, we believe that the changes we have adopted and the continuing reforms we proposed, and are adopting in this final rule with comment period, for FY 2008 will improve payment accuracy and reduce financial incentives to create specialty hospitals. D. Refinement of DRGs Based on Severity of Illness For purposes of the following discussions, the term “CMS DRGs” means the DRG system we currently use under the IPPS; the term “Medicare-Severity DRGs (MS–DRGs)” means the revisions that we proposed to make (and are adopting in this final rule with comment period) to the current CMS DRGs to better recognize severity of illness and resource use based on case complexity. Although we have found the terms “CMS DRGs” and “MS–DRGs” useful to distinguish the current DRG system from the DRGs that we proposed to adopt for FY 2008, we invited public comments on how to best refer to both the current DRGs and the proposed DRGs to avoid confusion and improve clarity. *Comment:*
                         One commenter responded to our request for name suggestions for the new DRG system. The commenter agreed that the name should differentiate which DRG scheme is being referenced. The commenter did not provide an alternative suggestion. *Response:*
                         We agree with the importance of being able to differentiate between the current and the revised DRG system. We believe the name “Medicare Severity DRGs (MS–DRGs)” is an appropriate name for this revised system. Therefore, we are adopting as final our reference to the revised DRG system as the “Medicare Severity DRGs (MS DRGs).” 1. Evaluation of Alternative Severity-Adjusted DRG Systems In the FY 2007 IPPS final rule, we stated our intent to engage a contractor to assist us with an evaluation of alternative DRG systems that may better recognize severity than the current CMS DRGs. We noted it was possible that some of the alternative systems would better recognize severity of illness and are based on the current CMS DRGs. We further stated that if we were to develop a clinical severity concept using the current CMS DRGs as the starting point, it was possible that several of the issues raised by commenters (in response to the CS DRGs, which, in the FY 2007 IPPS proposed rule, we proposed to adopt for FY 2008 or earlier) would no longer be a concern. We noted that if we were to propose adoption of severity DRGs for FY 2008, we would consider the issues raised by commenters on last year's proposed rule as we continued to make further refinements to account for complexity as well as severity to better reflect relative resource use. We stated that we believed it was likely that at least one of several alternative severity-adjusted DRG systems suggested for review (or potentially a system we would develop ourselves) would be suitable to achieve our goal of improving payment accuracy beginning in FY 2008. On September 1, 2006, we awarded a contract to the RAND Corporation to perform an evaluation of alternative severity-adjusted DRG classification systems. RAND is evaluating several alternative DRG systems based on how well they are suited to classifying and making payments for hospital inpatient services provided to Medicare patients. Each system is being assessed on its ability to differentiate among severity of illness. A final report is due on or before September 1, 2007. RAND's draft interim report focused on the following criteria: Severity-adjusted DRG classification systems. • How well does each classification system explain variation in resource use? • How would the classification system affect a hospital's patient mix? • Are the groupings manageable, administratively feasible and understandable? Payment accuracy—What are the payment implications of selected models? In response to our request, several vendors of DRG systems submitted their products for evaluation. The following products were evaluated by RAND: 3M/Health Information Systems (HIS) CMS DRGs modified for AP–DRG Logic (CMS+AP–DRGs)
                    Consolidated Severity-Adjusted DRGs (CS DRGs) Health Systems Consultants (HSC) Refined DRGs (HSC–DRGs) HSS/Ingenix All-Payer Severity DRGs with Medicare modifications (MM–APS–DRGs) Solucient Solucient Refined DRGs (Sol–DRGs) Vendors submitted their commercial (off-the-shelf) software to RAND in late September 2006. The five systems were compared to the CMS DRGs that were in effect as of October 1, 2006 (FY 2007). RAND assigned FY 2004 and FY 2005 Medicare discharges from acute care hospitals to the FY 2007 CMS DRGs and 
                        ( print page 47142)
                        to each of the alternative severity-adjusted DRG systems. RAND's initial analysis provided an overview of each alternative DRG classification system, their comparative performance in explaining variation in resource use, differences in DRG grouping logic, and case mix change. A Technical Expert Panel comprised of individuals representing academic institutions, hospital associations, and MedPAC was formed in October 2006. The members received the preliminary draft report of RAND's alternative severity-adjusted DRG systems evaluation in early January 2007. The panel met with RAND and CMS on January 18, 2007, to discuss the preliminary draft report and to provide additional comments. RAND incorporated items raised by the panel into its preliminary draft report and submitted a revised interim report to CMS in mid-March 2007. CMS posted RAND's interim report on the CMS Web site in late March 2007. Interested individuals can view RAND's interim report on the CMS Web site at: 
                        *http://www.cms.hhs.gov/​Reports/​Reports/​itemdetail.asp?​itemID=​CMS1197292.*
                         The report may also be viewed on RAND's Web site at 
                        *http://www.rand.org/​pubs/​online/​health.* At this time, RAND has completed its evaluation of the alternative severity adjusted DRG systems. RAND's interim report reflects its evaluation of five alternative DRG systems using the criteria described above. Since the proposed rule, RAND evaluated the Medicare Severity DRG (MS–DRG) system using the same criteria applied to the other DRG systems. We are continuing to work with RAND to evaluate alternate methodologies for establishing relative weights using the MS–DRGs. Once RAND completes its work on the alternate methodologies for establishing relative weights, we will be in a better position to evaluate the issue of charge compression and potential improvements to our methodology to determine cost-based relative weights. We plan to review RAND's analysis of these issues and determine if it will be appropriate to propose additional adjustments to the MS–DRGs or the relative weight methodology in the FY 2009 IPPS proposed rule. We instructed RAND to evaluate the MS–DRGs using the same criteria that it applied to the other DRG systems. Consistent with conclusions we made in the IPPS proposed rule, RAND's findings demonstrate that MS–DRGs explain 43 percent of the cost variation; a 9.1 percent improvement over the CMS DRGs. RAND reports that the explanatory power of the MS–DRGs is higher than the CMS+AP–DRGs, but lower than the other systems analyzed. The MS–DRGs have the lowest adjusted R2
                         values among the severity-adjusted systems in seven MDCs. In three of these MDCs, the R2
                         values are actually lower than under the CMS DRGs: MDC 19 (Mental Diseases and Disorders), MDC 20 (Alcohol/Drug Use and Alcohol/Drug Induced Organic Mental Disorders) and MDC 22 (Burns). RAND attributes the reduction in R2
                         values to how the CMS DRGs were collapsed to form the base DRGs and recommends future examination. We agree that RAND's findings provide us with potential issues to examine to further improve the MS–DRGs for FY 2009. Although RAND's findings related to R2
                         in certain MDCs are of concern, we believe the MS–DRGs remain an improvement over the current CMS DRGs and have significant advantages over the other DRG systems being evaluated. Specifically, they are more up-to-date because of our review of secondary diagnoses and classification into MCCs and CCs. Further, they are understandable, available in the public domain, and will have fewer transition issues than the other systems. As MS–DRGs are a modification of the current CMS DRGs, they allow for updates and maintenance to continue using the same process as under the current CMS DRGs. Depending on the criteria being evaluated, the relative merits of each system being evaluated by RAND are different. For instance, the CS DRGs performed well in explaining resource variation but have the highest potential for case-mix growth. Other than the MS–DRGs, the CMS+AP–DRGs did the poorest among the systems evaluated in explaining variation in resource usage but did the best on producing reliable and stable results. The remaining systems generally performed somewhere in between on most of the measures that RAND used in its comparative analysis. The MS–DRGs are the result of modifications to the CMS DRGs to better account for severity. Unlike the other systems, the MS–DRGs are available in the public domain, and as a result, systems implementation and other costs are likely to be at a minimum. As suggested above, RAND found that the MS–DRGs are an improvement over the CMS DRGs and compare favorably to the alternative DRG systems being evaluated on some criteria and not as well on others. As RAND has completed its evaluation of the alternative DRG systems, including the MS–DRGs, consistent with RAND's findings, we believe it is appropriate at this time to adopt the MS–DRG system for the Medicare IPPS in FY 2008. While there will be an opportunity for the public to comment on RAND's findings, we expect to permanently adopt the MS–DRGs for the IPPS. We do not think it is likely that there will be persuasive public comments suggesting that one of the alternative DRG systems being evaluated by RAND is clearly superior. In our view, none of the systems appears to be clearly superior or inferior to the other systems based on the criteria RAND used for the evaluation. Given the strong support in the public comments for the MS–DRGs and the fact they compare well overall to the alternative DRG systems being evaluated by RAND, we believe it is likely that the MS–DRGs will be the system that Medicare uses permanently for the IPPS. However, because we are interested in public input on this issue, we are making RAND's final report available on the CMS Web Site at: 
                        *http://www.cms.hhs.gov/​Reports/​Reports/​itemdetail.asp?​itemID=​CMS1197292.*
                         The report may also be viewed on RAND's Web site at 
                        *http://www.rand.org/​pubs/​online/​health.* Interested members of the public can write to the following address to make their views known to us about the RAND Report: Division of Acute Care, Center for Medicaid Management, 7500 Security Boulevard, C4–08–06, Baltimore, MD 21244, Attn: Mady Hue. In the FY 2008 IPPS proposed rule, we proposed to adopt the MS–DRGs for FY 2008. We are providing the following update on RAND's progress in evaluating the MS–DRGs against the alternative DRG systems. In the proposed rule, we also invited public comment regarding RAND's preliminary analysis of each vendor-supplied alternative severity-adjusted DRG system described below. A summary of any public comments that we received and our responses to those comments are presented under each subject area. a. Overview of Alternative DRG Classification Systems Analysis of how each of the six severity adjusted DRG systems performs began by using the current CMS DRGs as a baseline. Two of the six systems (CS DRGs and MM–APS–DRGs) are derivatives of all-patient severity-adjusted DRG systems that have been modified by their developers for the Medicare population and two of the systems (HSC–DRGs and Sol–DRGs) are all-patient systems that incorporate severity levels into the CMS DRGs. The CMS+AP–DRGs are a combination of CMS DRGs and a modification for the Medicare population of the major CC 
                        ( print page 47143)
                        (MCC) severity groupings used in the AP–DRG system. (The AP–DRG system was developed by 3M/HIS specifically for the State of New York to capture the non-Medicare population.) The MS–DRG system modifies the current CMS DRGs by collapsing any paired DRGs (DRGs distinguished by the presence or absence of CCs and/or age) into base DRGs and then splits the base DRGs into MCC/CC-severity levels. Table A below shows how each of the six alternative severity-adjusted systems classifies patients into base DRGs and their corresponding severity levels. Table A.—Logic of CMS and Alternative DRG Systems
CMS–DRG
CMS+AP–DRG
HSC–DRG
Sol–DRG
MM–APS–DRG
CS DRG
MS–DRGNumber of MDCs
25
25
25
25
25
25
25Number of base DRGs
379
379
391
393
328
270
335Total number of DRGs
538
602
1,293
1,261
915
863
745Number of DRGs 500 discharges
97 (18%)
97 (16%)
374 (29%)
474 (38%)
115 (13%)
113 (13%)
38 (5.2%)Number of CC (severity) subclasses
2
3
3 (med) or 4 (surg)
3 (med) or 4 (surg)
3
4
3CC subclasses
With CC, without CC for selected base DRGs
Without CC, With CC for selected base DRGs and Major CC across DRGs within MDC
No CC, Class C CC, Class B CC, Class A CC (Surgical only)
Minor/no substantial CCs, Moderate CCs, Major CCs, Catastrophic CCs (Surgical only)
Without CC, With CC, With Major CC with some collapsing at base DRG level
Minor, Moderate, Major, Severe with some collapsing at DRG level
Without CC, With CC, With Major CC with collapsing between severity levels for same base DRG.Multiple CCs recognized
No
No
No
No
Yes (in computation of weight)
Yes
No.CC assignment logic
Presence/absence
Presence/absence
Presence/absence
Presence/absence
Presence/absence
18-step process
Presence/absence.MDC assignment
Principal diagnosis
Principal diagnosis
Principal diagnosis
Principal diagnosis
Principal diagnosis
Principal diagnosis with rerouting
Principal diagnosis.Death used in DRG assignment
Yes (in selected DRGs)
Yes (in selected DRGs)
Yes (“early death” DRGs)
Yes (“early death” DRGs)
Yes (in selected DRGs)
No
Yes (in selected DRGs and CC assignments).
 RAND's evaluation of the logic for each system demonstrated the following: Four systems add severity levels to the base CMS DRGs; the CS DRGs add severity levels to the base APR DRGs, which are comparable but not identical to the base CMS DRGs. Both the CS DRGs and MM–APS–DRGs collapse some base DRGs with low Medicare volume. The MS–DRGs collapse the current CMS DRG splits and either leave the base DRG undivided or divide it into two or three severity levels.
                    The HSC–DRGs and the Sol–DRGs use uniform severity levels for each base DRG (three for medical and four for surgical). The general structure of the MS–DRG logic establishes three severity levels for each base DRG: With MCC, with CC, and without CC. However, CMS consolidated severity levels for the same base DRG if they do not meet specific statistical criteria. The general structure of the MM–APS–DRG logic includes three severity levels for each base DRG, but some severity levels for the same base DRG are consolidated to address Medicare low-volume DRGs and nonmonotonicity issues. Monotonicity is when the average costs for a severity group consistently rise as the severity level of the group increases. For example, in a monotonic system, if within a base DRG there are three severity groups and level 1 severity is less than level 2 severity and level 2 severity is less than level 3 severity, the average costs for a level 3 case would be greater than the average costs for a level 2 case, which would be greater than the average costs for a level 1 case. When a DRG is nonmonotonic, the mean cost in the higher severity level is less than the mean cost in the lower severity level. The general structure of the CS DRGs includes four severity levels for each base DRG. However, severity level consolidations occur to address Medicare low-volume DRGs and nonmonotonicity. The CS DRGs consolidate both adjacent severity levels for the same base DRG and the same severity level across multiple base DRGs (especially for severity level 4).
                    Under the CMS+AP–DRGs and MM–APS–DRGs, each diagnosis is assigned a uniform CC-severity level across all base DRGs (other than CCs on the exclusion list for specific principal diagnoses). The remaining systems assign diagnoses to CC-severity level classifications by groups of DRGs.
                    Under the grouping logic used by all systems other than the CS DRGs, each discharge is assigned to the highest severity level of any secondary diagnosis. The MS–DRGs assign discharges with no CC but certain high cost devices to a higher severity level. The CS DRGs adjust the initial severity level assignment based on other factors, including the presence of additional CCs. None of the other systems adjusts the severity level classification for additional factors or CCs. However, the MM–APS–DRG system handles additional CCs through an enhanced relative weight.( print page 47144)
                    The HSC–DRGs and the Sol–DRGs have a medical “early death” DRG within each MDC. The CS DRGs do not use death in the grouping logic. In addition, most complications of care do not affect the DRG assignment. The MS–DRGs use death in making an assignment in selected DRGs and do not count certain conditions as MCCs and CCs (such as cardiac arrest) in patients who die during the inpatient stay. b. Comparative Performance in Explaining Variation in Resource Use In evaluating the comparative performance of each alternative DRG system, RAND used MedPAR data from FY 2004 and FY 2005. RAND excluded data from CAHs, Indian Health Service hospitals, and hospitals that have all-inclusive rate charging practices. Consistent with CMS practice, RAND did not exclude data from Maryland hospitals, which operate under an IPPS waiver. Records that failed edits for data consistency or that had missing variables that were needed to determine standardized costs were also excluded. RAND reported that evaluation of each alternative severity-adjusted DRG system is a complex process due to differences in how each of the severity levels are applied, the number of severity-adjusted DRGs in each system, and the average number of discharges assigned to each DRG. In addition, the manner in which the DRGs for patients 0 to 17 years of age are assigned in the severity-adjusted systems affects the number of low volume DRGs using Medicare discharges. Low-volume, severity-adjusted DRGs can affect the relative performance of a classification system. However, the percentage of Medicare discharges assigned to these DRGs is small—approximately 0.7 percent in the HSC–DRG and Sol–DRG systems compared to 0.1 percent in the CMS DRGs. To facilitate compatrisons across the severity-adjusted DRG system, RAND assigned a severity level to each MS–DRG consistent with the method used for the other DRG systems. The severity level is based on the lowest severity level. If a base MS–DRG divided into two DRGs, one for both discharges with no CC and discharges with CCs and the other for discharges with MCCs, RAND assigned Level 0 to the DRG for discharges with no MCC and Level 2 to the DRG for discharges with MCCs. RAND also assigned Severity Level 0 to base DRGs that do not split by CC level. Table B summarizes the distribution of DRGs and discharges across severity levels by classification system, exclusive of MDC 15, ungroupable discharges, and statistical outliers. In comparison to the other severity-adjusted systems, the MS–DRGs have a much higher percentage of discharges assigned to the lowest severity level. This includes base DRGs that are not divided into severity subgroups, the no CC severity level, and the no MCC severity level in those base DRGs that are split based on the presence of a MCC only. Sixty percent of discharges are assigned to Severity Level 0 DRGs compared to only 20 percent in the CS DRG system. There are several reasons for the higher percentage, including the reassessment of CC assignments, the collapsing of the no CC and CC severity levels in 43 base MS–DRGs, and no severity subgroups in 53 base MS–DRGs. 
 
  Severity-adjusted DRGs are designed to reduce the amount of cost variation within DRGs. To compare how much within-DRG variation occurs in each DRG system, RAND computed the mean standardized cost, standard deviation, and coefficient of variation (CV) for each DRG across the various systems. Each severity-adjusted system has a smaller proportion of DRGs with a CV 100 percent than the CMS DRGs. Seventeen percent of the 511 CMS DRGs to which Medicare patients were assigned in 2005 had a CV 100 percent. In contrast, 8 percent of the 736 MS–DRGs have a CV 100 percent. This is a slightly lower percentage than in the CMS+AP DRGs but slightly higher percentage than the other four severity-adjusted DRG systems. Only 1.7 percent of discharges are assigned to MS–DRGs with a CV 100 percent, which is comparable to the percentage of discharges assigned to DRGs with a CV 100 percent in the CS DRGs and the CMS+AP DRGs. The MM–APS DRGs and CMS+AP DRGs have slightly lower and higher percentages, respectively, of discharges assigned to DRGs with a CV 100 percent. RAND utilized a general linear regression model to evaluate how well each severity-adjusted DRG system explains variation in costs per case. The initial results demonstrate that all six severity-adjusted DRG systems predict cost better than the CMS DRGs. The CS DRGs have higher adjusted R2
                         values (explanatory power) than the other severity-adjusted systems in nearly every MDC. In general, the adjusted R2
                         value for the CS DRGs is 0.4458, a 13-percent improvement over the adjusted R2
                         value for the CMS DRGs. The HSC–DRGs demonstrate an 11-percent improvement, while the adjusted R2
                         values for the MM–APS–DRGs and Sol–DRGs are 10.0 percent and 9.7 percent higher, respectively, than the CMS DRG R2
                         value. The adjusted R2
                         value for the MS–DRGs is 0.4300, a 9.1 percent improvement over the CMS DRGs. The CMS+AP–DRGs show the smallest improvement, nearly 8 percent. Another aspect of RAND's evaluation was to identify the validity of each alternative DRG system as a measurement for resource costs. For a base DRG, the severity levels should be monotonic; that is, the mean cost per discharge should increase simultaneously with an increase in the severity level. A distinction between patient groups and varying treatment costs should be accomplished by the severity levels. When a DRG is nonmonotonic, the mean cost in the higher severity level is less than the mean cost in the lower severity level. RAND studied the percentage differences and absolute differences in cost between the severity levels within the base DRGs for each system under evaluation. For the analysis, RAND assigned the severity levels for discharges assigned to the CMS+AP–
                        ( print page 47146)
                        DRGs and CS DRGs that include several base DRGs to the base DRG to which they would have been assigned at a lower severity level. Table C shows the percentage difference between the mean standardized cost for discharges with severity levels 1 through 3 as applicable to the adjacent lower severity level within the base DRG (for example, Base DRG 1 Severity Level 1 compared with Base DRG 1 Severity Level 0). The first column of the table shows the number of DRGs with severity level 0 and the proportion of discharges assigned to those DRGs. The “Other DRGs” column, which is not applicable to the MS–DRGs, includes DRGs for age 0 to 17 years and any DRGs for which there was no base DRG with severity level 0 that could be used in the comparison, for example, no Medicare discharges were assigned to the base DRG severity level 0. For severity level 1 and higher, RAND computed the ratio of the mean cost for that level to the mean cost for the adjacent lower level (for example, mean cost
                        DRG Level 2
                        /mean cost
                        DRG Level 1
                        ) and reported the results by the magnitude of the ratio. RAND used the number of discharges assigned to the higher severity level to calculate the percentage of discharges assigned to each ratio category. For the two systems (CMS+AP–DRGs and CS DRGs) that include several base DRGs, RAND assigned those discharges to the lower severity level base DRG. Following that methodology, RAND was able to calculate how much more costly the discharges assigned to the consolidated or lower severity levels were than the discharges in the base DRG assigned to the next higher severity level. Results demonstrate that, overall, nonmonotonicity is not a factor across the alternative DRG systems. There are only a small percentage of discharges that are assigned to nonmonotonic DRGs. Unlike the other systems, all severity level 1 or level 2 MS–DRGs were monotonic. Using the data from severity of illness levels 1 through 3 (except for the MM–APS–DRGs, which do not have a severity of illness level 3), RAND calculated the discharge-weighted mean cost difference between severity levels and the mean ratio of the cost per discharge for the higher severity level to the adjacent lower severity level. The greatest cost discrimination was present in the higher severity levels versus the lower severity levels across all the systems. Unlike the other systems, each MS–DRG was at least 20 percent more costly than the adjacent lower severity DRG. The remaining systems demonstrated equivalent percentage cost differences between the severity levels as shown in Table C below. 
 
  In examining whether each of the alternative DRG systems provided stability in the relative weights from year to year, RAND compared the relative weights derived from the MedPAR data in FY 2004 to the relative weights data from FY 2005. RAND's results demonstrate that generally, across all the systems, only a small percentage of DRGs had greater than a 5-percent change in relative weights. RAND did not repeat this analysis for the MS–DRGs. However, RAND had no reason to expect that the results would be substantially different for this system. For further details and discussion, we encourage readers to view RAND's full interim report on the CMS Web site at: 
                        *http://www.cms.hhs.gov/​Reports/​Reports/​itemdetail.asp?​itemID=​CMS1197292.*
                         The report may also be viewed on RAND's Web site at 
                        *http://www.rand.org/​pubs/​online/​health.* c. Payment Accuracy and Case-Mix Impact Similar to how CMS established the relative weights in the FY 2007 IPPS final rule, RAND used standardized costs as determined by the national CCR and the FY 2005 MedPAR data to construct relative weights for each of the DRG systems being evaluated. RAND analyzed the effect of variations in the explanatory power on the distribution of Medicare payments for each system under evaluation. The preliminary findings indicate payment accuracy is improved by each severity-adjusted system by redistributing payment from lower-cost discharges to higher-cost discharges. However, the total payment redistribution across systems differs and reflects the payment impact of improved explanatory power. Although these findings are estimates, the percent of total payment redistributed was the least under the CMS+AP–DRGs (7.1 percent) and the most under the CS DRGs (11.9 percent). The total payment redistribution under the MS–DRGs is 8.4 percent of the total payment. The redistribution is less than the CS DRG system, the same as the HSC–DRG system, and more than in the other systems, even though some of these systems have higher explanatory power. Table D shows changes in case-mix index (CMI) by hospital category across alternative severity-adjusted DRG 
                        ( print page 47148)
                        systems. Results demonstrate that, under the severity-adjusted systems, urban hospitals have a higher average CMI than under the CMS DRGs, and rural hospitals have a lower CMI. The analysis suggests that any system adopted to better recognize severity of illness with a budget neutrality constraint will result in payment redistribution that can be expected to benefit urban hospitals at the expense of rural hospitals. This impact occurs because patients treated in urban hospitals are generally more severely ill than patients in rural hospitals and the CMS DRGs are not currently recognizing the full extent of these differences. For purposes of the study, RAND assumed no behavioral changes in coding practice or the types of patients treated. On average, the CMI for urban hospitals increases under the severity-adjusted systems, and that for rural hospitals decreases. The change is greatest in the CS DRGs, where the CMI for rural hospitals is 2.4 percent lower than that under the CMS DRGs. The CMI for large urban hospitals (those located in metropolitan areas with more than 1 million population) and other urban hospitals is 0.6 and 0.1 percent higher, respectively, under the CS DRGs. Under the MS-DRGs, there is a slightly larger increase in the average CMI for large urban hospitals, a reduction in the CMI for other urban hospitals, and a smaller reduction for rural hospitals. The CMI for larger hospitals increases, while that for smaller hospitals decreases across the systems. This result is consistent with a severity-adjusted DRG system shifting payment from less expensive cases to more expensive cases. Larger hospitals tend to have relatively more complex cases and severely ill patients than smaller hospitals do. Teaching hospitals also tend to treat more complex cases, but the impact on these facilities differs by severity-adjusted DRG system. Across all the severity-adjusted systems, nonteaching hospitals have a lower CMI, ranging from a 0.2 percent reduction under the HSC-DRGs and Sol-DRGs to a 0.5 percent reduction under the CS DRGs. In three of the systems (CMS+AP-DRG, HSC-DRG, and MM-APS-DRG), hospitals with large teaching programs (100 or more residents) would experience a larger increase than hospitals with smaller teaching programs. Under the Sol-DRG system, hospitals with large teaching programs would have a 0.1 percent increase, compared with a 0.2 percent increase for hospitals with smaller teaching programs. Under the CS DRG system, the CMI for hospitals with large teaching programs would be about the same, but that for hospitals with smaller teaching programs would increase 0.7 percent relative to the CMS DRGs. Table D.—CMI Change in Alternative DRG Systems Relative to the CMS DRG CMI
Number of hospitals
Number of discharges
CMS-DRG CMI
Percentage change from CMS-DRG CMICMS+AP-DRG
                                 (Percent)
HSC-DRG
                                 (Percent)
Sol-DRG
                                 (Percent)
MM-APS-DRG
                                 (Percent)
CSDRG
                                 (Percent)
MS-DRG
                                 (Percent)ALL
3,890
12,165,763
1.00
0.0
0.0
0.0
0.0
0.0
0.0By Geographic Location:Large urban areas (pop1 million)
1,485
5,715,356
1.02
0.5
0.4
0.3
0.6
0.6
0.7Other urban areas (pop1 million )
1,186
4,578,447
1.04
−0.2
−0.2
−0.1
−0.2
0.1
−0.3Rural hospitals
1,219
1,871,960
0.84
−1.3
−0.9
−1.0
−1.4
−2.4
−1.7Bed Size (Urban):0––99 beds
685
611,139
0.91
−1.0
−1.1
−1.1
−1.3
−1.6
−1.2100–199 beds
875
2,346,922
0.93
0.0
0.1
0.0
0.1
0.0
0.0200–299 beds
511
2,446,737
1.00
0.1
0.2
0.3
0.3
0.6
0.3300–499 beds
433
2,965,216
1.08
0.3
0.3
0.3
0.4
0.8
0.4500 or more beds
167
1,923,789
1.17
0.6
0.3
0.2
0.4
0.4
0.5Bed Size (Rural):0–49 beds
543
330,242
0.73
−2.5
−2.1
−2.2
−2.7
−5.0
−3.050–99 beds
398
595,599
0.80
−1.4
−1.0
−1.1
−1.6
−2.7
−2.0100–149 beds
160
415,367
0.85
−1.1
−0.7
−0.8
−1.2
−2.0
−1.5150–199 beds
69
260,910
0.91
−0.8
−0.6
−0.7
−0.8
−1.5
−1.0200 or more beds
49
269,842
0.99
−0.6
−0.1
−0.1
−0.6
−0.5
−0.9Urban by Region:New England
129
541,471
0.99
0.1
−0.2
−0.5
−0.5
−0.6
−0.5Middle Atlantic
370
1,621,488
1.00
0.0
−0.4
−0.5
−0.3
−1.5
−0.1South Atlantic
432
2,208,336
1.04
0.5
0.7
0.7
0.7
1.4
0.7East North Central
410
1,856,164
1.03
0.6
0.7
0.6
0.8
1.5
0.6East South Central
168
696,943
1.06
−0.2
−0.2
−0.2
−0.2
−0.3
−0.4West North Central
164
657,322
1.08
−0.3
−0.3
0.0
−0.3
0.3
−0.3West South Central
369
1,115,411
1.05
0.1
0.0
0.1
0.3
0.5
0.3Mountain
153
465,093
1.08
0.4
0.2
0.5
0.4
1.0
0.7Pacific
423
1,016,135
1.03
0.0
−0.2
−0.1
−0.1
0.2
0.3Puerto Rico
53
115,440
0.87
−1.1
−1.4
−0.1
−1.2
−5.1
−1.3Rural by Region:New England
34
49,842
0.90
−0.6
−0.6
−0.5
−1.1
−0.6
−1.1Middle Atlantic
68
139,639
0.85
−1.1
−0.7
−0.7
−1.3
−1.5
−1.4South Atlantic
191
409,116
0.82
−0.8
−0.4
−0.5
−0.9
−1.8
−1.2East North Central
163
290,069
0.87
−1.1
−0.7
−0.9
−1.3
−1.8
−1.6East South Central
201
328,326
0.82
−1.5
−0.9
−1.1
−1.4
−3.2
−1.9West North Central
184
240,449
0.87
−1.6
−1.2
−1.1
−1.8
−2.5
−2.0West South Central
227
266,419
0.80
−2.1
−1.8
−1.9
−2.0
−4.3
−2.5Mountain
91
80,219
0.85
−1.2
−1.0
−0.4
−1.3
−1.2
−1.1Pacific
60
67,881
0.86
−0.9
−1.0
−1.1
−1.4
−1.6
−1.6( print page 47149)By Payment Classification:Teaching Status:Non-teaching
2,791
6,115,193
0.92
−0.4
−0.2
−0.2
−0.4
−0.5
−0.4Fewer than 100 Residents
853
4,061,451
1.04
0.1
0.2
0.2
0.2
0.7
0.2100 or more Residents
246
1,989,119
1.16
0.8
0.3
0.1
0.5
0.0
0.6Urban DSH:Non-DSH
778
2,574,640
1.02
−0.1
0.0
0.1
−0.2
0.5
0.0100 or more beds
1,541
7,378,095
1.05
0.3
0.2
0.2
0.4
0.4
0.4Less than 100 beds
352
341,068
0.82
−0.9
−0.8
−1.0
−1.1
−2.0
−1.1Rural DSH:Non-DSH
238
300,747
0.87
−1.4
−1.0
−0.9
−1.7
−1.9
−1.7SCH
402
599,823
0.83
−1.3
−1.0
−1.0
−1.4
−2.4
−1.8RRC
132
466,395
0.92
−0.8
−0.3
−0.5
−0.7
−1.4
−1.1Other Rural100 or more beds
60
135,146
0.80
−0.9
−0.8
−1.2
−1.3
−2.0
−1.5Less than 100 beds
387
369,849
0.74
−2.1
−1.6
−1.7
−2.2
−4.3
−2.6Urban teaching and DSH:Both teaching and DSH
829
4,705,476
1.09
0.5
0.3
0.3
0.5
0.5
0.5Teaching and no DSH
204
1,108,092
1.06
0.0
0.1
0.0
−0.1
0.4
0.1No teaching and DSH
1,064
3,013,687
0.95
−0.1
0.1
0.0
0.1
0.1
0.1No teaching and no DSH
574
1,466,548
1.00
−0.2
−0.1
0.1
−0.3
0.5
0.0Rural Hospital Types:RRC
145
519,808
0.92
−0.8
−0.4
−0.5
−0.7
−1.4
−1.1SCH
423
457,119
0.79
−1.6
−1.2
−1.2
−1.7
−3.0
−2.1MDH
180
164,453
0.75
−2.1
−1.7
−1.7
−2.3
−4.1
−2.7SCH and RRC
76
266,027
0.92
−0.9
−0.7
−0.7
−1.1
−1.3
−1.3MDH and RRC
8
19,746
0.85
−1.4
−0.6
−0.8
−1.6
−1.9
−1.7Other Rural
387
444,807
0.77
−1.6
−1.2
−1.4
−1.8
−3.3
−2.1
 RAND also noted that changes in documentation and coding that increase case mix will occur with each severity adjusted DRG system they evaluated. Increases in CMI after adopting the system could be the result of improved coding rather than increases in actual patient severity. RAND observed that the experience of Maryland hospitals using the APR DRG system provides some indication of the likely impact on case-mix of introducing a severity-adjusted system. RAND also noted that coding behaviors are expected to vary under alternative systems according to RAND. Therefore, the risk of case-mix growth due to improved documentation and coding exists with any system. However, RAND advises that the amount of risk can be assessed based on the logic of the DRG system and result in anticipated changes in coding behavior. For the analysis we presented in the proposed rule, RAND found that the CMS+AP–DRG system may have the lowest risk of case-mix increase, while the CS DRGs present the greatest risk. The remaining systems under evaluation demonstrated equivalent risk, based on the DRG logic and other features specific to each system. RAND did not repeat the analysis of the potential for documentation and coding improvements to increase case-mix using the MS–DRGs because it only worked with FY 2005 data to evaluate them. Further, CMS did a detailed analysis of the likely impact of documentation and coding improvements on case-mix using the MS–DRGs. Section II.D.6. of the preamble of this rule describes in detail the CMI impact under the MS–DRGs using the State of Maryland's experience and data. d. Other Issues for Consideration RAND was asked to examine whether each of the alternative severity-adjusted DRG systems under evaluation appears to contain logic that is manageable, administratively feasible, and understandable. RAND's results describe the extent to which those features are present in the grouping logic of each system. A brief summary of these findings and other discussion points follow. For more complete details of the grouping logic for each system evaluated, we encourage readers to review RAND's interim report at the following CMS Web site: 
                        *http://www.cms.hhs.gov/​Reports/​Reports/​itemdetail.asp?​itemID=​CMS1197292.*
                         The report may also be viewed on RAND's Web site at 
                        *http://www.rand.org/​pubs/​online/​health.* To increase and promote understanding of a DRG classification system, the grouping logic should include a uniform structure. With the exception of the CS DRGs, RAND found that there is uniformity in the hierarchical structure for assigning discharges to MDCs, DRGs, and severity levels for each system evaluated. The CS DRGs utilize a complex rerouting logic and severity of illness level assignment. However, the result is a higher explanatory power that accounts for limitations in the current system. Therefore, due to the complexities associated with that system, it may not easily be understood. However, if the results yield clinically coherent groups of patients with comparable costs, RAND concluded that the system may be worth exploring further. The HSC–DRG and Sol-DRG grouping logic uses a standard number of severity levels for each base DRG, although the result is an increase in the number of low-volume DRGs. The standard severity level structure provides increased understanding, although as mentioned 
                        ( print page 47150)
                        previously, low-volume, severity-adjusted DRGs can affect the relative performance of a classification system. The MM–APS–DRGs and CS DRGs use standard DRG severity levels. However, the method of collapsing DRGs varies due to the modifications made for Medicare use. The underlying logic of the MS–DRG system uses standard severity levels, but the criteria for establishing severity subgroups result in severity levels that vary by base DRG. Because the severity levels are often collapsed and the resulting subgroups depend on the particular DRG, it is a more complicated system to understand than those systems that uniformly define subgroups according to RAND. By only collapsing DRGs to determine relative weights, RAND notes it is possible to preserve the underlying DRG structure, which perhaps would lead to a more understandable system. As stated earlier, there are also several transition issues that require attention when evaluating alternative severity-adjusted DRG systems. In determining how manageable, administratively feasible, and understandable the systems being evaluated are, consideration should be given to how they crosswalk or map to the current CMS DRGs. Because four of the systems under evaluation are based on the underlying CMS DRG grouping logic to establish their base DRGs (CMS+AP–DRGs, HSC–DRGs, Sol-DRGs, and MM–APS–DRGs), the CMS DRGs are able to crosswalk smoothly to these severity-adjusted DRGs. Conversely, crosswalking in reverse or backward mapping from the CMS+AP DRGs to the CMS DRGs is problematic due to the discharges in one severity level of the CMS+AP–DRG system compared to several base CMS DRGs. As expected, the CS DRGs do not crosswalk easily to the CMS DRGs due to the complex grouping logic. The MM–APS–DRGs pose unique complications as well due to the large number (over 1,000) of DRGs. Although the MS–DRGs are based on the CMS DRGs, there are challenges in crosswalking discharges between the two systems because of the revisions in the CC list and the sequential renumbering of the DRGs. System updates are another important factor that may have serious implications. All of the DRG systems RAND evaluated were reported to make annual updates to reflect ICD–9–CM coding changes. However, the CC severity level assignments for each system have not routinely been reviewed and revised. The CC exclusion list and severity level assignments should be reviewed where appropriate to reflect current patterns of care, according to RAND. RAND found that the MS–DRGs are the most updated of the severity-adjusted DRG systems. CMS reviewed the CC list and severity-level assignments in developing the MS–DRGs. Further, the MS–DRGs incorporate recent refinements in the CMS DRGs to account for complexity as well as severity. According to RAND, the other CMS-based systems use CC lists and severity level assignments that are based on outdated analyses of the effect of a condition on treatment costs from either the 1988 Yale study or the 1994 CMS refinement study. The APR DRGs have not been reviewed for several years and are not as current as the severity-based systems according to RAND. Accessibility to each of the severity-adjusted DRG system's logic and software is also a concern. Each system RAND analyzed is currently maintained as a proprietary product. In general, all of the vendors indicated a willingness to place their product in the public domain, under certain terms. As such, CMS believes it is likely there would need to be discussion as to whether there would be any limitations (such as the source code as well as the DRG logic) on the availability of the DRG systems to hospitals or competing vendors. None of these concerns would be an issue with the MS–DRGs. RAND further noted that because the MS–DRGs are in the public domain, there should be less disruption to existing arrangements for acquiring and installing the GROUPER software and integrating that software with other hospital systems. The intent of each vendor to provide public access to its GROUPER logic and software is described in further detail in RAND's interim report. *Comment:*
                         One commenter supported the efforts of CMS to evaluate several alternatives to the existing DRG system. The commenter expressed appreciation that CMS had incorporated comments submitted by the provider community in setting the criteria for evaluating the various DRG products. This commenter also stated it looked forward to reviewing the final recommendations when the RAND report is released. *Response:*
                         We appreciate the commenter's support of our efforts. As we indicated in the proposed rule, we have focused our efforts in response to public comments regarding the refinement of the current DRG system. With the assistance of RAND in the evaluation of alternative severity-adjusted DRG systems, our objective has been to select a classification system that will better recognize severity of illness, utilization of resources, and complexity of services. The ultimate goal of these combined objectives is to greatly improve the payment accuracy of the IPPS. *Comment:*
                         Several commenters supported the implementation of a severity-based system. However, they urged CMS to wait until RAND completes the final report before moving forward with a specific system. One commenter articulated its appreciation of the thorough analysis conducted on the other alternative severity-adjusted systems. However, the commenter remains concerned that CMS would consider moving forward with the MS–DRGs in the absence of completing an analysis of them using the same criteria applied to the other systems under review. Other commenters expressed concern that CMS may implement the proposed MS–DRGs for FY 2008 and then switch to a completely different severity-based system in FY 2009, or phase in a different system in subsequent years. One commenter stated that, given the potential for heightened administrative burdens as well as financial consequences, it would seem prudent that CMS invest the needed time and energy to confirm whether its belief in the proposed MS–DRG system can be validated. This same commenter added that by stating it is not precluded from adopting another system for FY 2009, CMS is tacitly acknowledging that the MS–DRG system may not be the best system. Another commenter stated that CMS' request for RAND to evaluate the proposed MS–DRGs indicates it is not satisfied that the MS DRGs are ready for long-term use in the IPPS. *Response:*
                         In the proposed rule, we indicated that we asked RAND to evaluate the proposed MS–DRG system using the same criteria it is applying to the other alternative severity-adjusted DRG systems. Our intent in not committing permanently to the MS–DRGs was not to suggest that we were not satisfied with the long-term application of the MS–DRG system or that we had concerns about it being the best system. Rather, we were interested in an objective evaluation of the MS–DRGs by RAND using the same criteria applied to the other alternative severity-adjusted systems. That is, before making a permanent commitment to the MS–DRGs, we were interested in knowing how well it demonstrates the ability to meet the objectives described previously—better recognition of severity of illness, utilization of resources, complexity of services and improved payment accuracy over the current CMS DRG system. While we proposed the MS–DRGs for 
                        ( print page 47151)
                        implementation in FY 2008, we were further interested in the public's response to the MS–DRGs and RAND's evaluation of them before making a final decision on a permanent DRG system to use for Medicare payment. Specifically, public comments on the FY 2007 IPPS proposed rule asked that CMS show evidence that the alternative system proposed results in an improved payment system compared to the current system, test the degree to which the variation in costs within cases at the DRG level is reduced, maintain the improvements made over the years to account for complexity of service and new technologies, and avoid a proprietary system that lacks transparency. We considered all these factors in the development of the MS–DRGs and had we not provided the proposed MS–DRG system to RAND for evaluation, we would not be able to make a fair comparison and final determination for the best course of action for Medicare long term. At the time of the proposed rule, we were unsure whether RAND would be able to complete its evaluation of the MS–DRGs by the time of this final rule with comment period. However, as summarized above, RAND has completed its analysis of the MS–DRG system and found that it compares favorably to the other DRG systems being evaluated on a number of criteria. As RAND has completed its evaluation of alternative DRG systems, including the MS–DRGs, consistent with RAND's findings, we believe it is appropriate at this time to adopt the MS–DRG system for Medicare in FY 2008. We believe the MS–DRGs represent an improvement over the current CMS DRGs. While there will be an opportunity for the public to comment on RAND's findings, we expect to permanently adopt the MS–DRGs for the IPPS. We do not believe it is likely that there will be persuasive public comments suggesting that one of the alternative DRG systems being evaluated by RAND is clearly superior. We plan on using RAND's report to continue to examine ways to improve and refine the Medicare inpatient payment system and expect that any future refinements will be based on the MS–DRGs. Therefore, as final policy for FY 2008, we are adopting the MS–DRGs as the new classification system for the IPPS. *Comment:*
                         One commenter agreed that CMS should adopt a transparent and publicly available DRG system and applauded the proposed MS–DRGs. The commenter stated that the transparency of the current system has been a critical aspect of its success over the years, and this will be even more important to ensure the successful adoption of the new severity-adjusted system chosen. *Response:*
                         We appreciate the commenter's support for the proposal to use MS DRGs. We agree that transparency is an important factor in the selection of a new severity-adjusted DRG system. We refer readers to sections II.D.2. and 3. of the preamble of this final rule with comment period for a complete discussion of the MS–DRGs. *Comment:*
                         One commenter stated CMS should consider adopting a more robust severity-based DRG system than the proposed MS–DRGs. The commenter admitted that it regards the APR DRG system highly and indicated it should not be abandoned because it is more complicated to implement and because of the controversy surrounding its suggested implementation. The commenter also noted that, as RAND stated in its preliminary report, it is a more robust, accurate, and precise system, and it was reluctant to see CMS abandon this superior system entirely before receiving RAND's final report and recommendations. Further, the commenter stated that, while the MS–DRGs would unquestionably represent a major improvement over the current CMS DRGs, it believed CMS has the ability and should proceed with introducing a better and more robust system and continue exploring further options while waiting for RAND's final report. *Response:*
                         In the FY 2007 proposed rule (71 FR 24015), we proposed to adopt the CS DRGs which were based on a consolidated version of the APR DRGs. We received a significant number of public comments strongly urging us not to move forward with the CS DRGs. These comments are described in detail in the FY 2007 final rule (71 FR 47906 through 47912). Among other concerns, the public comments suggested that the system was overly complex and difficult to understand. Further, there was concern that the logic and source code would not be available in the public domain like the current CMS DRGs and that many of the improvements and refinements made to the CMS DRGs over the years would be abandoned. For these and other reasons, we decided not to adopt the CS DRGs for FY 2007. Our proposed adoption of MS–DRGs did not raise these same concerns in the public comments. Given that the MS–DRGs are a substantial improvement over the current CMS DRGs in their ability to recognize severity of illness and meet other objectives that we set for IPPS payment reform, we believe it is a better system to select for use by Medicare than the CS DRGs or APR DRGs. *Comment:*
                         One commenter, a vendor, submitted its DRG product to RAND for evaluation. The commenter expressed its concern that CMS developed a completely new and untested severity system while there are several alternate systems currently under evaluation by RAND. The commenter noted that its product has been in continuous use for 18 years and is based on the original Yale University methodology and developed under contract with the Health Care Financing Administration, now CMS, between 1986 and 1989. The commenter urged CMS to continue with the current CMS DRGs for one more year. According to the commenter, introducing a new temporary severity system, the MS–DRGs, with the expectation that hospitals move to another system for FY 2009, will create unnecessary havoc for the hospital industry. The commenter noted that it is pleased with the work CMS has done in reviewing 13,549 secondary diagnosis codes to refine the CC list and believed the use of this new list will result in a greatly improved DRG GROUPER. However, the commenter stated it is not fair to compare the FY 2008 MS–DRGs (with the new CC list and new codes) with FY 2006 and FY 2007 alternative severity systems using the unrevised CC list. The commenter recommended that CMS create Version 25.0 CMS DRGs with the new CC list and new codes to allow the vendors of the alternative systems until November or December to incorporate the information into updated versions of their systems. The commenter also suggested that the RAND report deadline could be extended beyond September 1, 2007, to allow the comparison of alternative DRG systems to occur with the revised CC list. In addition, the commenter believed the MS–DRGs have the following shortcomings: Although CMS' chief concern is Medicare patients, it is shortsighted to ignore non-Medicare patients in the proposed MS–DRG system, as the health care industry often focuses its attention on the Medicare relative value system for all of its hospital patients.
                    The DRG system has always been comprehensive, including all possible ICD–9–CM diagnoses and procedures. Consolidating low-volume procedures and procedures now performed primarily in an outpatient setting creates confusion in the MS–DRG classification system. Procedures such as tonsillectomies, carpal tunnel release, and cataract extractions are different MDCs and are treated by different medical specialists. They are similar( print page 47152)
                        only with respect to historical cost data and only for the time being.
                    Eliminating newborns, maternity, and congenital anomalies from the usual MS–DRG severity level approach does not provide a comprehensive severity system. Lastly, the commenter indicated that whatever software system is chosen for the public, it should be provided in a modern and accessible software language and format. The commenter recommended a “C” version, on CDs or DVDs, and suggested that continuing to place CMS software into the public domain written in IBM assembler and distributed through the National Technical Information Service (NTIS) on 9-track tapes or 3480 cartridges seems difficult to imagine, as this technology is over 40 years old. *Response:*
                         We disagree that we are implementing a “completely new and untested severity system.” While the MS–DRGs constitute a major reform to better recognize severity of illness, they are a refinement of the current CMS DRGs that have been in use for Medicare payment for over 20 years. Further, our proposed rule analysis—subsequently validated by RAND—suggested that they are major improvement over the current CMS DRGs. Most of the other systems represent less updated refinements of the CMS DRGs. While these systems have been in use for other purposes, we note that (other than the APR DRGs that are used for payment in Maryland and the AP DRGs that were used in New York's all payer ratesetting system in the 1990s), the other systems being evaluated have never been used for Medicare payment. We stated in the FY 2008 IPPS proposed rule that we developed the MS–DRG system in response to public comments received as a result of the FY 2007 proposed rule (in response to the proposed CS DRGs). We also stated we submitted the MS–DRG system to RAND for evaluation and the final report was expected on or before September 1, 2007. At this time RAND has completed the evaluation of alternative severity-adjusted DRG systems, including the MS–DRGs. In the near future, we will post RAND's analysis of the MS–DRG system to the following CMS Web site: 
                        *http://www.cms.hhs.gov/​Reports/​Reports/​itemdetail.asp?​itemID=​CMS1197292.*
                         The report may also be viewed on RAND's Web site at 
                        *http://www.rand.org/​pubs/​online/​health.*
                         This report is referred to as an Addendum to RAND's interim report that was released in March 2007. A completed final report incorporating the evaluation of all six severity adjusted DRG systems into one document will be posted to the CMS Web site after September 1, 2007. As noted above, we share the commenter's concern about adopting one DRG system this year and potentially another one next year. We believe the MS–DRGs should be the system that is adopted for long-term use by Medicare for IPPS payment. However, we are interested in obtaining further public input on RAND's findings. We do not believe it is likely that there will be persuasive public comments suggesting that one of the alternative DRG systems evaluated by RAND is clearly superior to the MS–DRGs. We appreciate the commenter's support of our efforts in the review of 13,549 secondary diagnosis codes. We agree that a new, updated CC list greatly improves the ability of a DRG GROUPER to reflect severity of illness and distribute payments more accurately. The intent of RAND's evaluation was to compare each of the alternative DRG systems in its current form. The fact that delays would be necessary to allow the other systems to adopt the improvements that CMS made to the CC list for the MS–DRGs suggests that the other systems would not be ready for implementation as soon. As noted elsewhere, we are interested in adopting comprehensive improvements to the DRG system for severity of illness at the earliest possible date. We do not believe it is in the public interest to delay adopting these improvements to wait for the alternative DRG systems to incorporate refinements to the CC list. Further, we note that CMS first discussed performing a comprehensive review of the CC list over 2 years ago. Each vendor could have undertaken a similar review of the CC list to improve its DRG product at any time. We disagree with the commenter's assertion that our decision should turn on how the MS–DRGs can be used for non-Medicare payers. As we have stated many times in the past, we encourage private insurers and other non-Medicare payers to make refinements to Medicare's DRG system to better suit the needs of the patients they serve. With respect to the maternity and newborn DRGs, we cannot adopt the same approach to refine these DRGs that we did with the rest of the MS–DRGs because of the extremely low volume of Medicare patients there are in these DRGs. Medicare simply does not have enough cases in these DRGs to apply the same approach we did in the other MDCs. Whether we made revisions to these DRGs or not, private insurers and other private payers would have to develop their own DRGs or relative weights to address the needs of these patients that are not well-represented in the Medicare population. With respect to other pediatric patients, in our view, a significant advantage of the MS–DRGs over the prior CMS DRGs is the fewer number of low volume DRGs. By eliminating pediatric (ages 0 to 17 years) splits, the MS–DRGs will have fewer low-volume DRGs and less instability in the DRG relative weights for the cases paid using these DRGs. With regards to the software, undere CMS' agreement with its contractor, the software provided by NTIS is the same public domain software that is provided to CMS for use by our system maintainers, regional offices, and fiscal intermediaries.MAC. We will consider this comment as we make updates to our information systems and related contracts. As stated elsewhere in this final rule with comment period, we are adopting the MS–DRGs for implementation on October 1, 2007 (FY 2008). A detailed discussion summarizing the public comments received in response to the MS–DRG proposal is described in section II.D.2. of the preamble of this final rule with comment period. 2. Development of the Medicare Severity DRGs (MS–DRGs) As discussed previously, we are committed to continuing our efforts of making refinements to the current CMS DRGs to better recognize severity of illness. In the FY 2007 IPPS final rule, we stated that we had begun a comprehensive review of over 13,000 diagnosis codes to determine which codes should be classified as CCs when present as a secondary diagnosis. We stated that we would also build on the severity DRG work we performed in the mid-1990's. We received a number of public comments on last year's proposed rule that supported the refinement of the current CMS DRGs so that they better recognize severity of illness for FY 2007. We also committed to performing a more thorough reform of the entire DRG system to better recognize severity of illness for FY 2008. As a result of this broad based analysis, we developed the MS–DRGs that we proposed and are adopting in this final rule with comment period. The MS–DRGs represent a comprehensive approach to applying a severity of illness stratification for Medicare patients throughout the DRGs. As discussed in proposed rule and in section II.D.5. of the preamble of this final rule with comment period, the MS–DRGs maintain the significant advancements in identifying medical technology made 
                        ( print page 47153)
                        to the DRGs in past years. At the same time, they greatly improve our ability to identify groups of patients with varying levels of severity using secondary diagnoses. Further, they improve our ability to assign patients to different DRG severity levels based on resource use that is independent of the patient's secondary diagnosis—referred to in this discussion as “complexity.” We proposed to adopt the MS–DRGs for FY 2008 and also submitted the system to RAND to be considered as part of its evaluation of alternative DRG systems. In the proposed rule, we encouraged comments on our proposed methodology to establish a severity DRG system and the resulting DRGs. a. Comprehensive Review of the CC List Our efforts to better recognize severity of illness began with a comprehensive review of the CC list. Currently, 115 DRGs are split based on the presence or absence of a CC. For these DRGs, the presence of a CC assigns the discharge to a higher weighted DRG. The list of diagnoses designated as a CC was initially created at Yale University in 1980–1981 as part of the project to develop an ICD–9–CM version of the DRGs. The researchers at Yale University developed the ICD–9–CM DRGs using national hospital data with diagnoses and procedures coded in ICD–9–CM from the second half of 1979. Because hospitals only began reporting ICD–9–CM codes in 1979, discharge abstracts at that time were much less likely to fully report all secondary diagnoses. As a result, the Yale University researchers developed a liberal definition of a CC as any secondary diagnosis that “would cause an increase in length of stay by at least 1 day in at least 75 percent of the patients.” Because of the likely underreporting of secondary diagnoses in the 1979 data, the Yale University researchers also used age as a surrogate for identifying patients with a CC. The original version of the ICD–9–CM DRGs assigned patients to a CC DRG if they had a secondary diagnosis on the CC list or if the patient was 70 years or older. With the implementation of the IPPS in FY 1984, the coding of secondary diagnoses by hospitals dramatically improved. During the first 4 years of the IPPS, the CC definition included the age 70 criterion. With the improved coding and reporting of diagnoses associated with the implementation of the IPPS, the use of age as a surrogate for CCs was no longer necessary. Thus, beginning in FY 1988, the age 70 criterion was removed from the CC definition and a CC DRG was defined exclusively by the presence of a secondary diagnosis on the CC list. Except for new diagnosis codes that were added to ICD–9–CM after FY 1984 (for example, HIV), the CC list of diagnoses currently used in the CMS DRGs is virtually identical to the CC list created at Yale University. However, there have been dramatic changes not only in the accuracy and completeness of the coding of secondary diagnoses but also in the characteristics of patients admitted to hospitals and the practice patterns within hospitals as well. Since the implementation of the IPPS, Medicare average length of stay has dropped dramatically from 9.8 days in 1983 to 5.7 days in 2005. The economic incentives inherent in DRGs motivated a change in practice patterns to discharge patients earlier from the hospital. These changes were facilitated by the increased availability of postacute care services, such as nursing homes and home health services, which allowed problems previously requiring continued hospitalization to be effectively treated outside the acute care hospital. Furthermore, there has also been a dramatic shift to outpatient surgery that avoids costly inpatient stays. Many surgical procedures formerly performed in the hospital are now routinely performed on an outpatient basis. As a result, patients admitted to the hospital today are on average more likely to have a CC than when the IPPS was implemented. The net effect of better coding of secondary diagnoses, reductions in hospital length of stay, increased availability of postacute care services, and the shift to outpatient care is that most patients (nearly 80 percent) admitted to a hospital now have a CC. As a result of the changes that have occurred during the 22 years since the implementation of the IPPS, the CC list as currently defined has lost much of its capacity to discriminate hospital resource use. Currently, 115 CMS DRGs have a CC subdivision. Up until FY 2002, the number of DRGs with a CC subdivision remained essentially unchanged from the original FY 1984 version of the DRGs. As a means of improving the payment accuracy of the DRGs, beginning with the FY 2002 DRG update, each base CMS DRG without a CC subdivision was evaluated to determine if a CC subdivision was warranted. Over the past five DRG updates, only seven base CMS DRGs have had a CC subdivision added. The primary constraint preventing a significant increase in the number of base CMS DRGs with a CC subdivision is the low number of patients who would be assigned to the non-CC group. Thus, the expansion of the number of CMS DRGs subdivided based on a CC is constrained because the vast majority of patients would be assigned to the CC group and few patients would be assigned to the non CC group. To remedy these problems, we reviewed each of the 13,549 secondary diagnosis codes to evaluate their assignment as a CC or non-CC using statistical information from the Medicare claims data and applying medical judgment based on current clinical practice. We refer to this list in this section as the “revised CC list.” The need for a revised CC list prompted a reexamination of the secondary diagnoses that qualify as a CC. Our intent was to better distinguish cases that are likely to result in increased hospital resource use based on secondary diagnoses. Using a combination of mathematical data and the judgment of our medical advisors, we included the condition on the CC list if it could demonstrate that its presence would lead to substantially increased hospital resource use. Diagnoses may require increased hospital resource use because of a need for such services as: Intensive monitoring (for example, an intensive care unit (ICU) stay).
                    Expensive and technically complex services (for example, heart transplant).
                    Extensive care requiring a greater number of caregivers (for example, nursing care for a quadriplegic). There are 3,326 diagnosis codes on the current CC list. Our 2006 review of the CC list reduced the number of diagnosis codes on the CC list to 2,583. Based on the current CC list, 77.66 percent of patients have at least one CC present. Based on the revised CC list from our 2006 review, the percent of patients having at least one CC present would be reduced to 40.34 percent. b. Chronic Diagnosis Codes The 1979 data used in the original formation of the CC list often did not have the manifestations of a chronic disease fully coded. As a result, the CC list included many chronic diseases with a broad range of manifestations. Such chronic illness diagnoses usually do not cause a significant increase in hospital resource use unless there is an acute exacerbation present or there is a significant deterioration in the underlying chronic condition. Therefore, in the revised CC list, we removed chronic diseases without a significant acute manifestation. Recognition of the impact of the chronic disease is accomplished by separately coding the acute manifestation. For example, the mitral valve disease codes 
                        ( print page 47154)
                        (codes 396.0 through 396.9) are assigned to the current CC list. However, unless the mitral valve abnormalities are associated with other diagnoses indicating acute deterioration, such as acute congestive heart failure, acute pulmonary edema, or respiratory failure, they would not be expected to significantly increase hospital resource use. Therefore, the revised CC list did not include the mitral valve codes. Recognition of the contribution of mitral valve disease to the complexity of hospital care would be accomplished by separately coding those diseases on the CC list that are associated with an acute exacerbation or deterioration of the mitral valve disease. The revised CC list applied the criterion that chronic diagnoses having a broad range of manifestations are not assigned to the CC list as long as there are codes available that allow the acute manifestations of the disease to be coded separately. For some diseases, there are ICD–9–CM codes that explicitly include a specification of the acute exacerbation of the underlying disease. For example, for congestive heart failure, the following codes specify an acute exacerbation of the congestive heart failure: 428.21, Acute systolic heart failure
                    428.41, Acute systolic and diastolic heart failure
                    428.43, Acute on chronic systolic heart failure
                    428.31, Acute diastolic heart failure
                    428.33, Acute on chronic diastolic heart failure These congestive heart failure codes are included on the revised CC list. However, the following congestive heart failure codes do not indicate an acute exacerbation and are not included in the revised CC list: 428.0, Congestive heart failure not otherwise specified
                    428.1, Left heart failure
                    428.20, Systolic heart failure not otherwise specified
                    428.22, Chronic systolic heart failure
                    428.32, Chronic diastolic heart failure
                    428.40, Systolic and diastolic heart failure
                    428.9, Heart failure not otherwise specified As a result of this approach, most chronic diseases were not assigned to the revised CC list. In general, a significant acute manifestation of the chronic disease must be present and coded for the patient to be assigned a CC. We made exceptions for diagnosis codes that indicate a chronic disease in which the underlying illness has reached an advanced stage or is associated with systemic physiologic decompensation and debility. The presence of such advanced chronic diseases, even in the absence of a separately coded acute manifestation, significantly adds to the treatment complexity of the patient. Thus, the presence of the advanced chronic disease inherently makes the reason for admission more difficult to treat. For example, under the revised CC list, stage IV, V, or end-stage chronic renal failure (codes 585.4 through 585.6) are designated as a CC, but stage I through III chronic renal failure (codes 585.1 through 585.3) are not. For obesity, a body mass index over 35 (codes V85.35 through V85.4) is a CC, but a body mass index between 19 and 35 is not. End-stage renal failure and extreme obesity are examples of chronic diseases for which the advanced stage of the disease is clearly specified. However, for most major chronic diseases, the stage of the disease is not clearly specified in the code. These codes were evaluated based on the consistency and intensity of the physiologic decompensation and debility associated with the chronic disease. For example, quadriplegia (codes 344.00 through 344.09) requires extensive care with a substantial increase in nursing services and more intensive monitoring. Therefore, quadriplegia is considered a CC in the revised CC list. c. Acute Diagnosis Codes Examples of acute diseases included on the revised CC list included acute myocardial infarction (AMI), cerebrovascular accident (CVA) or stroke, acute respiratory failure, acute renal failure, pneumonia, and septicemia. These six diseases are representative of the types of illnesses we included on the revised CC list. Other acute diseases were designated as a CC if their impact on hospital resource use would be expected to be comparable to these representative acute diseases. For example, acute endocarditis was included on the CC list but urinary tract infection was not. The revised CC list is essentially comprised of significant acute disease, acute exacerbations of significant chronic diseases, advanced or end stage chronic diseases and chronic diseases associated with extensive debility. Compared to the existing CC list, the revised CC list requires a secondary diagnosis to have a consistently greater impact on hospital resource use. The following Table E compares the current CC list and the revised CC list. There are 3,326 diagnosis codes on the current CC list. The CC revisions reduce the number of diagnosis codes on the CC list to 2,583. Based on the current CC list, 77.66 percent of patients have at least one CC present, using FY 2006 MedPAR data. Based on the revised CC list, the percent of patients having at least one CC present is reduced to 40.34 percent. The revised CC list increases the difference in average charges between patients with and without a CC by 56 percent ($15,236 versus $9,743). Table E.—Comparison of Current CC List and Revised CC List
Current CC list
Revised CC listCodes designated as a CC
3,326
2,583Percent of patients with one or more CCs
77.66
40.34Percent of patients with no CC
22.34
59.66Average charge of patients with one or more CCs
$24,538
$31,451Average charge of patients with no CCs
$14,795
$16,215
 The analysis above suggests that merely reviewing and updating the CC list can lead to significant improvements in the ability of the CMS DRGs to recognize severity of illness. Although we could potentially adopt this one change to better recognize severity of illness in the CMS DRGs, we have undertaken additional analyses that further refine secondary diagnoses into MCCs, CCs and non-CCs as described below. d. Prior Research on Subdivision of CCs into Multiple Categories (1) Refined DRGs During the mid-1980s, CMS (then HCFA) funded a project at Yale University to revise the use of CCs in the CMS DRGs. The Yale University project mapped all secondary diagnoses that were considered a CC in the CMS DRGs into 136 secondary diagnosis groups, each of which was assigned a CC complexity level. For surgical patients, each of the 136 secondary diagnosis groups was assigned to 1 of 4 CC complexity levels (non-CC, moderate CC, MCC, and catastrophic CC). For medical patients, each of the 136 secondary diagnosis groups was assigned to 1 of 3 CC complexity levels (non-CC, moderate/MCC, and catastrophic CC). All age subdivisions and CC subdivisions in the DRGs were 
                        ( print page 47155)
                        eliminated and replaced by the four CC subgroups for surgical patients, or the three CC subgroups for medical patients. The Yale University project did not reevaluate the categorization of secondary diagnosis as a CC versus a non-CC. Only the diagnoses on the standard CC list were used to create the moderate, major, and catastrophic subgroups. All secondary diagnoses in a secondary diagnosis group were assigned the same level, and a patient was assigned to the subgroup corresponding to the highest level secondary diagnosis. The number of secondary diagnoses had no effect on the subgroup assigned to the patient (that is, multiple secondary diagnoses at one level did not cause a patient to be assigned to a higher subgroup). The DRG system developed by the Yale University project demonstrated that a subdivision of the CCs into multiple subclasses would improve the predictability of hospital costs. (2) 1994 Severity DRGs We also examined the work we performed in the mid-1990's to revise the CMS DRGs to better recognize severity. In 1993, we reevaluated the use of CCs within the CMS DRGs. The reevaluation excluded the CMS DRGs associated with pregnancy, newborn, and pediatric patients (MDCs 14 and 15 and DRGs defined based on age 0–17). The major CC list from the AP-DRGs that are used for Medicaid payment by New York and other States was used to identify an initial list of MCCs. Using Medicare data, we reevaluated the categorization of each secondary diagnosis as a non-CC, CC, or an MCC. The end result was that 111 diagnoses that were non-CCs in the standard CMS DRGs were made a CC, 220 diagnoses that were a CC were made a non-CC, and 395 CCs were considered an MCC. All CC splits in the CMS DRGs were eliminated, and an additional 24 DRGs were merged together. The resulting base CMS DRGs were then subdivided into three, two, or no subgroups based on an analysis of Medicare data. The result was 84 DRGs with no subgroups, 124 DRGs with two subgroups, and 85 DRGs with three subgroups. An additional 63 pregnancy, newborn, and pediatric DRGs not evaluated resulted in a total of 652 DRGs. A patient was assigned to the CC subgroup corresponding to the highest level secondary diagnosis. Multiple secondary diagnoses at one level did not cause a patient to be assigned to a higher subgroup. The categorization of a diagnosis as non-CC, CC, or MCC was uniform across the CMS DRGs, and there were no modifications for specific DRGs. As part of the FY 1995 IPPS proposed rule, we made a complete file of the revised DRG descriptions available to the public. However, we never adopted the revised DRGs (55 FR 27756). e. Medicare Severity DRGs (MS–DRGs) We had several options in developing a refinement to the current CMS DRGs to better recognize increased resource use due to severity of illness. One option would involve simply taking the work performed in 1994 and then updating it with all the code changes that have taken place since then. We were reluctant to do this because of changes in medical practices as well as the substantial changes in ICD–9–CM codes since that time. Another option would have been to build on current CMS DRGs which include a number of advancements that better identify medical practices and technologies. Many commenters on the FY 2007 IPPS proposed rule urged us to take the latter approach because they believed the current base CMS DRGs clearly differentiate between the complexities of varying surgical procedures and medical devices. Therefore, we chose the option of developing a new severity DRG system based on the current CMS DRGs. The development of the 1994 Severity DRGs involved three steps: Consolidation of existing DRGs into base DRGs.
                    Categorization of each diagnosis as an MCC, CC, or non-CC.
                    Subdivision of each base DRG into subclasses based on CCs. We reviewed and revised each of the three steps and applied them to our current CMS DRGs to develop DRGs that better identify severity of illness among Medicare patients. We refer to this system that we proposed (and are adopting in this final rule with comment period) as the Medicare Severity DRGs (MS–DRGs). The purpose of the MS–DRGs is to more accurately stratify groups of Medicare patients with varying levels of severity. (1) Consolidation of Existing CMS DRGs into Base MS–DRGs The first step in our process was the consolidation of existing CMS DRGs into new proposed base MS–DRGs. We combined together the 115 pairs of CMS DRGs that are subdivided based on the presence of a CC. We further consolidated the CMS DRGs that are split on the basis of a major cardiovascular condition, AMI with and without major complication (CMS DRGs 121 and 122), and cardiac catheterization with and without complex diagnoses (CMS DRGs 124 and 125). We also consolidated the three pairs of burn CMS DRGs that were defined based on the presence of a CC or a significant trauma (CMS DRGs 506 and 507; 508 and 509; and 510 and 511). Next, we consolidated the 43 pediatric CMS DRGs that are defined based on age less than or equal to 17. These pediatric CMS DRGs contain a very low volume of Medicare patients. As shown in Table 10 of the FY 2007 IPPS final rule (71 FR 48318), only two of these pediatric CMS DRGs contained more than 100 patients (CMS DRGs 298 and 333). Seventeen of these pediatric DRGs had no patients (CMS DRGs 30, 33, 41, 48, 54, 58, 137, 252, 255, 282, 330, 340, 343, 393, 405, 446, and 448). As we have stated frequently, our primary focus in maintaining the CMS DRGs is to serve the Medicare population. We do not have the data or the expertise to maintain the DRGs in clinical areas that are not relevant to the Medicare population. We continue to encourage users of the CMS DRGs (or MS–DRGs that are being adopted) to make relevant adaptations if they are being used for a non-Medicare patient population. In addition to the pediatric CMS DRGs defined by the age of the patient, there are a number of CMS DRGs that relate primarily to the pediatric or adult population that have very low volume in the Medicare population, such as male sterilization, tubal interruptions, circumcisions, tonsillectomies, and myringotomies. These CMS DRGs were consolidated into the most clinically similar MS–DRG. Over the past two decades, the site of service for some elective procedures such as carpal tunnel release, cataract extraction, and laparoscopy has shifted from the inpatient to the outpatient setting, resulting in the CMS DRGs associated with these procedures having very low volume. These CMS DRGs were also consolidated into the most clinically similar MS–DRG. In addition, there were some clinically related CMS DRGs that had significant Medicare patient volume but had no significant difference in resource use. For example, thyroid (CMS DRG 290) and parathyroid (CMS DRG 289) procedures were virtually identical in terms of hospital resource use and were, therefore, consolidated. In total, 34 of these CMS DRGs were consolidated. The DRG consolidations are summarized in Table F below. Four pairs of MS–DRGs (223 and 224; 228 and 229; 323 and 324; and 551 and 552) were defined based on the presence of a CC or some other condition. For example, MS–DRG 323 is defined based on the presence of a CC or the performance of extracorporeal shock 
                        ( print page 47156)
                        wave lithotripsy. For these MS–DRGs, the CC condition was removed and the pair of DRGs remains separate but defined based only on the other condition (that is, MS–DRG 323 became urinary stones with extracorporeal shock wave lithotripsy). As was done in the 1994 severity DRG work, we did not consolidate any of the CMS DRGs for maternity or newborn cases. Before proceeding further, we made one additional change to a base DRG assignment after completing these consolidations. We assigned cranial-facial bone procedures to a new base DRG (Cranial/Facial Bone Procedures). These cases were previously assigned to DRGs 52 and 55 through 63. We also created a new base DRG, MS–DRG 245 (Automatic Implantable Cardiac Defibrillator (ACID) Lead and Generator Procedures). This DRG was created by removing automatic implantable cardiac defibrillator leads and generator procedures from the pacemaker DRG (CMS DRG 551; now new MS–DRGs 242 through 244). Table F below shows how DRGs in the CMS DRGs (Version 24.0) were consolidated into new base MS DRGs. We refer readers to section II.D.2. of the preamble of the proposed rule and this final rule with comment period for a detailed discussion of CCs and MCCs under the MS–DRG system. Table F.—DRG Consolidation
CMS–DRG version 24.0
DRG description
MS–DRGs version 25.0
New base  MS–DRG description6
Carpal Tunnel Release
40 
                                 41  
                                 42
Peripheral  Cranial Nerve  Other Nervous System Procedure with MCC, with CC, and without CC/MCC.7, 8
Peripheral  Cranial Nerve  Other Nervous System Procedure.36
Retinal Procedures
116 
                                 117
Intraocular Procedures with and without CC/MCC.38
Primary Iris Procedures.39
Lens Procedures with or without Vitrectomy.42
Intraocular Procedures Except Retina, Iris  Lens.43
Hyphema
124 
                                 125
Other Disorders of the Eye with and without MCC.46,  47,  48
Other Disorders of the Eye.50
Sialoadenectomy
139
Salivary Gland Procedures.51
Salivary Gland Procedures Except Sialoadenectomy.52
Cleft Lip  Palate Repair
133
Other Ear, Nose, Mouth  Throat O.R. Procedures with and without CC/MCC.55
Miscellaneous Ear, Nose, Mouth  Throat Procedures.56
Rhinoplasty
131 
                                 132
New DRG—Cranial/Facial Bone Procedures with and without CC/MCC.57, 58
Tonsillectomy  Adenoidectomy Procedure, Except Tonsillectomy /or Adenoidectomy Only.59, 60
Tonsillectomy /or Adenoidectomy Only.61, 62
Myringotomy with Tube Insertion.63
Other Ear, Nose, Mouth  Throat O.R. Procedures.67
Epiglottitis
152 
                                 153
Otitis Media  Upper Respiratory Infection with and without MCC.68, 69, 70
Otitis Media  Upper Respiratory Infection.71
Laryngotracheitis.72
Nasal, Trauma  Deformity
154 
                                 155  
                                 156
Other Ear, Nose, Mouth  Throat Diagnoses with MCC, with CC, without CC/MCC.73, 74
Other Ear, Nose, Mouth  Throat Diagnoses.185, 186
Dental  Oral Diseases Except Extractions  Restorations
157 
                                 158  
                                 159
Dental  Oral Diseases with MCC, with CC, without CC/MCC.187
Dental Extractions  Restorations.199
Hepatobiliary Diagnostic Procedure for Malignancy
420 
                                 421  
                                 422
Hepatobiliary Diagnostic Procedures with MCC, with CC, without CC/MCC.200
Hepatobiliary Diagnostic Procedure for Non-Malignancy.( print page 47157)244,  245
Bone diseases  Specific Arthropathies
553 
                                 554
Bone Diseases  Arthropathies with and without MCC.246
Non-Specific Arthropathies.259,  260
Subtotal Mastectomy for Malignancy *
584 
                                 585
Breast Biopsy, Local Excision  Other Breast Procedures with and without CC/MCC.261
Breast Procedures for Non-Malignancy Except Biopsy  Local Excision.262
Breast Biopsy  Local Excision for Non-Malignancy.267
Perianal  Pilonidal Procedures
579 
                                 580  
                                 581
Other Skin, Subcutaneous Tissue  Breast Procedures with MCC, with CC, without CC/MCC.268
Skin, Subcutaneous Tissue  Breast Plastic Procedures.269,  270
Other Skin, Subcutaneous Tissue  Breast Procedure.289
Parathyroid Procedures
625 
                                 626  
                                 627
Thyroid, Parathyroid  Thyroglossal Procedures with MCC, with CC, without CC/MCC.290
Thyroid Procedures.291
Thyroglossal Procedures.294
Diabetes  35
637
Diabetes with MCC, with CC, without CC/MCC.295
Diabetes  35.338
Testes Procedures for Malignancy
711 
                                 712
Testes Procedures with and without CC/MCC.339, 340
Testes Procedures, Non-Malignancy.342,  343
Circumcision

Procedure 64.0 changed to non-O.R. Cases with only this procedure will go to medical DRGs.351
Sterilization, Male
729 
                                 730
Other Male Reproductive System Diagnoses with and without CC/MCC352
Other Male Reproductive System Diagnoses.361
Laparoscopy  Incisional Tubal Interruption
744 
                                 745
DC, Conization, Laparascopy  Tubal Interruption with and without CC/MCC.362
Endoscopic Tubal Interruption.363
DC, Conization  Radio-Implant, for Malignancy.364
DC, Conization Except for Malignancy.411
History of Malignancy without Endoscopy
843 
                                 844  
                                 845
Other Myeloproliferative Disease or Poorly Differentiated Neoplasm Diagnosis with MCC, with CC, without CC/MCC.412
History of Malignancy with Endoscopy.413, 414
Other Myeloproliferative Disease or Poorly Differentiated Neoplasm Diagnosis.465
Aftercare with History of Malignancy as Secondary Diagnosis
949
Aftercare with and without.466
Aftercare without History of Malignancy as Secondary Diagnosis
950
CC/MCC.* Codes 85.22 and 85.23 in CMS DRGs 259 and 260 were moved to MS–DRG 582 and 583.
 As summarized in Table G, the consolidation resulted in the formation of 335 base MS–DRGs. Table G.—Consolidation of Current CMS DRGs Into MS DRGs
NumberCurrent CMS DRGs
538Elimination of CC subgroups
−114Elimination of MCC subgroups
−7Elimination of CC complexity subgroups
−5( print page 47158)Elimination of age 0–17 subgroups
−43Consolidation due to volume or resource similarity
−34New DRG
+1Revised Base DRGs
311Newborn, maternity and error DRGs
+24Base DRGs for severity subdivision
335
 The end result of the consolidation of the CMS DRGs in the MS–DRGs was similar to the consolidation performed in the 1994 severity DRGs. The 1994 DRG consolidations resulted in 356 base DRGs plus 2 error DRGs. The number of the 1994 base DRGs is different because new CMS DRGs have been added since 1994, the 43 age 0–17 pediatric CMS DRGs were not consolidated, and some of the volume shifts to outpatient care had not yet occurred in 1994. In the 1994 severity DRGs, 24 DRGs were consolidated due to volume or resource similarity. Sixteen of these 1994 DRG consolidations are included in the 34 consolidations done in the 2007 consolidations. However, due to concerns expressed by our physician consultants, 8 of the DRG consolidations from 1994 were not done. For example, interstitial lung disease (DRGs 92 and 93) was not consolidated with simple pneumonia and pleurisy (DRGs 89, 90, 91) as was done in the 1994 consolidations. *Comment:*
                         One commenter expressed concern that the focus of MS–DRGs was on the Medicare population. As a result of this focus, many of the DRGs reflect severity and resource use only for the Medicare population. The commenter stated that certain diagnoses present differently at different ages or actually represent a different disease process. For instance, the commenter stated that hypertension in a child represents a very different disease than for adults. The commenter also stated that CMS DRGs 569 and 570 (Major Small and Large Bowel Procedures with CC and with or without Major Gastrointestinal Diagnosis, respectively) have different costs for a Medicare patient than a child. The commenter also indicated that CMS did not perform updates to MDC 14 (Obstetrics) and MDC 14 (Newborns and Other Neonates with Problems Arising in the Perinatal Period). The commenter stated that the MS-DRGs will not work well for other populations. *Response:*
                         The MS–DRGs were specifically designed for purposes of Medicare hospital inpatient services payment. As we stated above, we generally use MedPAR data to evaluate possible DRG classification changes and recalibrate the DRG weights. The MedPAR data only represent hospital inpatient utilization by Medicare beneficiaries. We do not have comprehensive data from non-Medicare payers to use for this purpose. The Medicare program only provides health insurance benefits for people over the age of 65 or who are disabled or suffering from end-stage renal disease. Therefore, newborns, maternity, and pediatric patients are not well-represented in the MedPAR data that we used in the design of the MS–DRGs. We simply do not have enough data to establish stable and reliable DRGs and relative weights to address the needs of non-Medicare payers for pediatric, newborn, and maternity patients. For this reason, we encourage those who want to use MS–DRGs for patient populations other than Medicare make the relevant refinements to our system so it better serves the needs of those patients. (2) Categorization of Diagnoses We decided to establish three different levels of CC severity into which we would subdivide the diagnosis codes. The proposed three levels are MCC, CC, and non-CC. Diagnosis codes classified as MCCs reflect the highest level of severity. The next level of severity includes diagnosis codes classified as CCs. The lowest level is for non-CCs. Non-CCs are diagnosis codes that do not significantly affect severity of illness and resource use. Therefore, secondary diagnoses that are non-CCs do not affect the DRG assignment under either the CMS DRGs or the MS–DRGs. The categorization of diagnoses as an MCC, CC, or non-CC was accomplished using an iterative approach in which each diagnosis was evaluated to determine the extent to which its presence as a secondary diagnosis resulted in increased hospital resource use. In order to begin this iterative process, we started with an initial categorization of each diagnosis as an MCC, CC, or non-CC. As noted previously, the 1994 CC revision began by separating CCs into MCC and CC based on the AP–DRG major CCs. One way to begin this iterative process would have been to use the 1994 CC categorization. However, the 1994 CC categorization was based on FY 1992 data and ICD–9–CM diagnosis codes, which now are 15 years old. Since 1992, 1,897 new diagnosis codes have been added, and 346 diagnosis codes have been deleted. Because the revised CC list (explained in section II.C.2.a. of this preamble) was based on current ICD–9–CM codes and used recent data, we decided to utilize the revised CC list rather than the 1994 categorization as our starting point for determining whether each secondary diagnosis should be an MCC, a CC, or a non-CC. The revised CC list categorizes each diagnosis as a CC or a non-CC. We decided to use this list in combination with the categorization under the AP–DRGs and the APR DRGs. The AP–DRGs and the APR DRGs are updated annually with current codes and provide a good comparison source to use with the revised CC list. We designated as an MCC any diagnosis that was a CC in the revised CC list and was an AP–DRG major CC and was an APR DRG default severity level 3 (major) or 4 (extensive). We designated as a non-CC any diagnosis that was a non-CC in the revised CC list and was an AP–DRG non-CC and was an APR DRG default severity level of 1 (minor). Any diagnoses that did not meet either of the above two criteria was designated as a CC. The only exception to our approach was for diagnoses related to newborns, maternity, and congenital anomalies. These diagnoses are very low volume in the Medicare population and were not reviewed for purposes of creating the revised CC list. We used the APR DRGs to categorize these diagnoses. For newborn, obstetric, and congenital anomaly diagnoses, we designated the APR DRG default severity level 3 (major) and 4 (extreme) diagnoses as an MCC, the APR DRG default severity level 2 (moderate) diagnoses as a CC, and the APR DRG default severity 1 (minor) diagnoses as a non-CC. Table H summarizes the number of codes in each CC category. Table H.—Initial Categorization of CC Codes
Number of codesMCC
1,096CC
4,221Non CC
8,232Total
13,549
 This initial CC categorization of diagnosis codes was used to begin the iterative process of determining the proposed final CC categorization for each diagnosis code. 
                        ( print page 47159) (3) Additional CC Exclusions For some CMS DRGs, the presence of specific secondary diagnoses affects the base DRG assignment. For example, in MDC 5 (Diseases and Disorders of the Circulatory System), the presence of an AMI code as the principal diagnosis or as a secondary diagnosis will cause the patient to be assigned to the AMI DRGs (CMS DRGs 121 through 123). Therefore, if the AMI code is present as a secondary diagnosis, it should not be used to assign the CC category for a patient because it is redundant within the definition of the base DRG. Similarly, for MDC 24 (Multiple Significant Trauma), specific combinations of significant trauma as principal or secondary diagnosis cause the assignment to the multiple trauma DRGs (CMS DRGs 484 through 487). Therefore, any secondary diagnosis of trauma is redundant with the definition of the multiple trauma DRGs and should not be used to determine the CC category for a patient. Any secondary diagnoses that are used to assign a specific proposed base MS–DRG were excluded from the determination of the CC category for patients assigned to that base MS–DRG. *Comment:*
                         Several commenters asked that we make changes to the CC and exclusion list for codes associated with sepsis. The commenters stated that two Systemic Inflammatory Response Syndrome (SIRS) codes, 995.91 (Sepsis) and 995.92 (Severe sepsis) are CCs under MS–DRGs. The commenters believed that if a patient has SIRS and pneumonia, both conditions should be coded, and that this coding would result in a patient admitted with SIRS being assigned to MS–DRG 871 (Septicemia without Mechanical Ventilation with MCC). The commenters stated that the pneumonia would count as a MCC in this case. The commenters requested that CMS exclude pneumonia from being a MCC when it occurs with sepsis. The commenters believed pneumonia should be excluded as an MCC for a patient with sepsis because it is an underlying and related condition, and that these patients should not be assigned to MS–DRG 871. The commenters stated that the other SIRS codes, 995.93 (Systemic Inflammatory Response Syndrome due to noninfectious process without acute organ dysfunction) and 995.94 (Systemic Inflammatory Response Syndrome due to noninfectious process with acute organ dysfunction) are excluded from acting as a CC for pancreatitis (code 577.0). The commenters asked that CMS not exclude codes 995.93 and 995.94 with code 577.0. *Response:*
                         The commenters are mistaken about codes 995.91 and 995.92. While these two codes are not CCs, they are on the MCC list. Our data and the judgment of our medical advisors support the assignment of these codes to the MCC list. Furthermore, we do not believe it is appropriate to exclude pneumonia as an MCC for sepsis and severe sepsis. These patients would be at an extremely high level of severity. SIRS is not always associated with pneumonia but when it is, the patient is at a higher severity level. Therefore, we are not making this change to the CC exclusion list by excluding pneumonia codes from acting as a MCC with code 995.91 and 995.92. On the second issue the commenters raised, they are incorrect that codes 995.91 and 995.92 are excluded from acting as a CC for code 577.0. These codes are not on the CC exclusion list for code 577.0. Therefore, both would act as a MCC for code 577.0. We are not making any changes to the CC exclusion list as a result of these comments. (4) Analysis of Secondary Diagnoses The 311 base MS–DRGs (335 total base DRGs minus the MDC 14, MDC 5, and error DRGs) were subdivided into three CC subgroups. Patients were assigned to the subgroup corresponding to the most extreme CC present. All but four of the base MS–DRGs had strictly monotonically increasing average charges across the three CC subgroups (that is, average charges progressively increased from the non-CC to the CC to the MCC subgroups). The four MS–DRGs that failed to have monotonically increasing charges all had at least one CC subgroup with very low volume. For example, the non CC subgroup for the pancreas transplant DRG (CMS DRG 513) had only 2 cases. The overall statistics by CC subgroup for the 311 base MS–DRG are contained in Table I. Patients in the MCC subgroup have average charges that are nearly double the average charges for patients in the CC subgroup. The CC subgroup with the largest number of patients is the non-CC subgroup with 41.1 percent of the patients. Table I.—Overall Statistics for MS–DRGs Excluding Those in MDCs 14 and 15
CC subgroup
Number of cases
Percent
Average chargesMajor
2,604,696
22.2
$44,246CC
4,293,744
36.6
24,131Non-CC
4,818,411
41.1
18,435
 In order to evaluate the initial assignment of secondary diagnoses to the three CC subclasses, we devised a system that determined the impact on resource use of each secondary diagnosis. For each secondary diagnosis, we measured the impact in resource use for the following three subsets of patients: (a) Patients with no other secondary diagnosis or with all other secondary diagnoses that are non-CCs. (b) Patients with at least one other secondary diagnosis that is a CC but none that is an MCC. (c) Patients with at least one other secondary diagnosis that is an MCC. Numerical resource impact values were assigned for each diagnosis as follows: Value
Meaning0
Significantly below expected value for the non-CC subgroup.1
Approximately equal to expected value for the non-CC subgroup.2
Approximately equal to expected value for the CC subgroup.3
Approximately equal to expected value for the MCC subgroup.4
Significantly above the expected value for the MCC subgroup.
 Each diagnosis for which Medicare data were available was evaluated to determine its impact on resource use and to determine the most appropriate CC subclass (non-CC, CC, or MCC) assignment. In order to make this determination, the average charge for each subset of cases was compared to the expected charge for cases in that 
                        ( print page 47160)
                        subset. The following format was used to evaluate each diagnosis: Code
Diagnosis
Cnt1
C1
Cnt2
C2
Cnt3
C3
 Count (Cnt) is the number of patients in each subset and C1, C2, and C3 are a measure of the impact on resource use of patients in each of the subsets. The C1, C2, and C3 values are a measure of the ratio of average charges for patients with these conditions to the expected average charge across all cases. The C1 value reflects a patient with no other secondary diagnosis or with all other secondary diagnoses that are non-CCs. The C2 value reflects a patient with at least one other secondary diagnosis that is a CC but none that is a major CC. The C3 value reflects a patient with at least one other secondary diagnosis that is a major CC. A value close to 1.0 in the C1 field would suggest that the code produces the same expected value as a non-CC diagnosis. That is, average charges for the case are similar to the expected average charges for that subset and the diagnosis is not expected to increase resource usage. A higher value in the C1 (or C2 and C3) field suggests more resource usage is associated with the diagnosis and an increased likelihood that it is more like a CC or major CC than a non-CC. Thus, a value close to 2.0 suggests the condition is more like a CC than a non-CC but not as significant in resource usage as an MCC. A value close to 3.0 suggests the condition is expected to consume resources more similar to an MCC than a CC or non-CC. For example, a C1 value of 1.8 for a secondary diagnosis means that for the subset of patients who have the secondary diagnosis and have either no other secondary diagnosis present, or all the other secondary diagnoses present are non-CCs, the impact on resource use of the secondary diagnoses is greater than the expected value for a non-CC by an amount equal to 80 percent of the difference between the expected value of a CC and a non-CC (that is, the impact on resource use of the secondary diagnosis is closer to a CC than a non-CC). Table J below shows examples of the results. Table J.—Examples of Impact on Resource Use of Secondary Diagnoses
Code
Cnt1
C1
CntC2
C2
Cnt3
C3
CC 
                                 subclass401.1, Benign essential hypertension
12,308
0.955
40,113
1.715
5,297
2.384
Non CC.530.81, Esophageal reflux
294,673
0.986
917,058
1.639
122,076
2.302
Non CC.560.1, Paralytic Ileus
10,651
1.466
87,788
2.320
51,303
3.226
CC.491.20, Obstructive chronic bronchitis
7,003
1.416
32,276
2.193
13,355
3.035
CC.410.71, Subendocardial infarction initial episode
1,657
2.245
30,226
2.778
42,862
3.232
MCC.518.81, Acute respiratory failure
5,332
2.096
118,937
2.936
223,054
3.337
MCC.
 The resource use impact reports were produced for all diagnoses except obstetric, newborn, and congenital anomalies (10,690 diagnoses). These mathematical constructs were used as guides in conjunction with the judgment of our clinical staff to classify each secondary diagnosis reviewed as an MCC, CC or non-CC. Our clinical panel reviewed the resource use impact reports and modified 14.9 percent of the initial CC subclass assignments as summarized in Table K below. The rows in the table are the initial CC subclass categories and the columns are the final CC subclass categories. *Comment:*
                         Several commenters acknowledged the detailed description of the methodology used in categorizing secondary diagnoses as MCCs, CCs, or non-CCs. While they were appreciative of the detailed iterative process outlined in the proposed rule (72 FR 24702), the commenters requested that CMS provide the numerical values (the C1 to C3 values) that were assigned to classify each diagnosis as an MCC, CC or non-CC. *Response:*
                         We agree that it would be helpful to share the data we developed and used for each individual code as part of our CC evaluation process. We will post this data on the CMS Web site at: 
                        *http://www.cms.hhs.gov/​AcuteInpatientPPS/​*
                         under the Downloads section. Table K.—CC Subclass Modifications
Initial CC subclass
Final CC subclassMCC
CC
Non-CC
Total
PercentMCC
847
62
0
909
8.5CC
542
2,579
737
3,858
36.1Non-CC
0
272
5,651
5,923
55.4Total
1,389
2,913
6,388
10,690Percent
13.0
27.2
59.8
 Of the diagnoses initially designated as an MCC, 6.8 percent were made a CC (62/909), and of the diagnoses initially designated as non-CC, 4.6 percent were made a CC (272/5,923). The major shift occurred in the diagnoses initially assigned to the CC subclass. Fourteen percent of the diagnoses initially designated as a CC were made an MCC (542/3858), and 19.1 percent of the diagnoses initially designated a CC were made a non-CC (737/3,858). In determining the CC subclass assigned to a diagnosis, imprecise codes were, in general, not assigned to the MCC or CC 
                        ( print page 47161)
                        subclass. For example, the congestive heart failure codes have the following CC subclass assignments: Code
CC subclass assignment428.21, Acute systolic heart failure
MCC.428.41, Acute systolic  diastolic heart failure
MCC.428.43, Acute on chronic systolic heart failure
MCC.428.31, Acute diastolic heart failure
MCC.428.33, Acute on chronic diastolic heart failure
MCC.428.1, Left heart failure
CC.428.20, Systolic heart failure NOS
CC.428.22, Chronic systolic heart failure
CC.428.32, Chronic diastolic heart failure
CC.428.40, Systolic  diastolic heart failure
CC.428.0, Congestive heart failure NOS
Non-CC.428.9, Heart failure NOS
Non-CC.
 The acute heart failure codes are MCCs, and the chronic heart failure codes are CCs. However, Not Otherwise Specified (NOS) heart failure codes are non-CCs. Thus, the precise type of heart failure must be specified in order for an MCC or CC to be assigned. There are currently 13,549 ICD–9–CM diagnosis codes. The external cause of injury and poisoning codes (E800 through E999) and congenital abnormality codes were not included in our current CC review for the MS–DRGs. We excluded the external cause of injury and poisoning codes from consideration as an MCC or a CC because they describe how an injury occurred, and not the exact nature of the injury. For instance, if a patient fell on the deck of a boat and fractured his or her skull, one would assign an E code to describe the fall on the boat. A separate diagnosis code would be assigned to describe the exact nature of any resulting injury such as a contusion, fractured bone, or skull fracture and concussion. A patient would be assigned to a severity level based on the exact nature of the injury and not the manner in which the injury occurred. Therefore, we decided not to classify any of the E codes as either an MCC or a CC. The congenital abnormality codes describe abnormalities when a baby is born. At times, a beneficiary may live with these congenital abnormalities for years without a problem. The congenital abnormalities may later lead to complications that require hospital admissions. Should these congenital abnormalities lead to medical problems that result in a hospital admission for a Medicare beneficiary, the exact nature of the condition being treated would also be assigned a code. This more precise code would be evaluated to determine whether or not it was an MCC or a CC. Therefore, we decided not to classify congenital abnormality codes as an MCC or a CC, but to instead use the other reported diagnosis codes that better describe the reason for the admission. Excluding the external cause of injury codes, we reviewed 10,690 diagnosis codes. As was done in our 1994 severity proposal, diagnoses that were closely associated with patient mortality were assigned different CC subclasses, depending on whether the patient lived or died. These diagnoses are: 427.41, Ventricular fibrillation
                    427.5, Cardiac arrest
                    785.51, Cardiogenic shock
                    785.59, Other shock without mention of trauma
                    799.1, Respiratory arrest Resource use for patients with these diagnoses who were discharged alive was consistent with an MCC. Resource use for patients with these diagnoses who died was consistent with a non-CC. Further, most patients who died could legitimately have one of these diagnoses coded. As a result, these diagnoses are assigned an MCC subclass for patients who lived and a non-CC subclass for patients who died. For some secondary diagnoses assigned to the CC subclass, our medical advisors identified specific clinical situations in which the diagnosis should not be considered a CC. In such clinical situations, the CC exclusion list was used to exclude the secondary diagnosis from consideration in determining the CC subgroup, essentially making the secondary diagnosis a non-CC. For example, primary cardiomyopathy (code 425.4) is designated as a CC. However, for patients admitted for congestive heart failure, our medical advisors believed that primary cardiomyopathy should be treated as a non-CC. In order to accomplish that, the congestive heart failure principal diagnoses were added to the CC exclusion list for primary cardiomyopathy as a secondary diagnosis. The list of diagnosis codes that we proposed to classify as an MCC (which we are adopting in this final rule with comment period) was included in Table 6J in the Addendum to FY 2008 IPPS proposed rule. The diagnosis codes that we proposed to classify as a CC (which are adopting in this final rule with comment period) were included in Table 6K in the Addendum to the proposed rule. The E-codes, which are diagnosis codes used to classify external causes of injury and poisoning, are not included in this list. All E codes are designated as non-CCs under the current CMS DRG system and our evaluation supports this non-CC designation as appropriate. We are including a list of changes to the MCC and CC lists as a result of public comments on the proposed rule later in section II.G.13. of the preamble of this final rule with comment period. We will post a complete final list of the MCC and CC codes on the CMS Web site at: 
                        *http://www/​cms/​hhs/​gov/​AcuteInpatientPPS/​*
                         under the Files for Download section. *Comment:*
                         One commenter supported the basic methodology used to identify MCCs and CCs. The commenter's analysis of discharge data generally confirms the notion that the presence of chronic disease does not usually have material impact on the expected cost of care. The commenter agreed that the emphasis on acute manifestations of chronic diseases is both clinically and financially appropriate. The commenter stated that the current CC list is nearly 25 years old and does not reflect the extent to which clinical practice has changed during that period, with concomitant changes in expected resource use. The commenter further stated that the current CC list also does not reflect the nature of changes in coding practices during that period, changes that have undermined the value of the current CC list. The commenter stated that the elimination of common secondary diagnoses such as code 428.0 (Congestive heart failure, unspecified) 
                        ( print page 47162)
                        and code 427.31 (Atrial fibrillation) from the CC list will help to restore CC status as a meaningful indicator of differential expected resource use. The commenter also believed that elimination of these diagnosis codes will address the current situation in which nearly 80 percent of Medicare discharges contain one or more CCs. *Response:*
                         We agree that it was important to perform a careful review of the CC list to develop lists that more accurately identify patients with significantly different severity levels. We believe that by using both statistical data as well as input from our medical advisors, we were able to develop the MCCs and CCs that do a much better job of classifying Medicare patients with varying levels of severity. We also agree that is important to remove chronic diagnoses from the CC list that do not have a significant impact on severity. We also believe that nonspecific codes such as code 428.0 should not be included on the CC list. The ICD–9–CM coding system has more specific codes to identify the specific type of heart failure. These more specific codes have data supporting their inclusion on the MCC and CC list. Our medical advisors also supported the inclusion of the more specific heart failure codes on the MCC and CC list. We also agree that patients with atrial fibrillation (code 427.31) do not necessarily have a higher level of severity. The Medicare data suggest that when this condition appears on the claim and the patient has no other secondary diagnosis that is a CC, the charge data suggest the condition produces an expected value for a non-CC rather than a CC case. Further in the judgment of our medical advisors, the condition should not be on the CC list. When the atrial fibrillation leads to additional cardiac problems, the additional problems may be represented by codes that are on the MCC or CC list. We agree that by removing codes from the CC list that do not contribute to significantly higher levels of severity, we can better recognize severity of illness and more accurately reimburse hospitals. We spent extensive time carefully reviewing the ICD–9–CM diagnosis codes to develop the MCC and CC list. Our current CC list for Version 24.0 of the CMS DRGs contains 3,326 codes. The MS–DRGs have 3,342 codes on the MCC list and 4,922 codes on CC list. While we did remove codes from the CC list and add others to the list, we believe that the end result is a better classification of conditions for identifying differences in severity of illness. We appreciate the commenter's support for our efforts. *Comment:*
                         Several commenters supported the MCC and CC lists as a better means of identifying severity. The commenters recommended that CMS consider adopting the revised CC list in FY 2008 as an interim step toward IPPS reform. The commenters recommended that CMS delay implementation of the new severity system until FY 2009 but adopt the revised CC list in FY 2008. The commenters stated that by implementing the revised CC list in FY 2008, CMS could move forward in its goal of utilizing a system that more accurately recognizes the severity of illness of patients. The commenters believed this option would allow a more accurate DRG system to be in place while CMS is evaluating the final RAND report to determine which severity-based DRG system to propose for implementation in FY 2009. Another commenter who supported the move to MS–DRGS and CMS' efforts in creating the MCC and CC lists stated that it had been working with CMS for years to develop a mechanism to appropriately account for the resources involved in the care of patients with severe sepsis. The commenter believed that the MS–DRGs in which severe sepsis is recognized as a major complication, along with acute respiratory distress syndrome, organ failure, and other conditions where resource use is more intense, will go a long way towards better recognition of severity of illness. One commenter applauded CMS for the work it has put into developing a system that will consider complexity of care as well as severity of illness in determining Medicare payment for hospital inpatient services. The commenter particularly supported the recognition of hemophilia and end-stage renal disease as MCCs. The commenter stated that these conditions clearly meet the criteria for treatment as MCCs because they often require “expensive and technologically complex” services that lead to substantially increased resource use and reflect the highest level of severity. The commenter encouraged CMS to add other diagnoses as the evidence warrants. *Response:*
                         Comments and responses on whether to implement MS–DRGs in FY 2008 or at a later date are discussed in detail in section II.D. of the preamble of this final rule with comment period. We appreciate the support for our efforts in creating the MCC and CC lists and agree that it is important to examine data using the system and continue to refine the MCC and CC lists. *Comment:*
                         One commenter commended CMS on the systematic way it reviewed 13,549 secondary diagnosis codes to evaluate their assignment as a CC or non-CC using a combination of mathematical data and the judgment of its medical advisors. The commenter stated that, as part of the effort to better recognize severity of illness, CMS conducted the most comprehensive review of the CC list since the creation of the DRG classification. However, the commenter disagreed with the classification of many common secondary diagnoses as non-CCs. Specifically, the commenter questioned threshold levels that were used and at what point in the analysis CMS decided that a code was not a CC. For example, the commenter asked what was considered “intensive monitoring,” inquiring whether intensive monitoring refers to additional nursing care on a daily basis, additional testing, intensive care unit care, extended length of stay, all of these factors, or some other factor. In some instances, the commenter noted that similar or comparable codes within the same group have remained a CC/MCC, while other clinically similar codes or codes requiring similar resources may have been omitted. Without greater transparency, and a code-by-code explanation, the commenter was unable to determine why significant secondary diagnoses requiring additional resources have been removed from the CC list. For the most part, the commenter's analysis concentrated on reviewing current CCs that have been omitted from the revised CC list. The commenter made the following overall recommendations with regard to the CC list: CMS should make the final revised CC list publicly available as quickly as possible so that hospitals may focus on understanding the impact of the revised CC list, training and educating their coders, and working with physicians for any documentation improvements required to allow the reporting of more specific codes where applicable.
                    CMS should consider additional refinements to the revised CC list and, in particular, address issues where the ICD–9–CM codes may need to be modified to provide the distinction between different levels of severity.
                    In situations where a new code is required, CMS should default to leaving the codes as CCs until new codes can be created. *Response:*
                         The process of evaluating both claims data and clinical issues is a challenging one. Our medical advisors performed an extensive evaluation of codes for the MCC and CC lists, combining their medical judgment and claims data. We have reviewed a number of specific codes raised by 
                        ( print page 47163)
                        commenters and considered whether or not the codes should be a MCC or CC. These numerous code requests are discussed below. Also, as mentioned earlier, we plan to post the data we used to evaluate each code on the CMS Web site. These data may assist the public in making recommendations for additional changes to the MCC and CC lists. Any revisions made to the MS–DRGs or the MCC and CC lists are being made available with this final rule with comment period. As suggested by the commenter, we plan to evaluate further refinements to the MCC and CC lists each year as we obtain additional recommendations and data under the MS–DRG system. *Comment:*
                         One commenter acknowledged the significant effort and consideration CMS has given to developing both the mathematical and clinical judgment criteria in determining severity classifications. However, the commenter did not believe it was possible to fully assess the assignment of diagnosis codes in the severity classification because there was an incomplete description of the process in the proposed rule. *Response:*
                         As stated earlier, we plan to post on the CMS Web site the data used in analyzing how to classify each ICD–9–CM code as an MCC, CC, or non-CC. Our process for making CC/MCC decisions was an iterative one involving data review and clinical analysis. In the FY 2008 IPPS proposed rule (72 FR 24702 through 24705), we explained in detail our methodology for determining whether a secondary diagnosis qualified as an MCC, CC, or non-CC. Although posting these data results on the CMS Web site may be helpful in illustrating for commenters the data we used in classifying conditions as MCCs, CCs or non-CCs, we note that these data were combined with clinical judgment to make the final determinations. That is, the data were used as an adjunct to the judgment of our medical advisors. Clinical judgment may differ by individual physician. Thus, the data alone may be helpful but not definitive in helping commenters understand the reasons for some of our decisions. Nevertheless, we welcome further public input on potential revisions to the MCC and CC lists for FY 2009. We anticipate making updates to the MCC and CC lists each year as we receive additional recommendations and data. Again, below we respond to comments about specific codes. *Comment:*
                         One commenter commended CMS for undertaking a long-overdue comprehensive review and revision of the CC list. However, the commenter stated that more industry input is needed regarding the revised CC and MCC designations in the MS–DRG system. The commenter stated that the brevity of the public comment period, in combination with insufficient detail associated with the process and rationale for categorization of diagnoses as MCCs, CCs, and non-CCs, made it very difficult to conduct a thorough analysis of all of the codes on the MCC and CC lists. Another commenter stated that its members have only had an opportunity to do a cursory comparison of the current CMS CC list to the MS–DRG MCC and CC lists. The commenter stated that it should have the ability to do a complete analysis prior to implementation. The commenter believed such a review would be time intensive and likely to take a number of months of information exchange before it could be completed. Although the commenter acknowledged that the MCC and CC lists were included in the 
                        **Federal Register**
                         notice and posted on the CMS Web site, the commenter believed the review was hampered by a lack of GROUPER software and a GROUPER Definitions Manual from being able to complete their review. The commenter also expressed concern that the analysis of secondary diagnoses was based on charges instead of costs. The commenter stated that if CMS’ intent is to convert to a cost-based structure, a determination of the impact of secondary diagnoses should not be based on charges. The commenter added that this analysis appeared to be inconsistent with the evolution to a cost-based DRG weight system. *Response:*
                         We recognize the extensive time that is required by the public in order to perform a review of the MCC and CC lists. However, we note that a DRG Definitions Manual and GROUPER have never been made available until after completion of the final rule in past years and public commenters never before suggested that we need to delay implementation of proposed changes to the IPPS. While we acknowledge that the changes proposed for FY 2008 are significantly more comprehensive than the changes we propose in a typical year, the base DRG assignments under the MS–DRGs are largely unchanged from the prior CMS DRGs. The major changes result from assignment of a case to a DRG severity level using the new classification of secondary diagnoses as MCCs, CCs or non-CCs. For this reason, we made extensive information available to allow public commenters to perform a variety of analyses. The proposed rule included comprehensive lists of the codes that we classified as MCCs and CCs, and we made this information available electronically on the CMS Web site. The FY 2006 MedPAR data that were used to simulate proposed rule policies were made available simultaneous with public display of the FY 2008 proposed rule. This data file included both the CMS DRG assigned to the case using the Version 24.0 GROUPER and the proposed MS–DRG assignment. Further, we provided—at no extra cost to the purchaser—an FY 2005 version of the MedPAR that also included the CMS and MS–DRG assignment at the case level. For these reasons, we do not believe the lack of availability of a GROUPER or a DRG Definitions Manual should have precluded commenters from being able to analyze the revised MCC and CC lists. In fact, we note that a number of public commenters did provide suggestions for further revisions to these lists, suggesting there was ample time to be able to do these analyses. We have considered the suggestion that we analyze changes to the MCC and CC lists using average costs instead of charges. We adopted a cost-based weighting methodology because of our concern that differential markups among routine and ancillary services made charges a poor proxy for costs when setting relative weights for dissimilar types of cases. That is, different types of cases would use very different mixes of routine and ancillary services with variable markups and could create distortions in relative weights that are based on charges. However, we are less concerned about using charges when comparing cases that share the same primary diagnosis, which are likely to use similar mixes of services when deciding whether to make a DRG change. In these cases, we believe charges may provide a reasonable proxy for costs because the cases use similar services with similar markups. The methodology that we use to develop cost-based weights is very complex and works well to give us a measure of relative average resource use when combining a high number of cases together in a single DRG. We would need to analyze whether a methodology that tries to determine average costs at the case or code level would provide reliable results for making decisions about MCCs and CCs or DRG changes. Nevertheless, we appreciate this comment and will continue to give it further consideration as we evaluate alternative approaches to updating the MCC and CC lists and the MS–DRGs in the future. *Comment:*
                         One commenter stated that CMS should address the inconsistencies 
                        ( print page 47164)
                        within the CC list identified by its physician and hospital reviewers. The commenter also recommended that, where necessary, CMS should obtain additional input from physicians in the appropriate specialties to determine the standard of care and consequent increased hospital resource use of some of the conditions. The commenter provided a list of conditions that were removed from the revised CC list and urged CMS to maintain them on the CC list. *Response:*
                         We agree that the review of codes for the MCC and CC list was a daunting task requiring careful review by our panel of medical advisors. We used a number of physicians in this process, including internists and surgeons, to evaluate the effect of specific codes on a patient's severity levels. When necessary, our panel contacted other medical specialists, such as orthopedists and oncologists, to obtain additional input. We appreciate the CC issues brought to our attention. We reexamined specific codes brought to our attention below. We expect that we will continue to revise and update both the CC list and MCC list as we gain experience and data under the MS–DRG system. We anticipate making additional changes in the future with this added information. *Comment:*
                         One commenter stated that, in some cases, the current ICD–9–CM classification system does not adequately distinguish between acute and chronic forms of a condition. In the MS–DRG system, this distinction appears to be critical in predicting resources utilized at the patient level. The commenter recommended that CMS work with the NCHS to make ICD–9–CM code modifications to improve this acute and chronic distinction. Additionally, the commenter suggested that CMS and HHS should take immediate steps for the adoption of ICD–10–CM, as this system is much better than ICD–9–CM at distinguishing clinical severity, which is a key aspect of any severity-adjusted DRG system. The commenter believed that continued use of ICD–9–CM severely limits the ability of a severity-adjusted DRG system to recognize severity of illness. *Response:*
                         We encourage anyone with specific recommendations for revisions to the ICD–9–CM diagnosis codes to contact Donna Pickett, National Center for Health Statistics, Centers for Disease Control and Prevention at: (301) 458–4434. Information on requesting changes to the ICD–9–CM diagnosis codes can be found on the Web site at: 
                        *http://www.cdc.gov/​nchs/​icd9.htm.*
                         The Department is continuing to evaluate whether to move to ICD–10. *Comment:*
                         One comment disagreed with CMS’ elimination of many chronic conditions from the CC list. The commenter stated that patient care resources are utilized to prevent acute exacerbation of a chronic condition. The commenter believed that to not include these conditions on a CC list is a major flaw in the logic. The commenter supported inclusion of chronic conditions on the CC list as means to recognize the resources utilized to manage these conditions effectively, whether they are currently in an acute phase. The commenter did not mention specific chronic conditions that should be added to the MCC and CC lists. *Response:*
                         We address comments on specific conditions below. However, as a general matter, we found the Medicare data do not generally support that chronic or “unspecified” conditions are more resource intensive than conditions with an acute manifestation of a chronic disease that are described by specific codes. After carefully considering this issue, our medical advisors agreed that unspecified or chronic conditions generally are not suggestive of a higher level of severity of illness in and of themselves when there are more specific codes available to further describe the patient's specific condition or an acute manifestation of a chronic disease. We note that unspecified and chronic conditions are very commonly found in the Medicare patient population. The purpose of the MS–DRGs is to identify those conditions that lead to higher severity of illness and resource use relative to the average Medicare patient. These conditions suggest average or less than average resource use across the entire Medicare population. If we were to classify chronic and unspecified conditions as MCCs and CCs, the MS–DRGs ability to better recognize severity of illness would be significantly diminished. Condition-Specific Comments We received a number of recommendations of codes to be added to the CC list and the MCC list. We have divided these recommendations into three general categories and will address them accordingly. The three categories are: Nonspecific codes
                    Symptoms, chronic conditions, and low severity conditions
                    High severity codes that were erroneously left off of the CC or MCC list. The first category of recommendations includes a number of codes that are nonspecific. For instance, one frequent recommendation for addition to the CC list is the nonspecific code 428.0 (Congestive heart failure, unspecified). This code is one of several codes that identify patients who have heart failure. Depending on the degree of certainty by the physician of the exact nature of the heart failure, a code can be assigned to indicate a very specific and acute form of heart failure, or a more general, nonspecific code can be assigned to represent a patient with heart failure, but the exact nature of the heart failure is unknown. Other nonspecific conditions include disorders of a heart valve. If the exact nature of the disorder of a heart valve is known, a specific code can be assigned. If the exact nature or degree of the disorder of the valve is not known, a more general, nonspecific code can be assigned. As discussed earlier in this final rule with comment period, our claims data and the clinical analysis of our medical advisors indicate that patients described by the more general, nonspecific codes are not at a higher severity level. If a patient's condition worsens and develops additional diagnoses or complications, these more specific conditions may be on the CC list or MCC list. The most frequently mentioned, nonspecific code by commenters was code 428.0. Therefore, we will provide a detailed summary of these comments and our response. There were a number of other nonspecific conditions suggested for additions to the CC list. We will address these conditions after summarizing the comments on congestive heart failure. The second category includes a variety of codes representing symptoms, chronic conditions, and other conditions that do not describe a high level of severity. These conditions do not themselves indicate a high severity level using our mathematical analysis of the claims data combined with the clinical analysis by our medical advisors. As stated earlier, we did not include most chronic conditions on the CC list or the MCC list unless the code also indicates an acute exacerbation that would raise the severity level. If a patient has a chronic condition that deteriorates or develops into an acute complication, the more acute condition or complication may be on the CC list or the MCC list. The third category of codes includes codes that commenters suggested should have been included on the CC list or the MCC list because they clearly describe a high level of severity. Upon further review, we agree that this third group of codes meet the criteria for being included on the CC list or MCC list. The claims data and our medical advisors' clinical analysis clearly support the addition of these codes to the CC list or the MCC list. 
                        ( print page 47165) (a) Codes Representing Nonspecific Conditions Congestive Heart Failure—Code 428.0 *Comment:*
                         One commenter endorsed the implementation of the revised CC list. The commenter stated that CMS used new criteria for refining the CC and MCC lists, which led to the removal of codes currently on the CC list. The commenter compared the old and revised CC lists and found that the revision added 2,002 codes and dropped 425 codes, for a net increase of 1,577 codes. The commenter stated that, even though the number of added codes far exceeds the number of dropped codes, in the last three MedPAR files, the dropped codes were used an average of 40,864 times, while the added codes were used an average of only 887 times. The commenter stated that many of the dropped codes pertain to unspecified conditions for which more specific codes are available and included on the revised CC list. The highest volume code, code 428.0, was applied to an average of 2.3 million Medicare fee-for-service cases a year during the past 3 years. This code is the most widely used secondary diagnosis code, despite the fact that 12 more specific codes were added in FY 2003. The additional codes are shown in the Table L below. Table L.—Incidence of Secondary Diagnosis Coding for Heart Failure FY 2004–FY 2006
ICD–9–CM code
Description
New in 
                                 FY 2003428.0
Congestive heart failure, unspecified428.1
Left heart failure428.20
Systolic heart failure; unspecified
x428.21
Systolic heart failure; acute
x428.22
Systolic heart failure; chronic
x428.23
Systolic heart failure; acute on chronic
x428.30
Diastolic heart failure; unspecified
x428.31
Diastolic heart failure; acute
x428.32
Diastolic heart failure; chronic
x428.33
Diastolic heart failure; acute on chronic
x428.40
Combined systolic and diastolic heart failure; unspecified
x428.41
Combined systolic and diastolic heart failure; acute
x428.42
Combined systolic and diastolic heart failure; chronic
x428.43
Combined systolic and diastolic heart failure; acute on chronic
x428.9
Heart failure, unspecified
 The commenter stated that, by making code 428.0 a non-CC, hospitals will react by coding more precisely using the more definitive heart failure codes, raising the CMI, which results in documentation and coding-related overpayments. The commenter argued that, if the revised CC list were implemented before hospitals had a chance to improve their coding to accommodate the revisions, “case-mix creep and IPPS overpayments would ensure.” *Response:*
                         This commenter suggests reasons why Medicare should adopt the MS–DRGs over a transition period and does not appear to be opposed to our decision not to classify congestive heart failure as either an MCC or a CC. The commenter also suggests how hospitals will respond to the coding incentives that will be presented by revisions to the MCC and CC lists as well as the MS–DRGs. The issue of adopting the MS–DRGs over a transition is addressed in detail in section II.E. of the preamble of this final rule with comment period. We further address the implications of the coding incentives raised in this public comment in section II.D.6. of the preamble of this final rule with comment period that discusses an adjustment to IPPS rates for improvements in documentation and coding. *Comment:*
                         A number of other commenters urged CMS to classify the condition under code 428.0 as a CC. The commenters indicated that code 428.0 identifies an acute condition, not a benign or a chronic condition. Some commenters stated that any inpatient with congestive heart failure requires increased nursing care to closely monitor and assess physical symptoms and vital signs for indications of increased congestion. Patients often need to undergo repeated laboratory studies. Another commenter stated that the proposed rule incorrectly characterized the diastolic and systolic heart failure codes as congestive heart failure. The commenter pointed out that according to the Fourth Quarter 2002 issue of Coding Clinic for ICD–9–CM, congestive heart failure is not an inherent component of the codes in category 428 for systolic and diastolic heart failure. Therefore, according to Coding Clinic, the commenter stated that code 428.0 should be assigned as an additional code when the patient has systolic or diastolic congestive heart failure. The commenter added that code 428.0 may appropriately be assigned by itself when congestive heart failure is documented, but there is no documentation of systolic or diastolic heart failure. The commenter stated that, in ICD–9–CM, there is no distinction between an acute exacerbation of congestive heart failure and chronic congestive heart failure. Code 428.0 is assigned for both. The commenter added that codes 402.11 (Benign hypertensive heart disease with congestive heart failure) and 402.91 (Unspecified hypertensive heart disease with congestive heart failure) are on the CC list. The commenter suggested that code 428.0 be included on the revised CC list as well. Another commenter who objected to the removal of code 428.0 from the CC list stated that, currently, ICD–9–CM codes do not distinguish between acute, chronic, or acute exacerbation of chronic congestive heart failure. All forms of this condition are assigned to code 428.0. The commenter indicated that medical record documentation may not typically include information on whether the congestive heart failure is systolic or diastolic (acute versions of heart failure with this specificity are considered MCCs). The commenter requested that code 428.0 be added as an MCC until a new code can be created to identify acute exacerbation of congestive heart failure. The commenter stated that the fact that there is “congestion” is medically more problematic and more resource intensive and may necessitate care in the intensive care unit and a prolonged 
                        ( print page 47166)
                        hospital stay. The commenter stated that coding guidelines necessitate that acute pulmonary edema of cardiac origin be assigned code 428.0. *Response:*
                         Given the number of public comments on this one condition, our medical advisors reviewed the data and clinical issues surrounding code 428.0 again. They strongly recommend that we not change this code to a CC. There are three reasons for this recommendation. First, as stated earlier, we developed a policy of classifying nonspecific codes as non-CCs when a more specific code was available that identified the more specific nature of the patient's illness. Second, data for this and other nonspecific codes do not support assigning it to a higher severity level. Third, in the clinical judgment of our medical advisors, the use of a nonspecific code means that the physician had not identified a medical condition that indicates the patient is at a higher severity level or requires greater resources. This code is vague and does not provide any description of the exact nature of the heart failure. Data for this very commonly reported code clearly indicate that these patients are at a low severity level. However, claims data and our general policy of assigning nonspecific codes to a lower severity level were not the only factors that we used to classify a code as an MCC, CC, or non-CC. As stated above, the data were only used as an adjunct to the judgment of our medical advisors. In the judgment of our medical advisors, the condition described by code 428.0 does not suggest an increase in patient severity of illness. In this case, 12 more specific codes are available to indicate the more severe forms of heart failure. If the physician includes more precise information in the medical record that would allow the coder to identify a more specific code to describe the type of heart failure, the documentation will reflect that the hospital treated a more severely ill patient and the case will be assigned to a higher severity level. While we decided to classify code 428.0 as a non-CC based on our policy concerning nonspecific codes, the data, and the judgment of our medical advisors, we note that heart failure is an important national health issue. We believe it is very important for hospitals and physicians to use the most specific codes that describe the incidence of heart failure in their patients. In order to accurately and completely evaluate health care outcomes for the treatment of heart failure, detailed and accurate information is needed on patients with this condition. Physicians and hospitals will undermine efforts to obtain more information on patients with this disease when they use a nonspecific code when there is a more detailed code to describe their patient. We highly encourage physicians and hospitals to work together to use the most specific codes that describe their patients” conditions. Such an effort will not only result in more accurate payment by Medicare but will provide better information on the incidence of this disease in the Medicare patient population. *Comment:*
                         As stated earlier, a number of commenters requested CMS to add additional nonspecific codes to the CC list. These codes represent a variety of nonspecific conditions affecting multiple body systems. The commenters stated that the following nonspecific codes may increase the severity level for a patient, and should, therefore, be added to the CC list. 070.70, Unspecified viral hepatitis C
                    287.30, Primary thrombocytopenia, unspecified
                    287.5, Thrombocytopenia, unspecified
                    303.00, Acute alcohol intoxication, unspecified
                    345.90, Epilepsy, unspecified, without intractable epilepsy
                    403.90, Hypertensive chronic kidney disease, unspecified, with chronic kidney disease stage I through stage IV, or unspecified
                    424.0, Mitral valve disorders
                    424.1, Aortic valve disorders
                    426.13, Other second degree atrioventricular block
                    426.6, Other heart block
                    426.9, Conduction disorder, unspecified
                    447.6, Arteritis, unspecified
                    458.9, Hypotension, unspecified
                    451.2, Thrombophlebitis of lower extremities, unspecified
                    459.0, Hemorrhage, unspecified
                    585.5, Chronic kidney disease, unspecified
                    707.0, Decubitus ulcer, unspecified
                    780.39, Other convulsions *Response:*
                         As previously stated, we did not classify nonspecific codes to the MCC list or the CC list when more specific codes were available to identify the condition of the patient. In general, we found that the data did not support classifying unspecified codes as either MCCs or CCs. Further, after detailed discussions of potential clinical scenarios among our medical advisors, there was a consensus that a specified condition for the patient generally signals higher degree of severity of illness. If the physician was to diagnose additional information about the patient's condition or should the patient's condition worsen, a more precise code would be assigned that may be a CC or an MCC. As a result of these comments, our medical advisors again reviewed these codes and determined that their original decisions were correct. That is, they do not believe that these nonspecific codes should be classified as MCCs or CCs when more specific codes are available that provide more information about patient severity of illness. For these reasons, we are not adding the codes listed above to the CC list. (b) Symptoms, Chronic Conditions, and Low Severity Conditions *Comment:*
                         Commenters requested that we add a number of codes to the CC list that describe symptoms, chronic conditions, and low severity conditions. These conditions include the following codes: 070.54, Chronic viral hepatitis C
                    250.4x, Diabetes mellitus with renal manifestations
                    250.5x*,*
                         Diabetes mellitus with ophthalmic manifestations
                    250.6*x*, Diabetes mellitus with neurological manifestations
                    250.7x, Diabetes mellitus with peripheral circulatory disorders
                    250.8x, Diabetes mellitus with other specified manifestations
                    263.0, Moderate Malnutrition
                    263.1, Mild malnutrition
                    276.51, Dehydration
                    276.52, Hypovolemia
                    276.6, Fluid overload
                    276.7, Hyperpotassemia
                    276.9, Electrolyte and fluid disorders
                    280.0, Iron deficiency anemias, secondary to blood loss (chronic)
                    284.8, Aplastic anemias, not elsewhere classified
                    287.39 Other primary thrombocytopenia
                    287.4 Secondary thrombocytopenia
                    303.01 Acute alcohol intoxication, continuous
                    303.02 Acute alcohol intoxication, episodic
                    306.00, Blindness
                    389.9, Deafness
                    413.9, Angina pectoris
                    427.31, Atrial fibrillation
                    428.1, Left heart failure (change from CC to MCC)
                    451.0, Thrombophlebitis of superficial vessels of lower extremities;
                    492.8, Other emphysema
                    496, Chronic airway obstruction, not elsewhere classified
                    585.3, Chronic kidney disease, stage III (moderate)
                    599.7, Hematuria
                    710.0, Systemic lupus erythematosus
                    731.3, Major osseous defects( print page 47167)
                    786.03, Apnea
                    788.20, Urinary retention
                    799.02, Hypoxemia
                    V45.1, Renal dialysis status *Response:*
                         As discussed earlier, we did not assign chronic conditions to the CC list or the MCC list. These conditions do not themselves indicate a high severity level using our mathematical analysis of the claims data combined with the clinical judgment by our medical advisors. As stated earlier, we did not include most chronic conditions on the CC list or the MCC list unless the code also indicates an acute exacerbation that would raise the severity level. If the chronic condition worsens and the patient develops an acute complication, the more specific code for the acute exacerbation would identify the increased level of severity of illness and, if warranted, would be on the CC or the MCC list. We also did not include general symptoms on the CC list because, alone, they do not suggest a high level of severity of illness. Codes identifying symptoms such as hematuria, apnea, or hypoxemia that are found in many patients may indicate a wide range of patient severity and describe a transient finding. Should the physician diagnose a more specific condition that led to the symptoms, more information about the patient and their severity of illness would be known. The specific diagnosis may indicate higher severity of illness and the code that describes it may be included on the CC list or the MCC list. We also did not include conditions on the CC list or the MCC list that do not generally raise the severity level of a patient. If the code describes patients who range from mild to severe, we believe it is best to use additional secondary diagnosis codes that would be reported to better describe the true nature of the patient's condition. These more precise codes may be on the CC list or the MCC list. Our clinical advisors reviewed claims data and the clinical issues surrounding patients who had the symptoms, chronic diagnoses, and less severe conditions listed above. They recommend that we not add the codes listed above to the CC list because these conditions do not significantly increase a patient's severity of illness. Therefore, we are not adding the codes listed above to the CC list. (c) High Severity Codes That Were Erroneously Left Off of the CC List or the MCC List As stated earlier, a number of commenters recommended the addition of codes to the CC list or the MCC list for conditions that the commenters stated clearly represented a high severity level. The commenters provided information on the degree to which these conditions are life threatening and require extensive amounts of resources. The commenters questioned why these conditions were left off of the CC and MCC lists. Commenters recommended the removal of two codes from the CC list because the commenters believed they do not increase the patient's severity level or lead to more resource use. We discuss these conditions below. *Comment:*
                         Commenters requested that we add the following five codes to the CC list. The commenters stated that these conditions clearly increase the severity level and lead to more resource use. 285.1, Acute posthemorrhagic anemia
                    403.91, Hypertensive chronic kidney disease, unspecified, with chronic kidney disease stage V or end stage renal disease
                    426.53, Other bilateral bundle branch block
                    426.54, Trifascicular block
                    451.11, Phlebitis and thrombophlebitis, femoral vein (deep) (superficial) *Response:*
                         We agree with the commenters that the five codes listed above should have been included on the CC list. Upon further review of our data and discussions among our medical advisors, there was consensus that these codes describe patients with a higher severity level. Therefore, we are adding them to the CC list. *Comment:*
                         Commenters requested that we remove the following two codes from the CC list and make them non-CCs. The commenters indicated that there are more specific heart failure codes that would be assigned along with these codes that would indicate whether or not the patient had a severe form of heart failure. The commenters stated that these two codes do not indicate the exact nature of the heart failure and therefore should not be on the CC list. 402.11, Hypertensive heart disease, benign, with heart failure
                    402.91, Hypertensive heart disease, unspecified, with heart failure *Response:*
                         We agree with the commenters. Upon further review, we do not believe the codes meet the criteria to be considered CCs. The codes do not describe the exact nature of the heart failure. The more specific heart failure codes that would be reported along with these codes would be used to justify the assignment to a high severity level. Therefore, we are removing the two codes from the CC list. *Comment:*
                         Commenters requested that we add the following four codes to the MCC list. The commenters indicated that these four codes describe patients at the highest level of severity. Patients with these conditions would use an extensive amount of resources. Furthermore, the commenters added, codes that describe similar conditions are currently on the MCC list. The commenters believed these codes were erroneously excluded from the MCC list. 282.69, Other sickle-cell disease with crisis
                    345.2, Petit mal status
                    345.71, Epilepsia partialis continua, with intractable epilepsy
                    780.01, Coma *Response:*
                         We agree that we made an error in excluding these four codes from the MCC list. Therefore, we are adding the four codes to the MCC list. We provide a summary of all the additions and deletions to the CC list and the MCC list at the end of this section. Additional Comments on CC List We received several additional comments concerning the CC and MCC lists which we summarize below. Some of the comments involved the commenter's confusion about our proposed CC and MCC lists. Others involved a disagreement with our proposal of not making significant changes to the DRGs to better distinguish severity of illness in pregnancies and newborns, even though they are not a significant part of the Medicare population. We also received recommendations for alternative ways to classify conditions as CCs that do not meet our current criteria. In addition, we received comments on our proposal of not classifying specific conditions as a CC/MCC when the patient dies. We discuss these issues below. Other Myelopathy—Code 336.8 *Comment:*
                         One commenter requested that we add code 336.8 (Other myelopathy) to the CC list. *Response:*
                         Code 336.8 is already on the CC list. Therefore, we are not making any further change for code 336.8. Ascites—Code 789.5 *Comment:*
                         One commenter requested that we add the code 789.5 (Ascites) to the CC list *Response:*
                         We note that code 789.5 is being deleted as of October 1, 2007, when two new codes are being created, code 789.51 (Malignant ascites) and code 789.59 (Other ascites). Both of these new codes are on the CC list. Therefore no additional change is required for ascites. Aplastic Anemias, Not Elsewhere Classified—Code 284.8( print page 47168) *Comment:*
                         One commenter objected to the removal of code 284.8 (Aplastic anemias, not elsewhere classified (NEC)) from the CC list. *Response:*
                         Code 284.8 was placed on the MCC list. Thus, while it is not classified as a CC as the comment suggested, it is an MCC. We are maintaining code 284.8 on the MCC list, as we agree that this is a condition that places a patient at a high severity level. Complications of Pregnancy, Childbirth and Puerperium—Codes 630 through 677 *Comment:*
                         One commenter objected to the removal of codes from category 630 through 677 (Complications of pregnancy, childbirth and puerperium) of the CC list. The commenter was concerned about the number and wide breadth of codes from Chapter 11 of the ICD–9–CM, Complications of pregnancy, childbirth and puerperium (categories 630–677), that are being removed from the CC list . The commenter acknowledged CMS” position that, due to the low volume in the Medicare population, diagnoses related to newborns, maternity and congenital anomalies codes in this section were not reviewed. Of special concern to the commenter were conditions such as infections, acute renal failure, air and pulmonary embolism, cardiac arrest, shock, among others, that are MCCs or CCs and would be coded as such if not for the fact that the ICD–9–CM classification considers problems associated with pregnancy, childbirth and the puerperium to be so clinically significant that they require special combination codes. The combination codes are intended to identify that the presence of the pregnancy complicates the condition. For example, code 415.19 (Other pulmonary embolism and infarction) is an MCC, while code 673.20 (Obstetrical blood-clot embolism, unspecified) is not even a CC. The commenter recommended that codes in Chapter 11 be carefully evaluated and validated with clinical experts, similar to the process to which the codes in other chapters were submitted. The commenter believed that combination codes should be treated consistently. If the condition is considered a CC or MCC in a nonpregnant patient, the corresponding pregnancy-related combination code also should be a CC or MCC. *Response:*
                         As we stated in our proposed rule and elsewhere in this final rule with comment period, we focused our attention in developing the MS–DRGs for the Medicare population. We did not conduct a detailed review of Chapter 11 codes. We encourage other payers who want to use MS–DRG to update the system for their own population. Diagnoses related to newborns, maternity, and congenital anomalies are very low volume in the Medicare population and were not reviewed for purposes of creating the MCC and CC lists. We used the APR DRGs to categorize these diagnoses. This DRG system is used for the all payer ratesetting system in Maryland and will be based on data that better reflects the newborn and maternity population than Medicare. For newborn, obstetric, and congenital anomaly diagnosis, we classified severity level 3 (major) and 4 (extreme) diagnoses as an MCC. We designated default severity level 2 (moderate) diagnoses as a CC and all other diagnoses as a non-CC. We encourage the commenter to review the MCC and CC lists in on the CMS Web site. Many codes in the 630 to 677 range appear on the MCC list. Extreme Immaturity—Code 765.0 *Comment:*
                         One commenter objected to codes in category 765.0 (Extreme immaturity) not being classified as CCs. The commenter stated that codes in category 765.0 represent infants with a birth weight of less than 1000 gm. The commenter indicated that common problems with very low birthweight babies are low oxygen levels at birth; inability to maintain body temperature; difficulty feeding and gaining weight; infection; breathing problems, such as respiratory distress syndrome; neurological problems, such as intraventricular hemorrhage; gastrointestinal problems, such as necrotizing enterocolitis; and sudden infant death syndrome (SIDS). The commenter stated that while some of these problems have unique ICD–9–CM codes that could be reported, not all of them do (for example, inability to maintain body temperature). *Response:*
                         While we appreciate the commenter's concern about the CC classifications for newborns, we state again that we did not examine these newborn codes as part of our development of the MS–DRGs. We focused our efforts on the Medicare population and used the APR DRG classification for newborn diagnoses for Medicare. If the APR DRG classification of this condition were to change, we would also adopt the same designation for Medicare. Exclusion of MCCs and CC When a Patient Dies *Comment:*
                         Several commenters addressed codes that represent diagnoses associated with patient mortality. The commenter indicated that, in the proposed rule, CMS noted that diagnoses that were closely associated with patient mortality were assigned different CC subclasses, depending on whether the patient lived or died. These diagnoses are: 427.41, Ventricular fibrillation;
                    427.5, Cardiac arrest;
                    785.51, Cardiogenic shock;
                    785.59, Other shock without mention of trauma; and
                    799.1, Respiratory arrest. The commenters agreed that these diagnoses should be considered MCCs for patients who are discharged alive. However, the commenters disagree with CMS” proposal to make these diagnoses non-CCs when a patient dies. The commenters urged CMS to consider the patient's length of stay or other factors when these codes are reported and count them as an MCC when a patient dies during the admission. The commenters agreed that a patient who expires soon after admission may not have significant resources associated with these conditions. However, the commenters believed that this is not true when a patient has been hospitalized longer, such as for a week. *Response:*
                         Our medical advisors examined this issue again and continue to believe it is not appropriate to classify a case as an MCC based on one of the codes above if the patient dies. While we understand the concern of the commenters, we do not believe that a long length of stay patient will necessarily lead to the conclusion that it is appropriate to code these conditions in a patient that dies in the hospital. It is a possible that a terminally ill patient with a long length of stay required no special resuscitation efforts that would suggest higher resource use associated with coding of these conditions. We are concerned that changing our policy to allow use of these codes for a patient that died in the hospital could lead to accurate and widespread coding of the conditions when they are not indicative of a higher patient resource costs. Therefore, we are continuing our policy of classifying the diagnoses listed above as MCCs only if the patient is discharged alive. We will evaluate alternative approaches such as looking at the length of stay and other factors for these patients and make future DRG revisions, as needed. Selected Conditions in Joint Replacement Patients *Comment:*
                         One commenter asked that we classify certain codes as MCCs or CCs for patients having a joint replacement. The commenter specifically requested that the following codes be made either MCCs or CCs when occurring in a joint replacement patient: 
                        ( print page 47169) 731.3, Major osseous defect
                    278.0, Obesity
                    278.01, Morbid obesity
                    V85.35, Body mass index 35.0–35.9, adult
                    V85.37, Body mass index 37.0–37.9, adult *Response:*
                         We do not believe that we should make further changes to the MS–DRG assignments based on combinations of selected diagnoses. These types of analyses could be done with virtually any MS–DRG and would add significant complexity to the DRG system that we do not believe is warranted at this time. Our medical advisors reviewed both the data and clinical issues surrounding these codes and determined that they would not significantly increase the severity level for Medicare patients on average across all patients. Therefore, they are not CCs. We are not changing these codes to CCs. They will remain non-CC for all cases. The following table summarizes changes to the proposed MCC (Table 6J) and CC (Table 6K) lists published in the proposed rule. These changes are a result of review of comments and were discussed in detail above. A complete, updated CC and MCC list will be posted on the CMS Web site at: 
                        *http://www.cms.hhs.gov/​AcuteInpatientPPS/​*
                         under Downloads. We will continue to evaluate our criteria for the development of the CC and MCC list to determine if refinements to these criteria are needed. As we gain data and experience under MS–DRGs, we believe that there may be refinements to these criteria. Changes to MCC and CC List as a Result of Comments
Add to CC list:285.1
Acute posthemorrhagic anemia.403.91
Hypertensive chronic kidney disease, unspecified, with chronic kidney disease stage V or end stage renal disease.426.53
Other bilateral bundle branch block.426.54
Trifascicular block.451.11
Phlebitis and thrombophlebitis, femoral vein (deep) (superficial).Remove from CC list:345.2
Petit mal status.345.71
Epilepsia partialis continua, with intractable epilepsy.402.11
Hypertensive heart disease, benign, with heart failure.402.91
Hypertensive heart disease, unspecified, with heart failure.780.01
Coma.Add to MCC list:282.69
Other sickle-cell disease with crisis.345.2
Petit mal status.345.71
Epilepsia partialis continua, with intractable epilepsy.780.01
Coma.Remove from MCC list:None
 3. Dividing MS–DRGs on the Basis of the CCs and MCCs In developing the MS–DRGs, two of our major goals were to create DRGs that would more accurately reflect the severity of the cases assigned to them and to create groups that would have sufficient volume so that meaningful and stable payment weights could be developed. As noted above, we excluded the CMS DRGs in MDCs 14 and 15 from consideration because these DRGs are low volume. As stated previously, we do not have the expertise or data to maintain the CMS DRGs for newborns, pediatric, and maternity patients. We continue to maintain MDCs 14 and 15 without modification in order to have MS–DRGs available for these patients in the rare instance where there is a Medicare beneficiary admitted for maternity or newborn care. In designating an MS–DRG as one that will be subdivided into subgroups based on the presence of a CC or MCC, we developed a set of criteria to facilitate our decision-making process. In order to warrant creation of a CC or major CC subgroup within a base MS–DRG, the subgroup had to meet all of the following five criteria: A reduction in variance of charges of at least 3 percent.
                    At least 5 percent of the patients in the MS-DRG fall within the CC or MCC subgroup.
                    At least 500 cases are in the CC or MCC subgroup.
                    There is at least a 20-percent difference in average charges between subgroups.
                    There is a $4,000 difference in average charges between subgroups. Our objective in developing these criteria was to create homogeneous subgroups that are significantly different from one another in terms of resource use, that have enough volume to be meaningful, and that improve our ability to explain variance in resource use. These criteria are essentially the same criteria we used in our 1994 severity analysis. In developing the MS–DRGs, we continued to apply our longstanding policy that each DRG should contain patients who are similar from a clinical perspective. To begin our analysis, we subdivided each of the base MS–DRGs into three subgroups: non-CC, CC, and MCC. Each subgroup was then analyzed in relation to the other two subgroups using the volume, charge, and reduction in variance criteria. The criteria were applied in the following hierarchical manner: If a three-way subdivision met the criteria, we subdivided the base MS–DRG into three CC subgroups.
                    If only one type of two-way subdivisions met the criteria, we subdivided the base MS–DRG into two CC subgroups based on the type of two-way subdivision that met the criteria.
                    If both types of two-way subdivisions met the criteria, we subdivided the base MS– DRG into two CC subgroups based on the type of two-way subdivision with the highest R2
                         (most explanatory power to explain the difference in average charges).
                    Otherwise, we did not subdivide the base MS–DRG into CC subgroups. For any given base MS–DRG, our evaluation in some cases showed that a subdivision between a non-CC and a combined CC/MCC subgroup was all that was warranted (that is, there was not a great enough difference between the CC and MCC subgroups to justify separate CC and MCC subgroups). Conversely, in some cases, even though an MCC subgroup was warranted, there was not a sufficient difference between the non-CC and CC subgroups to justify separate non-CC and CC subgroups. Based on this methodology, a base MS–DRG may be subdivided according to the following three alternatives, rather than the current “with CC” and “without CC” division. DRGs with three subgroups (MCC, CC, and non-CC).
                    DRGs with two subgroups consisting of an MCC subgroup but with the CC and non-CC subgroups combined. We refer to these groups as “with MCC” and “without MCC.”
                    DRGs with two subgroups consisting of a non-CC subgroup but with the CC and MCC subgroups combined. We refer to these two groups as “with CC/MCC” and “without CC/MCC.” As a result of the application of these criteria, 745 MS–DRGs were created as shown in the following table. 
                        ( print page 47170) Table M.—Number of CC Subgroups
Subgroups
Number of base MS–DRGs
Number of MS–DRGsNo subgroups
53
53Three subgroups
152
456Two subgroups: CC and major CC; non-CC
43
86Two subgroups: non-CC and CC; major CC
63
126Subtotal
311
721MDC 14
22
22Error DRGs
2
2Total
335
745
 The 745 MS–DRGs represent an increase over the 652 DRGs we proposed in our 1994 CC revision analysis. The increase in the number of DRGs is primarily the result of an increase in the number of proposed base MS–DRGs that are subdivided into three CC subgroups. The distribution of patients across the different types of CC subdivisions is contained in Table N below. The table shows that 51.7 percent of the patients are assigned to base MS–DRGs with three CC subgroups, and only 11.8 percent of the patients are assigned to base MS–DRGs with no CC subgroups. Table N.—Distribution of Patients by Type of CC Subdivision
CC subdivision
Count
PercentNone
1,382,810
11.8(MCC and CC), Non-CC
629,639
5.4MCC, (CC and Non-CC)
3,650,321
31.2MCC, CC, and Non-CC
6,054,081
51.7
 Using Medicare charge data (without applying any criteria to remove statistical outlier cases), the reduction in variance (R2
                        ) was computed for current CMS DRGs, the MS–DRGs with all 311 base MS–DRGs subdivided into 3 CC subgroups, and the MS–DRGs collapsed into 745 DRGs. Table O below shows that the R2
                         for the MS–DRGs with all 311 base MS–DRGs subdivided into 3 CC subgroups (957 DRGs composed of 311 base MS–DRGs subdivided into 3 CC subgroups plus an additional 22 MDC 14 and MDC 15 DRGs as well as 2 error DRGs) is 10.62 percent higher than the current CMS DRGs. Collapsing the 957 MS–DRGs down to 745 MS–DRGs lowers this increase in R2
                         slightly to 9.41 percent. Although adopting a 3-way split for each base MS–DRG would produce a DRG system with higher explanatory power, the 957 MS–DRGs would not meet the criteria we specified above for subdividing each base DRG. The criteria we specified above would create a monotonic DRG system. We believe that the value of having a monotonic DRG system outweighs the slight decrease in explanatory power. For this reason, we proposed to adopt the 745 MS–DRGs. Table O.—Explanatory Power (R2
                            ) for MS–DRGs
R2
Percent changeCurrent CMS DRG
36.192007 CMS Severity DRGs with 3 CC Subgroups
40.03
10.622007 CMS Severity DRGs Collapsed to 714 DRGs
39.59
9.41
 *Comment:*
                         One commenter supported our five criteria for establishing severity subgroups. The commenter believed the use of specific quantitative criteria to determine how specific base DRGs are divided into terminal categories that reflect severity levels is logical and designed to ensure that only substantively important differences in resource requirements are recognized by the MS–DRG system. The commenter did note that CMS had not explicitly included statistical significance in these criteria and urged CMS to consider CC or MCC splits only when they meet minimal standards of both size and statistical significance. *Response:*
                         We appreciate the commenter's support for our five criteria for establishing severity subgroups. We will consider the commenter's other suggestion as we make further refinements to the MS–DRGs. *Comment:*
                         One commenter disagreed with our five criteria for establishing severity subgroups. The commenter stated that these criteria are too restrictive, lack face validity, and create perverse admission selection incentives for hospitals by significantly overpaying for cases without a CC and underpaying for cases with a CC. The commenter recommended that the existing five criteria be modified for low-volume subgroups to assure materiality. For higher volume MS–DRG subgroups, they recommended that two other criteria be considered, particularly for nonemergency, elective admissions. These two criteria are: Is the per-case underpayment amount significant enough to affect admission vs. referral decisions on a case-by-case basis?
                    Is the total level of underpayments sufficient to encourage systematic admission vs. referral policies, procedures, and marketing strategies? The commenters also recommended refining the five existing criteria for MCC/CC/without subgroups as follows: Create subgroups if they meet the five existing criteria, with cost difference between subgroups ($1,350) substituted for charge difference between subgroups ($4,000).
                    If a proposed subgroup meets criteria # 2 and # 3 (at least 5 percent of discharges in the subgroup and at least 500 cases) but fails one of the others, create the subgroup if either of the following criteria is met: —At least $1,000 cost difference per case between subgroups; or —At least $1,000,000 overall cost should be shifted to cases with a CC (or MCC) within the base DRG for payment weight calculations. The commenter stated that this approach would affect DRGs where the total dollars under consideration may be quite high (for example, in the hundreds of millions), due to large numbers of procedures, but the percentage difference in average charges falls short of the 20 percent difference in average charges between subgroups. *Response:*
                         We disagree that the five criteria for establishing severity subgroups are too restrictive and will lead to overpayments for cases without a CC and underpay for cases with a CC. Relative to the current CMS DRGs, the statistical data above suggest that the construction of the MS–DRGs using these criteria will improve payment accuracy. The explanatory of the MS–DRGs to predict resource use is more than 9 percent greater than under the current CMS DRGs. Further, under the current CMS DRGs, nearly 78 percent of patients are in the highest severity level, while only 22.2 percent are in the 
                        ( print page 47171)
                        highest severity level under the MS–DRGs. In addition to having a better distribution of cases among severity levels, the MS–DRGs have more significant difference in average charges over the different severity levels compared to the current CMS DRGs (72 FR 24706). The commenter does not appear to disagree with these statistics suggesting that improvements will result from the MS–DRGs. Rather, the commenter is suggesting that we should create more subgroups with smaller differences in average charges (or costs). We do not believe the first two alternative criteria are practical or necessary to apply. They would require us to make subjective judgments about whether a hospital would treat patients or refer them elsewhere solely based on payment incentives. We do not believe it is possible or appropriate for us to make judgments about whether a hospital would decide to treat or not treat a patient based on how much they are paid. Further, with the exception of cardiac specialty hospitals, we have no evidence hospitals are selectively treating or avoiding particular types of patients because of incentives present in Medicare's IPPS payments. The reforms we are making are intended to pay hospitals more accurately for the patients they are already treating and avoid incentives for more specialty hospitals to form. Therefore, we do not believe it is practical or necessary to use the first two criteria suggested by the commenter. With respect to the last criteria, we note that the MS–DRGs represent a significant expansion in the number of DRGs from 538 in FY 2007 to 745 in FY 2008. The commenter is suggesting that we create additional subgroups with less variation between the subgroups. Payments under a prospective payment system are predicated on averages. Thus, most individual cases within any DRG system will have costs that are either higher or lower than the average for that group. While creating groups that have lower differences in average charges or costs between the groups may lessen variation around the average and improve explanatory power, it will also create more low-volume groups and increase the likelihood that the relative weights will be nonmonotonic and have instability in their values from year to year. We believe the value of a lower number of DRGs outweighs the benefit we would obtain from a slight increase in R2
                         and the risk of having nonmonotonic DRGs that would come from adopting the commenter's suggestions. 4. Conclusion We believe the MS–DRGs represent a substantial improvement over the current CMS DRGs in their ability to differentiate cases based on severity of illness and resource consumption. As developed, the MS–DRGs increase the number of DRGs by 207, while maintaining a reasonable patient volume in each DRG. The MS–DRGs increase the explanation of variance in hospital resource use relative to the current CMS DRGs by 9.41 percent. Further, the data shown below in Table P and Table Q illustrate how assignment of cases to different severity of illness subclasses improves in the MS–DRGs relative to the CMS DRGs. Table P.—Overall Statistics for CMS DRGs
CC subclass—current CMS DRG
Percent
Average chargesOne or more CCs
77.66
$24,538Non-CC
22.34
14,795
 Table Q.—Overall Statistics for MS–DRGs
CC subgroup
Number of cases
Percent
Average chargesMCC
2,607,351
22.2
$44,219CC
4,298,362
36.6
24,115Non-CC
4,826,980
41.1
18,416
 Under the current CMS DRGs, 78 percent of cases are assigned to the highest severity levels (CC) and the remaining 22 percent are assigned to the lowest severity level (non-CC). Applying the three severity subclasses to FY 2006 data would result in approximately 22 percent of patients being assigned to the severity subgroup with the highest level of severity (MCC), 41 percent being assigned to the lowest severity subclass (non-CC), and the remaining 37 percent being assigned to the middle severity subclass (CC). Adding the new MCC subgroup greatly enhances our ability to identify and pay hospitals for treating patients with high levels of severity. As Table Q above shows, the new subgroups also have significantly different resource requirements. The MCC subgroup contains patients with average charges almost twice as large as for those in the CC group ($44,219 compared to $24,115). In addition to resulting in improvements in the DRG system's recognition of severity of illness, we believe the MS–DRGs are responsive to the public comments that were made on last year's IPPS proposed rule with respect to how we should undertake further DRG reform. In the FY 2007 IPPS final rule, we identified three major concerns in the public comments about our proposed adoption of CS DRGs: We received comments after the FY 2007 IPPS final rule suggesting that further adjustments were needed to the proposed DRG system. The commenters believed that the CS DRGs did not incorporate many of the changes to the DRG assignments that have been made over the years to the CMS DRGs. There was significant interest in the public comments in either revising the CS DRGs to reflect these changes or using the CMS DRGs as the starting point to better recognize severity. We believe that the MS–DRGs are responsive to these suggestions. The MS–DRGs use the CMS DRGs as the starting point for revising the DRGs to better recognize resource complexity and severity of illness. We are generally retaining all of the refinements and improvements that have been made to the base DRGs over the years that recognize the significant advancements in medical technology and changes to medical practice. At the same time, the MS–DRGs greatly improve our ability to identify groups of patients with varying levels of severity. They retain all of the improvements made to the DRGs over the years, while providing a more equitable basis for hospital payment. We received many comments on the FY 2007 IPPS rule about the potential use of a proprietary DRG system. The comments about the CS DRGs raised compelling issues about the potential government use of a proprietary system, including concerns about the availability, price, and transparency of the source code, logic and documentation of the DRG system. The commenters noted that CMS makes available these resources in the public 
                        ( print page 47172)
                        domain for purchase through the National Technical Information Service at nominal fees to cover costs. The commenters urged CMS not to adopt a proprietary DRG system that would not be available on the same terms as the current CMS DRGs. There are no proprietary issues associated with the MS–DRGs. The MS–DRGs will be available on the same terms as the current CMS DRGs through the National Technical Information Service. We also received other comments on the FY 2007 IPPS rule concerning the use of CS DRGs. The commenters stated that no alternatives to CS DRGs had been evaluated. The commenters suggested that alternative DRG systems can better recognize severity than the CS DRGs and should be evaluated before CMS decides which system to adopt. In response to these concerns, we contracted with RAND Corporation to evaluate several alternative DRG systems, including the MS–DRGs that we proposed and are finalizing in this final rule with comment period for FY 2008. As indicated above, we believe the MS–DRGs offer significant improvements to the DRG system without many of the liabilities the public commenters on the FY 2007 IPPS rule identified with the CS DRGs. Thus, we believe the MS–DRGs offer significant improvements in recognition of severity of illness and complexity of resources and are adopting them for FY 2008. *Comment:*
                         Many commenters supported the MS–DRGs. One commenter stated that “your proposal showcases the best of CMS, evidenced, for example, by an elegant and reasonable framework for severity-adjusted DRGs.” Another commenter stated that it was “about time that Medicare adopted a DRG system that allows for more equitable reimbursement for cases of severe illness with high risk of death or significant morbidity.” Other commenters stated that it was very apparent that CMS dedicated an extensive amount of thought, planning, and resources toward the development of the MS DRGs, and that the system appears to be a very reasonable approach toward stratifying the patient grouping system more distinctly based on the severity of the patient's illness. Many commenters found the MS–DRGs to represent a reasonable approach to DRG refinement, stating they are, in principle, a positive advancement and will create a more equitable and accurate payment system. Other commenters stated that the MS DRGs are an effective method for incorporating greater refinements to reflect variations in patient severity. Other commenters stated that hospitals providing services to more complex patients should be paid in a manner that reflects the nature of that care. These commenters stated that they do not want to see a payment system that rewards hospital inefficiency and it is reasonable that Medicare reimbursement policy assures that services are appropriately compensated. Other commenters stated that, over time, some DRGs have become more profitable than others. The commenters stated that making adjustments in rates helps to restore balance to the entire hospital inpatient payment system. These commenters endorsed CMS’ efforts to achieve these goals through the adoption of the MS–DRGs. Other commenters expressed their appreciation for CMS’ recognition and consideration of issues raised in the public comments on last year's proposal to adopt CS DRGs. The commenters indicated that CMS took account of the public comments in crafting this year's MS–DRG proposal. The commenter applauded CMS for addressing many concerns that were expressed regarding CS DRGs. One of these commenters stated that MS–DRGs are significantly superior to the CS DRGs that were proposed last year. One commenter indicated that it had asked CMS to do the following when considering adoption of a new DRG system: Show evidence that the alternative resulted in an improved hospital payment system compared to the existing DRG system;
                    Test the degree to which the variation in costs within cases at the DRG level is reduced;
                    Consider whether there were easier ways to adjust for severity similar to the differentiation of patients in FY 2006 based on the absence or existence of a major cardiovascular diagnosis;
                    Maintain the improvements made to differentiate cases based on complexity in the existing system; and
                    Avoid creating a system that is proprietary and lacks transparency. The commenter indicated that CMS made a concerted effort to develop a system that incorporates all of these goals and indicated their support for these meaningful improvements to the IPPS. Like this commenter, several other commenters were also in agreement that the proposed DRG system should not be proprietary to avoid limiting public access to the system. Another commenter who expressed appreciation for CMS’ responsiveness to issues raised in last year's IPPS rule indicated that the MS–DRGs are logical, transparent, and nonproprietary, which well suits the needs of the health care community. Other commenters also expressed support for CMS’ decision to make the MS–DRGs nonproprietary, open, and accessible, and available on the same terms as the current DRGs. Another commenter stated that it had decades of experience doing work with DRG systems and believe that there has been a need for a severity adjustment mechanism in the CMS DRGs to facilitate more accurate payment under the IPPS. In its view, the MS–DRG methodology is an appropriate mechanism to add severity adjustments to IPPS for FY 2008. According to the commenter, the MS–DRGs’ advantages include: They are based on the current CMS DRGs, whose technical features, data structures, and program algorithms have been fine-tuned over the years to accommodate the insertion and deletion of DRGs, changes in code/criteria lists, changes to CC and CC exclusion lists, changes in hierarchy, addition or deletion of DRG criteria, among others.
                    Additional severity adjustments will not require substantial modifications to this basic, extensible, and highly efficient architecture. The architecture will facilitate the addition of new categories necessitated by the introduction of new technologies or the application of the methodology to non-Medicare populations. The commenter recommended that CMS plan for a more flexible, four-character nomenclature in the severity DRG system as soon as reasonably possible. The commenter noted that all commercially available severity-adjusted DRG systems have adopted a nomenclature that employs an initial 3-digit base DRG designation followed by a 1-digit severity score. This approach is far more flexible and transparent. More importantly, the approach lends itself more readily to the addition of new base DRGs and the evolution of more granular severity-adjustment. Many commenters were supportive of the MS–DRGs because they were derived from the existing system and, therefore, preserve the numerous policy decisions made over the years and embodied in the CMS DRGs. These commenters appreciated that severity stratifications were created from the existing base DRGs with the result of redistribution within, rather than across, the DRGs. Commenters also stated that the MS–DRGs provide CMS with the flexibility of making DRG reassignments within a base MS–DRG by moving more complex services up a severity level. Other commenters stated that the MS–
                        ( print page 47173)
                        DRG system does a better job than last year's proposed CS DRGs or the current CMS DRGs of reflecting advancements in medical technology and other improvements in medical care. Some commenters stated that, with the development and proposal of MS–DRGs, they saw little reason for CMS to continue assessing and considering alternative patient classification systems in the foreseeable future. These commenters stated that the MS–DRG system is more transparent, accessible, and understandable than the alternative systems being evaluated by RAND. Some commenters stated that the MS–DRGs provide more accurate grouping for severity of illness while retaining the CMS–DRG refinements to account for more accurate payment of resource utilization. However, these commenters recommended that the implementation of MS–DRGs be delayed for one year to wait for the final RAND report and the availability of a GROUPER. One commenter stated that the MS–DRGs are an excellent attempt to define severity of illness based on DRGs for the Medicare population but urged us not to implement them in FY 2008 unless it is deemed to be the final system adopted from the ones being studied by RAND. Several commenters stated that hospitals will undergo enormous costs to “educationally gear up” for the MS–DRGs. The commenter stated that the hospital community must expend educational dollars in its attempt to improve coding to optimize each case's DRG assignment. These comments were concerned about the burden and expense that would be imposed on hospitals from adopting one significant DRG reform this year and another one next year. A number of other similar comments urged CMS not to move to MS–DRGs if it plans to implement another new severity system in FY 2009. *Response:*
                         We appreciate the support for MS–DRGs. We agree that, building on the current DRG system, we have maintained the best aspects of our past efforts while adding additional refinements to better identify severity. We also agree that it is beneficial to consider moving to a four-character nomenclature for MS–DRGs. We have already developed an internal version with four characters, with the fourth character indicating the severity levels. Systems restrictions prevent us from using this four-character numbering system in Medicare's data systems at this time. However, we will continue to evaluate the possibility of moving to such a numbering system. With respect to the comments about the RAND project and the concern about adopting two different DRG reforms in succeeding years, we note that RAND has completed its evaluation of alternative DRG systems, including the MS–DRGs. Consistent with RAND's findings, we believe it is appropriate at this time to adopt the MS–DRG system for Medicare in FY 2008. While there will be an opportunity for the public to comment on RAND's findings, we expect to permanently adopt the MS–DRGs for the IPPS. We do not believe it is likely that there will be persuasive public comments suggesting that one of the alternative DRG systems being evaluated by RAND is clearly superior. *Comment:*
                         One commenter fully endorsed the move to MS–DRGs, but stressed the need of maintaining the current level of transparency in the DRG system, regardless of the chosen methodology. The commenter stated that many companies offer software that hospitals and health plans utilize in managing the billing, coding, and payment for hospital inpatient services under the DRGs. The development of this software is possible only because the current DRG methodology is a transparent system. By that, they mean that members of the public can obtain full access to the details underlying the system by purchasing information and software from the National Technical Information Service (NTIS) at a nominal charge in a timely manner (well in advance of the implementation of changes). The commenter appreciated the agency's commitment in the FY 2007 final rule to “continue to strive to promote transparency in our decision making as well as in future payment and classification systems, as we have done in the past.” The commenter commended CMS for its continued attention to the transparency issue and appreciates CMS' proposal to make the MS–DRGs available on the same terms as they currently do CMS DRGs through NTIS. *Response:*
                         We agree that it is important to provide updates and modifications to the DRG system in a transparent manner. We intend to continue our efforts to do so by providing the necessary information through our regulations, Web sites, and through NTIS. The MS–DRGs will be available to the public on the same terms as the CMS DRGs. *Comment:*
                         MedPAC reviewed the MS–DRGs and commended CMS for its commitment to improve the accuracy of Medicare payments for hospital acute inpatient services. MedPAC stated that CMS staff had made significant progress toward achieving this goal with the development of MS–DRGs coupled with cost-based weights. MedPAC's analysis showed that MS–DRGs will result in a substantial improvement in payment accuracy. MedPAC took several steps to evaluate the proposed MS–DRGs. First, they examined their face validity. An effective patient classification system, in the context of a payment system, should group together clinically similar cases that have similar costs. In addition, MedPAC stated that relative weights calculated for the classification groups (MS–DRGs) generally should exhibit a consistent hierarchy of values across levels of severity of illness for different conditions. Therefore, one issue is how much costs vary around the mean cost per case for cases grouped within MS–DRGs. Another issue is whether relative weights for different severity levels show the expected hierarchy across most clinical conditions. For comparison, MedPAC also looked at the cost variation and relationships among relative weights for cases grouped in the current DRGs and in the severity categories of the APR DRGs. MedPAC also examined how the MS–DRGs would affect payment accuracy in the IPPS, measured by how closely payments would track costs for different types of cases. MedPAC compared payment accuracy under the MS–DRGs with the results under the current CMS DRGs and the severity categories of the APR DRGs. MedPAC found that MS–DRGs did a better job of grouping cases with similar costs into the same category. This was expected because the MS–DRGs break out high severity (and high cost) cases with MCCs into separate DRGs. For comparison, MedPAC also calculated the amount of variation in costs among cases within the severity classes of APR DRGs (Version 23). The average absolute difference for the APR DRGs, in turn, was 7.4 percent lower than the value for DRGs. MedPAC stated that this suggests that at least some opportunities are available for further refinement of the MS–DRGs. Although MedPAC found the MS–DRGs were not perfect, and may need to be further refined over time, it believed they represent a significant improvement over the current CMS DRGs. MedPAC's analysis showed that payment accuracy increased substantially when moving from the current DRGs to one based on the MS–DRGs. *Response:*
                         We agree with MedPAC that the MS–DRGs represent a significant improvement over the current CMS DRGs. As suggested above, we intend to use RAND's evaluation of the MS–DRGs to make further improvements to it. We appreciate MedPAC's suggestion to use the APR DRGs to also help us identify potential 
                        ( print page 47174)
                        areas where further improvements can be made to the MS–DRGs. *Comment:*
                         One comment stated that the “Crosswalk from CMS DRGs to MS–DRGs” was somewhat misleading. The commenter was concerned that some entities are interpreting it as a one-to-one mapping. The commenter suggested that it be clarified that an individual DRG code cannot be mapped directly to a MS–DRG. The commenter recommended that MS–DRG implementation be delayed so that CMS can release the MS–DRG GROUPER and allow hospitals time to analyze the impact prior to implementation. *Response:*
                         After public display of the proposed rule, we were asked to provide additional information on the CMS Web site showing how the current CMS DRGs map to the new MS–DRGs. Although we provided this information, we were concerned about its usefulness because of the very issue raised in this public comment. That is, there is not a one-to-one crosswalk between the 538 DRGs that exist under the CMS DRGs and the 745 MS–DRGs. While this information may not have been as useful as originally anticipated by members of the public that requested it, we believe the fact that there is not a one-to-one crosswalk between the CMS DRGs and the MS–DRGs was well understood by the public based on the description of each system in the proposed rule. In addition, we made other information available to the public that would allow for a detailed analysis of the MS–DRG proposal as well as the continuing transition to cost-based weights. We made available two MedPAR files (FY 2005 and FY 2006) that included the CMS DRG and MS–DRG assignment for each case. In addition, we made available charge-based, cost-based, and blended weights under the CMS DRGs and the blended weights under the MS–DRGs. With this information, we believe the public had detailed information to be able to do a comprehensive analysis of our proposal to adopt MS–DRGs. We do not believe that there should have been any confusion associated with the publicly requested CMS DRG to MS–DRG crosswalk on the CMS Web site, and we do not see this comment as a reason to delay implementation of the MS–DRGs. *Comment:*
                         A number of commenters urged CMS to process more than nine diagnosis and six procedure codes. The commenters stated that this particular concern is more acute with MS–DRGs where a hospital needs to make sure that CMS processes codes that are MCCs and CCs because they determine DRG assignment. The commenters also stated that vendors and health care groups make decisions about quality of care based upon the CMS claim file. The commenters asked CMS to commit to a timeframe when it will revise its systems to accept all 25 diagnosis and procedure codes provided via electronic transmissions. *Response:*
                         We recognize the importance of using and analyzing as much clinical data from claims as possible. Unfortunately, current system limitations preclude CMS from processing more than nine diagnoses and six procedures at this time. We will continue to review this matter in conjunction with our other information systems priorities. *Comment:*
                         Several commenters stated that ICD–10–CM and ICD–10–PCS would provide a much better foundation for a severity-adjusted DRG system than ICD–9–CM. The value of MS–DRGs or any other severity-adjusted DRG system that relies on claims data will be limited by the continued use of an obsolete, non-specific classification system. ICD–10–CM and ICD–10–PCS would provide greater clinical detail, and up-to-date clinical information for capturing information on disease severity, including complications, comorbidities and risk factors, as well as more detailed information on the use of medical technology and its impact on resource utilization and outcomes. The longer adoptions of contemporary classifications are delayed, the more CMS must develop alternatives that become costly to administer and for providers costly to continually implement. One commenter stated that, in previous years, the commenter's recognition of the industry's need for consistency in medical coding, improved data integrity, and more precise and contemporary data reflecting 21st century medicine has led it to advocate for adoption and coordinated implementation of ICD–10–CM and ICD–10–PCS in their previous comments on the IPPS. The commenter stated that it is unfortunate that, as new initiatives that rely heavily on coded data gain momentum (such as present on admission reporting, pay-for-performance, and DRG refinements to better recognize severity of illness), ICD–10–CM and ICD–10–PCS still have not been implemented as replacements for ICD–9–CM. One commenter stated that if the obsolete ICD–9–CM coding system had been replaced earlier, claims data that would significantly add to the knowledge needed to measure severity, quality, and other factors under consideration would now be available. The commenter stated that the proposed MS–DRG system and other proposals in this year's proposed rule are excellent examples of how ICD–10–CM and ICD–10–PCS could improve the ability to refine reimbursement systems in order to better reflect severity of illness. The commenter urged CMS and HHS to take immediate action to secure the adoption and implementation of these two classification systems, and supporting transaction standards as early as possible. *Response:*
                         We are continuing to carefully analyze issues associated with implementing ICD–10. *Comment:*
                         Several commenters opposed the reuse of the current CMS DRG numbers in the MS–DRG system. Although one commenter acknowledged the advantages of maintaining the current 3-digit numerical scheme, it believed the use of the same DRG numbers in both the CMS DRG and MS–DRG systems will create confusion when analyzing longitudinal data, given the same DRG number will have a different meaning in the two systems. The commenter suggested that delaying implementation of a severity-adjusted DRG system until FY 2009 would allow additional time for making more extensive systems modifications, such as adopting an alphanumeric or 4-digit numerical structure for the new DRG system. Another commenter suggested that CMS begin numbering with a 4-digit number so that there will not be confusion about which system is being used. *Response:*
                         We agree that it is beneficial to consider moving to a 4-character nomenclature for MS–DRGs. We have already developed an internal version with four characters, with the fourth character indicating the severity levels. Systems restrictions prevent us from using this 4-character numbering system in Medicare's data systems at this time. However, we will continue to evaluate the possibility of moving to such a numbering system in the future. We do not expect the changes to our data systems that would be necessary to adopt a 4-digit DRG numbering system will occur with a year's delay of the MS–DRGs. Therefore, we do not believe that we should delay the improvements in recognition of severity of illness in our payment system for this reason. If there is public interest, we will make our internal 4-digit numbering system available on the CMS Web site to assist the public in understanding the future numbering system we would be likely to adopt. Such information may also be useful to the public to engage in the types of analysis suggested by this public comment. 
                        ( print page 47175) *Comment:*
                         One commenter stated that the Medicare CMS DRG GROUPER is used by some payers for their commercial, non-Medicare business. The commenter understands that CMS may want to move to MS–DRGs for Medicare patients, but is concerned about its continued access to the current GROUPER program, should Medicare decide to replace CMS DRGs with MS–DRGs. The commenter requested that the existing CMS GROUPER remain intact for commercial insurers to utilize for their non-Medicare contracts. The commenter suggested this could be done by keeping the GROUPER in the CMS database with the title “CMS GROUPER.” The commenter stated CMS would not need to update the weights of the CMS GROUPER or make any other adjustments. *Response:*
                         The focus of CMS’ efforts is in developing and maintaining a DRG system that is appropriate for its Medicare population. We have, and will continue to, encourage other payers to make any necessary modifications to this program to meet their needs. The current versions of the CMS DRGs will remain in the public domain. However, we do not intend to make any updates to them once we move to the MS–DRGs or another severity DRG system. We do not believe that Medicare should undertake the effort and expense to maintain and update a DRG system that will have no application for Medicare beneficiaries. We encourage other payers to avail themselves of any DRG logic in our nonproprietary system from past years and use this information as appropriate to develop updates and refinements annually to suit the needs of their own patient populations. 5. Impact of the MS–DRGs Unlike the CS DRGs we proposed last year for FY 2008, the payment impacts from the MS–DRGs we proposed to adopt (and are finalizing in this final rule with comment period) for FY 2008 would largely be redistributive within each base MS–DRG. Such a result occurs because we collapse the current CC/non-CC, age and other distinctions that exist in the CMS DRGs and redivide them based on MCCs, CCs, and non-CCs. Thus, within each base MS–DRG, some cases will be paid more and some less, but the base MS–DRGs are retained so there is no redistribution between types of cases as would have occurred under the proposed CS DRGs. In the proposed rule, we encouraged readers to review Table 5 in the Addendum to the proposed rule for a list of the proposed MS–DRGs and the proposed respective relative weight from the revisions we proposed to better recognize severity of illness to better understand how payment for cases within each base MS–DRG will be affected. As indicated above, all of the severity DRG systems being evaluated by RAND can be expected to result in similar redistributions in case-mix among hospitals. The payment models used by RAND and CMS (and RTI as well) all assume static utilization. That is, payment impact models simulate the effects of a change in policy, assuming no change to Medicare utilization. Any system adopted to better recognize severity of illness with a budget neutrality constraint will result in case-mix changes that can be expected to benefit urban hospitals at the expense of rural hospitals. This impact occurs because patients treated in urban hospitals are generally more severely ill than patients in rural hospitals and the CMS DRGs are not currently recognizing the full extent of these differences. Similarly, there will be differential impacts among other categories of hospitals (for example, teaching, disproportionate share, large urban, and other urban hospitals) depending on the mix of cases that each hospital treats. The impact of the MS–DRGs can be expected to have similar effects on case-mix as the DRG systems being analyzed by RAND. These conclusions are confirmed by RAND's analysis earlier in this final rule with comment period as well as the payment impacts we illustrated in the proposed rule and again in this final rule with comment period. *Comment:*
                         One commenter believed that a “stop loss” provision should be instituted as part of the transition. Similar to that under the IPF PPS, no hospital can receive less than 70 percent of what they would otherwise have been paid under the old system. Another commenter asked that CMS investigate mechanisms for dampening large payment rate fluctuations. *Response:*
                         Changes in payments from MS–DRGs will be mitigated in any single year by adopting them over a 2-year transition period. We believe a 2-year transition period for implementation of the MS–DRGs addresses the concern of these commenters. Further information is provided in section II.E. of the preamble of this final rule with comment period about how MS–DRG relative weights are being determined to reflect implementation over a 2-year period. 6. Changes to Case-Mix Index (CMI) From the MS–DRGs After the 1983 implementation of the IPPS DRG classification system, CMS observed unanticipated growth in inpatient hospital case-mix (the average relative weight of all inpatient hospital cases), which we use as a proxy measurement for severity of illness. We had projected the rate of growth in case-mix for the period 1981 to 1984 to be 3.4 percent. The realized rate of growth during this period, which included the introduction of the IPPS, was 8.4 percent, a variance in excess of 1.6 percent per year. The unexpected growth in payments was due to increases in the hospital case-mix index (CMI) beyond the previously projected trend. Hospitals’ CMI values measure the expected treatment cost of the mix of patients treated by a particular hospital. There are three factors that determine changes in a hospital's CMI: (a) Admitting and treating a more resource intensive patient-mix (due, for example, to technical changes that allow treatment of previously untreatable conditions and/or an aging population); (b) Providing services (such as higher cost surgical treatments, medical devices, and imaging services) on an inpatient basis that previously were more commonly furnished in an outpatient setting; and (c) Changes in documentation (more complete medical records) and coding practice (more accurate and complete coding of the information contained in the medical record). We note that changes in patient-mix and medical practice signal 
                        *real*
                         changes in underlying resource utilization and cost of treatment. While these changes may have occurred in response to incentives from IPPS policies, they represent real changes in resource needs. In contrast, changes in CMI as a result of improved documentation and coding do not represent real increases in underlying resource demands. For the implementation of the IPPS in 1983, improved documentation and coding were found to be the primary cause in the underprojection of CMI increases, accounting for as much as 2 percent in the annual rate of CMI growth observed post-PPS.[2] The Medicare Trustees Technical Review Panel [3]
                        
                         has previously determined the annual measured change in CMI for inpatient hospital services to oscillate around an underlying real trend of 1 percent annual growth. In 1991 the Medicare-specific trend in real CMI growth was found in a then-HCFA 
                        ( print page 47176)
                        funded study [4]
                        
                         to be within a range of 1 to 1.4 percent. In the annual study conducted by CMS, there has been no evidence to support a real case-mix increase in excess of the annually projected 1 percent upper bound in the period. MedPAC findings have echoed this with its recent study of real case-mix change finding growth rates for years 2002, 2003, and 2004 of 1 percent, 0.6 percent, and 0.4 percent, respectively.[5] In the proposed rule, we indicated that we believe that adoption of the proposed MS–DRGs would create a risk of increased aggregate levels of payment as a result of increased documentation and coding. MedPAC notes that “refinements in DRG definitions have sometimes led to substantial unwarranted increase in payments to hospitals, reflecting more complete reporting of patients' diagnoses and procedures.” MedPAC further notes that “refinements to the DRG definitions and weights would substantially strengthen providers' incentives to accurately report patients' comorbidities and complications.” To address this issue, MedPAC recommended that the Secretary “project the likely effect of reporting improvements on total payments and make an offsetting adjustment to the national average base payment amounts.” [6] The Secretary has broad discretion under section 1886(d)(3)(A)(vi) of the Act to adjust the standardized amount so as to eliminate the effect of changes in coding or classification of discharges that do not reflect real changes in case-mix. While we modeled the changes to the DRG system and relative weights to ensure budget neutrality, we are concerned that the large increase in the number of DRGs will provide opportunities for hospitals to do more accurate documentation and coding of information contained in the medical record. Coding that has no effect on payment under the current CMS–DRGs may result in a case being assigned to a higher paid DRG under the proposed MS–DRGs. Thus, more accurate and complete documentation and coding may occur because it will result in higher payments under the MS–DRG system. For the proposed rule, we stated that the potential for more accurate and complete documentation and coding will apply equally under the acute IPPS as well as under the LTCH PPS because the same DRGs are used for both payment systems. However, for reasons explained elsewhere in this final rule with comment period, we are limiting this analysis to the IPPS. CMS in the past has adjusted standardized amounts under the IRF PPS to account for case-mix increases due to improvements in documentation and coding. In 2004, RAND [7]
                        
                         published a technical report as part of the follow-up to the implementation of the IRF PPS. The initial weights used within the IRF PPS were based on a mix of CY 1999 and CY 1998 data. The study reviewed the changes between this base data set and the IRF PPS implementation year of 2002. The report found that the weight per discharge for IRFs had grown by 3.4 percent between the CY 1999 data set and the CY 2002 data set. In a detailed analysis of both statistical patterns in acute stay records and directly measured coding practices, RAND found that the level of case-mix increase associated with documentation and coding-induced changes in the transition year ranged between 1.9 and 5.8 percent, with the upper end of the estimate associated with real declines in resource use. (We note that RAND revised its report in late 2005 to reflect an upper bound of 5.9 percent, instead of the 5.8 percent that we reported in the FY 2006 IRF PPS proposed and final rules.) We used the results of this analysis to justify a 1.9 percent adjustment to payment rates for IRFs in FY 2006 (70 FR 47904) and a 2.6 percent adjustment to payment rates for IRFs in FY 2007 (71 FR 48370), for a combined total adjustment of 4.5 percent. The implementation year was marked by the transitioning of hospitals to the IRF PPS payment based on cost reports beginning January 1, 2002, and staggered to October 1, 2002. A combination of increased familiarity with the system by providers and the staggered transition could mean that documentation and coding-induced case-mix change continued as hospitals experienced ongoing changes in the early years of the IRF PPS and as the incentives within the system were more widely recognized. We also recognize that significant changes in IRF patient populations may be occurring as a result of recent regulatory changes, such as the phase-in of the 75-percent rule compliance percentage. We intend to continue analyzing changes in coding and case-mix closely, using the most current available data, as part of our ongoing monitoring of the IRF PPS and, based on this analysis, we intend to propose additional payment refinements for IRFs in the future as the analysis indicates such adjustments are warranted. Furthermore, as part of our analysis of this issue, we considered the recent experience of the State of Maryland with adopting the APR DRG system. Maryland introduced APR DRGs for payment for three teaching hospitals in 2000. Between State fiscal years (SFYs) 2001 and 2005,[8]
                        
                         the remaining hospitals continued to be paid using modified CMS DRGs. In June 2004, the remaining hospitals were notified that Maryland would expand the use of APR DRGs throughout its all payer charge-per-case system beginning in July 2005. Hospitals in Maryland improved coding and documentation in response to the adoption of APR DRGs. As a result of this improved documentation and coding, reported CMI increased at a greater rate than real CMI. Given the similarity between coding incentives using the APR DRGs in Maryland and the MS–DRGs that are being proposed for Medicare, we analyzed Maryland data to develop an adjustment for improved documentation and coding. For the Maryland analysis, we assume that, in SFY 2005, those hospitals not already being paid under the APR DRG system began acting as if the transition to the new DRG logic had already taken place. This assumption is supported by the following facts: (a) Maryland hospitals were reporting to the Health Services and Cost Review Commission (HSCRC), Maryland's governing body of its all-payer ratesetting system using the APR DRG GROUPER in 2005; (b) hospitals were provided training in coding under the APR DRG GROUPER; (c) hospitals had access to reports based on APR DRG logic; and (d) hospitals were given large amounts of feedback as to their performance under the GROUPER by the HSCRC relative to peer hospitals. The incentives for Maryland hospitals are to code as completely and accurately as possible because, beginning in July 2005, all Maryland hospitals were paid using APR DRGs. SFY 2005 was an 
                        ( print page 47177)
                        important year in Maryland, as it marked the beginning of the 2-year period of transition after which a hospital's revenues were reduced if coding was not as complete as a peer hospital. Under the current CMS DRGs, each secondary diagnosis code is recognized as either a CC or non-CC. Hospitals in Maryland and nationally for Medicare only needed to code one secondary diagnosis as a CC when paid using CMS DRGs for the patient to be assigned to a higher-weighted DRG split based on the presence or absence of a CC. Under the APR DRGs, each secondary diagnosis is designated as minor, moderate, major, or extreme. Under the MS–DRGs, each secondary diagnosis is designated as a non-CC, CC, or MCC. Hospitals in Maryland have incentives under the APR DRGs to code until a case is assigned to the highest of the four severity levels within a base DRG. Under the MS–DRGs, hospitals will have incentives to code until a case is assigned to one of up to three severity levels within a base DRG. Although the APR DRGs and the MS–DRGs may be different, we believe that hospitals have the same incentive under both systems to code as completely as possible. For this reason, we believe that the Maryland experience is a reasonable basis for projecting changes in coding practices for the wider national hospital population for the first 2 years of the MS–DRGs. We believe the analysis presented below provides a reasonable analysis of the potential growth in CMI due to improved documentation and coding. In addition to the similarity between coding incentives under the proposed MS–DRGs and the APR DRGs, we note that Maryland is an all-payer State; therefore, hospitals are paid by all third party payers—not just the State's Medicaid program—using the APR DRGs. Coding has been very important for each hospital's overall revenue for many years, and the incentives are uniform across all third party payers. The transition to APR DRGs was known well in advance of the actual date and, as stated above, hospitals were provided training in coding under the APR DRGs. It is reasonable to expect that hospitals' experience with improved documentation and coding will occur over a period of at least 2 years. Thus, the experience in Maryland may be similar to expectations for case-mix growth for the nation as a whole. Finally, in reviewing the results from Maryland, we note that three large teaching hospitals began using APR DRGs prior to SFY 2005. These facilities generally treat a wider variety of patients with higher acuity that gives them a greater potential for increasing coding under the APR DRG system than other hospitals throughout Maryland. Because these hospitals were paid using the APR DRGs earlier than other Maryland hospitals, we believe data for these hospitals need to be analyzed from an earlier time period. However, based on the consultations with the HSCRC, we believe there were special issues with one of these hospitals that may have made its case-mix growth during the early years of the transition to the APR DRGs atypical of the other teaching hospitals.[9]
                        
                         Therefore, we did not separately analyze the data for this hospital from the earlier time period and, as stated below, included its data with the rest of the Maryland hospitals. As part of its contract with CMS, 3M Health Information Systems reviewed the Maryland data in the context of our proposed changes to adopt MS–DRGs. 3M grouped Medicare cases in Maryland through both the CMS DRGs Version 24.0 and the proposed MS–DRGs for FY 2008. At our request, 3M deleted two of the three early transition hospitals from the data. It compared the results of the observed growth in case-mix from these data to the same process applied to Medicare data, excluding Maryland hospitals. The MedPAR data file for Federal fiscal year (FFY) 2006 (October 2005 through September 2006) was used to create relative weights for both CMS DRG Version 24.0 and the MS–DRGs. The MedPAR data file contained 12,794,280 records. In constructing the weights, the following edits were used: Cases with zero covered charges or length of stay were excluded.
                    Cases with length of stay greater than 2 years were excluded.
                    Only hospitals contained in the impact file for the FY 2007 IPPS final rule were included. The latter criterion excluded providers reimbursed outside of the IPPS, including Maryland hospitals, from the weight calculation. 3M employed standardized charge-based relative weights developed in accordance with the CMS methodology. Cost-based weights were not used and no adjustment to the charge weights was made for application of CMS transfer and postacute care transfer payment policy. 3M further grouped 2 years of MedPAR data from FY 2004 and FY 2005, using CMS DRG Version 24.0 and the MS–DRGs for hospitals nationally. Using 2 years of MedPAR data with one version of each DRG system further required 3M to make adjustments to the data to reflect revisions to ICD–9–CM codes that are made each year. MedPAR data for Maryland IPPS acute care providers within the IPPS data set were similarly assigned to the MS–DRGs and CMS DRGs for FYs 2004 through 2006. Each Maryland record, exclusive of the two early transition teaching hospitals for the 3 observed years (SFY 2004 to SFY 2006), was assigned to a proposed MS–DRG based on the ICD–9–CM codes the hospital submitted. The same results were obtained from data at the national level using the MS–DRGs. Further, we obtained data from the HSCRC showing the weighted average increase in case-mix for calendar years 2001 to 2003 for the two large academic medical centers that began an early transition to the APR DRGs. In addition, we also obtained case-mix increases under the CMS DRGs for FYs 2004 through 2006. The Medicare Actuary examined the data below: 
 
 Table R.—Maryland and National Data Used for Case-Mix Adjustment Analysis
FY 2004 to 2005 
                                 (percent)
FY 2005 to 2006 
                                 (percent)
FY 2004 to 2006 
                                 (percent)Rest of Maryland MS–DRG CMI Δ
2.30
2.57
4.93CY 2000 to FY 2003Early Transition Hospitals
4.4
6.7
11.4National MS–DRG CMI Δ
0.47
2.65
3.13National CMS DRG CMI Δ
−0.04
1.20
1.16Blend of MS–DRG  CMS DRG Δ using 0.47 Percent for 2005 and 1.2 Percent for 2006


1.68Difference between Maryland Early Transition Hospitals and National Data


9.58Difference between Rest of Maryland and National Data


3.20Medicare Actuary Estimate (75%/25%) Δ between Early Transition and Rest of Maryland


4.8
 The data above show that case-mix for hospitals increased by 4.93 percent from SFYs 2004 to 2006, during which Maryland adopted the APR DRGs for most hospitals. Case-mix for the two large teaching hospitals that were paid using the APR DRGs earlier than other hospitals in the State increased by 11.4 percent from SFYs 2001 to 2003. The weighted average increase in Maryland from these two categories of hospitals is 5.58 percent. Case-mix using the MS–DRGs would have increased 0.47 percent in FY 2005 and 2.65 percent in FY 2006. Nationally, Medicare case-mix using the CMS DRGs decreased by 0.04 percent in FY 2005 and increased by 1.2 percent in FY 2006. The Actuary calculated a Medicare case-mix increase nationally over 2 years using a blend of these data from the MS–DRGs for FY 2005 and national Medicare data for FY 2006 from the CMS DRGs. The Actuary did not use either the −0.04 percent for the CMS DRGs or the 2.65 percent for the MS–DRGs to create this blended case-mix because these figures appeared atypical to national trends. Therefore, the Actuary dropped one atypically high and low number from each of the 2 years of data and calculated an average increase of 1.68 percent from FY 2004 to FY 2006. These data demonstrate that the measure of average CMI for Medicare cases is growing more rapidly within Maryland than nationally. Case-mix for the Maryland teaching hospitals and the rest of Maryland increased 9.58 percent and 3.20 percent more, respectively, than the national average over 2 years, suggesting that improved documentation and coding lead to perceived, but not real, changes in case-mix. The Actuary noted that the case-mix increase in Maryland for two large teaching hospitals over a 2-year period was much higher in the early years of the APR DRGs than other Maryland hospitals (11.4 percent compared to 4.93 percent for the rest of Maryland). Further, teaching hospitals generally treat cases with higher acuity than other hospitals and have more opportunity to improve coding and documentation to increase case-mix than other hospitals. Teaching hospitals also represent a higher proportion of national Medicare data than they do of the data in Maryland. The two early transition teaching hospitals in Maryland account for approximately 10 percent of the Medicare discharges in Maryland. Nationally, teaching hospitals account for approximately 50 percent of Medicare discharges. Therefore, the Actuary believes that the teaching hospitals should be given a higher weight in the national data than they represent in Maryland. However, like other hospitals, teaching hospitals vary in size and patient mix and not all have the same opportunity to improve documentation and coding. Therefore, we believe the weight given to teaching hospitals should be higher than the 10 percent for the two early transition hospitals in Maryland but lower than the 50 percent of discharges that they account for in Maryland. The Actuary gave a weight of 25 percent for teaching hospitals and 75 percent for the rest of Maryland to the excess growth in case-mix over the national average and estimates that an adjustment of 4.8 percent will be necessary to maintain budget neutrality for the transition to the MS–DRGs. This analysis reflects our current estimate of the necessary adjustment needed to maintain budget neutrality for improvements in documentation and coding that lead to increases in case-mix. Consistent with the statute, we will compare the actual increase in case-mix due to documentation and coding to our projection once we have actual data to revise the Actuary's estimate and the adjustment we make to the standardized amounts. Based on the Actuary's analysis, using the Secretary's authority under section 1886(d)(3)(A)(vi) of the Act to adjust the standardized amount to eliminate the effect of changes in coding or classification of discharges that do not reflect real changes in case mix, we proposed to reduce the IPPS standardized amounts by 2.4 percent each year for FY 2008 and FY 2009. We indicated that we were considering proposing a 4.8 percent adjustment for FY 2008. However, we believed it would be appropriate to provide a transition because we would be making a significant adjustment to the standardized amounts. In the proposed rule, we expressed interest in receiving public comments on whether we should apply the proposed adjustment in a single year, over 2 years, or in different increments than 
                        1/2
                         of the adjustment each year. Section 1886(d)(3)(A)(vi) of the Act further gives the Secretary authority to revisit adjustments to the standardized amounts for changes in coding or classification of discharges that were based on estimates in a future year. Consistent with the statute, we will compare the actual increase in case mix due to documentation and coding to our projection once we have actual data for FY 2008 and FY 2009 for the FY 2010 and FY 2011 IPPS rules. At that time, if necessary, we may make a further adjustment to the standardized amounts to account for the difference between our projection and actual data. *Comment:*
                         Many commenters opposed the documentation and coding adjustment, which they believed would reduce payments to hospitals by $24 billion over the next 5 years. The commenters did not believe this reduction is warranted. They suggested the adjustment for documentation and coding is a “backdoor attempt” to reduce Medicare's inpatient hospital payments. One commenter stated that the documentation and coding 
                        ( print page 47179)
                        adjustment would result in a total estimated reduction in payment for Pennsylvania hospitals of $67.5 million in FY 2008, and an estimated $1.6 billion over the next 5 years. The commenter stated that such reductions and attempts at backdoor budget cuts would only further erode scarce resources and challenge hospitals in their ability to care for patients. The commenter stated that until MS–DRGs are fully implemented, and CMS can document and demonstrate that any increase in case-mix results from changes in coding practices rather than real changes in patient severity, there should be no documentation and coding adjustment. *Response:*
                         We stress that there are no savings attached to this adjustment. This adjustment is not a “backdoor” attempt to reduce Medicare inpatient hospital payments. Without a documentation and coding adjustment, the changes to MS–DRGs would not be budget neutral. Substantial evidence supports our conclusion that the CMI will increase as a result of adoption of MS–DRGs without corresponding growth in patient severity. We have provided evidence from studies going back over 20 years that show that hospitals respond to incentives when payment classifications are changed to improve documentation and coding to receive higher payments. Maryland provides a recent example demonstrating the validity of the finding that hospitals respond to changes in payment classification groups by changing documentation and coding practices. Furthermore, we are not aware of a situation in which a new or revised payment system provided a payment incentive to improve documentation and coding, yet hospitals did not improve documentation and coding. *Comment:*
                         Many commenters stated that the documentation and coding adjustment is based on assumptions made with little to no data or experience about how medical record documentation and coding practices will change as a result of the implementation of MS–DRGs. One commenter stated that the proposed adjustment has no basis in actual data or research pertaining to inpatient hospital coding practices. One commenter objected to the −2.4 percent adjustment for documentation and coding stating it could not understand the proposal and noted that the hospitals are utilizing the coding system that the Department of Health and Human Services has created. The commenter stated that if, in fact, the new severity DRGs were designed to better recognize the resources needed to treat the various DRG conditions, the argument can be made that CMS has been underpaying institutions for over 20 years. Other commenters objecting to the documentation and coding adjustment further indicated that hospitals have operated under the current DRG system for 23 years and hospitals are already expert in their ability to maximize coding for payment. These commenters stated that not even in the initial years of the IPPS was coding change found to be in the magnitude of CMS’ proposed FY 2008 and FY 2009 cuts. The commenters stated that the proposed MS–DRGs would be a refinement of the existing system; the underlying classification of patients and “rules of thumb” for coding would be the same. They stated that there is no evidence that an adjustment of 4.8 percent over 2 years is warranted when studies by RAND, cited in the preamble, are looking at claims between 1986 and 1987 at the beginning of the IPPS that showed only a 0.8 percent growth in case-mix due to coding. The commenters stated that even moving from the original reasonable cost-based system to a new patient classification-based PPS did not generate the type of coding changes CMS contends will occur under the MS–DRGs. Many commenters disagreed with the applicability of generalizing from the experience in Maryland to Medicare. One commenter indicated that MS–DRGs and APR DRGs are two completely different ways to classify patients, and generalizing from one system to the other cannot be done. The existing classification rules will change only marginally with the introduction of MS–DRGs, whereas they are very different under the APR DRG system. Differences include: APR DRGs consider multiple CCs in determining the placement of the patient and, ultimately, the payment. In fact, to be placed in the highest severity level, more than one high-severity secondary diagnosis is required.
                    APR DRGs consider interactions among primary and secondary diagnoses. Thus, factors that increase the severity level for a case under the APR DRGs will not occur under the MS–DRGs.
                    APR DRGs consider interactions among procedures and diagnoses as well. MS–DRGs do not.
                    APR DRGs have four severity subclasses for each base DRG, while MS–DRGs have three tiers, and this is only for 152 base DRGs—106 base DRGs only have two tiers and 77 base DRGs are not split at all.
                    Less than half the number of patient classifications in the MS–DRG system are dependent on the presence or absence of a CC—410 for MS–DRGs versus 863 for APR DRGs. The commenters believed that all of these differences make the Maryland experience an invalid comparison. They suggested there is significantly less possibility for changes in coding to affect payment under the MS–DRGs. Another commenter indicated that the CMS analysis is not applicable to Medicare because Maryland hospitals were not paid using a DRG system prior to APR DRG implementation. DRG data were collected for statistical purposes, but DRGs were not used for reimbursement. The commenter added that coding practices under APR DRGs are not necessarily comparable to MS–DRGs because they were not designed for reimbursement purposes. Further, the commenter found that the system logic is not always consistent with nationally recognized coding rules and guidelines, resulting in possible changes in coding practices that do not necessarily represent improved coding. The commenter stated that hospitals have little ability to change their classification and coding practices. Another commenter stated that Maryland's hospitals were paid prior to the APR DRGs under a State ratesetting system where an incentive to code accurately did not significantly affect what a hospital was paid. The commenter stated that APR DRGs are also much more complicated than MS–DRGs. The commenter stated that generalizing the Maryland experience to the rest of the nation's hospitals is an “apples to oranges” comparison. One commenter also disagreed with CMS’ use of the example of the IRF PPS to justify the coding adjustment. The commenter believed that the IRF experience is an inappropriate comparison. The commenter stated that coding changes seen under the IRF PPS were the result of moving from a cost-based system to a PPS, not the marginal difference of moving from the existing CMS DRGs to the refined MS–DRGs. In addition, coding under the IRF PPS is driven by the Inpatient Rehabilitation Patient Assessment Instrument (IRF–PAI). This tool provides an incentive for IRFs to code in a way that differs from the IPPS, which does not utilize a patient assessment instrument. The commenter believed that coding for the IRF–PAI differs significantly from the longstanding coding rules that inpatient PPS hospitals have followed for the following reasons: The IRF–PAI introduced a new data item into coding—namely, “etiological( print page 47180)
                        diagnosis.” The definition of this new diagnosis and the applicable coding rules are significantly different than the “principal diagnosis” used to determine the DRG. More importantly, the Official Coding Guidelines that apply to all other diagnostic coding do not apply to the selection of the ICD–9–CM etiologic diagnoses codes.
                    The Official Coding Guidelines do not consistently apply to the coding of secondary diagnoses on the IRF–PAI. Several different exceptions to the guidelines have been developed by CMS for the completion of the IRF–PAI.
                    The definition of what secondary diagnoses may be appropriately reported differs under the IRF–PAI from the definition used by other inpatient coders.
                    Most hospitals are already coding as carefully and accurately as possible because of other incentives in the system to do so, such as risk adjustment in various quality reporting systems. Analysis of Medicare claims from 2001 to 2005 suggests that hospitals have been coding CCs at high rates for many years. More than 70 percent of claims already include CCs, and more than 50 percent of claims have at least eight secondary diagnoses (the maximum number accepted in Medicare's DRG GROUPER). Hospitals” assumed ability to use even more CCs under MS–DRGs is very low. The commenter also indicated that according to an article in the magazine Healthcare Financial Management, the level of coding on claims suggests that the presence of a CC on a bill is not strongly influenced by financial gain. The proportion of surgical cases with a CC code is higher for cases where there is no CC split and, thus, no financial benefit, than on those cases where there is a CC split and a corresponding higher payment. Thus, coding is driven primarily by coding guidelines and what is in the medical record rather than by financial incentives according to this commenter. In addition, the commenter believed that many cases simply do not have additional CCs to be coded. For many claims, additional codes are simply not warranted and not supported by the medical record. Therefore, there is no opportunity for a coding change to increase payment. The commenter analyzed the all-payer health care claims databases from California, Connecticut, Florida, and Michigan because, unlike the MedPAR files, these databases include all 25 diagnoses reported on the claims. This analysis showed that only 0.25 percent of claims had an MCC or CC appear for the first time in positions 10 through 25. The commenter believed this strongly suggests that hospitals will not be able to “re-order” their secondary diagnoses to appear higher on the claim so that Medicare will pay a higher rate. The commenter's coding experts note that most hospitals use software that automatically re-sorts the secondary diagnoses to ensure that those pertinent to payment are included in positions two through nine. The commenter also examined secondary diagnosis codes and found that there were relatively few non-specific codes listed among the common secondary diagnoses of discharges without a MCC/CC. The commenter believed that this means hospitals cannot shift large numbers of discharges to MCCs or CCs based on coding a more specific code to replace a nonspecific code. The commenter further indicated that there is no opportunity for increased payment due to a change in coding for 77 base DRGs under the MS–DRG system, as there is only one severity class and no differentiation in payment. Additionally, there are MS–DRGs that are now split between “with MCC” and “without MCC” (a combined non-CC and CC MS–DRG) that have historically contained a single CC/non-CC split. These DRGs already required secondary diagnosis coding; thus, the codes to qualify the case as an MCC already would have been present. In these cases, it is very unlikely that the medical record would justify an MCC that is not already present in the medical record. Coders must code strictly based on what the physician notes in the chart. Therefore, the commenter believed it is highly unlikely that a coder will be able to select an MCC that was not previously present in the medical record. One commenter stated that case-mix will and should increase from adoption of the MS–DRGs. According to the comment, changes in case-mix due to improved accuracy in documentation and coding have been observed since the introduction of DRG payments in 1983. These changes have occurred in every refinement of every classification system across every care setting. The commenter stated that changes are driven primarily by the fact that documentation and numbers of diagnoses coded is inevitably incomplete due to time pressures for completion of paperwork and limitations of computer systems to identify this information. If an item is not used and/or not important, it is less well documented. Refinements in patient classification make certain paperwork more important, encouraging providers to improve their documentation and reporting accuracy. This, in turn, increases apparent case mix that depends on these codes according to this commenter. The commenter stated that coding changes that affect CMI are desirable in the long run, since they represent more accurate data and evidence-based care, payments, quality measurement, management decisions, and policy are all enhanced. This increase in accuracy is not only desired, it is necessary to truly reform health care (severity adjusted payments, quality measurement and reporting, value based-purchasing, among others), where “bad data” is frequently cited as an excuse to defer reform efforts. This commenter stated that it is impossible to accurately predict the total magnitude and timing of case-mix changes. Every hospital will have their own documentation and coding accuracy baseline, and their own real CMI based on accurate data for their patient mix. Each will have a different commitment to increasing their accuracy, resources to do so, and learning curve for implementation. The commenter believed that, like any prediction of the future, it will inevitably be wrong, particularly due to its complexity. *Response:*
                         Many of the commenters ascribed the term “behavioral offset” to our proposed rule and believed that CMS was pejoratively describing hospital motives. We note that we did not use the term “behavioral offset” to describe the proposed −2.4 percent adjustment to IPPS rates for FYs 2008 and 2009 for changes in documentation and coding. We regret that the term “behavioral offset” has been attributed to us. The proposed rule uses the phrase “documentation and coding adjustment” to refer to the proposed −4.8 percent (−2.4 percent each year for FYs 2008 and 2009) adjustment to the IPPS standardized amounts to maintain budget neutrality for the MS–DRGs consistent with the statute. Further, we believe it is important to address the notion in some of the public comments that CMS believes changes in how services are documented or coded that is consistent with the medical record is inappropriate or otherwise unethical. We do not believe there is anything inappropriate, unethical or otherwise wrong with hospitals taking full advantage of coding opportunities to maximize Medicare payment that is supported by documentation in the medical record. In its public comments, MedPAC recommended an adjustment for improvements in documentation and coding and also noted that hospitals' efforts to improve the specificity and 
                        ( print page 47181)
                        accuracy of documentation and coding are perfectly legitimate.[10] We encourage hospitals to engage in complete and accurate coding. Section 1886(d)(3)(A)(vi) of the Act authorizes the Secretary to adjust the standardized amount so as to eliminate the effect of changes in coding or classification of discharges that do not reflect real changes in case-mix. In its public comments, MedPAC indicated that the increases in payments that result from improvements in documentation and coding are not warranted because the increase in measured case-mix does not reflect any real change in illness severity or the cost of care for the patients being treated. Therefore, offsetting adjustments to the PPS payment rates are needed to protect the Medicare program and those who support it through taxes and premiums from unwarranted increases in spending.[11] In response to the comment that stated, “moving from the original reasonable cost-based system to a new patient classification-based PPS did not generate the type of coding changes CMS contends will occur under the MS–DRGs,” we believe the estimates for improvements in documentation and coding are within the range of those projected under the original IPPS. As stated above, for the implementation of the IPPS in 1983, RAND found that improved documentation and coding were found to be the primary cause in the underprojection of CMI increases, accounting for as much as 2 percent in the annual rate of CMI growth observed post-PPS.[12]
                        
                         This study found a 2 percent annual change in case-mix from improvements in documentation and coding during the original adoption of the IPPS, while we are forecasting a 4.8 percent 
                        *total*
                         increase due to the MS–DRGs. MedPAC's public comments citing a study in 
                        *Health Affairs*
                         found that the original adjustment for anticipated increases in case mix due to documentation and coding “were substantially smaller than the actual change in case mix which increased more than 7 percent from the pre-PPS period to the first full year of the PPS system.” [13]
                        
                         MedPAC further noted that CMI increases due to improvements in documentation can be expected to occur over many years. It stated that the Prospective Payment Assessment Commission (a predecessor of MedPAC) considered case-mix change in developing its annual update recommendations to the Congress and made offsetting adjustments for continuing coding improvements for 10 consecutive years from 1986 to 1995.[14]
                        
                         For these reasons, we disagree with the comment that our forecast of changes in case-mix from improvements in documentation and coding are not within the range of those projected when the original IPPS was implemented. With respect to comments about the use of the APR DRG system in Maryland to forecast an adjustment for improvements in documentation and coding for Medicare, we agree that there are differences between the APR DRGs being used in Maryland and the MS–DRGs being proposed for use by Medicare. We believe that coding incentives in Maryland under the APR DRGs and nationally under the MS–DRGs are similar, not identical. The Maryland experience provides a useful example to forecast the potential increase in case mix from improvements in documentation because it is a recent and similar change to what we plan to adopt for Medicare. Although the APR DRGs and the MS DRGs may be different, we believe that hospitals have the same incentive under both systems to code as completely as possible. Moreover, as explained above, we estimated CMI growth using the MS DRG and CMS DRG GROUPERs, not APR DRG GROUPER. We used Medicare claims from Maryland hospitals for our analysis, but we grouped the claims under the CMS DRG GROUPER and proposed MS DRG GROUPER. For these reasons, we continue to believe that the Maryland experience is a reasonable basis for projecting increased case mix in the wider national hospital population for the first 2 years of the MS–DRGs. MedPAC supported using the Maryland experience to forecast potential increases in case mix by stating: “The case-mix reporting changes that occurred in Maryland-when that state adopted APR DRGs in its all payer rate-setting system—provide one of the few recent benchmarks for comparison outside of Medicare's historical experience.” [15] The reference to the IRF PPS was not intended to suggest that we used the experience with that system to forecast a potential adjustment under the IPPS. Rather, we were merely noting that the adoption of a PPS system for IRFs also produced an increase in case-mix as a result of the new incentives presented by going to a different payment system. The example suggests that there is strong evidence that hospitals—whether they are IRFs, acute care IPPS hospitals, or LTCHs—respond to coding incentives presented by their respective payment systems and will react accordingly. MedPAC's public comments also supported this point. In its public comments on the FY 2008 IPPS proposed rule, MedPAC stated that there were increases in case mix with the introduction of prospective payment systems for IRFs and LTCHs.[16] The comments about reordering of codes and substituting specific codes for nonspecific codes suggests that hospitals are already maximizing coding opportunities and there is no further changes they can make that would result in an increase in Medicare payment. With respect to reordering of codes, the commenter argues that MCCs and CCs will already be found in the first 9 fields on the Medicare claim and the codes that are stored or processed from fields 10 to 25 cannot be moved up higher on the claim to increase payment. While this public comment suggests that there will be no opportunity to increase case mix by moving secondary diagnoses higher on a claim, another public comment provided a specific estimate of how much this practice could increase case-mix. The commenter examined data from New York State discharges and indicated that if MCC and CC codes that are currently provided beyond the original 9 diagnoses on the claim that are used by Medicare are moved to the first 9 positions, case mix would increase by 0.5 percent. This reaffirms CMS' views that hospitals focus their documentation and coding efforts to maximize reimbursement. Again, we believe these examples provide evidence from the public comments supporting the necessity for us to apply an adjustment for documentation and coding to meet the requirements of the law. 
                        ( print page 47182) We believe increases in case-mix do not only have to come from moving codes higher on the claim. A hospital can merely change the order of a principal and secondary diagnosis for closely related conditions to affect payment. The selection of a principal diagnosis that was previously coded as secondary can increase hospital payment. Again, we found a public comment suggesting that reordering of principal and secondary diagnoses can increase case mix. The commenter stated some DRG groups only count a code in “the primary position while others only count a code in a secondary position.” The commenter is noting that many DRGs are split based on the presence or absence of an MCC or CC as a secondary diagnosis. According to the commenter, many Medicare patients have multiple conditions occasioning their admission, suggesting that reordering the principal and secondary diagnosis codes can result in an increase in case-mix. We also disagree with the comments suggesting that hospitals do not have the opportunity to substitute a specified for an unspecified code to increase case mix. In fact, we believe these incentives will be very strong under the MS–DRGs with the reclassification of many unspecified codes as non-CCs. Again, we found statements in the public comments that support the notion that hospitals will have opportunities to substitute a specified for an unspecified condition to increase case-mix under the MS DRGs. One commenter indicated that the CC list revisions encourage coding of more detailed codes and estimates that switching from “not otherwise specified” codes to detailed codes could increase case mix by 0.5 percent. Another commenter states: “The most dramatic example is ICD–9–CM code 428.0, Congestive heart failure, unspecified, which was applied to an average of 2.3 million Medicare fee-for-service cases a year during the past three years. This was the most widely used secondary diagnosis code, despite the fact that 12 more specific codes were added in FY 2003 * * * if the revised CC list were implemented before hospitals had a chance to improve their coding to accommodate the revisions, then case-mix creep and inpatient prospective payment system (IPPS) overpayments would ensue.” We further note that many of the public comments arguing against the documentation and coding adjustment also request a year's delay in implementation of the MS–DRGs so “hospitals may focus on understanding the impact of the revised CC list, training and educating their coders, and working with their physicians for any documentation improvements required to allow the reporting of more specific codes where applicable.” We believe this comment provides a strong indication that, even though many public commenters themselves argue against the need for the documentation and coding adjustment, the same commenters would like a year's delay to take the very actions that they say make an adjustment unnecessary. The MS–DRGs are not making any changes to ICD–9–CM codes. While the MS–DRGs do include some consolidations of base DRGs, the major changes from the current DRGs simply involve adding severity levels to many of the new MS–DRGs. The move to MS–DRGs will not necessitate additional data elements or changes in reporting practices. Therefore, hospitals may continue to document and code as they do currently to be paid by Medicare under the MS–DRGs. The only reason hospitals would need a delay in the MS–DRGs is to have more time to understand how their revenues are affected by coding under the new DRG system. In our view, there is a clear indication in these comments that hospitals will change their documentation and coding practices and increase case mix consistent with the payment incentives that are provided by the MS–DRG system. As further evidence that documentation and coding practices are affected by payment, we note a recent article in the Journal of AHIMA (American Health Information Management Association) which discusses methods for improving clinical documentation in order to increase reimbursement. The article describes a program at a hospital utilizing clinical documentation specialists that work on the hospital treatment floors to encourage improvements in clinical documentation. The article states that one year after implementing the program, the hospital gained an additional $1.5 million in reimbursement. In the second year, the hospital gained $900,000. The article reports a similar program at another hospital where the “the academic hospital was overly conservative in its coding practices and “leaving money on the table.’ ” [17]
                        
                         These examples provide strong support for concluding that there were opportunities under the current CMS DRGs to improve coding and increase payment. With incentives changing under the MS–DRGs, we believe there will be additional opportunities to improve documentation and coding. We believe this article supports our contention that hospital coders and physicians will respond to incentives available under MS–DRGs by improving documentation and coding to increase case-mix. *Comment:*
                         One commenter stated that the ICD–9–CM Official Guidelines for Coding and Reporting and the American Hospital Association's Coding Clinic for ICD 9–CM provide official industry guidance on complete, accurate ICD–9–CM coding, without regard to the impact of code assignment on reimbursement. AHIMA's Standards of Ethical Coding stipulate that “coding professionals are expected to support the importance of accurate, complete, and consistent coding practices for the production of quality healthcare data.” The commenter believed that all diagnoses and procedures should be coded and reported in accordance with the official coding rules and guidelines and does not advocate the practice of only coding enough diagnoses and procedures for correct DRG assignment. The commenter stated that increased attention to the quality of coding and documentation as a result of the role coding plays in DRG assignment has led to much-improved coding practices since the adoption of the IPPS in 1983. The commenter further noted that hospitals code more completely so CMS has more complete data to make DRG modifications that would recognize the resource-intensiveness of a diagnosis or procedure. *Response:*
                         We believe the commenter's assertion supports our point that improvements in documentation and coding occurred as a result of the payment incentives provided by the IPPS. That is, the commenter is saying that the adoption of the original IPPS in 1983 led hospitals to improve documentation and coding practices because “of the role coding plays in DRG assignment.” The commenter believed that MS–DRGs will not lead to changes in documentation and coding practices and cites—among other sources—AHIMA's Standards of Ethical Coding. AHIMA is a professional association representing more than 51,000 health information professionals who work throughout the healthcare industry whose work is closely engaged with the diagnosis and procedure classification systems that serve to create the DRGs. The article cited above from the July–August issue of the Journal of AHIMA provided documented examples of how hospitals can change coding practices to maximize payments. Thus, there is an 
                        ( print page 47183)
                        assertion in this comment that official coding rules and guidelines require all diagnoses and procedures to be reported on the claim minimizing opportunities for changes in documentation and coding to increase case mix. However, AHIMA's own professional journal provides strong evidence of opportunities that exist for improvements in coding to increase payment. As we stated previously and suggested by the article in the Journal of AHIMA, we believe that payment incentives lead hospital staff to carefully examine documentation and coding practices, work with physicians to improve the precision of clinical documentation in order to make subsequent changes in coding. *Comment:*
                         A number of commenters requested that CMS not make the documentation and coding adjustment until hospitals have had experience with the MS–DRGs. Once the MS–DRGs are fully implemented, the commenters indicated that CMS can investigate whether payments have increased due to coding rather than the severity of patients and determine if an adjustment is necessary. Several commenters stated that CMS is not required to make a prospective adjustment to IPPS rates to account for improvements in documentation and coding and should not do so without an understanding of whether there will even be coding changes in the first few years of the refined system. Another commenter stated that CMS should retrospectively determine the national rate reduction to offset increases in case-mix from improvements in documentation and coding even though the reduction would be made to future rates and would not account for potential increases in payment that would occur until the adjustment is made. The commenter indicated that section 1886(d)(3)(A)(vi) of the Act authorizes just such an adjustment and it is the only way to ensure that the level of the reduction is accurate. All of these commenters argued that CMS can always correct for additional payments made as a result of coding changes in a later year when there is sufficient evidence and an understanding of the magnitude. One commenter suggested that CMS defer (but not eliminate) adjustments for improvements in documentation and coding. This commenter suggested that CMS make the adjustment at a later time when there is actual data suggesting how much improvements in documentation have increased case mix but that we consider a “stop loss” if initial coding changes appear to far exceed the current 4.8 percent estimate. The commenter indicated that CMS should encourage facilities to improve their documentation and coding accuracy sooner (that is, prior to adjusting for documentation and coding), and not do any MCC/CC consolidations until after coding improvements have occurred (that is, have 3 severity levels for all DRGs). Another commenter noted that RAND's evaluation of alternative severity DRG systems included an assessment of how coding behaviors are expected to vary under each system. However, RAND did not evaluate the MS–DRGs and further noted that it was not able to empirically assess the relative risk the alternative severity-adjusted systems pose for case mix increases attributable to coding improvement without having the opportunity to observe actual changes in coding behavior when a DRG system is used for payment. The commenter did not believe any payment adjustment to account for case mix increases, which are attributable to coding improvements, should be made until CMS has conducted appropriate research to determine the extent to which improvements in coding becomes an issue under the proposed MS–DRG system. While the design of the MS–DRG system may encourage an increased level of coding specificity, the commenter stated that it is unknown what effect, if any, this might have on the CMI. *Response:*
                         RAND did not repeat the analysis of the potential for documentation and coding improvements to increase case mix using the MS–DRGs because it only worked with FY 2005 data to evaluate them. The RAND report refers readers to the analysis CMS did of the likely impact of documentation and coding improvements on case mix using the MS–DRGs.[18] With respect to delaying making any adjustments for documentation and coding, the commenters are correct that section 1886(d)(3)(A)(vi) of the Act gives the Secretary authority to revisit adjustments to the standardized amounts for changes in coding or classification of discharges that were based on estimates in a future year. We also note that section 1886(d)(4)(C) of the Act requires that “changes in classifications or weighting factors” not increase or decrease aggregate inpatient hospital payments. We believe that Congress has expressed its clear preference that all changes to DRG reclassifications be budget neutral. Substantial evidence indicates that, unless we make an adjustment to account for improvements in documentation and coding, aggregate payments under the IPPS will increase when we adopt MS–DRGs as a result of these improvements in documentation and coding. Further, as discussed above, the independent Office of the Actuary validated the −1.2 percent adjustment to the standardized amount to ensure that improvements in documentation and coding do not increase case-mix and IPPS payments. In addition, by revisiting the adjustment at a later date when we have actual data, we can ensure that the standardized amounts are permanently set at the level they otherwise would have been had the increase in case mix due to improvements in documentation and coding been known. That is, any overestimate or underestimate of the adjustment for improvements in documentation would not be permanently embedded in the IPPS standardized amount for subsequent years. While any differences between projected and actual data could result in higher or lower payments to hospitals for the intervening years, MedPAC believes that CMS should provide an adjustment that lies somewhere in the middle of its own estimate of 2.0 percent and CMS' estimate of 4.8 percent. In its comments, MedPAC recommended that CMS should adopt an adjustment for improvements in documentation and coding between 1.6 and 1.8 percent per year that would “put both Medicare and the hospital industry at some risk that the actual value will turn out to be higher or lower than the adjustment that is applied.” [19] *Comment:*
                         Several commenters agreed with RAND's assertion that the magnitude of coding improvement is likely to vary across hospitals, depending on how strong their current coding practices are and the resources they are able to devote to improving them. One commenter stated that the hospitals that already use the more specific codes and those with a low proportion of cases in split DRGs would receive fewer, if any, overpayments because their case mix indices would not increase as much, or at all. The commenter stated that New York hospitals, in particular, would have less opportunity for coding improvement than other hospitals because the union of the Medicare CC list and the New 
                        ( print page 47184)
                        York State CC list has 279 more codes than the Medicare CC list alone. Thus, moving from the union of the CC list to the revised CC list would add only 1,298 codes, 279 fewer codes than in the rest of the country. Furthermore, New York hospitals are well-practiced in using specific codes because the New York State AP–DRG grouper differentiates between CCs and major CCs, as the MS–DRG grouper would do. This commenter and others that cited the RAND study agree that CMS' practice of making an across-the-board adjustment to PPS payments to address case mix increases attributable to coding improvements raises an equity issue that CMS needs to consider. The adjustment to the standardized amount for documentation and coding for hospitals that have already improved coding would result in significant payment losses according to the commenter rather than offsetting higher case mix indices. The commenter stated that these changes are not uniform, creating unintended distributional impacts. The commenter stated that the process to make adjustments for documentation and coding is an across the board adjustment to the standardized amount, while actual changes will vary widely. This will create unintended distributional impacts across patient types, providers, and states that will in turn, according to the commenter, create push-back in providers, states, Congress, and potentially the courts. One of these commenters acknowledged that CMS may not have the option to recoup overpayments on a hospital-specific basis, as is done in New York. The commenter suspected that the proposed documentation and coding adjustment is too high because hospitals in other states—particularly New York—have more experience with secondary diagnosis coding than the Maryland hospitals had before their change to APR DRGs. Therefore, hospitals in other states probably have less opportunity to generate documentation and coding improvements that increase case mix. *Response:*
                         We agree that completeness of hospital coding practices may well vary across hospitals. Although we recognize this variability, we believe there will be potential for coding improvements to increase case mix for all hospitals. For instance, as noted above, a hospital can change the order of a principal and secondary diagnosis for closely related conditions to affect payment. The selection of a principal diagnosis that was previously coded as secondary can increase hospital payment. This type of potential coding change to increase case mix could be available to all hospitals irrespective of whether or not they maximized coding in the past. As noted above, a commenter examined data from New York State discharges and indicated that if MCC and CC codes that are currently provided beyond the original 9 diagnoses on the claim that are used by Medicare are moved to the first 9 positions, case mix would increase by 0.5 percent. Thus, this comment indicates that there will be at least some opportunity to increase case mix through improvements in documentation and coding in States like New York that have used sophisticated DRG systems in the past for payment. Similarly, there are public comments suggesting hospitals can select a specified condition in place of an unspecified one to increase payment under the MS–DRGs but that this change in documentation and coding practice will not be applicable in areas of the country where a DRG system is in use that distinguishes between MCCs and CCs. As noted above, congestive heart failure, unspecified appears on an average of 2.3 million cases per year from FY 2004 to FY 2006 or on over 20 percent of the Medicare claims. In our view, billing of an unspecified code on this magnitude of claims suggests potential improvements in coding from substituting a specified for an unspecified code are widespread. While improvements in documentation and coding that increase case mix may be variable, section 1886(d)(3)(A)(vi) of the Act only allows us to apply the adjustments that are a result of changes in the coding or classification of discharges that do not reflect real changes in case mix to the standardized amounts. *Comment:*
                         Several commenters indicated that there should be a transition to the MS–DRGs. A number of commenters supported a 4-year transition period for implementing the MS–DRGs. The commenters stated that such a transition would allow hospitals the opportunity to educate their employees and physicians to assure proper, accurate coding, along with allocation of required resources through their budgetary process. The commenters recommended that FY 2008 be used to prepare for and test the MS–DRGs. In FY 2009 through 2011, the DRG weights would be computed as a blend of the MS–DRGs and the current DRGs. These commenters believed a 1-year delay would provide hospitals adequate time to implement and test the new system and adjust operations and staffing for predicted revenues. They also suggested that the 1-year delay would provide CMS adequate time to finalize data and a CC list, introduce and test software for case classification and payment, and train its fiscal agents. It would also allow vendors and State agencies time to incorporate such changes into their respective software and information systems. Other commenters were concerned that CMS would implement the MS–DRGs in FY 2008 and then, as a result of the final RAND report, move to another new system for FY 2009. These commenters urged CMS to delay the implementation of the MS–DRGs if there was a possibility for another completely new system in FY 2009. These commenters stated that hospitals will expend a large number of hours educating their coding staff about the MS–DRGs so that they can attempt to legitimately optimize their payment. Some commenters recommended that CMS implement the MS–DRGs effective October 1, 2007, with a 3-year phase-in approach of the relative weights. One commenter indicated that CMS should phase in the revised CC list and MS–DRGs to reduce the amount of documentation and coding related overpayments that would be made “in the first place.” The commenter recommended that the MS–DRGs not be implemented in FY 2008. Instead, they recommend that the revised CC list be used with a Version 25.0 of the current CMS DRGs and allow vendors of the alternative severity systems being evaluated by RAND to incorporate this information into an updated version of their systems. The commenter stated that the updated version of the CMS DRGs using the revised CC list would produce a greatly improved DRG GROUPER. The commenter recommended a 5-year phase-in during which the old CC list/CMS–DRG weights and the new CC list/MS–DRG weights would be blended in the following proportions: 80/20 percent in FY 2008, 60/40 percent in FY 2009, 40/60 percent in FY 2010, 20/80 percent in FY 2011, and 0/100 percent in FY 2012. The commenter stated that CMS should release the MS–DRG grouper software as soon as possible and should also encourage vendors to release products as soon as possible that ensure that both old and new CCs are listed among the first eight secondary diagnoses, as these are the only ones that can be used for payment purposes. With respect to the phase-in, the commenter believed it is prudent to begin to use the new CC list/MS–DRGs in FY 2008 so that hospitals are compelled as soon as possible (1) to improve their coding, and (2) to educate 
                        ( print page 47185)
                        their physicians about complete documentation. However, the commenter would not want the new DRG weights to represent a majority of the blend until they can be based on the first year of corrected data. The FY 2010 weights would be based on the FY 2008 cases, so they would reflect the first year's coding corrections and would presumably be more accurate. Because it can take several years for hospitals and physicians to adjust to new documentation and coding requirements, continuing blended payments in FY 2011 would be important to minimize documentation and coding related overpayments, according to the commenter. The commenter stated that the goal is to minimize the aggregate level of documentation and coding related overpayments so that hospitals not generating increases in case mix are not unfairly penalized by an across-the-board reduction. If overpayments could be recouped on a hospital-specific basis, the commenter stated that an attenuated phase-in would not be necessary. The commenter stated that they realized that their recommended phase in would be cumbersome because each case would have to be grouped twice to determine the DRG assignment under the CMS DRG and MS–DRG GROUPERS. However, the commenter believed this is the better policy option since the alternative for good-coding hospitals and those with relatively few patients in split DRGs would be to effectively eliminate the IPPS update for 2 years. *Response:*
                         We received many comments in support of the MS–DRGs, particularly because they are so structurally similar to the current DRGs, and therefore, we believe that a full year's delay is unwarranted. While the MS–DRGs include some consolidations of base DRGs, the major changes from the current DRGs simply involve adding severity levels to many of the new MS–DRGs. The move to MS–DRGs will not necessitate additional data elements or changes in reporting practices. Providers will be submitting the same clinical information on their claims. In our view, the issues in the comments concerning the need to examine the new system in detail do not justify delaying the move to this new system. We have provided detailed information in both the proposed and final rule as well as on our Web site on the formation of the MS–DRGs. We believe the significant benefits of the new system outweigh concerns by the provider community that they have not had time to analyze the details of the new system. We are confident that once they start working with the new system, they will find it simple to understand and far better at identifying and paying for more costly and severely ill patients. Accordingly, we do not believe that extensive preparation for implementation of the MS DRGs is necessary, and therefore, we are not delaying adoption of the MS–DRGs until FY 2009. MedPAC also carefully evaluated the options of implementing MS–DRGs in FY 2008 versus deferring the implementation until FY 2009 and agrees with our assessment that there is not sufficient cause to delay the proposed adoption of MS–DRGs beyond FY 2008. While MedPAC agreed that MS–DRGs should be implemented in FY 2008, it also stated that the transition should coincide with the transition to cost-based weights—that is, implement the MS–DRGs over a 2-year period beginning in FY 2008.[20]
                        
                         We agree with MedPAC that the MS–DRGs should be implemented over a 2-year transition period that coincides with the phase-in of cost-based weights. Therefore, we will implement MS–DRGs beginning in FY 2008 over a 2-year transition period where the DRG relative weights will be a blend of 50 percent each of the CMS DRG and MS DRG weights. We have provided more detail in section II.D.2. of the preamble of this final rule with comment period about the DRG relative weight calculations over this 2-year transition period. There appears to be a suggestion in many of the public comments both here and above that delaying implementation of MS–DRGs will allow the improvements in documentation and coding to occur before they have any financial impact on the Medicare program because hospitals would know and be encouraged to code using the incentives provided under the MS–DRGs, while Medicare would continue to be using the current CMS DRGs for payment. As discussed, one comment suggested that we could lessen the need for the documentation and coding adjustment by minimizing the financial impact of improvements in documentation and coding through a long transition period (5 years). We believe hospitals will not improve documentation and coding consistent with the incentives provided under the MS–DRGs unless they have a financial incentive to do so. As indicated in one public comment, “Documentation and numbers of diagnosis codes is inevitably incomplete due to time pressures for completion of ‘paperwork' and limitation of computer systems to capture this information. If an item is not used and/or not important, it is less well documented.” If there is a delay in MS–DRGs, the coding incentives that would come with its adoption would not be present and, therefore, likely would not occur. While we appreciate the suggestion for adopting a long transition period to provide an incentive to improve coding but minimize its financial impact on Medicare, such an idea may well just extend the period of time that documentation and coding improvements occur while delaying the improvements in recognition of severity of illness that would result from adopting MS DRGs. Again, we do not believe that either delaying or adopting MS–DRGs over a long period of time will reduce the need to apply a documentation and coding adjustment of the magnitude we estimated. We believe that adopting either of the ideas would only result in us needing to delay or extend the period of time over which the documentation and coding adjustment is applied. *Comment:*
                         MedPAC indicated that case-mix might increase more or less than the 4.8 percent we estimated from Maryland's experience. MedPAC recommended an adjustment between 1.6 and 1.8 percent a year for 2 years. This adjustment is based on a comparison between the MS–DRGs in Maryland and nationally (2.0 percent over 2 years) increased: To reflect their view that many hospitals do not respond quickly to improve reporting after major changes in the DRG definitions; and
                    The estimated change in case-mix for hospitals in the rest of the nation may reflect some improvements in documentation and coding in response to changes in the DRG definitions that were adopted in 2006 (such as the refinements to the cardiac care DRGs among others). MedPAC recommended that we apply an adjustment that is somewhere in the middle between their estimate of 2.0 and the CMS figure of 4.8 percent. According to MedPAC, a middle point in the range of 1.6 to 1.8 percent per year would put both Medicare and the hospital industry at some risk that the actual value will turn out to be higher or lower than the adjustment that is applied. If the actual increase due to improvements in case-mix reporting turns out to be higher, the Medicare program will have paid more than it should have. If the actual increase is lower, the hospitals will have been paid less than they should have. MedPAC noted that we have already stated a willingness to correct for any difference 
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                        between our forecast and the actual increase in case mix due to improved coding when data become available in 2009 when we prepare the proposed rule for fiscal year 2010. MedPAC further suggested that CMS plan on taking coding adjustments for longer than two years. CMS may want to adopt a series of adjustments that takes somewhat higher adjustments in the first few years of the MS–DRG changes, on the assumption that history has shown that previous coding adjustments have underestimated the impact of the changes. *Response:*
                         We proposed to adjust the IPPS standardized amounts by −2.4 percent each year for FYs 2008 and 2009 for improvements in documentation and coding that will increase case-mix. As we are adopting the MS–DRGs over a 2-year transition period, we do not believe that the incentives to improve documentation and coding will be as strong in the first year as we previously estimated. Further, as suggested above by the evidence when the IPPS was first implemented, MedPAC, and other public comments, it can take several years for hospitals and physicians to adjust their documentation and coding practices in response to payment incentives. For these reasons, we believe the documentation and coding adjustment should be applied over a period of 3 rather than 2 years. We do not agree with MedPAC that a larger adjustment “should be taken in the first few years of the MS–DRGs on the assumption that history has shown that previous coding adjustments have underestimated the impact of changes.” Rather, as stated above, we believe that the coding incentives during the first year of MS–DRGs will be lessened because we are adopting them over a 2-year transition period. Therefore, we believe a smaller adjustment should be applied in the initial year. We continue to believe that our analysis justifies a −4.8 percent adjustment for improvements in documentation and coding at this time. Therefore, we are applying an adjustment of −1.2 percent in this final rule with comment period to the IPPS standardized amounts for FY 2008 and based on current projections will apply adjustments of −1.8 percent each year to the IPPS standardized amounts for FYs 2009 and 2010. Consistent with the statute, we will compare the actual increase in case-mix due to documentation and coding to our projection once we have actual data to revise the Actuary's estimate and the adjustment we make to the standardized amounts. With these adjustments occurring over 3 rather than 2 years, we will have information in 2009 as we prepare the IPPS rule for FY 2010 to reevaluate how the actual increase in case mix compares to our estimate. We may also have partial year information in 2008 to inform any proposal for FY 2009. Therefore, we will consider revising the planned adjustments for FY 2009 and FY 2010 if information in the Medicare billing data suggests that our projections are either too high or low compared to actual experience. Based on the Actuary's analysis, using the Secretary's authority under section 1886(d)(3)(A)(vi) of the Act to adjust the standardized amount to eliminate the effect of changes in coding or classification of discharges that do not reflect real changes in case-mix, we are reducing the IPPS standardized amount by −1.2 percent for FY 2008. Section 1886(d)(3)(A)(vi) of the Act further gives the Secretary authority to revisit adjustments to the standardized amounts for changes in coding or classification of discharges that were based on estimates in a future year. Consistent with the statute, we will compare the actual increase in case-mix due to documentation and coding to our projection once we have actual data for FY 2008. At that time, if necessary, we may make a further adjustment to the standardized amounts to account for the difference between our projection and actual data. 7. Effect of the MS–DRGs on the Outlier Threshold To qualify for outlier payments, a case must have costs greater than Medicare's payment rate for the case plus a “fixed loss” or cost threshold. The statute requires that the Secretary set the cost threshold so that outlier payments for any year are projected to be not less than 5 percent or more than 6 percent of total operating DRG payments plus outlier payments. The Secretary is required by statute to reduce the average standardized amount by a factor to account for the estimated proportion of total DRG payments made to outlier cases. Historically, the Secretary has set the cost threshold so that 5.1 percent of estimated IPPS payments are paid as outliers. The FY 2007 cost outlier threshold is $24,485. Therefore, for any given case, a hospital's charge adjusted to cost by its hospital-specific CCR must exceed Medicare's DRG payment by $24,485 for the case to receive cost outlier payments. Adoption of the MS–DRGs will have an effect on calculation of the outlier threshold. For the proposed rule and this final rule with comment period, we analyzed how the outlier threshold would be affected by adopting the MS–DRGs. Using FY 2005 MedPAR data, we have simulated the effect of the MS–DRGs on the outlier threshold. By increasing the number of DRGs from 538 to 745 to better recognize severity of illness, the MS–DRGs would be providing increased payment that better recognizes complexity and severity of illness for cases that are currently paid as outliers. That is, many cases that are high-cost outlier cases under the current CMS DRG system would be paid using an MCC DRG under the MS–DRGs and could potentially be paid as nonoutlier cases. For this reason, we expected the FY 2008 outlier threshold to decline from its FY 2007 level of $24,485. We proposed an FY 2008 outlier threshold of $23,015. In this final rule with comment period, we are establishing an FY 2008 outlier threshold of $22,650. In section II.A.4. of the Addendum to this final rule with comment period, we provide a more detailed explanation of how we determined the final FY 2008 cost outlier threshold. We address any comments received on the FY 2008 proposed outlier threshold in section II.A.4. of the Addendum to this final rule with comment period. 8. Effect of the MS–DRGs on the Postacute Care Transfer Policy Existing regulations at § 412.4(a) define discharges under the IPPS as situations in which a patient is formally released from an acute care hospital or dies in the hospital. Section 412.4(b) defines transfers from one acute care hospital to another. Section 412.4(c) establishes the conditions under which we consider a discharge to be a transfer for purposes of our postacute care transfer policy. In transfer situations, each transferring hospital is paid a per diem rate for each day of the stay, not to exceed the full DRG payment that would have been made if the patient had been discharged without being transferred. The per diem rate paid to a transferring hospital is calculated by dividing the full DRG payment by the geometric mean length of stay for the DRG. Based on an analysis that showed that the first day of hospitalization is the most expensive (60 FR 45804), our policy provides for payment that is double the per diem amount for the first day (§ 412.4(f)(1)). Transfer cases are also eligible for outlier payments. The outlier threshold for transfer cases is equal to the fixed-loss outlier threshold for nontransfer cases, divided by the geometric mean length of stay for the DRG, multiplied by the length of stay for the case, plus one day. The purpose of the IPPS postacute care transfer payment policy is to avoid providing an incentive for a hospital to transfer 
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                        patients to another hospital early in the patients' stay in order to minimize costs while still receiving the full DRG payment. The transfer policy adjusts the payments to approximate the reduced costs of transfer cases. Beginning with the FY 2006 IPPS, the regulations at § 412.4 specified that, effective October 1, 2005, we make a DRG subject to the postacute care transfer policy if, based on Version 23.0 of the DRG Definitions Manual (FY 2006), using data from the March 2005 update of FY 2004 MedPAR file, the DRG meets the following criteria: The DRG had a geometric mean length of stay of at least 3 days;
                    The DRG had at least 2,050 postacute care transfer cases; and
                    At least 5.5 percent of the cases in the DRG were discharged to postacute care prior to the geometric mean length of stay for the DRG. In addition, if the DRG was one of a paired set of DRGs based on the presence or absence of a CC or major cardiovascular condition (MCV), both paired DRGs would be included if either one met the three criteria above. If a DRG met the above criteria based on the Version 23.0 DRG Definitions Manual and FY 2004 MedPAR data, we made the DRG subject to the postacute care transfer policy. We noted in the FY 2006 final rule that we would not revise the list of DRGs subject to the postacute care transfer policy annually unless we make a change to a specific CMS DRG. We established this policy to promote certainty and stability in the postacute care transfer payment policy. Annual reviews of the list of CMS DRGs subject to the policy would likely lead to great volatility in the payment methodology with certain DRGs qualifying for the policy in one year, deleted the next year, only to be reinstated the following year. However, we noted that, over time, as treatment practices change, it was possible that some CMS DRGs that qualified for the policy will no longer be discharged with great frequency to postacute care. Similarly, we explained that there may be other CMS DRGs that at that time had a low rate of discharges to postacute care, but which might have very high rates in the future. The regulations at § 412.4 further specify that if a DRG did not exist in Version 23.0 of the DRG Definitions Manual or a DRG included in Version 23.0 of the DRG Definitions Manual is revised, the DRG will be a qualifying DRG if it meets the following criteria based on the version of the DRG Definitions Manual in use when the new or revised DRG first became effective, using the most recent complete year of MedPAR data: The total number of discharges to postacute care in the DRG must equal or exceed the 55th percentile for all DRGs; and
                    The proportion of short-stay discharges to postacute care to total discharges in the DRG exceeds the 55th percentile for all DRGs. A short-stay discharge is a discharge before the geometric mean length of stay for the DRG. A DRG also is a qualifying DRG if it is paired with another DRG based on the presence or absence of a CC or MCV that meets either of the above two criteria. The MS–DRGs that we proposed to adopt (and are finalizing in this final rule with comment period) for FY 2008 are a significant revision to the current CMS DRG system. Because the new MS–DRGs are not reflected in Version 23.0 of the DRG Definitions Manual, consistent with § 412.4, we proposed to recalculate the 55th percentile thresholds in order to determine which MS–DRGs would be subject to the postacute care transfer policy. Further, under the MS–DRGs, the subdivisions within the base DRGs will be different than those under the current CMS DRGs. Unlike the current CMS DRGs, the MS–DRGs are not divided based on the presence or absence of a CC or MCV. Rather, the MS–DRGs have up to three subdivisions based on: (1) The presence of a MCC; (2) the presence of a CC; or (3) the absence of either an MCC or CC. Consistent with our existing policy under which both DRGs in a CC/non-CC pair are qualifying DRGs if one of the pair qualifies, we proposed that each MS–DRG that shared a base MS–DRG would be a qualifying DRG if one of the MS–DRGs that shared the base DRG qualified. We proposed to revise § 412.4(d)(3)(ii) to codify this policy. Similarly, we believe that the changes to adopt MS–DRGs also necessitate a revision to one of the criteria used in § 412.4(f)(5) of the regulations to determine whether a DRG meets the criteria for payment under the “special payment methodology.” Under the special payment methodology, a case subject to the special payment methodology that is transferred early to a postacute care setting will be paid 50 percent of the total IPPS payment plus the average per diem for the first day of the stay. Fifty percent of the per diem amount will be paid for each subsequent day of the stay, up to the full MS–DRG payment amount. A CMS DRG is currently subject to the special payment methodology if it meets the criteria of § 412.4(f)(5). Section 412.4(f)(5)(iv) specifies that if a DRG meets the criteria specified under § 412.4(f)(5)(i) through (f)(5)(iii), any DRG that is paired with it based on the presence or absence of a CC or MCV is also subject to the special payment methodology. Given that this criterion would no longer be applicable under the MS–DRGs, we proposed to add a new § 412.4(f)(6) that includes a DRG in the special payment methodology if it is part of a CC/non-CC or MCV/non-MCV pair. We proposed to update this criterion so that it conforms to the proposed changes to adopt MS–DRGs for FY 2008. The revision would make an MS–DRG subject to the special payment methodology if it shares a base MS–DRG with an MS–DRG that meets the criteria for receiving the special payment methodology. *Comment:*
                         One commenter urged CMS to “suspend application of the postacute care transfer policy for one year, until sufficient data is available, and then apply the criteria anew to the MS–DRGs.” As an alternative to ceasing the application of the postacute care transfer policy for one year, the commenter recommended that CMS limit the application of the postacute care transfer policy as much as possible until better data are available and not to increase the average length of stay for less complicated DRGs over their current levels. *Response:*
                         Under both the CMS DRGs and MS–DRGs, there were two criteria for making a DRG subject to the postacute care transfer policy. These criteria are: The total number of discharges to postacute care in the DRG must equal or exceed the 55th percentile for all DRGs; and
                    The proportion of short-stay discharges to postacute care to total discharges in the DRG must equal or exceed the 55th percentile for all DRGs. While these criteria are identical under the CMS DRGs and the MS–DRGs, we needed to recalculate the 55th percentile thresholds in order to determine which MS–DRGs would be subject to the postacute care transfer policy to conform the existing policy to the new DRG system. Further, we also needed to make a conforming change to our policy that a DRG is subject to the postacute care transfer policy if it is one of a paired set of DRGs based on the presence or absence of a CC or MCV where one of the DRGs in the set meets the numerical criteria specified above. As the MS–DRGs have subdivisions based on MCC, CCs and non-CCs rather than MCVs, CCs and non-CCs, we needed to amend the regulatory text to reflect the nomenclature of the MS–DRG system. Therefore, our policy for making a DRG subject to the postacute care transfer policy under the MS–DRGs is unchanged other than to make it 
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                        conform to the new DRG system. As our policy is unchanged, we do not believe that either suspending or limiting application of the postacute care transfer policy under the MS–DRGs is warranted. *Comment:*
                         One commenter opposed CMS’ “proposal to significantly expand the list of the DRGs subject to the postacute care transfer policy.” The commenter, a hospital, noted that “manual processes” would have to take place in order to identify patients meeting the home health criteria. Specifically, the commenter stated that, “hospitals [would] either have to contact patients to determine if they have received home health services within 3 days after discharge or wait for the fiscal intermediary to let the hospital know that a patient received home care that was not planned at the time of discharge which requires coders to review and correct the disposition and for the Business Office to resubmit the claim.” *Response:*
                         We note that we did not propose to change or expand the postacute care transfer policy provision in this year's proposed rule. Rather, we applied existing post-acute transfer policy to the new MS–DRG system. Thus, the criteria that would have made a CMS–DRG subject to the postacute care transfer policy last year were the same as those applied to the MS–DRGs for FY 2008. We note that in FY 2007, 190 CMS DRGs of 538 CMS DRGs were subject to the postacute care transfer policy, or about 35 percent. For FY 2008, 273 out of 745 MS–DRGs are subject to the postacute care transfer policy or about 36 percent. Therefore, the proportion of postacute care transfer MS–DRGs subject to the policy is very similar to what it was last year under the CMS DRGs. Thus, we disagree there has been a “significant expansion” of DRGs subject to the postacute care transfer policy. Rather, we are simply conforming the existing postacute care transfer policy to the new MS–DRGs. In response to the commenter's concern about it being administratively burdensome to identify patients who received home health care services subsequent to discharge from the acute care hospital, we note that, under section 1886(d)(5)(J)(ii)(III) of the Act, the term “qualified discharge” includes a discharge from an IPPS hospital upon which the patient is provided home health services from a home health agency if such services relate to the condition or diagnosis for which the patient received hospital inpatient services. The proposed rule did not make any change to application of the postacute care transfer policy in this circumstance. We note that, in most instances, patients are discharged from the acute hospital with a written plan of care for the provision of home health services, so hospitals would usually know if a patient was going to receive home health care services at the time of discharge. Additionally, we do not expect that the administrative burden of identifying patients discharged to home for the provision of home health services within 3 days will be any greater under the MS–DRG system than it was under the CMS DRG system because the proportion of DRGs subject to the postacute care transfer policy is very similar under both systems. *Comment:*
                         One commenter stated that it is unreasonable to categorize all three MS–DRGs in the same base DRG as subject to the postacute care transfer policy if only one of the three meets the criteria. The commenter suggested that, for base MS–DRGs where there are three base-DRGs, two of the three base-DRGs should meet the postacute care transfer criteria (on their own) for all of them to be subject to the postacute care transfer policy and that if only one meets the criteria, none should be subject to the postacute care transfer policy. *Response:*
                         Under the CMS DRG system, some DRGs were paired with others (with CC or without CC). Under that system, if one DRG qualified for the postacute care transfer policy, we included its paired DRG so as not to create an incentive for hospitals not to include any code that would identify a complicating or comorbid condition. The same logic applies under the MS–DRG system: If one DRG in a set meets the postacute care transfer criteria, we believe that it is appropriate to include the paired or grouped DRGs so as not to create any coding incentives to bypass the postacute care transfer payment. Therefore, we disagree with the commenter that it is “unreasonable” to include a group of MS–DRGs where only one MS–DRG in the group meets the postacute care transfer criteria on its own. We also note that we apply the same logic to the special-pay MS–DRGs. That is, if an MS–DRG qualifies to receive the special payment methodology, any other MS–DRGs that share the same base MS–DRG also qualify to receive the special payment methodology. In this final rule with comment period, we are adopting the proposed postacute care transfer policy conforming changes as final. In addition, § 412.4(f)(3) states that the postacute care transfer policy does not apply to CMS DRG 385 for newborns who die or are transferred. We proposed to make a conforming change to this paragraph to reflect that this CMS DRG would become MS–DRG 789 (Neonates, Died or Transferred to Another Acute Care Facility) under our proposed DRG changes for FY 2008. We did not receive any comments on this proposal and, therefore, are finalizing this conforming change as proposed. These revisions do not constitute a change to the application of the postacute care transfer policy. Therefore, any savings attributed to the postacute care transfer policy will be unchanged as a result of adopting the MS–DRGs. Consistent with section 1886(d)(4)(C)(iii) of the Act, aggregate payments from adoption of the MS–DRGs cannot be greater or less than those that would have been made had we not made any DRG changes. We also proposed and are adopting as final technical changes to §§ 412.4(f)(5)(i) and (f)(5)(iv) to correct a cross-reference and a typographical error, respectively. E. Refinement of the Relative Weight Calculation In the FY 2007 IPPS final rule (71 FR 47882), effective for FY 2007, we began to implement significant revisions to Medicare's inpatient hospital rates by basing the relative weights on hospitals’ estimated costs rather than on charges. This reform was one of several measured steps to improve the accuracy of Medicare's payment for inpatient stays that include using costs rather than charges to set the relative weights and making refinements to the current CMS–DRGs so they better account for the severity of the patient's condition. Prior to FY 2007, we used hospital charges as a proxy for hospital resource use in setting the relative weights. Both MedPAC and CMS have found that the limitations of charges as a measure of resource use include the fact that hospitals cross-subsidize departmental services in many different ways that bear little relation to cost, frequently applying a lower charge markup to routine and special care services than to ancillary services. In MedPAC's 2005 Report to the Congress on Physician-Owned Specialty Hospitals, MedPAC found that hospitals charge much more than their costs for some types of services (such as operating room time, imaging services and supplies) than others (such as room and board and routine nursing care).[21]
                        
                         Our analysis of the MedPAC report in the FY 2007 IPPS 
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                        proposed rule (71 FR 24006) produced consistent findings. In the FY 2007 IPPS proposed rule, we proposed to implement cost-based weights incorporating aspects of a methodology recommended by MedPAC, which we called the hospital-specific relative value cost center (HSRVcc) methodology. MedPAC indicated that an HSRVcc methodology would reduce the effect of cost differences among hospitals that may be present in the national relative weights due to differences in case mix adjusted costs. After studying Medicare cost report data, we proposed to establish 10 national cost center categories from which to compute 10 national CCRs based upon broad hospital accounting definitions. We made several important changes to the HSRVcc methodology that MedPAC recommended using in its March 2005 Report to the Congress on Physician-Owned Specialty Hospitals. We refer readers to the FY 2007 IPPS proposed rule (71 FR 24007 through 24011) for an explanation and our reasons for the modification to MedPAC's methodology. In its public comments on the FY 2007 IPPS proposed rule, MedPAC generally agreed with the adaptations we made to its methodology. MedPAC further recommended that we expand the number of distinct hospital department CCRs being used from 10 to 13, which we subsequently adopted in the FY 2007 IPPS final rule. We did not finalize the HSRVcc methodology for FY 2007 because of concerns raised in the public comments on the FY 2007 IPPS proposed rule (71 FR 47882 through 47898). Rather, we adopted a cost-based weighting methodology without the hospital-specific relative weight feature. In response to a comment from MedPAC, we also expanded the number of distinct hospital departments with CCRs from 10 to 13. We indicated our intent to study whether to adopt the HSRVcc methodology after we had the opportunity to further consider some of the issues raised in the public comments. In the interim, we adopted a cost-based weighting methodology over a 3-year transition period, substantially mitigating the redistributive payment impacts illustrated in the proposed rule, while we engaged a contractor to assist us with evaluating the HSRVcc methodology. Some commenters raised concerns about potential bias in cost-based weights due to “charge compression,” which is the practice of applying a lower percentage markup to higher cost services and a higher percentage markup to lower cost services. These commenters were concerned that our proposed weighting methodology may undervalue high cost items and overvalue low cost items if a single CCR is applied to items of widely varying costs in the same cost center. The commenters suggested that the HSRVcc methodology would exacerbate the effect of charge compression on the final relative weights. One of the commenters suggested an analytic technique of using regression analysis to identify adjustments that could be made to the CCRs to better account for charge compression. We indicated our interest in researching whether a rigorous model should allow an adjustment for charge compression to the extent that it exists. We engaged a contractor, RTI International (RTI), to study several issues with respect to the cost-based weights, including charge compression, and to review the statistical model provided to us by the commenter for adjusting the weights to account for it. We discuss RTI's findings in detail below. Commenters also suggested that the cost report data used in the cost methodology are outdated, not consistent across hospitals, and do not account for the costs of newer technologies such as medical devices. However, the relationship between costs and charges (not costs alone) is the important variable in setting the relative weights under this new system. Older cost reports also do not include the hospital's higher charges for these same medical devices. Therefore, it cannot be known whether the CCR for the more recent technologies will differ from those we are using to set the relative weights. The use of national average cost center CCRs rather than hospital-specific CCRs may mitigate potential inconsistencies in hospital cost reporting. Nevertheless, in the FY 2007 IPPS final rule, we agreed that it was important to review how hospitals report costs and charges on the cost reports and on the Medicare claims and asked RTI to further study this issue as well. In summary, we proposed to adopt HSRVcc relative weights for FY 2007 using national average CCRs for 10 hospital departments. Based on public comments concerned about charge compression and the accuracy of cost reporting, we decided not to finalize the HSRVcc methodology, but adopted cost-based weights without the hospital specific feature. In response to comments from MedPAC, we expanded the number of hospital cost centers used in calculating the national CCRs from 10 to 13. Finally, we decided to implement the cost-based weighting methodology gradually, by blending the cost-based and charge-based weights over a 3-year transition period beginning with FY 2007, while we further studied many of the issues raised in the public comments. We refer readers to the FY 2007 IPPS final rule (71 FR 47882) for more details on our final policy for calculating the cost-based DRG relative weights. 1. Summary of RTI's Report on Charge Compression In August 2006, we awarded a contract to RTI to study the effects of charge compression in calculating DRG relative weights. The purpose of the study was to develop more accurate estimates of the costs of Medicare inpatient hospital stays that can be used in calculating the relative weights per DRG. RTI was asked to assess the potential for bias in relative weights due to CCR differences within the 13 CCR groups used in calculating the cost-based DRG relative weights and to develop an analysis plan that explored alternative methods of estimating costs with the objective of better aligning the charges and costs used in those calculations. RTI was asked to consider methods of reducing the variation in CCRs across services within cost centers by: Modifying existing cost centers and/or creating new centers.
                    Using statistical methods, such as the regression adjustment for charge compression. Some commenters on the FY 2007 IPPS proposed rule suggested that we use a regression adjustment to account for charge compression. As part of its contract, RTI convened a Technical Expert Panel composed of individuals representing academic institutions, hospital associations, medical device manufacturers, and MedPAC. The members of the panel met on October 27, 2006, to evaluate RTI's analytic plan, to identify other areas that are likely to be affected by compression or aggregation problems, and to propose suggestions for adjustments for charge compression. We posted RTI's draft interim report on the CMS Web site in March 2007. For more information, interested individuals can view RTI's report at the following Web site: 
                        *http://www.cms.hhs.gov/​Reports/​Reports/​itemdetail.asp?​itemID=​CMS1197292.*
                         The report may also be viewed on RAND's Web site at 
                        *http://www.rand.org/​pubs/​online/​health.* As the first step in its analysis, RTI compared the reported Medicare program charge amounts from the cost reports to the total Medicare charges summed across all claims filed by providers. Using cost and charge data 
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                        from the most recent available Medicare cost reports and inpatient claims from IPPS hospitals, RTI was charged with performing an analysis to determine how well the MedPAR charges matched the cost report charges used to compute CCRs. The accuracy of the DRG cost estimates is directly affected by this match because MedPAR charges are multiplied by CCRs to estimate cost. RTI found consistent matching of charges from the Medicare cost report to charges grouped in the MedPAR claims for some cost centers but there appeared to be problems with others. For example, RTI found that the data between the cost report and the claims matched well for total discharges, days, covered charges, nursing unit charges, pharmacy, and laboratory. However, there appeared to be inconsistent reporting between the cost reports and the claims data for charges in several ancillary departments (medical supplies, operating room, cardiology, and radiology). For example, the data suggested that hospitals often include costs and charges for devices and other medical supplies within the Medicare cost report cost centers for Operating Room, Radiology or Cardiology, while other hospitals include them in the Medical Supplies cost center. RTI found that some charge mismatching results from the way in which charges are grouped in the MedPAR file. Examples include the intermediate care nursing charges being grouped with intensive care nursing charges and electroencephalography (EEG) charges being grouped with laboratory charges. RTI suggested that reclassifying intermediate care charges from the intensive care unit to the routine cost center could address the former problem. As the second step in its analysis, RTI reviewed the existing cost centers that are combined into the 13 groups used in calculating the national average CCRs. RTI identified CCRs with potential aggregation problems and considered whether separating the charge groups could result in more accurate cost conversion at the DRG level. The analysis led RTI to calculate separate CCRs for Emergency Room and Blood and Blood Administration, both of which had been included in “Other Services” in FY 2007. During this second step, RTI noted that a variation of charge compression is also present in inpatient nursing services because most patients are charged a single type of accommodation rate per day that is linked to the type of nursing unit (routine, intermediate, or intensive), but not to the hours of nursing services given to individual patients. Unlike the situation with charge compression in ancillary service areas, there are virtually no detailed charge codes that can distinguish patient nursing care use. Therefore, any potential bias cannot be empirically evaluated or adjustments made without additional data. Next, RTI examined individual revenue codes within the cost centers and used regression analysis to determine whether certain revenue codes in the same cost center had significantly different markup rates. Those revenue codes include devices, prosthetics, implants within the Medical Supplies cost center, IV Solutions within the Drugs cost center, CT scanning and MRI within the Radiology cost center, Cardiac Catheterization within the Cardiology cost center, and Intermediate Care Units within the Routine Nursing Care cost center. Devices, prosthetics, and implants within the Medical Supplies cost center have a lower markup and, as a result, a higher CCR than the remainder of the medical supplies group according to RTI's analysis. Within the Drugs CCR, IV Solutions have a much higher markup and much lower CCR than the other drugs included in the category. Within the Radiology CCR, CT scanning and MRI have higher markups and lower CCRs than the remaining radiology services. RTI's results for Cardiac Catheterization and Intermediate Care Units were ambiguous due to data problems. RTI's analysis also determined the impact of the disaggregated CCRs on the relative weights. Differences in CCRs alone do not necessarily alter the DRG relative weights. The impact on the relative weights is the result of the interaction of CCR differences and DRG differences in the proportions of the services with different CCRs. In FY 2007, we calculated relative weights using CCRs for 13 hospital departments. The RTI analysis suggests expanding the number of distinct hospital department CCRs from 13 to 19. Of the additional six CCRs, two would result from separating the Emergency Department and Blood (Products and Administration) from the residual “Other Services” category. Four additional CCRs would result from applying a regression method similar to a method suggested in last year's public comments to three existing categories: supplies, radiology, and drugs. This method, as adapted by RTI, used detailed coding of charges to disaggregate hospital cost centers and derive separate, predicted alternative CCRs for the disaggregated services. RTI's analysis suggests splitting Medical Supplies into one CCR for Devices, Implants, and Prosthetics and one CCR for Other Supplies; splitting Radiology into one CCR for MRIs, one CCR for CT scans, and one CCR for Other Radiology; and splitting Drugs into one CCR for IV Solutions and one CCR for Other Drugs. RTI's draft report provides the potential impacts of adopting these changes to the CCRs. We note that RTI's analysis was based on Version 24.0 of the CMS DRGs. Because the proposed MS–DRGs were under development for the FY 2008 IPPS proposed rule, they were unavailable to RTI for their analysis. The results of RTI's analysis may be different if applied to the MS–DRGs. However, it seems reasonable to believe that the impact of RTI's suggestions will be consistent using Version 24.0 of the CMS DRGs and the MS–DRGs, as both systems generally use the same base DRGs while applying different subdivisions to recognize severity of illness. Of all the adjusted CCRs, the largest impact on weights came from accounting for charge compression in medical supplies for devices and implants. The impact on weights from accounting for CCR differences among drugs was modest. The impact of splitting MRI and CT scanning from the radiology CCR was greater than the impact of modifying the Drugs CCRs, but less than the impact of splitting the Medical supplies group. Separating Emergency Department and Blood Products and Administration from the “Other Services” category would raise the CCR for other services in the group. RTI found that disaggregating cost centers may have a mitigating effect on the impact of transitioning from charge-based weights to cost-based weights. That is, the changes being suggested by RTI will generally offset (fully or more than fully in some cases or in part in other cases) the impacts of fully implemented cost-based weights that we are adopting over the FY 2007–FY 2009 transition period. Thus, RTI's analysis suggests that expanding the number of distinct hospital department CCRs used to calculate cost-based weights from 13 to 19 will generally increase the relative weights for surgical DRGs and decrease them for the medical DRGs compared to the fully implemented cost-based weights to which we began transitioning in FY 2007. 2. RTI Recommendations In its report, RTI provides recommendations for the short term, medium term, and long term, to mitigate aggregation bias in the calculation of relative weights. We summarize RTI's 
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                        recommendations below and respond to each of them. a. Short-Term Recommendations Most of RTI's short-term recommendations have already been described above. The most immediate changes that RTI recommends implementing include expanding from 13 distinct hospital department CCRs to 19 by: Disaggregating “Emergency Room” and “Blood and Blood Products” from the “Other Services” cost center;
                    Establishing regression-based estimates as a temporary or permanent method for disaggregating the Medical Supplies, Drugs, and Radiology cost centers; and
                    Reclassifying intermediate care charges from the intensive care unit cost center to the routine cost center. We believe these recommendations have significant potential to address issues of charge compression and potential mismatches between how costs and charges are reported in the cost reports and on the Medicare claims. RTI's recommendations show significant promise in the short term for addressing issues raised in the public comments on the cost-based weights in the FY 2007 IPPS proposed rule. However, in the time available for the development of the proposed rule, we were unable to investigate how RTI's recommended changes may interact with other potential changes to the DRGs and to the method of calculating the DRG relative weights. As we noted above, RTI's analysis was done on the Version 24.0 of the CMS DRGs and not the MS–DRGs we proposed for FY 2008. For the proposed rule and this final rule with comment period, we were not able to examine the combined impacts of the MS–DRGs and RTI's recommendations. In addition, we believe it is also important to consider that, in the FY 2007 IPPS final rule (71 FR 47897), we anticipated undertaking further analysis of the HSRVcc methodology over the next year in conjunction with the research we were to do on charge compression. Analysis of the HSRVcc methodology will be part of the second phase of the RAND study of alternative DRG systems to be completed by September 1, 2007, that has not been completed in time for this final rule with comment period. As a result, we have also been unable to consider the effects of the HSRVcc methodology together with the MS–DRGs and RTI's recommendations. Finally, we note that in order to complete the analysis in time for the proposed rule or this final rule with comment period, RTI's study used only hospital inpatient claims. However, hospital ancillary departments typically include both inpatient and outpatient services within the same department and only a single CCR covering both inpatient and outpatient services can be calculated from Medicare cost reports. Although we believe that applying the regression method used by RTI to only inpatient services is unlikely to have had much impact for the adjustments recommended by RTI, the preferred approach would be to apply the regression method to the combined inpatient and outpatient services. The latter approach would ensure that any potential CCR adjustments in the IPPS would be consistent with potential CCR adjustments in the OPPS. We hope to expand their analysis to incorporate outpatient services during the coming year. Although we did not propose to adopt RTI's recommendations for FY 2008, we solicited public comments on expanding from 13 CCRs to 19 CCRs. Again, we noted that RTI's analysis suggests significant improvements that could result in the cost-based weights from adopting its recommendations to adjust for charge compression. Therefore, we also expressed interest in public comments on whether we should proceed to adopt the RTI recommended changes for FY 2008 in the absence of a detailed analysis of how the relative weights would change if we were to address charge compression while simultaneously adopting an HSRVcc methodology together with the MS–DRGs. Given the change in the impacts that were illustrated in last year's FY 2007 IPPS final rule (71 FR 47915–47916), going from a hospital-specific to a nonhospital-specific cost-weighting methodology, we believe that sequentially adjusting for charge compression and later adopting an HSRVcc methodology could create the potential for instability in IPPS payments over the next 2 years (that is, payments for surgical DRGs would increase and payment for medical DRGs would decrease if we were to adopt the RTI recommended changes for FY 2008, but could potentially reverse direction if we were to adopt an HSRVcc methodology for FY 2009). Again, we solicited public comments on all of these issues before making a final decision as to whether to proceed with the RTI's short-term recommendations in the final rule for FY 2008. *Comment:*
                         Many commenters commented on whether we should proceed in adopting the recommendations made by RTI in its January 2007 report, particularly concerning changes in cost reporting practices and the additional, regression-based CCRs. Several commenters focused on problems highlighted by RTI with the inconsistent and varying methods in which hospitals group their charges in MedPAR and report costs and charges on the Medicare cost report, which can result in distortions in the DRG weights. Some commenters asserted that mismatching is not caused by the failure of hospitals to prepare their cost reports correctly, as appeared to be suggested by the RTI study. Other commenters noted that RTI recommends the incorporation of edits to reject cost reports or require more intensive review by auditors to resolve the lack of uniformity in cost reporting. However, the commenters believed that such edits or audits will not solve the mismatch problem because hospitals' reporting is consistent with the cost reporting instructions. The commenters described that, currently, cost report instructions included with the CMS Form-339 allow for three methods of reporting Medicare charges. The method selected by each hospital is specific to its information systems and based on the method that most accurately aligns Medicare program charges on Cost Report Worksheet D–4 (inpatient) and/or Worksheet D, Part IV (outpatient) with the overall cost and charges reported on Worksheets A and C. Many hospitals elect to allocate some or all of the Medicare program charges from the Medicare Provider Statistical and Reimbursement (PSR) data to various lines in the cost report based on hospital-specific financial system needs. Under this scenario, total hospital CCRs are aligned with the hospital's program charges, but would not match the charge groupings used in MedPAR. Instead of increased edits or cost report rejections, the commenters believed that hospitals must be educated to report costs and charges, particularly for supplies, in a way that is consistent with how MedPAR groups charges. The commenters are launching such an educational campaign, which would encourage consistent reporting that they believe would, in turn, produce consistent groupings of departments within the 13 cost center groups that are currently used to create the cost-based weights, or any future expansion of the categories that may occur. The commenters stated that their educational efforts will take time and CMS should recognize that some hospitals will be in a better position to adopt certain cost report changes more rapidly because the changes may be more expensive and time-consuming for some hospitals to adopt relative to 
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                        others. The commenters requested that CMS communicate with its fiscal intermediaries/MAC that such action is appropriate and encouraged for improvements in Medicare's cost-based weights. The commenters were concerned that, without direction from CMS, the fiscal intermediaries/MAC may not allow hospitals to change how they report costs. Although one commenter supported the education of hospitals in better cost reporting, this commenter opposed mandating hospitals to make these cost reporting changes. One commenter stated that “it is important to note that charge compression results from hospitals' markup practices,” and that the problem would be eliminated if hospitals would use a single markup for all items and services included within all revenue centers. Another commenter asserted that hospitals are not consistent in their cost reporting and the first step should be to issue cost report instructions. The next step would be to allocate audit resources to the fiscal intermediary/MAC in order to determine whether these instructions are properly implemented because reporting of costs and charges does have an indirect effect on payments to hospitals. Another commenter stated that CMS needs to place more emphasis and audit resources toward ensuring that hospitals properly complete their cost reports. However, while another commenter supported scrutiny and auditing for extreme CCRs, the commenter also appreciated that CMS has limited audit resources. One commenter stated that adjustments to revenue codes reported on the standard UB–04 claims forms may also be appropriate to better match charges on claims forms with the charges (and costs) reported on the Medicare cost report. Other commenters stated that the costing of the weights should be done at the UB revenue code level. Given the variety of ways in which hospitals report their costs and charges, it is impossible to make assumptions related to revenue codes across all hospitals without the assistance of the PSR crosswalk, which is submitted with the filed cost report as an attachment to the CMS–339 form. The commenters noted that if CMS is going to continue a transition to cost-based weights, hospitals will need time to align their mapping of cost centers into departments or cost categories for purposes of cost reporting and claims reporting. The accurate costing of claims would be in line with the original MedPAC recommendations. In light of the cost reporting and MedPAR mismatch problems, the commenters did not believe that a temporary, regression-based adjustment that does not fix the underlying concerns with cost reporting is appropriate. The commenters are concerned that, for the sake of expediency, the use of estimates (a regression analysis approach), as opposed to efforts to collect accurate data at the appropriate cost center level, would be insufficient. In addition, the commenters expressed doubt that a regression model can be easily validated, as the DRG weights are modified on an annual basis. One commenter argued that CMS did not include details of the regression-based adjustment in the proposed rule and, consequently, the commenter could not assess the impact of implementing the adjustment. The commenter agreed with CMS' assessment that RTI's adjustments might change if they are implemented jointly with MS–DRGs, and if estimated using both inpatient and outpatient costs and charges. This commenter, along with others, believed that, at the very least, implementation of the regression-based CCRs should be delayed, and once short-term educational efforts and CMS' long-term cost report evaluation are underway, it would be more appropriate to have an informed discussion on which cost report changes are needed to alleviate the issue of charge compression. *Response:*
                         In the FY 2008 IPPS proposed rule (72 FR 24715), we stated that because we did not have sufficient time to investigate how RTI's recommended changes might interact with other possible changes to the DRGs and the DRG relative weights, and because RTI's regression method was only applied to inpatient services and not also outpatient services, we decided not to propose implementing RTI's recommendations for FY 2008. However, we also stated that, despite these concerns, we believe RTI's recommendations have the potential to significantly address the issues of charge compression and potential mismatches between how costs and charges are reported in the cost reports and on the Medicare claims. Therefore, we solicited comments on whether we should expand the 13 CCRs to 19 CCRs for FY 2008. We have carefully considered all comments, ranging from those urging us to adopt all 19 CCRs in FY 2008, to those believing that the regression-based CCRs should be delayed for at least a year, if used at all. Because of concerns that we and some commenters continue to have about premature adoption of the regression-based CCRs without the benefit of knowing how they will interact with other DRG changes, and the arguments in the comments summarized above concerning cost and claims reporting, we have decided to finalize our proposal to not implement the four regression-based CCRs for medical supplies and devices, IV drugs, and radiology (MRI and CT scans) for FY 2008. However, as we explain in more detail in response to comments below, we are adopting the two cost report-based CCRs for “Emergency Room” and “Blood and Blood Products” for a total of 15 national average CCRs for FY 2008. We believe these changes to the relative weight methodology do not have the disadvantages that are of concern to the commenters. That is, recognizing these additional departments will allow us to use information that is already being reported by hospitals in their cost reports and adopt some of the changes being recommended by RTI without going to a regression-based model at this time. Many of the concerns in the comments summarized above related to how hospitals' report costs and charges on the cost report and how hospitals include charges on their bills for inpatient services or the way the charges are grouped in the MedPAR. RTI indicated that more precise cost reporting is the best solution to address the issue of charge compression in the long term. Many commenters believed that rather than rely on increased edits and audits to resolve the lack of uniformity in cost reporting, hospitals must be educated to report costs and charges in a manner that is consistent with the way in which MedPAR groups charge, and the commenters were launching an educational campaign accordingly. We agree with the educational initiative of these commenters. Participation in these educational initiatives by hospitals is voluntary. Hospitals are not required to change how they report costs and charges if their current cost reporting practices are consistent with rules and regulations and applicable instructions. However, to the extent allowed under current regulations and cost report instructions, we encourage hospitals to report costs and charges consistently with how the data are used to determine relative weights. We believe achieving this goal is of mutual benefit to both Medicare and hospitals. The commenters also suggested that CMS should inform the fiscal intermediary/MAC that hospitals may be changing their cost reporting and allocation methodologies in response to the educational initiative, that such action is encouraged, and that more 
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                        audit resources should be allocated to fiscal intermediaries/MAC to ensure that any new cost reporting instructions are being implemented properly. First, we intend to notify the fiscal intermediaries/MAC of this cost reporting educational initiative subsequent to the issuance of this final rule with comment period, and provide both fiscal intermediaries/MAC and hospitals with guidance on how to address requests for changes in cost reporting practices from hospitals. Second, each hospital that wishes to change its cost reporting practices must follow the directives at § 413.53(a)(1) of our regulations and PRM–1, section 2203, regarding matching the charges to the costs reported in each cost center. We recommend that the hospital also disclose the changes made in a cover letter with the submission of the cost report. Commenters submitted suggestions about how MedPAR could be modified to further distinguish categories of charges. As we stated in the proposed rule, we will consider suggestions for adding additional revenue codes to MedPAR in conjunction with other competing priorities for our information systems. We cannot create additional revenue codes. Requests for new revenue codes on hospital bills have to be made to and approved by the National Uniform Billing Committee (NUBC). *Comment:*
                         Some commenters were uncertain whether RTI's recommendations to expand certain cost categories through regression analysis is the appropriate solution to address the issue of charge compression and potential inconsistencies in how hospitals report costs and charges. The commenters supported the expansion of categories to include CCRs based on cost centers that already exist on the cost report, such as emergency department and blood products, and possibly others after further examination. Another commenter stated that creating a CCR for blood and blood products will reflect more accurately the cost of blood and will help ensure future IPPS updates will account more adequately for these products. Although one commenter understood that CMS has not been able to analyze the effect of implementing the regression adjustments with the proposed MS–DRGs, the commenter believed that CMS should adopt RTI's adjustment to the CCRs for drugs and IV solutions for FY 2008, and subsequently analyze and report on the effects of this adjustment on MS–DRGs. Another commenter noted that while the RTI regression estimates provide a practical short-term approach to address charge compression for drugs, supplies, and radiology revenue cost centers, this method does not identify all of the charge compression that occurs at each hospital in these revenue centers, nor does it address charge compression that may be occurring in other revenue centers such as cardiology, or the routine and intensive care revenue cost centers where nursing costs per day are currently treated as if they were uniform across patient categories. Another commenter also asked that CMS remember that the primary use of the cost report is to determine a hospital's costs of treating Medicare patients. The commenter noted that the cost report is still used for cost-based payment for many hospitals, such as CAHs, SCHs, and MDHs, and many State Medicaid plans and other payers also rely on data from the cost report to determine payment rates. Because of these uses, the commenters asked CMS to proceed cautiously with changing the cost report to avoid unintended consequences for hospitals where the cost report determines a significant portion of current payment. The commenter offered its services in reviewing and discussing cost report changes that Medicare may propose. Another commenter recommended that CMS work with hospital finance experts so the most appropriate and accurate instructions are issued, with very specific instructions as to where services are to be classified on the cost report and that subcategories should be eliminated. Another commenter did not support RTI's recommendations for revising the cost reports to reduce cost and charge misalignment and to create new cost centers because of “the enormous amount of work hospitals would have to perform” to change internal operations and data collection to accommodate the revisions. The commenter expressed concern that this would lead to “rising inefficiency and administrative costs.” This commenter, and others, believed that “clear, detailed instructions from CMS” would be needed to differentiate between a “device,” “implant,” or “IV solution,” and other “new nomenclature that distinguishes and separates tens of thousands of items and drugs, for instance, implantable spinal screws, bandages and bone cement, into specific cost centers” would be necessary. *Response:*
                         As we noted in the proposed rule and in response to comments above, we believe that RTI's regression-based CCRs may be a promising means for addressing charge compression in the short term. However, because we do not yet know how the additional regression-based CCRs would interact with the MS–DRGs or with the HSRV methodology, and the significant concerns raised by a number of commenters about adopting regression-based CCRs, we are not adopting the adjustments to address charge compression in the FY 2008 IPPS final rule. We note RTI's long-term recommendations suggest addressing charge compression through adding new cost centers to the cost report and undertaking additional activities such as improvements in how hospitals report costs and charges. Thus, we believe that RTI and many of the public comments conclude that ultimately improved and more precise cost reporting is the best way to minimize charge compression. While we are not adopting the regression-based adjustments to address charge compression, we believe that the FY 2008 IPPS final rule relative weights should take advantage of additional information that is already reported on the cost report. Because the cost report currently allows for the creation of specific CCRs for Emergency Room and Blood and Blood Products, and some commenters expressed explicit support for expanding the number of CCRs based on cost centers that already exist on the cost report, we have decided to separate Emergency Room costs and charges and Blood and Blood Products costs and charges from the current “Other Services” CCR for the purposes of calculating the cost-based portion of the FY 2008 relative weights. That is, in accordance with RTI's short-term recommendation, for FY 2008, we are adding two additional CCRs to the current list of 13 CCRs, for a total of 15 CCRs. We are using line 61 on Worksheets C, Part I and D–4 to create the Emergency Room CCR and lines 46 and 47 on Worksheets C, Part I and D–4 to create a CCR for Blood and Blood Products. We are modifying the table listing the 15 cost center groupings in section II.H. of the preamble of this final rule with comment period accordingly. With respect to the commenters that asked CMS to remember that the primary use of the cost report is to determine a hospital's costs of treating Medicare patients, we intend to proceed cautiously as the commenters suggest. To the extent that the cost report changes that we make improve consistency and accuracy of cost reporting, these benefits will extend to providers whose payments are based on reasonable costs (CAHs) or otherwise use the cost report to determine hospital-specific rates (SCHs and MDHs). As we stated above, we intend to work with finance and cost report experts in the hospital community if we 
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                        decide to modify the cost report or its instructions to address issues with the DRG relative weights. We also understand that hospitals may be concerned about the resources that may be required to adapt to potential cost report changes. Any changes that would be made to the Medicare cost report would be done under the Paperwork Reduction Act and, by law, could not be undertaken without considering the burden that would be imposed on all hospitals. *Comment:*
                         Some commenters supported making adjustments to address charge compression. These commenters noted that charge compression was first identified in 2000 and MedPAC and other researchers have also recognized this issue. The commenters recommended implementation of a regression-based adjustment in the FY 2007 final rule and stated that this methodology has been evaluated and validated through RTI's study. Many commenters believe that RTI's results provide ample evidence of charge compression that justifies the implementation of their recommendations for the FY 2008 final rule. Furthermore, commenters stated that RTI's regression-based adjustment is appropriate and can be implemented immediately without any administrative burdens to the hospital. Several commenters emphasized that CMS should make it a priority to apply the regression methodology to the Medical supplies CCR. These commenters noted that in the proposed rule, CMS stated: “of all the adjusted CCRs, the largest impact on weights came from accounting for charge compression in medical supplies for devices and implants,” which demonstrates that a regression approach should be applied at least to disaggregate the medical supplies category into one CCR for “Devices and Implants” and a separate CCR for “Other Supplies.” One commenter disagreed with the reasons CMS expressed in the proposed rule for delaying implementation of RTI's recommendations, and found them to be “rather insubstantial.” The commenter did not believe that the combined impact of RTI's recommendations and the proposed MS–DRGs need to be studied before CMS could proceed with implementing the regression-based CCRs. The commenter noted that the relative independence of RTI's recommendations from the proposed MS–DRG changes was confirmed by a study commissioned by AdvaMed. The commenter also stated that the fact that RTI's analysis only included inpatient claims is relatively insignificant. The commenter believed that if further adjustments need to be made to incorporate outpatient claims into the regression estimate next year, they can be done with a fairly minor impact. This commenter, and others, urged CMS to implement a regression that uses both inpatient and outpatient claims when making an adjustment for charge compression for the CY 2008 OPPS, and use the same regression in subsequent years for both the IPPS and OPPS. Another commenter stated that, although it understood that CMS wishes to understand the various interactions of regression-based CCRs with other aspects of the IPPS, the effect of charge compression is “demonstrable and measurable” and should be implemented in FY 2008 for the “sake of payment accuracy.” Another commenter stated that CMS' concern about the interaction between addressing charge compression and other proposed changes appeared “disingenuous, as CMS is proposing so many changes that the interaction of the various components cannot be estimated.” The commenter also questioned CMS' hesitation to make changes to the cost report to accommodate RTI's recommendation due to limited information system resources, time constraints, and inconvenience. The commenter asserted that “hospitals find the defense of scarce resources, compressed implementation lead times and cost justification vis-a-vis outcomes an interesting option for CMS given the fact that it is manifestly unavailable to hospitals who have similar issues.” *Response:*
                         We disagree with the notion of the commenter that found us to be “disingenuous” because the “interaction of various components [of the IPPS] cannot be estimated.” We refer the commenter to the payment impact section of the IPPS proposed rule (72 FR 25119) and this final rule with comment period as well as the FY 2007 IPPS proposed rule (71 FR 24025) where we simulate the interaction of a number of different payment reforms including the adoption of cost-based weights, severity DRGs, and other changes. We note that for some categories of hospitals, the impact of adopting MS–DRGs is significant. The RTI work suggests that further changes to the relative weights will also be significant and potentially result in additional redistributions of Medicare payment. In our view, the “interactions of various components” can be determined and before we adopt potential policy options in a final rule, the public should be fully informed on the potential impacts. As we discussed in the FY 2008 proposed rule, we have concerns about implementing regression-based CCRs in the final rule without specifically proposing them because of concerns about how these changes would interact with the transition to MS–DRGs, the calculation of cost-based relative weights, and possibly the HSRV method. Despite the commenters' support for the regression-based CCRs, we are still concerned about the accuracy of using regression-based estimates to determine relative weights rather than the Medicare cost report. Many public commenters, including several national hospital associations, shared these same concerns. However, we believe that more specific CCRs will improve payment accuracy for several DRGs. Therefore, as we stated above, we are implementing RTI's recommendation to expand the current 13 CCRs to 15 CCRs without the use of a regression-based adjustment. In the proposed rule, we indicated there was insufficient time to assess how RTI's recommendations may interact with other potential changes to the DRGs and to the method of calculating the DRG relative weights. We noted that RTI's study examined charge compression within Version 24.0 of the CMS DRGs, and we could not examine their interactive effects with the MS–DRGs and be able to timely publish the FY 2008 proposed rule. For this reason, we requested public comment on whether to adopt these changes in the final rule without having fully analyzed them for the proposed rule. While there was strong support for adopting the regression-based charge adjustments in these comments, many other commenters believed that we should provide the public with modeled payment impacts and an opportunity to comment before implementing regression-based CCRs. We are also continuing to consider whether to adopt an HSRV payment methodology for FY 2009. We anticipate undertaking further analysis of the HSRV methodology and would like to incorporate RTI's recommendations into that analysis. Although its evaluation of alternative severity DRG systems is complete, we are currently working with RAND to study the HSRV methodology. Furthermore, we continue to believe that adjusting for charge compression and later adopting the HSRV methodology could create payment instability over the next 2 years and it would be preferable to consider simultaneously adopting these changes. Finally, if we were to adopt adjustments for charge compression, the preferred approach would be to apply 
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                        the regression method to the combined inpatient and outpatient services. The RTI report discussed the notion that separating services that are generally delivered in outpatient settings might improve the accuracy of CCRs for inpatient services, and these areas include therapeutic radiology, nuclear medicine, chemotherapy, electroconvulsive therapy and outpatient surgery. RTI noted that while these charges are not significant under the IPPS, aggregation bias may be present in these outpatient services which would affect the overall department CCR. Therefore, we will consider expanding our analysis to include outpatient services. *Comment:*
                         One commenter urged CMS to separately distinguish intermediate (step-down) level nursing care costs. Another commenter argued that it is illogical that nursing costs are reflected in the relative weights only through flat room and board charges, given that nursing care is a variable, rather than a fixed cost. The commenter asserted that, as a result, a significant amount of money is being misallocated across hospitals for required nursing care. The commenter urged CMS to give serious consideration to the RTI report's recommendation to establish study groups and research options for improving patient-level charging within nursing units, as the outcomes could improve precision in relative resource weights without adding substantial administrative costs to either Medicare or to hospitals. Specifically, the commenter strongly supported the creation of a separate direct and indirect cost center at each hospital and the inclusion of these data in the annual Medicare cost report, the reporting and collection of nursing intensity data, and adjustment of the Medicare payment for severity of illness by modifying the proposed APR DRG severity adjustment formula to incorporate nursing intensity and cost within each diagnosis and severity category. The commenter also mentioned the New York State Medicaid model, which was the first prospective payment system to recognize and reimburse for relative nursing resource consumption levels among DRGs through the use of Nursing Intensity Weights (NIWs). The NIWs, which were developed by an expert panel, have been reevaluated and updated periodically to maintain consistency with changes in the DRG definitions. The commenter recommended that, because this program has been successfully implemented in a large state for a number of years, a Medicare demonstration project based on this model should be launched. *Response:*
                         The commenters' raise interesting concerns related to nursing costs that are variable but are reflected in the DRG weights only as fixed costs through flat room and board charges. There are currently no detailed charge codes that can be used to distinguish the intensity in nursing services provided by type of patient. In its report, RTI noted “because intensity of nursing is likely correlated with DRG assignment, this could be a significant source of bias in DRG weights.” Particularly because nursing comprises such a significant portion of hospital costs and charges, we agree that this issue should be further studied. We are interested in knowing whether the public has any ideas for how the relative weight methodology can systematically recognize and reimburse for differences in nursing resource consumption provided across hospital inpatients. We will consider whether we should study the possibility of using NIWs to recognize nursing intensity in the DRG relative weights. *Comment:*
                         Commenters supported adopting the regression CCRs to alleviate charge compression, but some commenters were concerned that the application of this adjustment methodology to capital intensive radiology services is premature and requires additional analysis. The commenters noted that the RTI report found that within the Radiology CCR, CT scanning and MRI have higher markups and lower CCRs than the remaining radiology services. Implementing RTI's recommendation to apply a regression method to split Radiology into one CCR each for MRIs, CT scans and Other Radiology could potentially result in lower CCRs for the CT and MRI categories. One commenter cited an analysis conducted by Direct Research, LLC, that found that the majority of hospitals do not allocate the capital costs of MRI and CT scan machines to the radiology cost center. Rather, the capital costs could be allocated more broadly across hospital services on a square footage basis. However, the commenter noted that RTI's analysis for radiology services assumes a detailed capital allocation for these services that results in differential CCRs found in MRIs and CT scans, which the commenter suggested is actually not found in the data. Therefore, the commenters requested that the regression-based CCRs for radiology not be adopted at this time. *Response:*
                         We appreciate the comment on the limitations of the regression-based CCR on radiology. This is another example of how changes to cost reporting can potentially improve the accuracy of CCRs for radiology and other departments. In our view, the commenter raises another issue that requires additional analysis before we adopt regression-based adjustments to address charge compression. *Comment:*
                         One comment addressed our proposal to move cost report line 54 for EEG out of the Cardiology cost center group into the Laboratory cost center group. The commenter noted that where providers elect to report EEG separately on line 54, this seems appropriate. However, some providers combine EEG with EKG on line 53 (usually because the EEG services are purchased as outside services and not a separate cost center for the hospital). In those instances, moving only the EEG costs would be impossible. The commenter noted that CMS did not indicate what portion of providers separately report EEG services on line 54, but the commenter was concerned that there will be continued mismatching under either grouping. The commenter encouraged CMS to consider expanding the MedPAR database to include separate fields for all revenue codes so that detailed analyses and accurate matching of costs and charges can be performed. The commenter also concurred with CMS' recommendation to move radioisotope costs to the radiology services grouping and out of “other services.” *Response:*
                         We responded earlier that suggestions for adding additional revenue codes to MedPAR will be considered in conjunction with other competing priorities for our information systems. In the FY 2008 proposed rule, we decided to move the costs for cases involving EEG from the Cardiology cost center group to the Laboratory Cost center group to maintain consistency with their corresponding EEG MedPAR claims, which are categorized under Laboratory charges. Although the commenter indicated that hospitals may be combining EEG costs with EKG costs on line 53 instead of reporting it as a separate cost on line 54, we believe the MedPAR is clear in categorizing EEG claims under revenue codes 0740 and 0749, and therefore, costs for EEG should be reported on line 54 of the cost report as well. For this reason, we are finalizing our proposal to move the costs for cases involving EEG from the Cardiology cost center group to the Laboratory Cost center for purposes of calculating the DRG relative weights. As described in the FY 2008 IPPS proposed rule, we will also calculate the DRG relative weights for FY 2008 by moving radioisotype costs from the Other 
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                        Services CCR to the Radiology Services CCR. *Comment:*
                         One commenter was concerned that hospitals do not have consistent charging and billing practices on an inpatient and outpatient basis for the administration of medications by injection and/or infusion at the bedside. *Response:*
                         We did not propose any changes on this issue. However, we will consider this issue as we research potential improvements that can be made to how hospitals report costs and charges. *Comment:*
                         One commenter stated that it believed it is important for CMS to explicitly recognize the “limitations” of the cost-based weighting methodology and its applicability to non-Medicare patients because this is a “major precedent setting change for the entire hospital field.” The commenter stated that in studies that it conducted, it found that the use of departmental CCRs presents a bias in that the higher unit costs of services provided to children that are labor intensive in terms of nursing and respiratory therapy are not reflected in the department-wide CCRs. The commenter requested that, at a minimum, CMS recognize in the final rule that there are cost issues in the Medicare CCR methodology that have implications for non-Medicare patient populations. *Response:*
                         The cost-based relative weights were developed solely using Medicare data. We do not have non-Medicare data that can be used to set DRG relative weights. For this reason, we are concerned that non-Medicare payers may be using our payment systems and rates without making refinements to address the needs of their own populations. As stated earlier, we encourage non-Medicare payers to adapt the MS–DRGs and the relative weight methodology to better serve their needs. Among its other short-term recommendations, RTI also suggested that we incorporate edits to reject or require more intensive review of cost reports from hospitals with extreme CCRs. This action would reduce the number of hospitals with excluded data in the national CCR computations, and would also improve the accuracy of all departmental CCRs within problem cost reports by forcing hospitals to review and correct the assignment of costs and charges before the cost report is filed. Although we do not have a substantive disagreement with the recommendation, we generally focus our audit resources on areas in which cost report information directly affects payments to individual providers. RTI further suggested revising cost report instructions to reduce cost and charge mismatching and program charge misalignment in its short-term recommendations. Although RTI suggests such an action could be immediately effective for correcting the reporting of costs and charges for medical supply items that are now distributed across multiple cost centers, we note that changes to improve cost reporting now will not become part of the relative weights for several years because of lags between the submission of hospital reports and our ability to use them in setting the relative weights. Currently, we expect there will continue to be a 3-year lag between a hospital's cost report fiscal year and the year it is used to set the relative weights. Thus, even if it were possible to issue instructions immediately beginning for FY 2008, revised reporting would not affect the relative weights until at least FY 2011. Nevertheless, we agree with this recommendation, and in the proposed rule, we welcomed public input on potential changes to cost reporting instructions to improve consistency between how charges are reported on cost reports and in the Medicare claims. We indicated that we would consider these changes to the cost reporting instructions as we consider further changes to the cost report below. In the summary of the comments above, we stated that some commenters believed that RTI's recommendation to incoporate edits to reject cost reports or require more intensive audits will not solve the mismatch problem because hospitals' reporting is consistent with cost reporting instructions. The commenters instead recommended that hospitals be educated to report costs and charges in a manner that is consistent with how MedPAR groups charges. However, other commenters supported more intensive auditiing of cost reports. In response to these comments, we stated above that we agree with the initiative to educate hospitals to improve cost reporting and that we intend to inform the fiscal intermediaries/MAC of this educational initiative. We also stated that we intend to provide the fiscal intermediaries/MAC of this educational initiative. We also stated that we intend to provide fiscal intermediaries/MAC and hospitals with guidance on how to address requests for changes in cost reporting practices from hospitals. *Comment:*
                         Some commenters supported the use of the Standard Analytic File (SAF) to calculate CCRs, as used by RTI in its study, as the SAF provides more detailed charge data on supplies, drugs and radiology services, which would improve the payment accuracy for those revenue centers with significant charges. *Response:*
                         We appreciate the comment on the use of the SAF to calculate national CCRs. The RTI study used the SAF to extract detailed charge information for selected revenue codes with potential aggregation bias and used this information in the creation of the synthetic CCRs. However, because we are not expanding the CCRs using regression adjustments for FY 2008, it is not necessary to use the SAF to compute the relative weights in this final rule with comment period. Rather, we are using the FY 2006 MedPAR file and FY 2005 hospital cost reports to calculate the national CCRs. *Comment:*
                         Many commenters noted that, while the proposed rule seems to suggest that methods of addressing charge compression should be considered together with implementation of an HSRV methodology, these two issues (charge compression and HSRV) need not and should not be linked. The commenters reiterated their opposition to implementation of the HSRV methodology, as previously expressed in comments on the FY 2007 proposed rule, arguing that the method is flawed and may even introduce more bias into the relative weight calculations. Another commenter (who also opposed implementation of the HSRV methodology) stated that should the HSRV method be implemented, many DRG weights could move in one direction if the charge compression adjustments were implemented in FY 2008, and then move in the other direction if the HSRV method were to be implemented in FY 2009. This commenter requested that CMS delay both changes for at least one year, and implement the HSRV method and the regression-based CCRs only after issuing a formal proposal with a thorough analysis that is made available to the public for review and comment. One commenter stated that the RTI revisions should be reviewed in combination with the severity-based system recommended by RAND and should not be adopted in FY 2008. The commenter stated that CMS and the provider community should evaluate these recommendations and implement them together in FY 2009. One commenter stated that the combined use of hospital-specific charges and a national CCR will result in a distortion of the DRG weights and a shifting of Medicare payments among hospitals, 
                        *not*
                         based on resource utilization, but rather on a mathematical calculation. This commenter recommended that CMS review the impact of using hospital-specific 
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                        charges and costs to determine whether the national CCR has created inaccurate DRG weights. MedPAC commented that adopting cost-based HSRV weights would result in substantial additional improvements in payment accuracy. MedPAC believed that the HSRV methodology removes all of the differences in the level of costs across hospitals, and is preferable to CMS’ current method used for standardization, which is incomplete and introduces avoidable errors into the computation of payment weights. Two other commenters supported the adoption of the HSRV methodology and strongly opposed the current methodology and believed it is flawed for the following reasons: (1) The proposed formula derives a national average charge based on all hospitals being weighted equally, which disadvantages hospitals located in historically “low charge” States, and results in small, rural hospitals carrying the same weight as large, urban hospitals; (2) The data being used are outdated and do not reflect the cost of new technology; (3) Costs in excess of 25 percent are omitted by CMS from “high cost” hospitals in the cost base, while leaving in all of the charges from those same “high cost” hospitals and assigning a relative value on reduced costs. Since the costs are being excluded, but not the charges, there is a corresponding mismatching of revenues and costs; (4) The data contain only audited data, and hospitals that have not been audited would not be included in the data. These two commenters stated that CMS should test the sensitivity of weights using various methodological assumptions and share the resulting data with the public. The commenters requested that CMS should “strive” to create a system that improves payments and does not include the “obvious flaws” listed above. *Response:*
                         Many commenters expressed their concerns and opposition to the HSRV methodology last year. As we explained in response to those comments in the FY 2007 IPPS final rule, we decided not to adopt the HSRV methodology to standardize charges for FY 2007 but stated that we would undertake further analysis of the method. As we indicated in the FY 2008 IPPS proposed rule, we engaged RAND as the contractor to study alternative DRG systems. The second phase of the RAND study will include evaluating the HSRV methodology; the evaluation report will not be available until after the issuance of this final rule with comment period. Therefore, we will consider those results as we plan changes as part of the FY 2009 IPPS rulemaking process. We intend to carefully analyze how the relative weights would change if we were to adopt regression-based CCRs to address charge compression while simultaneously adopting an HSRV methodology using fully phased-in MS–DRGs. Although many commenters do not believe that the HSRV methodology and addressing charge compression should be linked, we believe, as did one commenter, that sequentially adjusting for charge compression and later adopting the HSRV methodology could create instability in IPPS payments over the next 2 years. Accordingly, we intend to include a detailed description and discussion of RAND's and any other analyses that we may undertake on these issues in the FY 2009 IPPS proposed rule. In response to the commenters who supported adopting the HSRV methodology and believed it superior to the method used by CMS currently, in the FY 2007 IPPS final rule (71 FR 47883), we stated that there are certain administrative difficulties with adjusting charges to costs using hospital-specific CCRs. Therefore, at least until we have the opportunity to analyze the results of RAND's analysis, we are utilizing national average CCRs to determine cost. We also do not believe that the use of hospital-specific charges together with national average CCRs redistributes Medicare payments among hospitals merely based on a mathematical calculation, as one commenter indicated. On the contrary, a system that improves payment accuracy and moderates the influence of individual hospital reporting practices on a national payment system is not one which haphazardly redistributes payments. We note that, in a report issued in July 2006, the GAO found that CMS's system of national CCRs shows promise to improve payment accuracy because it reduces the impact that individual hospital-reporting practices has on the DRG relative weights (GAO–06–880, “CMS's Proposed Approach to Set Hospital Inpatient Payments Appears Promising”). With respect to the commenters' concerns regarding inappropriate “equal weighting” of hospitals, under CMS' current methodology for computing national CCRs, these concerns were addressed in last year's IPPS final rule. The national CCRs are the sum of all costs divided by the sum of all charges. Thus, all hospitals are not weighted equally. Larger hospitals will have more weight than smaller hospitals in the final CCR calculation. In response to the commenters' concerns that the data are outdated and do not reflect the costs of new technology, there is an inevitable lag between the availability of information from hospital claims or cost reports and the time it can be used to determine relative weights. We always use the most recent data available to set relative weights. Furthermore, as we noted in the FY 2007 IPPS final rule, CMS' current method of using national average CCRs eliminates the need to match claims (for FY 2008, the 2006 MedPAR) to the time period of the CCRs (for FY 2008, FY 2005 HCRIS), which would be necessary under an HSRV method that uses hospital-specific CCRs. Thus, we can use claims data from one year later under our cost-based weighting methodology. We also note that add-on payments made for the latest advancements in medical technologies may not be included in the 2-year-old hospital claims data that are used to set the relative weights. Regarding the comments stating that CMS mismatches revenues and costs by omitting excessive costs from “high cost” hospitals in the cost base, while leaving in the charges from those same “high cost” hospitals, we note that this is not actually the case. If a hospital's costs are dropped from the national average CCR calculations, the hospital's charges are also dropped from the national average CCR calculations. Lastly, the commenters' assertion that the cost report data used for CCRs include only audited data is incorrect. If the commenters are referring to the cost report data that CMS uses to calculate the national average CCRs, we note that in accessing data for IPPS hospitals from HCRIS, we select all IPPS hospitals, and do not only select hospitals whose cost reports are audited. *Comment:*
                         MedPAC submited comments on the method we use to calculate the national CCRs for the cost-based relative weights. The methodology to calculate the national CCRs is described in section II.H. of the preamble of this final rule with comment period. MedPAC suggested that we standardize the Medicare charges and costs used to calculate the national CCRs from the Medicare cost reports to adjust for differences in local wage levels, IME, and DSH. The standardization would be consistent with the use of national standardized charges by revenue center also used in the calculation of cost-based relative weights from the MedPAR. *Response:*
                         While we did not propose any changes to the cost-based relative weights methodology, we appreciate the comment on maintaining consistency 
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                        among our data sources. Although we currently standardize charges from the MedPAR file when calculating relative weights, we do not standardize costs and charges from hospital cost reports, as MedPAC recommended. We may consider this recommendation as we continue to refine our methodology for calculating relative weights. However, we note that there would be no need to standarize costs and charges from hospital cost reports under an HSRV methodology. b. Medium-Term Recommendations RTI recommended that we expand the MedPAR file to include separate fields that disaggregate several existing charge departments. For compatibility with prior years' data, the new fields should partition the existing ones rather than recombine charges. RTI recommended including additional fields in the MedPAR file for the hospital departments that it statistically disaggregated in its report, as well as intermediate care, observation beds, other special nursing codes, therapeutic radiation and EEG, and possibly others. As with some of RTI's earlier recommendations with respect to cost reports, we will examine this suggestion in conjunction with other competing priorities CMS has been given for our information systems. We have limited information systems resources, and we will need to consider whether the time constraints we have to develop the IPPS final rule, in conjunction with the inconvenience of using the SAF and accounting for charge compression through regression, will justify the infrastructure cost to our information systems of incorporating these variables into the MedPAR. Finally, RTI's medium-term recommendations include encouraging providers to use existing standard cost centers, particularly those for Blood and Blood Administration and for Therapeutic Radiology, in the current Medicare cost report. We believe this is closely related to the recommendation for improved cost reporting instructions. Therefore, we will consider this recommendation as part of any further effort we may undertake to revise cost reporting instructions or change the cost report. *Comment:*
                         Some commenters supported expanding the MedPAR file to include separate fields to disaggregate additional cost centers. One commenter supported this recommendation and suggested that the assignment of revenue codes and charges to revenue centers in MedPAR should be reviewed and changed to better reflect hospital accounting practices as reflected on the Medicare cost report. *Response:*
                         We will consider suggestions for modifying MedPAR in conjunction with other competing priorities we have for our information systems. Further, while we support the efforts of the national hospital associations to streamline hospital's reporting practices, we note that CMS does not instruct hospitals in the appropriate revenue codes to use because hospitals have discretion as to where and how they allocate charges based on their own financial system needs. c. Long-Term Recommendations RTI's long-term recommendations include adding new cost centers to the Medicare cost report and/or undertaking the following activities: Add “Devices, Implants and Prosthetics” under the line for “Medical Supplies Charged to Patients.” Consider also adding a similar line for IV Solutions as a subscripted line under the line for “Drugs Charged to Patients.”
                    Add CT Scanning and MRI as subscripted lines under the line for “Radiology-Diagnostic.” About one-third of hospitals that offer CT Scanning and/or MRI services are already reporting these services on nonstandard line numbers. More consistent reporting for both cost centers would eliminate the need for statistical estimation on the radiology CCRs.
                    In consultation with hospital industry representatives, determine the best way to separate cardiology cost centers and add a new standard cost center for cardiac catheterization and/or for all other cardiac diagnostic laboratory services. About 20 percent of hospitals already include a nonstandard line on their cost reports for catheterization. Creating a new standard cost center could improve consistency in reporting and substantially improve the program charge mismatching that now occurs.
                    In consultation with hospital industry representatives, consider establishing a new cost center to capture intermediate care units as distinct from routine or intensive care.
                    Establish expert study groups or other research vehicles to study options for improving patient-level charging within nursing units. Nursing accounts for one-fourth of IPPS charges and 41 percent of the computed costs from our claims analysis file. Historically, nursing charges and costs have been assigned to patients without relying on individual measures of service use. Consideration should be given to finding ways to improve precision in nursing cost finding that will improve relative resource weights without adding substantial administrative costs to either the Medicare program or to hospitals. We agree with RTI that attention should be paid to these issues as we consider changes to the Medicare cost report. The cost report has not been revised in nearly 10 years. During this time, there have been significant changes to the Medicare statute and regulations that have affected the Medicare payment policies. Necessary incremental changes have been made to the Medicare cost report over the years to accommodate the Medicare wage index, disproportionate share payments, indirect and direct graduate medical education payments, reporting of uncompensated care costs, among others. The adoption of cost-based weights for the IPPS beginning in FY 2007 has brought further attention to the importance of the Medicare cost report and how hospitals report costs and charges. We recently began doing a comprehensive review of the Medicare cost report and plan to make updates that will consider its many uses. As we update the cost report, we will give strong consideration to RTI's recommendations and potential long-term improvements that could be made to the IPPS cost-based relative weighting methodology. *Comment:*
                         Several commenters made recommendations for how the relative weights would be calculated under a 3-year transition from the current DRGs to the new MS–DRGs. Some commenters suggested three options as follows: (1) Use two GROUPERs (CMS DRGs and MS–DRGs) and then blend the weights for each individual case. (2) Blending current DRG weights with MS–DRG weights: To calculate a blended cost-based weight, CMS could first calculate cost-based weights using the current DRGs. CMS could then calculate cost-based weights using the MS–DRGs. The blended weight for each MS–DRG would be based on the weighted average relative weights (based on the current DRGs from which cases group into the new MS–DRGs) and the MS–DRG weight. Under this approach, CMS would continue to calculate cost-based weights for the current DRGs during the first 2 years of the transition period. This approach recognizes that a case has different relative weights in the new system versus the current DRG system. (3) Blending MS–DRG base and severity level weights: CMS would blend the actual MS–DRG weight with the weight of the base MS–DRG. The base MS–DRG weight is determined by 
                        ( print page 47199)
                        using expected case mix volume among severity levels. For example, if an MS–DRG was subdivided into two subgroups: with the non-CC DRG accounting for 90 percent of the cases and the other 10 percent in the CC DRG, these ratios would be used to blend the base and the DRG-specific weight. Under this approach, CMS would not have to calculate weights using two different DRG systems. On the other hand, this approach does not use the current system when calculating the blended rates. The commenters noted that while option 1 would provide the most accurate blended weights, it is the most burdensome to implement because it would require use of two GROUPERs, whereas under options 2 and 3, CMS would only use the blended relative weights, allowing hospitals and Medicare contractors to use only one grouping software. MedPAC suggested that CMS adopt a 2-year transition period for MS–DRGs to coincide with the remainder of the current transition period for implementing cost-based weights, so as to “balance the payment impacts of implementing severity refinements and cost-based weights.” MedPAC suggested that a 2-year transition might work as follows: CMS could group cases using the MS–DRG grouper beginning in FY 2008, but then use a blended weight for each category. The blended weight for an MS–DRG would reflect partly the weight that would have been assigned under an MS–DRG system with fully implemented cost-based weights. The weight for each MS–DRG in FY 2008 would be a blend of two parts: 50 percent of the average DRG weight that would have been attached to cases in the MS–DRG from the 2006 MedPAR file under a policy of1/3
                         charge-based weights and 
                        2/3
                         cost-based weights. These DRG weights are the ones that would have applied to the same cases under the FY 2008 policy if CMS simply continued the transition to cost-based weights without changing the DRG definitions.
                    50 percent of the CMS refined weights for the MS–DRG for FY 2008. In FY 2009, cases would be grouped in the MS–DRGs and the weight for each MS–DRG would be a 100 percent cost-based weight. *Response:*
                         We have carefully considered each comment in determining whether there should be a transition period for the relative weights computed using MS–DRGs, the length of the transition and how to compute weights during the transition. We also considered how to accommodate a transition to MS–DRG relative weights with the continuing transition to cost-based weights. Although we received strong general support for adopting the MS–DRGs, we do believe that some transition is warranted to mitigate the magnitude of potential changes in payment to hospitals that could occur in one year. Furthermore, we agree with MedPAC that a two-year transition period that coincides with the remainder of the transition period for implementing cost-based weights is appropriate. By having these changes occur simultaneously over the same transition period, we can avoid having large changes in payment that would occur with sequential implementation. Further, we can also accomplish all of the payment reforms according to the same schedule. Accordingly, we are implementing a 2-year transition to MS–DRGs. For FY 2008, the first year of the transition, 50 percent of the relative weight for each MS–DRG will be based on the CMS DRG relative weight and 50 percent will be based on the MS–DRG relative weight. In FY 2009, the relative weights will be based entirely on the MS–DRG relative weight. The blended relative weights for FY 2008 are computed as follows: First, using the Version 24.0 GROUPER, relative weights are calculated based on 100 percent costs and 100 percent charges, respectively (see section II.H. of the preamble of this final rule with comment period for a description of the cost- and charge-based calculations). Then these weights are blended using two-thirds of the cost-based weights and one-third charge-based weights to establish the CMS DRG portion of the transition weights. Second, using the Version 25.0 GROUPER, relative weights are calculated based on 100 percent costs and 100 percent charges, respectively (see section II.H. of the preamble of this final rule with comment period for a description of how we compute cost-based and charge-based weights). These weights are then blended using two-thirds of the cost-based weights and one-third charge-based weights to establish the MS–DRG portion of the transition weights. Under the transition blend we are adopting in this final rule with comment period, we group cases to MS–DRGs (using the Version 25.0 GROUPER), but the payment weight for each DRG is a 50/50 blend of the MS–DRG weight and the CMS DRG weight. Thus, we had to determine a blended weight for each DRG. Using the claims in the FY 2006 MedPAR database that we used to compute cost-based weights under the Version 24.0 GROUPER, we grouped each case to a CMS DRG (using the Version 24.0 GROUPER) and an MS–DRG (using the Version 25.0 GROUPER). Commonly, a set of cases that grouped to a single MS–DRG grouped to two or more CMS DRGs. Therefore, we determined an average CMS DRG weight for all cases that grouped to each MS–DRG. Specifically, we summed the CMS DRG weights of all the cases that grouped to each MS–DRG and then divided that number by the transfer-adjusted case count. To establish the final blended weight for each DRG, we added 50 percent of the MS–DRG weight to 50 percent of the average CMS DRG weight for that MS–DRG. These final blended relative weights are listed in Table 5 of this final rule with comment period. *Comment:*
                         Some commenters expressed concern about the continued transition from charge-based weights to cost-based weights, in light of RTI's recommendations to alleviate charge compression on the relative weights and the proposal to introduce MS–DRGs. For FY 2008, we proposed that the relative weights would be based on one-third charges and two-third costs. Some commenters suggested that this transition should be delayed until the public comments associated with cost reporting and charge compression can be addressed. We have also received comments expressing concern on the potential fluctuations in hospital payment if we were to implement both RTI's recommendations on charge compression along with the MS–DRG system. In both cases, commenters suggested delaying the transition from charge-based to cost-based weights by maintaining the relative weights at two-third charges and one-third costs. MedPAC also expressed concern about continuing the transition to cost-based weights. However, unlike the commenter above, MedPAC suggested that CMS discontinue the transition period to cost-based weights and implement 100 percent cost-based weights in FY 2008. MedPAC's recommendation to discontinue the transition to cost-based weights presumed full introduction of the MS–DRGs in FY 2008. The commenters believed the payment fluctuations that will occur with full implementation of MS–DRGs can be mitigated by fully adopting cost weights. However, as suggested above, MedPAC also suggested as an alternative adopting MS–DRG weights according to the same schedule as the cost-based weights. *Response:*
                         We appreciate the commenters' expressing concerns about the continued transition to cost-based relative weights and the potential changes in payment from the 
                        ( print page 47200)
                        application of this methodology. In the FY 2007 IPPS final rule, we discussed our rationale for implementing cost-based weights over a 3-year transition period. We stated that the 3-year transition would mitigate the annual payment effects from the changes to the relative weights while we further study whether to make adjustments to account for charge compression. We believe that the cost-based methodology reduces bias in the relative weights and makes Medicare's payments more accurate for both medical and surgical DRGs. Therefore, any delays in the transition would not further our goal of payment accuracy. We believe that current efforts to improve cost reporting and our decision not to implement regression-based CCRs will alleviate concerns about additional fluctuations in hospital payments from further changes to the relative weight methodology. Furthermore, we believe that, for some types of hospitals (such as rural hospitals), the payment changes from MS–DRGs are the opposite of those that will occur from the transition to cost-based weights. For this reason, we believe a 2-year transition of the MS–DRG system that coincides with the remaining two years of the transition to cost-based weights will reduce the magnitude of annual payment changes and achieve our long-term goal of improvements in payment accuracy. Therefore, we are continuing with the 3-year transition to cost-based weights. For FY 2008, the DRG relative weights will be a blend of 33 percent of charge-based weights and 67 percent of cost-based weights. For the first year of the MS–DRG transition, the relative weights will be a blend of 50 percent of the CMS–DRG weight and 50 percent of the MS–DRG weight. F. Hospital-Acquired Conditions, Including Infections 1. General Medicare's IPPS encourages hospitals to treat patients efficiently. Hospitals receive the same DRG payment for stays that vary in length. In many cases, complications acquired in the hospital do not generate higher payments than the hospital would otherwise receive for other cases in the same DRG. To this extent, the IPPS does encourage hospitals to manage their patients well and to avoid complications, when possible. However, complications, such as infections, acquired in the hospital can lead to higher Medicare payments in two ways. First, the treatment of complications can increase the cost of hospital stays enough to generate outlier payments. However, the outlier payment methodology requires that hospitals experience large losses on outlier cases (for example, in FY 2007, the fixed-loss amount was $24,485 before a case qualified for outlier payments, and the hospital then only received 80 percent of its estimated costs above the fixed-loss cost threshold). Second, under the MS–DRGs we are adopting in this final rule with comment period, there are 258 sets of DRGs that are split into 2 or 3 subgroups based on the presence or absence of a major CC (MCC) or CC. If a condition acquired during the beneficiary's hospital stay is one of the conditions on the MCC or CC list, the result may be a higher payment to the hospital under the MS–DRGs. (We refer readers to section II.D. of this final rule with comment period for a detailed discussion of DRG reforms.) 2. Legislative Requirement Section 5001(c) of Pub. L. 109–171 requires the Secretary to select, by October 1, 2007, at least two conditions that are (a) high cost or high volume or both, (b) result in the assignment of a case to a DRG that has a higher payment when present as a secondary diagnosis, and (c) could reasonably have been prevented through the application of evidence-based guidelines. For discharges occurring on or after October 1, 2008, hospitals will not receive additional payment for cases in which one of the selected conditions was not present on admission. That is, the case will be paid as though the secondary diagnosis was not present. Section 5001(c) provides that we can revise the list of conditions from time to time, as long as the list contains at least two conditions. Section 5001(c) also requires hospitals to submit the secondary diagnoses that are present at admission when reporting payment information for discharges on or after October 1, 2007. 3. Public Input In the FY 2007 IPPS proposed rule (71 FR 24100), we sought input from the public regarding conditions with evidence-based guidelines that should be selected in order to implement section 5001(c) of Pub. L. 109–171. The comments that we received were summarized in the FY 2007 IPPS final rule (71 FR 48051 through 48053). In the FY 2008 IPPS proposed rule (72 FR 24716), we again sought formal public comment on conditions that we proposed to select under section 5001(c). As discussed below, in this final rule with comment period, we first summarize the comments we received on the FY 2007 IPPS proposed rule. We then explain our detailed proposals included in the FY 2008 proposed rule, followed by a summary of the public comments on each condition proposed and our responses to those public comments. In summary, the majority of the comments that we received in response on the FY 2007 IPPS proposed rule addressed conceptual issues concerning the selection, measurement, and prevention of hospital-acquired infections. Many commenters encouraged CMS to engage in a collaborative discussion with relevant experts in designing, evaluating, and implementing this section. The commenters urged CMS to include individuals with expertise in infection control and prevention, as well as representatives from the provider community, in the discussions. Many commenters supported the statutory requirement for hospitals to submit information regarding secondary diagnoses present on admission beginning in FY 2008, and suggested that it would better enable CMS and health care providers to more accurately differentiate between comorbidities and hospital-acquired complications. MedPAC, in particular, noted that this requirement was recommended in its March 2005 Report to Congress and indicated that this information is important to Medicare's value-based purchasing efforts. Other commenters cautioned us about potential problems with relying on secondary diagnosis codes to identify hospital-acquired complications, and indicated that secondary diagnosis codes may be an inaccurate method for identifying true hospital-acquired complications. A number of commenters expressed concerns about the data coding requirement for this payment change and asked for detailed guidance from CMS to help them identify and document hospital-acquired complications. Other commenters expressed concern that not all hospital-acquired infections are preventable and noted that sicker and more complex patients are at greater risk for hospital-acquired infections and complications. Commenters suggested that CMS include standardized infection-prevention process measures, in addition to outcome measures of hospital-acquired infections. Some commenters proposed that CMS expand the scope of the payment changes beyond the statutory minimum of two conditions. They noted that the death, injury, and cost of hospital-acquired infections are too high to limit this provision to only two conditions. Commenters also recommended that CMS annually select additional hospital 
                        ( print page 47201)
                        acquired complications for the payment change. Conversely, a number of commenters proposed that CMS initially begin with limited demonstrations to test CMS' methodology before nationwide implementation. One commenter recommended that CMS include appropriate consumer protections to prevent providers from billing patients for the nonreimbursed costs of the hospital-acquired complications and to prevent hospitals from selectively avoiding patients perceived at risk of complications. In addition to the broad conceptual suggestions, some commenters recommended specific conditions for possible inclusion in the payment changes, which we discussed in detail in the preamble of the proposed rule and in section II.D.4. of this final rule with comment period. We also discuss throughout section II.D. of the preamble of this final rule with comment period other comments that we have considered in developing hospital-acquired conditions that would be subject to reporting. As it is not addressed elsewhere, we are responding here to the comment about hospitals billing patients for costs of hospital-acquired complications that are not counted as MCCs and CCs. Section 5001(c) does not make the additional cost of a hospital acquired complication a noncovered cost. The additional costs that a hospital would incur as a result of a hospital-acquired complication remains a covered Medicare cost that is included in the hospital's IPPS payment. Medicare's payment to the hospital is for all inpatient hospital services provided during the stay. The hospital cannot bill the beneficiary for any charges associated with the hospital-acquired complication. With respect to the concern about a hospital avoiding patients that are at high risk of complications, we note that the policy is selecting only those conditions that are “reasonably preventable.” Thus, we are only selecting those conditions where, if hospital personnel are engaging in good medical practice, the additional costs of the hospital-acquired condition will, in most cases, be avoided and the risk of selectively avoiding patients at high risk of complications will be minimized. We further note that Medicare's high cost outlier policy is unaffected by section 5001(c). The hospital's total charges for all inpatient services provided during the stay will continue to be used to determine whether the case qualifies for an outlier payment. Thus, there will continue to be limitations on a hospital's financial risk of treating high cost cases even if, despite the hospital maintaining good medical practice to avoid complications, a reasonably preventable condition occurs after admission. Finally, as stated further below, we are continuing to work to identify exclusions for situations where the policy should not apply for the selected condition. 4. Collaborative Effort CMS worked with public health and infectious disease experts from the Centers for Disease Control and Prevention (CDC) to identify a list of hospital-acquired conditions, including infections, as required by section 5001(c) of Pub. L. 109–171. As previously stated, the selected conditions must meet the following three criteria: (a) high cost or high volume or both; (b) result in the assignment of the case to a DRG that has a higher payment when present as a secondary diagnosis; and (c) could reasonably have been prevented through the application of evidence-based guidelines. CMS and CDC staff also collaborated on developing a process for hospitals to submit a Present on Admission (POA) indicator with each secondary condition. The statute requires the Secretary to begin collecting this information as of October 1, 2007. The POA indicator is required in order for us to determine which of the selected conditions developed during a hospital stay. The current electronic format used by hospitals to obtain this information (ASC X12N 837, Version 4010) does not provide a field to obtain the POA information. We issued instructions requiring acute care IPPS hospitals to submit the POA indicator for all diagnosis codes, effective October 1, 2007, through Change Request No. 5499, with a release date of May 11, 2007. The instructions specify how hospitals under the IPPS submit this information in segment K3 in the 2300 loop, data element K301 on the ASC X12N 837, Version 4010 claim. Specific instructions on how to select the correct POA indicator for a diagnosis code are included in the ICD–9–CM Official Guidelines for Coding and Reporting. These guidelines can be found at the following Web site: 
                        *http://www.cdc.gov/​nchs/​datawh/​ftpserv/​ftpicd9/​ftpicd9.htm.* CMS and CDC staff also received input from a number of groups and organizations on hospital-acquired conditions, including infections. Many of these groups and organizations recommended the selection of conditions mentioned in the FY 2007 IPPS final rule, including the following because of the high cost or high volume (frequency) of the condition, or both, and because in some cases preventable guidelines already exist: Surgical site infections. The groups and organizations stated that there were evidence-based measures to prevent the occurrence of these infections which are currently measured and reported as part of the Surgical Care Improvement Program (SCIP).
                    Ventilator-associated pneumonias. The groups and organizations indicated that these conditions are currently measured and reported through SCIP. However, other organizations counseled against selecting these conditions because they believed it was difficult to obtain good definitions and that it was not always clear which ones are hospital acquired.
                    Catheter associated bloodstream infections.
                    Pressure ulcers.
                    Hospital falls. The injury prevention groups included this condition among a group referred to as “serious preventable events,” also commonly referred to as “never events” or “serious reportable events.” A serious preventable event is defined as a condition which should not occur during an inpatient stay.
                    Bloodstream infections/septicemia. Some commenters suggested that we focus on one specific organism, such as staph aureus septicemia.
                    Pneumonia. Some commenters recommended the inclusion of a broader group of pneumonia patients, instead of restricting cases to ventilator-associated pneumonias. Some commenters mentioned that while prevention guidelines exist for pneumonia, it is not clear how effective these guidelines may be in preventing pneumonia.
                    Vascular catheter associated infections. Commenters indicated that there are CDC guidelines for these infections. Other commenters stated that while this condition certainly deserves focused attention by health care providers, there is not a unique ICD 9 CM code that identifies vascular catheter-associated infections. Therefore, these commenters suggested that there would be difficulty separately identifying these conditions.
                    Clostridium difficile-associated disease (CDAD). Several commenters identified this condition as a significant public health issue. Other commenters indicated that, while prevalence of this condition is emerging as a public health problem, there is not currently a strategy for reasonably preventing these infections.
                    Methicillin-resistant staphylococcus aureus (MRSA). Several commenters indicated that MRSA has( print page 47202)
                        become a very common bacteria occurring both in and outside the hospital environment. However, other organizations stated that the code for MRSA (V09.0, Infection with microorganism resistant to penicillins Methicillin-resistant staphylococcus aureus) is not currently classified as a CC. Therefore, the commenters stated that MRSA does not lead to a higher reimbursement when the code is reported.
                    Serious preventable events. As stated earlier, some commenters representing injury prevention groups suggested including a broader group of conditions than hospital falls which should not be expected to occur during a hospital admission. They noted that these conditions are referred to as “serious preventable events,” and include events such as the following: (a) leaving an object in during surgery; (b) operating on the wrong body part or patient, or performing the wrong surgery; (c) air embolism as a result of surgery; and (d) providing incompatible blood or blood products. Other commenters indicated serious preventable events are so rare that they should not be selected as a hospital condition that cannot result in a case being assigned to a higher paying DRG. 5. Criteria for Selection of the Hospital-Acquired Conditions CMS and CDC staff greatly appreciate the many comments and suggestions offered by organizations and groups that were interested in providing input into the selection of the initial hospital-acquired conditions. CMS and CDC staff evaluated each recommended condition under the three criteria established by section 1886(d)(4)(D)(iv) of the Act. In order to meet the higher payment criterion, the condition selected must have an ICD–9–CM diagnosis code that clearly identifies the condition and is classified as a CC, or as an MCC (as proposed for the MS DRGs in the proposed rule). Some conditions recommended for inclusion among the initial hospital-acquired conditions did not have codes that clearly identified the conditions. Because there has not been national reporting of a POA indicator for each diagnosis, there are no Medicare data to determine the incidence of the reported secondary diagnoses occurring after admission. To the extent possible, we used information from the CDC on the incidence of these conditions. CDC's data reflect the incidence of hospital-acquired conditions in 2002. We also examined FY 2006 Medicare data on the frequency that these conditions were reported as secondary diagnoses. We developed the following criteria to assist in our analysis of the conditions. The conditions described were those recommended for inclusion in the initial hospital-acquired infection provision. Coding—Under section 1886(d)(4)(D)(ii)(I) of the Act, a discharge is subject to the payment adjustment if “the discharge includes a condition identified by a diagnosis code” selected by the Secretary under section 1886(d)(4)(D)(iv) of the Act. We only selected conditions that have (or could have) a unique ICD–9–CM code that clearly describes the condition. Some conditions recommended by the commenters would require the use of two or more ICD-9-CM codes to clearly identify the conditions. Although we did not exclude these conditions from further consideration, the need to utilize multiple ICD-9-CM codes to identify them may present operational issues. For instance, the complexities associated with selecting septicemia as a hospital-acquired condition subject to section 5001(c) of the DRA may present operational issues in identifying whether or not the condition was present upon admission. The vast number of clinical scenarios that we would have to account for could complicate implementation of the provision.
                    Burden (High Cost/High Volume)—Under section 1886(d)(4)(D)(iv)(I) of the Act, we must select cases that have conditions that are high cost or high volume, or both.
                    Prevention guidelines—Under section 1886(d)(4)(D)(iv)(II) of the Act, we must select codes that describe conditions that could reasonably have been prevented through application of evidence-based guidelines. We evaluated whether there is information available for hospitals to follow to prevent the condition from occurring.
                    MCC or CC—Under section 1886(d)(4)(D)(iv)(III) of the Act, we must select codes that result in assignment of the case to a DRG that has a higher payment when the code is present as a secondary diagnosis. The condition must be an MCC or a CC that would, in the absence of this provision, result in assignment to a higher paying DRG.
                    Considerations—We evaluated each condition above according to how it meets the statutory criteria in light of the potential difficulties that we would face if the condition were selected. 6. Selection of Hospital-Acquired Conditions We discuss below our analysis of each of the conditions that were raised as possible candidates for selection under section 5001(c) of Pub. L. 109–171 according to the criteria described above in section II.D.5. of the preamble of this final rule with comment period. We also discuss any considerations, which would include any administrative issues surrounding the selection of a proposed condition. For example, the condition may only be able to be identified by multiple codes, thereby requiring the development of special GROUPER logic to also exclude similar or related ICD–9–CM codes from being classified as a CC. Similarly, a condition acquired during a hospital stay may arise from another condition that the patient had prior to admission, making it difficult to determine whether the condition was reasonably preventable. Following a discussion of each condition, we provide a summary that describes how each condition was considered for the proposed rule, whether we are selecting it to be subject to the provision in this FY 2008 IPPS final rule or if it will continue to be considered for the future. In the proposed rule, we presented 13 conditions. The summary discussion and table reflect changes to the order of the conditions. The summary presents the conditions that best meet the statutory criteria and which conditions we are selecting to be subject to the payment adjustment for hospital-acquired conditions beginning in FY 2009. In the proposed rule, we encouraged comments on these conditions. We asked commenters to recommend how many and which conditions should be selected in the FY 2008 IPPS final rule along with justifications for these selections. We also encouraged additional comments on clinical, coding, and prevention issues that may affect the conditions selected. While, in this final rule with comment period, we present these 13 conditions in the order they were proposed, we have re-ranked these conditions based on how well they meet the statutory criteria according to compelling public health reasons in addition to public comment and internal analysis. We received approximately 127 timely public comments on this section from hospitals and health care systems, provider associations, consumer groups, purchasers, medical device manufacturers, pharmaceutical companies, information technology companies, and health care research organizations. *Comment:*
                         Some commenters urged CMS to use discretion in selecting hospital-acquired conditions that will be subject to the statutory provision and suggested that CMS limit the number of conditions selected. A large majority of 
                        ( print page 47203)
                        commenters strongly supported the inclusion of three of the serious preventable events (object left in surgery, air embolism and blood incompatibility) and generally commented that the remaining conditions are not always preventable or may not have unique codes established. A number of commenters both supported and opposed the conditions other than the three serious preventable events mentioned above. The commenters were generally optimistic about considering proposed conditions for the future upon resolution of suggested issues. A few commenters proposed that CMS initially begin with limited demonstrations to test CMS’ methodology before nationwide implementation. These commenters specifically mentioned the Michigan Hospital Association Keystone Center. The commenters who suggested not including conditions other than the three serious preventable events mentioned above noted that sicker and more complex patients are at greater risk for hospital-acquired infections and complications. In particular, the commenters believed some of the conditions proposed are a biological inevitability at a certain predictable rate regardless of safe practice. In addition, the commenters expressed concern about the difficulty of distinguishing between hospital-acquired and community-acquired infections. The commenters also believed that CMS should use incentives to allow hospitals to adopt innovative infection prevention technologies and provide necessary treatments for infections. Finally, a few commenters submitted additional conditions that were not included in the 13 conditions we considered in the proposed rule. *Response:*
                         In general, we discuss our responses to each of these comments below in the context of the specific conditions they reference. With respect to the general comment that we should only select the three serious preventable events, we believe there is a significant public health interest in selecting more than just these conditions. According to the commenters, many of the other conditions we considered are not always preventable and, therefore, should not be selected. The statute indicates that the provision should apply to conditions that “could reasonably have been prevented through the application of evidence-based guidelines.” Therefore, for this reason, we are selecting other conditions in addition to the serious preventable events to be subject to this provision in this final rule with comment period. We discuss the application of the statutory criteria to each of the conditions we considered below and why we believe the condition is “reasonably preventable.” (a) Catheter-Associated Urinary Tract Infections Coding—ICD–9–CM code 996.64 (Infection and inflammatory reaction due to indwelling urinary catheter) clearly identifies this condition. The hospital would also report the code for the specific type of urinary infection. For instance, when a patient develops a catheter associated urinary tract infection during the inpatient stay, the hospital would report code 996.64 and 599.0 (Urinary tract infection, site not specified) to clearly identify the condition. There are also a number of other more specific urinary tract infection codes that could also be coded with code 996.64. These codes are classified as CCs. If we were to select catheter-associated urinary tract infections, we would implement the decision by not counting code 996.64 and any of the urinary tract infection codes listed below when both codes are present and the condition was acquired after admission. If only code 966.64 were coded on the claim as a secondary diagnosis, we would not count it as a CC. Burden (High Cost/High Volume)—CDC reports that there are 561,667 catheter-associated urinary tract infections per year. For FY 2006, there were 11,780 reported cases of Medicare patients who had a catheter associated urinary tract infection as a secondary diagnosis. The cases had average charges of $40,347 for the entire hospital stay. According to a study in the 
                        *American Journal of Medicine,*
                         catheter-associated urinary tract infection is the most common nosocomial infection, accounting for more than 1 million cases in hospitals and nursing homes nationwide.[22]
                        
                         Approximately 11.3 million women in the United States had at least one presumed acute community-acquired urinary tract infection resulting in antimicrobial therapy in 1995, with direct costs estimated at $659 million and indirect costs totaling $936 million. Nosocomial urinary tract infection necessitates one extra hospital day per patient, or nearly 1 million extra hospital days per year. It is estimated that each episode of symptomatic urinary tract infection adds $676 to a hospital bill. In total, according to the study, the estimated annual cost of nosocomial urinary tract infection in the United States ranges between $424 and $451 million. Prevention guidelines—There are widely recognized guidelines for the prevention of catheter-associated urinary tract infections. Guidelines can be found at the following Web site: 
                        *http://www.cdc.gov/​ncidod/​dhqp/​gl_​catheter_​assoc.html.* CC—Codes 996.64 and 599.0 are classified as CCs in the CMS DRGs as well as in the MS–DRGs. Considerations—The primary prevention intervention would be not using catheters or removing catheters as soon as possible, both of which are worthy goals because once catheters are in place for 3 to 4 days, most clinicians and infectious disease/infection control experts do not believe urinary tract infections are preventable. While there may be some concern about the selection of catheter associated urinary tract infections, it is an important public health goal to encourage practices that will reduce urinary tract infections. Approximately 40 percent of Medicare beneficiaries have a urinary catheter during hospitalization based on Medicare Patient Safety Monitoring System (MPSMS) data. As stated above in the Coding section, this condition is clearly identified through ICD–9–CM code 996.64. Code 996.64 is classified as a CC. The hospital would also report the code for the specific type of urinary infection. For instance, when a patient develops a catheter associated urinary tract infection during the inpatient stay, the hospital would report codes 996.64 and 599.0 or another more specific code that clearly identifies the condition. These codes are classified as CCs under the CMS DRGs as well as the MS–DRGs. To select catheter-associated urinary tract infections as one of the hospital-acquired conditions that would not be counted as a CC, we would not classify code 996.64 as a CC if the condition occurred after admission. Furthermore, we would also not classify any of the codes listed below as CCs if present on the claim with code 996.64 because these additional codes identify the same condition. The following codes represent specific types of urinary infections. We did not include codes for conditions that could be considered chronic urinary infections, such as code 590.00 (Chronic pyelonephritis, without lesion or renal medullary necrosis). Chronic conditions may indicate that the condition was not acquired during the current stay. We would not count code 996.64 or any of the following codes representing acute urinary 
                        ( print page 47204)
                        infections if they developed after admission and were coded together on the same claim. 112.2 (Candidiasis of other urogenital sites)
                    590.10 (Acute pyelonephritis, without lesion of renal medullary necrosis)
                    590.11 (Acute pyelonephritis, with lesion of renal medullary necrosis)
                    590.2 (Renal and perinephric abscess)
                    590.3 (Pyeloureteritis cystica)
                    590.80 (Pyelonephritis, unspecified)
                    590.81 (Pyelitis or pyelonephritis in diseases classified elsewhere)
                    590.9 (Infection of kidney, unspecified)
                    595.0 (Acute cystitis)
                    595.3 (Trigonitis)
                    595.4 (Cystitis in diseases classified elsewhere)
                    595.81 (Cystitis cystica)
                    595.89 (Other specified type of cystitis, other)
                    595.9 (Cystitis, unspecified)
                    597.0 (Urethral abscess)
                    597.80 (Urethritis, unspecified)
                    599.0 (Urinary tract infection, site not specified) We believe the condition of catheter-associated urinary tract infection meets all of our criteria for selection as one of the initial hospital-acquired conditions. We can easily identify the cases with ICD–9–CM codes. The condition is a CC under both the CMS DRGs and the MS–DRGs. The condition meets our burden criterion with its high cost and high frequency. There are prevention guidelines on which the medical community agrees to avoid catheter-associated urinary tract infections. We believe this condition best meets the criteria discussed. Therefore, we proposed the selection of catheter-associated urinary tract infections as one of the initial hospital-acquired conditions. We encouraged comments on both the selection of this condition and the related conditions that we proposed to exclude from being counted as CCs. *Comment:*
                         Most commenters suggested that a large number of physicians believe urinary tract infections may not be preventable after several days of catheter placement. A few commenters submitted the following statement from the proposed rule (72 FR 24719): “once catheters are in place for 3–4 days, most clinicians and infection control experts do not believe UTIs are preventable.” The commenters also noted the potential difficulty in identifying this condition at admission. Still other commenters believed this condition is difficult to code because the ICD–9–CM codes do not distinguish between catheter-associated inflammation and infection. The commenters asked CMS to consider a new code for “inflammatory reaction from indwelling catheter” distinct from “catheter associated urinary tract infection.” In addition, the commenters noted that prevention guidelines are still being debated. The commenters referenced the prevention guideline published in 1981 and posted on the Web site at: 
                        *http://www.cdc.gov/​ncidod/​dhqp/​gl_​catheter_​assoc.html.* A few commenters also recommended exceptions for this condition, including patients with immunosuppression, patients who have a catheter placed for therapeutic installation of antimicrobial/chemotherapy agent, patients with sustained urinary tract trauma, and patients in need of permanent use of a catheter. Commenters stated that Medicare reimbursement does not cover the increased cost of antibiotic-coated catheters which have been shown to reduce the incidence of catheter infections. These same commenters asked CMS to change Medicare payment policy to encourage the application of proven existing technology. Commenters provided two potential examples of unintended consequences if this condition is to be implemented. First, the commenters believed that physicians and hospitals will increase urinalysis testing to identify urinary tract infections prior to admission. Second, the commenters suggested that physicians and hospitals will use more antibiotics to “clean” the urine of bacteria upon admission. *Response:*
                         CMS seeks to reduce the incidence of preventable catheter associated urinary tract infections by reducing unnecessary and inappropriate use of indwelling urinary catheters in hospitalized Medicare patients. There is widespread evidence that catheters may lead to an increased risk of infection if they are in place for several days. In addition, there are prevention guidelines to assist physicians in determining how long a urinary catheter should be left in place that can prevent catheter-associated urinary tract infections. Therefore, we believe that catheter-associated urinary tract infections are reasonably preventable by following well-established prevention guidelines, and we are selecting this condition. Concerning the request for the creation of a new code for “inflammatory reaction from indwelling catheter,” we recommend the commenter contact the CDC. The CDC is responsible for maintaining the diagnosis part of the ICD–9–CM codes. We encourage commenters to send specific requests for new or revised ICD–9–CM diagnosis codes to Donna Pickett, CDC, at 3311 Toledo Road, Room 2402, Hyattsville, MD 20782, or via e-mail to 
                        *dfp4@cdc.gov.*
                         Additional information on requesting a new ICD–9–CM diagnosis code may be obtained from the Web site at: 
                        *http://www.cdc.gov/​nchs/​icd9.htm.* The commenters are correct that prevention guidelines for avoiding catheter-associated urinary tract infections are scheduled to be updated by CDC's Healthcare Infection Control Practices Committee (HICPAC). The National Quality Forum (NQF) is currently working to update hospital-acquired infection definitions. The effort currently underway will update prevention guidelines that have been in place since 1981. We believe the ongoing effort to update prevention guidelines for avoiding catheter-associated urinary tract infections provides further evidence that this condition is a strong candidate to be selected because of how well it meets the statutory criteria. We appreciate the many comments urging CMS to consider implementing exceptions for catheter-associated urinary tract infections when it is a hospital-acquired condition but is not preventable. We will carefully consider these suggestions as we plan for the implementation of this new requirement in FY 2009. With respect to the comment about encouraging the use antibiotic-coated catheters, we continue to work in cooperation with device companies and other associations to ensure that Medicare beneficiaries receive the most current therapeutic modalities. We annually update Medicare inpatient hospital payment rates to reflect hospital resource use for the latest medical technology and other innovations in how care is delivered. We do not agree there will be significant unintended consequences of selecting catheter-associated urinary tract infections. As stated earlier, we believe this condition is generally avoidable if medical professionals carefully follow longstanding prevention guidelines. We believe hospitals, physicians, and others that treat Medicare patients will focus on taking medically appropriate steps to determine the length of time a catheter is in place. We do not believe it is inappropriate to perform a urinalysis upon admission to the hospital if clinically indicated. We would not 
                        ( print page 47205)
                        consider doing so an unintended consequence. We appreciate all the public comments on this condition, and have considered all of these points of view. We believe this condition meets the criteria of the DRA: There are unique codes that identify catheter-associated urinary tract infections that are currently considered to be a CC under the MS–DRGs;
                    Prevention guidelines currently exist and will be updated prior to the October 1, 2008 implementation date of this provision; and
                    As shown above, catheter-associated urinary tract infections are high cost/high volume conditions. Therefore, in this final rule with comment period, we are selecting the condition of catheter-associated urinary tract infections to be subject to the provision beginning October 1, 2008. (b) Pressure Ulcers Coding—Pressure ulcers are also referred to as decubitus ulcers. The following codes clearly identify pressure ulcers. 707.00 (Decubitus ulcer, unspecified site)
                    707.01 (Decubitus ulcer, elbow)
                    707.02 (Decubitus ulcer, upper back)
                    707.03 (Decubitus ulcer, lower back)
                    707.04 (Decubitus ulcer, hip)
                    707.05 (Decubitus ulcer, buttock)
                    707.06 (Decubitus ulcer, ankle)
                    707.07 (Decubitus ulcer, heel)
                    707.09 (Decubitus ulcer, other site) Burden (High Cost/High Volume)—This condition is both high-cost and high volume. For FY 2006, there were 322,946 reported cases of Medicare patients who had a pressure ulcer as a secondary diagnosis. These cases had average charges for the hospital stay of $40,381. Prevention guidelines—Prevention guidelines can be found at the following Web sites: 
                        *http://www.npuap.org/​positn1.html*
                         and 
                        *http://www.ncbi.nlm.nih.gov/​books/​bv.fcgi?​rid=​hstat2.chapter.4409.* CC—Decubitus ulcer codes are classified as CCs under the CMS DRGs. Codes 707.00, 707.01, and 707.09 are CCs under the MS–DRGs. Codes 707.02 through 707.07 are considered MCCs under the MS–DRGs. As discussed earlier, MCCs result in even larger payments than CCs. Considerations—Pressure ulcers are an important hospital acquired complication. Prevention guidelines exist (non-CDC) and can be implemented by hospitals. Clinicians may state that some pressure ulcers present on admission cannot be identified (skin is not yet broken (Stage I) but damage to tissue is already done and skin will eventually break down). However, by selecting this condition, we would provide hospitals the incentive to perform careful examination of the skin of patients on admission to identify decubitus ulcers. If the condition is present on admission, the provision will not apply. In the proposed rule, we proposed to include pressure ulcers as one of our initial hospital-acquired conditions. This condition can be clearly identified through ICD–9–CM codes. These codes are classified as a CC under the CMS DRGs and as a CC or MCC under the MS–DRGs. Pressure ulcers meet the burden criteria because they are both high cost and high frequency cases. There are clear prevention guidelines. While there is some question as to whether all cases with developing pressure ulcers can be identified on admission, we believe the selection of this condition will result in a closer examination of the patient's skin on admission and better quality of care. We welcomed comments on the proposed inclusion of this condition. *Comment:*
                         A majority of commenters supported the intent of selecting the condition of pressure ulcers, but had concerns about how the provision would be implemented in practice. A large majority of commenters believed hospitals will more carefully examine the skin of patients if this condition is selected. However, many commenters cited difficulty in detecting stage 1 pressure ulcers on admission, particularly in certain patient populations. The commenters cited the Guidance to Surveyors for Long-Term Care Facilities (CMS Manual System Pub. 100–07, State Operations Provider Certification issued November 2004, page 5), noting CMS” previous acknowledgment that some pressure ulcers are “unavoidable.” The commenters cited evidence of an increased risk of pressure ulcer reoccurrence after a patient has had at least one stage IV ulcer. The commenters expressed concern about how this condition will be coded upon admission. The commenters also suggested that present-on-admission coding of pressure ulcers will rely solely on physicians' notes and diagnoses, according to Medicare coding rules. The commenters were concerned that the current ICD–9–CM codes for pressure ulcers are not precise enough to delineate differences in wound depth, which is an important factor for determining the severity of an ulcer. The commenters recommended that CMS supplement ICD–9–CM codes for pressure ulcers with severity adjustments for complications and comorbidities that are present on admission. Because patients with pressure ulcers often have other complicating conditions, the commenters stated that it is unlikely that pressure ulcers would potentially be the only secondary diagnosis that would change the DRG assignment from one without a CC to one with a CC. Lastly, the commenters noted that accurate identification of a pressure ulcer requires the education and expertise of a trained physician. The commenters suggested that CMS should exclude patients enrolled in the Medicare hospice benefit and patients with certain diagnoses that make them more highly prone to pressure ulcers such as hemiplegia, quadriplegia, wasting syndrome, with advanced AIDS and/or protein malnutrition associated with a variety of serious end stage illnesses. *Response:*
                         We appreciate the overwhelming public support for the intent of selecting this condition, provided we can address the concerns raised in the public comments. We acknowledge the commenters' concern that CMS previously stated some pressure ulcers are “unavoidable.” However, we believe improved screening to identify pressure ulcers upon admission for inpatient care will increase the quality of care. By screening patients entering the hospital for pressure ulcers, the ulcers will be discovered earlier and improve treatment of this preventable condition. We agree that the POA coding of pressure ulcers will rely on the attending physician, who has primary responsibility for documenting and diagnosing a patient's clinical conditions. Pressure ulcers that are identified through screening upon admission that are documented properly will continue to be assigned to a higher paying DRG. With respect to the comment about patients with pressure ulcers having other complications and comorbidities, we note that many of the new MS–DRGs are subdivided into two or more severity levels. We will continue to evaluate the need for additional severity levels within base MS–DRGs. On the specific issue of the MS–DRGs that include pressure ulcers, we note that these MS–DRGs are already divided into three severity levels as follows: MS–DRG 573 (Skin Graft /or Debridement for Skin Ulcer or Cellulitis with MCC)( print page 47206)
                    MS–DRG 574 (Skin Graft /or Debridement for Skin Ulcer or Cellulitis with CC)
                    MS–DRG 575 (Skin Graft /or Debridement for Skin Ulcer or Cellulitis without CC/MCC) We are aware that many patients with pressure ulcers may also have other comorbid and complicating conditions that will continue to assign the patient to a higher paying DRG. We do not believe this fact should preclude physicians and hospitals from screening patients for pressure ulcers upon admission. As we indicated in the proposed rule (72 FR 24726), we believe only a minority of cases will have one of the selected conditions as the only CC or MCC present on the claim. However, we believe it will continue to lead to improvements in the quality of care. We believe the selection of this condition will lead the physician and hospital to perform a proper skin exam upon admission, leading to earlier identification and treatment of pressure ulcers. With respect to the comment that accurate identification of a pressure ulcer requires the education and expertise of a trained physician, we agree. Hospitals should be using properly educated and trained physicians to identify and treat pressure ulcers (as well as all other medical conditions). We appreciate all the public comment on this condition, and have considered all of these points of view. We believe the condition of pressure ulcers meets the criteria of the DRA: There are unique codes that identify pressure ulcers that are currently considered to be a CC or an MCC under the MS–DRGs;
                    Prevention guidelines to avoid pressure ulcers currently exist; and
                    As shown above, pressure ulcers are high-cost/high-volume conditions. Therefore, in this final rule with comment period, we are selecting the condition of pressure ulcers to be subject to the payment adjustment for hospital acquired conditions beginning October 1, 2008. We referred the matter concerning the need for additional, detailed ICD–9–CM codes to the CDC. We believe further specificity in the ICD–9–CM codes will aid in distinguishing early from late stage pressure ulcers prior to the implementation date of this provision on October 1, 2008. Serious Preventable Events Serious preventable events are events that should not occur in health care. The injury prevention community has developed information on serious preventable events. CMS reviewed the list of serious preventable events and identified those events for which there was an ICD–9–CM code that would assist in identifying them. We identified four types of serious preventable events to include in our evaluation. These include leaving an object in a patient; performing the wrong surgery (surgery on the wrong body part, wrong patient, or the wrong surgery); air embolism following surgery; and providing incompatible blood or blood products. Three of these serious preventable events have unique ICD–9–CM codes to identify them. There is not a clear and unique code for surgery performed on the wrong body part, wrong patient, or the wrong surgery. Each of these events is discussed separately. (c) Serious Preventable Event—Object Left in during Surgery Coding Retention of a foreign object in a patient after surgery is identified through ICD–9–CM code 998.4 (Foreign body accidentally left during a procedure). Burden (High Cost/High Volume)—For FY 2006, there were 764 cases reported of Medicare patients who had an object left in during surgery reported as a secondary diagnosis. The average charges for the hospital stay were $61,962. This is a rare event. Therefore, it is not high volume. However, an individual case will likely have high costs, given that the patient will need additional surgery to remove the foreign body. Potential adverse events stemming from the foreign body could further raise costs for an individual case. Prevention guidelines—There are widely accepted and clear guidelines for the prevention of this event. This event should not occur. Prevention guidelines for avoiding leaving objects in during surgery are located at the following Web site: 
                        *http://www.qualityindicators.ahrq.gov/​psi_​download.htm.* CC—This code is a CC under the CMS DRGs as well as under the MS DRGs. Considerations—There are no significant considerations for this condition. There is a unique ICD–9–CM code and wide agreement on the prevention guidelines. We proposed to include this condition as one of our initial hospital-acquired conditions. The cases can be clearly identified through an ICD–9–CM code. This code is a CC under both the CMS DRGs and the MS–DRGs. There are clear prevention guidelines. While the cases may not meet the high frequency criterion, they do meet the high-cost criterion. Individual cases can be high cost. In the proposed rule, we welcomed comments on including this condition as one of our initial hospital-acquired conditions. *Comment:*
                         A large majority of commenters supported CMS' efforts to identify the condition of “object left in surgery” as one that should not occur in the hospital setting. The commenters supported selecting this condition in this year's IPPS rule. The commenters applauded CMS for identifying a hospital acquired condition that has discrete ICD–9–CM codes and known methods of prevention. In addition, a few commenters noted that prevention guidelines for this condition are fully identified and endorsed by the NQF. MedPAC also complimented CMS for its efforts to identify “object left in surgery” and stated that CMS should not allow a case to be classified as a CC/MCC if this “never event” occurs during a patient's stay. The commenters urged CMS to make exceptions for objects deliberately left in place in surgery as opposed to accidental retained foreign objects. The commenters noted that a patient may return to the hospital months or years after an object was left in during surgery, and it is necessary to have POA codes to identify patients that return to a different hospital to have the object removed. All of the commenters recognized that this event can cause great harm to patients. *Response:*
                         We believe exceptions for this condition are not necessary. The code that identifies this event, 998.4 (Foreign body accidentally left during a procedure) specifically states that the object was accidentally left in during the surgery. This code would not be assigned if a device or implant was deliberately implanted into a patient. In addition, as stated earlier, we recognize the important role of the attending physician in designating whether or not the serious preventable event occurred during the current admission. We agree with the commenters that a patient may return to the hospital months or years after the surgery to have the foreign object removed. In this circumstance, the hospital would code the condition as present on admission and the provision would not apply. By documenting the event early, the correct POA code can be applied. We agree with the commenters that this serious preventable event should be selected as a hospital-acquired condition in this final rule with comment period. Therefore, we are including this condition in the list of those to be implemented in FY 2009. 
                        ( print page 47207) (d) Serious Preventable Event—Air Embolism Coding—An air embolism is identified through ICD–9–CM code 999.1 (Complications of medical care, NOS, air embolism). Burden (High Cost/High Volume)—This event is rare. For FY 2006, there were 45 reported cases of air embolism for Medicare patients. The average charges for the hospital stay were $66,007. Prevention guidelines—there are clear prevention guidelines for air embolisms. This event should not occur. Serious preventable event guidelines can be found at the following Web site: 
                        *http://www.qualityindicators.ahrq.gov/​psi_​download.htm.* CC—This code is a CC under the CMS DRGs and is an MCC under the MS–DRGs. Considerations—There are no significant considerations for this condition. There is a unique ICD–9–CM code and wide agreement on the prevention guidelines. In addition, as stated earlier, the condition is a CC under the CMS DRGs and an MCC under the MS–DRGs. While the condition is rare, it does meet the cost burden criterion because individual cases can be expensive. Therefore, air embolism is a high-cost condition because average charges per case are high. In the proposed rule, we welcomed comments on the proposal to include this condition. *Comment:*
                         A large number of commenters supported CMS' efforts to select this condition as one that should not occur in the hospital setting. The commenters considered this an appropriate condition to include for the final rule. The commenters applauded CMS for identifying a hospital acquired condition that has discrete ICD–9–CM codes and known methods of prevention. In addition, the commenters noted that prevention guidelines for this condition are fully identified and endorsed by the NQF. MedPAC also complimented CMS for its efforts to identify “air embolism” and stated that CMS should not allow a case to be classified as a CC/MCC if this “never event” occurs during a patient's stay. The commenters urged CMS to make exceptions for situations when air embolism is technically unavoidable because of a special surgical procedure. All of the commenters recognized that this event can cause great harm to patients. *Response:*
                         We appreciate the support for the selection of this condition. We also welcome specific recommendations that would clearly define an appropriate exception to this condition, including any appropriate ICD–9–CM diagnosis and procedure codes which the commenter believes clearly define such an occurrence and the justification for an exception. At this point, we do not believe such an exception is necessary. We agree with commenters that this serious preventable event should be included in the FY 2008 final rule. Therefore, we are including the condition of air embolism in the list of those to be implemented in FY 2009. (e) Serious Preventable Event—Blood Incompatibility Coding—Delivering ABO-incompatible blood or blood products is identified by ICM–9–CM code 999.6 (Complications of medical care, NOS, ABO incompatibility reaction). Burden (High Cost/High Volume)—This event is rare. Therefore, it is not high volume. For FY 2006, there were 33 reported cases of blood incompatibility among Medicare patients, with average charges of $46,492 for the hospital stay. Therefore, individual cases have high costs. Prevention guidelines—There are prevention guidelines for avoiding the delivery of incompatible blood or blood products. The event should not occur. Serious preventable event guidelines can be found at the following Web site: 
                        *http://www.qualityindicators.ahrq.gov/​psi_​download.htm* CC—This code is a CC under the CMS DRGs as well as the MS–DRGs. Considerations—There are no significant considerations for this condition. There is a unique ICD–9–CM code which is classified as a CC under the CMS DRGs as well as the MS–DRGs. There is wide agreement on the prevention guidelines. While this may not be a high-volume condition, average charges per case are high. Therefore, we believe this condition is a high-cost condition and, therefore, meets our burden criterion. We proposed to include this condition as one of our initial hospital acquired conditions. *Comment:*
                         A large number of commenters supported CMS' efforts to identify “blood incompatibility” as one condition that should not occur in the hospital setting. The commenters considered this an appropriate condition to include for FY 2009. The commenters applauded CMS for identifying a hospital acquired condition that has discrete ICD–9–CM codes and known methods of prevention. In addition, the commenters noted that prevention guidelines for this condition are fully identified and endorsed by the NQF. MedPAC also complimented CMS for its efforts to identify “blood incompatibility” and stated that CMS should not allow a case to be classified as a CC/MCC if this “never event” occurs during a patient's stay. The commenters urged CMS to make exceptions for situations when blood incompatibility is technically unavoidable in emergencies when patients deliberately receive unmatched blood. All of the commenters recognized that this event can cause great harm to patients. *Response:*
                         As suggested by commenters, hospitals should not be transfusing incompatible blood. The condition meets the criteria for being selected. It is a potential hospital acquired condition that has discrete ICD–9–CM codes and known methods of prevention. Prevention guidelines for this condition are fully identified and endorsed by the NQF. We acknowledge that there may a rare emergency where a hospital does not have compatible blood available for transfusion. We welcome specific recommendations that would define circumstances where blood incompatibility is unavoidable, including any appropriate ICD–9–CM diagnosis and procedure codes, which the commenters believe clearly define such an occurrence. If providers can provide such a clinical scenario that can be identified by existing or new ICD–9–CM codes, we will consider excluding this situation from the provision. We agree with the commenters that this serious preventable event should be included in the FY 2008 final rule. Therefore, we are including the condition of blood incompatibility in the list of those to be implemented in FY 2009. (f) Staphylococcus Aureus Bloodstream Infection/Septicemia Coding—ICD–9–CM Code 038.11 (Staphylococcus aureus septicemia) identifies this condition. However, the codes selected to identify septicemia are somewhat complex. The following ICD–9–CM codes may also be reported to identify septicemia: 995.91 (Sepsis) and 995.92 (Severe sepsis). These codes are reported as secondary codes and further define cases with septicemia.
                    998.59 (Other postoperative infections). This code includes septicemia that develops postoperatively.
                    999.3 (Other infection). This code includes but is not limited to sepsis/septicemia resulting from infusion, injection, transfusion, and vaccination (ventilator-associated pneumonia is also included here).( print page 47208) Burden (High Cost/High Volume)—CDC reports that there are 290,000 cases of staphylococcus aureus infection annually in hospitalized patients of which approximately 25 percent are bloodstream infections or sepsis. For FY 2006, there were 29,500 cases of Medicare patients who had staphylococcus aureus infection reported as a secondary diagnosis. The average charges for the hospital stay were $82,678. Inpatient staphylococcus aureus result in an estimated 2.7 million days in excess length of stay, $9.5 billion in excess charges, and approximately 12,000 inpatient deaths per year. Prevention guidelines—CDC guidelines are located at the following Web site: 
                        *http://www.cdc.gov/​ncidod/​dhqp/​gl_​intravascular.html.* CC—Codes 038.11, 995.91, 998.59, and 999.3 are classified as CCs under the CMS DRGs and as MCCs under the MS–DRGs. Considerations—Preventive health care associated bloodstream infections/septicemia that are preventable are primarily those that are related to a central venous/vascular catheter, a surgical procedure (postoperative sepsis) or those that are secondary to another preventable infection (for example, sepsis due to catheter-associated urinary tract infection). Otherwise, physicians and other public health experts may argue whether septicemia is reasonably preventable. The septicemia may not be simply a hospital acquired infection. It may simply be a progression of an infection that occurred prior to admission. Furthermore, physicians cannot always tell whether the condition was hospital-acquired. We examined whether it might be better to limit the septicemia cases to a specific organism (for example, code 038.11 (Staphylococcus aureus septicemia)). CDC staff recommended that we focus on staphylococcus aureus septicemia because this condition is a significant public health issue. As stated earlier, there is a specific code for staphylococcus aureus septicemia, code 038.11. Therefore, the cases would be easy to identify. However, as stated earlier, while this type of septicemia is identified through code 038.11, coders may also provide sepsis code 995.91 or 995.92 to more fully describe the staphylococcus aureus septicemia. Codes 995.91 and 995.92 are reported as secondary codes and further define cases with septicemia. Codes 995.91 and 995.92 are CCs under the CMS DRGs and MCCs under the MS–DRGs. 998.59 (Other postoperative infections). This code includes septicemia that develops postoperatively.
                    999.3 (Other infection). This code includes but is not limited to sepsis/septicemia resulting from infusion, injection, transfusion, and vaccination (ventilator-associated pneumonia is also indexed here). To implement this condition as one of our initial ones, we would have to exclude the specific code for staphylococcus aureus septicemia, 038.11, and the additional septicemia codes, 995.91, 995.92, 998.59, and 999.3. We acknowledge that there are additional issues involved with the selection of this condition that may involve developing an exclusion list of conditions present on admission for which we would not apply a CC exclusion to staphylococcus aureus septicemia. For example, a patient may come into the hospital with a staphylococcus aureus infection such as pneumonia. The pneumonia might develop into staphylococcus aureus septicemia during the admission. It may be appropriate to consider excluding cases such as those of patients admitted with staphylococcus aureus pneumonia that subsequently develop staphylococcus aureus septicemia from the provision. In order to exclude cases that did not have a staphylococcus aureus infection prior to admission, we would have to develop a list of specific codes that identified all types of staphylococcus aureus infections such as code 482.41 (Pneumonia due to staphylococcus aureus). We likely would not apply the new provision to cases of staphylococcus aureus septicemia if a patient were admitted with staphylococcus aureus pneumonia. However, if the patient had other types of infections, not classified as being staphylococcus aureus, and then developed staphylococcus aureus septicemia during the admission, we would apply the provision and exclude the staphylococcus aureus septicemia as a CC. We were not able to identify any other specific ICD–9–CM codes that identify specific infections as being due to staphylococcus aureus. Other types of infections, such as urinary tract infections, would require the reporting of an additional code, 041.11 (Staphylococcus aureus), to identify the staphylococcus aureus infection. This additional coding presents administrative issues because it will not always be clear which condition code 041.11 (Staphylococcus aureus) is describing. We do not believe it would be appropriate to make code 041.11, in combination with other codes, subject to the hospital-acquired conditions provision until we better understand how to address the administrative issues that would be associated with their selection. Therefore, we would exclude staphylococcus aureus septicemia cases with code 482.41 reported as being subject to the hospital-acquired conditions provision. Stated conversely, we would allow staphylococcus aureus septicemia to count as a CC if the patient was admitted with staphylococcus aureus pneumonia. We recognize that there may be other conditions which we should consider for this type of exclusion. We proposed to include staphylococcus aureus bloodstream infection/septicemia (code 038.11) as one of our initial hospital-acquired conditions. We also proposed to exclude codes 995.91, 998.59, and 999.3 from counting as an MCC/CC when they were reported with code 038.11. The condition can be clearly identified through ICD 9 CM codes that are classified as CC under the CMS DRGs and MCCs under the MS–DRGs. The condition meets our burden criterion by being both high cost and high volume. There are prevention guidelines which we acknowledge are subject to some debate among the medical community. We also acknowledge that we would have to exclude this condition if a patient were admitted with a staphylococcus aureus infection of a more limited location, such as pneumonia. In the proposed rule, we encouraged commenters to make suggestions on this issue and to recommend any other appropriate exclusion for staphylococcus aureus septicemia. We also encouraged comments on the appropriateness of selecting staphylococcus aureus septicemia as one of our proposed initial hospital acquired conditions. *Comment:*
                         Many commenters opposed CMS' proposed selection of this condition as part of the FY 2008 final rule. There were a minority of commenters who strongly supported the selection of this condition. These commenters noted the existence of technologies that allow the physician to determine the presence of Staphylococcus Aureus upon admission. Many more commenters stated that accurately identifying staphylococcus aureus septicemia on admission will be difficult, particularly in patients who may have a staphylococcus aureus infection in a limited location. Several commenters referenced the FY 2008 IPPS proposed rule, which stated “physicians cannot always tell whether the condition was hospital acquired.” Other commenters also noted that there is still debate 
                        ( print page 47209)
                        among physicians regarding the prevention guidelines for staphylococcus aureus septicemia. The proliferation of changes in coding guidelines presents coding problems for hospitals to accurately identify present-on-admission status according to some comments. Specifically, the commenters noted that codes to identify sepsis are very complex and have had recent changes. For instance, there is a code that currently includes septicemia that develops postoperatively, but does not clearly distinguish between intravascular and catheter-associated sources of septicemia. The commenters also suggested that additional coding may be necessary to accurately identify this condition in the many forms it often presents upon admission. Some commenters suggested that the addition of codes may create a challenge for coding staff to identify the correct code. A large majority of commenters urged CMS to narrow the category for staphylococcus aureus septicemia to include only patients for whom it is reasonably clear that the hospital was the source of the infection and that it could have been reasonably prevented. *Response:*
                         We appreciate the plethora of comments regarding staphylococcus aureus septicemia. The commenters were very insightful and presented the challenges of selecting this condition in the FY 2008 final rule. We agree that the recent proliferation of ICD–9–CM codes for this condition will make it difficult to code and could present an administrative burden on hospitals. In addition, we are sensitive to the difficulty of identifying when a disease has progressed to sepsis or septicemia. Given the course of progression to septicemia, it can be very difficult for a clinician to appropriately diagnose staphylococcus aureus septicemia as present on admission. While we acknowledge the many concerns raised by the commenters, we continue to believe that hospital acquired staphylococcus aureus septicemia remains a significant public health issue. We are aware of the continued need to prevent Staphylococcus Aureus septicemia in the hospital setting. Therefore, we plan to engage in a collaborative discussion with relevant experts to identify the circumstances when staphylococcus aureus septicemia is preventable. If we can identify when staphylococcus aureus septicemia is a reasonably preventable condition and have codes to distinguish those situations, we will consider this condition for future years. We appreciate the many comments and suggestions as we consider staphylococcus aureus septicemia for selection in the future, and look forward to receiving more public input to identify only instances when this condition is preventable. Therefore, we are not selecting this condition in this final rule with comment period. We plan to collaborate with the public on this important public health issue and continue to consider the condition for selection in the FY 2009 final rule. We encourage and welcome public comment to further evaluate this condition. (g) Ventilator Associated Pneumonia (VAP) and Other Types of Pneumonia Coding—Pneumonia is identified through the following codes: 073.0 (Ornithosis with pneumonia)
                    112.4 (Candidiasis of lung)
                    136.3 (Pneumocystosis)
                    480.0 (Pneumonia due to adenovirus)
                    480.1 (Pneumonia due to respiratory syncytial virus)
                    480.2 (Pneumonia due to parainfluenza virus)
                    480.3 (Pneumonia due to SARS-associated coronavirus)
                    480.8 (Pneumonia due to other virus not elsewhere classified)
                    480.9 (Viral pneumonia, unspecified)
                    481 (Pneumococcal pneumonia [Streptococcus pneumoniae pneumonia])
                    482.0 (Pneumonia due to Klebsiella pneumoniae)
                    482.1 (Pneumonia due to Pseudomonas)
                    482.2 (Pneumonia due to Hemophilus influenzae [H. influenzae])
                    482.30 (Pneumonia due to Streptococcus, unspecified)
                    482.31 (Pneumonia due to Streptococcus, Group A)
                    482.32 (Pneumonia due to Streptococcus, Group B)
                    482.39 (Pneumonia due to other Streptococcus)
                    482.40 (Pneumonia due to Staphylococcus, unspecified)
                    482.41 (Pneumonia due to Staphylococcus aureus)
                    482.49 (Other Staphylococcus pneumonia)
                    482.81 (Pneumonia due to Anaerobes)
                    482.82 (Pneumonia due to Escherichia coli [E. coli])
                    482.83 (Pneumonia due to other gram-negative bacteria)
                    482.84 (Pneumonia due to Legionnaires' disease)
                    482.89 (Pneumonia due to other specified bacteria)
                    482.9 (Bacterial pneumonia unspecified)
                    483.0 (Pneumonia due to Mycoplasma pneumoniae) There is not a unique code that identifies ventilator-associated pneumonia. The creation of a code for ventilator-associated pneumonia was discussed at the September 29, 2006 meeting of the ICD–9–CM Coordination and Maintenance Committee meeting. Many issues and concerns were raised at the meeting concerning the creation of this proposed new code. It has been difficult to define ventilator-associated pneumonia. We plan to continue working closely with the CDC to develop a code that can accurately describe this condition for implementation in FY 2009. CDC will address the creation of a unique code for this condition at the September 28–29, 2007 ICD–9–CM Coordination and Maintenance Committee meeting. While we list 27 pneumonia codes above, our clinical advisors do not believe that all of the codes mentioned could possibly be associated with ventilator-associated pneumonia. Our clinical advisors specifically question whether the following codes would ever represent cases of ventilator-associated pneumonia: 073.0, 480.0, 480.1, 480.2, 480.3, 480.8, 480.9, and 483.0. Therefore, we have a range of pneumonia codes, all of which may not represent cases that could involve ventilator-associated pneumonia. In addition, we do not have a specific code that uniquely identifies cases of ventilator-associated pneumonia. Burden (High Cost/High Volume)—CDC reports that there are 250,205 ventilator-associated pneumonias per year. Because there is not a unique ICD–9–CM code for ventilator-associated pneumonia, there is not accurate data for FY 2006 on the number of Medicare patients who had this condition as a secondary diagnosis. However, we did examine data for FY 2006 on the number of Medicare patients who listed pneumonia as a secondary diagnosis. There were 92,586 cases with a secondary diagnosis of pneumonia, with average charges of $88,781. According to the journal 
                        *Critical Care Medicine*
                        , patients with ventilator-associated pneumonia have statistically significantly longer intensive care lengths of stay (mean = 6.10 days) than those who do not (mean = 5.32–6.87 days). In addition, patients who develop ventilator-associated pneumonia incur, on average, greater than or equal to $10,019 in additional hospital costs compared to those who do not.[23]( print page 47210)
                        Therefore, we believe that this is a high-volume condition. Prevention guidelines—Prevention guidelines are located at the following Web site: 
                        *http://www.cdc.gov/​ncidod/​dhqp/​gl_​hcpneumonia.html.*
                         However, it is not clear how effective these guidelines are in preventing pneumonia. Ventilator-associated pneumonia may be particularly difficult to prevent. CC—All of the pneumonia codes listed above are CCs under the CMS DRGs and under the MS–DRGs, except for the following pneumonia codes which are non-CCs: 073.0, 480.0, 480.1, 480.2, 480.3, 480.8, 480.9, 483.0. However, as mentioned earlier, there is not a unique ICD–9–CM code for ventilator-associated pneumonia. Therefore, this condition does not currently meet the statutory criteria for being selected. Considerations—Hospital-acquired pneumonias, and specifically ventilator-associated pneumonias, are an important problem. However, based on our work with the medical community to develop specific codes for this condition, we have learned that it is difficult to define what constitutes ventilator-associated pneumonia. Although prevention guidelines exist, it is not clear how effective these are in preventing pneumonia. Clinicians cannot always tell which pneumonias are acquired in a hospital. In addition, as mentioned above, there is not a unique code that identifies ventilator-associated pneumonia. There are a number of codes that capture a range of pneumonia cases. It is not possible to specifically identify if these pneumonia cases are ventilator-associated or arose from other sources. Because we cannot identify cases with ventilator-associated pneumonia and there are questions about its preventability, we did not propose to select this condition as one of our initial hospital-acquired conditions. However, we welcomed public comments on how to create an ICD–9–CM code that identifies ventilator-associated pneumonia, and we encouraged participation in our September 28–29, 2007 ICD–9–CM Coordination and Maintenance Committee meeting where this issue will be discussed. We indicated that we would reevaluate the selection of this condition in FY 2009. *Comment:*
                         Some commenters urged CMS to select ventilator-associated pneumonia at this time. Most commenters recommended that CMS delay selecting this condition until a unique code is established. Some commenters submitted an evidence-based peer-reviewed American Association for Respiratory Care (AARC) Clinical Practice Guideline (CPG) on strategies that should be disseminated and available to hospitals for the prevention of ventilator associated pneumonia. The CPG can be found at 
                        *http://www.rcjournal.com/​cpgs/​09.03.0869.html.*
                         Concurrently, the AARC acknowledges that more research needs to be done in this area. A majority of commenters believed this condition can be reasonably prevented through evidence-based medicine guidelines. These commenters noted that current unique codes for this condition are absent. These commenters urged CMS to consider the development of an explicit ICD–9–CM code for this ventilator-associated pneumonia and to select it at a later date. *Response:*
                         At the time of publication of this final rule with comment period, there is not a code associated with ventilator-associated pneumonia. Therefore, this condition does not currently meet the statutory criteria for being selected. However, the ICD–9–CM Coordination and Maintenance Committee will meet September 27–28, 2007, to discuss the creation of a unique ICD–9–CM code for this condition. Further information of the Committee's activities on diagnosis code issues can be found at the Web site: 
                        *http://www.cdc.gov/​nchs/​icd9.htm.*
                         We believe that once this condition has a unique code, it should be further considered for selection beginning in FY 2009. We believe that ventilator-associated pneumonia meets some of the criteria for being selected. There are guidelines for prevention of ventilator-associated pneumonia within CDC evidence based guidelines for healthcare associated pneumonia. More information can be found at: 
                        *http://www.cdc.gov/​ncidod/​dhqp/​gl_​hcpneumonia.html.*
                         Furthermore, we are aware that the American Thoracic Society and the Infectious Disease Society of America collaborated to produce guidelines on the prevention of ventilator-associated pneumonia. As indicated above, most pneumonias are CCs. Therefore, it is reasonable to believe that ventilator-associated pneumonia will also be classified as a CC once a new code is created to identify it. At that time, we can further consider whether the condition is reasonably preventable and should be subject to this provision. We appreciate all the public comment on this condition, and considered all of the respondents' point of view. While we acknowledge the clinical challenge of clearly identifying ventilator-associated pneumonia, we believe that once this condition has a unique ICD–9–CM code, coupled with well-known prevention guidelines that are the result of evidence-based medicine, we will give strong consideration for selecting this condition for FY 2009, and including it in the FY 2009 IPPS proposed rule. (h) Vascular Catheter-Associated Infections Coding—The proposed rule noted that the code used to identify vascular catheter associated infections is ICD–9–CM code 996.62 (Infection due to other vascular device, implant, and graft). This code includes infections associated with all vascular devices, implants, and grafts. It does not uniquely identify vascular catheter associated infections. Therefore, there was not a unique ICD–9–CM code for this infection at the time of the proposed rule. CDC and CMS staff requested that the ICD–9–CM Coordination and Maintenance Committee discuss the creation of a unique ICD–9–CM code for vascular catheter associated infections because the issue is important for public health. The proposal to create a new ICD–9–CM was discussed at the March 22 23, 2007 meeting of the ICD–9–CM Coordination and Maintenance Committee. A summary of this meeting can be found at: 
                        *http://www.cdc.gov/​nchs/​icd9.htm.*
                         In the proposed rule, we indicated that coders would have to assign code 996.62 plus an additional code for the infection such as septicemia to identify vascular catheter-associated infections. Therefore, a list of specific infection codes would have to be developed to go along with code 996.62 if CDC did not create a code for vascular catheter-associated infections. If the vascular catheter-associated infection was hospital-acquired, the DRG logic would have to be modified so that neither the code for the vascular catheter associated infection along with the specific infection code would count as a CC. However, even if these actions were taken, we were concerned that code 996.62 is not specific to vascular catheter-associated infections. Burden (High Cost/High Volume)—CDC reports that there are 248,678 central line associated bloodstream infections per year. It appears to be both high cost and high volume. However, we were not able to identify Medicare data on these cases because there is no existing unique ICD–9–CM code. Prevention guidelines—CDC guidelines are located at the following Web site: 
                        *http://www.cdc.gov/​ncidod/​dhqp/​gl_​intravascular.html.* CC—Code 996.62 is a CC under the CMS DRGs and the MS–DRGs. However, as stated earlier, this code is broader than vascular catheter associated infections. Therefore, at the time of the 
                        ( print page 47211)
                        proposed rule, there was not a unique ICD–9–CM code to identify the condition, and it did not meet the statutory criteria to be selected. However, the proposed rule indicated that we will be seeking to create a code(s) to identify this condition and may select it as a condition under the provision beginning in FY 2009. Considerations—There was not yet a unique ICD–9–CM code to identify this condition at the time of the proposed rule. In the proposed rule, we indicated that if a code were created prior to October 1, 2007, we would be able to specifically identify these cases. Some patients require long-term indwelling catheters, which are more prone to infections. Ideally catheters should be changed at certain time intervals. However, circumstances might prevent such practice (for example, the patient has a bleeding diathesis). In addition, a patient may acquire an infection from another source which can colonize the catheter. As mentioned earlier, coders would also assign an additional code for the infection, such as septicemia. Therefore, a list of specific infection codes would have to be developed to go along with code 996.62. If the vascular catheter-associated infection was hospital-acquired, the DRG logic would have to be modified so that neither the code for the vascular catheter-associated infection along with the specific infection code would count as a CC. Without a specific code for infections due to a catheter, it would be difficult to identify these patients. Given the current lack of an ICD–9–CM code for this condition, we did not propose to include it as one of our initial hospital-acquired conditions. However, we believed it showed merit for inclusion in future lists of hospital acquired conditions once we had resolved the coding issues and were able to better identify the condition in the Medicare data. We indicated that we would reevaluate the selection of this condition in FY 2009. We encouraged comments on this condition which was identified as an important public health issue by several organizations that provided recommendations on hospital-acquired conditions. We indicated that we were particularly interested in receiving comments on how we should handle additional associated infections that might develop along with the vascular catheter-associated infection. *Comment:*
                         Some commenters stated there was not a unique ICD–9–CM code for vascular catheter-associated infection. Therefore, the condition does not meet the criteria for being selected. These commenters requested that CMS consider creating an explicit code for catheter-associated infections and selecting the condition at that time. One commenter recommended that CMS examine selecting vascular-catheter associated infections and identify the condition using the CPT codes for insertion of a central venous catheter. Other commenters recommend selecting the condition and rely on the use of specific codes for the insertion of catheters to supplement the existing code 996.62 (Infection and inflammatory reaction due to other vascular device, implant, and graft). The commenters believed that this alternative approach may reduce the need to rely on a unique code for catheter associated blood stream infection (CA–BSI). Some commenters noted that it is possible to screen for bloodstream infections upon admission. Other commenters suggested that CMS exempt vascular surgery, implantable device codes, and other obvious sources of existing conditions that cause blood stream infection prior to catheter placement. Finally, the commenters suggested that CMS exclude long-term catheter insertions such as the tunneled central venous catheter using codes 365.57 through 365.66. *Response:*
                         Since the publication of the FY 2008 IPPS proposed rule, CDC has created a new code for vascular catheter-associated infection. The new code 999.31, (Infection due to central venous catheter) will become effective on October 1, 2007. It is available for public viewing along with other new codes listed on the CMS Web site at: 
                        *http://www.cms.hhs.gov/​ICD9ProviderDiagnosticCodes/​Downloads/​new_​diagnosis_​codes_​2007.pdf.*
                         This new code will address commenters concerns regarding coding for this condition. We appreciate all the public comment on this condition, and have considered all of these points of view. For the proposed rule, our only barrier to selecting vascular catheter-associated infections was the absence of a unique code to identify the condition. As CDC has since created a code to identify vascular catheter-associated infections, we believe the condition meets the criteria for being selected: There are unique codes that identify vascular catheter-associated infections as a CC under the MS–DRGs;
                    Prevention guidelines exist to avoid vascular catheter-associated infections; and
                    As shown above, vascular catheter-associated infections are high-volume conditions. At this time, we have not decided whether there are specific clinical situations where a vascular catheter associated infection would not be considered preventable. We will consider exceptions to the policy in the circumstances provided in the public comments. We will consider these suggestions before the provision becomes effective in FY 2009. (i) Clostridium Difficile-Associated Disease (CDAD) Coding—This condition is identified by ICD–9–CM code 008.45 (Clostridium difficile). Burden (High Cost/High Volume)—CDC reports that there are 178,000 cases per year in U.S. hospitals. For FY 2006, there were 110,761 reported cases of Medicare patients with CDAD as a secondary diagnosis, with average charges for the hospital stay of $52,464. Therefore, this is a high-cost and high-volume condition. Prevention guidelines—Prevention guidelines are not available. Therefore, we do not believe this condition can reasonably be prevented through the application of evidence-based guidelines. CC—Code 008.45 is a CC under the CMS DRGs and the MS–DRGs. Considerations—CDAD is an emerging problem with significant public health importance. If found early CDAD cases can easily be treated. However, cases not diagnosed early can be expensive and difficult to treat. CDAD occurs in patients on a variety of antibiotic regiments, many of which are unavoidable, and therefore preventability is an issue. We did not propose to include CDAD as one of our initial hospital acquired conditions at this time, given the lack of prevention guidelines. We welcomed public comments on CDAD, specifically on its preventability and whether there is potential to develop guidelines to identify it early in the disease process and/or diminish its incidence. We indicated that we would reevaluate the selection of this condition in FY 2009. *Comment:*
                         Commenters noted the current clinical debate surrounding this condition reveals that it is very difficult to prevent in all cases; it can be prevalent within the hospital setting. In addition, some commenters noted this condition may be caused by the treatment protocol prescribed for a principal diagnosis; it can also occur if the patient is immune-compromised. Finally, some commenters stated that a significant percentage of CDAD is unavoidable, and it is difficult to distinguish community acquired from hospital acquired CDAD. Commenters 
                        ( print page 47212)
                        also urged CMS to delay selection of this condition because there is a lack of unique codes, complication codes, and guidelines for prevention of this condition. *Response:*
                         This condition meets two of the three statutory criteria. There is an ICD–9–CM code for CDAD. The code is 008.45 (Clostridium difficile). Therefore, the condition can be clearly identified through the use of ICD–9–CM codes. Code 008.45 is also a CC under the CMS DRGs and the MS–DRGs. Also, as shown above, CDAD occurs with significant frequency in the Medicare population and is a high cost condition. However, prevention guidelines for this condition are currently unavailable. As suggested by the commenters, leading clinicians believe this condition may not be reasonably preventable because it can occur as a result of broad spectrum antibiotic administration, which is often unavoidable. Although we agree with these commenters, we are also aware of the public interest in this issue and will continue to be interested in selecting this condition if treatment protocols evolve to the point where CDAD is a preventable condition and prevention guidelines are developed. We are not selecting this condition for implementation in the FY 2008 final rule. It does not currently meet the statutory guidelines for being selected because there are no prevention guidelines. Nevertheless, we will consider adopting this condition in the future if prevention guidelines to avoid CDAD are developed. (j) Methicillin-Resistant Staphylococcus Aureus (MRSA) Coding—MRSA is identified by ICD–9–CM code V09.0 (Infection with microorganisms resistant to penicillins). One would also assign a code(s) to describe the exact nature of the infection. Burden (High Cost/High Volume)—For FY 2006, there were 95,103 reported cases of Medicare patients who had MRSA as a secondary diagnosis. The average charges for these cases were $31,088. This condition is a high-cost and high-volume infection. MRSA has become a very common bacterium occurring both in and outside of the hospital environment. Prevention guidelines—CDC guidelines are located at the following Web site: 
                        *http://www.cdc.gov/​ncidod/​dhqp/​pdf/​ar/​mdroGuideline2006.pdf*. CC—Code V09.0 is not a CC under the CMS DRGs and the MS–DRGs. The specific infection would be identified in a code describing the exact nature of the infection, which may be a CC. Considerations—As stated earlier, preventability may be hard to ascertain since the bacteria have become so common both inside and outside the hospital. There are also considerations in identifying MRSA infections because hospitals would report the code for MRSA along with additional codes that would describe the exact nature of the infection. We would have to develop a list of specific infections that could be the result of MRSA. We did not propose to include MRSA as one of our initial hospital-acquired conditions because the condition is not a CC. We recognize that associated conditions may be a CC. In the proposed rule, we welcomed comments on the proposal not to include this condition. Should there be support for including this condition, we requested recommendations on what codes might be selected to identify the specific types of infections associated with MRSA. *Comment:*
                         Commenters displayed a high level of interest in this condition, not only as a hospital-acquired condition, but also as a broader public health problem that continues to affect Medicare beneficiaries. Commenters noted that MRSA is both high volume and high cost, referring to the language in the proposed rule. For this reason, many commenters believed this condition should be given a unique ICD–9–CM code to be tracked in FY 2008. Furthermore, the commenters urged CMS to include it on the list of conditions for FY 2009 for which reimbursement may be withheld. Medical device companies that provide products to screen for MRSA commented in support of selecting the condition. However, a large number of commenters had reservations about selecting this condition because MRSA is not a CC or MCC under the new MS–DRGs. Most commenters acknowledged the clear prevention guidelines for MRSA. However, they contend that there remains debate on whether MRSA is reasonably preventable. These commenters indicated MRSA is ubiquitous and may be colonizing in so many potential patients that it is difficult to determine if it is acquired in a hospital. The commenters also noted current literature reveals a strain of community acquired MRSA that may be difficult to detect upon admission to the hospital. *Response:*
                         We acknowledge the strong public health interest in reducing the number of MRSA related infections. However, MRSA does not currently meet the statutory criteria to be selected. Although there is an ICD–9–CM code to identify MRSA and CDC has prevention guidelines to reduce its incidence, we do not believe that there is a consensus among public health experts that MRSA is preventable. The public comments and the literature on this condition reveal a vigorous debate over whether MRSA is really community-acquired rather than hospital acquired given the significant potential number of patients that can be colonized with MRSA prior to admission. While this concern may be possible to address through screening patients for MRSA upon admission, the condition is not currently identified as a CC or MCC under the MS–DRGs. If present as a secondary diagnosis, the presence of MRSA alone does not lead to higher Medicare payment. Our data do not suggest that presence of MRSA alone will lead to higher hospital costs that would justify classifying it as a CC or MCC. Therefore, as the condition is not an MCC or CC, it does not meet the statutory criteria for being selected at this time. Although we are not selecting MRSA at this time, we believe it is a precursor to several other conditions that we have selected. MRSA may be a precursor to catheter associated urinary tract infections, vascular catheter-associated infections, and mediastinitis after coronary artery bypass graft (CABG) surgery—a surgical site infection that we have selected and is discussed in more detail below. (k) Surgical Site Infections Coding—Surgical site infections are identified by ICD–9–CM code 998.59 (Other postoperative infection). The code does not tell the exact location or nature of the postoperative wound infection. The code includes wound infections and additional types of postoperative infections such as septicemia. The coding guidelines instruct the coder to add an additional code to identify the type of infection. To implement this condition we would have to remove both code 998.59 and the specific infection from counting as a CC if they occurred after the admission. We would have to develop an extensive list of possible infections that would be subject to the provision. We may also need to recommend the creation of a series of new ICD–9–CM codes to identify various types of surgical site infections, should this condition merit inclusion among those that are subject to the proposed hospital-acquired conditions provision. Burden (High Cost/High Volume)—CDC reports that there are 290,485 surgical site infections each year. As stated earlier, there is not a unique code for surgical site infection. Therefore, we examined Medicare data on patients 
                        ( print page 47213)
                        with any type of postoperative infection. For FY 2006, there were 38,763 reported cases of Medicare patients who had a postoperative infection. These patients had average charges for the hospital stay of $79,504. We are unable to determine how many of these patients had surgical site infections. Prevention guidelines—CDC guidelines are available at the following Web site: 
                        *http://www.cdc.gov/​ncidod/​dhqp/​gl_​surgicalsite.html.* CC—Code 998.59 is a CC under the CMS DRGs and the MS–DRGs. Considerations—As mentioned earlier, code 998.59 is not exclusive to surgical site infections. It includes other types of postoperative infections. Therefore, code 998.59 does not currently meet the statutory criteria for being subject to the provision because it does not uniquely identify surgical site infections. To identify surgical site infections, we would need new codes that provide more detail about the type of postoperative infection as well as the site of the infection. In addition, one would report both code 998.59 as well a more specific code for the specific type of infection, making implementation difficult. While there are prevention guidelines, it is not always possible to identify the specific types of surgical infections that are preventable. Therefore, we did not propose to select surgical site infections as one of our proposed hospital-acquired conditions at this time. However, we welcomed public comments on whether we can develop criteria and codes to identify preventable surgical site infections that would assist us in reducing their incidence. We indicated that we were exploring ways to identify surgical site infections and would reevaluate this condition in FY 2009. *Comment:*
                         A number of commenters specifically requested that CMS consider selecting mediastinitis after coronary artery bypass graft (CABG) surgery. Commenters noted that mediastinitis is a postoperative infection that can arise after CABG. Commenters stated that the condition meets the criteria set forth in the DRA. According to the comments, mediastinitis is a frequently occurring and costly infection that will develop after CABG surgery. The commenters noted that there are unique codes to identify mediastinitis and prevention guidelines that are backed by evidence based medicine have been developed. *Response:*
                         We agree that mediastinitis meets the statutory criteria for being selected. Coding—There are unique ICD–9–CM codes to identify the condition. The ICD–9–CM code for mediastinitis is 519.2. Burden (High Cost/High Volume)—We examined Medicare data on patients who received a CABG operation (with codes 36.10–36.19) and also had mediastinitis (ICD–9–CM code 519.2) as a secondary diagnosis. For FY 2006, there were 108 reported cases of Medicare patients who had this postoperative infection after CABG. These patients had average charges for the hospital stay of $304,747. Therefore, mediastinitis is a high-cost condition. Prevention guidelines—The CDC surgical site infection prevention guidelines are backed by evidence based medicine. Further information can be found at: 
                        *http://www.cdc.gov/​ncidod/​dhqp/​gl_​surgicalsite.html*. We are selecting this condition because it meets the statutory criteria and was suggested in the public comments. We would identify the coronary artery bypass graft procedures through procedure codes 36.10 through 36.19. Therefore, when a patient has a coronary artery bypass graft performed (code 36.10 through 36.19), and a secondary diagnosis of mediastinitis (code 519.2) is reported that was not present on admission, we will not count mediastinitis as an MCC beginning October 1, 2009. “Surgical site infections” is a broad category, and we were looking for assistance from the public for ways to identify specific surgical site infections. We appreciate the suggestion to select mediastinitis after CABG surgery when it is a hospital acquired condition. We are selecting this condition for implementation in this FY 2008 final rule. We welcome additional recommendations for other types of surgical site infections that could also be selected and look forward to working with stakeholders and the public as we consider additional surgical site infections in the future. (l) Serious Preventable Event—Surgery on Wrong Body Part, Patient, or Wrong Surgery Coding—Surgery performed on the wrong body part, wrong patient, or the wrong surgery would be identified by ICD–9–CM code E876.5 (Performance of inappropriate operation). This diagnosis code does not specifically identify which of these events has occurred. Burden (High Cost/High Volume)—As stated earlier, there are not unique ICD–9–CM codes which capture surgery performed on the wrong body part or the wrong patient, or the wrong surgery. Therefore, we examined Medicare data on the code for performance of an inappropriate operation. For FY 2006, there was one Medicare case reported with this code, and the patient had average charges for the hospital stay of $24,962. This event is rare. Therefore, it is not high volume. Individual cases could have high costs. However, we were unable to determine the impact with our limited data. Prevention guidelines—There are guidelines to ensure that the correct surgery was performed on the correct patient or correct patient's body part. This event should not occur. Further information and prevention guidelines can be found at: 
                        *http://www.ahrq.gov/​clinic/​ptsafety/​*. CC—This code is not a CC under the CMS DRGs and the MS–DRGs. Therefore, it does not meet the criteria for selection under section 1886(d)(4)(D)(iv) of the Act. However, Medicare does not pay for performing surgery on the wrong body part or patient, or performing the wrong surgery. These services are not considered to be reasonable and necessary and are excluded from Medicare coverage. Considerations—There are significant considerations for the selection of this condition. There is not a unique ICD–9–CM code that would describe the nature of the inappropriate operation. All types of inappropriate operations are included in code E876.5. Unlike other conditions, performance of an inappropriate operation is not a complication of a prior medical event that was medically necessary. Rather, in this case, there was a needed intervention but it was done to either the wrong body part or the wrong patient, or was not the correct operation. Thus, a service was completed that was not reasonable and necessary and Medicare does not pay for any inpatient service associated with the wrong surgery. It is not necessary for us to select this condition because Medicare does not pay for it under any circumstances. *Comment:*
                         A majority of commenters agreed that there are not unique codes to identify wrong surgery. In addition, these commenters pointed out that there are guidelines to ensure that the correct surgery is being performed on the correct patient or correct patient's body part. These commenters stated that wrong surgery is a serious preventable event that should not occur. One commenter urged CMS to rank the condition—surgery on wrong body part, wrong patient, or wrong surgery (wrong site surgery)—higher in our list of hospital-acquired conditions. This commenter stated that wrong site surgery may not be rare, but rather may be quite prevalent. The commenter disagreed with CMS' belief that wrong 
                        ( print page 47214)
                        site surgery should not be considered as a complication because it is a risk of being in a hospital. The commenter recommended the development of specific codes for wrong site surgery. *Response:*
                         With respect to this latter comment, the commenter may have misunderstood our discussion of this issue in the proposed rule. We never asserted wrong site surgery is not a complication because it is a risk of being in a hospital. Rather, we stated the event itself is wrong and should never occur. Unlike CCs and MCCs, wrong surgery is not a complication of a prior medical event that was medically necessary. Wrong surgery is not a CC or an MCC because the entire event itself should never occur, is not reasonable and necessary and should not result in any payment to the hospital or physician. We are not selecting wrong surgery because it is not an event for which Medicare should pay less; it is an event for which Medicare should pay nothing at all. As stated in the proposed rule, there is not a unique ICD–9–CM code that identifies surgery performed on the wrong body part or the wrong patient, or the wrong surgery. Code E876.5 (Performance of inappropriate operation) does not describe what specifically was wrong with the surgery, such as whether it was performed on the wrong side, the wrong patient, or if the wrong surgery were performed. In examining Medicare data on the code for performance of an inappropriate operation, we found only one case reported in FY 2006. We agree this is a serious issue that requires close examination and monitoring. The proposed rule indicated that wrong surgery (right patient, wrong surgery, right surgery, wrong patient, etc.) is not a reasonable and necessary service. Therefore, it is not covered by Medicare and should not be paid. Wrong surgery is not a CC and does not meet the criteria of the statute. As stated above, there are generally recognized guidelines hospitals and physicians must follow to ensure that the correct surgery was performed on the correct patient or correct patient's body part. This event should not occur. If hospitals fail to ensure the correct surgery is performed, there are other provisions in the regulations to address this alarming event. For instance, a hospital must meet the CoPs in order to participate in Medicare. If wrong surgery was performed, the hospital could be out of compliance with the Surgical Services CoP, the Quality Assessment and Performance Improvement CoP, or potentially others. Performance of wrong surgery may suggest a systems failure or systems that do not comply with the CoPs that should be further investigated. We are interested in promoting a culture of safety and are interested in helping hospitals improve their performance. The hospital would have an opportunity to develop and present a plan of correction to avoid termination of its participation in Medicare by addressing the deficiencies that resulted in an incorrect surgery being performed. The final action that would be taken would depend on the individual circumstances and whether the hospital has addressed the problem to reduce the chance of a similar occurrence in the future. In any event, we reiterate that the way for Medicare to address wrong surgery is not through this provision that does not pay extra for preventable hospital complications when we should be paying nothing at all, but instead through Medicare's regulations that ensure that every Medicare provider meets basic quality of care standards. (m) Falls and Fractures, Dislocations, Intracranial Injury, Crushing Injury, and Burns Coding—There is no single code that shows that a patient has suffered a fall in the hospital. Codes would be assigned to identify the nature of any resulting injury from the fall such as a fracture, contusion, concussion, etc. There is a code to indicate that a patient fell from bed, code E884.4 (Fall from bed). One would then assign a code that identifies the external cause of the injury (the fall from the bed) and an additional code(s) for any resulting injury (a fractured bone). Burden (High Cost/High Volume)—As stated earlier, there is not a code to identify all types of falls. Therefore, in the FY 2008 IPPS proposed rule, we examined Medicare data on the number of Medicare beneficiaries who fell out of bed. For FY 2006, there were 2,591 cases reported of Medicare patients who fell out of bed. These patients had average charges of the hospital stay of $24,962. However, depending on the nature of the injury, costs may vary in specific cases. Prevention guidelines—Falls may or may not be preventable. Serious preventable event guidelines can be found at the following Web site: 
                        *http://www.qualityindicators.ahrq.gov/​psi_​download.htm*. CC—Code E884.4 is not a CC under the CMS DRGs or the MS–DRGs. Considerations—There are not clear codes that identify all types of falls. Hospitals would also have to use additional codes for fractures and other injuries that result from the fall. In addition, depending on the circumstances, the falls may or may not be preventable. We did not propose the inclusion of falls as one of our initial hospital-acquired conditions because we could only identify a limited number of these cases, and they were not classified as CCs. However, we welcomed public comments on how to develop codes or coding logic that would allow us to identify injuries that result from falls in the hospital so that Medicare would not recognize the higher costs associated with treating patients who acquire these conditions in the hospital. *Comment:*
                         Several commenters stated that the category of falls is not appropriate for inclusion as one of the hospital-acquired conditions. Specifically, the commenters noted that it is impossible to prevent all falls, and the definition of what constitutes a “preventable fall” is not well-defined. Several commenters strongly recommended the inclusion of falls for the final rule because falls and their resulting injuries are an important public health safety issue. However, these commenters did not give further details or recommendations to CMS regarding how to identify falls and related injuries as a hospital-acquired condition that would be subject to this provision. *Response:*
                         With respect to the comment that not all falls are preventable, we reiterate that the statutory provision authorizes the Secretary to select conditions that “could reasonably have been prevented through the application of evidence based guidelines.” We believe that injuries that occur in the hospital due to falls are preventable. As discussed earlier, we received a couple of comments urging us to include falls as one of our hospital acquired conditions. We recognize that preventable injuries are an important patient safety issue. Therefore, we considered additional ways to identify patients who had preventable injuries that occurred in the hospital. We examined the use of a combination of External cause of injury codes and the specific injury to identify these cases. We identified five external causes of injury codes that would identify falls in a hospital. These include: E884.2 Fall from chair
                    E884.3 Fall from wheelchair
                    E884.4 Fall from bed
                    E884.5 Fall from other furniture
                    E884.6 Fall from commode These codes clearly identify certain types of falls. If coded for an inpatient, they could identify that the fall occurred in the hospital. If these codes appeared 
                        ( print page 47215)
                        on a claim along with a fracture or trauma code that did not reflect that the condition was present on admission, we could conclude that the injury was a result of a fall in the hospital that should not be counted as an MCC or CC. However, we identified potential problems in using the external cause of injury codes. There is a separate field on the electronic claim to report one external cause of injury code. However, hospitals do not report the POA indicator with this field. Therefore, we will not be able to tell if the external cause of injury code is identifying an event that occurred before or after admission. Hospitals can also report external cause of injury codes as a secondary diagnosis. If the hospital lists the external cause of injury code among the secondary diagnoses, the hospital would be assigning a Present on Admission indicator to the external cause of injury code. In these cases, we would be able to identify that one of the five types of falls indicated above occurred after admission. We could use this information along with the ICD–9–CM diagnosis code for the specific type of injury, such as a fracture, to not allow the specific injury to count as a MCC or CC, since it would be the result of a preventable injury. In our analysis of the use of an external cause of injury code, we believe this approach is too complicated to identify preventable injuries. Therefore, we focused on simply identifying injuries that should not occur during a hospitalization. If a preventable injury occurs during a hospitalization, it should be included on our list of hospital acquired conditions. We reviewed diagnosis codes contained in the Injury and Poisoning Chapter of ICD–9–CM and attempted to develop a list of codes that could identify potential adverse events that may or may not have been the result of a fall occurring in the hospital setting. After reviewing each category of diagnosis codes, we identified the following injuries that should not occur during a patient's hospitalization. The generic categories of injuries are as follows: Fractures—ICD–9–CM code range 800 through 829
                    Dislocations—ICD–9–CM code range 830 through 839
                    Intracranial injury—ICD–9–CM code range 850 through 854
                    Crushing injury—ICD–9–CM code range 925 through 929
                    Burns—ICD–9–CM code range 940 through 949
                    Other and unspecified effects of external causes—ICD–9–CM code range 991 through 994 In our view, the above conditions should not occur after admission to the hospital. That is, if the patient is admitted to the hospital without a crushing injury, a burn, fracture, dislocation, among others, we can see no reason why such an event would not be preventable while the patient is in the hospital. None of these injuries should occur after admission. We believe this range of conditions offers a relatively uncomplicated method to determine if an injury or trauma is acquired in the hospital. This range of conditions meets the statutory criteria for being selected when they are MCCs or CCs. First, they are identifiable with ICD–9–CM codes. Second, injuries that occur as a result of a fall in the hospital complicate the care and treatment of the patient. Fractures and dislocations and other injuries are common in the Medicare population. There were more than 175,000 fractures and other traumatic injuries in the above range of codes for FY 2006. Third, hospital acquired injuries included in this range of codes should not occur and are preventable. Although we have not identified specific prevention guidelines for the conditions described by the above range of codes, we believe these types of injuries and trauma should not occur in the hospital, and we look forward to working with CDC and the public in identifying research that has or will occur that will assist hospitals in following the appropriate steps to prevent these conditions from occurring after admission. We welcome public comments on additions and deletions to this injury list as well as our findings on the use of a combination of external cause of injury codes and injury codes to identify patients that acquired an injury in the hospital due to a fall. We also welcome any additional suggestions to identify cases where preventable injuries, such as falls, occur during hospitalization. We will review all recommendations in the FY 2009 IPPS rule in order to further refine our policy to identify preventable injuries and ensure that Medicare does not pay extra by counting them as MCC or CCs. (n) Other Conditions Suggested Through Comment: Deep Vein Thrombosis (DVT)/ Pulmonary Embolism (PE) *Comment:*
                         A number of commenters encouraged CMS to select Venous Thromboembolism (VTE), which includes both Deep Vein Thrombosis (DVT) and Pulmonary Embolism (PE), as a preventable condition. The commenters noted that prophylactic measures exist to avoid these conditions and they are preventable if these steps are followed. The commenters asserted that this condition meets the DRA criteria requirements for a condition eligible for a payment adjustment in that it involves high cost and high volume (according to the 2006 MedPAR data, DVT resulted in more than 180,000 discharges with a mean standardization cost of $17,410 and PE in more than 100,000 discharges with a mean standardization cost of $20,742), and results in assignment to a higher paying DRG if present as a secondary diagnosis. The commenters also noted that both DVT and PE have ICD–9–CM codes that are on the MCC and CC lists. In addition, this condition can be prevented in accordance with evidence-based guidelines. These commenters cited Geerts, et al., Prevention of Venous Thromboembolism: The Seventh ACCP Conference on Antithrombotic and Thrombolytic Therapy, Chest, 126: 338S–400S (2004). The commenters acknowledged DVT and PE are identified by multiple codes, but asserted that administrative issues surrounding the selection of this condition could be resolved. They requested that CMS consider selecting DVT and PE as preventable complications for which hospitals will not receive additional payments. *Response:*
                         We appreciate these comments suggesting that we add DVT and PE to our list of conditions that would be subject to the hospital acquired conditions provision. A DVT is a blood clot that forms in a vein, most commonly in the lower extremity. It can arise secondary to a number of clinical circumstances, including prolonged inactivity or bedrest, or from extended periods of time with the lower extremity in a bent position. It can also arise in the setting of a hypercoagulable state such as that which occurs with a number of malignancies, where the blood has an increased propensity to form clots, and it is also more common in patients taking oral contraceptives, particularly in conjunction with regular tobacco use. A PE is a clot that occurs in one of the pulmonary arteries that supplies a portion of the lung, most commonly when part or all of a DVT migrates to the pulmonary vessels from its original location, although it can also occur in the absence of a DVT, and it is a particularly serious event that is often life threatening. We refer readers to the current medical literature to further define DVT and PE. We agree that there are circumstances where these conditions are preventable, 
                        ( print page 47216)
                        and where the condition meets the statutory criteria to be selected. These conditions can be identified by unique ICD–9–CM codes. DVT can be identified through codes 453.40 (Venous embolism and thrombosis of unspecified deep vessels of lower extremity), 453.41 (Venous embolism and thrombosis of deep vessels of proximal lower extremity), and 453.42 (Venous embolism and thrombosis of deep vessels of distal lower extremity). All three codes are on the CC list. PE is identified through codes 415.10 (Iatrogenic pulmonary embolism and infarction) and 415.19 (Other pulmonary embolism and infarction). Both of these codes are on the MCC list. The commenters provided Medicare data showing that these conditions are both frequent and high cost in the Medicare population. Finally, the commenters have identified prevention guidelines backed by evidence based medicine to avoid DVTs and PEs. Therefore, at least in some circumstances, these conditions meet the statutory criteria for being selected. We appreciate the collaborative efforts of other organizations to further define the prevention guidelines for this condition. We recognize that routine admission physical examinations should include efforts to detect a DVT. Although we believe DVTs and PEs may be preventable in certain circumstances (such as when an otherwise healthy patient is having elective surgery on a lower extremity), it is possible that a patient may have a DVT upon admission that goes unidentified, and it is also possible that DVT may occur because of other circumstances, such as an occult malignancy. If a DVT is clinically suspected upon admission to the hospital, the definitive diagnosis of a DVT can be made with a Doppler ultrasound examination or intravenous venogram, or both. We anticipate that it is not feasible to perform these studies on every hospitalized patient. In the case of a patient who is admitted with a clinically unapparent DVT that is not detected, the hospital will have followed all typical patient care protocols yet the DVT went undiagnosed upon admission. It may remain undetected until the patient exhibits symptoms of either the DVT or a PE that is unrelated to the patient's principal diagnosis. In these circumstances, we believe the DVT or PE should continue to be counted as an MCC or CC because, in our view, the condition either was unidentifiable prior to admission or did not likely occur as a result of poor management of the patient while they were in the hospital. We believe it is very important to select DVTs and PEs only when they are preventable through following standard prevention guidelines. We will seek to identify clearly defined instances of preventable DVT and PE that should not occur in the hospital setting which will help to further increase hospital quality of care. We appreciate suggestions on how to identify DVTs and PEs that are preventable hospital acquired conditions. If we can identify only those circumstances where DVTs and PEs are preventable and meet the statutory criteria for being selected, we likely would make them subject to the provision in the FY 2009 IPPS final rule. We welcome comments on this issue and look forward to working with stakeholders to identify instances of preventable DVTs and PEs prior to implementation of this provision on October 1, 2008. (o) Other Conditions Suggested Through Public Comment: Legionnaires’ Disease *Comment:*
                         One commenter suggested that CMS select Legionnaire's disease. The commenter asserted that this condition is high cost/high volume: CDC estimates between 8,000 and 18,000 cases per year. Due to underreporting and underdiagnosis, only 2 to 10 percent of cases are reported. Death occurs in 10 to 15 percent of cases. In addition, the commenter cited established prevention guidelines: CDC prevention guidelines are available and widely distributed. Finally, the commenter stated that Legionnaires’ disease is identified by ICD–9–CM code 482.84. *Response:*
                         While there may be a discrete ICD–9–CM code to identify Legionnaires’ disease, it is not typically a hospital acquired condition. Legionnaires’ disease is usually acquired outside of a hospital from a contaminated water supply that may or may not have any relation to a particular institution. Any outbreak of Legionnaires’ disease suggests a significant public health emergency that should be addressed by public health resources rather than by a particular Medicare payment policy. (p) CMS Response to Additional Comments We welcomed any comments on the clinical aspects of the conditions and on which conditions should be selected for implementation on October 1, 2008. We also solicited comments on any problematic issues for specific conditions that may support not selecting them as one of the initial conditions. We encouraged comments on how some of the administrative problems can be overcome if there is support for a particular condition. Commenters did not raise any general administrative concerns. Rather, a number of commenters addressed the potential for an appeals process and POA coding issues. We have included the comment and response for each issue below: Appeals Process: *Comment:*
                         A large number of commenters requested clarification from CMS on how hospitals appeal CMS decisions that a particular patient may fall under the hospital-acquired conditions policy and, therefore, is not eligible for higher payment through assignment to the higher CC/MCC level of the MS-DRG. They asked CMS to provide specific instructions for hospitals to follow for appealing a decision. *Response:*
                         We do not believe a separate appeals process is necessary for the payment adjustment for hospital-acquired conditions because existing procedures provide adequate opportunity for review. Under 42 CFR § 412.60(d), a hospital has 60 days after the date of the notice of the initial assignment of a discharge to a DRG to request a review of that assignment. The hospital may submit additional information as a part of its request. A hospital that believes a discharge was assigned to the incorrect DRG as a result of the payment adjustment for hospital-acquired conditions may request review of the DRG assignment by its fiscal intermediary or MAC. However, we note that section 1886(d)(7)(B) of the Act, as amended by section 5001(c)(2) of the DRA, provides that there shall be no administrative or judicial review of the establishment of DRGs, including the selection and revision of codes under the payment adjustment for hospital acquired conditions. Therefore, although a hospital may request review of a DRG assignment in a particular case, the statute does not provide for review of the codes we select to be subject to the payment adjustment for hospital-acquired conditions. POA Coding *Comment:*
                         Commenters suggested that all secondary diagnoses coded as present on admission be used to support the development of new complication rate measures and other quality indicators in the future. They suggested that CMS should develop special Grouper logic to exclude similar ICD–9-CM codes. The commenters stated that reducing hospital payments for a condition present upon admission, but not documented, is too punitive. 
                        ( print page 47217) Many commenters submitted the experiences of two States that already use present-on-admission coding. They believed it takes several years and intense educational efforts to achieve reliable data and therefore there must be a strong clinical training component. The commenters recommended that CMS implement the collection of the POA indicator but delay the implementation of any conditions that are dependent on its use until physicians and hospitals have an appropriate level of experience. *Response:*
                         We refer commenters to the Change Request No. 5499 released on May 11, 2007, for answers to additional questions regarding present-on-admission coding. We remind commenters that the DRG payment adjustment based on the POA indicator is not applicable until October 1, 2008. It is important to note that hospitals will gain experience in reporting POA information during FY 2008 prior to it having a payment impact in FY 2009. Prevention Guidelines *Comment:*
                         A small number of commenters questioned the feasibility and reliability of current prevention guidelines. The commenters supported CMS’ goal of encouraging improvements in health care and reducing the number of preventable infections, but believed that hospitals must be reimbursed appropriately for providing the care patients need. The commenters believed that CMS should be sure that hospitals are not penalized for infections that originated outside the hospital or that are caused by factors beyond the hospital's control. The commenters suggested that CMS should recognize that, even with the best infection control practices, some infections will occur anyway. They added that reducing payments for all cases in which those infections occur could harm hospitals’ ability to purchase and provide advanced drugs and treatment modalities or invest in other infection control technologies. *Response:*
                         We address each concern regarding prevention guidelines in the respective response for each condition. We are committed to improving quality and decreasing the number of hospital-acquired conditions. In that goal, we have chosen these specific conditions because they fulfill the criteria outlined in the DRA: the conditions have unique codes that are MCCs or CCs; the conditions are high volume, high cost or both; and the conditions can be reasonably prevented through the application of evidence-based guidelines. Academic Centers/Hospitals with high risk patients: *Comment:*
                         Commenters representing academic centers and hospitals with high risk patient populations urged CMS to consider excluding patients considered to be high risk such as those that are more susceptible to infections. *Response:*
                         As indicated above, we are selecting conditions that are “reasonably preventable” through application of evidence-based guidelines and meet the other statutory criteria. In response to comments on each of the conditions considered, we indicated that we are researching whether to establish exceptions to the conditions for specific clinical circumstances where the condition may not be preventable. The determination of whether a patient is “high risk” will depend on the specific circumstances of the patient and the condition under consideration. We do not believe it is possible to classify a patient generally as “high risk” in all the circumstances where the provision could potentially apply. As we indicated above, we welcome public comments on clinical scenarios where a specific condition may not be reasonably preventable in the hospital and how to identify and distinguish those circumstances from other situations where the condition is preventable. 7. Other Issues Under section 1886(d)(4)(D)(vi) of the Act, “[a]ny change resulting from the application of this subparagraph shall not be taken into account in adjusting the weighting factors under subparagraph (C)(i) or in applying budget neutrality under subparagraph (C)(iii).” Subparagraph (C)(i) refers to DRG classifications and relative weights. Therefore, the statute requires the Secretary to continue counting the conditions selected under section 5001(c) of the DRA as MCCs or CCs when updating the relative weights annually. Thus, the higher costs associated with a case with a hospital-acquired MCC or CC will continue to be assigned to the MCC or CC DRG when calculating the relative weight but payment will not be made to the hospital at one of these higher-paying DRGs. Further, subparagraph (C)(iii) refers to the budget neutrality calculations that are done so aggregate payments do not increase as a result of changes to DRG classifications and relative weights. Again, the higher costs associated with the cases that have a hospital-acquired MCC or CC will be included in the budget neutrality calculation but Medicare will make a lower payment to the hospital for the specific cases that includes a hospital-acquired MCC or CC. Thus, to the extent that the provision applies and cases with an MCC or CC are assigned to a lower-paying DRG, section 5001(c) of the DRA will result in cost savings to the Medicare program. We note that the provision will only apply when the selected conditions are the only MCCs and CCs present on the claim. Therefore, if a nonselected MCC or CC is on the claim, the case will continue to be assigned to the higher paying MCC or CC DRG, and there will be no savings to Medicare from the case. We believe the provision will apply in a small minority of cases because it is rare that one of the selected conditions will be the only MCC or CC present on the claim. To summarize, we appreciate all of the comments on hospital-acquired conditions and look forward to continued input as we plan to implement these hospital-acquired conditions. Below is the list of conditions that we are selecting in this FY 2008 final rule. These conditions will be made subject to the provision beginning on October 1, 2008 (FY 2009). Serious Preventable Event—Object Left in Surgery
                    Serious Preventable Event—Air Embolism
                    Serious Preventable Event—Blood incompatibility
                    Catheter-Associated Urinary Tract Infections
                    Pressure Ulcers (Decubitus Ulcers)
                    Vascular Catheter-Associated Infection
                    Surgical Site Infection—Mediastinitis After Coronary Artery Bypass Graft (CABG) Surgery
                    Hospital Acquired Injuries—Fractures, Dislocations, Intracranial Injury, Crushing Injury, Burn, and Other Unspecified Effects of External Causes We will also propose the following conditions for consideration in the FY 2009 IPPS proposed rule. We will work diligently to address issues surrounding these conditions and propose to select these conditions in the FY 2009 IPPS final rule. Ventilator Associated Pneumonia (VAP)
                    Staphylococcus Aureus Septicemia
                    Deep Vein Thrombosis (DVT)/ Pulmonary Embolism (PE) Finally, we list below the set of conditions that signal further analysis for future implementation. Methicillin Resistant Staphylococcus Aureus (MRSA)
                    Clostridium Difficile-Associated Disease (CDAD)
                    Wrong Surgery—Provision not applicable because Medicare should not pay less; it should not pay at all.( print page 47218) Table 1.—Hospital-Acquired Conditions
(in rank order)
Condition
Considered in NPRM
Proposed in NPRM
Selected in FY 2008 final rule
May be considered in future rulemaking1. Serious Preventable Event—Object left in surgery
Yes
Yes
Yes
N/A.2. Serious Preventable Event—Air embolism
Yes
Yes
Yes
N/A.3. Serious Preventable Event—Blood incompatibility
Yes
Yes
Yes
N/A.4. Catheter-Associated Urinary Tract Infections
Yes
Yes
Yes
N/A.5. Pressure Ulcers (Decubitus Ulcers)
Yes
Yes
Yes
N/A.6. Vascular Catheter-Associated Infection
Yes
No (No FY 2008 code)
Yes (Code Created for FY 2008)
N/A.7. Surgical Site Infection—Mediastinitis after Coronary Artery Bypass Graft (CABG) surgery
Yes (All surgical site infections, not just Mediastinitis)
No (No unique codes)
Yes (Comments suggested Mediastinitis which has unique code)
N/A.8. Falls
Yes
No (Coding not unique)
Yes (Operational difficulties will be overcome by FY 2009)
Expand to all hospital acquired injuries, adverse events.9. Ventilator Associated Pneumonia (VAP)
Yes
No (Coding not unique)
No (Coding not unique)
Yes—FY 2009 IPPS final rule (Pursuing code with CDC).10. Staphylococcus Aureus Septicemia
Yes
Yes
No (Must identify subset where preventable)
Yes—FY 2009 IPPS final rule.11. Deep Vein Thrombosis (DVT)/ Pulmonary Embolism (PE)
No
No
No
Yes—FY 2009 IPPS final rule (Work to identify situations where it should be preventable).12. Methicillin Resistant Staphylococcus Aureus (MRSA)
Yes
No
No
Yes.13. Clostridium Difficile—Associated Disease (CDAD)
Yes
No
No
Yes.Other: Medicare Does not Pay For:14. Wrong Surgery
Yes
No
No
Provision not Applicable. Medicare should not pay at all.
 G. Changes to Specific DRG Classifications 1. Pre-MDCs: Intestinal Transplantation In the FY 2005 IPPS final rule (69 FR 48976), we reassigned intestinal transplant cases from CMS DRG 148 (Major Small and Large Bowel Procedures with CC) and CMS DRG 149 (Major Small and Large Bowel Procedures without CC) to CMS DRG 480 (Liver Transplant and/or Intestinal Transplantation). In the FY 2006 IPPS final rule (70 FR 47286), we continued to evaluate these cases to see if a further DRG change was warranted. While we found that intestinal only transplants and combination liver-intestine transplants have higher average charges than other cases in CMS DRG 480, these cases are extremely rare (there were only 4 cases in FY 2004) and the insufficient number of cases did not warrant creating a separate DRG. For FY 2008, we examined the September 2006 update of the FY 2006 MedPAR file and found 1,208 cases assigned to CMS DRG 480. In section II.C. of the preamble of the FY 2008 IPPS proposed rule, we proposed to split CMS DRG 480 into two severity levels: MS–DRG 005 (Liver Transplant and/or Intestinal Transplant with MCC) and MS–DRG 006 (Liver Transplant and/or Intestinal Transplant without MCC). The following table displays our results: MS–DRG
Number of cases
Average length of stay
Average chargesMS–DRG 006—All cases
446
10.05
$129,519MS–DRG 006—Intestinal transplant cases only
3
34
354,793MS–DRG 005—All cases
762
22.25
243,271MS–DRG 005—Intestinal transplant cases only
9
40.22
460,089MS–DRG 005—Intestinal and liver transplant
1
56
1,179,425
 Under the MS–DRGs, 10 of 13 intestinal transplant cases are assigned to proposed MS–DRG 005 based on the secondary diagnosis of the patient. The three remaining intestinal transplant cases do not have an MCC and would 
                        ( print page 47219)
                        be assigned to MS–DRG 006, absent further changes to the DRG logic. These three intestinal transplants have average charges of approximately $354,793 and an average length of stay of 34 days. Average charges and length of stay for these three cases are more comparable to the average charges of approximately $243,271 and average length of stay of 22.25 days for all cases assigned to proposed MS–DRG 005. For this reason, we proposed to move all intestinal transplant cases to MS–DRG 005. As part of the proposal, we proposed to redefine proposed MS–DRG 005 as “Liver Transplant with MCC or Intestinal Transplant.” The presence of a liver transplant with MCC or an intestinal transplant would assign a case to the higher severity level. We also proposed to redefine proposed MS–DRG 006 as “Liver Transplant without MCC”. *Comment:*
                         Two commenters supported the proposed reassignment of intestinal transplants to MS–DRG 005. One commenter stated that CMS should continue to evaluate the frequency of this procedure and reassign it to an appropriate DRG reflective of its high resource utilization. *Response:*
                         We appreciate the support of the commenters and agree that when we receive sufficient data, we will again consider a separate intestinal transplant DRG. *Comment:*
                         One commenter supported separate MS–DRGs for intestinal transplants and combination liver-intestine transplants. The commenter cited that the data from the Milliman 2005 U.S. Organ and Tissue Transplant Cost Estimates and Discussion Research Report supports separate MS–DRGs. This report provided data for 58 intestine only transplants with estimated first year billed charges of $813,600 and 47 liver-intestine transplants with estimated first year billed charges of $830,200. *Response:*
                         The report submitted by the commenter does not indicate whether the patients cited in the study were Medicare. Further, it is not clear whether the identified costs were hospital inpatient only or total. For these reasons, we are not using these data to make an MS–DRG assignment. However, we are open to considering, to the extent feasible, reliable, validated data other than MedPAR data in annually recalibrating and reclassifying the DRGs. In this final rule with comment period, we are adopting as final our proposal to reassign intestinal transplantation cases to MS–DRG 005. We are also redefining MS–DRG 005 as “Liver Transplant with MCC or Intestinal Transplant” and MS–DRG 006 as “Liver Transplant without CC”. 2. MDC 1 (Diseases and Disorders of the Nervous System) a. Implantable Neurostimulators We received a joint request from three manufacturers to review the DRG assignment for cases involving neurostimulators. The commenters are concerned that: Neurostimulator cases may be assigned to 30 different DRGs in 12 different MDCs depending upon the patient's principal diagnosis.
                    Neurostimulator cases represent a small proportion of the total cases in their assigned DRG and have higher costs.
                    The 11 new ICD–9–CM codes created beginning in FY 2007 that identify pain are assigned to MDC 23 (Factors Influencing Health Status and Other Contacts With Health Services) rather than MDC 1 (Diseases and Disorders of the Nervous System). The manufacturers were concerned that these pain codes will be a common principal diagnosis for patients who receive a neurostimulator and will be assigned to MDC 23, which contains a wide variety of dissimilar diagnoses. The new ICD–9–CM codes are: 338.0 (Central pain syndrome), 338.11 (Acute pain due to trauma), 338.12 (Acute post-thoracotomy pain), 338.18 (Other acute postoperative pain), 338.19 (Other acute pain), 338.21 (Chronic pain due to trauma), 338.22 (Chronic post-thoracotomy pain), 338.28 (Other chronic postoperative pain), 338.29 (Other chronic pain), 338.3 (Neoplasm related pain (acute)(chronic)), and 338.4 (Chronic pain syndrome). The manufacturers recommended that we: Reroute all spinal and peripheral neurostimulator cases into a common set of base DRGs.
                    Reclassify ICD–9–CM pain codes 338.0 through 338.4 currently assigned to MDC 23 into MDC 1 when reported as the principal diagnosis.
                    Revise surgical CMS DRGs in MDC 1 based on whether the patient received a major device.
                    Split the single surgical CMS DRG in MDC 19 (Mental Diseases and Disorders) and MDC 23 into two CMS DRGs: one CMS DRG for minor procedures as defined by CMS DRGs 477 (Non-Extensive O.R. Procedure Unrelated to Principal Diagnosis) and CMS DRG 468 (Extensive O.R. Procedure Unrelated to Principal Diagnosis) and one CMS DRG for major procedures.
                    Create a new CMS DRG in MDC 1 for major devices. The manufacturers recognized that implementing a re-routing feature in the CMS DRG system would be a major undertaking and, alternatively, suggested reassigning the pain codes to MDC 1 as an interim step. In the FY 2008 IPPS proposed rule, we noted that we agreed with this suggestion. With respect to the suggestion to split the single surgical CMS DRG in MDCs 19 and 23 into two CMS DRGs and create a major device CMS DRG within MDC 1, in the FY 2008 IPPS proposed rule, we encouraged commenters to examine the assignment of neurostimulator cases under the MS–DRGs to determine whether the changes we proposed to adopt to better recognize severity in the CMS DRG system would address these concerns. The implantation of a neurostimulator requires two types of procedures. First, the surgeons implant leads containing electrodes into the targeted section of the brain, spine, or peripheral nervous system. Second, a neurostimulator pulse generator is implanted into the pectoral region and extensions from the neurostimulator pulse generator are tunneled under the skin and connected with the proximal ends of the leads. Hospitals stage the two procedures required for a full system neurostimulator implant. There are separate ICD–9–CM procedure codes that identify the implant of the leads and the insertion of the pulse generator. The three codes for the leads insertion are: 02.93  (Implantation or replacement of intracranial neurostimulator lead(s)); 03.93 (Implantation or replacement of spinal neurostimulator lead(s)); and code 04.92 (Implantation or replacement of peripheral neurostimulator lead(s). The five codes for the insertion of the pulse generator are: 86.94 (Insertion or replacement of single array neurostimulator pulse generator, not specified as rechargeable); 86.95 (Insertion or replacement of dual array neurostimulator pulse generator, not specified as rechargeable); 86.96 (Insertion or replacement of other neurostimulator pulse generator); 86.97 (Insertion or replacement of single array rechargeable neurostimulator pulse generator); and 86.98 (Insertion or replacement of dual array rechargeable neurostimulator pulse generator). The patient's principal diagnosis determines the MDC assignment. Implant of a cranial, spinal or peripheral neurostimulator will result in assignment of the case to a surgical DRG within that MDC. Although the manufacturers are correct that neurostimulator cases can potentially be assigned to many different CMS DRGs 
                        ( print page 47220)
                        based on the patient's principal diagnosis, they also provided data that showed that nearly 90 percent are assigned to 6 different CMS DRGs that cross two MDCs. In MDC 1, neurostimulator cases are assigned to four CMS DRGs: CMS DRG 7 (Peripheral and Cranial Nerve and Other Nervous System Procedures with CC); CMS DRG 8 (Peripheral and Cranial Nerve and Other Nervous System Procedures without CC); CMS DRG 531 (Spinal Procedures with CC); and CMS DRG 532 (Spinal Procedures without CC). In MDC 8 (Disease and Disorders of the Musculoskeletal System and Connective Tissue), neurostimulator cases are assigned to two CMS DRGs: CMS DRG 499 (Back and Neck Procedures Except Spinal Fusion with CC); and CMS DRG 500 (Back and Neck Procedures Except Spinal Fusion without CC). With very limited exceptions, such as tracheostomies and certain types of transplants, the principal diagnosis is fundamental to the assignment of a case to an MDC within the DRG system. By relying on the patient's principal diagnosis, the DRG system will group together patients who are clinically similar. As indicated in the proposed rule, for this reason, we were concerned about adopting the suggestion that all neurostimulator cases be rerouted to a common DRG irrespective of the patient's principal diagnosis. We believe such a step would be fundamentally inconsistent with the idea of creating common groups of patients who are clinically similar based on diagnosis and procedures. For this reason, we do not believe that a rerouting step should be adopted that would group together all neurostimulator cases. However, in the FY 2008 IPPS proposed rule, we agreed with the manufacturers' suggestion that the new ICD–9–CM codes created in FY 2007 for central and chronic pain syndrome and chronic pain (codes 338.0, 338.21 through 338.29, and 338.4) should be assigned to MDC 1 when present as the principal diagnosis. The manufacturers requested that we reclassify the pain codes (338.0 through 338.4) from MDC 23 to MDC 1. Our medical consultants advised that the acute pain codes (codes 338.11 through 338.19) should remain in MDC 23 because the acute pain is not a neurological condition. According to the manufacturers, the National Center for Health Statistics' (NCHS) choice in locating the pain codes within ICD–9–CM's Nervous System chapter has much clinical validity, particularly for chronic pain. The manufacturers further noted that acute pain is typically self-limited, a symptomatic response to an immediate insult that serves the body as a warning sign. However, chronic pain is unrelenting and serves no warning or protective function. It is a disease process of its own accord, according to the commenters. The manufacturers described pain as follows. Broadly, there are two main categories of pain: Nociceptive and neuropathic. Nociceptive pain is caused by sensory neurons, called nociceptors, responding to tissue damage. This type of pain is the body's normal response to injury. The pain is usually localized and time-limited. That is, when the tissue damage heals, the pain typically resolves. Acute pain is typically nociceptive. In general, nociceptive pain is typically treated with anti-inflammatories and, in more severe cases, with opioids via a morphine pump for example. In contrast, neuropathic pain is caused by malfunctioning or pathologically altered nervous pathways stemming from injury to the nervous system, either as a direct result of trauma to a nerve (phantom limb syndrome, reflex sympathetic dystrophy/complex regional pain syndrome after injury) or due to other medical conditions that cause damage to the nerve such as herpes (postherpetic neuralgia), diabetes (diabetic neuropathy), and peripheral vascular disease (critical limb ischemia). Failed back surgery syndrome (FBSS) is another common source of neuropathic pain. Typically, neuropathic pain is chronic and may persist for months or years beyond the healing of damaged tissue. Because the nerves themselves have been damaged, neuropathic pain can be considered its own disease process. Neuropathic pain may be more difficult to treat than nociceptive pain and has been shown to be more responsive to neurostimulation. The pain codes, created effective October 1, 2006, are currently assigned to MDC 23. The neurostimulator cases with a principal diagnosis using the pain codes were assigned to CMS DRG 461 (O.R. Procedure with Diagnoses of Other Contact with Health Services) for the first time in FY 2007. As explained above, prior to our adoption of the new pain codes in FY 2007, these cases had historically been assigned to CMS DRGs 7 and 8 (Peripheral and Cranial Nerve and Other Nervous System Procedure with and without CC, respectively) in MDC 1. Adopting the commenters' recommendation would result in the neurostimulator cases being assigned to their historic CMS DRGs. Our medical officers agreed that cases that use the new pain diagnosis codes for central and chronic pain syndrome and chronic pain (codes 338.0, 338.21 through 338.29, and 338.4) as a principal diagnosis should be assigned to MDC 1. For this reason, in the FY 2008 IPPS proposed rule, we proposed to assign cases with a principal diagnosis of central pain syndrome (code 338.0), chronic pain due to trauma (code 338.21), chronic post-thoracotomy pain (code 338.22), other chronic postoperative pain (code 338.28), other chronic pain (code 338.29), or chronic pain syndrome (code 338.4) to MDC 1, although we explained that we planned to monitor their use and may reassign them if needed. *Comment:*
                         Several commenters supported our proposal to assign diagnosis codes for central and chronic pain syndrome and chronic pain as a principal diagnosis to MDC 1. One commenter stated that this proposal recognizes the fundamentally neurologic nature of these cases. *Response:*
                         We appreciate the support of the commenters. Accordingly, in this final rule with comment period, we are adding diagnosis codes 338.0, 338.21, 338.22, 338.28, 338.29, and 338.4 when assigned as a principal diagnosis to MDC 1. b. Intracranial Stents Effective October 1, 2004, the ICD–9–CM Coordination and Maintenance Committee created procedure code 00.62 (Percutaneous angioplasty or atherectomy of intracranial vessel(s)). At the same time, we created code 00.65 (Percutaneous insertion of intracranial vascular stent(s)). It is our customary practice to assign new codes to the same DRG as their predecessor codes. The service described by code 00.62 was removed from code 39.50 (Angioplasty or atherectomy of other noncoronary vessel(s)), which is assigned to CMS DRG 533 (Extracranial Procedures with CC) and CMS–DRG 534 (Extracranial Procedures without CC) (MS–DRGs 37, 38, and 39 (Extracranial Procedures with MCC, with CC, and without CC/MCC, respectively, in this final rule with comment period) when the patient has a principal diagnosis in MDC 1. Therefore, we assigned code 00.62 to CMS DRGs 533 and 534 in MDC 1 beginning in FY 2005. In addition, we made code 00.65 a non-O.R. procedure for DRG assignment. We also assigned code 00.62 to the Non-Covered Procedure edit of the MCE, as Medicare had a national non-coverage determination for intracranial angioplasty and atherectomy with stenting. Effective November 6, 2006, Medicare covers percutaneous transluminal angioplasty (PTA) and stenting of intracranial arteries for the treatment of 
                        ( print page 47221)
                        cerebral artery stenosis in cases in which stenosis is 50 percent or greater in patients with intracranial atherosclerotic disease when furnished in accordance with FDA-approved protocols governing Category B Investigational Device Exemption (IDE) clinical trials. CMS determined that coverage of intracranial PTA and stenting is reasonable and necessary under these circumstances. All other indications for PTA without stenting to treat obstructive lesions of the vertebral and cerebral arteries remain noncovered. This decision can be found online in the CMS Coverage Manual (Publication 100.3): 
                        *http://www.cms.hhs.gov/​Manuals/​IOM/​itemdetail.asp*
                         at section 20.7.B.5. A manufacturer recently met with CMS to request that code 00.62 be reassigned to CMS DRGs 1 and 2 (Craniotomy Age  17 with and without CC, respectively) (MS–DRGs 025 (Craniotomy and Endovascular Intracranial Procedures with MCC), 026 (Craniotomy and Endovascular Intracranial Procedures with CC), and 027 (Craniotomy and Endovascular Intracranial Procedures without CC/MCC) in this final rule with comment period) and CMS–DRG 543 (Craniotomy with Major Device Implant or Acute Complex Central Nervous System Principal Diagnosis) (MS–DRGs 023 and 024 (Craniotomy with Major Device Implant or Acute Complex Central Nervous System Principal Diagnosis with MCC and without MCC, respectively, in this final rule with comment period). The manufacturer noted that other similar endovascular intracranial procedures that treat a cerebrovascular blockage are currently assigned to the craniotomy CMS DRGs. These endovascular-approach cases already assigned to the craniotomy CMS DRGs are identified by procedure codes 39.72 (Endovascular repair or occlusion of head and neck vessels), 39.74 (Endovascular removal of obstruction from head and neck vessel(s)), and 39.79 (Other endovascular repair (of aneurysm) of other vessels). Under the MS–DRGs in the FY 2008 IPPS proposed rule, we proposed the assignment of procedure codes 39.72, 39.74, and 39.79 to MS–DRGs 025, 026, and 027 and MS–DRGs 023 and 024. Although we have concerns about the assignment of additional endovascular procedures to an open surgical DRG, we agreed that there is clinical consistency between procedure codes 39.72, 39.74, and 39.79 and procedure code 00.62. For this reason, we agreed that procedure code 00.62 should be assigned to MS–DRGs 025, 026, and 027, and MS–DRGs 023 and 024, which are divided by the presence or absence of specific CCs. In order to assure appropriate DRG assignment as described above, we proposed to make conforming changes to the MCE by removing code 00.62 from the Non-Covered Procedure edit. However, as intracranial PTA is only covered when performed in conjunction with insertion of a stent, we proposed to redefine the edit by specifying that code 00.62 must be accompanied by code 00.65 (Percutaneous insertion of intracranial vascular stent(s)). Should code 00.65 not be reported on the claim, the case would fail the MCE edit. For a full discussion of this change, we refer readers to the MCE discussion in section II.F.6. of the preamble of this final rule with comment period. Although we proposed to assign endovascular intracranial procedures to the same MS–DRGs as craniotomy, we remained concerned that endovascular intracranial procedures are clinically different than open craniotomy surgical procedures and may have very different resource requirements. At the current time, there are an insufficient number of cases to warrant creation of a separate base DRG for endovascular intracranial procedures. However, as we indicated in the proposed rule, we intend to revisit the assignment of intracranial endovascular procedures at a later date when more data are available to analyze these cases. *Comment:*
                         Several commenters supported the proposal to assign endovascular procedure codes to open surgical DRGs. One commenter commended CMS for the proposal and stated that the reassignment places these cases in DRGs of more appropriate clinical and resource homogeneity (than their previous assignments to the extracranial procedure DRGs). *Response:*
                         We continue to have reservations about the classification of open craniotomy surgeries and endovascular cranial procedures within the same DRGs. However, we note that there is clinical consistency between procedure codes 39.72, 39.74, 39.79 (endovascular procedures on the head and neck), which are assigned to open surgical DRGs, and code 00.62 (an intracranial endovascular procedure). We will continue to monitor these DRGs for uniformity both from a clinical as well as a resource-consumption standpoint as more data become available. In this final rule with comment period, for FY 2008, we are assigning code 00.62 to MS–DRGs 25, 26, and 27 as well as MS–DRGs 23 and 24, as we proposed and describe above. We note that the claims containing code 00.62 must be accompanied by code 00.65 in order to qualify as a covered procedure. As previously stated, the lack of code 00.65 on the claim will cause the claim to fail the MCE edit, and the claim will be denied. 3. MDC 3 (Diseases and Disorders of the Ear, Nose, Mouth, and Throat)—Cochlear Implants Cochlear implants were first covered by Medicare in 1986 and were assigned to CMS DRG 49 (Major Head and Neck Procedures) in MDC 3 (Diseases and Disorders of the Ear, Nose, Mouth, and Throat). CMS DRG 49 is the highest weighted DRG in that MDC. However, two manufacturers of cochlear implants contend that this DRG assignment is clinically and economically inappropriate and have requested that cochlear implant cases be reassigned from CMS DRG 49 to CMS DRG 543 (Craniotomy with Major Device Implant or Acute Complex Central Nervous System Principal Diagnosis). The manufacturers stated that procedures assigned to CMS DRG 49 are performed mostly for diseases such as head and neck cancers, while procedures in CMS DRG 543 include operations on and inside the skull and implantation of complex devices, including intracranial neurostimulators. The manufacturers described the cochlear implant procedure as requiring incisions behind the ear to remove a section of the temporal bone, followed by microscopic neurotologic surgery under general anesthesia, and is typically completed in 2 to 4 hours to restore hearing to the profoundly deaf. For these reasons, these manufacturers believe cochlear implant procedures are similar to open craniotomies. Based on their analysis of the FY 2005 MedPAR data, the manufacturers identified a total of 139 cochlear implant cases using ICD–9–CM procedure codes 20.96 (Implantation or replacement of cochlear prosthetic device NOS), 20.97 (Implantation or replacement of cochlear prosthetic device, single channel), and 20.98 (Implantation or replacement of cochlear prosthetic device, multiple channel). The manufacturers reported 121 out of 139 cochlear implant cases were assigned to CMS DRG 49 with average standardized charges of approximately $58,078. When we reviewed the FY 2006 MedPAR data, we identified 104 cochlear implant cases assigned to CMS DRG 49. In the MS–DRGs in the FY 2008 IPPS proposed rule, CMS–DRG 49 is subdivided into two severity levels: MS–DRG 129 (Major Head and Neck 
                        ( print page 47222)
                        Procedures with CC or MCC) and MS DRG 130 (Major Head and Neck Procedures without CC). The following table displays our results: MS–DRG
Number of cases
Average length of stay
Average chargesMS–DRG 130—All cases
1,095
3.04
$23,928MS–DRG 130—Code 20.96 cases only
38
1.63
51,740MS–DRG 130—Code 20.97 cases only
2
1.50
38,855MS–DRG 130—Code 20.98 cases only
45
1.24
50,219MS–DRG 129—All cases
1,244
5.35
34,169MS–DRG 129—Code 20.96 cases only
10
2.70
81,351MS–DRG 129—Code 20.97 cases only
1
5.00
95,441MS–DRG 129—Code 20.98 cases only
8
3.13
53.510
 Under the proposed MS–DRGs, 19 out of 104 cochlear implant cases are assigned to MS–DRG 129 based on the secondary diagnosis of the patient. The 85 remaining cochlear implant cases do not have a CC or MCC and were proposed to be assigned to MS–DRG 130, absent further changes to the DRG logic. The average charges of approximately $54,238 for cochlear implant cases are higher than the average charges of approximately $29,375 for the other cases in CMS DRG 49. However, the average charges are not as high as the average charges of approximately $78,118 for cases assigned to CMS DRG 543. Further, our medical advisors do not believe that surgery to implant a cochlear implant is clinically similar to an open craniotomy in MDC 1 because typically a craniotomy involves removing and then replacing a section of the skull in order to perform a procedure on or within the brain, whereas a cochlear implant involves drilling a hole in the mastoid bone in order to insert the implant into the inner ear. We have been unable to address this issue under the current DRGs because there are not enough inpatient cochlear implant cases to warrant creation of a separate DRG. Although these cases will continue to have higher charges than other cases in their assigned DRG, in the FY 2008 proposed rule, we proposed to move the cochlear implant cases to the higher DRG severity level within CMS DRG–49. As part of this proposal, we indicated that we would redefine MS–DRG 129 as “Major Head and Neck Procedures with CC or MCC or Major Device.” The presence of a major head and neck procedure with a CC or MCC or major device would assign the case to the higher severity level within CMS–DRG 49. *Comment:*
                         Some commenters supported the proposed reassignment of cochlear implant cases to MS–DRG 129. *Response:*
                         We appreciate the commenters' support for the proposed MS–DRG assignment for these cases. *Comment:*
                         Two commenters expressed appreciation for CMS's recognition of the payment issues facing cochlear implants by proposing to classify these cases to MS–DRG 129. However, one of the commenters stated that, even with the proposed reassignment, the costs of these cases are nearly 60 percent higher than all cases within MS–DRG 129. The commenters contended that these procedures should be assigned to MS–DRG 24 (Craniotomy with Major Device Implant or Acute Complex Central Nervous System Principal Diagnosis with MCC). They pointed out that cases that have been assigned to DRG 543 in the CMS–DRGs are assigned to MS–DRGs 23 and 24 (Craniotomy with Major Device Implant or Acute Complex Central Nervous System Principal Diagnosis with and without MCC) in the MS–DRGs. The commenters stated that cochlear implant procedures are clinically and resource coherent with other craniotomy procedures such as Kinetra® dual array deep brain stimulator and should be assigned to MS–DRG 024. One of the commenters indicated that the principal diagnosis codes for hearing loss are currently assigned to MDC 3, not MDC 1. They believed that this MDC assignment prevents cochlear implants from being assigned to MS–DRG 024. The commenters suggested that sensorineural hearing loss (codes 389.10–389.18) is a nervous system disorder that should be assigned to MDC 1. One commenter stated that cochlear implantation cases should be assigned as a pre-MDC based on complexity and should be assigned to a separate or different DRG that involves implantation of a complex neural stimulation device. Another commenter recommended that CMS develop a third level of complexity for major head and neck procedures and assign cochlear implants to the highest severity level. *Response:*
                         Our medical advisors do not believe that surgery to implant a cochlear implant is clinically similar to an open craniotomy in MDC 1. Typically, a craniotomy involves removing and then replacing a section of the skull in order to perform a procedure on or within the brain, whereas a cochlear implant involves entering the mastoid bone, not the intracranial space. With regard to the MDC assignment, we believe that sensorineural hearing loss is due to a defect in the inner ear or the acoustic nerve and is a disorder of the ear that is appropriately assigned to MDC 3. As the low volume of cochlear implant cases does not justify a new MS–DRG, the current base DRG assignment for cochlear implants is appropriate. In addition, MS–DRG 129 does not meet the criteria for a three-level split. Therefore, we do not believe there is a better alternative to the policy we proposed. Accordingly, in this final rule with comment period, we are assigning all cochlear implant cases to MS–DRG 129. MS–DRG 129 is redefined as “Major Head and Neck Procedures with CC or MCC or Major Device.” 4. MDC 8 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue) a. Hip and Knee Replacements In the FY 2006 IPPS final rule (70 FR 47303), we deleted DRG 209 (Major Joint and Limb Reattachment Procedures of Lower Extremity) and created two new DRGs: 544 (Major Joint Replacement or Reattachment of Lower Extremity) and 545 (Revision of Hip or Knee Replacement). The two new DRGs were created because revisions of joint replacement procedures are significantly more resource intensive than original hip and knee replacement procedures. DRG 544 includes the following procedure code assignments: 81.51, Total hip replacement
                    81.52, Partial hip replacement
                    81.54, Total knee replacement( print page 47223)
                    81.56, Total ankle replacement
                    84.26, Foot reattachment
                    84.27, Lower leg or ankle reattachment
                    84.28, Thigh reattachment DRG 545 includes the following procedure code assignments: 00.70, Revision of hip replacement, both acetabular and femoral components
                    00.71, Revision of hip replacement, acetabular component
                    00.72, Revision of hip replacement, femoral component
                    00.73, Revision of hip replacement, acetabular liner and/or femoral head only
                    00.80, Revision of knee replacement, total (all components)
                    00.81, Revision of knee replacement, tibial component
                    00.82, Revision of knee replacement, femoral component
                    00.83, Revision of knee replacement, patellar component
                    00.84, Revision of knee replacement, tibial insert (liner)
                    81.53, Revision of hip replacement, not otherwise specified
                    81.55, Revision of knee replacement, not otherwise specified Further, we created a number of new ICD–9–CM procedure codes effective October 1, 2005, that better distinguish the many different types of joint replacement procedures that are currently being performed. In the FY 2006 IPPS final rule (70 FR 47305), we indicated a commenter had requested that, once we receive claims data using the new procedure codes, we closely examine data from the use of the codes under the two new DRGs to determine if future additional DRG modifications are needed. Further, the American Association of Hip  Knee Surgeons (AAHKS) recommended that we make further refinements to the DRGs for knee and hip arthroplasty procedures. AAHKS previously presented data to CMS on the important differences in clinical characteristics and resource utilization between primary and revision total joint arthroplasty procedures. AAHKS stated that CMS’ decision to create a separate DRG for revision of total joint arthroplasty (TJA) in October 2005 resulted in more equitable reimbursement for hospitals that perform a disproportionate share of complex revision of TJA procedures, recognizing the higher resource utilization associated with these cases. AAHKS stated that this important payment policy change led to increased access to care for patients with failed total joint arthroplasties, and ensured that high volume TJA centers could continue to provide a high standard of care for these challenging patients. AAHKS further stated that the addition of new, more descriptive ICD–9–CM diagnosis and procedure codes for TJA in October 2005 gave it the opportunity to further analyze differences in clinical characteristics and resource intensity among TJA patients and procedures. Inclusive of the preparatory work to submit its recommendations, the AAHKS compiled, analyzed, and reviewed detailed clinical and resource utilization data from over 6,000 primary and revision TJA procedure codes from 4 high volume joint arthroplasty centers located within different geographic regions of the United States: University of California, San Francisco, CA; Mayo Clinic, Rochester, MN; Massachusetts General Hospital, Boston, MA; and the Hospital for Special Surgery, New York, NY. Based on its analysis, AAHKS recommended that CMS examine Medicare claims data and consider the creation of separate DRGs for total hip and total knee arthroplasty procedures. CMS DRG 545 currently contains revisions of both hip and knee replacement procedures. AAHKS stated that based on the differences between patient characteristics, procedure characteristics, resource utilization, and procedure code payment rates between total hip and total knee replacements, separate DRGs were warranted. Furthermore, AAHKS recommended that CMS create separate base DRGs for routine versus complex joint revision or replacement procedures as shown below. Routine Hip Replacements 00.73, Revision of hip replacement, acetabular liner and/or femoral heal only
                    00.85, Resurfacing hip, total, acetabulum and femoral head
                    00.86, Resurfacing hip, partial, femoral head
                    00.87, Resurfacing hip, partial, acetabulum
                    81.51, Total hip replacement
                    81.52, Partial hip replacement
                    81.53, Revision of hip replacement, not otherwise specified Complex Hip Replacements 00.70, Revision of hip replacement, both acetabular and femoral components
                    00.71, Revision of hip replacement, acetabular component
                    00.72, Revision of hip replacement, femoral component Routine Knee Replacements and Ankle Procedures 00.83, Revision of knee replacement, patellar component
                    00.84, Revision of knee replacement, tibial insert (liner)
                    81.54, Revision of knee replacement, not otherwise specified
                    81.55, Revision of knee replacement, not otherwise specified
                    81.56, Total ankle replacement Complex Knee Replacements and Other Reattachments 00.80, Revision of knee replacement, total (all components)
                    00.81, Revision of knee replacement, tibial component
                    00.82, Revision of knee replacement, femoral component
                    84.26, Foot reattachment
                    84.27, Lower leg or ankle reattachment
                    84.28, Thigh reattachment AAHKS also recommended the continuation of CMS DRG 471 (Bilateral or Multiple Major Joint Procedures of Lower Extremity) without modifications. CMS DRG 471 includes any combination of two or more of the following procedure codes: 00.70, Revision of hip replacement, both acetabular and femoral components
                    00.80, Revision of knee replacement, total (all components)
                    00.85, Resurfacing hip, total, acetabulum and femoral head
                    00.86, Resurfacing hip, partial, femoral head
                    00.87, Resurfacing hip, partial, acetabulum
                    81.51, Total hip replacement
                    81.52, Partial hip replacement
                    81.54, Total knee replacement
                    81.56, Total ankle replacement As discussed in section II.C. of the preamble of this final rule with comment period, we proposed, and are adopting in this final rule with comment period, MS–DRGs to better recognize severity of illness for FY 2008. The MS–DRGs include two new severity of illness levels under the current base DRG 544. We also proposed to add three new severity of illness levels to the base DRG for Revision of Hip or Knee Replacement (currently DRG 545). The new MS–DRGs are as follows: MS–DRG 466 (Revision of Hip or Knee Replacement with MCC)
                    MS–DRG 467 (Revision of Hip or Knee Replacement with CC)
                    MS–DRG 468 (Revision of Hip or Knee Replacement without CC/MCC)
                    MS–DRG 469 (Major Joint Replacement or Reattachment of Lower Extremity with MCC)( print page 47224)
                    MS–DRG 470 (Major Joint Replacement or Reattachment of Lower Extremity without MCC) We found that the MS–DRGs greatly improved our ability to identify joint procedures with higher resource costs. The following table indicates the average charges for each new MS–DRG for the joint procedures. MS–DRGs That Replace DRGs 544 and 535 With New Severity Levels
MS–DRG
Number of cases
Average length of stay
Average  chargesMS–DRG 466
3,886
9.55
$69,649.08MS–DRG 467
10,078
6.06
48,575.01MS–DRG 468
26,718
4.06
38,720.28MS–DRG 483
28,211
8.46
53,676.09MS–DRG 484
390,344
4.03
33,465.85
 AAHKS analyzed Medicare data under the CMS DRG system and was unaware of how its analysis would change under the proposed MS–DRGs. Under the CMS DRGs, the AAHKS recommendation would replace 2 DRGs with 4 new ones. However, under the proposed MS– DRGs, the AAHKS recommendation would result in 5 DRGs becoming 12. Because AAHKS is recommending four new joint replacement DRGs (two for knees and two for hips), each would need to be subdivided into severity levels under our proposed MS–DRG system. Therefore, the four new joint DRGs could be subdivided into three levels each, leading to 12 new DRGs. For the proposed rule, we indicated that the changes we proposed to adopt are sufficiently better for recognizing severity of illness among the hip and knee replacement cases. We did not believe that there would be significant improvements in the proposed MS–DRGs' recognition of severity of illness from creating an additional 7 DRGs. However, we acknowledged the valuable assistance the AAHKS had provided to CMS in creating the new joint replacement procedure codes and modifying the joint replacement DRGs beginning in FY 2006. These efforts greatly improved our ability to categorize significantly different groups of patients according to severity of illness. In the proposed rule, we welcomed comments from AAHKS on whether the proposed MS–DRGs recognize patient complexity and severity of illness in the hip and knee replacement DRGs consistent with the concerns it expressed to us in previous comments. We also welcomed public comments from others on whether the proposed changes to the hip and knee replacement DRGs better recognize severity of illness and complexity of these operations in the Medicare patient population. *Comment:*
                         Two commenters supported CMSs' efforts to refine the DRG system to better identify costs associated with different joint procedures. The commenters encouraged CMS to continue working with the orthopedic community, including AAHKS, to monitor the need for additional new DRGs. The commenters stated that proposed MS–DRGs 466 through 470 are a good first step. However, they stated that CMS should continue to evaluate the data for these procedures and consider additional refinements to the MS–DRGs, including the need for additional severity levels. *Response:*
                         We agree that MS–DRGs better identify resource costs for joint procedures than do the CMS DRGs. The AAHKS and others are welcome to suggest additional refinements to us if they believe further improvements are needed. *Comment:*
                         One commenter (AAHKS) stated that it was pleased that CMS decided to recognize both surgical complexity and medical severity of illness in the MS–DRGs. The commenter stated that MS–DRGs are more reflective of procedural complexity than the CS–DRGs proposed last year. In addition, the commenter believed that the process is fairly straightforward, making it easier to understand, with the grouping logic available in the public domain. However, the commenter raised several concerns about the proposed joint replacement and revision MS–DRGs. AAHKS stated that its data suggest that all three base DRGs (primary replacement, revision of major joint replacement, and bilateral joint replacement) should be separated into three severity levels (that is, MCC, CC, and non-CC). We proposed three severity levels for revision of hip and knee replacement (MS–DRGs 466, 467, and 468). The commenter agreed with this 3-level subdivision. The commenter recommended that the base DRG for the proposed two severity subdivision MS–DRGs for major joint replacement or reattachment of lower extremity with and without CC/MCC (MS–DRGs 483 and 484) be subdivided into three severity levels, as was the case for the revision of hip and knee replacement MS–DRGs. The commenter also recommended that the two severity subdivision MS–DRGs for bilateral or multiple major joint procedures of lower extremity with and without MCC (MS–DRGs 461 and 462) be subdivided three ways for this base DRG. The commenter acknowledged that the three-way split would not meet all five of the criteria for establishing a subgroup, and stated that these criteria were too restrictive, lack face validity, and create perverse admission selection incentives for hospitals by significantly overpaying for cases without a CC and underpaying for cases with a CC. The commenter recommended that the existing five criteria be modified for low volume subgroups to assure materiality. For higher volume MS–DRG subgroups, the commenter recommended that two other criteria be considered, particularly for nonemergency, elective admissions: Is the per-case underpayment amount significant enough to affect admission vs. referral decisions on a case-by-case basis?
                    Is the total level of underpayments sufficient to encourage systematic admission vs. referral policies, procedures, and marketing strategies? The commenter also recommended refining the five existing criteria for MCC/CC without subgroups as follows: Create subgroups if they meet the five existing criteria, with cost difference between subgroups ($1,350) substituted for charge difference between subgroups ($4,000);
                    If a proposed subgroup meets criteria number 2 and 3 (at least 5 percent and at least 500 cases) but fails one of the others, then create the subgroup if either of the following criteria are met:
                    At least $1,000 cost difference per case between subgroups; or
                    At least $1 million overall cost should be shifted to cases with a CC (or( print page 47225)
                        MCC) within the base DRG for payment weight calculations. *Response:*
                         In section II.B.3. of this preamble, we respond to the recommendation that we modify our five criteria for creating severity subgroups and state we do not believe it is appropriate to do so at this time. At this time, we believe the criteria we established to create subdivisions within a base DRG are reasonable and establish the appropriate balance between better recognition of severity of illness, sufficient differences between the groups, and a reasonable number of cases in each subgroup. However, we may consider further modifications to the criteria at a later date once we have had some experience with MS–DRGs created using the proposed criteria. We examined data for the base DRGs for MS–DRGs 461 and 462 (Bilateral or Multiple Major Joint Procedures of Lower Extremity with MCC and without MCC, respectively) as well as the base DRGs for MS–DRGs 469 and 470 (Major Joint Replacement or Reattachment of Lower Extremity with CC and without CC, respectively) for the proposed rule. Our data did not support creating additional subdivisions based on the criteria we proposed. *Comment:*
                         Another commenter (AAHKS) continued to support the separation of routine and complex joint procedures. The commenter believed that certain joint replacement procedures have significantly lower average charges than do other joint replacements. The commenter's data suggest that more routine joint replacements are associated with substantially less resource utilization than other more complex revision procedures. The commenter stated that leaving these procedures in the revision MS–DRGs results in substantial overpayment for these relatively simple, less costly revision procedures, which in turn results in a relative underpayment for the more complex revision procedures. *Response:*
                         We examined data on this issue and identified two procedure codes for partial knee revisions that had significantly lower average charges than did other joint revisions. The two codes are as follows: 00.83 Revision of knee replacement, patellar component
                    00.84 Revision of total knee replacement, tibial insert (liner) The following table illustrates our findings for MS–DRG 466 (Revision of Hip or Knee Replacement with MCC), MS–DRG 467 (Revision of Hip or Knee replacement with CC), and MS–DRG 468 (Revision of Hip or Knee Replacement without CC/MCC): MS–DRG
Number of cases
Average length of stay
Average chargesMS–DRG 466—All cases
3,886
9.55
$69,649.08MS–DRG 466 with code 00.83 or 00.84 only
258
10.53
54,141.72MS–DRG 467—All cases
10,078
6.06
48,575.01MS–DRG 467 with code 00.83 or 00.84 only
955
5.47
31,191.04MS–DRG 468—All cases
26,718
4.06
38,720.28MS–DRG 468 with code 00.83 or 00.84 only
2,718
3.45
22,799.31
 Cases with codes 00.83 and 00.84 have significantly lower charges than do other cases in these DRGs. For cases in MS–DRG 466, those with codes 00.83 or 00.84 have average charges of $54,141.72 compared to average charges of $69,646.08 for all cases within the DRG, a difference of $15,507.36. There is a difference of $17,383.97 for MS–DRG 467 and $15,920.97 for MS–DRG 468. The data suggest that these less complex partial knee revisions are less resource intensive than other cases assigned to MS–DRGs 466, 467, or 468. We examined other orthopedic DRGs to which these two codes could be assigned. As can be seen in the table below, these cases have very similar average charges to those in MS–DRG 485 (Knee Procedures with Principal Diagnosis of Infection with MCC), MS–DRG 486 (Knee Procedures with Principal Diagnosis of Infection with CC), MS–DRG 487 (Knee Procedures with Principal Diagnosis of Infection without CC), MS–DRG 488 (Knee Procedures without Principal Diagnosis of Infection with CC or MCC), and MS–DRG 489 (Knee Procedures without Principal Diagnosis of Infection without CC). MS–DRG
Number of cases
Average length of stay
Average chargesMS–DRG 485—All cases
916
12.69
$59,722.69MS–DRG 485 with code 00.83 or 00.84 only
174
11.71
57,649.86MS–DRG 486—All cases
1,461
8.39
37,730.19MS–DRG 486 with code 00.83 or 00.84 only
336
7.73
37,315.10MS–DRG 487—All cases
1,139
5.84
27,184.41MS–DRG 487 with code 00.83 or 00.84 only
262
7.73
29,142.35MS–DRG 488—All cases
1,462
5.66
30,073.21MS–DRG 488 with code 00.83 or 00.84 only
703
4.24
30,138.06MS–DRG 489—All cases
3,687
3.11
18,865.79MS–DRG 489 with code 00.83 or 00.84 only
2,456
3.18
22,122.64
 Given the very similar resource requirements of MS–DRG 485 and the fact that these DRGs also contain knee procedures, we will move codes 00.83 and 00.84 out of MS–DRGs 466, 467, and 468 and into MS–DRGs 485, 486, 487, 488, and 489. We will continue to monitor the revision DRGs to determine if additional modifications are needed. *Comment:*
                         One commenter expressed concern about the grouper logic for assigning cases to MS–DRG 471 (Bilateral or Multiple Major Joint Procedures of Lower Extremity (current CMS–DRG 471)). Specifically, the commenter stated that the following bilateral joint replacements should be, 
                        ( print page 47226)
                        but are not, assigned to MS–DRGs 461 and 462. A patient receives identical acetabular revisions of both hips (00.71 and 00.71).
                    A patient receives a total revision of one hip (00.70) and an acetabular revision of the other hip (00.71).
                    A patient receives both a total hip replacement (81.51) and a total knee replacement (81.54).
                    A patient receives both a total revision of one hip (00.70) and a total replacement of the other hip (81.51). *Response:*
                         We addressed this issue in the FY 2007 final rule and do not believe additional modifications are needed. We are providing the following summary of the previous action. After publication of the FY 2006 IPPS final rule, a number of hospitals and coding personnel advised us that the DRG logic for CMS DRG 471 (Bilateral or Multiple Major Joint Procedures of Lower Extremity), which utilizes the new and revised hip and knee procedure codes under CMS DRGs 544 and 545, also includes codes that describe procedures that are not bilateral or that do not involve multiple major joints. CMS DRG 471 was developed to include cases where major joint procedures such as revisions or replacements were performed either bilaterally or on two joints of one lower extremity. We changed the logic for CMS DRG 471 in FY 2006 for the first time when we added the new and revised codes. The commenters indicated that, by adding the more detailed codes that do not include total revisions or replacements to the list of major joint procedures to CMS DRG 471, we were assigning cases to CMS DRG 471 that did not have bilateral or multiple joint procedures. For example, when a hospital reported a code for revision of the tibial component (code 00.81) and patellar component of the right knee (code 00.83), the FY 2006 DRG logic assigned the case to CMS DRG 471. The commenters indicated that this code assignment was incorrect because only one joint has undergone surgery, but two components were used. One commenter indicated that ICD–9–CM did not identify left/right laterality. Therefore, it was difficult to use the current coding structure to determine if procedures were performed on the same leg or on both legs. The commenters raised concern about whether CMS intended to pay hospitals using CMS DRG 471 for procedures performed on one joint. The commenters indicated that the DRG assignments for these codes would also make future data analysis misleading. The commenters recommended removing codes from CMS DRG 471 that do not specifically identify bilateral or multiple joint procedures so that it would only include cases involving the more resource intensive cases of bilateral or multiple total joint replacements and revisions. We agreed that the new and revised joint procedure codes should not be assigned to CMS DRG 471 unless they include bilateral and multiple joints. Therefore, in the FY 2007 IPPS final rule, we removed the following codes from CMS DRG 471 that did not identify bilateral and multiple joint revisions or replacements: 00.71, Revision of hip replacement, acetabular component
                    00.72, Revision of hip replacement, femoral component
                    00.73, Revision of hip replacement, acetabular liner and/or femoral head only
                    00.81, Revision of knee replacement, tibial component
                    00.82, Revision of knee replacement, femoral component
                    00.83, Revision of knee replacement, patellar component
                    00.84, Revision of total knee replacement, tibial insert (liner)
                    81.53, Revision of hip replacement, not otherwise specified
                    81.55, Revision of knee replacement, not otherwise specified DRG 471 contains the following codes: 00.70, Revision of hip replacement, both acetabular and femoral components
                    00.80, Revision of knee replacement, total (all components)
                    00.85, Resurfacing hip, total, acetabulum and femoral head
                    00.86, Resurfacing hip, partial, femoral head
                    00.87, Resurfacing hip, partial, acetabulum
                    81.51, Total hip replacement
                    81.52, Partial hip replacement
                    81.54, Total knee replacement
                    81.56, Total ankle replacement As a result of the removal of the identified codes from CMS DRG 471 in FY 2007, the reporting of one or more of the following hip or knee revision codes would be assigned to DRG 545: 00.71, 00.72, 00.73, 00.81, 00.82, 00.83, 00.84, 81.53, and 81.55. This list included partial revisions of the knee and hip as well as unspecified joint procedures such as code 81.55 where it was not clear if the revision is total or partial. Given this historical information of the changes we made in FY 2007, we will address the current commenter's concerns. The commenter's first scenario in which a patient received identical acetabular revisions of both hips 00.71 and 00.71 would not be assigned to CMS DRG 471 (Bilateral or Multiple Major Joint Procedures of Lower Extremity), which becomes MS–DRGs 461 and 462. Even though this scenario identified revisions to two joints, they were both partial revisions that were less resource intensive than full bilateral or multiple joint revisions or replacements. In our view, the decision not to assign these cases to CMS DRG 471 was consistent with the public comments we received on the FY 2007 IPPS rule to ensure that CMS DRG 471 includes only full bilateral or multiple joint replacements or revisions. Similarly, the second scenario in which a patient receives a total revision of one hip (00.70) and a partial acetabular revision of the other hip (00.71) would not lead to the assignment of CMS DRG 471 for the same reason. As with the first scenario, code 00.71 was not included in CMS DRG 471. There was only one total and one partial joint revision in this scenario. Again, we believe that our decision not to assign these cases to CMS DRG 471 was consistent with the public comments to only include bilateral or multiple full revisions or replacements in this DRG. The third and fourth scenarios in which a patient received both a total hip replacement (81.51) and a total knee replacement (81.54) and another patient received both a total revision of one hip (00.70) and a total replacement of the other hip (81.51) would be assigned to CMS DRG 471. These are either full replacements or revisions on multiple joints. As we adopted the same logic to assign cases under the MS–DRGs as under the CMS DRGs, only full replacements or revisions of multiple joints will be included in MS–DRGs 461 and 462 (the MS–DRG analog to CMS DRG 471). Therefore, we are not making any revisions to the bilateral or multiple major joint procedures of lower extremity DRGs, MS DRG 461 and 462. The same procedure code DRG logic used in CMS DRG 471 will be applied to MS DRGs 461 and 462. b. Spinal Fusions In the FY 2007 IPPS final rule (71 FR 47947), we discussed a request that urged CMS to consider applying a severity concept to all of the back and spine surgical cases, similar to the approach that was used in the FY 2006 final rule in refining the cardiac DRGs with an MCV. Specifically, the commenter recommended that the use of spinal devices be uniquely identified within the spine DRGs. The commenter's suggestion involved the development of 10 new spine DRGs as 
                        ( print page 47227)
                        well as additional modifications. One of these modifications included revising CMS DRG 546 (Spinal Fusions Except Cervical with Curvature of the Spine or Malignancy). The commenter stated CMS DRG 546 did not adequately recognize clinical severity or the resource differences among spinal fusion patients whose surgeries include fusing multiple levels of their spinal vertebrae. We agreed with the commenter that it was important to recognize severity when classifying groups of patients into specific DRGs. In addition, in response to recommendations from MedPAC's March 2005 Report to Congress, we stated that we were conducting a comprehensive analysis of the entire DRG system to determine if we could better identify severity of illness. We further stated that until results from our analysis were available, it would be premature to implement a severity concept for the spine DRGs. Therefore, we did not make any adjustments to those DRGs at that time. Under the MS–DRGs described in section II.D. of the preamble of the proposed rule, we proposed a number of refinements that would better recognize severity for FY 2008. The proposed MS–DRGs, which we are adopting in this final rule with comment period, included several refinements to the spine DRGs. These refinements are described in detail below. In the FY 2006 IPPS final rule, we noted that there are numerous innovations occurring in spinal surgery such as artificial spinal disc prostheses, kyphoplasty, vertebroplasty and the use of spine decompression devices. As part of our analysis of the DRG system for the proposed rule, we did a comprehensive review of the DRGs for spinal fusion and other back and neck procedures to determine whether additional refinements beyond the proposed MS–DRGs were necessary. We studied data from the FY 2006 MedPAR file for the entire group of spine DRGs. This group included DRG 496 (Combined Anterior/Posterior Spinal Fusion), DRGs 497 and 498 (Spinal Fusion Except Cervical with and without CC, respectively), DRGs 499 and 500 (Back and Neck Procedures Except Spinal Fusion with and without CC, respectively), DRGs 519 and 520 (Cervical Spinal Fusion with and without CC, respectively), and DRG 546 (Spinal Fusion Except Cervical with Curvature of the Spine or Malignancy). As indicated earlier, we proposed a two or three-way split for each of these spine DRGs to better recognize severity of illness, complexity of service, and resource utilization. In addition, we examined the procedure codes that identify multiple fusion or refusion of the vertebrae (codes 81.62 through 81.64) to determine if the data supported further refinement when a greater number of vertebrae are fused. In applying the proposed MS–DRG logic, CMS DRG 497 and 498 were collapsed and the result was a split with two severity levels: proposed MS–DRG 459 (Spinal Fusion Except Cervical with MCC) and proposed MS–DRG 460 (Spinal Fusion Except Cervical without MCC). There were a total of 51,667 cases in proposed MS–DRGs 459 and 460. We identified 288 cases where nine or more (T1–S1) vertebrae were fused (code 81.64) that we proposed to assign to MS–DRGs 459 and 460. The average charges and length of stay for cases in these MS–DRGs were closer to the average charges and length of stay for cases in proposed MS–DRGs 456 through 458 (Spinal Fusion Except Cervical with Curvature of the Spine or Malignancy with MCC, with CC, and without CC, respectively). For example, in proposed MS–DRG 460, there were 238 cases with an average length of stay of 6.20 days and average charges of $110,908 when nine or more noncervical (T1–S1) vertebrae are fused. There were an additional 50 cases in which nine or more vertebrae were fused in proposed MS–DRG 459 with average charges of $171,839. Without any further modification to the proposed MS–DRGs, these cases would be assigned to proposed MS–DRGs 459 and 460 that have average charges of $59,698 and $99,298, respectively. However, we believe that the average charges for these cases ($142,871, $95,489, and $77,528, respectively) are more comparable to the average charges for cases in proposed MS–DRGs 456 through 458. We believe these data support assigning cases where nine or more noncervical (T1–S1) vertebrae are fused from MS–DRG 459 and 460 into MS–DRG 456 through 458. The table below represents our findings. MS–DRG
Number of cases
Average length of stay
Average chargesMS–DRG 459 (Spinal Fusion Except Cervical with MCC)—All Cases
3,186
10.10
$99,298MS–DRG 459 (Spinal Fusion Except Cervical with MCC)—Cases with Procedure Code 81.64 (Fusion or refusion of 9 or more vertebrae)
50
13.00
171,839MS–DRG 460 (Spinal Fusion Except Cervical without MCC)—All Cases
48,481
4.36
59,698MS–DRG 460 (Spinal Fusion Except Cervical without MCC)—Cases with Procedure Code 81.64 (Fusion or refusion of 9 or more vertebrae)
238
6.20
110,908MS–DRG 456 (Spinal Fusion Except Cervical with Curvature of the Spine or Malignancy with MCC)—All Cases
548
14.79
142,871MS–DRG 456 (Spinal Fusion Except Cervical with Curvature of the Spine or Malignancy with MCC)—Cases with Procedure Code 81.64 (Fusion or refusion of 9 or more vertebrae)
61
13.34
170,655MS–DRG 457 (Spinal Fusion Except Cervical with Curvature of the Spine or Malignancy with CC)—All Cases
1,500
8.14
95,489MS–DRG 457 (Spinal Fusion Except Cervical with Curvature of the Spine or Malignancy with CC)—Cases With Procedure Code 81.64 (Fusion or refusion of 9 or more vertebrae)
146
8.88
125,722MS–DRG 458 (Spinal Fusion Except Cervical with Curvature of the Spine or Malignancy without CC)—All Cases
1,340
4.58
77,528MS–DRG 458 (Spinal Fusion Except Cervical with Curvature of the Spine or Malignancy without CC)—Cases with Procedure Code 81.64 (Fusion or refusion of 9 or more vertebrae)
81
6.21
123,823
 Therefore, we proposed to move those cases that include fusing or refusing nine or more noncervical (T1–S1) vertebrae from MS–DRGs 459 and 460 into MS DRGs 456 though 458. This modification would include revising the MS–DRG title to reflect the fusion or refusion of nine or more noncervical (T1–S1) vertebrae. The revised titles for proposed MS–DRGs 456 through 458 would be as follows: 
                        ( print page 47228) MS–DRG 456 (Spinal Fusion Except Cervical with Spinal Curvature or Malignancy or 9+ Fusions with MCC)
                    MS–DRG 457 (Spinal Fusion Except Cervical with Spinal Curvature or Malignancy or 9+ Fusions with CC)
                    MS–DRG 458 (Spinal Fusion Except Cervical with Spinal Curvature or Malignancy or 9+ Fusions without CC/MCC) In the FY 2008 IPPS proposed rule, we invited public comment on this topic as well as on the additional changes we proposed to the spine MS–DRGs discussed below. Further analysis demonstrated that spinal fusion cases with a principal diagnosis of tuberculosis or osteomyelitis also have higher average charges than other cases in CMS DRG 497 (MS–DRGs 459 and 460 in this final rule with comment period) that were more similar to the cases assigned to CMS DRG 546 (MS–DRGs 456 through 458 in this final rule with comment period). Although the volume of cases is relatively low, the data show very high average charges for these patients. The following tables display our results: MS–DRGs
Number of cases
Average length of stay
Average chargesMS–DRG 459 (Spinal Fusion Except Cervical with MCC)
3,186
10.10
$99,298MS–DRG 460 (Spinal Fusion Except Cervical without MCC)
48,481
4.36
59,698MS–DRG 456 (Spinal Fusion Except Cervical with Spinal Curvature or Malignancy or 9+ Fusions with MCC)
548
14.79
142,870MS–DRG 457 (Spinal Fusion Except Cervical with Spinal Curvature or Malignancy or 9+ Fusions with CC)
1,500
8.14
95,489MS–DRG 458 (Spinal Fusion Except Cervical with Spinal Curvature or Malignancy or 9+ Fusions without CC/MCC)
1,340
4.58
77,528
 Tuberculosis and Osteomyelitis
Principal diagnosis
Number of cases
Average length of stay
Average chargesCodes 015.02, 015.04, 015.05, 730.08, 730.18 and 730.28
194
24.8
$128,073
 For this reason, we proposed to add the following diagnoses to the principal diagnosis list for MS–DRGs 456 through 458: 015.02, Tuberculosis of bones and joints, vertebral column, bacteriological or histological examination unknown (at present)
                    015.04, Tuberculosis of bones and joints, vertebral column, tubercle bacilli not found (in sputum) by microscopy, but found by bacterial culture
                    015.05, Tuberculosis of bones and joints, vertebral column, tubercle bacilli not found by bacteriological examination, but tuberculosis confirmed histologically
                    730.08, Acute osteomyelitis of other specified sites
                    730.18, Chronic osteomyelitis of other specified sites
                    730.28, Unspecified osteomyelitis of other specified sites. For the complete list of principal diagnosis codes that lead to assignment of CMS DRG 546 (MS–DRGs 496 through 498 in this final rule with comment period), we refer readers to section II.D.4.b. of the preamble of the FY 2007 IPPS final rule (71 FR 47947). *Comment:*
                         One commenter expressed support of CMS’ refinement of the DRGs for spinal procedures, and noted that it had made several recommendations in the past. Specifically, this commenter was pleased with the refinements to address multiple level procedures such as those in proposed MS–DRGs 456–458 (Spinal Fusion Except Cervical with Spinal Curvature or Malignancy or 9+ Fusions with MCC/with CC/and without CC/MCC, respectively), as well as the proposal to add specified diagnoses of tuberculosis and osteomyelitis to the list of principal diagnoses for MS–DRGs 456–458. The commenter also supported the proposal to move cases involving the use of motion-preserving spine devices into the higher severity level of MS–DRG 490. This commenter suggested that MS–DRG 460 (Spinal Fusion Except Cervical without MCC) should include severity levels that distinguish with CC and without CC cases. The commenter urged CMS to create a CC split for this MS–DRG. *Response:*
                         We appreciate the commenter's support for the refinements proposed to the spine DRGs. The data analysis conducted in developing the MS–DRGs did not support a CC split for proposed MS–DRG 460. As stated in the FY 2008 proposed rule, in order to warrant creation of a CC or major CC subgroup within a base MS–DRG, the subgroup had to meet all five criteria. We refer readers to the FY 2008 proposed rule (72 FR 24705) and section II.D.3 of this final rule with comment period for a complete listing of the criteria. As stated in the proposed rule, the data did support a split for proposed MS–DRG 460 with two severity levels of with MCC and without MCC. Therefore, in this final rule with comment period we are implementing MS–DRG 460 as final policy. *Comment:*
                         One manufacturer requested that CMS reassign newly created procedure code 84.82 (Insertion or replacement of pedicle-based dynamic stabilization device(s)), effective October 1, 2007, from proposed MS–DRG 490 to MS–DRG 460. The commenter stated the surgical procedure requirements for code 84.82 are very similar to other procedures that were proposed for assignment to MS–DRG 460 as a result of the complexity and resources utilized. The commenter further noted that in the FY 2008 proposed rule (72 FR 24734) CMS reported a total of 83 cases identified by code 84.59 (Insertion of other spinal devices) a predecessor code to 84.82 and it is unknown whether the cases reported with code 84.59 truly reflect dynamic stabilization procedures. *Response:*
                         In developing the MS–DRGs, we conducted a comprehensive review of the entire group of spine DRGs and proposed a number of revisions to account for differences in level of severity, complexity, and resource utilization. We believe the proposed spinal MS–DRGs more appropriately classify the variety of emerging spinal technologies. In response to the uncertainty of correct coding and 
                        ( print page 47229)
                        accurate charge information for the reporting of pedicle-based dynamic stabilization devices by code 84.59, we refer the commenter to the ICD–9–CM Coordination and Maintenance Committee Meeting's September 28–29, 2006 and March 22–23, 2007 interim coding advice regarding these devices, which was to continue using code 84.59 to describe this technology. Effective October 1, 2007, new code 84.82 will be available to identify and describe procedures using pedicle-based dynamic stabilization devices more accurately. Our practice has been to assign a new code to the same MS–DRG as its predecessor code unless we have clinical information or cost data that demonstrates a different MS–DRG assignment is warranted. At this time, we have no information to suggest that ICD–9–CM code 84.82 should be reassigned from MS–DRG 490. As final policy for FY 2008, code 84.82 will be assigned to MS–DRG 490. *Comment:*
                         Two commenters indicated that they supported the reassignment of spinal fusion cases with a principal diagnosis of tuberculosis or osteomyelitis to MS–DRGs 456–458 (Spinal Fusion Except Cervical with Spinal Curvature or Malignancy or 9+ Fusions with MCC/with CC/and Without CC/MCC, respectively) to better recognize the utilization of resources involved with these cases, however they recommended that the MS–DRG titles be modified to reflect these conditions. One of the commenters suggested the following title modifications: MS–DRG 456 (Spinal Fusion Except Cervical with Spinal Curvature, Malignancy, Tuberculosis, or Osteomyelitis or 9+ Fusions with MCC)
                    MS–DRG 457 (Spinal Fusion Except Cervical with Spinal Curvature, Malignancy, Tuberculosis, or Osteomyelitis or 9+ Fusions with CC)
                    MS–DRG 458 (Spinal Fusion Except Cervical with Spinal Curvature, Malignancy, Tuberculosis, or Osteomyelitis or 9+ Fusions without CC/MCC) *Response:*
                         We appreciate the commenter's support of the proposal to reassign cases with a principal diagnosis of tuberculosis or osteomyelitis to MS–DRGs 456–458. We also appreciate the suggestion for revising the DRG titles to better classify these patients. While we recognize the creative approach to modifying the code titles, we must limit the DRG titles to 68 characters. We have reviewed the MS–DRG titles and are revising them as follows: MS–DRG 456 (Spinal Fusion Except Cervical with Spinal Curvature or Malignancy or 9+ Fusions with MCC)
                    MS–DRG 457 (Spinal Fusion Except Cervical with Spinal Curvature or Malignancy or 9+ Fusions with CC)
                    MS–DRG 458 (Spinal Fusion Except Cervical with Spinal Curvature or Malignancy or 9+ Fusions without CC/MCC) Therefore, effective October 1, 2007, the new titles for MS–DRGs 456–458 will be implemented as above. c. Spinal Disc Devices Over the past several years, manufacturers of spinal disc devices have requested reassignment of DRGs for their products and applied for new technology add-on payment. CHARITETM
                         is one of these devices. CHARITETM
                         is a prosthetic intervertebral disc. On October 26, 2004, the FDA approved the CHARITETM
                         Artificial Disc for single level spinal arthroplasty in skeletally mature patients with degenerative disc disease between L4 and S1. On October 1, 2004, we created new procedure codes for the insertion of spinal disc prostheses (codes 84.60 through 84.69). We provided the CMS DRG assignments for these new codes in Table 6B of the FY 2005 IPPS proposed rule (69 FR 28673). We received comments on the FY 2005 proposed rule recommending that we change the assignments for these codes from CMS DRG 499 (Back and Neck Procedures Except Spinal Fusion with CC) and CMS DRG 500 (Back and Neck Procedures Except Spinal Fusion without CC) to the CMS DRGs for spinal fusion, CMS DRG 497 (Spinal Fusion Except Cervical with CC) and CMS DRG 498 (Spinal Fusion Except Cervical without CC), for procedures on the lumbar spine and to CMS DRGs 519 and 520 for procedures on the cervical spine. In the FY 2005 IPPS final rule (69 FR 48938), we indicated that CMS DRGs 497 and 498 are limited to spinal fusion procedures. Because the surgery involving the CHARITETM
                         Artificial Disc is not a spinal fusion, we decided not to include this procedure in these CMS DRGs. However, we stated that we would continue to analyze this issue and solicited further public comments on the DRG assignment for spinal disc prostheses. In the FY 2006 final rule (70 FR 47353), we noted that, if a product meets all of the criteria for Medicare to pay for the product as a new technology under section 1886(d)(5)(K) of the Act, there is a clear preference expressed in the statute for us to assign the technology to a DRG based on similar clinical or anatomical characteristics or costs. However, for FY 2006, we did not find that the CHARITETM
                         Artificial Disc met the substantial clinical improvement criterion and, thus, did not qualify as a new technology. Consequently, we did not address the DRG classification request made under the authority of this provision of the Act. We did evaluate whether to reassign the CHARITETM
                         Artificial Disc to different CMS DRGs using the Secretary's authority under section 1886(d)(4) of the Act (70 FR 47308). We indicated that we did not have Medicare charge information to evaluate CMS DRG changes for cases involving an implant of a prosthetic intervertebral disc like the CHARITETM
                         and did not make a change in its CMS DRG assignments. We stated that we would consider whether changes to the CMS DRG assignments for the CHARITETM
                         Artificial Disc were warranted for FY 2007, once we had information from Medicare's data system that would assist us in evaluating the costs of these patients. As we discussed in the FY 2007 IPPS proposed rule (71 FR 24036), we received correspondence regarding the CMS DRG assignments for the CHARITETM
                         Artificial Disc, code 84.65 (Insertion of total spinal disc prosthesis, lumbosacral). The commenter had previously submitted an application for the CHARITETM
                         Artificial Disc for new technology add-on payments for FY 2006 and had requested a reassignment of cases involving CHARITETM
                         implantation to CMS DRGs 497 and 498. The commenter asked that we examine claims data for FY 2005 and reassign procedure code 84.65 from CMS DRGs 499 and 500 into CMS DRGs 497 and 498. The commenter again stated the view that cases with the CHARITETM
                         Artificial Disc reflect comparable resource use and similar clinical indications as do those in CMS DRGs 497 and 498. If CMS were to reject reassignment of the CHARITETM
                         Artificial Disc to CMS DRGs 497 and 498, the commenter suggested creating two separate DRGs for lumbar disc replacements. On February 15, 2006, we posted a proposed national coverage determination (NCD) on the CMS Web site seeking public comment on our proposed finding that the evidence is not adequate to conclude that lumbar artificial disc replacement with the CHARITETM
                         Artificial Disc is reasonable and necessary. The proposed NCD stated that lumbar artificial disc replacement with the CHARITETM
                         Artificial Disc is generally not indicated in patients over 60 years old. Further, it stated that there is insufficient evidence among either the aged or disabled Medicare population to make a 
                        ( print page 47230)
                        reasonable and necessary determination for coverage. With an NCD pending to make spinal arthroplasty with the CHARITETM
                         Artificial Disc noncovered, we indicated in the FY 2007 IPPS proposed rule that we did not believe it was appropriate at that time to reassign procedure code 84.65 from CMS DRGs 499 and 500 to CMS DRGs 497 and 498. After considering the public comments and additional evidence received, we made a final NCD on May 16, 2006, that Medicare would not cover the CHARITETM
                         Artificial Disc for the Medicare population over 60 years of age. For Medicare beneficiaries 60 years of age and under, local Medicare contractors have the discretion to determine coverage for lumbar artificial disc replacement procedures involving the CHARITETM
                         Artificial Disc. The final NCD can be found on the CMS Web site at: 
                        *http://www.cms.hhs.gov/​mcd/​viewncd.asp:ncd_​id-150.10​ncd_​version1​basket=​ncd%3A150%2E10%3A1%3ALumbar+​Artificial+​Disc+​Replacement%280ADR%29.* We agreed with a commenter on the FY 2007 IPPS proposed rule that it was not appropriate to consider a DRG revision at that time for the CHARITETM
                         Artificial Disc, given the recent decision to limit coverage for surgical procedures involving this device. Although we had reviewed the Medicare charge data, we were concerned that there were a very small number of cases for patients under 60 years of age who had received the CHARITETM
                         Artificial Disc. We believed it appropriate to base the decision of a DRG change on charge data only on the population for which the procedure is covered. We had an extremely small number of cases for Medicare beneficiaries under 60 on which to base such a decision. For this reason, we did not believe it was appropriate to modify the CMS DRGs in FY 2007 for CHARITETM
                         cases. For FY 2008, we proposed to collapse CMS DRGs 499 and 500 (Back and Neck Procedures Except Spinal Fusion With and Without CC, respectively) and identified a total of 74,989 cases. Under the proposed MS–DRGs (which we are adopting in this final rule with comment period), the result of the analysis of the data supports that these CMS DRGs split into two severity levels: MS–DRG 490 (Back and Neck Procedures Except Spinal Fusion with CC or MCC) and MS–DRG 491 (Back and Neck Procedures Except Spinal Fusion Without CC or MCC). We found a total of 53 cases that used the CHARITETM
                         Artificial Disc. Without any further modification to the proposed MS–DRGs, average charges are $26,481 for 6 cases with a CC or MCC and $37,324 for 47 CHARITETM
                         cases without a CC or MCC. (We find it counterintuitive that average charges for cases in the higher severity level are lower but checked our data and found it to be correct). We also analyzed data for other spinal disc devices. Average charges for the X Stop Interspinous Process Decompression Device (code 84.58) are $31,400 for cases with a CC or MCC and $28,821 for cases without a CC or MCC. Average charges for other specified spinal devices described by code 84.59 (Coflex, Dynesys, M-Brace) are $34,002 for 18 cases with a CC or MCC and $33,873 for 65 cases without a CC or MCC. We compared these average charges to data in the proposed spinal fusion MS–DRGs 453 (Combined Anterior/Posterior Spinal Fusion With MCC), 454 (Combined Anterior/Posterior Spinal Fusion with CC), 455 (Combined Anterior/Posterior Spinal Fusion without CC/MCC), 459 (Spinal Fusion Except Cervical with MCC), and 460 (Spinal Fusion Except Cervical without MCC). These cases have lower average charges than the spinal fusion MS–DRGs. The following tables display the results: MS–DRGs 490 and 491
Number of cases
Average length of stay
Average chargesMS–DRG 490—All Cases
17,493
5.13
$29,656MS–DRG 490—Cases with Procedure Code 84.65 (CHARITETM
                                )
6
3.33
26,481MS–DRG 491—All Cases
57,496
2.27
17,789MS–DRG 491—Cases with Procedure Code 84.65 (CHARITETM
                                )
47
2.43
37,324MS–DRG 491—Cases without Procedure Code 84.65 (CHARITETM
                                )
57,449
2.27
17,773MS–DRG 490—All Cases
17,493
5.13
29,656MS–DRG 490—Cases with Procedure Code 84.58 (X Stop)
179
2.65
31,400MS–DRG 490—Cases without Procedure Code 84.58 (X Stop)
17,314
5.15
29,638MS–DRG 491—All Cases
57,496
2.27
17,789MS–DRG 491—Cases with Procedure Code 84.58 (X Stop)
1,174
1.34
28,821MS–DRG 491—Cases without Procedure Code 84.58 (X-Stop)
56,322
2.29
17,559MS–DRG 490—All Cases
17,493
5.13
29,656MS–DRG 490—Cases with Procedure Code 84.59 (Coflex/Dynesys/M-Brace)
18
5.56
34,002MS–DRG 490—Cases without Procedure Code 84.59 (Coflex/Dynesys/M-Brace)
17,475
5.13
29,651MS–DRG 491—All Cases
57,496
2.27
17,789MS–DRG 491—Cases with Procedure Code 84.59 (Coflex/Dynesys/M-Brace)
65
2.35
33,873MS–DRG 491—Cases without Procedure Code 84.59 (Coflex/Dynesys/M-Brace)
57,431
2.27
17,770
 MS–DRGs 453, 454, 455, 459 and 460
Number of cases
Average length of stay
Average  chargesMS–DRG 453—Combined Anterior/Posterior Spinal Fusion With MCC
792
15.84
$180,658MS–DRG 454—Combined Anterior/Posterior Spinal Fusion With CC
1,411
8.69
116,402MS–DRG 455—Combined Anterior/Posterior Spinal Fusion Without CC/MCC
1,794
4.84
85,927MS–DRG 459—Spinal Fusion Except Cervical with MCC
3,186
10.10
99,298MS–DRG 460—Spinal Fusion Except Cervical without MCC
48,481
4.36
59,698
 The data demonstrate that the average charges for CHARITETM
                         and the other devices are higher than other cases in proposed MS–DRGs 490 and 491 but lower than proposed MS–DRGs 453 through 455 and 459 and 460. For this reason, we do not believe that any of the cases that use these spine devices should be assigned to the spinal fusion 
                        ( print page 47231)
                        MS–DRGs. However, we do believe that the average charges for cases using these spine devices are more similar to the higher severity level in MS–DRG 490. As such, in the FY 2008 IPPS proposed rule, we proposed to move cases with procedure codes 84.58, 84.59, and 84.65 into proposed MS–DRG 490 and revise the title to reflect disc devices. The proposed modified MS–DRG title would be: MS–DRG 490 (Back and Neck Procedures Except Spinal Fusion with CC or MCC or Disc Devices). We believe these proposed changes to the spine DRGs are appropriate to recognize the similar utilization of resources, differences in levels of severity, and complexity of the services performed for various types of spinal procedures described above. We encouraged commenters to provide input on this approach to better recognize the types of patients these procedures are being performed upon and their outcomes. *Comment:*
                         Several commenters supported our proposal to recognize utilization of resources, differences in levels of severity, and the complexity of spinal procedures in proposed MS–DRGs 490 and 491. The commenters were pleased with the proposal to reassign cases identified by procedure codes 84.58 [24]
                        
                        , 84.59 and 84.65 to proposed MS–DRG 490 (Back and Neck Procedures Except Spinal Fusion with CC or MCC or Disc Devices). One commenter stated that the proposed refinements to MS–DRG 490 result in Medicare payment that better recognizes patient conditions and procedural complexity. Another commenter believed that the proposals will provide more appropriate payment and ensure patient access to spine technologies. This commenter commended CMS for its responsiveness in considering resource use associated with new technologies, such as spine motion preservation devices, and stated the proposal to assign higher payment rates will enable hospitals to provide Medicare patients with access to these technologies. Two commenters suggested CMS also consider moving cases with procedure code 84.62 (Insertion of total spinal disc prosthesis, cervical) into MS–DRG 490. The commenters stated that this procedure is clinically coherent with the other cases proposed for reassignment to this DRG. Many commenters also recommended that CMS continue analyzing claims data in the future to ensure appropriate DRG assignment for all spinal related procedures. *Response:*
                         We greatly appreciate the commenters’ support of our proposal. We analyzed data for procedure code 84.62 and found 23 cases with an average length of stay of 1.48 days and average charges of $30,114 in MS–DRG 491. We also identified 4 cases in MS–DRG 490 with an average length of stay of 10.5 days and average charges of $104,313. The table below displays our results. MS–DRG
Number of cases
Average length of stay
Average chargesMS–DRG 490—All cases
17,493
5.13
$29,655MS–DRG 490—Cases with code 84.62
4
10.50
104,313MS–DRG 490—Cases without code 84.62
17,484
5.13
29,633MS–DRG 491—All cases
57,496
2.27
17,788MS–DRG 491—Cases with code 84.62
23
1.48
30,114MS–DRG 491—Cases without code 84.62
57,470
2.27
17,783
 We agree that cases with procedure code 84.62 appear to require greater utilization of resources than other cases in MS–DRG 491 and they are clinically similar to other spine disc prostheses cases we are assigning to MS–DRG 490. Therefore, in this FY 2008 final rule, we are moving cases identified by procedure code 84.62 from MS–DRG 491 to MS–DRG 490. *Comment:*
                         One commenter urged CMS to reconsider the placement of procedure code 84.65 (Insertion of total spinal disc prosthesis, lumbosacral) into MS–DRG 490. The commenter indicated this code represents technology that is a significant alternative to spinal fusion for a number of patients diagnosed with degenerative disc disease. The commenter noted that a total disc replacement is different from the other procedures included in MS–DRG 490 and is more complex. For example, excision of an intervertebral disc (code 80.51) represents only one component of a total disc replacement surgery; however, both procedures are assigned to the same DRG and receive the same payment. The commenter further noted that other procedures included in MS–DRG 490 do not involve the removal of a disc and including all of these procedures together is not an accurate reflection of clinical coherence. According to the commenter, a variety of new artificial discs are leading to improvements in the area of total disc replacement procedures, including the ProDisc-LTM
                         Total Disc Arthroplasty. In addition, the commenter stated, “appropriate Medicare payment is essential to ensure access to this alternative treatment and the diffusion of an innovative new technology.” The commenter believed that the most appropriate MS–DRG assignment for code 84.65 is MS–DRG 460 (Spinal Fusion Except Cervical without MCC) and requested that CMS reassign procedure code 84.65 to MS–DRG 460 and modify the title to “Spinal Fusion Except Cervical without MCC and Artificial Disc Replacement.” *Response:*
                         We disagree with the commenter that cases identified by procedure code 84.65 should be reassigned to MS–DRG 460 with a revised title. We provided the analysis in the FY 2008 IPPS proposed rule that demonstrated the average charges for code 84.65 were substantially lower than the average charges for the spinal fusion MS–DRGs but higher than the average charges for other cases in proposed MS–DRGs 490 and 491. As a result, we proposed to move cases identified by procedure code 84.65 into the higher severity level and modify the proposed title to reflect disc devices. We agree with the above statement, “appropriate Medicare payment is essential to ensure access to this alternative treatment and the diffusion of an innovative new technology” made by the commenter. The charge data do not support moving cases with procedure code 84.65 into the spinal fusion DRGs at this time. As a result, effective October 1, 2007, cases 
                        ( print page 47232)
                        identified by procedure code 84.65 will remain assigned to MS–DRG 490 (Back and Neck Procedures Except Spinal Fusion with CC or MCC or Disc Devices) with the modified title as proposed. d. Other Spinal DRGs We did not identify any data to support moving cases in or out of CMS DRGs 496 (Combined Anterior/Posterior Spinal Fusion), 519 (Cervical Spinal Fusion with CC), or 520 (Cervical Spinal Fusion without CC)). Under the proposed MS–DRG system, we proposed to split CMS DRG 496 into three severity levels: MS–DRG 453 (Combined Anterior/Posterior Spinal Fusion with MCC), MS–DRG 454 (Combined Anterior/Posterior Spinal Fusion with CC), and proposed MS–DRG 455 (Combined Anterior/Posterior Spinal Fusion without CC). We also proposed to split CMS DRG 519 into three severity levels: MS–DRG 471 (Cervical Fusion with MCC), MS–DRG 472 (Cervical Fusion with CC), and MS–DRG 473 (Cervical Fusion without CC). In the FY 2008 IPPS proposed rule, we did not propose changes to these DRGs. We did not receive any public comments on the above proposals to refine the remaining spinal DRGs. Therefore, in this final rule with comment period, we are adopting as final MS–DRGs 453, 454, 455, 471, 472, and 473. 5. MDC 17 (Myeloproliferative Diseases and Disorders, Poorly Differentiated Neoplasm): Endoscopic Procedures Between last year's final rule and this year's proposed rule, we received a request from a manufacturer to review the DRG assignment of codes 33.71 (Endoscopic insertion or replacement of bronchial valve(s)), 33.78 (Endoscopic removal of bronchial device(s) or substances), and 33.79 (Endoscopic insertion of other bronchial device or substances) with the intent of moving these three codes out of CMS DRG 412 (History of Malignancy With Endoscopy) (MS–DRGs 843, 844, and 845 in this final rule with comment period). The requestor noted that CMS DRG 412 is titled to be a DRG for cases with a history of malignancy, and none of the three codes (33.71, 33.78, or 33.79) necessarily involve treatment for malignancies. In addition, the requestor believed the integrity of the DRG is compromised because the other endoscopy codes assigned to CMS DRG 412 are all diagnostic in nature, while codes 33.71, 33.78, and 33.79 represent therapeutic procedures. The requestor also stated that while the diagnostic endoscopies in CMS DRG 412 do not have significant costs for equipment or pharmaceutical agents beyond the basic endoscopy, the therapeutic procedures described by codes 33.71, 33.78, and 33.79 involve substantial costs for devices or substances in relation to the cost of the endoscopic procedure itself. The requestor was concerned that, if these three codes continue to be assigned to CMS DRG 412, payment will be so inadequate as to constitute a substantial barrier to Medicare beneficiaries for these treatments. ICD–9–CM procedure codes 33.71, 33.78, and 33.79 were all created for use beginning October 1, 2006. In the proposed rule, we stated that these codes have been in use only for a few months, and we had no data to make a different DRG assignment. We assigned these codes based on the advice of our medical officers to a DRG that included similar clinical procedures. On the matter of codes 33.71, 33.78, and 33.79 being therapeutic in nature while all other endoscopies assigned to CMS DRG 412 are diagnostic, we disagreed with the commenter in the proposed rule. CMS DRG 412 includes procedure codes for therapeutic endoscopic destruction of lesions of the bronchus, lung, stomach, anus, and duodenum, as well as codes for polypectomy of the intestine and rectum. In addition, we note that there are codes for insertion of therapeutic devices currently located in this DRG. In the proposed rule, we stated that it would be premature to assign these codes to another DRG without any supporting data. We indicated that we would reconsider our decision for these codes if we had data suggesting that a DRG reassignment was warranted. Therefore, aside from the proposed changes to the MS–DRGs, in the FY 2008 IPPS proposed rule, we did not propose to change the current DRG assignment for codes 33.71, 33.78, and 33.79. *Comment:*
                         We did not receive any specific comments addressing the published proposal. We did receive comments asking CMS to use external data to make DRG assignments until Medicare data are available. *Response:*
                         We reiterate that the new codes under discussion were created for use beginning October 1, 2006. Commenters did not provide any external data for us to evaluate. We have no data that would support a different DRG assignment for these codes. Therefore, codes 33.71 (Endoscopic insertion or replacement of bronchial valve(s)), 33.78 (Endoscopic removal of bronchial device(s) or substances), and 33.79 (Endoscopic insertion of other bronchial device or substances) will remain assigned to MS–DRGs 843, 844, and 845 (Other Myeloproliferative Disease or Poorly Differentiated Neoplasm Diagnosis w/MCC, w/CC or w/o CC/MCC respectively) until we have data that suggest a different DRG assignment would be warranted. 6. Medicare Code Editor (MCE) Changes As explained under section II.B.1. of the preamble of this final rule with comment period, the Medicare Code Editor (MCE) is a software program that detects and reports errors in the coding of Medicare claims data. Patient diagnoses, procedure(s), and demographic information are entered into the Medicare claims processing systems and are subjected to a series of automated screens. The MCE screens are designed to identify cases that require further review before classification into a DRG. For FY 2008, we proposed to make the following changes to the MCE edits. a. Non-Covered Procedure Edit: Code 00.62 (Percutaneous angioplasty or atherectomy of intracranial vessel(s)) As discussed in II.G.2. of the preamble of this final rule with comment period, under MDC 1, code 00.62 is a covered service when performed in conjunction with code 00.65 (Percutaneous insertion of intracranial vascular stent(s)). Effective November 6, 2006, Medicare covers PTA and stenting of intracranial arteries for the treatment of cerebral artery stenosis in cases in which stenosis is 50 percent or greater in patients with intracranial atherosclerotic disease when furnished in accordance with the FDA-approved protocols governing Category B Investigational Device Exemption (IDE) clinical trials. CMS determined that coverage of intracranial PTA and stenting is reasonable and necessary under these circumstances. Therefore, we proposed to make a conforming change and to add the following language to this edit: Procedure code 00.62 (PTA of intracranial vessel(s)) is identified as a noncovered procedure except when it is accompanied by procedure code 00.65 (Intracranial stent). We did not receive any public comments on this proposal. Therefore, for FY 2008, we are adopting as final our proposed revision of the coverage edit, recognizing procedure code 00.62 (Percutaneous angioplasty or atherectomy of intracranial vessel(s)) as a covered procedure when reported in conjunction with procedure code 00.65 (Intracranial stent). 
                        ( print page 47233) b. Non-Specific Principal Diagnosis Edit 7 and Non-Specific O.R. Procedures Edit 10 When MCE Non-Specific Principal Diagnosis Edit 7 and Non-Specific O.R. Procedures Edit 10 were created at the beginning of the IPPS, it was with the intent that they were to encourage hospitals to code as specifically as possible. While the codes on both edits are valid according to the ICD–9–CM coding scheme, more precise codes are preferable to give a more complete understanding of the services provided on the Medicare claims. When the MCE was created, we had intended that these specific edits would allow educational contact between the provider and the contractor. It was never the intention that these edits would be used to deny/reject or return-to-provider those claims submitted with non-specific codes. However, we found these two edits to be misunderstood, and found that claims were erroneously being denied, rejected, or returned. On November 11, 2006, CMS issued a Joint Signature Memorandum that instructed all fiscal intermediaries and all Part A and Part B Medicare Administrative Contractors (A/B MACs) to deactivate the Fiscal Intermediary Shared System Edits W1436 through W1439 and W1489 through W1491 which edited for Non-Specific Diagnoses and the Non-Specific Procedures. Therefore, in the FY 2008 IPPS proposed rule, we proposed to make a conforming change to the MCE by removing the following codes from Edit 7: 00320 01590 01591 01592 01593 01594 01596 0369 0399 0528 05310 0538 05440 0548 0558 05600 0568 06640 07070 07071 0728 0738 07420 08240 0979 09810 09830 09950 0999 1009 1109 1129 1149 1279 129 1309 13100 1319 1329 1369 1370 1371 1372 1373 1374 138 1390 1391 1398 1409 1419 1429 1439 1449 1469 1479 1509 1519 1529 1539 1543 1579 1589 1590 1609 1619 1629 1639 1649 1709 1719 1729 1739 1749 1769 179 1809 1839 1874 1879 1889 1899 1909 1929 1949 1969 1991 20490 20491 20590 20591 20690 20691 20890 20891 2129 2139 2149 2159 2169 2189 2199 2229 2239 2249 2259 2279 22800 2299 2306 2319 2329 2349 23690 23770 23875 2390 2391 2392 2393 2394 2396 2397 2398 2399 2469 2519 25200 2529 2539 2549 25510 2569 2579 2589 2681 2709 2719 2729 2739 27540 2759 27650 27730 2779 2793 2799 28730 28800 28850 28860 28950 3239 3249 326 32700 32710 32720 32730 32740 3309 3319 3349 3359 34120 
                        ( print page 47234) 3419 3439 3449 34690 34691 3489 3499 3509 3519 3529 3539 3569 3579 3589 3599 3609 3619 3629 3639 3649 3659 3669 3679 3689 36900 36901 36902 36903 36904 36905 36906 36907 36908 36910 36911 36912 36913 36914 36915 36916 36917 36918 36920 36921 36922 36923 36924 36925 3693 3694 36960 36961 36962 36963 36964 36965 36966 36967 36968 36969 36970 36971 36972 36973 36974 36975 36976 3698 3699 3709 3719 3729 3739 3749 3759 3769 3779 3789 37960 3809 3819 3829 3839 3849 3859 3879 38800 38810 38830 38840 38860 38870 3889 38900 38910 3897 3899 41090 41091 41092 412 4149 4179 42650 4275 4279 42820 42830 42840 4289 4299 4329 43390 43490 4379 4389 4419 4429 4449 44620 4479 4519 45340 4539 4579 4599 4619 46450 46451 4749 4919 5169 51900 5199 5209 52100 52110 52120 52130 52140 5219 52320 52330 52340 5239 52400 52420 52430 52450 52460 52470 5249 52520 52540 52550 52560 5259 5269 5279 52800 5299 5309 53640 5379 5539 56400 5649 5679 5689 56960 5699 5739 57510 5759 5769 5779 5799 5859 5889 5890 5891 5899 5909 5959 5969 5989 59960 5999 60090 60091 6019 6029 60820 6089 6109 6169 6179 61800 6184 6189 6199 6209 62130 6219 62210 6229 6239 
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                        ( print page 47236) 66480 66490 66491 66494 66500 66510 66520 66530 66540 66550 66560 66570 66580 66590 66591 66592 66593 66594 66600 66610 66620 66630 66700 66710 66800 66810 66820 66880 66890 66891 66892 66893 66894 66900 66910 66920 66930 66940 66950 66960 66970 66980 66990 66991 66992 66993 66994 67000 67100 67110 67120 67130 67140 67150 67180 67190 67191 67192 67193 67194 67200 67300 67310 67320 67330 67380 67400 67410 67420 67430 67440 67450 67480 67490 67492 67494 67500 67510 67520 67580 67590 67600 67610 67620 67630 67640 67650 67660 67680 67690 67691 67692 67693 67694 677 6809 6819 6829 68600 6869 6949 7019 7049 7059 7069 70700 70710 7079 7149 71590 7179 71849 71850 71870 72230 72270 72280 72290 7239 7244 7289 73000 73010 73020 73030 73090 73091 73092 73093 73094 73095 73096 73097 73098 73099 73310 73340 73390 7359 73600 73620 73630 73670 7369 73810 7389 74100 74190 7429 7439 7449 7459 7469 74760 7489 74900 74910 7509 7519 7529 75310 75312 75320 7539 7559 75670 7579 7599 7600 7601 7602 7603 7604 7605 7606 76070 76072 76073 76074 76079 7608 7609 7610 7611 7612 7613 7614 7615 7616 7617 7618 7619 7629 7630 7631 7632 7633 7634 7635 7636 7637 76383 7639 76520 7679 7689 77010 
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                        ( print page 47238) 9989 In addition, we proposed to make a conforming change to the MCE by removing the following codes from Edit 10: 0650 0700 3500 3510 3520 3550 3560 3570 3610 3710 3770 3800 3810 3830 3840 3850 3860 3880 4040 4050 4100 4210 4240 4400 4440 4500 4590 0763 0769 4610 4620 4640 4650 4660 4680 5300 5310 5640 7550 7670 7700 7720 7760 7770 7780 7790 7800 7810 7820 7830 7840 7850 7870 7880 7890 0780 2630 7910 7920 7930 7940 7950 7960 7980 7990 8000 8010 8020 8040 8070 8080 8090 8100 8120 8130 8153 8155 8400 8440 8460 8469 8660 8670 *Comment:*
                         Several commenters commended CMS for simplifying what they considered to be a burdensome edit that has ceased to serve its intended purpose. *Response:*
                         We appreciate the commenters' support for the removal of the specified codes from Edit 7 and Edit 10. *Comment:*
                         One commenter pointed out that code 015.95 (Tuberculosis of unspecified bones and joints, tubercle bacilli not found by bacteriological examination, but tuberculosis confirmed histologically) was included on the list of nonspecific principal diagnoses in the MCE, but was not included in the list of codes to be deleted in the proposed rule. *Response:*
                         The commenter is correct; code 015.95 should have been included in the list of codes to be deleted from Edit 7. We have modified the list to include deletion of this code as part of the deletion of the edit in the MCE software. After consideration of the public comments received, in this final rule with comment period, we are finalizing our deletion of the specified listed codes in Edit 7 (Non-Specific Principal Diagnosis) (including code 015.95) and in Edit 10 (Non-Specific O.R. Procedures) of the MCE. c. Limited Coverage Edit 17 Edit 17 in the MCE contains ICD–9–CM procedure codes describing medically complex procedures, including lung volume reduction surgery, organ transplants, and implantable heart assist devices which are to be performed only in certain pre-approved medical centers. CMS has established, through regulation (CMS–3835–F: Medicare Conditions of Participation: Requirements for Approval and Reapproval of Transplant Centers to Perform Organ Transplants, published in the 
                        **Federal Register**
                         on March 30, 2007 (72 FR 15198)), a survey and certification process for organ transplant programs. The organs covered in this transplant regulation are heart, heart and lung combined, intestine, kidney, liver, lung, pancreas, and multivisceral. Historically, kidney transplants have been regulated under the End-Stage Renal Disease (ESRD) conditions for coverage. Other types of organ transplant facilities have been regulated under various NCDs. The regulation becomes effective on June 28, 2007. Organ transplant programs will have 180 days from the June 28, 2007 effective date of the regulation to apply for participation in the Medicare program under the new survey and certification process. After these programs apply, we will survey and approve programs that meet the new Medicare conditions of participation. Until transplant facilities are surveyed and approved, kidney transplant facilities will continue to be regulated under the ESRD conditions for coverage, and other types of organ transplant facilities will continue to be regulated under the NCDs. In the FY 2008 IPPS proposed rule, we proposed to add conforming Medicare Part A payment edits to the MCE, consistent with the requirements of the organ transplant regulation (CMS–3835–F), to ensure that Medicare covers only those organ transplants performed in Medicare approved facilities. We proposed to add the following procedure codes to the existing list of limited coverage procedures under Edit 17: 55.69, Other kidney transplantation
                    52.80, Pancreatic transplant, not otherwise specified
                    52.82, Homotransplant of pancreas We did not receive any public comments on this portion of the proposed MCE revisions. Therefore, we will implement the changes as stated above by adding procedure codes 55.69, 52.80, and 52.82 to the list of limited coverage procedures in the MCE. d. Revision to Part 1, Pancreas Transplant Edit A Effective for services performed on or after April 26, 2006, we published an NCD for Pancreas Transplants in section 260.3 of the Coverage Manual, stating that pancreas alone transplants are reasonable and necessary for Medicare beneficiaries in facilities that are Medicare-approved for kidney transplantation. In addition, patients must have a diagnosis of Type I diabetes mellitus. The complete NCD can be found at the following CMS Web site: 
                        *http://www.cms.hhs.gov/​mcd/​ viewncd
                            ( print page 47239)
                            .asp?ncd_id=260.3ncd_version= 3basket=ncd%3A260%2E3%3A3%3APancreas+Transplants.* Edit A in the MCE currently includes the following language and codes. Procedure codes 52.80 (Pancreatic transplant, not otherwise specified) and 52.82 (Homotransplant of pancreas) are identified as non-covered procedures except for the following two conditions: When either 52.80 or 52.82 are combined with the procedure code in Procedure list 2 and there is at least one principal or secondary diagnosis code present from both Diagnosis List 1 and Diagnosis List 2. *Procedure List 1:* Code 52.80 Code 52.82 *Procedure List 2:* Code 55.69 *Diagnosis List 1:* Codes 250.00 through 250.93 *Diagnosis List 2:* Code 403.01 Code 403.11 Code 403.91 Code 404.02 Code 404.03 Code 404.12 Code 404.13 Code 404.92 Code 404.93 Codes 585.1 through 585.6 Code 585.9 Code V42.0 Code V43.89” This technical correction was not included in the FY 2008 IPPS proposed rule because of the timing of the release of the NCD. However, we need to make a revision to Edit A in the MCE to conform to the changes in our national coverage of the pancreas alone (PA) procedure. This NCD was implemented on July 3, 2006, which prevented us from addressing the MCE edit in the FY 2007 IPPS final rule. However, because the MCE changes for FY 2007 are retroactive to April 26, 2006, both procedure codes 52.80 and 52.82 will still trigger a limited coverage edit when coverage criteria have been met. Therefore, we are removing Edit A in its entirety from the MCE. 7. Surgical Hierarchies Some inpatient stays entail multiple surgical procedures, each one of which, occurring by itself, could result in assignment of the case to a different DRG within the MDC to which the principal diagnosis is assigned. Therefore, it is necessary to have a decision rule within the GROUPER by which these cases are assigned to a single DRG. The surgical hierarchy, an ordering of surgical classes from most resource intensive to least resource intensive, performs that function. Application of this hierarchy ensures that cases involving multiple surgical procedures are assigned to the DRG associated with the most resource intensive surgical class. Because the relative resource intensity of surgical classes can shift as a function of DRG reclassification and recalibrations, we reviewed the surgical hierarchy of each MDC, as we have for previous reclassifications and recalibrations, to determine if the ordering of classes coincides with the intensity of resource utilization. A surgical class can be composed of one or more DRGs. For example, in MDC 11, the surgical class “kidney transplant” consists of a single DRG (DRG 302) and the class “kidney, ureter and major bladder procedures” consists of three DRGs (DRGs 303, 304, and 305). Consequently, in many cases, the surgical hierarchy has an impact on more than one DRG. The methodology for determining the most resource intensive surgical class involves weighting the average resources for each DRG by frequency to determine the weighted average resources for each surgical class. For example, assume surgical class A includes DRGs 1 and 2 and surgical class B includes DRGs 3, 4, and 5. Assume also that the average charge of DRG 1 is higher than that of DRG 3, but the average charges of DRGs 4 and 5 are higher than the average charge of DRG 2. To determine whether surgical class A should be higher or lower than surgical class B in the surgical hierarchy, we would weight the average charge of each DRG in the class by frequency (that is, by the number of cases in the DRG) to determine average resource consumption for the surgical class. The surgical classes would then be ordered from the class with the highest average resource utilization to that with the lowest, with the exception of “other O.R. procedures” as discussed below. This methodology may occasionally result in assignment of a case involving multiple procedures to the lower weighted DRG (in the highest, most resource intensive surgical class) of the available alternatives. However, given that the logic underlying the surgical hierarchy provides that the GROUPER search for the procedure in the most resource intensive surgical class, in cases involving multiple procedures, this result is sometimes unavoidable. We note that, notwithstanding the foregoing discussion, there are a few instances when a surgical class with a lower average charge is ordered above a surgical class with a higher average charge. For example, the “other O.R. procedures” surgical class is uniformly ordered last in the surgical hierarchy of each MDC in which it occurs, regardless of the fact that the average charge for the DRG or DRGs in that surgical class may be higher than that for other surgical classes in the MDC. The “other O.R. procedures” class is a group of procedures that are only infrequently related to the diagnoses in the MDC, but are still occasionally performed on patients in the MDC with these diagnoses. Therefore, assignment to these surgical classes should only occur if no other surgical class more closely related to the diagnoses in the MDC is appropriate. A second example occurs when the difference between the average charges for two surgical classes is very small. We have found that small differences generally do not warrant reordering of the hierarchy because, as a result of reassigning cases on the basis of the hierarchy change, the average charges are likely to shift such that the higher ordered surgical class has a lower average charge than the class ordered below it. For FY 2008, we did not propose any revisions of the surgical hierarchy for any MDC. In general, the MS DRGs that we proposed (and are adopting in this final rule with comment period) for use in FY 2008 and discussed in section II.D. of the preamble of this final rule with comment period follow the same hierarchical order as the CMS DRGs they are replacing, except for DRGs that were deleted and consolidated. *Comment:*
                         Two commenters supported no changes in the surgical hierarchy for FY 2008. However, one commenter stated that CMS should continue to revisit this issue on an annual basis. *Response:*
                         We will continue to conduct annual analysis of the surgical hierarchy in the MS-DRGs as we have with the CMS-DRGs and propose revisions when necessary. For FY 2008, there will no changes to the surgical hierarchy. 8. CC Exclusions List a. Background As indicated earlier in the preamble of this final rule with comment period, under the IPPS DRG classification system, we have developed a standard list of diagnoses that are considered CCs. Historically, we developed this list using physician panels that classified each diagnosis code based on whether the diagnosis, when present as a secondary condition, would be considered a substantial complication or 
                        ( print page 47240)
                        comorbidity. A substantial complication or comorbidity was defined as a condition that, because of its presence with a specific principal diagnosis, would cause an increase in the length of stay by at least 1 day in at least 75 percent of the patients. We refer readers to section II.D.2. and 3. of the preamble of this final rule with comment period for a discussion of the refinement of CCs in relation to the MS-DRGs we proposed and are adopting in this final rule with comment period for FY 2008. b. CC Exclusions List for FY 2008 In the September 1, 1987 final notice (52 FR 33143) concerning changes to the DRG classification system, we modified the GROUPER logic so that certain diagnoses included on the standard list of CCs would not be considered valid CCs in combination with a particular principal diagnosis. We created the CC Exclusions List for the following reasons: (1) to preclude coding of CCs for closely related conditions; (2) to preclude duplicative or inconsistent coding from being treated as CCs; and (3) to ensure that cases are appropriately classified between the complicated and uncomplicated DRGs in a pair. As we indicated above, we developed a list of diagnoses, using physician panels, to include those diagnoses that, when present as a secondary condition, would be considered a substantial complication or comorbidity. In previous years, we have made changes to the list of CCs, either by adding new CCs or deleting CCs already on the list. In the May 19, 1987 proposed notice (52 FR 18877) and the September 1, 1987 final notice (52 FR 33154), we explained that the excluded secondary diagnoses were established using the following five principles: Chronic and acute manifestations of the same condition should not be considered CCs for one another.
                    Specific and nonspecific (that is, not otherwise specified (NOS)) diagnosis codes for the same condition should not be considered CCs for one another.
                    Codes for the same condition that cannot coexist, such as partial/total, unilateral/bilateral, obstructed/unobstructed, and benign/malignant, should not be considered CCs for one another.
                    Codes for the same condition in anatomically proximal sites should not be considered CCs for one another.
                    Closely related conditions should not be considered CCs for one another. The creation of the CC Exclusions List was a major project involving hundreds of codes. We have continued to review the remaining CCs to identify additional exclusions and to remove diagnoses from the master list that have been shown not to meet the definition of a CC.[25] For FY 2008, as we proposed, we are making limited revisions to the CC Exclusions List to take into account the changes that will be made in the ICD–9–CM diagnosis coding system effective October 1, 2007. (See section II.G.10. of the preamble of this final rule with comment period for a discussion of ICD–9–CM changes.) We are making these changes in accordance with the principles established when we created the CC Exclusions List in 1987. In addition, as discussed in section II.D.3. of the preamble of this final rule with comment period, we are indicating on the CC exclusion list some updates to reflect the exclusion of a few codes from being an MCC under the MS-DRG system that we are adopting for FY 2008. Tables 6G and 6H, Additions to and Deletions from the CC Exclusion List, respectively, which are included in the Addendum to this final rule with comment period, will be effective for discharges occurring on or after October 1, 2007. Each of these principal diagnoses for which there is a CC exclusion is shown with an asterisk, and the conditions that will not count as a CC are provided in an indented column immediately following the affected principal diagnosis. A complete updated MCC, CC, and Non-CC Exclusions List is available through the Internet on the CMS Web site at: 
                        *http:/www.cms.hhs.gov/​AcuteInpatientPPS.*
                         Beginning with discharges on or after October 1, 2007, the indented diagnoses will not be recognized by the GROUPER as valid CCs for the asterisked principal diagnosis. Alternatively, the complete documentation of the GROUPER logic, including the current CC Exclusions List, is available from 3M/Health Information Systems (HIS), which, under contract with CMS, is responsible for updating and maintaining the GROUPER program. The current DRG Definitions Manual, Version 24.0, is available for $225.00, which includes $15.00 for shipping and handling. Version 25.0 of this manual, which will include the final FY 2008 DRG changes, will be available in hard copy for $250.00. Version 25.0 of the manual is also available on a CD for $200.00; a combination hard copy and CD is available for $400.00. These manuals may be obtained by writing 3M/HIS at the following address: 100 Barnes Road, Wallingford, CT 06492; or by calling (203) 949–0303. Please specify the revision or revisions requested. 9. Review of Procedure Codes in CMS DRGs 468, 476, and 477 Each year, we review cases assigned to CMS DRG 468 (Extensive O.R. Procedure Unrelated to Principal Diagnosis), CMS DRG 476 (Prostatic O.R. Procedure Unrelated to Principal Diagnosis), and CMS DRG 477 (Nonextensive O.R. Procedure Unrelated to Principal Diagnosis) to determine whether it would be appropriate to change the procedures assigned among these CMS DRGs. Under the MS-DRGs that we are adopting for FY 2008, discussed in section II.D. of the preamble of this final rule with comment period, CMS DRG 468 has a three-way split and becomes MS-DRGs 981, 982, and 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC). CMS DRG 476 becomes proposed MS-DRGs 984, 985, and 986 (Prostatic O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC). CMS DRG 477 becomes MS–DRGs 987, 988, and 989 (Nonextensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC). MS–DRGs 981 through 983, 984 through 986, and 987 through 989 (formerly CMS DRGs 468, 476, and 477, respectively) are reserved for those cases in which none of the O.R. procedures performed are related to the principal diagnosis. These CMS DRGs are 
                        ( print page 47241)
                        intended to capture atypical cases, that is, those cases not occurring with sufficient frequency to represent a distinct, recognizable clinical group. MS-DRGs 984 through 986 (previously CMS DRG 476) are assigned to those discharges in which one or more of the following prostatic procedures are performed and are unrelated to the principal diagnosis: 60.0, Incision of prostate.
                    60.12, Open biopsy of prostate.
                    60.15, Biopsy of periprostatic tissue.
                    60.18, Other diagnostic procedures on prostate and periprostatic tissue.
                    60.21, Transurethral prostatectomy.
                    60.29, Other transurethral prostatectomy.
                    60.61, Local excision of lesion of prostate.
                    60.69, Prostatectomy, not elsewhere classified.
                    60.81, Incision of periprostatic tissue.
                    60.82, Excision of periprostatic tissue.
                    60.93, Repair of prostate.
                    60.94, Control of (postoperative) hemorrhage of prostate.
                    60.95, Transurethral balloon dilation of the prostatic urethra.
                    60.96, Transurethral destruction of prostate tissue by microwave thermotherapy.
                    60.97, Other transurethral destruction of prostate tissue by other thermotherapy.
                    60.99, Other operations on prostate. All remaining O.R. procedures are assigned to MS–DRGs 981 through 983 and 987 through 989 (previously CMS DRGs 468 and 477), with MS–DRGs 987 through 989 (previously CMS DRG 477) assigned to those discharges in which the only procedures performed are nonextensive procedures that are unrelated to the principal diagnosis.[26] In the FY 2008 IPPS proposed rule, we did not propose to change the procedures assigned among these DRGs. We did not receive any public comments on this subject. Therefore, for FY 2008, we are not changing the procedures assigned among these DRGs. a. Moving Procedure Codes From CMS DRG 468 (MS–DRGs 981 Through 983) or CMS DRG 477 (MS–DRGs 987 through 989) to MDCs We annually conduct a review of procedures producing assignment to CMS DRG 468 (MS–DRGs 981 through 983 in this final rule with comment period) or CMS DRG 477 (MS–DRGs 987 through 989 in this final rule with comment period) on the basis of volume, by procedure, to see if it would be appropriate to move procedure codes out of these DRGs into one of the surgical DRGs for the MDC into which the principal diagnosis falls. The data are arrayed in two ways for comparison purposes. We look at a frequency count of each major operative procedure code. We also compare procedures across MDCs by volume of procedure codes within each MDC. We identify those procedures occurring in conjunction with certain principal diagnoses with sufficient frequency to justify adding them to one of the surgical DRGs for the MDC in which the diagnosis falls. In the FY 2008 IPPS proposed rule, we did not propose to remove any procedures from CMS DRG 468 (MS–DRGs 981 through 983 in this final rule with comment period) or CMS DRG 477 (MS–DRGs 987 through 989). We did not receive any public comments on this subject. Therefore, based on this year's review, we are not removing any procedures from these DRGs. b. Reassignment of Procedures Among CMS DRGs 468, 476, and 477 (MS–DRGs 981 through 983, 984 through 986, and 987 through 989) We also annually review the list of ICD–9–CM procedures that, when in combination with their principal diagnosis code, result in assignment to CMS DRGs 468, 476, and 477 (MS–DRGs 981 through 983, 984 through 986, and 987 through 989, respectively, in this final rule with comment period), to ascertain whether any of those procedures should be reassigned from one of these three DRGs to another of the three DRGs based on average charges and the length of stay. We look at the data for trends such as shifts in treatment practice or reporting practice that would make the resulting DRG assignment illogical. If we find these shifts, we would propose to move cases to keep the DRGs clinically similar or to provide payment for the cases in a similar manner. Generally, we move only those procedures for which we have an adequate number of discharges to analyze the data. We did not propose to move any procedure codes among these DRGs. We did not receive any public comments on this subject. Therefore, we are not moving any procedure codes from CMS DRG 476 (MS–DRGs 984, 985, and 986 in this final rule with comment period) to CMS DRG 468 (MS–DRGs 981, 982, and 983 in this final rule with comment period) or to CMS DRG 477 (MS–DRGs 987, 988, and 989 in this final rule with comment period), or from CMS DRG 477 (MS–DRGs 987, 988, and 989 in this final rule with comment period) to CMS DRGs 468 (MS–DRGs 981, 982, and 983 in this final rule with comment period) or to CMS DRG 476 (MS–DRGs 984, 985, and 986 in this final rule with comment period) for FY 2008. c. Adding Diagnosis or Procedure Codes to MDCs Based on our review this year, as we proposed, we are not adding any diagnosis codes to MDCs for FY 2008. We did not receive any public comments on this subject. 10. Changes to the ICD–9–CM Coding System As described in section II.B.1. of the preamble of this final rule with comment period, the ICD–9–CM is a coding system used for the reporting of diagnoses and procedures performed on a patient. In September 1985, the ICD–9–CM Coordination and Maintenance Committee was formed. This is a Federal interdepartmental committee, co chaired by the National Center for Health Statistics (NCHS), the Centers for Disease Control and Prevention, and CMS, charged with maintaining and updating the ICD–9–CM system. The Committee is jointly responsible for approving coding changes, and developing errata, addenda, and other modifications to the ICD–9–CM to reflect newly developed procedures and technologies and newly identified diseases. The Committee is also responsible for promoting the use of Federal and non Federal educational programs and other communication techniques with a view toward 
                        ( print page 47242)
                        standardizing coding applications and upgrading the quality of the classification system. The Official Version of the ICD–9–CM contains the list of valid diagnosis and procedure codes. (The Official Version of the ICD–9–CM is available from the Government Printing Office on CD–ROM for $25.00 by calling (202) 512–1800.) The Official Version of the ICD–9–CM is no longer available in printed manual form from the Federal Government; it is only available on CD–ROM. Users who need a paper version are referred to one of the many products available from publishing houses. The NCHS has lead responsibility for the ICD–9–CM diagnosis codes included in the 
                        *Tabular List*
                         and 
                        *Alphabetic Index for Diseases,*
                         while CMS has lead responsibility for the ICD–9–CM procedure codes included in the 
                        *Tabular List*
                         and 
                        *Alphabetic Index for Procedures.* The Committee encourages participation in the above process by health-related organizations. In this regard, the Committee holds public meetings for discussion of educational issues and proposed coding changes. These meetings provide an opportunity for representatives of recognized organizations in the coding field, such as the American Health Information Management Association (AHIMA), the American Hospital Association (AHA), and various physician specialty groups, as well as individual physicians, health information management professionals, and other members of the public, to contribute ideas on coding matters. After considering the opinions expressed at the public meetings and in writing, the Committee formulates recommendations, which then must be approved by the agencies. The Committee presented proposals for coding changes for implementation in FY 2008 at a public meeting held on September 28–29, 2006, and finalized the coding changes after consideration of comments received at the meetings and in writing by December 4, 2006. Those coding changes are announced in Tables 6A through 6F in the Addendum to this proposed rule. The Committee held its 2007 meeting on March 22–23, 2007. Proposed new codes for which there was a consensus of public support and for which complete tabular and indexing changes can be made by May 2007 will be included in the October 1, 2007 update to ICD–9–CM. Code revisions that were discussed at the March 22–23, 2007 Committee meeting could not be finalized in time to include them in the Addendum to the proposed rule. These additional codes are included in Tables 6A through 6F of this final rule with comment period and are marked with an asterisk (*). Copies of the minutes of the procedure codes discussions at the Committee's September 28–29, 2006 meeting can be obtained from the CMS Web site at: 
                        *http://cms.hhs.gov/​ICD9ProviderDiagnosticCodes/​03_​meetings.asp.*
                         The minutes of the diagnosis codes discussions at the September 28–29, 2006 meeting are found at: 
                        *http://www.cdc.gov/​nchs/​icd9.htm.*
                         Paper copies of these minutes are no longer available and the mailing list has been discontinued. These Web sites also provide detailed information about the Committee, including information on requesting a new code, attending a Committee meeting, and timeline requirements and meeting dates. We encourage commenters to address suggestions on coding issues involving diagnosis codes to: Donna Pickett, Co Chairperson, ICD–9–CM Coordination and Maintenance Committee, NCHS, Room 2402, 3311 Toledo Road, Hyattsville, MD 20782. Comments may be sent by E mail to: 
                        *dfp4@cdc.gov.* Questions and comments concerning the procedure codes should be addressed to: Patricia E. Brooks, Co Chairperson, ICD–9–CM Coordination and Maintenance Committee, CMS, Center for Medicare Management, Hospital and Ambulatory Policy Group, Division of Acute Care, C4–08–06, 7500 Security Boulevard, Baltimore, MD 21244 1850. Comments may be sent by E mail to: 
                        *patricia.brooks2@cms.hhs.gov.* The ICD–9–CM code changes that have been approved will become effective October 1, 2007. The new ICD–9–CM codes are listed, along with their DRG classifications, in Tables 6A and 6B (New Diagnosis Codes and New Procedure Codes, respectively) in the Addendum to this final rule with comment period. As we stated above, the code numbers and their titles were presented for public comment at the ICD–9–CM Coordination and Maintenance Committee meetings. Both oral and written comments were considered before the codes were approved. In the FY 2008 IPPS proposed rule, we only solicited comments on the proposed classification of these new codes. *Comment:*
                         One commenter expressed concern that the 2-month timeframe between adoption of new ICD–9–CM codes and the effective date of new codes creates a disadvantage for the coding community because updating of facility-specific and industry information, such as education/training materials and code books, is based on the final codes. The commenter noted that ICD–9–CM code changes discussed at the March 22–23, 2007 ICD–9–CM Coordination and Maintenance Committee meeting were not listed in the FY 2008 IPPS proposed rule, so the coding community has 2 months, rather than 5 months, to update its coding products. The commenter recommended that CMS consider implementation of codes discussed at the spring meeting in April of the following year, rather than forcing the new codes into the October release. *Response:*
                         We are sympathetic to the commenter's concern that the short timeframe between adoption of new codes and the effective date of new codes may make it challenging to update coding products. However, this short time period has proven to be invaluable for collecting MedPAR data on new technologies as soon as possible. Therefore, we will continue our current process of attempting to expedite the creation of new ICD–9–CM codes. For codes that have been replaced by new or expanded codes, and the corresponding new or expanded diagnosis codes are included in Table 6A. New procedure codes are shown in Table 6B. Diagnosis codes that have been replaced by expanded codes or other codes or have been deleted are in Table 6C (Invalid Diagnosis Codes). These invalid diagnosis codes will not be recognized by the GROUPER beginning with discharges occurring on or after October 1, 2007. Table 6D contains invalid procedure codes. These invalid procedure codes will not be recognized by the GROUPER beginning with discharges occurring on or after October 1, 2007. Revisions to diagnosis code titles are in Table 6E (Revised Diagnosis Code Titles), which also includes the DRG assignments for these revised codes. Table 6F includes revised procedure code titles for FY 2008. In the September 7, 2001 final rule implementing the IPPS new technology add on payments (66 FR 46906), we indicated we would attempt to include proposals for procedure codes that would describe new technology discussed and approved at the Spring meeting as part of the code revisions effective the following October. As stated previously, ICD –9–CM codes discussed at the March 22–23, 2007 Committee meeting that received consensus and that were finalized by May 2007, are included in Tables 6A through 6F of the Addendum to this final rule with comment period. Section 503(a) of Pub. L. 108–173 included a requirement for updating ICD–9–CM codes twice a year instead of a single update on October 1 of each 
                        ( print page 47243)
                        year. This requirement was included as part of the amendments to the Act relating to recognition of new technology under the IPPS. Section 503(a) amended section 1886(d)(5)(K) of the Act by adding a clause (vii) which states that the “Secretary shall provide for the addition of new diagnosis and procedure codes on April 1 of each year, but the addition of such codes shall not require the Secretary to adjust the payment (or diagnosis related group classification) * * * until the fiscal year that begins after such date.” This requirement improves the recognition of new technologies under the IPPS system by providing information on these new technologies at an earlier date. Data will be available 6 months earlier than would be possible with updates occurring only once a year on October 1. While section 1886(d)(5)(K)(vii) of the Act states that the addition of new diagnosis and procedure codes on April 1 of each year shall not require the Secretary to adjust the payment, or DRG classification, under section 1886(d) of the Act until the fiscal year that begins after such date, we have to update the DRG software and other systems in order to recognize and accept the new codes. We also publicize the code changes and the need for a mid year systems update by providers to identify the new codes. Hospitals also have to obtain the new code books and encoder updates, and make other system changes in order to identify and report the new codes. The ICD–9–CM Coordination and Maintenance Committee holds its meetings in the spring and fall in order to update the codes and the applicable payment and reporting systems by October 1 of each year. Items are placed on the agenda for the ICD–9–CM Coordination and Maintenance Committee meeting if the request is received at least 2 months prior to the meeting. This requirement allows time for staff to review and research the coding issues and prepare material for discussion at the meeting. It also allows time for the topic to be publicized in meeting announcements in the 
                        **Federal Register**
                         as well as on the CMS Web site. The public decides whether or not to attend the meeting based on the topics listed on the agenda. Final decisions on code title revisions are currently made by March 1 so that these titles can be included in the IPPS proposed rule. A complete addendum describing details of all changes to ICD–9–CM, both tabular and index, is published on the CMS and NCHS Web sites in May of each year. Publishers of coding books and software use this information to modify their products that are used by health care providers. This 5 month time period has proved to be necessary for hospitals and other providers to update their systems. A discussion of this timeline and the need for changes are included in the December 4–5, 2005 ICD–9–CM Coordination and Maintenance Committee minutes. The public agreed that there was a need to hold the fall meetings earlier, in September or October, in order to meet the new implementation dates. The public provided comment that additional time would be needed to update hospital systems and obtain new code books and coding software. There was considerable concern expressed about the impact this new April update would have on providers. In the FY 2005 IPPS final rule, we implemented section 1886(d)(5)(K)(vii) of the Act, as added by section 503(a) of Pub. L. 108–173, by developing a mechanism for approving, in time for the April update, diagnosis and procedure code revisions needed to describe new technologies and medical services for purposes of the new technology add-on payment process. We also established the following process for making these determinations. Topics considered during the Fall ICD–9–CM Coordination and Maintenance Committee meeting are considered for an April 1 update if a strong and convincing case is made by the requester at the Committee's public meeting. The request must identify the reason why a new code is needed in April for purposes of the new technology process. The participants at the meeting and those reviewing the Committee meeting summary report are provided the opportunity to comment on this expedited request. All other topics are considered for the October 1 update. Participants at the Committee meeting are encouraged to comment on all such requests. There were no requests for an expedited April l, 2007 implementation of an ICD–9–CM code at the September 28–29, 2006 Committee meeting. Therefore, there were no new ICD–9–CM codes implemented on April 1, 2007. We believe that this process captures the intent of section 1886(d)(5)(K)(vii) of the Act. This requirement was included in the provision revising the standards and process for recognizing new technology under the IPPS. In addition, the need for approval of new codes outside the existing cycle (October 1) arises most frequently and most acutely where the new codes will identify new technologies that are (or will be) under consideration for new technology add-on payments. Thus, we believe this provision was intended to expedite data collection through the assignment of new ICD–9–CM codes for new technologies seeking higher payments. Current addendum and code title information is published on the CMS Web site at: 
                        *www.cms.hhs.gov/​icd9ProviderDiagnosticCodes/​01_​overview.asp#TopofPage.*
                         Information on ICD–9–CM diagnosis codes, along with the Official ICD–9–CM Coding Guidelines, can be found on the Web site at: 
                        *www.cdc.gov/​nchs/​icd9.htm.*
                         Information on new, revised, and deleted ICD–9–CM codes is also provided to the AHA for publication in the 
                        *Coding Clinic for ICD–9–CM.*
                         AHA also distributes information to publishers and software vendors. CMS also sends copies of all ICD–9–CM coding changes to its contractors for use in updating their systems and providing education to providers. These same means of disseminating information on new, revised, and deleted ICD–9–CM codes will be used to notify providers, publishers, software vendors, contractors, and others of any changes to the ICD–9–CM codes that are implemented in April. The code titles are adopted as part of the ICD–9–CM Coordination and Maintenance Committee process. Thus, although we publish the code titles in the IPPS proposed and final rules, they are not subject to comment in the proposed or final rules. We will continue to publish the October code updates in this manner within the IPPS proposed and final rules. For codes that are implemented in April, we will assign the new procedure code to the same DRG in which its predecessor code was assigned so there will be no DRG impact as far as DRG assignment. Any midyear coding updates will be available through the Web sites indicated above and through the 
                        *Coding Clinic for ICD–9–CM.*
                         Publishers and software vendors currently obtain code changes through these sources in order to update their code books and software systems. We will strive to have the April 1 updates available through these Web sites 5 months prior to implementation (that is, early November of the previous year), as is the case for the October 1 updates. 11. Other DRG Issues Addressed in the FY 2008 IPPS Proposed Rule a. Seizures and Headaches After publication of the FY 2007 IPPS final rule (71 FR 47928), we received correspondence expressing concerns about the revisions we made to the seizure and headache DRGs effective on October 1, 2006. We created new DRGs 
                        ( print page 47244)
                        562 (Seizure Age  17 With CC), DRG 563 (Seizure Age  17 Without CC), and DRG 564 (Headaches Age  17) as an interim step to better recognize severity of illness among seizure and headache patients for FY 2007. Although national Medicare utilization data supported the revised DRGs, the commenter indicated that the change did not appropriately recognize hospital resources associated with the patients treated in the hospital's inpatient headache program. The commenter stated that patients who are admitted to the hospital's inpatient headache program suffer from chronic headache pain and require inpatient treatment that can last up to 12 days. The commenter noted that these patients are referred from around the country after several months of unsuccessful pain relief and treatment. The commenter indicated that the majority of patients treated at the hospital's inpatient headache program are drug dependent from being administered increasing dosages of pain relievers that have been unsuccessful in resolving chronic headache pain. Further, the commenter noted that the patients require detoxification before any headache treatment begins. The commenter urged CMS to subdivide the headache DRG to better recognize the higher level of severity associated with treating chronic headache patients in the hospital's program. Although we are sympathetic to the commenter, it is not feasible to design a DRG system that addresses concerns that may be unique to one facility. Other than this one commenter, we did not receive any concern about our decision to create separate DRGs for seizures and headaches. However, we agreed to review this issue as part of our effort to redesign the DRG system to better recognize severity of illness for FY 2008. As discussed in section II.C. of the preamble of this final rule with comment period, we are adopting MS–DRGs for FY 2008. While the CMS DRG structure did not support splitting the headache DRG based on the presence or absence of a CC, the MS–DRGs support the creation of a split for the headache DRGs based on whether the patient has a MCC as shown below: MS–DRG
Number of cases
Average length of stay
Average chargesMS–DRG 102 (Headaches with MCC)
1,268
5.04
$19,077MS–DRG 103 (Headaches without MCC)
14,277
3.22
11,989
 (The criteria for determining whether to subdivide a DRG are described in detail earlier in section II.D. of the preamble of this final rule with comment period.) Thus, we proposed to create two MS–DRGs for headaches under the MS–DRGs as shown below: MS–DRG 102 (Headaches with MCC).
                    MS–DRG 103 (Headaches without MCC). We believe this proposed structure would better recognize those headache patients who are severely ill and require more resources as described by the commenter. We refer the readers to section II.D. of the preamble of this final rule with comment period for a detailed discussion of the MS–DRGs. *Comment:*
                         Three commenters supported a DRG system that accounts for the severity of illness, intensity of service, and differences in the cost of care in treating headache patients. They strongly support CMS' proposal to revise its current headache classification, CMS DRG 564 (Headaches Age  17), that was effective as of October 1, 2006 (FY 2007). One of the commenters stated that CMS DRG 564 does not adequately classify headache cases based on the presence or absence of complicating conditions and assumes a relatively short length of stay, resulting in inadequate payments to cover the costs of treating severely complex chronic headache patients that are referred to specialized treatment centers such as theirs. The commenters also agreed with the use of secondary diagnoses to improve payments and better account for severity within a DRG that is defined by the diagnosis of headache. However, the commenters indicated that certain secondary diagnoses related to medication overuse and dependency are not considered MCCs for headache cases. According to one of the commenters, the common secondary diagnosis codes used for patients with medication overuse and dependency are identified by the following ICD–9–CM codes (a fifth digit representing the drug dependence as unspecified (0), continuous (1), episodic (2), or in remission (3) would be applied according to the physician documentation): 304.0x, Opioid type dependence.
                    304.1x, Sedative, hypnotic or anxiolytic dependence.
                    304.2x, Cocaine dependence.
                    304.3x, Cannabis dependence.
                    304.4x, Amphetamine and other psychostimulant dependence.
                    304.5x, Hallucinogen dependence.
                    304.6x, Other specified drug dependence.
                    304.7x, Combinations of opioid type drug with any other.
                    304.8x, Combinations of drug dependence excluding opioid type drug.
                    304.9x, Unspecified drug dependence. The commenters recognize that most of the above listed conditions were included on the proposed CC list; however, none of them were included on the proposed MCC list. Therefore, the majority of patients treated in the commenter's specialized headache program will not qualify to be assigned to proposed MS–DRG 102 (Headache with MCC) and will be paid using proposed MS–DRG 103 (Headache without MCC)—the lower severity level. The commenter further noted that, in contrast to patients who primarily exhibit substance abuse, the headache patient does not primarily exhibit addictive disease, but is a desperate individual who takes increasing amounts of medication to control pain that has not successfully been controlled. In addition, the patient experiences withdrawal phenomena (sweating, shaking, crawling skin, sleeplessness, changes to blood pressure and pulse) as he or she attempts to reduce the drugs at the recommendation of the physician. The commenter noted that a chronic headache patient with a narcotics addiction is more costly to treat because, to ensure a successful treatment outcome, the patient must be effectively withdrawn from the offending medication, while simultaneously addressing the escalating pain and controlling it which requires inpatient hospitalization that can last up to 2 weeks. Another commenter suggested that according to the MCCs identified, there appeared to be a significant variance in cost for headache patients whose stay involved an additional two days. This commenter encouraged CMS to examine the creation of a CC split under the current CMS DRG classification if the adoption of the MS–DRG system does not take place. The commenter stated the determination should consider whether the MCCs used in the MS–DRG 
                        ( print page 47245)
                        analysis are on the current CMS DRG CC list. One of the commenters provided several suggestions for how the proposed MS–DRG classification could more accurately identify case complexity for inpatient headache cases. The suggestions are described below. 1. Include the ICD–9–CM codes (304.00–304.93) on the list of MCCs. These conditions are true indicators of case complexity and patients with these complications should be paid at the higher severity level if there are only these two adult headache DRGs. 2. If the above suggestion of moving those codes to the MCC list has unintended consequences for a large number of the other (non-headache) DRGs, another approach would be to add a modifier to the CC list recognizing these codes as MCCs for cases in which the principal diagnosis is headache. 3. Add a third headache MS–DRG specifically for the opioid and other medication overuse codes. The commenter indicated a preference for the third option stating that based on the data available and medical judgment, this MS–DRG would be the most clinically appropriate method to better recognize severity among headache cases. In addition, the commenter noted it is most consistent with efforts already underway in the ICD–10 classification system to identify medication overuse in patients with a principal diagnosis of headache, although ICD–10 is not yet available. *Response:*
                         We appreciate the commenter's support of the proposed MS–DRG classification system to better recognize severity of illness, intensity of service, and differences in the cost of care in treating headache patients. The commenters are correct that the drug dependency diagnosis codes (304.0x–304.9x) are not considered MCCs in the proposed MS–DRG system. As we discussed in the proposed rule (72 FR 24702), we categorized diagnoses as MCCs, CCs, and non-CC based on an iterative approach in which each diagnosis was evaluated to determine the extent to which its presence as a secondary diagnosis resulted in increased hospital resources. We examined the MedPAR data for headache patients with drug dependency (codes 304.00–304.93). Our medical advisors also analyzed clinical issues surrounding patients who have these codes reported as a secondary diagnosis. After evaluation of the data and clinical issues, our medical advisors recommend that we not change the CC status for the drug dependency codes. Our analysis demonstrated approximately 254 cases in MS DRG 103 with an average length of stay of 4.9 days and average charges approximately $2,500 higher than without drug dependency. There were 25 cases in MS DRG 102 with an average length of stay of 7 days and average charges approximately $5,000 higher than all cases in MS–DRG 102. The results are shown in the table below. Headaches
DRG
Number of cases
Average length of stay
Average chargesMS–DRG 102 with MCC—All cases
1,268
5.04
$19,077MS–DRG 102 with MCC—With secondary diagnosis of drug dependency codes 304.00–304.93
25
7
24,061MS–DRG 103 without MCC—all cases
14,277
3.22
11,989MS–DRG 103 with MCC—With secondary diagnosis of drug dependency codes 304.00–304.93
254
4.9
14,447
 The process used to subdivide a MS–DRG into severity levels based upon the presence of a CC or MCC included five criteria. All five criteria had to be met to satisfy the requirement of creating severity levels. We refer readers to section II.D.3. of the preamble to this final rule with comment period for a complete discussion of these criteria. In studying the data for headaches, the number of cases that include secondary diagnoses of drug dependency does not meet the minimum requirement of 500 cases to create another subdivision. Therefore, only the “with MCC” and “without MCC” severity levels were established and proposed for headache cases. We agree with the commenter that headache patients who suffer from medication overuse are not identical to substance abuse patients. However, if a headache patient presents to the hospital with withdrawal phenomena and it is the drug withdrawal symptoms that require attention and resolution prior to directing treatment towards the headache symptoms, the reason for the patient's admission (or principal diagnosis) appears to be the drug withdrawal. The Official ICD–9–CM Guidelines for Coding and Reporting instruct that the principal diagnosis is defined in the Uniform Hospital Discharge Data Set (UHDDS) as “that condition established after study to be chiefly responsible for occasioning the admission of the patient to the hospital for care.” Therefore, these headache patients are being admitted to address their drug dependency and drug withdrawal before any headache treatment can begin. As discussed above, at this time, analysis of the data does not support assigning the drug dependency codes as MCCs. Secondly, there is not justification to warrant adding modifiers to the drug dependency codes that are currently on the CC list to consider those diagnoses as MCCs for headache cases only. (Further, modifiers are not used in ICD–9–CM.) Lastly, the data does not support subdividing the proposed MS–DRGs for headaches into another severity level. In this FY 2008 final rule, we are adopting the MS–DRGs. Therefore, effective October 1, 2007, the MS–DRGs for headache cases will be as follows: MS–DRG 102 (Headaches with MCC)
                    MS–DRG 103 (Headaches without MCC). *Comment:*
                         One commenter applauded CMS for the changes in the DRG structure to better recognize differences in patient severity. This commenter recommended further refinements to proposed MS–DRG 100 (Seizures with MCC) and MS–DRG 101 (Seizures without MCC). According to the commenter, most Medicare patients who are assigned to the seizure DRGs are admitted to receive acute treatment that is typically provided in the general medical setting. Alternatively, the commenter stated that patients who suffer from uncontrolled seizures or intractable epilepsy are admitted to an epilepsy center for a comprehensive evaluation to identify the epilepsy seizure type, the cause of the seizure, and the location of the seizure. The commenter added that these patients are admitted to the hospital for 4 to 6 days with 24-hour monitoring that includes the use of EEG video monitoring along with cognitive testing and brain imaging procedures. The commenter noted that 
                        ( print page 47246)
                        patients treated in an epilepsy center receive highly technical care that is comparable to the care received in a hospital's intensive care unit, and these patients are more costly to treat. With the assistance of an outside reviewer, the commenter analyzed cost data for proposed MS–DRGs 100 and 101, which focused on a target group of patients identified with a diagnosis of epilepsy (diagnosis codes 345.0 through 345.9) or convulsions (diagnosis code 780.39) and the presence of EEG video monitoring (vEEG) (procedure code 89.10) or a Wada test (procedure code 89.19). The commenter stated that the patients identified with those codes are treated in specialized epilepsy centers. The commenter recommended that CMS further refine proposed MS–DRGs 100 and 101 by subdividing cases with the combination of a diagnosis of epilepsy and one of the diagnostic tests performed into separate DRGs defined as follows: MS–DRG XXX (Epilepsy Evaluation with MCC)
                    MS–DRG XXX (Epilepsy Evaluation without MCC) The commenter acknowledged that the target group of cases constitutes a small portion of the total cases found in MS–DRGs 100 and 101. However, the commenter noted that the diagnostic procedures described above (codes 89.10 and 89.19) are performed by a small minority of hospitals in the United States. The commenter believed that the recommendation to refine these DRGs would result in a minimal impact on other hospitals, while substantially improving the accuracy of payment to those hospitals specializing in epilepsy treatment. *Response:*
                         We appreciate the commenter's support of our efforts to better recognize severity in the DRG system and its recommendation to further refine the proposed seizure DRGs. Epilepsy is currently identified by ICD–9–CM diagnosis codes 345.0x through 345.9x. There are two fifth-digits that may be assigned to a subset of the epilepsy codes, depending on the physician documentation: 0—without mention of intractable epilepsy.
                    1—with intractable epilepsy. According to the commenter, the specialized epilepsy centers focus on treating patients who suffer from intractable epilepsy. The data that the commenter reviewed included the range of epilepsy codes (345.0 through 345.9), the code for convulsions (780.39) and the codes for the diagnostic tests (89.10 and 89.19). The data that were submitted by the commenter did not clearly identify the specific epilepsy codes reviewed or the combination of the diagnostic procedures performed along with specified epilepsy codes. It was also unclear what secondary codes were reviewed in the analysis. As a result, we were unable to conduct our own analysis to evaluate the commenter's recommendation. In addition, we do not believe that we should make further changes to the MS–DRG assignments based on combinations of selected diagnoses. These types of analyses could be done with virtually any MS–DRG and would add significant complexity to the DRG system that we do not believe is warranted at this time. We encourage the commenter to provide the specific codes used in its analysis so we can examine this issue as we continue to make further refinements to the DRGs for FY 2009. We also note that the topic of epilepsy has been discussed over the last couple of years at the ICD–9–CM Coordination and Maintenance Committee meetings due to confusion with physician documentation and the implications of coding a patient as having a one-time seizure versus “labeling” the patient as having the diagnosis of epilepsy. It is unclear if the data identifying these conditions are accurate and reliable as a result of this confusion. In conclusion, as final policy for FY 2008, effective October 1, 2007, the following seizure DRGs are adopted as proposed: MS–DRG 100 (Seizures with MCC).
                    MS–DRG 101 (Seizures without MCC). b. Devices That Are Replaced Without Cost or Where Credit for a Replaced Device Is Furnished to the Hospital (1) Background We addressed the topic of Medicare payment for devices that are replaced without costs or where credit for a replaced device is furnished to the hospital in the FY 2007 IPPS final rule (71 FR 47962). In that final rule, we included the following background information: In recent years, there have been several field actions and recalls with regard to failure of implantable cardiac defibrillators (ICDs) and pacemakers. In many of these cases, the manufacturers have offered replacement devices without cost to the hospital or credit for the device being replaced if the patient required a more expensive device. In some circumstances, manufacturers have also offered, through a warranty package, to pay specified amounts for unreimbursed expenses to persons who had replacement devices implanted. Nonetheless, we believe that incidental device failures that are covered by manufacturer warranties occur routinely. While we understand that some device malfunctions may be inevitable as medical technology grows increasingly sophisticated, we believe that early recognition of problems would reduce the number of people who would be potentially adversely affected by these device problems. The medical community needs heightened and early awareness of patterns of device failures, voluntary field actions, and recalls so that it can take appropriate corrective action to care for patients. Systematic efforts must be undertaken by all interested and involved parties, including manufacturers, insurers, and the medical community, to ensure that device problems are recognized, and are addressed as early as possible so that patients' quality of health care is protected and high quality medical care, equipment, and technologies are provided. We are taking several steps to assist in the early recognition and analysis of patterns of device problems to minimize the potential for harm from device related defects to Medicare beneficiaries and the public in general. In recent years, CMS has recognized the importance of data collection as a condition of Medicare coverage for selected services. In 2005, we issued an NCD that expanded coverage of ICDs and also required registry participation when the devices were implanted for certain clinical indications. The NCD included this requirement in order to ensure that the medical care received by Medicare beneficiaries was reasonable and necessary and, therefore, that the provider or supplier would be appropriately paid. Presently, the American College of Cardiology μ National Cardiovascular Data Registry (ACC NCDR) collects these data and maintains the registry. In addition to ensuring appropriate payment of claims, collection, and ongoing analysis of ICD implantation, registry data can facilitate public response to the quality of health care issues in the event of future device recalls. Analysis of registry data may uncover patterns of device malfunction, device related infection, or early battery depletion that would trigger a more specific investigation. Patterns found in registry data may identify problems in patient outcomes earlier than the currently available mechanisms, which do not systematically collect detailed information about each patient who receives an ICD. We encourage the medical community to work to develop additional registries 
                        ( print page 47247)
                        for implantable devices, so that timely and comprehensive information is available regarding devices, recipients of those devices, and patients' quality of health care status and medical outcomes. While participation in an ICD registry is required as a Medicare condition of coverage for ICD implantation for certain clinical conditions, we believe that the potential benefits of other data collection extend well beyond their application in Medicare's specific NCDs. As medical technology continues to advance swiftly, data collection regarding the short term and long term medical outcomes of new technologies, especially concerning implanted devices that may remain in the bodies of patients for their lifetimes, will be essential to the timely recognition of any specific device related problems, patterns of complications, and health-related outcomes. This information will facilitate early interventions to mitigate any harm potentially imposed upon Medicare beneficiaries and the public, and to improve the quality and efficiency of health care services provided. Moreover, published data from registries may further help the development of high quality, evidence based clinical practice guidelines for the care of patients who may receive device implants. In turn, widespread use of evidence based guidelines may reduce variation in medical practice, leading to improved personal care and overall public health. Registry information may also contribute to the development of more comprehensive and refined quality metrics that may be used to systematically assess the collected data, and then improve the safety and quality of health care provided to Medicare beneficiaries. Such improvements in the quality of care that result in better personal health will require the sustained commitment of industry, payers, health care providers, and others to progressively work towards that goal, and to ensure excellent and open communication and rapid system wide responses. One strategy for this data collection involves adding information to the claims forms. CMS has a long history of collecting hemoglobin or hematocrit data from ESRD patients on the claims form. Modification of claims forms was necessary to do that. CMS is exploring the use of claims data to collect other types of clinical or technical data such as device manufacturer and model number. The systematic recording of model numbers can enhance knowledge of device-related outcomes and complications. We look forward to further discussions with the public about new strategies to both recognize device related problems early as well as recognize health-related outcomes of new technologies. In addition, we believe that the routine identification of Medicare claims for certain device implantation procedures in situations where a payment adjustment is appropriate may enhance the medical community's recognition of device related problems, potentially leading to more timely improvements in medical device technologies. This systematic approach, which enables hospitals to identify and then appropriately report selected services when devices are replaced without cost to the hospital, or with full or partial credit to the hospital for the cost of the replaced device, should provide comprehensive information regarding the hospitals' experiences with Medicare beneficiaries who have specific medical devices that are being replaced. Because Medicare beneficiaries are common recipients of implanted devices, the claims information may be particularly helpful in identifying patterns of device related problems early in their natural history, so that appropriate strategies to reduce future problems may be developed. One possible strategy would be for the Medicare program to use information obtained through the use of bar coding of medical devices. The FDA issued a final rule in the 
                        **Federal Register**
                         on February 26, 2004 (69 FR 9119), that required bar codes for human drugs and biological product labels effective April 26, 2006. In the final rule, FDA deferred action on requiring bar codes for medical devices, noting the difficulty in standardizing medical devices, as compared to drugs and biologicals, which have the unique NDC numbering system. This rule can be reviewed on the 
                        **Federal Register**
                        's Web site at: 
                        *http://www.docket.access.gpo.gov/​2004/​04-4249.htm.* We intend to monitor FDA's work in this area to determine how this technology could help CMS promote higher quality through better clinical decision making and, as discussed below, assist in improving the accuracy of the Medicare payment system. In addition to our concern for overall public health, we also have a fiduciary responsibility to the Medicare Trust Fund to ensure that Medicare pays only for covered services. Therefore, in the FY 2007 IPPS final rule, we indicated that we believe we need to consider whether it is appropriate to reduce the Medicare payment in cases in which an implanted device is replaced at reduced or no cost to the hospital or with partial or full credit for the removed device. Such consideration could cover certain devices for which credit for the replaced medical device is given, or medical devices that are replaced as a result of or pursuant to a warranty, field action, voluntary recall, or involuntary recall, and medical devices that are provided free of charge. We indicated that conveying this information to the Medicare beneficiary could provide for a reduction in the IPPS payment if we determine that the device is replaced without cost to the provider or beneficiary or when the provider receives full credit for the cost of a replaced device. In FY 2007 IPPS final rule, we indicated a need to develop a methodology to determine the amount of the reduction to the otherwise payable IPPS payment for medical devices furnished to Medicare beneficiaries. We believe that this policy is appropriate because, in these cases, the full cost of the replaced device is not incurred and, therefore, an adjustment to the payment is necessary to remove the cost of the device. (2) Current and Proposed Policies In the CY 2007 OPPS final rule (71 FR 68071 through 68077), we adopted a policy that requires a reduced payment to a hospital or ambulatory surgical center when a device is provided to them at no cost. From our experience with the OPPS, we understand that a manufacturer will often provide a credit or partial credit for the recalled device rather than a free replacement. In other situations, a manufacturer will provide either a full or partial credit for a device that needs to be replaced only during the manufacturer's warranty period. In either of these situations, the original implantation of the device was paid for either by Medicare, another third party on behalf of the beneficiary by making payment directly to the hospital, or the implantation was paid for directly by the beneficiary. Therefore, we believe that Medicare should not pay the hospital for the full cost of the replacement if the hospital is receiving a partial or full credit, either due to a recall or service during the warranty period. The device was already paid for at the time of initial implantation, and Medicare should retain the credit that is being provided to the hospital for service to a Medicare beneficiary. Moreover, we also believe that a proposed adjustment is consistent with section 1862(a)(2) of the Act, which excludes from Medicare coverage an item or service for which neither the beneficiary, nor anyone on his or her behalf, has an obligation to pay. 
                        ( print page 47248)
                        Payment of the full IPPS payment amount in cases in which the device was replaced under warranty or in which there was a full or partial credit for the price of the recalled or failed device effectively results in Medicare payment for a noncovered item. Therefore, in the FY 2008 IPPS proposed rule, we proposed to adjust the IPPS payment amount in these circumstances under the authority of section 1886(d)(5)(I) of the Act, which permits the Secretary to make “exceptions and adjustments to such payment amounts * * * as the Secretary deems appropriate.” Under the OPPS, we currently only apply the reduced payment amount in situations where the hospital received a replacement device at no cost or at full credit for the replacement device. Unlike the current OPPS policy, we proposed for purposes of the IPPS to apply the policy for partial as well as full credit for a replacement device. As we indicated above, our experience with the OPPS suggests that the policy should be applied beyond full replacement of a recalled device. We proposed to reduce the amount of the Medicare IPPS payment when a full or partial credit towards a replacement device is made or the device is replaced without cost to the hospital or with full credit for the removed device. However, we do not believe that the IPPS policy should apply to all DRGs and all situations in which a device is replaced without cost to the hospital for the device or with full or partial credit for the removed device. We recognize that, in many cases, the cost of the device is a relatively modest part of the IPPS payment. In other situations, we believe the amount of the credit will also be nominal. In these cases, we believe that the averaging nature of payments under the IPPS would incorporate any significant savings from a warranty replacement, field action, or recall into the payment rate for the associated DRG, and that no specific adjustment would be necessary or appropriate. For this reason, we proposed to apply the policy only to those DRGs under the IPPS where the implantation of the device determines the base DRG assignment and situations where the hospital received a credit equal to 20 percent or more of the cost of the device. We believe a credit that is equal to or more than this percentage is substantial, and Medicare should not pay for the full cost of these replacement devices because hospitals have received significant savings from the manufacturer for its replacement costs. In the proposed rule, we sought comment on the application of this percentage amount. We further believe that it is appropriate to limit application of the policy only to those DRGs where implantation of the device determines the DRG assignment. In making a decision to assign a case based on whether a device was implanted, we recognized that the device cost was a significant portion of the overall costs faced by the hospital that treats the case. Therefore, we believe that Medicare should not make full payment for those DRGs where the assignment of the case is made based on implantation of the device when the hospital is receiving either a full or significant partial credit for the device. In the proposed rule, we included a listing of the CMS DRGs (including the proposed new MS-DRG title) that would be subject to this policy. CMS has requested and received new condition codes from the National Uniform Billing Committee (NUBC) to describe claims where a provider has received a device or product without cost. We will use these condition codes to reduce payment when the hospital used a device for which full or partial credit is given, or the item was replaced as a result of or under a warranty, field action, voluntary recall, involuntary recall, or otherwise provided free of charge. On November 4, 2005, we issued Change Request 4058, Transmittal 741, in the Medicare Claims Processing Manual. The effective date of this transmittal was April 1, 2006, and the implementation date was April 3, 2006. This transmittal specifies that the following two new condition codes have been created. They are defined below: Condition Code 49—Product Replacement within Product Lifecycle. Replacement of a product earlier than the anticipated lifecycle due to an indication that the product is not functioning properly.
                    Condition Code 50—Product Replacement for Known Recall of a Product. The manufacturer or the FDA has identified the product for recall and therefore replacement. This transmittal can be accessed at the following Web site: 
                        *http://www.cms.hhs.gov/​Transmittals/​downloads/​R741CP.pdf.* Hospitals must report these codes on any claim for IPPS services that includes a replacement device or product for which they received full or partial credit. Hospital billing offices would report one of these condition codes in addition to the specific code for the type of procedure performed (for example, replacement of a defibrillator). We proposed to require the hospital to provide invoices or other information indicating its normal cost of the device and the amount of the credit it received. Under our policy, the fiscal intermediary (or, if applicable, the MAC) would process claims involving DRGs that are subject to this policy that include a device that is replaced without cost to the hospital for the device or with full or partial credit for the removed device as identified by condition codes 49 or 50. For a device provided to the hospital without cost, the fiscal intermediary (or, if applicable, the MAC) would subtract the cost of the device from the DRG payment. For a device for which the hospital received a full or partial credit, the fiscal intermediary (or, if applicable, the MAC) would subtract the amount credited from the DRG payment. CMS will issue specific claims processing instructions to Medicare contractors and hospitals on implementing this policy. We proposed to require the hospital to provide invoices or other information indicating the cost of the device and the amount of credit it received. In the proposed rule, we sought comment on the best approach to making this payment adjustment and what types of documentation hospitals should provide to the fiscal intermediary or MAC. We proposed to invoke our special exceptions and adjustment authority under section 1886(d)(5)(I)(i) of the Act to make this adjustment. The special exceptions and adjustment authority authorizes us to provide “for such other exceptions and adjustments to [IPPS] payment amountsm * * * as the Secretary deems appropriate.” We believe it would be appropriate to adjust payments for surgical procedures to replace certain devices by providing payments to hospitals only for the non-device-related procedural costs when such a device is replaced without cost to the hospital for the device or with full credit for the removed device. *Comment:*
                         Many commenters addressed this proposal. Some commenters suggested that CMS rescind the implementation of the proposed policy. Other commenters supported “the goal of accurate payment for services provided and * * * the concept of a payment offset for devices that are replaced without cost or where a credit is furnished to the hospital for a replaced device.” However, most commenters also suggested that, if CMS were to implement the policy, CMS reconsider the process. The commenters believed that blanket implementation of the proposal ignores the underlying concept of the DRG payment system. They stated that DRG payments are fundamentally based on averages of historical costs and charges. 
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                        They added that to reduce the payment for cases involving replacement of a medical device assumes that either these types of cases have not occurred in the past or are occurring at such a dramatic increase as to materially skew the averages used to develop the DRG weights. The commenters reiterated that CMS has stated that we believe device failures that are covered by manufacturers’ warranties occur routinely. The commenter noted that this statement acknowledges that incidental device failure has occurred in the past and was likely covered by the manufacturer warranty. The commenter stated that, if so, this practice is part of the historical cost and charge data used to develop the current DRG weights for cases involving implantation, and that reduction of payment of certain cases involving a reimplantation would ignore the average DRG weight for those cases that already implicitly include this reduction. Another commenter suggested that CMS develop a proxy to the full cost of the device by using a percentage of the DRG, based on historical data because Medicare does not reimburse providers at full cost. One commenter recommended that, if adopted, CMS include in this policy that these claims will not be included in the calculation of relative weights, as this will reduce payment of services for procedures with non-replacement devices. Several commenters suggested that CMS should consider raising the proposed threshold from 20 percent to greater than 50 percent of the cost of the device. Given the administrative burden of manually processing these claims, the commenters believed that it is not worth the burden on the hospitals’ or fiscal intermediaries’ part if only a nominal portion of the cost of the device is at issue. Commenters further suggested that if CMS implements this policy, estimated costs should be calculated from the charges on the claims and the DRG payment only reduced by the device cost if the payment is greater than the cost of the case less the cost of the device. Several commenters cited the administrative burden that would result with implementation of this policy. One commenter stated that the proposal would result in significant operational burden and would essentially delay payment for otherwise clean claims. The commenter encouraged CMS to obtain invoice cost information from hospitals by having the hospitals report returned devices with a specific code similar to the use of HCPCS code C9399 (outpatient reporting for new drugs without HCPCS codes). The commenter indicated that hospitals are able to report the HCPCS code and the NCD number for drugs in the remarks section of the claim form in form locator field 84. The commenter believed a similar approach can be used in the inpatient setting when either Condition Code 49 or 50 is present on the claim. This would trigger the hospital to report the percentage of the device credit in the remarks field. The commenter suggested that this approach would provide CMS with the data it needs while eliminating the need for hard copy invoices, which will significantly reduce the hospital reporting burden. Another commenter suggested using a similar approach—applying an average adjustment based on the previous year's experience with credits to arrive at an aggregate method for making payment adjustments rather than a claim-by-claim approach. Some commenters raised concerns about the use of condition code 49 with devices that are returned within the warranty period. These commenters explained that the time from explant of a device, receipt of the device by the manufacturer, subsequent device analysis and issuance of the warranty results can often be eight weeks or longer. According to the commenters, a hospital will be unaware during this time whether a full, partial, or even zero credit will be made. The commenter suggested that hospitals be either: (1) Allowed to submit the claims immediately without condition code 49 and submit a claim adjustment with condition code 49 at a later date once the credit determination is made; or (2) allow hospitals to hold the claim until a determination is made on the level of the credit. Another commenter who suggested that CMS adopt this approach raised a concern about “unintended consequences.” The commenter expressed a concern that hospitals may not return a nonworking device to avoid the payment offset resulting in the manufacturer being unable to identify defects that need to be corrected. This commenter suggested that “discouraging device return from hospitals” would be “detrimental to industry efforts at identifying trends and improving the long-term reliability of current and future products.” The commenter suggested that allowing hospitals to submit a bill without Condition Code 49 and later submitting an adjustment claim with the code could avoid discouraging hospitals from returning devices that are replaced. Other commenters raised concerns about the nomenclature that is used to describe Condition Code 49. These commenters were concerned that Condition Code 49 describes “replacement of a product earlier than the anticipated lifecycle due to an indication that the product is not functioning properly.” One commenter was concerned that submitting a bill immediately with Condition Code 49 would indicate a premature determination that a device was replaced due to improper functioning. Like the commenter above, this commenter was concerned that the manufacturer may make a later determination that the device was functioning properly or the warranty period had expired and hospital will have already billed using Condition Code 49. Another commenter suggested that a device may be replaced during a warranty period even though it is functioning properly (for example, the patient depleted a battery prematurely because of higher than normal energy needs). In this case, the commenter was concerned that Condition Code 49 will label the replacement as being due to a malfunction when it actually results from higher than normal use but proper functioning of the device. The commenter suggested alternative nomenclature for Condition Code 49 that focuses on the product being replaced earlier than its anticipated lifecycle as a result of either a product malfunction or higher than normal use. Finally, some commenters raised concerns about the use of invoices to determine the level of the reduction in Medicare's payment. One commenter indicated that credits are derived using the original and current contract prices for the device being explained and the product price for the replacement device. According to this commenter, manufacturers can provide hospitals with the credit dollar amount and the percentage the credit represents of the full cost of the device. Based on that information, hospitals will easily be able to determine whether they need to submit a claim with Condition Code 49 (that is, the credit is equal to or greater than the threshold reduction where the policy applies) and can furnish Medicare without the dollar amount of the credit that is due. *Response:*
                         We disagree with the commenters who suggested that our proposal assumes that either device recalls or replacements have not occurred in the past or are occurring at such a dramatic increase as to materially skew the averages used to develop the DRG weights. Our policy assumes that hospital charges include the full cost of the device. Although the relative weights are based on estimated costs, charges are an important element of the relative weight methodology. We apply hospital cost-to-charge ratios to hospital 
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                        charges to determine the DRG relative weight. If hospitals have uniform charging practices for all cases irrespective of whether they receive a device at no cost or with a partial credit, the CCR will be applied to a hospital charge that does not reflect that the hospital did not pay the full cost of the device. Under these circumstances, we believe it is appropriate that Medicare's payment should recognize a hospital's reduced cost for a device that it receives either at no or a substantially reduced cost. We agree with the commenters who suggested that the proposed threshold should be raised from 20 percent to 50 percent or greater of the cost of the device. The commenters have raised valid issues about potential administrative burden and delays that could occur when determining whether a device was replaced due to a malfunction or due to higher than normal use. We agree that the policy should not apply if only a nominal portion of the cost of the device is at issue. With respect to the suggestion that the policy should only apply if Medicare's payment is greater than estimated costs of the case (less the device) calculated from the charges on the claims, we believe the policy we have adopted to recognize the lower costs of replaced devices that are either replaced at no cost or partial cost is reasonable. However, we may consider this idea in the future as we continue to make refinements to our policy for full or partial credit devices. We understand the commenters’ concerns about potential delays that could occur while a returned device is being evaluated during a warranty service period. Of the suggestions we received to address this concern, we agree that hospitals should have the options of either: (1) Submitting the claims immediately without Condition Code 49 and a claim adjustment with Condition Code 49 at a later date once the credit determination is made or (2) holding the claim until a determination is made on the level of the credit. We believe that giving hospitals these options would address the concern of the commenter that hospitals may not return a non-working device for a replacement. Further, these ideas would facilitate more efficient administration of the policy by allowing the hospital to be provided with all of the information it needs to be paid correctly by Medicare without the need to suspend claims or delay payment. However, hospitals should note that if choosing option 1 above, the rules for submitting adjustment claims still apply and can be found at: 
                        *http://www.cms.hhs.gov/​manuals/​downloads/​clm104c01.pdf*, section 130.2. The commenters raise a valid point concerning the nomenclature for Condition Code 49 that only describes device malfunctions when the policy may apply to other situations. We will bring the concerns of the commenter to the National Uniform Billing Committee (NUBC) for further consideration. The NUBC is a committee brought together by the American Hospital Association and includes the participation of all major national provider and payer organizations. Their major role is to maintain the integrity of the UB 92 and (now UB 04) data set and to be a forum for discussions that lead to mutually agreed data elements for the claim as well as the data elements for other claim-related transactions. With respect to the comments about using invoice information as documentation for the credit due to Medicare, we provided invoices as an example of the type of documentation a fiscal intermediary or MAC may require to determine the percentage credit. Our fiscal intermediaries (or MAC if applicable) are in the best position to evaluate and determine matters regarding the adequacy of documentation to determine Medicare payment. In this final rule with comment period, we are not requiring any specific documentation to determine whether the percentage credit will apply. Invoices or the documentation (including those suggested in the public comments) would be at the discretion of the fiscal intermediary or MAC. Therefore, after consideration of the public comments received, for FY 2008, we are implementing the following decisions regarding returned devices. We are applying the policy to the MS–DRGs listed in the chart below; those cases being MS–DRGs where the implantation of the device determines the base DRG assignment. Further, we are applying the policy in situations where the hospital received a credit equal to 50 percent or more of the cost of the device. Hospitals have the option of either: (1) Submitting the claims immediately without condition code 49 and a claim adjustment with condition code 49 at a later date once the credit determination is made or (2) holding the claim until a determination is made on the level of the credit. Should hospitals choose option 1, we note that the rules for submitting adjustment claims do apply, and can be found at the Web site noted above. CMS will issue specific claims processing instructions to Medicare contractors and hospitals on implementing this policy. DRGs Subject to Final Policy
MDC
MS-DRG
Narrative description of DRGPRE
1 and 2
Heart Transplant or Implant of Heart Assist System with and without MCC, respectively (former CMS–DRG 103, Heart Transplant or Implant of Heart Assist System).1
25 and 26
Craniotomy and Endovascular Intracranial Procedure with MCC or with CC, respectively (former CMS–DRG 1, Craniotomy Age  17 with CC).1
26 and 27
Craniotomy and Endovascular Intracranial Procedure with CC or without CC/MCC, respectively (former CMS–DRGs 2, Craniotomy Age  17 without CC).1
40 and 41
Peripheral  Cranial Nerve  Other Nervous System Procedure with MCC; or with CC or Peripheral Neurostimulator, respectively (former CMS–DRG, 7 Peripheral  Cranial Nerve  Other Nervous System Procedures with CC).1
42
Peripheral  Cranial Nerve  Other Nervous System Procedure without CC/MCC (former CMS–DRG 8, Peripheral  Cranial Nerve  Other Nervous System Procedures without CC).1
23 and 24
Craniotomy with Major Device Implant or Acute Complex Central Nervous System Principal Diagnosis with MCC or Chemotherapy Implant; and without MCC [or Chemotherapy Implant], respectively (former CMS–DRG 543, Craniotomy with Major Device Implant or Acute Complex Central Nervous System Principal Diagnosis).3
129 and 130
Major Head  Neck Procedures with CC/MCC or Major Device; or without CC/MCC, respectively (former CMS–DRG 49, Major Head  Neck Procedures).( print page 47251)5
216, 217, and 218
Cardiac Valve  Other Major Cardiothoracic Procedure with Cardiac Catheterization With MCC; or with CC; or without CC/MCC, respectively (former CMS–DRG 104, Cardiac Valve  Other Major Cardiothoracic Procedures with Cardiac Catheterization).5
219, 220, and 221
Cardiac Valve  Other Major Cardiothoracic Procedure without Cardiac Catheterization with MCC; or with CC, or without CC/MCC, respectively (former CMS–DRG 105, Cardiac Valve  Other Major Cardiothoracic Procedures without Cardiac Catheterization).5
237
Major Cardiovascular Procedures with MCC or Thoracic Aortic Aneurysm Repair (former CMS–DRG 110, Major Cardiovascular Procedures with CC).5
238
Major Cardiovascular Procedures without MCC (former CMS–DRG 111, Major Cardiovascular Procedures without CC).5
260, 261, and 262
Cardiac Pacemaker Revision Except Device Replacement with MCC, or with CC, or without CC/MCC, respectively (former CMS-DRGs 117, Cardiac Pacemaker Revision Except Device Replacement).5
258 and 259
Cardiac Pacemaker Device Replacement with MCC, and Without MCC, respectively (former CMS–DRG 118, Cardiac Pacemaker Device Replacement).5
226 and 227
Cardiac Defibrillator Implant without Cardiac Catheterization with MCC and without MCC, respectively (former CMS–DRG 515, Cardiac Defibrillator Implant without Cardiac Catheterization).5
215
Other Heart Assist System Implant (former CMS–DRG 525, Other Heart Assist System Implant).5
222 and 223
Cardiac Defibrillator Implant with Cardiac Catheterization with Acute Myocardial Infarction/Heart Failure/Shock with MCC and without MCC, respectively (former CMS–DRGs 535, Cardiac Defibrillator Implant with Cardiac Catheterization with Acute Myocardial Infarction/Heart Failure/Shock).5
224 and 225
Cardiac Defibrillator Implant with Cardiac Catheterization without Acute Myocardial Infarction/Heart Failure/Shock with MCC and without MCC, respectively (former CMS–DRG 536, Cardiac Defibrillator Implant with Cardiac Catheterization without Acute Myocardial Infarction/Heart Failure/Shock).5
242, 243, and 244
Permanent Cardiac Pacemaker Implant with MCC, with CC, and without CC/MCC, respectively (MS–DRG 551, Permanent Cardiac Pacemaker Implant with Major Cardiovascular Diagnosis or AICD Lead or Generator.5
242, 243, and 244
Permanent Cardiac Pacemaker Implant with MCC, with CC, and without CC/MCC, respectively (former CMS–DRG 552, Other Permanent Cardiac Pacemaker Implant without Major Cardiovascular Diagnosis).8
461 and 462
Bilateral or Multiple Major Joint Procedures of Lower Extremity with MCC, or without MCC, respectively (former CMS–DRG 471, Bilateral or Multiple Major Joint Procedures of Lower Extremity).8
469 and 470
Major Joint Replacement or Reattachment of Lower Extremity with MCC or without MCC, respectively (former CMS–DRG 544, Major Joint Replacement or Reattachment of Lower Extremity).8
466, 467, and 468
Revision of Hip or Knee Replacement with MCC, with CC, or without CC/MCC, respectively (former CMS–DRG 545, Revision of Hip or Knee Replacement).
 To codify in regulations the policies for the IPPS discussed above, we are adding a new paragraph (g) to § 412.2 and a new § 412.89 to 42 CFR part 412, Subpart F. We are also making a technical, conforming change to the heading of Subpart F and adding an uncoded center heading before the proposed new § 412.89. 12. Other MS–DRG Issues Raised in the Public Comments on the Proposed Rule a. Heart Transplants or Implants of Heart Assist System and Liver Transplants (Pre-MDC) In our analysis of heart transplant or implant of heart assist system base DRGs and liver transplant base DRGs, we found that each warranted two subdivisions based on our five criteria for establishing the MS–DRGs discussed in section II.D. of this final rule with comment period. We proposed two MS–DRGs for heart transplant or implant of heart assist system: MS–DRG 001 (Heart Transplant or Implant of Heart Assist System with MCC) and MS–DRG 002 (Heart Transplant or Implant of Heart Assist System without MCC). We also proposed two MS–DRGs for liver transplant: MS DRG 005 (Liver Transplant with MCC or Intestinal Transplant) and MS–DRG 006 (Liver Transplant without MCC). *Comment:*
                         Two commenters responded to our proposal on the subdivision of heart transplant or implant of heart assist system. One commenter representing one of the manufacturers of left ventricular assist devices (LVAD) stated that this change seems to appropriately identify severity of illness based upon mean length of stay days and charges associated with implantable LVADs as long as hospitals accurately report and document complications. Another commenter representing transplant surgeons recommended that CMS defer implementation of separate severity levels for heart transplant and liver transplants pending further study. The commenter stated that payment for the uncomplicated procedures—the without MCC group—are too low, resulting in financial instability for many centers and the creation of inappropriate patient selection incentives. The commenter submitted an analysis showing that of the 37 heart transplant centers for which data were available, 10 (27 percent) would undergo DRG payment reductions of more than 10 percent while, of the 52 liver transplant centers, 11 (19 percent) would experience reductions of more than 10 percent, with many experiencing reductions over 20 percent. The commenter indicated that transplant cases are relatively low volume which makes these DRGs more vulnerable to fluctuations. The commenter stated that while the concept of dividing DRGs based on severity is conceptually sound in the context of admissions for many medical conditions and perhaps for certain surgical admissions, transplantation as a whole is an extremely complex process that generally involves patients with life threatening conditions. The commenter stated that the presence or absence of a condition on the MCC list is not a good predictor of inpatient hospital costs for liver and heart transplants. The commenter stated that one factor that 
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                        influences hospital costs and lengths of stay is the characteristics of the donor organ. The commenter stated that the donor risk index and the model for end-stage liver disease (MELD) system which prioritizes patients waiting for liver transplants by severity of illness are two important factors for any severity index for transplant DRGs. This information is not identified in the MedPAR data. Several commenters also stated that the use of certain donor organs increase in hospital costs for transplantation. A category of donor called DCD (donor after cardiac death) generally represents a donor with a severe brain injury who is taken to the operating room, removed from the ventilator, and who dies a cardiac, rather than a brain, death. Another category of donor called ECD (extended or expanded criteria donor) is generally older and sicker than a standard donor. Use of organs from DCD or ECD donors permits transplantations that may be more expensive, as the organs may not be optimal. The commenters suggested that we take these issues into consideration when making DRG assignments. In addition, two commenters stated that a separate DRG may be needed to address the significantly higher costs associated with combined liver/kidney transplants. One of the commenters stated that the recent increases in volume justify creation of a separate DRG. Another commenter stated that the Milliman 2005 U.S. Organ and Tissue Transplant Cost Estimates and Discussion Research Report indicates a separate MS–DRG is warranted at a higher level. However, the commenter did not provide data on combined liver/kidney transplants from the report. *Response:*
                         We cannot use the factors suggested in the commenters to subdivide the transplant DRGs because they are not distinctly identified in the current ICD–9–CM coding system. The National Center for Health Statistics is responsible for the maintenance of the diagnosis codes. We have advised representatives from the transplant industry to approach the National Center for Health Statistics in order to request unique codes to identify cases that include factors such as a DCD or ECD donor or the patient's MELD score. Without specific data that show how these factors affect patient costs, we cannot use them to subdivide the transplant DRGs. Suggestions on coding issues involving diagnosis codes should be directed to: Donna Pickett, Co-chairperson, ICD–9–CM Coordination and Maintenance Committee, NCHS, Room 2402, 3311 Toledo Road, Hyattsville, MD 20782. Comments may be sent by E-mail to: 
                        *dfp4@CDC.gov*. The table below illustrates our findings on heart and liver transplant MS–DRGs: MS–DRG
Number of cases
Average length of stay
Average chargesMS–DRG 001 (Heart transplant or implant of heart assist system with MCC)
572
41.03
$442, 339MS–DRG 002 (Heart transplant or implant of heart assist system without MCC)
304
22.81
250,693MS–DRG 005 (Liver transplant with MCC or intestinal transplant)
762
22.25
243, 271MS–DRG 006 (Liver transplant without MCC)
446
10.05
129,519
 The data support the current MCC split for heart and liver transplants. Therefore, we disagree with the commenter who suggested that diagnosis codes do not explain patient resource cost for these DRGs. In addition, the MCC split was supported by another commenter that manufactures LVADs. In response to the comments about the impact on transplant centers, we note that the change to the MS–DRGs is redistributive within each base DRG. Payment for the high severity cases will increase, and it will decrease for other cases. In total, Medicare payments for transplants likely will be unchanged. Rather, Medicare's payment will be better directed to reflect patient severity of illness. In response to the comment about combined liver/kidney transplants, we believe these patients would have a secondary diagnosis that is an MCC that would result in the patient being assigned to MS–DRG 005. For instance, a common cause of combined liver and kidney failure is hepatorenal syndrome, in which the liver failure actually causes the kidney failure. In this case, the principal diagnosis is liver failure. The second diagnosis—kidney failure—is an MCC. Patients with combined liver/kidney failure are very sick patients, and we believe it is highly likely that if they are properly coded, all patients would be assigned to MS–DRG 005 and be paid the maximum amount for a patient receiving a liver transplant. At this time, we do not believe that a separate MS–DRG is needed for combined liver-kidney transplants. With respect to the Milliman 2005 US Organ and Tissue Transplant Cost Estimates and Discussion Research Report discussed by the commenter, we are open to considering, to the extent feasible, reliable, validated data other than MedPAR data in annually recalibrating and reclassifying the DRGs. Because the commenter did not provide data on combined liver/kidney transplants from the report, we could not fully evaluate the commenter's claims. b. Gliadel® Wafer (MDC 1) Gliadel® Wafer is the only implantable chemotherapy agent approved by FDA for the treatment of malignant brain tumors. This treatment is approved for newly diagnosed patients with high-grade malignant glioma and for patients with recurrent glioblastoma multiforme, which is the most fatal form of primary brain tumor. ICD–9–CM procedure code 00.10 (Implantation of chemotherapeutic agent) was created October 1, 2002 to uniquely identify this technology. In the FY 2008 IPPS proposed rule, we proposed to assign the technology to MS–DRG 23 (Craniotomy with Major Device Implant or Acute Complex Central Nervous System Principal Diagnosis with MCC) and MS–DRG 24 (Craniotomy with Major Device Implant or Acute Complex Central Nervous System Principal Diagnosis without MCC). *Comment:*
                         One commenter, the manufacturer of the Gliadel® Wafer technology, recommended that CMS recognize the complexity and costs associated with implantation of Gliadel® Wafer and reassign all cases that use it to MS–DRG 23. The commenter also recommended that the MS–DRG titles for MS–DRG 23 and 24 be revised to: MS–DRG 023, “Craniotomy with Acute Complex Central Nervous System Principal Diagnosis with MCC or Major Device Implant”; and
                    MS–DRG 024, “Craniotomy with Acute Complex Central Nervous System Principal Diagnosis without MCC.” The commenter provided data showing a total of 502 cases receiving the Gliadel® Wafer. The majority of the patients, 84 percent (423 cases), were assigned to MS–DRG 24. For MS–DRG 
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                        24, the commenter reported that the standardized average charges for Gliadel® cases were approximately $74,069, which is 27 percent greater than the average charges for non-Gliadel cases in MS–DRG 24 of approximately $58,181. Many commenters encouraged CMS to reassign these cases to MS–DRG 23. *Response:*
                         Based on our review on the FY 2006 MedPAR data, we found 73 Gliadel® cases assigned to MS–DRG 23 and 398 cases assigned to MS–DRG 24. The following table displays our results: MS–DRG
Number of cases
Average length of stay
Average chargesMS–DRG 23—All cases
2,950
13.63
$91,518MS–DRG 23—Gliadel cases
73
12.44
104,975MS–DRG 24—All cases
2,432
8.63
61,865MS–DRG 24—Gliadel cases
398
7.03
75,482
 Under the MS–DRGs, 73 out of 471 Gliadel® cases are assigned to MS–DRG 023. The 398 remaining Gliadel® cases do not have an MCC and would be assigned to MS–DRG 024, absent further changes to the DRG logic. The average charges of approximately $75,482 for Gliadel® cases are higher than the average charges of approximately $61,865 for the overall cases in MS–DRG 024 and are approximately midway between the with and without MCC severity levels. In this final rule with comment period, we are assigning all Gliadel® cases to MS–DRG 23. The title for MS–DRG 023 is changed to “Craniotomy with Major Device Implant or Acute Complex Central Nervous System Principal Diagnosis with MCC or Chemo Agent Implant”. The presence of craniotomy with major device implant or acute complex central nervous system principal diagnosis with MCC or implantation of chemotherapeutic agent would assign a case to the higher severity level. c. Myasthenia Gravis and Acute and Chronic Inflammatory Demyelinating Neuropathies (AIDP–CIDP) (MDC 1) *Comment:*
                         One comment, a national association that represents neurologists and neuroscience professionals, was concerned that there are no separate DRGs for Myasthenia Gravis and Acute and Chronic Inflammatory Demyelinating Neuropathies (AIDP–CIDP). Myasthenia gravis is an autoimmune disease caused by antibodies that block receptors at the neuromuscular junction resulting in decreased activation of muscles by nerves, leading to varying degrees of muscle weakness. Acute inflammatory demyelinating neuropathy, also known as Guillain-Barre Syndrome, is caused by an autoimmune process that attacks the myelin sheaths around nerves, causing defective nerve transmission that leads to sensory loss and muscle weakness. Chronic inflammatory demyelinating neuropathy is a chronic, relapsing form of the acute syndrome. We proposed to assign these conditions to MS–DRGs 56 and 57 (Degenerative Nervous System Disorders With and Without MCC, respectively). According to the commenter, cases with these conditions should not be assigned to an MS–DRG for degenerative nervous system disorders. The commenter stated that a separate DRG needs to be established to recognize the substantially higher costs of treating patients with an acute exacerbation of myasthenia gravis. There are two ICD–9–CM diagnosis codes for myasthenia gravis: code 358.00 (Myasthenia gravis without (acute) exacerbation) and code 358.01 (Myasthenia gravis with exacerbation). According to the commenter, in addition to plasmapheresis, acute myasthenia gravis patients often require respiratory support, intensive care unit stays, and IVIG administration. The commenter requested that CMS review cost data for admissions under this diagnosis and determine whether these cases had costs that were substantially higher than other cases assigned to the same DRG. The commenter stated that, similar to myasthenia gravis, AIDP and CIDP are highly likely to require respiratory support and intensive care unit stays with plasmapheresis or IVIG administration, or both, when presenting acutely or in acute exacerbation. The ICD–9–CM diagnosis code that is reported for AIDP is code 357.0 (Acute infective polyneuritis), and the appropriate diagnosis code for CIDP is code 357.81 (Chronic inflammatory demyelinatng polyneuritis). The commenter stated that the data on AIDP and CIDP are unavailable at this time. Therefore, the commenter requested that CMS track these cases in consideration of a separate DRG for AIDP/CIDP for next year. *Response:*
                         The commenter raised a concern that myasthenia gravis cases are being assigned to the degenerative nervous system disorders DRG, and did not believe that the condition should be assigned to that DRG. However, we would point out that myasthenia gravis cases are currently assigned to CMS–DRG 12 (Degenerative Nervous System Disorders). Moving to the MS–DRGs did not alter this DRG logic. We simply subdivided this DRG into two severity levels. Given the extensive changes we are making in moving to MS–DRGs we believe it is premature to consider refinements to this base DRG for myasthenia gravis cases. Rather, we will wait to gain experience under the MS–DRGs and determine whether further refinements are needed to the base DRGs. d. Peripheral and Spinal Neurostimulators (MDC 1 and MDC 8) In our analysis of spinal procedures and peripheral and cranial nerve and other nervous system procedures based DRGs in MDC 1, we found that each warranted three subdivisions based on our five criteria. There are three MS–DRGs for spinal procedures: MS–DRG 28 (Spinal Procedures with MCC), MS–DRG 29 (Spinal Procedures with CC), and MS–DRG 30 (Spinal Procedures without CC). There are three MS–DRGs for peripheral and cranial nerve and other nervous system procedures: MS–DRG 40 (Peripheral and Cranial Nerve and Other Nervous System Procedures with MCC), MS–DRG 41 (Peripheral and Cranial Nerve and Other Nervous System Procedures with CC), and MS–DRG 42 (Peripheral and Cranial Nerve and Other Nervous System Procedures without CC). For back and neck procedures based DRGs in MDC 8, we found that the base DRG warranted two subdivisions based on our five criteria. There are two MS–DRGs for back and neck procedures except spinal fusion: MS–DRG 490 (Back and Neck Procedures Except Spinal Fusion with CC/MCC or Disc Devices) and MS–DRG 491 (Back and Neck Procedures Except Spinal Fusion without CC/MCC). *Comment:*
                         Several commenters analyzed the effects of the MS–DRGs and contended that the payment levels for cases with implantable 
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                        neurostimulator devices are, in many instances, inadequate to cover the cost of the device and the hospital procedure to implant it. The commenters stated that most neurostimulator cases are assigned to the lowest severity level in these DRGs and concluded that the average charges of these cases are more similar to the higher severity levels. The commenters recommended that CMS: For spinal cord nonrechargeable stimulator cases in MDC 1: Reassign all full system implants which includes cases reported with ICD–9–CM procedure codes 03.93 (Implantation or replacement of spinal neurostimulator lead(s)) and 86.94 (Insertion or replacement of single array neurostimulator pulse generator, not specified as rechargeable), or 86.95 (Insertion or replacement of dual array neurostimulator pulse generator, not specified as rechargeable), to MS–DRG 29 and revise the title to “Spinal Procedure with CC or Major Device Implant.”
                    For spinal cord rechargeable neurostimulator cases in MDC 1: Reassign all full-system implant cases reported with ICD–9–CM procedure codes 03.93 and 86.97 (Insertion or replacement of single array rechargeable neurostimulator pulse generator) or 86.98 (Insertion or replacement of dual array rechargeable neurostimulator pulse generator) to MS–DRG 28, and revise the title to “Spinal Procedure with MCC or Major Device Implant.”
                    For spinal cord rechargeable neurostimulator cases in MDC 8: Reassign all full-system implant cases reported with ICD–9–CM procedure codes 03.93 and 86.97 (Insertion or replacement of single array rechargeable neurostimulator pulse generator) or 86.98 (Insertion or replacement of dual array rechargeable neurostimulator pulse generator) to MS–DRG 490.
                    For peripheral nonrechargeable neurostimulator cases in MDC 1: Reassign all full-system implant cases reported with ICD–9–CM procedure codes 04.92 (Implantation or replacement of peripheral neurostimulator lead(s)) and 86.94 or 86.95 to MS–DRG 041 and revise the title to “Peripheral and Cranial Nerve and Other Nervous System Procedures with CC or Major Device Implant.”
                    For peripheral rechargeable neurostimulator cases in MDC 01: Reassign all full-system implant cases reported with ICD–9–CM procedure codes 04.92 and 86.97 or 86.98 to MS–DRG 040 and revise the title to “Peripheral and Cranial Nerve and Other Nervous System Procedures with MCC or Major Device Implant.” Two commenters recommended device-dependent surgical DRGs for these cases. Several commenters also provided an alternative option to the recommendations listed above: Assign all full-system spinal cord stimulator cases (rechargeable and non-rechargeable) in MDC 1 to MS–DRG 029.
                    Assign all full-system Spinal cord stimulator cases (rechargeable and non-rechargeable) in MDC 8 to MS–DRG 490.
                    Assign all full-system peripheral neurostimulator cases (rechargeable and non-rechargeable) in MDC 1 to MS–DRG 041.
                    Maintain the new-technology add-on payment for rechargeable neurostimulators for one additional year because of limited data. *Response:*
                         We analyzed the FY 2006 MedPAR data for full system spinal and peripheral neurostimulators, both nonrechargeable and rechargeable, using the procedure codes listed above. We found that the majority of spinal neurostimulator cases in MDC 1 (113 cases) were assigned to MS–DRG 030. The majority of the peripheral neurostimulator cases (44 cases) were assigned to MS–DRG 042. The majority of the spinal neurostimulator cases (253 cases) in MDC 8 were assigned to MS–DRG 491. The following table displays our results: MS–DRG
Number of cases
Average length of stay
Average charges**Spinal Procedures**MS–DRG 028—With MCC
1,531
14.67
$88,392.05MS–DRG 029—With CC
2,699
7.63
46,223.20MS–DRG 030—Without MCC or CC
3,540
3.67
27,081.14**Spinal Neurostimulators**MS–DRG 028—With MCC
7
2.57
81,208.14MS–DRG 029—With CC
29
3.10
68,090.03MS–DRG 030—Without MCC/CC
113
1.81
57,399.84
 The average charges for the 113 spinal neurostimulator cases assigned to MS DRG 030 of approximately $57,400 are much higher than the average charges of approximately $27,081 for the overall charges in MS–DRG 030. The charges for these cases more closely approximate the charges for the other cases in the CC level, MS–DRG 029. MS–DRG
Number of cases
Average length of stay
Average charges**Peripheral and Cranial Nerve Procedures**MS—DRG 040–With MCC
4,300
13.59
$64,354.13MS–DRG 041—With CC
7,388
7.53
37,421.99MS–DRG 042—Without MCC/CC
5,112
3.65
30,600.18**Peripheral Neurostimulators**MS–DRG 040—With MCC
12
8.92
63,170.42MS–DRG 041—With CC
24
4.96
45,118.04MS–DRG 042—Without MCC/CC
44
1.71
50,716.25
 
 
 The average charges for the 44 peripheral neurostimulator cases assigned to MS–DRG 042 of approximately $50,716 are much higher than the average charges of approximately $30,600 for the overall charges in MS–DRG 042. Further, they are even higher than the 24 MS–DRG 041 cases with a peripheral neurostimulator and a CC. The relationship between average charges for neurostimulator cases and the MS–DRG where they are assigned does not appear to be monotonic in this case. We believe the low volume of cases for this technology may explain this unusual pattern in average charges. One or a few cases with aberrant charges could potentially be skewing the data. Nevertheless, we do believe the data for the MS–DRG 042 peripheral neurostimulator cases does illustrate that their average charges should be reassigned to a higher severity level. Although average charges for peripheral neurostimulator cases without an MCC or CC appear to be midway between average charges for cases in MS–DRGs 040 and 041, we do not believe these cases should be assigned to the “with MCC” MS–DRG at this time. Before deciding whether further MS–DRG assignment is warranted, we prefer to have more data that demonstrates monotonicity in the average charges. MS–DRG in MDC 8
Number of cases
Average length of stay
Average chargesMS–DRG 490—All cases
17,493
5.13
$29,656.66MS–DRG 490—Spinal neurostimulator cases
49
3.69
62,385.33MS–DRG 491—All cases
57,496
2.27
17,788.59MS–DRG 491—Spinal neurostimulator cases
253
1.62
56,238.72
 The average charges for the 253 spinal neurostimulator cases assigned to MS–DRG 491 in MDC 8 of approximately $56,239 are much higher than the average charges of approximately $17,789 for the overall charges in MS–DRG 491. The charges for these cases are also higher than the average charges of $29,656 for MS–DRG 490. We believe these cases should be assigned to MS–DRG 490 at this time. In this final rule with comment period, we are assigning full system spinal cord nonrechargeable and rechargeable neurostimulator cases in MS–DRG 030 to MS–DRG 029 in MDC 1. ICD 9 CM procedure codes 03.93 and 86.94 or 86.95 or 86.97 or 86.98 must be reported in order for the spinal neurostimulator cases to be assigned to MS–DRG 029. We are defining MS–DRG 029 as “Spinal Procedures with CC or Neurostimulator.” The presence of a spinal procedure with CC or neurostimulator would assign the case to the second severity level. We are also assigning full system peripheral nonrechargeable and rechargeable neurostimulator cases in MS–DRG 042 to MS–DRG 041 in MDC 1. ICD–9–CM procedure codes 04.92 and 86.94 or 86.95 or 86.97 or 86.98 must be reported in order for the peripheral neurostimulator cases to be assigned to MS–DRG 041. We are defining MS–DRG 041 as “Peripheral and Cranial Nerve and Other Nervous System Procedures with CC or Neurostimulator.” The presence of a peripheral and cranial nerve procedure with CC or neurostimulator would assign the case to the second severity level. The full system spinal cord nonrechargeable and rechargeable neurostimulator cases in MS–DRG 491 are being assigned to MS–DRG 490. ICD–9–CM procedure codes 03.93 and 86.94 or 86.95 or 86.97 or 86.98 must be reported in order for the spinal neurostimulator cases to be assigned to MS–DRG 490. We are defining MS–DRG 490 as “Back and Neck Procedures Except Spinal Fusion with CC/MCC or Disc Devices or Neurostimulator.” The presence of a back and neck except spinal fusion procedure with CC/MCC or disc devices or neurostimulator would assign the case to the second severity level. We refer readers to section II.J. of the preamble to this final rule with comment period for new technology discussions about rechargeable neurostimulators. We will continue to monitor these low volume full system neurostimulator cases for further refinements if warranted. e. Stroke and Administration of Tissue Plasminogen Activator (tPA) (MDC 1) In FY 2006, CMS created CMS DRG 559 (Acute Ischemic Stroke with Use of Thrombolytic Agent) by assigning diagnosis codes for embolic stroke codes plus procedure code 99.10 (Injection or infusion of thrombolytic agent) to this new CMS DRG. The coding content of CMS DRGs 14 (Intracranial Hemorrhage or Cerebral Infarction) was not modified—cases that included a diagnosis code for embolic stroke but the patient was not administered a thrombolytic agent continued to be assigned to this DRG. CMS DRG 15 (Nonspecific CVA and Precerebral Occlusion without Infarct) also remained unchanged. Under the new MS–DRGs, the former CMS DRG 559 will have three severity levels: MS–DRG 061 (Acute Ischemic Stroke with Use of Thrombolytic Agent with MCC), MS–DRG 062 (Acute Ischemic Stroke with Use of Thrombolytic Agent with CC), and MS–DRG 063 (Acute Ischemic Stroke with Use of Thrombolytic Agent w/o CC/MCC). *Comment:*
                         One commenter agreed with CMS’ proposal to take the severity of a patient's illness into account when establishing payment rates. The commenter noted that severely ill or complex patients require more intensive evaluation, treatment, and monitoring, resulting in higher costs. The commenter added that it is logical to reimburse hospitals at a higher rate for those patients who require more care. However, the commenter expressed some concerns with the proposed payment rates for stroke patients with a CC or without a CC/MCC who are treated with tPA, noting that according to its calculations, reimbursement rates for MS–DRGs 062 and 063 will decrease. The commenter believed that this decrease could create a financial disincentive for hospitals if payment for MS–DRGs 062 and 063 fails to provide adequate reimbursement for those costs incurred by facilities that administer tPA. *Response:*
                         The cost of treating patients with tPA continues to be represented in MS–DRGs 061, 062, and 063, but the cases have been distributed according to the presence of an MCC, or a CC, or the lack of either an MCC or CC in MS–DRG 063 according to the historical data represented by MedPAR. Medicare likely will continue to pay the same amount for all patients treated with tPA. However, our payments will better reflect patient severity of illness by paying higher amounts for those cases where the patient has an MCC or CC than if they do not. *Comment:*
                         One commenter urged CMS to create a process that allows for periodic evaluation and updating of the MCC and CC lists, noting that CMS must 
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                        institute a process that allows for the addition of other conditions that create a special concern for one set of patients, including stroke patients, to the MCC and CC lists. *Response:*
                         As described in section II.D.3. of this preamble, we reviewed more than 13,000 diagnosis codes in order to establish the MCC and CC lists. This review activity is an ongoing, annual process, as CMS has reviewed portions of the diagnosis codes every year with regard to placement on the CC list. The difference is that this year more than 13,000 diagnosis codes were reviewed, and the designation has changed from simply “CC” to major comorbidity or complication (MCC) or comorbidity or complication (CC). We believe these lists to be comprehensive and we will continue to evaluate their content with regard to all patients. *Comment:*
                         One commenter expressed concern about the so-called “drip and ship” cases where tPA is administered in the emergency department at Hospital A, but the patient is immediately transferred to Hospital B, which has a stroke center. The commenter pointed out that many community hospitals do not have the necessary resources, including neurology expertise, to care for the critically ill stroke patient. However, the commenter added, with the support of a nearby stroke center, they are able to diagnose ischemic stroke and institute reperfusion (tPA) treatment within the critical three hour window. The commenter stated that transfer after administration of tPA is required by the need to closely monitor patients after reperfusion treatment. Given the critical need to minimize brain damage by immediately administering the tPA when indicated, the commenter stated that the original hospital where the patient presented with stroke symptoms must not delay treatment until after the patient is transferred. When a patient is treated with reperfusion therapy in a local emergency department, but transferred and admitted to another hospital with the necessary stroke services, it is the understanding of the commenter that CMS’ current policy, as implemented through the DRG GROUPER, requires that those cases be assigned to a stroke DRG that does not recognize the reperfusion therapy. The hospital to which the patient was ultimately admitted did not administer the reperfusion therapy, and the hospital which administered the thrombolytic drug did not admit the patient. The commenter noted that these patients are in the severely ill category and require the same high level of resources as any other patient who receives reperfusion therapy and who would normally be assigned to CMS DRG 559. The commenter made the following suggestion: “When a patient has been started on reperfusion therapy [tPA] at another hospital, as an outpatient, and is transferred to a hospital with a stroke center, the case should be assigned to one of the “stroke-with-thrombolytic agent DRGs” (MS–DRGs 061, 062, or 063). *Response:*
                         We previously considered this situation in 2005 when we created DRG 559 that separately distinguished stroke patients administered a thrombolytic agent. The commenter is suggesting that it is not the thrombolytic agent itself that raises the hospital's costs (although in our view, it is certainly an element of higher costs) but all of the other services that are provided by the receiving hospital to such a patient. Although we recognize the concerns of the commenter, the emergency room is already being compensated for the administration of the tPA. Therefore, we do not believe it would be appropriate for Medicare to pay for the same service at another facility. f. Gliasite ® Radiation Therapy System (RTS) (MDC 1) *Comment:*
                         One commenter, the manufacturer of Gliasite ® Radiation Therapy System (RTS), wrote that this technology is used in the treatment of malignant brain cancer. The commenter indicated that patients who undergo this treatment require two admissions. The first admission includes tumor debulking and a special catheter is implanted. The following ICD–9–CM procedures are assigned to report the procedures performed: Code 01.59 (Other excision or destruction of lesion or tissue of brain) and code 01.27 (Insertion of catheter(s) into cranial cavity or tissue). Under the proposed MS–DRGs, the case for this admission with a principal diagnosis of glioblastoma and procedure codes 01.59 and 01.27 would be assigned to MS–DRGs 26 and 27 (Craniotomy and Endovascular Intracranial Procedures with and without MCC/CC, respectively). The commenter added that the second admission usually occurs in a week or 10 days and entails liquid radioisotope infused into the special catheter. The patient is monitored for a few days and then the radioisotope is removed. ICD–9–CM procedure code 92.20 (Infusion of liquid brachytherapy radioisotope) and code 01.27 (Removal of catheter(s) from cranial cavity or tissue) would be assigned to identify the procedures performed in the second admission. Under the proposed MS–DRGs, for the second admission, the case with a principal diagnosis of glioblastoma and procedure codes 92.20 and 01.27 would be assigned to medical MS–DRGs 54 and 55 (Nervous System Neoplasm with and without MCC, respectively). The commenter requested that CMS recognize the resources associated with infusion of radioisotope and establish two new surgical MS–DRGs for these admissions/treatments: Liquid radiotherapy infusion for glioblastoma without tumor debulking.
                    Liquid radiotherapy infusion for glioblastoma with craniotomy, tumor debulking, and implantation of infusion catheter. The commenter stated that the costs of the implant can be considered equivalent to the cost of an MCC and should be recognized in a surgical MS–DRG descriptor. *Response:*
                         The refinement of the DRGs is not based on the creation of any new logic under the MS–DRGs. We believe that it is not appropriate to make DRG revisions of this nature as part of the final rule since the base DRG has not changed for these cases. However, we will examine the need for further DRG refinements as we gain experience under the MS DRGs. g. Noninvasive Ventilation (MDC 4) *Comment:*
                         One commenter representing a national association requested the creation of a new DRG for noninvasive positive pressure ventilation (NPPV). According to the commenter, NPPV is an effective and preferred treatment in the management of patients with acute exacerbations of chronic obstructive pulmonary disease and other forms of respiratory failure. Currently, this treatment is identified in ICD–9–CM by procedure code 93.90 (Continuous positive airway pressure (CPAP)) and does not require the use of mechanical ventilation via an endotracheal tube or tracheotomy. The commenter indicated that NPPV is a valuable and clinically appropriate option for patients who may require short term (96 hours) ventilatory support when presenting with an acute respiratory failure condition. The commenter noted that results have demonstrated improved outcomes and less risk associated with less invasive devices. Therefore, the commenter stated, the selection of treatment for ventilatory support does not solely rely on patient acuity. To better recognize NPPV as an appropriate treatment in acute respiratory conditions and ensure proper reimbursement, the commenter also proposed that CMS consider 
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                        including NPPV (code 93.90) in proposed MS–DRG 207 (Respiratory System Diagnosis with Ventilatory Support 96+hours) if the creation of a new MS–DRG was not a viable option. *Response:*
                         We met with the commenter on June 13, 2007, regarding the above requests to create a new MS-DRG for patients who receive NPPV or reassign cases to a different MS-DRG. After discussing the clinical and coding issues surrounding NPPV, we advised the commenter to request a new procedure code to distinguish between the various treatments that are currently included in code 93.90. We informed the commenter about the ICD–9–CM Coordination and Maintenance Committee and the process for requesting a new procedure code. h. Heart Assist Devices (MDC 5) *Comment:*
                         One commenter requested that CMS create an additional severity level in MS-DRG 215 that would be titled “Other Heart Assist Implant without Major Complications.” The commenter indicated that CMS should have a consistent number of severity levels between this MS-DRG and MS-DRGs 001 or 002 (Heart Transplant or Implant of Heart Assist System with MCC or without MCC, respectively). In the proposed rule, MS-DRG 215 (formerly CMS DRG 525, and still titled “Other Heart Assist System Implant”) had no severity levels. The commenter stated that, by capturing the severity of the cases with devices coded to 37.65 (Implant of external heart assist system), hospitals will be more appropriately reimbursed and CMS will be consistent in its policy. The commenter added that without a severity breakdown in MS-DRG 215, it feared the integrity of the MS-DRG will be distorted, causing an unwarranted financial windfall for some cases. The commenter indicated that Medicare will be overpaying less severe cases and underpaying cases with major complications if MS-DRG 215 is not subdivided into with MCC and without MCC severity levels. *Response:*
                         We reviewed the following data specifically in light of this comment. Our findings are represented in the table below. MS-DRG
Number of cases
Average length of stay
Average chargesMS-DRG 215—All cases
142
11.32
$204,885.12MS-DRG 215—Cases with insertion of nonimplantable heart assist system (code 37.62)
63
10.95
134,669.43MS-DRG 215—Cases with repaid heart assist and system (code 37.63)
29
14.07
225,962.07MS-DRG 215—Cases with implant of external heart assist (VAD) (code 37.65)
59
11.80
286,953.90
 In the proposed rule (72 FR 24705), we explained that we developed a set of criteria to facilitate the decision-making process surrounding the subdivision of a DRG into subgroups based on the presence of a CC or MCC. We specified that in order to warrant creation of a CC or MCC subgroup within a base MS-DRG, the subgroup had to meet all of the five criteria listed. One of the criteria was that the subgroup contained at least 500 cases. In this instance, there are only 142 cases in the MedPAR data. Therefore, there are too few cases to warrant a subdivision of the base DRG into severity levels. We will continue to monitor this DRG, and should future data prove that a subdivision of MS-DRG 215 is warranted, we will consider revision of its structure. i. Automatic Implantable Cardioverter-Defibrillators (ACID) Lead and Generator Procedures (MDC 5) *Comment:*
                         One commenter commended CMS for creating a separate, stand alone DRG for automatic implantable cardioverter-defibrillator (AICD) generator replacements and defibrillator lead replacements. The new DRG is MS–DRG 245 (AICD lead and generator procedures). The MS–DRG contains the following codes: 00.52, Implantation or replacement of transvenous lead [electrode] into left ventricular coronary venous system.
                    00.54, Implantation or replacement of cardiac resynchronization defibrillator pulse generator device only [CRT–D].
                    37.95, Implantation of automatic cardioverter/defibrillator leads(s) only.
                    37.96, Implantation of automatic cardioverter/defibrillator pulse generator only.
                    37.97, Replacement of automatic cardioverter/defibrillator leads(s) only.
                    37.98, Replacement of automatic cardioverter/defibrillator pulse generator only. The commenter indicated that under the current CMS DRGs, the defibrillator generator and defibrillator lead replacements were included in DRG 551 with pacemaker implants. The commenter supported this new MS–DRG, which recognizes the distinct differences in resource utilization between pacemaker and defibrillator generators and leads. The commenter stated that CMS should consider additional refinements for the defibrillator generator and leads. In reviewing the standardized charges for the AICD leads, the commenter believed that the leads may be more appropriately assigned to another DRG such as MS–DRG 243 (Permanent Cardiac Pacemaker Implant with CC) or MS–DRG 258 (Cardiac Pacemaker Device Replacement with MCC). The commenter recommended that CMS consider moving the defibrillator leads back into a pacemaker DRG, either MS–DRG 243 or MS–DRG 258. *Response:*
                         We appreciate the commenter's support for the refinements made through the MS–DRGs to better identify differences in patient care costs associated with pacemakers and defibrillators. In our view, the data support separate DRGs for these very different devices. The commenter supported the proposed DRG change we made that removed both the defibrillator generators and leads from the pacemaker MS DRG and then recommended that we move the defibrillator leads only back into a pacemaker DRG. The commenter, as stated, had supported this change because the commenter believed that it better identified devices that were quite different. We proposed separating defibrillator and pacemaker devices because they are such different devices. Moving the defibrillator leads back into a pacemaker MS–DRG defeats the purpose of creating separate MS–DRGs for defibrillators and pacemakers. Therefore, we are finalizing MS DRG 245 as proposed with the leads and generator codes listed above. j. Artificial Heart (MDC 5) *Comment:*
                         One commenter requested that ICD–9–CM code 37.52 (Implantation of total replacement heart system) [which includes artificial heart] be moved from CMS DRG 525 (Other Heart Assist System Implant) to CMS DRG 103 (Heart Transplant or Implant of Heart Assist System). These CMS DRGs would be renumbered and renamed in the proposed MS–DRG system, with CMS DRG 525 becoming 
                        ( print page 47258)
                        MS–DRG 215 (Other Heart Assist System Implant) and CMS DRG 103 becoming MS–DRGs 001 (Heart Transplant or Implant of Heart Assist System with MCC) and 002 (Heart Transplant or Implant of Heart Assist System without MCC). The commenter stated that the change of MS–DRG assignment from MS–DRG 215 to MS–DRGs 001 or 002 will more accurately reflect the grouping of procedures for the implantation of a total replacement heart system with heart transplantation and other heart assist systems intended as destination therapy to more accurately recognize hospital resources for the treatment of end-stage heart failure. We received a similar comment from another manufacturer. *Response:*
                         Medicare does not currently cover artificial heart implants. ICD–9–CM procedure code 37.52 (Implantation of total replacement heart system) was created for potential use for discharges on or after October 1, 2003. However, code 37.52 was immediately put on the noncovered procedure list of the MCE as no device then existed that was deemed safe and effective as an artificial heart. The technology remains noncovered by Medicare. For this reason, we currently have no data to suggest that the DRG assignment for procedure code 37.52 needs to be changed. Our review of the second manufacturer's product shows it to be a bi-ventricular device, not an artificial heart as described in their marketing literature. This commenter also is currently in the process of requesting coverage for its device. We recommend that the manufacturer of this device request to be added to the agenda of the ICD–9–CM Coordination and Maintenance Committee meeting of September 27, 2007. An ICD–9–CM procedure code will help us to determine whether a Medicare patient treated with this new technology should be assigned to a DRG other than the one that includes the predecessor code used to describe the service. *Comment:*
                         One commenter suggested that CMS reevaluate the appropriateness of including ICD–9–CM procedure code 37.62 (Insertion of nonimplantable heart assist system) in CMS DRG 525 (Other Heart Assist System Implant), which will become MS–DRG 215 (Other Heart Assist System Implant), and reassign code 37.62 to more accurately reflect hospital resource consumption of services involving mechanical support for cardiovascular failure. The commenter suggested that patients treated with a nonimplantable heart assist system are less costly than other patients in MS–DRG 215 and should be reassigned to a different DRG that would reflect its lower costs. Further, the commenter suggested that hospitals may not be using code 37.62 consistent with its intended purpose. *Response:*
                         The commenter has not provided a compelling justification for changing the placement of code 37.62. Our understanding is that this code describes use of a nonimplantable heart assist system to temporarily replace the heart's function. The function of the device to replace the heart means that there are only three potential MS–DRGs where code 37.62 could be assigned: MS–DRG 215 (Other Heart Assist System Implant) and MS–DRGs 001 and 002 (Heart Transplant or Implant of Heart Assist System with and without MCC, respectively). The commenter suggested that the code should be assigned to a lower paying MS–DRG than MS–DRG 215. However, the only other MS–DRGs to which the code could be assigned have even higher payment weights. Therefore, we are making no changes to the DRG assignment for code 37.62 for FY 2008. Although the commenter suggested potential problems with use of the code, the commenter did not suggest any potential solutions for how to address this problem. Therefore, we have no information upon which to take further action to address the commenter's concern. k. Vascular Procedures (MDC 5) We proposed three MS–DRGs for vascular procedures: MS–DRG 252 (Other Vascular Procedures with MCC), MS–DRG 253 (Other Vascular Procedures with CC) and MS–DRG 254 (Other Vascular Procedures without CC/MCC). *Comment:*
                         One commenter evaluated the diagnoses associated with MS–DRGs 252, 253, and 254 to assess whether patients with diagnoses not on the CC or MCC lists were more costly to treat. The commenter selected the following 30 diagnosis codes: 250.70, Diabetes with peripheral circulatory disorders, type II or unspecified type, not stated as uncontrolled.263.9, Unspecified protein-calorie malnutrition.276.1, Hyposmolality and/or hyponatremia.276.2, Acidosis.276.51, Dehydration.276.7, Hyperpotassemia.276.8, Hypopotassemia.280.0, Secondary to blood loss (chronic).285.1, Acute posthemorrhagic anemia.287.5, Thrombocytopenia, unspecified.410.71, Subendocardial infarction, initial episode of care.427.1, Paroxysmal ventricular tachycardia.427.31, Atrial fibrillation.440.1, Atherosclerosis of renal artery.440.24, Atherosclerosis of the extremities with gangrene.444.22, Arterial embolism and thrombosis, lower extremity.458.9, Hypotension, unspecified.491.21, Obstructive chronic bronchitis with (acute) exacerbation.496, Chronic airway obstruction, not elsewhere classified.511.9, Unspecified pleural effusion.518.0, Pulmonary collapse.599.0, Urinary tract infection, site not specified.682.6, Other cellulitis and abscess, leg, except foot.682.7, Other cellulitis and abscess, foot, except toes.707.15, Ulcer of other part of foot.785.4, Gangrene.790.7, Bacteremia.996.62, Infection and inflammatory reaction due to vascular device, implant and graft.997.1, Cardiac complications.998.11, Hemorrhage complicating a procedure.
 
 
 The commenter recommended that CMS should: Reassign vascular procedure cases containing two or more of the identified diagnosis codes from MS–DRG 253 to MS–DRG 252.
                    Reassign vascular procedure cases containing two or more of the identified diagnosis codes from MS–DRG 254 to MS–DRG 253. *Response:*
                         In our proposed rule analysis, we found that the vascular procedures DRG warranted three subdivisions according to our five criteria. Nineteen of the 30 diagnosis codes suggested by the commenter already appear on the CC or MCC list and will result in a patient being assigned to either MS–DRG 252 or MS–DRG 253. The remaining 11 diagnosis codes do not appear on either list. These codes are: 250.70, 276.51, 276.7, 276.8, 280.0, 287.5, 427.31, 440.1, 458.9, 496, and 707.15. Although the commenter has identified common diagnoses in this patient population, our medical advisors reviewed the clinical issues and claims data for cases reporting each of the conditions not on the MCC or CC list as a secondary diagnosis. After evaluating the claims data and analyzing the clinical issues, our medical advisors recommend that we not change the CC status for the codes mentioned above. They do not believe there is sufficient justification for making these codes CCs. We do not believe that we should make further changes to the MS–DRG assignments based on combinations of selected diagnoses. These types of analyses could be done with virtually any MS–DRG and would add significant complexity to the DRG system that we do not believe is warranted at this time. We reiterate that the MS–DRGs—like the predecessor CMS–DRGs—are intended to establish an average payment based on groups of patients that are similar in costs and clinical characteristics. Over time, we found that the CMS DRGs did not sufficiently recognize differences in patient severity of illness, and we proposed to adopt the MS–DRGs as an alternative to achieve this objective. While we acknowledge that further potential improvements may be warranted as we have more experience with the new system, we have significant concerns about selectively analyzing specific diagnoses within a given MS–DRG to change their DRG assignment. Although we have increased the assigned severity level for a limited number of cases, these decisions recognize that the patient was more complex than was suggested by their secondary diagnosis either because of a specific procedure (in the case of intestinal transplants) or the type of technology used to treat their condition (in the case of cochlear implants and spinal stabilization devices). We refer readers to section II.D.2.a. of this preamble for complete information on the CC list. l. Coronary Artery Stents (MDC 5) Effective for cases discharged on or after October 1, 2005 (FY 2006), the ICD–9–CM Coordination and Maintenance Committee created a series of adjunct codes further describing procedures on the vascular system. These codes were at the 00.4 subcategory (Adjunct vascular system procedures), with codes 00.40 through 00.43 describing the number of vessels upon which a procedure was performed, and codes 00.45 through 00.48 describing the number of stents which were inserted. As these codes were deemed to be adjunct codes that supplemented the information describing a patient's hospital treatment, they were not considered procedure codes that would affect DRG assignment. However, coders were encouraged to thoroughly and completely code all hospital stays, in case this information would be used for future DRG determination. We received comments on the proposed MS–DRGs concerning the DRG assignment for procedures on multiple coronary vessels and insertion of multiple stents in coronary arteries. *Comment:*
                         Commenters have analyzed standardized charges in the FY 2006 MedPAR data for percutaneous transluminal coronary angioplasty (PTCA) in conjunction with codes indicating insertion of drug-eluting or non-drug-eluting coronary artery stent(s) and the use of codes indicating procedures on multiple vessels and/or insertion of multiple stents. These commenters believe that mean standardized charges for these combination codes vary substantially from the mean standardized charges associated with the DRGs to which they are proposed to be assigned. The DRGs under consideration in this section for drug-eluting stents are MS–DRG 246 (Percutaneous Cardiovascular Procedure with Drug-Eluting Stent with MCC) (formerly CMS DRG 557 (Percutaneous Cardiovascular Procedure with Drug-Eluting Stent with Major Cardiovascular Diagnosis)) and MS–DRG 247 (Percutaneous Cardiovascular Procedure with Drug-Eluting Stent without MCC) (formerly CMS DRG 558 (Percutaneous Cardiovascular Procedure with Drug-Eluting Stent without Major Cardiovascular Diagnosis)). The DRGs under consideration in this section for non-drug-eluting stents are MS–DRG 248 (Percutaneous Cardiovascular Procedure with Non-Drug-Eluting Stent with MCC) and MS–DRG 249 (Percutaneous Cardiovascular Procedure with Non-Drug-Eluting Stent with MCC). (These were either formerly CMS DRG 555 (Percutaneous Cardiovascular Procedures with Major Cardiovascular Diagnosis) or CMS DRG 556 (Percutaneous Cardiovascular Procedure with Non-Drug-Eluting Stent without Major Cardiovascular Diagnosis), respectively.) The commenters recommended that PTCA code 00.66 (Percutaneous transluminal coronary angioplasty [PTCA] or coronary atherectomy) in combination with a code for insertion of a drug-eluting or non-drug-eluting stent, plus adjunct codes indicating procedures on multiple vessels and insertion of multiple stents be assigned to MS–DRGs 246 and 248 as described above. They stated that their analysis of standardized charges for PTCA with insertion of a drug-eluting or non-drug-eluting stent(s) in multiple vessels or with insertion of multiple stents vary substantially from the mean standardized charges associated with the DRGs to which they are proposed to be assigned. The commenters found that the variation in charges between the subgroups and the overall DRG average meet CMS' criteria for moving cases between DRGs, and suggested that cases with multiple vessels and multiple stents be moved up to the first DRG in the series. That is, cases with insertion of drug-eluting stents in MS–DRG 247 would be assigned to MS–DRG 246, and cases with non-drug-eluting stents in MS–DRG 249 would be assigned to MS–DRG 248. In each of the MS–DRGs, cases where multiple vessels are treated or multiple stents are placed would be assigned to the “with MCC” MS–DRG rather than the “without MCC” MS–DRG. *Response:*
                         We reviewed the MedPAR data in response to these comments and found that PTCAs with four or more vessels or four or more stents were more comparable in average charges to the higher weighted DRG in the group. These data are summarized in the following tables. 
                        ( print page 47260) MS–DRG
Number of cases
Average length of stay
Average chargesMS–DRG 246—All cases
31,204
6.34
$64,009.36MS–DRG 246—Cases with codes 00.66 and 36.07 with 4 or more vessels (code 00.43) and 4 or more stents (code 000.48)
1,425
5.68
78,02.93MS–DRG 247—All cases
267,684
2.24
40,857.34MS–DRG 247—Cases with codes 00.66 and 36.07 with 4 or more vessels (code 00.43) and 4 or more stents (code 000.48)
8,095
2.33
61,666.34MS–DRG 248—All cases
4,710
6.53
56,671.61MS–DRG 248—Cases with codes 00.66 and 36.06 with 4 or more vessels (code 00.43) and 4 or more stents (code 000.48)
112
6.38
69,431.81MS–DRG 249—All cases
27,914
2.55
35,577.22MS–DRG 249—Cases with codes 00.66 and 36.06 with 4 or more vessels (code 00.43) and 4 or more stents (code 000.48)
232
3.76
54,203.87
 In both cases, we believe that the average charges for cases where four or more vessels are treated or four or more stents are placed more closely approximate average charges in the higher weighted MS–DRG. Therefore, we are assigning these cases to the higher weighted MS–DRG according to the following logic. Claims containing code 00.66 for PTCA, and code 36.07 (Insertion of drug-eluting coronary artery stent(s)), and code 00.43 (Procedure on four or more vessels) or code 00.48 (Insertion of four or more vascular stents) are assigned to MS–DRG 246. In addition, claims containing code 00.66 for PTCA, and code 36.06 (Insertion of non-drug-eluting coronary artery stent(s)), and code 00.43 or code 00.48 are assigned to MS–DRG 248. We are also making conforming changes to the MS–DRG titles as follows: MS–DRG 246 is titled “Percutaneous Cardiovascular Procedures with Drug-Eluting Stent(s) with MCC or 4 or more Vessels/Stents”. The title for MS–DRG 247 will remain unchanged. MS–DRG 248 is titled “Percutaneous Cardiovascular Procedures with Non Drug-Eluting Stent(s) with MCC or 4 or more Vessels/Stents”. The title for MS–DRG 249 will remain unchanged. This DRG modification is based on newly created codes that were developed to provide additional detail on the number of vessels treated and the number of stents inserted. The DRG combines two distinct concepts: the insertion of four or more stents or the performance of a vascular procedure on four or more vessels, in order to determine the DRG assignment. Although we are adopting this DRG change for FY 2008, we plan to continue examining whether this revision of the DRG definition captures a relatively homogeneous group of cases. We currently only have one year of data on these new codes. Therefore, we plan to revisit this issue further in next year's proposed rule when we have a second year of data to better distinguish the different types of cases that are treated with this technology. m. Endovascular Repair of Aortic and Thoracic Aneurysms (MDC 5) *Comment:*
                         Several commenters expressed concern that the relative weights for MS–DRGs 237 and 238 (Major Cardiovascular Procedures with MCC and without MCC, respectively), formerly CMS–DRGs 110 and 111 (Major Cardiovascular Procedures with CC and without CC, respectively) do not reflect the severity of illness and the resource use required for such complex care. One commenter noted that regardless of the DRG assignment, the cost of the endovascular graft or device does not change, nor is it insignificant. The commenter further stated that MS–DRGs 237 and 238 do not adequately factor into the relative weights that the device is not incidental to treatment; it is a major component of the treatment. *Response:*
                         New MS–DRGs 237 and 238 are exactly the same as their predecessor CMS DRGs 110 and 111 in content. Using historic Medicare charges and hospital cost report data submitted to us by hospitals, we have included the cost of the device into the MS–DRG relative weights. *Comment:*
                         Several commenters suggested that MS–DRGs 237 and 238 should be divided into three levels of severity: “with MCC”, “with CC”, and “without CC/MCC” and noted that it is important that CMS be consistent and not create inequities with regard to major surgical procedures. One commenter stated that patients with aortic aneurysm fall naturally into three clinical categories, with patients who are genetically predisposed to an aneurysm are likely to be younger (between 50 and 60 years of age, not between 70 and 80 years of age) and are more likely to be healthier than the typical aneurysm patient. Those cases are suggested for an MS–DRG without CC/MCC. The commenter added that the other cases would fall into the “with MCC” or “with CC” MS–DRGs based on the severity of their CCs. *Response:*
                         When we consolidated all existing DRGs into the base DRGs, we removed all demarcations that had been added over the years, including considerations for age, gender, and discharge disposition, as well as elimination of the current split based on the presence or absence of a CC, burns, trauma, AMI, major cardiovascular condition, among others. We then applied the severity criteria described elsewhere in this preamble, and stated that in order to warrant creation of a CC or major CC subgroup within a base MS–DRG, the subgroup had to meet all five criteria. The commenter states that genetically predisposed patients tend to be younger. Although age is a variable that would be available in the Medicare claims data, genetic predisposition to a certain class of diseases generally cannot be identified in the ICD–9–CM coding system. Therefore, as we are not able to identify those patients, we cannot subdivide these MS–DRGs using genetic predisposition as criterion. We considered subdividing MS–DRGs 237 and 238 into three DRGs for the proposed rule. However, MS–DRGs 237 and 238 did not meet the criteria for a 3-way split. *Comment:*
                         Two commenters suggested that instead of “with MCC” in the surgical DRGs, CMS should establish a list of devices that would be equivalent to the MCC categorization and further subdivide the MS–DRGs based on the presence of “with Major Device.” Specifically, they suggested that endovascular devices or grafts used during cardiovascular procedures should be considered major devices. Therefore, they added, when a major device or implantable graft is used in a cardiovascular repair procedure, such as those performed to repair an abdominal or thoracic aortic aneurysm, CMS should assign those cases to MS–DRGs where the DRG title has been changed to reflect that the costs of the device are similar to the costs of an MCC. 
                        ( print page 47261) *Response:*
                         We believe the commenter is suggesting that we establish a list of major devices and use them as a proxy for MCCs. We will take this suggestion under consideration in future reviews of the MS–DRGs. We looked at data to review the differences between endovascular graft repair of abdominal aortic aneurysm (code 39.71) and endovascular graft repair of thoracic aortic aneurysm (code 39.73). Our findings are represented in the table below. MS–DRG
Number of cases
Average length of stay
Average chargesMS–DRG 237—All cases
20,789
11.47
$93,824.52MS–DRG 237—Cases with code 39.71 (abdominal)
1,484
8.95
89,929.39MS–DRG 237—ases with code 39.73 (thoracic)
277
10.98
119,120.51MS–DRG 238—All cases
42,797
4.88
51,410.12MS–DRG 238—Cases with code 39.71 (abdominal)
14,091
2.58
55,798.25MS–DRG 238—Cases with code 39.73 (thoracic)
877
4.95
72,426.29
 Review of these data shows that the 887 thoracic cases in MS–DRG 238 have average charges that are between both groups. We believe that the data indicate that endovascular repair of the thoracic aorta cases should be assigned to MS–DRG 237. Therefore, we are assigning procedure code 39.73 (Endovascular implantation of graft in thoracic aorta) to MS–DRG 237 in FY 2008. n. O.R. Procedures for Obesity (MDC 10) *Comment:*
                         One commenter was concerned with the conditions that are classified as MCCs and CCs for MS–DRGs 619, 620, 621 (O.R. Procedures for Obesity with MCC, with CC, and without CC/MCC, respectively), previously CMS DRG 288. The commenter fully supported efforts to base payments on patient severity, but states that some of the proposed changes do not appear to achieve that goal. The commenter acknowledged the three severity levels added to former CMS DRG 288 (O.R. Procedures for Obesity). However, the commenter stated that all of the morbidly obese Medicare patients will have one or more serious comorbidities. The commenter was concerned about the application of the complete MCC and CC list to MS–DRGs 619, 620, and 621. The commenter stated that the following codes, which are on the MCC and CC lists, should not be considered MCCs or CCs for these bariatric DRGs because these conditions are “contraindications” to performing bariatric surgery: Diabetes codes 250.10 through 250.13; 250.20 through 250.23; and 250.30 through 250.33 (all MCCs).
                    Coronary atherosclerosis codes 414.02 through 414.04; and 414.06 and 414.07 (all CCs).
                    Aneurysm and dissection of heart codes 414.10 (CC), 414.12 (MCC), and 414.19 (CC). The commenter also requested that the following codes be classified as CCs for these bariatric DRGs: Diabetes codes—250.00 through 250.93.
                    Obstructive sleep apnea—327.23.
                    Hypertensive disease—401.0 through 405.99.
                    Cirrhosis of liver without mention of alcohol—571.5.
                    Biliary cirrhosis—571.6.
                    Other chronic nonalcoholic liver disease—571.8.
                    Unspecified chronic liver disease without mention of alcohol—571.9. *Response:*
                         Our clinical advisors disagree with the recommendations to change the diabetes, coronary atherosclerosis, and aneurysm and dissection codes from MCCs and CCs to non-CCs for the bariatric MS–DRGs. They believe these conditions represent significant CCs in the general patient population and the data we used to perform this analysis support their judgment. Although we do have secondary diagnosis codes that are “exclusions” (not counted as an MCC or a CC if they are related to the principal diagnosis), we have not analyzed whether to classify a particular diagnosis as an MCC or a CC for purposes of determining if a particular type of surgery should be performed. However, we believe the commenter indicates that our decision to classify these conditions as MCCs or CCs is correct by suggesting that the presence of these conditions is so significant in increasing severity of illness that it is a contraindication to surgery. We expect that physicians will not order surgical procedures that are contraindicated merely because the case would be assigned to a higher-paying DRG. Our medical advisors evaluated the request to make the codes specified above CCs. Our medical advisors reviewed claims data and clinical issues for cases reporting codes 250.00 through 250.93; 327.23; 401.0 through 405.99; and 571.5 as secondary diagnoses. After evaluating the claims data and analyzing the clinical issues, our medical advisors recommend that we not change the CC status for codes 250.00 through 250.93; 327.23; 401.0 through 405.99; and 571.5. They do not believe there is sufficient justification for making these codes CCs at this time. o. Penile Restorative Procedures (MDC 12) *Comment:*
                         One commenter, a national organization representing the prosthetic urology community applauded CMS for moving forward to ensure that Medicare payments for inpatient services are appropriate and accurately reflect the severity and resources required for patient care. The commenter supported the proposal to implement MS–DRGs on October 1, 2007. However, the commenter indicated that the cost of implants and prosthetics used in penile implant procedures are comparable to the resources utilized in a patient with a MCC or CC diagnosis. Generally, the commenter suggested that in surgical MS–DRGs where implants and prostheses are part of the ICD–9–CM procedure code title that CMS should consider revising the MS–DRG titles to account for the costs associated with surgical procedures that use an implant or prosthesis. As an example, the commenter expressed support for the proposed modification to MS–DRG 129 (Major Head and Neck Procedure with CC/MCC or Major Device). The commenter believed that, when a major implant/prosthesis/device demonstrates costs that are greater than or similar to the difference between the relative weights of a CC/MCC DRG versus a without CC/MCC DRG pair, CMS should recognize the device or implant in the MS–DRG titles and reassign these cases. Specifically, the commenter recommended that the title for proposed MS–DRG 709 (Penis Procedures with CC or MCC) be revised to add the phrase “or major device or implant” and include all cases where an implantable prosthesis is used in a penile restorative procedure. *Response:*
                         We appreciate the commenter's support for MS–DRGs and 
                        ( print page 47262)
                        its general suggestions for future refinements. The commenter did not provide specific examples of types of implants and prosthesis which they want to have evaluated for possible DRG reassignment. We are not clear as to whether or not there will be ICD– 9–CM procedure codes for these specific implants. It is premature to modify the MS–DRG titles at this time without more specific information and analysis. *Comment:*
                         This same commenter also urged CMS to review clinically significant conditions for penile restorative procedures on the proposed MCC and CC lists. *Response:*
                         We refer readers to section II.D.3. of this final rule with comment period for a complete discussion on the public comments received on the MCC and CC lists. We welcome any specific recommendations for future revisions and refinements to the MCC and CC lists. p. Female Reproductive System Reconstruction Procedures (MDC 13) *Comment:*
                         Two commenters requested that CMS establish levels within MS–DRG 748 (Female Reproductive System Reconstruction Procedures). The commenters noted that all of the other proposed MS–DRGs for surgical male and female reproductive system procedures have either “MCC or CC” subdivisions. The commenters believed that CMS may have made an oversight by not establishing severity levels within this MS–DRG. *Response:*
                         As stated in the FY 2008 proposed rule, in order to warrant creation of a CC or MCC subgroup within a base MS–DRG, the subgroup has to meet all five criteria. In developing the proposed MS–DRGs, this base DRG did not meet three of the five criteria required to subdivide a DRG into additional severity subgroups. MS–DRG 748 failed the following three criteria: At least 5 percent of the patients in the MS–DRG fall within the MCC or CC subgroup.
                    At least 500 cases are in the MCC or CC subgroup.
                    There is a $4,000 difference in average charge between subgroups. We refer readers to section II.D.3 of the FY 2008 proposed rule (72 FR 24705) for a complete listing of the criteria. As such, effective October 1, 2007, we are adopting the MS–DRGs as final policy and MS–DRG 748 will remain as proposed with the following title: MS–DRG 748 (Female Reproductive System Reconstruction Procedures). q. Urological and Gynecological Disorders With Grafts or Prosthesis (MDCs 13 and 14) *Comment:*
                         We received comments commending CMS for the creation of new ICD–9–CM procedure codes that identify the use of grafts or prosthetics in female pelvic prolapse repair procedures. The commenters acknowledged that the use of these new codes will result in better data collection, outcomes research, and improve the quality of health care for women. However, the commenters indicated that the cost of implants and prosthetics used in treating various urological and gynecological conditions are comparable to the resources utilized in a patient with an MCC or CC diagnosis. Specifically, the commenters recommended that the titles for the following proposed MS–DRGs be revised to add the term, “or major device” to account for cases where a graft or prosthesis is used. MS–DRG 333 (Rectal Resection with CC).
                    MS–DRG 662 (Minor Bladder Procedures with Major CC).
                    MS–DRG 707 (Major Male Pelvic Procedures with CC or Major CC).
                    MS–DRG 709 (Penis Procedures with CC or Major CC).
                    MS–DRG 746 (Vagina, Cervix Vulva Procedures with CC or Major CC). *Response:*
                         We appreciate the commenter's support of the new procedure codes and the suggestion to revise the proposed MS–DRG titles. The newly created codes describing the use of grafts or prosthetics are restricted to female pelvic prolapse repair procedures and are not effective until October 1, 2007. As a result, there is no data available for analysis at this time. We will evaluate these recommendations as we obtain additional data using the MS–DRGs to determine if future changes to the above mentioned MS–DRGs are warranted. r. High Dose Interleukin-2 (HD–IL–2) (MDC 17) We received comments concerning the appropriate assignment within the MS–DRGs of patients receiving High-dose Interleukin-2 (IL–2). In the FY 2004 final rule (68 FR 45360, August 1, 2003), we discussed the creation of a specific code to identify IL–2 (procedure code 00.15, High-dose infusion of Interleukin-2 (IL–2)) and the subsequent modification of existing CMS DRG 492 (Chemotherapy with Acute Leukemia as Secondary Diagnosis) by adding code 00.15 to the DRG logic and changing the title to “Chemotherapy with Acute Leukemia or with use of High Dose Chemotherapy Agent”. This drug is marketed as Proleukin©. Under the proposed MS–DRGs, CMS DRG 492 would be replaced by MS–DRG 837 (Chemotherapy with Acute Leukemia as Secondary Diagnosis or with High Dose Chemotherapeutic Agent with MCC), MS–DRG 838 (Chemotherapy with Acute Leukemia as Secondary Diagnosis with CC or High Dose Chemotherapeutic Agent), or MS–DRG 839 (Chemotherapy with Acute Leukemia as Secondary Diagnosis without CC/MCC). Administration of high-dose Interleukin-2 (HD–IL–2) is a hospital inpatient-based regimen that can produce durable remissions of metastatic renal cell cancer and metastatic melanoma in a subset of patients. In contrast to traditional cytotoxic chemotherapies which target cancer cells directly, HD–IL–2 enhances the body's natural cancer defenses by stimulating the growth and activity of cancer-killing white blood cells. HD–IL–2 therapy is associated with severe complications that can include: hypotension, metabolic acidosis, acute renal failure, arrhythmia, myocardial inflammation, coagulation defects, hyperthyroidism, psychosis, respiratory distress syndrome, catheter related septicemia, hyperbilirubinemia and thrombocytopenia. To safely administer HD–IL–2, the FDA-approved label states that HD–IL–2 “should be administered in a hospital setting under the supervision of a qualified physician experienced in the use of anticancer agents. An intensive care facility and specialists skilled in cardiopulmonary or intensive care medicine must be available.” Strict nursing protocols must be followed in order to minimize adverse events such as cardiac arrhythmias as well as severe hypotension. Because it is associated with such severe side effects, HD–IL–2 therapy requires substantially greater resource utilization, including longer hospital stays and additional nursing support, than conventional chemotherapy. Conventional chemotherapy may be administered to patients either on an outpatient basis or through a series of short (that is, 1 to 3 day) inpatient stays. By contrast, FDA approval for high-dose IL–2 refers specifically to the following protocol: “Each course of high-dose IL–2 therapy is administered during two separate hospital admissions, with an average length of stay of six to seven days each. For the first cycle, Interleukin-2 is administered every 8 hours over a 5-day period. Patients are then discharged to rest at home for 
                        ( print page 47263)
                        several days, and then readmitted for a second cycle consisting of an identical dosing regimen. These two cycles comprise the first course of high-dose IL–2 therapy, which may be repeated after 8 to 12 weeks if the patient is responding.” Based on data from peer reviewed publications, some centers may administer IL–2 “off-label” in low- or intermediate-dose regimens. For such off-label uses, IL–2 is either not administered as a bolus, or in a much lower-dose bolus. Because low- or intermediate-dose IL–2 therapy poses a lower risk of serious side effects, its administration is less resource intensive in terms of patient monitoring, nursing support, and length of stay. A specific code was created for the administration of High-dose Interleukin-2 beginning with cases discharged on or after October 1, 2003. Code 00.15 (High-dose infusion interleukin-2 (IL–2)) came from existing code 99.28 (Injection or infusion of biological response modified [BMR] as an antineoplastic agent), which had been created for use on or after October 1, 1994. However, as there may be some confusion in the industry concerning the differentiation and correct coding of “high-dose” IL–2 therapy from less resource intensive uses, some non-high-dose cases have probably been incorrectly billed under 00.15 as high-dose cases when they should have been classified to code 99.28. Code 00.15 is specifically titled “High-dose infusion Interleukin-2” and contains inclusion terms specifying “Infusion (IV Bolus, CIV) interleukin.” A specifically written “excludes note” in the Tabular section of the Procedure Manual sends Coders to code 99.28 to correctly describe the administration of low-dose infusion Interleukin-2. This confusion has possibly caused Medicare to overpay for some non-high-dose cases as if they were high dose cases, and may have reduced the reported average charges and costs of true high-dose IL–2 therapy [in the MedPAR data files]. If reported average charges do not reflect true high-dose IL–2 therapy, the result of this coding inaccuracy may be causing the IPPS relative weight to reflect a blend of the costs of patient treated with high-dose and low-dose administration of IL–2. To address this incorrect coding issue, CMS will clarify the ICD–9–CM coding system by making additional entries in both the Index and Tabular portions of the Procedure section of the code book. Procedure code 00.15 should only be billed for “bolus, high-dose IL–2.” Cases must satisfy the following four criteria, as documented in the medical record, to qualify for use of code 00.15 as “bolus, high-dose IL–2”: Bolus infusions given over no more than 30 minutes at a dose of no less than 600,000 IU/kg (weight adjusted);
                    Placement and utilization of a central line;
                    Administration in a hospital setting under the supervision of a qualified physician experienced in the use of anticancer agent with an intensive care facility and specialists skilled in cardiopulmonary or intensive care medicine available, and
                    A planned 5-day treatment protocol. *Comment:*
                         Commenters indicated that the administration of High-dose IL–2 is an extremely complicated and advanced therapy, requiring much stricter nursing protocols to prevent or manage the expected complications which accompany this type of cytotoxic therapy. The commenters also noted that HD–IL–2 cases are assigned to a CMS DRG for chemotherapy that, in their view, is clinically inappropriate. The commenters stated that technologies should be assigned to clinically consistent DRGs. Therefore, the commenters added, when a therapy differs clinically and in resource allocation from the other cases assigned to the same base DRG, adoption of a new DRG for that technology is warranted. Commenters urged CMS to reassess whether cases using HD–IL–2 and other treatments involving advanced technologies are assigned to appropriate DRGs and to create new, clinically appropriate DRGs for all advanced therapies. *Response:*
                         The cost of treating patients with HD–IL–2 continues to be represented in MS–DRGs 837, 838, and 839, but the cases have been distributed according to the presence or absence of an MCC, a CC, or the lack of either a comorbidity or complication according to the historical data represented by MedPAR. Medicare likely will continue to pay the same amount for all patients in these MS–DRGs. However, our payments will better reflect patient severity of illness by paying higher amounts for those cases where the patient has an MCC or CC than if they do not. The data suggest that it is appropriate to divide CMS DRG 492 based on severity levels, so for the MS–DRG system, new MS–DRGs 837, 838, and 839 were created, as described above. Our findings are represented in the following table. MS–DRG
Number of cases
Average length of stay
Average chargesMS–DRG 837—All cases
1,525
22.62
$107,269.93MS–DRG 837—Cases with IL–2 Infusion (Code 00.15)
56
8.11
73,104.34MS–DRG 837—Cases without IL–2 Infusion (Code 00.15)
1,469
23.17
108,600.39MS–DRG 838—All cases
855
9.15
46,596.45MS–DRG 838—Cases with IL–2 Infusion (Code 00.15)
555
4.78
44,008.54MS–DRG 838—Cases without IL–2 Infusion (Code 00.15)
522
11.94
48,247.36MS–DRG 839—All cases
1,307
6.04
22,693.30MS–DRG 839—Cases with IL–2 Infusion (Code 00.15)
20
4.40
38,002.15MS–DRG 839—Cases without IL–2 Infusion (Code 00.15)
1,287
6.07
22,455.40
 These data suggest that average charges for patients receiving HD–IL–2 are either comparable or lower than other patients within assigned MS–DRGs 837 and 838. For this reason, we believe most cases treated with HD–IL–2 will be paid adequately under the MS–DRGs. The remaining 20 cases in MS–DRG 839 have average charges that are more than $15,000 higher than other cases within this MS–DRG. The average charges for these cases are closer to those for MS–DRG 838. In spite of the possibility of erroneous coding of low-dose IL–2 cases to procedure code 00.15 instead of the more appropriate code 99.28 as discussed above, the data do not currently suggest a problem with Medicare payment for most of the HD–IL–2 cases assigned to MS–DRGs 837, 838, and 839. However, the data do suggest that the costs of cases of IL–2 coded with 00.15 currently assigned to MS–DRG 839 are closer to MS–DRG 838. Therefore, for FY 2008, we are assigning procedure code 00.15 (High-dose infusion of Interleukin–2 (IL–2)) to MS–DRG 837 (Chemotherapy with Acute Leukemia as Secondary Diagnosis 
                        ( print page 47264)
                        or with High Dose Chemotherapeutic Agent with MCC) and MS–DRG 838 (Chemotherapy with Acute Leukemia as Secondary Diagnosis with CC or High Dose Chemotherapeutic Agent). s. Computer Assisted Surgery *Comment:*
                         We received one comment from a manufacturer requesting that CMS recognize improved clinical outcomes resulting from computer assisted surgery and develop new MS–DRGs to group patients together who receive this technology. The commenter noted that effective October 1, 2004, CMS created codes to describe specific forms of computer assisted surgery. The commenter further noted that clinical outcomes are superior when computer assisted surgery is utilized; however, assigning the computer assisted surgery codes does not affect the DRG assignment. The commenter encouraged CMS to consider this issue as it continues to refine the DRG system. *Response:*
                         We appreciate the commenter's recommendation that CMS evaluate how to better recognize the clinical outcomes associated with computer-assisted surgical procedures. It is unclear which procedures the commenter is proposing we specifically examine at this time. Currently, the procedure codes that identify the use of computer assisted surgery are as follows: 00.31, Computer assisted surgery with CT/CTA.
                    00.32, Computer assisted surgery with MR/MRA.
                    00.33, Computer assisted surgery with fluoroscopy.
                    00.34, Imageless computer assisted.
                    00.35, Computer assisted surgery with multiple datasets.
                    00.39, Other computer assisted surgery. We will continue to study this issue as we obtain additional data under the MS–DRGs and determine if it is appropriate to make further modifications. 13. Changes to MS–DRG Logic As a Result of Public Comments To assist the readers in identifying all changes that were made to the MS–DRGs as a result of public comments received on the FY 2008 IPPS proposed rule, we have developed the following summary chart of those changes. MS–DRG Summary Chart
MDC/MS–DRG
Proposed title
Final title
Procedure code reassignments**Pre-MDC****Intestinal Transplant**MS–DRG 005
Liver transplant and/or intestinal transplant w MCC
Liver transplant w MCC or intestinal transplant
Cases with procedure code 46.97 (Transplant of intestine) are reassigned from MS–DRG 006 to MS–DRG 005.MS–DRG 006
Liver transplant and/or Intestinal Transplant w/o MCC
Liver transplant w/o MCC.**MDC 1 (Diseases and Disorders of the Nervous System)****Implantation of Chemotherapeutic Agent****Intracranial Stents**MS–DRG 023
Craniotomy with major device implant or acute complex central nervous system principal diagnosis with MCC
Cranio w major dev iImpl/acute complex CNS PDX with MCC or chemo implant
Cases with procedure code 00.10 (Implantation of chemotherapeutic agent) are reassigned from MS–DRG 024 to MS–DRG 023.MS–DRG 024
Craniotomy with major device implant or acute complex central nervous system principal diagnosis without MCC
Cranio w major dev impl/acute complex CNS PDX w/o MCC
Cases with procedure code 00.62 (Percutaneous angioplasty or atherectomy of intracranial vessel(s)) are reassigned from MS–DRGs 037–039 to MS–DRGs 023–024.**Intracranial Stents**MS–DRG 025
Craniotomy  endovascular intracranial procedures w MCC
Craniotomy  endovascular intracranial procedures w MCC
Cases with procedure code 00.62 (Percutaneous angioplasty or atherectomy of intracranial vessel(s)) are reassigned from MS–DRGs 037 039 to MS–DRGS 025–027.MS–DRG 026
Craniotomy  endovascular intracranial procedures w CC
Craniotomy endovascular intracranial procedures w CC.MS–DRG 027
Craniotomy  endovascular intracranial procedures w/o CC/MCC
Craniotomy  endovascular intracranial procedures w/o CC/MCC.( print page 47265)**Spinal Neurostimulators**MS–DRG 028 
                                 MS–DRG 029  
                                   
                                 MS–DRG 030
Spinal procedures w MCC 
                                 Spinal procedures w CC  
                                   
                                 Spinal procedures w/o CC/MCC
Spinal procedures w MCC 
                                 Spinal procedures w CC or spinal neurostimulators.  
                                 Spinal procedures w/o CC/MCC.
Full system spinal cord non-rechargeable and rechargeable neurostimulator cases in MS–DRG 030 are reassigned to MS–DRG 029 in MDC 1. ICD–9–CM procedure codes 03.93 (Implantation or replacement of spinal neurostimulator lead(s)), and 86.94 (Insertion or replacement of single array neurostimulator pulse generator, not specified as rechargeable), or 86.95 (Insertion or replacement of dual array neurostimulator pulse generator, not specified as rechargeable), or 86.97 (Insertion or replacement of single array rechargeable neurostimulator pulse generator), or 86.98 (Insertion or replacement of dual array rechargeable neurostimulator pulse generator) must be reported in order for the spinal neurostimulator cases to be assigned to MS–DRG 029.**Intracranial Stents**MS–DRG 037 
                                   
                                 MS–DRG 038  
                                 MS–DRG 039
Extracranial procedures w MCC 
                                 Extracranial procedures w CC  
                                 Extracranial procedures w/o CC/MCC
Extracranial procedures w MCC 
                                 Extracranial procedures w CC.  
                                 Extracranial procedures w/o CC/MCC.
Cases with procedure code 00.62 (Percutaneous angioplasty or atherectomy of intracranial vessel(s)) are reassigned from MS–DRGs 037 to MS–DRGs 023–027.**Peripheral Neurostimulators**MS–DRG 040 
                                   
                                 MS–DRG 041  
                                   
                                   
                                 MS–DRG 042
Periph  cranial nerve  other nerv syst proc w MCC 
                                 Peripheral/Cranial nerve  other nerv syst proc with CC.  
                                 Peripheral/cranial nerve  other nerv syst proc w/o CC/MCC.
Periph  cranial nerve  other nerv syst proc with MCC 
                                 Periph/cranial nerve  other nerv syst proc w CC or periph neurostim. 
                                 Periph/cranial nerve  other nerv syst proc w/o CC/MCC.
Full system peripheral non-rechargeable and rechargeable neurostimulator cases in MS–DRG 042 are reassigned to MS–DRG 041. ICD 9 CM procedure codes 04.92 (Implantation or replacement of peripheral neurostimulator lead(s)), and 86.94 (Insertion or replacement of single array neurostimulator pulse generator, not specified as rechargeable), or 86.95 (Insertion or replacement of dual array neurostimlator pulse generator, not specified as rechargeable), or 86.97 (Insertion or replacement of single array rechargeable neurostimulator pulse generator), or 86.98 (Insertion or replacement of dual array rechargeable neurostimulator pulse generator) must be reported in order for the peripheral neurostimulator cases to be assigned to MS–DRG 041.**Pain Codes**MS–DRG 091 
                                   
                                 MS–DRG 092  
                                   
                                 MS–DRG 093
Other disorders of nervous system w MCC 
                                 Other disorders of nervous system w CC.  
                                 Other disorders of nervous system w/o CC/MCC.
Other disorders of nervous system w MCC 
                                 Other disorders of nervous system w CC.  
                                 Other disorders of nervous system w/o CC/MCC.
Cases with a principal diagnosis of code 338.0 (Central pain syndrome) or code 338.21 (Chronic pain due to trauma) or code 338.22 (Chronic post-thoracotomy pain) or code 338.28 (Other chronic postoperative pain) or code 338.29 (Other chronic pain) or code 338.4 (Chronic pain syndrome) are reassigned from MDC 23, MS–DRGs 947–948 to MS–DRGs 091–093.**MDC 3 (Disease and Disorders of the Ear, Nose, Mouth, and Throat)****Cochlear Implants**MS–DRG 129 
                                   
                                 MS–DRG 130
Major head  neck procedures w CC/MCC 
                                 Major head  neck procedures w/o CC/MCC.
Major head  neck procedures w CC/MCC or Major Device 
                                 Major head  neck procedures w/o CC/MCC.
Cochlear implant cases are reassigned from MS–DRG 130 to MS–DRG 129. The ICD 9 CM procedure codes for cochlear implants are: 20.96 (Implantation or replacement of cochlear prosthetic device, not otherwise specified), or 20.97 (Implantation or replacement of cochlear prosthetic device, single channel), or 20.98 (Implantation or replacement of cochlear prosthetic device, multiple channel).( print page 47266)**MDC 5 (Disease and Disorders of the Circulatory System)****Endovascular Implantation of Graft in Thoracic Aorta**MS–DRG 237 
                                   
                                   
                                 MS–DRG 238
Major cardiovascular procedures w MCC 
                                   
                                 Major cardiovascular procedures w/o MCC.
Major cardiovasc procedures w MCC or thoracic aortic aneurysm repair 
                                 Major cardiovascular procedures w/o MCC.
Cases with procedure code 39.73 (Endovascular implantation of graft in thoracic aorta) are reassigned from MS–DRG 238 to MS–DRG 237.**Multiple Vessels, Multiple Coronary Stents**MS–DRG 246 
                                   
                                   
                                 MS–DRG 247
Percutaneous cardiovascular pro w drug-eluting stent w Major CC 
                                 Percutaneous cardiovascular proc w drug-eluting stent w/o Major CC.
Perc cardiovasc proc w drug-eluting stent w MCC or 4+ Vessels/Stents 
                                 Perc cardiovasc proc w drug-eluting stent w/o MCC.
Cases in MS–DRG 247 with procedure code 00.66 (Percutaneous transluminal coronary angioplasty [PTCA] or coronary atherectomy), and code 36.07 (Insertion of drug-eluting coronary artery stent(s)), and code 00.43 (Procedure on four or more vessels), or code 00.48 (Insertion of four or more vascular stents) are reassigned to MS–DRG 246.MS–DRG 248 
                                   
                                   
                                 MS–DRG 249
Percutaneous cardiovascular proc w non-drug-eluting stent w Major CC 
                                 Percutaneous cardiovascular proc w non-drug-eluting stent w/o Major CC.
Perc cardiovasc proc w non-drug-eluting stent w MCC or 4+ Ves/stents 
                                 Perc cardiovasc proc w non-drug-eluting stent w/o MCC.
Cases in MS–DRG 249 with procedure codes 00.66 (Percutaneous transluminal coronary angioplasty [PTCA] or coronary atherectomy), and code 36.06 (Insertion of non-drug-eluting coronary artery stent(s)), and code 00.43 (Procedure on four or more vessels), or code 00.48 (Insertion of four or more vascular stents) are reassigned to MS–DRG 248.**MDC 8 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue)****Spinal Fusion**MS–DRG 456 
                                   
                                   
                                 MS–DRG 457  
                                   
                                   
                                 MS–DRG 458
Spinal fusion exc cerv w spinal curv, malig or 9+ fusions w MCC 
                                 Spinal fusion exc w spinal curv, malig or 9+ fusions w CC.  
                                 Spinal fusion exc w spinal curv, malig or 9+ fusions w/o CC/MCC.
Spinal fusion exc cerv w spinal curv/malig/infec or 9+ fusions w MCC 
                                 Spinal fusion exc cerv w spinal curv/malig/infec or 9+ fusions w CC.  
                                 Spinal fusion exc cerv w spinal curv/malig/infec or 9+ fusions w/o CC/MCC.
The following diagnoses are added to the principal diagnosis list for MS–DRGs 456–458: 015.02 (Tuberculosis of bones and joints, vertebral column, bacteriological or histological examination unknown (at present)); 015.04 (Tuberculosis of bones and joints, vertebral column, tubercle bacilli not found (in sputum) by microscopy, but found by bacterial culture); 015.05 (Tuberculosis of bones and joints, vertebral column, tubercle bacilli not found by bacteriological examination, but tuberculosis confirmed histologically); 730.08 (Acute osteomyelitis of other specified sites); 730.18 (Chronic osteomyelitis of other specified sites); and 730.28 (Unspecified oteomyelitis of other specified sites). 
                                 Procedure code 81.64 (Fusion or refusion of 9 or more vertebrae) is added to the list of procedures for MS–DRGs 456–458.**Hip and Knee Replacements**MS–DRG 466 
                                   
                                 MS–DRG 467  
                                   
                                 MS–DRG 468
Revision of hip or knee replacement w MCC 
                                 Revision of hip or knee replacement w CC.  
                                 Revision of hip or knee replacement w/o CC/MCC.
Revision of hip or knee replacement w MCC 
                                 Revision of hip or knee replacement w CC.  
                                 Revision of hip or knee replacement w/o CC/MCC.
Cases with procedure code 00.83 (Revision of knee replacement, patellar component), or code 00.84 (Revision of total knee replacement, tibial insert (liner)) are reassigned from MS–DRGs 466–468 to MS–DRGs 485–489.MS–DRG 485
Knee procedures w pdx of infection w MCC
Knee procedures w pdx of infection w MCC.MS–DRG 486
Knee procedures w pdx of infection w CC
Knee procedures w pdx of infection w CC.MS–DRG 487
Knee procedures w pdx of infection w/o CC/MCC
Knee procedures w pdx of infection w/o CC/MCC.MS–DRG 488
Knee procedures w/o pdx of infection w CC/MCC
Knee Procedures without Principal Diagnosis of Infection with CC/MCC.MS–DRG 489
Knee procedures w/o pdx of infection w/o CC/MCC
Knee Procedures without Principal Diagnosis of Infection without CC/MCC.( print page 47267)**Spinal Procedures****Spinal Neurostimulators**MS–DRG 490 
                                   
                                   
                                 MS–DRG 491
Back  neck procedures except spinal fusion w CC/MCC or disc devices 
                                 Back  neck procedures except spinal fusion w/o CC/MCC.
Back  neck proc exc spinal fusion with CC/MCC or disc device/neurostim 
                                 Back  neck proc exc spinal fusion w/o CC/MCC.
Cases with procedure codes 84.59 (Insertion of other spinal devices), or 84.62 (Insertion of total spinal disc prosthesis, cervical), or 84.65 (Insertion of total spinal disc prosthesis, lumbosacral), or 84.80 (Insertion or replacement of interspinous process device(s)), or 84.82 (Insertion or replacement of pedicle-based dynamic stabilization device(s)), or 84.84 (Insertion or replacement of facet replacement devices) are reassigned from MS–DRG 491 to MS–DRG 490.Reassign full system spinal cord non-rechargeable and rechargeable neurostimulator cases in MS–DRG 491 to MS–DRG 490 in MDC 8. ICD–9–CM procedure codes 03.93 (Implantation or replacement of spinal neurostimulator lead(s)), and 86.94 (Insertion or replacement of single array neurostimulator pulse generator, not specified as rechargeable), or 86.95 (Insertion or replacement of dual array neurostimulator pulse generator, not specified as rechargeable), or 86.97 (Insertion or replacement of single array rechargeable neurostimulator pulse generator), or 86.98 (Insertion or replacement of dual array rechargeable neurostimulator pulse generator) must be reported in order for the spinal neurostimulator cases to be assigned to MS–DRG 490.**MDC 17 (MYELOPROLIFERATIVE DISEASES AND DISORDERS, POORLY DIFFERENTIATED NEOPLASM****High-dose infusion interleukin-2 [IL-2])**MS–DRG 837
Chemo w acute leukemia as sdx or w high dose chemo agent w MCC
Chemo w acute leukemia as sdx or w high dose chemo agent w MCC
Cases with procedure code 00.15 (High-Dose Infusion Interleukin-2 [IL-2]) are reassigned from MS–DRG 839 to MS–DRG 838.MS–DRG 838
Chemo w acute leukemia as sdx or w high dose chemo agent w CC
Chemo w acute leukemia as sdx w CC or high dose chemo agent.MS–DRG 839
Chemo w acute leukemia as sdx or w high dose chemo agent w/o CC/MCC
Chemo w acute leukemia as sdx w/o CC/MCC.**MDC 23 (Factors Influencing Health Status and Other Contacts with Health Status)**MS–DRG 947 
                                 MS–DRG 948
Signs  symptoms w MCC
                                 Signs  symptoms w/o MCC.
Signs  symptoms w MCC
                                 Signs  symptoms w/o MCC.
Cases with a principal diagnosis of code 338.0 (Central pain syndrome), 338.21 (Chronic pain due to trauma), or 338.22 (Chronic post-thoracotomy pain), or 338.28 (Other chronic postoperative pain), or 338.29 (Other chronic pain), or 338.4 (Chronic pain syndrome) are reassigned from MDC 23, MS–DRGs 947–948 to MS–DRGs 091–093 in MDC 1.
 H. Recalibration of DRG Weights In section II.E. of the preamble of this final rule with comment period, we stated that we are continuing to implement the cost-based DRG relative weights under a 3-year transition period such that, in FY 2008 (year two of the transition), the relative weights will be recalibrated using a blend of 67 percent of the cost-based relative weight and 33 percent of the charge-based relative weight. For FY 2009, the relative weights will be 100 percent cost-based. We are making a few minor changes to the cost-based relative weighting methodology that we adopted in the FY 2007 IPPS final rule (71 FR 47962 through 47971). However, in section II.E.2. of the preamble of the FY 2008 IPPS proposed rule, we requested public comments about whether to adopt any of the short-term recommendations to the cost-based relative weighting methodology for FY 2008 made by RTI. In response to those comments, we state in section II.E.2. of the preamble of this final rule with comment period that we are not adopting RTI's recommended regression-based CCRs for medical supplies and devices, IV drugs, and CT Scans and MRIs for FY 2008. However, as recommended by RTI, for FY 2008, we are adding two new CCRs for a total of 15 CCRs: One for “Emergency Room” and one for “Blood and Blood Products,” both of which can be derived directly from the Medicare cost report. As we proposed, in developing the FY 2008 system of weights, we used two data sources: Claims data and cost report data. As in previous years, the claims data source is the MedPAR file. This file is based on fully coded diagnostic and procedure data for all Medicare inpatient hospital bills. The FY 2006 MedPAR data used in this final rule with comment period include discharges occurring on October 1, 2005, through September 30, 2006, based on bills received by CMS through March 2007, from all hospitals subject to the IPPS and short-term, acute care hospitals in Maryland (which are under 
                        ( print page 47268)
                        a waiver from the IPPS under section 1814(b)(3) of the Act). The FY 2006 MedPAR file used in calculating the relative weights includes data for approximately 11,782,098 Medicare discharges from IPPS providers. Discharges for Medicare beneficiaries enrolled in a Medicare Advantage managed care plan are excluded from this analysis. The data exclude CAHs, including hospitals that subsequently became CAHs after the period from which the data were taken. The second data source used in the cost-based relative weighting methodology is the FY 2005 Medicare cost report data files from HCRIS, which represents the most recent full set of cost report data available. We used the March 31, 2007 update of the HCRIS cost report files for FY 2005 in setting the relative cost-based weights. Because we are implementing the relative weights on a transitional basis, it is necessary to calculate both charge-based and cost-based relative weights. The charge-based methodology used to calculate the DRG relative weights from the MedPAR data is the same methodology that was in place for FY 2006 and FY 2007 and was applied as follows: To the extent possible, all the claims were regrouped using the MS–DRGs being adopted for FY 2008, as discussed in section II.D. of the preamble of this final rule with comment period.
                    The transplant cases that were used to establish the relative weights for heart and heart-lung, liver and/or intestinal, and lung transplants (MS–DRGs 001, 002, 005, 006, and 007, respectively; previously CMS DRGs 103, 480, and 495) were limited to those Medicare-approved transplant centers that have cases in the FY 2006 MedPAR file. (Medicare coverage for heart, heart-lung, liver and/or intestinal, and lung transplants is limited to those facilities that have received approval from CMS as transplant centers.)
                    Organ acquisition costs for kidney, heart, heart-lung, liver, lung, pancreas, and intestinal (or multivisceral organs) transplants continue to be paid on a reasonable cost basis. Because these acquisition costs are paid separately from the IPPS rates, it was necessary to subtract the acquisition charges from the total charges on each transplant bill that showed acquisition charges before computing the average charge for the DRG and before eliminating statistical outliers.
                    Total charges were standardized to remove the effects of differences in area wage levels, IME and DSH payments, and, for hospitals in Alaska and Hawaii, the cost-of-living adjustment was applied. Beginning with FY 2008, because hospital charges include charges for both operating and capital costs, we are standardizing total charges to remove the effects of differences in geographic adjustment factors, large urban add-on payments, cost-of-living adjustments, DSH payments, and IME adjustments under the capital IPPS as well.
                    Statistical outliers were eliminated by removing all cases that were beyond 3.0 standard deviations from the mean of the log distribution of both the standardized charges per case and the standardized charges per day for each DRG.
                    The average charge for each DRG was then recomputed (excluding the statistical outliers). To compute the average DRG charge, we sum the standardized charges by DRG and divide by the transfer adjusted case count. A transfer case is counted as a fraction of a case based on the ratio of its transfer payment under the per diem payment methodology to the full DRG payment for nontransfer cases. That is, a transfer case receiving payment under the transfer methodology equal to half of what the case would receive as a nontransfer would be counted as 0.5 of a total case. The average charge per DRG is then divided by the national average standardized charge per case to determine the relative weight. The new charge-based weights were then normalized by an adjustment factor of 1.50850 so that the average case weight after recalibration was equal to the average case weight before recalibration. This normalization adjustment is intended to ensure that recalibration by itself neither increases nor decreases total payments under the IPPS as required by section 1886(d)(4)(C)(iii) of the Act. The methodology we used to calculate the DRG cost-based relative weights from the FY 2006 MedPAR claims data and FY 2005 Medicare cost report data is as follows: To the extent possible, all the claims were regrouped using the FY 2008 MS–DRG classifications discussed in section II.D. of the preamble of this final rule with comment period.
                    The transplant cases that were used to establish the relative weights for heart and heart-lung, liver and/or intestinal, and lung transplants (MS–DRGs 001, 002, 005, 006, and 007, respectively; previously CMS DRGs 103, 480, and 495) were limited to those Medicare-approved transplant centers that have cases in the FY 2006 MedPAR file. (Medicare coverage for heart, heart-lung, liver and/or intestinal, and lung transplants is limited to those facilities that have received approval from CMS as transplant centers.)
                    Organ acquisition costs for kidney, heart, heart-lung, liver, lung, pancreas, and intestinal (or multivisceral organs) transplants continue to be paid on a reasonable cost basis. Because these acquisition costs are paid separately from the prospective payment rate, it is necessary to subtract the acquisition charges from the total charges on each transplant bill that showed acquisition charges before computing the average cost for each DRG and before eliminating statistical outliers.
                    Claims with total charges or total length of stay less than or equal to zero were deleted. Claims that had an amount in the total charge field that differed by more than $10.00 from the sum of the routine day charges, intensive care charges, pharmacy charges, special equipment charges, therapy services charges, operating room charges, cardiology charges, laboratory charges, radiology charges, other service charges, labor and delivery charges, inhalation therapy charges, and anesthesia charges were also deleted.
                    At least 96.1 percent of the providers in the MedPAR file had charges for 10 of the 15 cost centers. Claims for providers that did not have charges greater than zero for at least 10 of the 15 cost centers were deleted.
                    Statistical outliers were eliminated by removing all cases that were beyond 3.0 standard deviations from the mean of the log distribution of both the total charges per case and the total charges per day for each DRG. Once the MedPAR data were trimmed and the statistical outliers were removed, the charges for each of the 15 cost groups for each claim were standardized to remove the effects of differences in area wage levels, IME and DSH payments, and for hospitals in Alaska and Hawaii, the applicable cost of living adjustment. Beginning with FY 2008, because hospital charges include charges for both operating and capital costs, we are standardizing total charges to remove the effects of differences in geographic adjustment factors, large urban add-on payments, cost-of-living adjustments, DSH payments, and IME adjustments under the capital IPPS as well. Charges were then summed by DRG for each of the 15 cost groups so that each DRG had 15 standardized charge totals. These charges were then adjusted to cost by applying the national average CCRs developed from the FY 2005 cost report data. The 15 cost centers that we used in the relative weight calculation are shown in the following table. Included 
                        ( print page 47269)
                        in the 15 CCRs are two distinct CCRs for FY 2008 for “Emergency Room” and “Blood and Blood Products.” The costs and charges for these two additional CCRs are removed from the “Other Services” CCR. The table shows the lines on the cost report that we used to create the 15 national cost center CCRs that we used to adjust the DRG charges to cost. For FY 2008, we are making minor revisions to the Cardiology, Laboratory, Radiology, and Other Services CCRs we are using to calculate the DRG relative weights, as follows: The costs for cases involving Electroencephalography (EEG), cost report line 54, are currently in the Cardiology cost center group. However, MedPAR categorizes the claims data for EEG under Laboratory Charges (revenue codes 0740 and 0749). In order to maintain consistency with matching costs on the cost report to charges on MedPAR claims, we are moving cost report line 54 for EEG out of the Cardiology cost center group into the Laboratory cost center group.
                    In the FY 2007 IPPS proposed rule, we originally included the costs for Radioisotopes, cost report line 43, in the Radiology cost center group. However, in response to comments, we moved Radioisotopes to the Other Services cost center group. After researching this issue further over the past year, we believe that Radioisotopes is a radiology-related service that more appropriately belongs in the Radiology cost center group. Accordingly, for FY 2008, as we proposed, we are moving the cost report line item for line 43, Radioisotopes, out of the Other Services cost center group and into the Radiology cost center group. The version of the 15 cost center groupings are in the table below:  
 
  
 
  
 
  
 
  
 
  
 
  
 
 We developed the national average CCRs as follows: Taking the FY 2005 cost report data, we removed CAHs, Indian Health Service hospitals, all inclusive rate hospitals, and cost reports that represented time periods of less than 1 year (365 days). We included hospitals located in Maryland as we are including their charges in our claims database. We then created CCRs for each provider for each cost center (see prior table for line items used in the calculations) and removed any CCRs that were greater than 10 or less than 0.01. We normalized the departmental CCRs by dividing the CCR for each department by the total CCR for the hospital for the purpose of trimming the data. We then took the logs of the normalized cost center CCRs and removed any cost center CCRs where the log of the cost center CCR was greater or less than the mean log plus/minus 3 times the standard deviation for the log of that cost center CCR. Once the cost report data were trimmed, we calculated a Medicare specific CCR. The Medicare specific CCR was determined by taking the Medicare charges for each line item from Worksheet D, Part 4 and deriving the Medicare specific costs by applying the hospital specific departmental CCRs to the Medicare specific charges for each line item from Worksheet D, Part 4. Once each hospital's Medicare specific costs were established, we summed the total Medicare specific costs and divided by the sum of the total Medicare specific charges to produce national average, charge weighted CCRs. After we multiplied the total charges for each DRG in each of the 15 cost centers by the corresponding national average CCR, we summed the 15 “costs” across each DRG to produce a total standardized cost for the DRG. The average standardized cost for each DRG was then computed as the total standardized cost for the DRG divided by the transfer adjusted case count for the DRG. The average cost for each DRG was then divided by the national average standardized cost per case to determine the relative weight. The new cost-based relative weights were then normalized by an adjustment factor of 1.50957 so that the average case weight after recalibration was equal to the average case weight before recalibration. Since more trims were applied to the data under the cost-based weighting methodology than under the charge-based methodology, a smaller universe of claims was used in the cost-based weighting methodology. In this instance, the different universe of claims also resulted in a slightly higher cost-based normalization factor than the normalization factor derived for charge-based weights. The normalization adjustment is intended to ensure that recalibration by itself neither increases nor decreases total payments under the IPPS, as required by section 1886(d)(4)(C)(iii) of the Act. The 15 national average CCRs for FY 2008 are as follows: Group
CCRRoutine Days
0.553Intensive Days
0.490Drugs
0.209Supplies  Equipment
0.345Therapy Services
0.428Laboratory
0.177Operating Room
0.303Cardiology
0.196Radiology
0.181Emergency Room
0.309Blood and Blood Products
0.455Other Services
0.451Labor  Delivery
0.501Inhalation Therapy
0.198Anesthesia
0.146
 As we explained in section II.D. of the preamble of this final rule with comment period, in response to comments, we are implementing the MS–DRGs with a 2-year transition period beginning in FY 2008. For FY 2008, the first year of the transition, 50 percent of the relative weight for a DRG is based on the two-thirds cost-based weight/one-third charge-based weight calculated using FY 2006 MedPAR data grouped to the Version 24.0 (FY 2007) DRGs. The remaining 50 percent of the FY 2008 relative weight for a DRG is based on the two-thirds cost-based weight/one-third charge based weight calculated using FY 2006 MedPAR grouped to the Version 25.0 (FY 2008) MS–DRGs. In FY 2009, the relative weights will be based on 100 percent cost weights computed using the Version 26.0 (FY 2009) MS–DRGs. Specifically, the blended relative weights for FY 2008 are computed as follows: First, using the Version 24.0 GROUPER, relative weights are calculated based on 100 percent cost-based and 100 percent charge-based, respectively. These weights are then blended using two-thirds of the cost-based weights and one-third of the charge-based weights to establish the CMS DRG portion of the transition weights. Second, using the Version 25.0 FY 2008 (MS–DRG) GROUPER, relative weights are calculated based on 100 percent cost-based weights and 100 percent charge-based weights, respectively. These weights are then blended using two-thirds of the cost-based weights and one-third of the charge-based weights to establish the MS–DRG portion of the transition weights. Under the transition blend we are adopting in this final rule with comment period, we will group cases to MS–DRGs (using the Version 25.0 GROUPER), but the payment weight for each DRG will be a 50/50 blend of the MS–DRG weight and CMS DRG weight. Thus, we had to determine a blended weight for each DRG. Using the claims in the FY 2006 MedPAR database that we used to compute cost based weights under the Version 24.0 GROUPER, we grouped each case to a CMS–DRG (using the Version 24.0 GROUPER) and an MS–DRG (using the Version 25.0 GROUPER). Commonly, a set of cases that grouped to a single MS–DRG grouped to two or more CMS DRGs. Therefore, we determined an average CMS DRG weight for all cases that grouped to each MS–DRG. Specifically, we summed the CMS DRG weights of all the cases that grouped to each MS–DRG and then divided that number by the transfer-adjusted case count. To establish the final blended weight for each DRG, we added 50 percent of the MS–DRG weight to 50 percent of the average CMS DRG weight for that MS–DRG. These final blended relative weights are listed in Table 5 of this final rule with comment period. When we recalibrated the DRG weights for previous years, we set a threshold of 10 cases as the minimum number of cases required to compute a reasonable weight. We used that same case threshold in recalibrating the DRG weights for FY 2008. Using the FY 2006 MedPAR data set, there are 7 MS–DRGs that contain fewer than 10 cases. Under the MS–DRGs, we have fewer low-volume DRGs than under the CMS DRGs because we no longer have separate DRGs for patients age 0 to 17 years. With the exception of newborns, we previously separated some DRGs based on whether the patient was age 0 to 17 years or age 17 years and older. Other than the age split, cases grouping to these DRGs are identical. The DRGs for patients age 0 to 17 years generally have very low volumes because children are typically ineligible for Medicare. In the past, we have found that the low volume of cases for the pediatric DRGs could lead to significant year-to-year instability in their relative weights. Although we have always encouraged non-Medicare payers to develop weights applicable to their own patient populations, we have heard frequent complaints from providers about the use of the Medicare relative weights in the pediatric population. We believe that 
                        ( print page 47277)
                        eliminating this age split in the MS–DRGs will provide more stable payment for pediatric cases by determining their payment using adult cases that are much higher in total volume. All of the low volume DRGs listed below are for newborns. Newborns are unique and require separate DRGs that are not mirrored in the adult population. Therefore, it remains necessary to retain separate DRGs for newborns. In FY 2008, because we do not have sufficient MedPAR data to set accurate and stable cost weights for these low-volume DRGs, we are computing weights for the low-volume DRGs by adjusting their FY 2007 weights by the percentage change in the average weight of the cases in other DRGs. The crosswalk table is shown below: Low Volume DRG
DRG title
Crosswalk to DRG789
Neonates, Died or Transferred to Another Acute Care Facility
FY 2007 FR weight (adjusted by percent change in average weight of the cases in other DRGs).790
Extreme Immaturity or Respiratory Distress Syndrome, Neonate
FY 2007 FR weight (adjusted by percent change in average weight of the cases in other DRGs).791
Prematurity With Major Problems
FY 2007 FR weight (adjusted by percent change in average weight of the cases in other DRGs).792
Prematurity Without Major Problems
FY 2007 FR weight (adjusted by percent change in average weight of the cases in other DRGs).793
Full-Term Neonate With Major Problems
FY 2007 FR weight (adjusted by percent change in average weight of the cases in other DRGs).794
Neonate With Other Significant Problems
FY 2007 FR weight (adjusted by percent change in average weight of the cases in other DRGs).795
Normal Newborn
FY 2007 FR weight (adjusted by percent change in average weight of the cases in other DRGs).
 I. MS–LTC–DRG Reclassifications and Relative Weights for LTCHs for FY 2008 1. Background In the June 6, 2003 LTCH PPS final rule (68 FR 34122), we changed the LTCH PPS annual payment rate update cycle to be effective July 1 through June 30 instead of October 1 through September 30. In addition, because the patient classification system utilized under the LTCH PPS uses the same CMS DRGs as those currently used under the IPPS for acute care hospitals, in that same final rule, we explained that the annual update of the long term care diagnosis related group (LTC–DRG) classifications and relative weights will continue to remain linked to the annual reclassification and recalibration of the CMS DRGs used under the IPPS. Therefore, we specified that we will continue to update the LTC–DRG classifications and relative weights to be effective for discharges occurring on or after October 1 through September 30 each year. We further stated that we will publish the annual proposed and final update of the LTC–DRGs in same notice as the proposed and final update for the IPPS (69 FR 34125). *Comment:*
                         Several commenters strongly recommended that we establish one rulemaking cycle that would encompass the update of the LTCH PPS payment rates (July 1) as well as the development of the LTC–DRG weights (October 1). One commenter also suggests that this change should begin for RY 2009 and, for that year, CMS should implement a 3-month update to the standardized amount (July 1, 2008 through September 30, 2008 with no other policy changes. The commenters also have stated that there should only be one rulemaking cycle because of interactive effects of adjustments made at two different times. *Response:*
                         In the RY 2008 LTCH PPS final rule (72 FR 26874), we responded to a similar comment by stating that we would “evaluate whether such a consolidation is a workable alternative to the present schedule.” While we appreciate the continued interest of commenters on this issue, we note that we did not propose a change to the LTCH PPS update cycle in the FY 2008 IPPS proposed rule. Therefore, we do not believe that the IPPS final rule is the appropriate vehicle for addressing these concerns. Rather, we believe that exploring the possibility of the consolidation of the LTCH PPS rulemaking cycles would be better addressed in the LTCH PPS rate year regulations since those rules are the primary vehicle for proposing and finalizing policy changes to the LTCH PPS. Therefore, we will continue our evaluation of this suggestion for the time being. In the FY 2008 IPPS proposed rule, we did not address the issue concerning changing the present update cycle for the LTCH PPS, and therefore, we are not making any changes to the LTCH PPS update cycle in this final rule with comment period. However, we will take all comments and suggestions concerning the RY 2009 update into consideration when preparing the RY 2009 LTCH PPS proposed rule. Commenters’ concerns regarding any changes to the present rulemaking cycle will be considered when we evaluate the possibility of making changes to the present update cycle as well as any options that may be available. To this end, any proposed changes to the present update cycle would be included in the RY 2009 LTCH PPS proposed rule for public comment. In the past, the annual update to the IPPS CMS DRGs has been based on the annual revisions to the ICD–9–CM codes and was effective each October 1. As discussed in the FY 2008 IPPS proposed rule (72 FR 24755 through 24757), with the implementation of section 503(a) of Pub. L. 108–173, there is the possibility that one feature of the GROUPER software program may be updated twice during a Federal fiscal year (October 1 and April 1) as required by the statute for the IPPS. Section 503(a) of Pub. L. 108–173 amended section 1886(d)(5)(K) of the Act by adding a new clause (vii) which states that “the Secretary shall provide for the addition of new diagnosis and procedure codes in [sic] April 1 of each year, but the addition of such codes shall not require the Secretary to adjust the payment (or diagnosis related group classification) * * * until the fiscal year that begins after such date.” This requirement improves the recognition of new technologies under the IPPS by accounting for those ICD–9–CM codes in the MedPAR claims data earlier than the agency had accounted for new technology in the past. In implementing the statutory change, the agency has provided that ICD–9–CM diagnosis and procedure codes for new medical technology may be created and assigned to existing DRGs in the middle of the Federal fiscal year, on April 1. However, 
                        ( print page 47278)
                        this policy change will not impact the DRG relative weights in effect for that year, which will continue to be updated only once a year (October 1), nor will it have any impact on Medicare payments in that year. The use of the ICD–9–CM code set is also compliant with the current requirements of the Transactions and Code Sets Standards regulations at 45 CFR Parts 160 and 162, promulgated in accordance with the Health Insurance Portability and Accountability Act of 1996 (HIPAA), Pub. L. 104–191. As noted above, the patient classification system used under the LTCH PPS is the same patient classification system that is used under the IPPS. Therefore, the ICD–9–CM codes currently used under both the IPPS and LTCH PPS may be updated as often as twice a year. This requirement is included as part of the amendments to the Act relating to recognition of new medical technology under the IPPS. Because we do not publish a midyear IPPS rule, any April 1 ICD–9–CM coding update will not be published midyear. Rather, we will assign any new diagnosis or procedure codes to the same DRG in which its predecessor code was assigned, so that there will be no impact on the DRG assignments (as also discussed in section II.G.10. of the preamble of this final rule with comment period). Any coding updates will be available through the Web sites provided in section II.G.10. of the preamble of this final rule with comment period and through the 
                        *Coding Clinic for ICD 9–CM,*
                         a product of the American Hospital Association. Publishers and software vendors currently obtain code changes through these sources in order to update their code books and software system. If new codes are implemented on April 1, revised code books and software systems, including the GROUPER software program, will be necessary because we must use current ICD–9–CM codes. Therefore, for purposes of the LTCH PPS, because each ICD 9–CM code must be included in the GROUPER algorithm to classify each case under the LTCH PPS, the GROUPER software program used under the LTCH PPS would need to be revised to accommodate any new codes. In implementing section 503(a) of Pub. L. 108–173, there will only be an April 1 update if new technology codes are requested and approved. We note that any new codes created for April 1 implementation will be limited to those diagnosis and procedure code revisions primarily needed to describe new technologies and medical services. However, we reiterate that the process of discussing updates to the ICD–9–CM is an open process through the ICD–9–CM Coordination and Maintenance Committee. Requestors will be given the opportunity to present the merits for a new code and to make a clear and convincing case for the need to update ICD–9–CM codes for purposes of the IPPS new technology add-on payment process through an April 1 update (as also discussed in section II.G.10. of the preamble of this final rule with comment period). As we discussed in the FY 2008 IPPS proposed rule (72 FR 24755), at the September 28, 2006 ICD–9–CM Coordination and Maintenance Committee meeting, there were no requests for an April 1, 2007 implementation of ICD 9–CM codes. Therefore, the next update to the ICD–9–CM coding system will not occur until October 1, 2007 (FY 2008). Because there were no coding changes suggested for an April 1, 2007 update, the ICD–9–CM coding set implemented on October 1, 2006, will continue through September 30, 2007 (FY 2008). The update to the ICD–9–CM coding system for FY 2008 is discussed above in section II.G.10. of the preamble of this final rule with comment period. Accordingly, in this final rule with comment period, as discussed in greater detail below, we are modifying and revising the LTC–DRG classifications and relative weights, to be effective October 1, 2007 through September 30, 2008 (FY 2008). In addition, we will notify LTCHs of any revisions to the GROUPER software used under the IPPS and the LTCH PPS that may be implemented on April 1, 2008. As discussed in greater detail below, the MS–LTC–DRGs for FY 2008 in this final rule with comment period are the same as the MS–DRGs adopted under the IPPS for FY 2008 (GROUPER Version 25.0) discussed in section II.B. of the preamble to this final rule with comment period. 2. Changes in the LTC DRG Classifications a. Background Section 123 of Pub. L. 106 113 specifically requires that the agency implement a PPS for LTCHs that is a per discharge system with a DRG-based patient classification system reflecting the differences in patient resources and costs in LTCHs. Section 307(b)(1) of Pub. L. 106–554 modified the requirements of section 123 of Pub. L. 106–113 by specifically requiring that the Secretary examine “the feasibility and the impact of basing payment under such a system [the LTCH PPS] on the use of existing (or refined) hospital diagnosis-related groups (DRGs) that have been modified to account for different resource use of long-term care hospital patients as well as the use of the most recently available hospital discharge data.” In accordance with section 123 of Pub. L. 106–113 as amended by section 307(b)(1) of Pub. L. 106-554 and § 412.515 of our existing regulations, the LTCH PPS uses information from LTCH patient records to classify patient cases into distinct LTC–DRGs based on clinical characteristics and expected resource needs. As described in section II.D. of the preamble of this final rule with comment period, we are adopting MS–DRGs under the IPPS because we believe that adopting this system will result in a significant improvement in the DRG system's recognition of severity of illness and resource usage. We believe these improvements in the DRG system will be equally applicable to the LTCH PPS. The changes we are currently making for the IPPS are reflected in the FY 2008 GROUPER, Version 25.0, to be effective for discharges occurring on or after October 1, 2007 through September 30, 2008. Currently, the LTC–DRGs used as the patient classification system under the LTCH PPS correspond to the current CMS DRGs applicable under the IPPS for acute care hospitals. Consistent with our historical practice of having LTC–DRGs correspond to the DRGs applicable under the IPPS, under the broad authority of section 123(a) of Pub. L. 106–113, as modified by section 307(b) of Pub. L. 106–554, as proposed, under the LTCH PPS we are adopting the use of MS–LTC–DRGs, which correspond to the MS–DRGs we are adopting under the IPPS. In addition, as stated above, we will be using the FY 2008 GROUPER Version 25.0 to classify cases effective for LTCH discharges occurring on or after October 1, 2007 through September 30, 2008. The changes to the current CMS DRG classification system used under the IPPS for FY 2008 (GROUPER Version 25.0) are discussed in section II.D. of the preamble to this final rule with comment period. *Comment:*
                         Four commenters indicated support for the adoption of the MS–LTC–DRGs for the LTCH PPS but noted specific concerns and included policy suggestions that they believed could address these concerns. *Response:*
                         We appreciate the commenters' support. We have seriously considered the areas of concern as well as the policy suggestions. As stated above, we are adopting the use of MS–LTC–DRGs beginning in FY 2008. 
                        ( print page 47279)
                        Below, we explain our responses to these stated concerns. *Comment:*
                         Several commenters expressed concern about the adoption of the MS–LTC–DRGs for FY 2008 in advance of RAND's final report. These commenters envisioned that a report recommending a DRG system other than the MS–DRGs, (upon which the MS–LTC–DRGs are based) could result in a CMS decision to implement “yet another” patient classification system in FY 2009. *Response:*
                         As noted above in our response to similar comments focusing on the use of the MS–DRGs by the IPPS, as RAND has completed its evaluation of the alternative DRG systems, including the MS–DRGs, consistent with RAND's findings, we believe it is appropriate at this time to adopt the MS–DRG system for Medicare in FY 2008 for the IPPS and at the same time, we are also adopting the MS–LTC–DRGs for the LTCH PPS. While there will be an opportunity for the public to comment on RAND's findings, we do not think it is likely that there will be persuasive public comments suggesting that one of the alternative DRG systems being evaluated by RAND is clearly superior. We plan to use RAND's report to continue to examine ways to improve and refine Medicare inpatient payment systems and expect that any future refinements will be based on MS–DRGs. Therefore, as final policy for FY 2008, we are adopting the MS–LTC–DRGs as the new classification system for the LTCH PPS. However, since we are interested in public input on this issue, we will make RAND's final report available on the CMS Web Site at: 
                        *http://www.cms.hhs.gov/​Reports/​downloads/​* Interested members of the public can write to the following address: Division of Acute Care, Center for Medicare Management, 7500 Security Boulevard, C4–08–06, Baltimore, MD 21244, Attn: Mady Hue. *Comment:*
                         Two commenters requested that CMS delay adoption of the MS–LTC–DRGs until FY 2009 in order to provide LTCHs additional time to analyze the impact of the new classification system and to provide meaningful comments. The commenters suggested that, during this time, CMS examine the interaction of MS–LTC–DRG relative weights and new policies established for RY 2008 (for example, revisions to the short-stay outlier policy resulting in the “IPPS comparable threshold”) before implementing MS–LTC–DRGs. The commenters further stated that such a delay would allow LTCHs the opportunity to adjust to the other recent LTCH PPS changes. *Response:*
                         We do not believe that it is either appropriate or necessary to delay the adoption of the MS–LTC–DRGs until FY 2009 as the commenters suggest. We believe that we provided a comprehensive analysis of the MS–DRG classification system, upon which the MS–LTC–DRGs are based, in the proposed rule and, as discussed elsewhere in these responses, clear and specific direction, which are evidenced by the number of comments that were received, which allowed hospital stakeholders to simulate the impacts of the proposed policy change. We do not believe a full year delay in implementation of the MS–DRGs and the MS–LTC–DRGs is necessary or appropriate. We believe that implementing the severity-based DRGs will result in more appropriate Medicare payments, a goal that should not be postponed. However, although we are not delaying the adoption of the severity-based DRGs for either the IPPS or the LTCH PPS, we are providing a 2–year transition to the full adoption of both the MS–DRGs and the MS–LTC–DRGs, described elsewhere in these responses. We believe the transition will mitigate the payment impact of the new DRG system for both acute care hospitals and LTCHs as they adapt to the system. Furthermore, as we note in our discussion of a similar comment regarding the adoption of the MS–DRGs for the IPPS (see section II.E. of the preamble of this final rule with comment period), many commenters supported immediate adoption of the MS–DRGs, particularly because they are so structurally similar to the current DRGs. Therefore, we continue to maintain that a full year's delay in the adoption of the MS–LTC–DRGs under the LTCH PPS is unwarranted. While the MS–DRGs do include some consolidations of base DRGs, the major changes from the current DRGs involve adding severity levels to the base DRGs. Therefore, the move to MS–LTC–DRGs will not necessitate additional data elements. Because we do not believe that extensive preparation for implementation of the MS–DRGs is necessary, we do not believe that it is appropriate or necessary to delay adoption of the MS–DRGs until FY 2009. We continue to believe that payment adjustments that were finalized in the RY 2008 LTCH PPS final rule, among which was the revision to the short-stay outlier policy noted by the commenters, will result in more appropriate Medicare payments to LTCHs. The revised SSO policy addresses the issue of LTCH discharges that are comparable to an acute care IPPS hospital discharge based on the length of stay for that discharge. That policy is not tied to or affected by the adoption of the MS–LTC–DRGs. Nor do we believe that the extension of the 25 percent threshold adjustment that we finalized for RY 2008 at revised § 412.534 and new § 412.536, which governs Medicare payments for patients discharged from LTCHs who were admitted from specific referring hospitals, is tied to or affected by the adoption of the MS–LTC–DRGs. Furthermore, as noted above, because the MS–LTC–DRGs are so structurally similar to the LTC–DRGs, we do not believe that postponing the adoption of the severity-weighted DRGs in order to evaluate the interaction of the policy changes implemented for the LTCH PPS for RY 2008 would confer any significant advantage to stakeholders. *Comment:*
                         Four commenters urged CMS to establish a 3-year transition to the full adoption of the MS–LTC–DRGs in order to minimize the “impact of behavioral changes in coding” resulting from the new system. Referring to the proposed 2.4 percent downward adjustment, the commenters also maintained that a 3-year transition would allow CMS to analyze LTCH data which would indicate whether there were coding changes that could warrant the application of a prospective adjustment to LTCH PPS payment rates. *Response:*
                         We have carefully considered each comment in determining whether there should be a transition period for the relative weights computed using the MS–LTC–DRGs, the length of the transition, and how to compute the relative weights during the transition. Although we received strong general support for adopting the MS–LTC–DRGs, we agree that some transition is warranted to mitigate the magnitude of potential changes in payment to LTCHs that could occur in one year. As discussed in section II.D. of the preamble to this final rule with comment period, although MedPAC recommended that CMS fully implement MS–DRGs immediately, MedPAC suggested that, if the agency chose not to fully implement severity-adjusted DRGs in FY 2008, CMS should implement MS–DRGs over a 2–year transition. Accordingly, as we discussed earlier regarding implementation of the MS–DRGs under the IPPS, we are also implementing a 2 year transition to MS–LTC–DRGs. For FY 2008, the first year of the transition, 50 percent of the relative weight for a MS–LTC–DRG will be based on average relative weight under Version 24.0 of the LTC–DRG GROUPER. The remaining 50 percent of the FY 2008 relative weight for a MS–
                        ( print page 47280)
                        LTC–DRG will be based on the MS–LTC–DRG relative weight. For a more detailed description of the calculation of the MS–LTC–DRG relative weights for FY 2008 under this transition methodology, we refer readers to section II.I.4. (step 7 of Steps for Determining the FY 2008 MS–LTC–DRG Relative Weights) of the preamble of this final rule with comment period.) In FY 2009, the MS–LTC–DRG relative weights will be based on 100 percent of MS–LTC–DRG relative weights. As discussed in detail elsewhere in these responses, we are not finalizing the proposed 2.4 percent downward adjustment to the MS–LTC–DRG relative weights. *Comment:*
                         Some commenters maintained that they are unable to fully evaluate the impact of the proposed MS–DRG system on their member hospitals due to the lack of access to the necessary tools. The commenters note that neither an MS–LTC–DRG GROUPER nor an MS–LTC–DRG Definitions Manual has been made available to help them completely understand the proposed system. Therefore, the commenters believed they have been prevented from thoroughly and completely evaluating the proposed system and providing meaningful comments. The commenter recommended delaying implementation of the MS–LTC–DRGs until such information has been made available and providers have had the opportunity to review it and provide meaningful comments. *Response:*
                         We disagree that LTCHs have not had adequate access to information concerning the changes to the MS–DRGs and the MS–LTC–DRGs. Ample and thorough information was published in the FY 2008 IPPS proposed rule. We refer the commenters to Section II.D.2., “Development of Proposed Medicare Severity DRGs (MS–DRGs)” beginning on page 24697 of the May 3, 2007 
                        **Federal Register**
                         (72 FR 24697 through 24707), where CMS’ entire process for the creation of the MS–DRGs was explained. We discussed the creation of base MS–DRGs, upon which the MS–LTC–DRGs are based, and the consolidation from the existing DRGs is summarized in Table F of the Addendum to the proposed rule (72 FR 24702). We also discussed the process for applying the severity criteria to each of the 335 base DRGs, resulting in 745 proposed MS–DRGs. We discussed the proposed changes to the LTC–DRG classifications (72 FR 24755 through 24771), and indicated that we proposed to conform the LTC–DRG system to the IPPS DRG system by using MS–LTC–DRGs which correspond to the proposed MS–DRGs. Further specific conforming language was spelled out on pages 24756 through 24757 of the FY 2008 IPPS proposed rule. In addition, we made other information available to the public that would allow for a detailed analysis of the MS–LTC–DRG proposal. We made available two MedPAR files (FY 2005 and FY 2006) that included the CMS DRG and MS–DRG assignment for each case. As discussed in the preamble to the proposed rule, the MS–LTC–DRGs and MS–DRGs share identical titles. Furthermore, Table 11 of the Addendum to the proposed rule listed the relative weight for each MS–LTC–DRG. With this information, the public could determine the MS–LTC–DRG assignment and relative weight for all cases in the FY 2005 and FY 2006 MedPAR files. Therefore, we believe the public had detailed information with which to perform a comprehensive analysis of our proposal to adopt MS–LTC–DRGs. Because we believe that adequate access to proposed changes to MS–LTC–DRGs has been provided, as discussed above, we are not delaying their implementation. As stated above, we are adopting the use of MS–LTC–DRGs under the LTCH PPS, which correspond to the MS–DRGs adopted under the IPPS. Accordingly, we will be using the FY 2008 GROUPER Version 25.0 effective for LTCH discharges occurring on or after October 1, 2007 through September 30, 2008. In conjunction with the changes to the existing CMS DRGs for the IPPS by adoption of the MS–DRGs, as discussed above, we are adopting the MS–LTC–DRGs for the LTCH PPS, as both sets of DRGs are determined from the same DRG structure. Although the structure of the DRGs used under the IPPS and the LTCH PPS are identical, we refer to the DRGs under the LTCH PPS as MS–LTC–DRGs. This conforming change, that is, to replicate the MS–LTC–DRG structure after the MS–DRG structure, is appropriate in order to maintain consistency and uniformity among a number of stakeholders, such as acute care hospitals, LTCHs, epidemiologists, rate setting organizations, and payors, among others. Notwithstanding the value of consistency, however, we also emphasize, that the adoption of the MS–LTC–DRGs as the patient classification system for the LTCH PPS will improve identification of severity of illness and hospital resource use which will result in more appropriate Medicare payments for LTCHs. As noted above, the patient classification system used under the LTCH PPS is the same patient classification system used under the IPPS, which historically has been updated annually as required by section 1886(d)(4)(C) of the Act and is effective for discharges occurring on or after October 1 through September 30 of each year. As such, the updates to the MS–DRG classification system used under the IPPS for FY 2008 (GROUPER Version 25.0), discussed in section II.D. of the preamble of this final rule with comment period, will be applicable to updates under the LTCH PPS (that is, the MS–LTC–DRGs). As discussed above, we proposed to adopt the MS–LTC–DRGs as the patient classification system under the LTCH PPS, beginning with discharges occurring on or after October 1, 2007. However, in the proposed rule, we omitted proposed changes to the regulation text reflecting the proposed change from LTC–DRGs to MS–LTC–DRGs. As discussed previously in this preamble, in this final rule with comment period, we are adopting MS–LTC–DRGs for use in the LTCH PPS beginning with discharges on or after October 1, 2007. In this final rule with comment period, we are revising the regulation text to conform to our proposed and final policy. Consequently, we are revising the regulation text at § 412.503 where we define terms associated with the LTCH PPS in order to indicate the adoption of the MS–LTC–DRGs as the patient classification system under the LTCH PPS beginning with FY 2008 for discharges occurring on or after October 1, 2007. First, we are adding language to the definition of “LTC–DRG” indicating that effective, October 1, 2007, the MS–LTC–DRGs are used to classify patient discharges occurring on or after October 1, 2007, from a long-term care hospital and that for patient discharges occurring on or after October 1, 2007 and that references to LTC–DRGs in 42 CFR Part 412, Subpart O for policy descriptions and/or payment calculations shall be considered to be references to the MS–LTC–DRGs. Secondly, we are adding a definition of “MS–LTC–DRGs” as “* * * the severity-adjusted diagnosis-related group used to classify patient discharges from a long-term care hospital based on clinical characteristics and average resource use, for prospective payment purposes for discharges from a long-term care hospital occurring on or after October 1, 2007.” Under the LTCH PPS, as described in greater detail below, we determine relative weights for each of the MS–LTC–DRGs to account for the difference in resource use by patients exhibiting the case complexity and multiple 
                        ( print page 47281)
                        medical problems characteristic of LTCH patients. (Unless otherwise noted in this final rule with comment period, our MS–LTC–DRG analysis is based on LTCH data from the March 2007 update of the FY 2006 MedPAR file, which contains hospital bills received through March 31, 2007, for discharges occurring in FY 2006.) LTCHs do not typically treat the full range of diagnoses as do acute care hospitals. Therefore, as we discussed in the August 30, 2002 LTCH PPS final rule (67 FR 55985), which implemented the LTCH PPS, and the FY 2006 IPPS final rule (70 FR 47324), we use low-volume quintiles in determining the DRG relative weights for DRGs with less than 25 LTCH cases (low-volume LTC–DRGs). Specifically, we group those low-volume DRGs into 5 quintiles based on average charges per discharge. (A listing of the composition of low-volume quintiles for the FY 2007 LTC–DRGs (based on FY 2005 MedPAR data) appears in section II.I.2. of the FY 2007 IPPS final rule (71 FR 47975 through 47978).) We also adjust for cases in which the stay at the LTCH is less than or equal to five sixths of the geometric average length of stay; that is, short stay outlier cases, as discussed below in section II.I.4. of the preamble of this final rule with comment period. b. Patient Classifications into DRGs Generally, under the LTCH–PPS, Medicare payment is made at a predetermined specific rate for each discharge; that is, payment varies by the DRG to which a beneficiary's stay is assigned. Just as cases have been classified into the MS–DRGs for acute care hospitals under the IPPS (section II.B. of the preamble of this final rule with comment period), cases have been classified into MS–LTC–DRGs for payment under the LTCH–PPS based on the principal diagnosis, up to eight additional diagnoses, and up to six procedures performed during the stay, as well as demographic information about the patient. The diagnosis and procedure information is reported by the hospital using the ICD–9–CM coding system. Under the MS–DRGs for the IPPS and the MS–LTC–DRGs for the LTCH–PPS, these factors will not change. Section II.B. of the preamble of this final rule with comment period discusses the organization of the existing CMS DRGs, which we are maintaining under the MS–DRG and MS–LTC–DRG systems. As noted above, the patient classification system for the LTCH–PPS is derived from the IPPS DRGs and is similarly organized into 25 major diagnostic categories (MDCs). Most of these MDCs are based on a particular organ system of the body and the remainder involves multiple organ systems (such as MDC 22, Burns). Accordingly, the principal diagnosis determines MDC assignment. Within most MDCs, cases are then divided into surgical DRGs and medical DRGs. Under the present CMS DRGs, some surgical and medical DRGs are further differentiated based on the presence or absence of CCs. The existing LTC–DRGs are similarly categorized. (See section II.B. of the preamble of this final rule with comment period for further discussion of surgical DRGs and medical DRGs.) The MS–DRGs and the MS–LTC–DRGs contain base DRGs that have been subdivided into one, two, or three severity levels. The most severe level has cases with at least one code that is a major CC, referred to as “with MCC”. The next lower severity level contains cases with at least one CC, referred to as “with CC”. Those DRGs without an MCC or a CC are referred to as “without CC/MCC”. When data did not support the creation of three severity levels, the base DRG was divided into either two levels or the base was not subdivided. The two-level subdivisions consist of one of the following subdivisions: With CC/MCC.
                    Without CC/MCC. In this type of subdivision, cases with at least one code that is on the CC or MCC list are assigned to the “with CC/MCC” DRG. Cases without a CC or an MCC are assigned to the “without CC/MCC” DRG. The other type of two-level subdivision is as follows: With MCC.
                    Without MCC. In this type of subdivision, cases with at least one code that is on the MCC list are assigned to the “with MCC” DRG. Cases that do not have an MCC are assigned to the “without MCC” DRG. This type of subdivision could include cases with a CC code, but no MCC. 3. Development of the FY 2008 MS–LTC–DRG Relative Weights a. General Overview of Development of the MS–LTC–DRG Relative Weights As we stated in the August 30, 2002 LTCH–PPS final rule (67 FR 55981), one of the primary goals for the implementation of the LTCH–PPS is to pay each LTCH an appropriate amount for the efficient delivery of medical care to Medicare patients. The system must be able to account adequately for each LTCH's case-mix in order to ensure both fair distribution of Medicare payments and access to adequate care for those Medicare patients whose care is more costly. To accomplish these goals, we have annually adjusted the LTCH–PPS standard Federal prospective payment system rate by the applicable relative weight in determining payment to LTCHs for each case. (As we have noted above, as proposed, we are adopting the MS–LTC–DRGs for the LTCH–PPS for FY 2008. However, this change in the patient classification system does not affect the basic principles of the development of relative weights under a DRG-based prospective payment system. For purposes of clarity, in the general discussion below in which we describe the basic methodology of the patient classification system, in use since the start of the LTCH–PPS (that is, LTC–DRGs), we use “MS–LTC–DRG” to specify the DRG system that will be used by the LTCH prospective payment system beginning in FY 2008.) Although the adoption of the MS–LTC–DRGs will result in some modifications of existing procedures for assigning weights in cases of zero volume and/or nonmonotonicity, discussed in detail in the following sections, as we proposed, the basic methodology for developing the FY 2008 MS–LTC–DRG relative weights in this final rule with comment period continue to be determined in accordance with the general methodology established in the August 30, 2002 LTCH–PPS final rule (67 FR 55989 through 55991). (As noted above, in this preamble, “LTC–DRGs” will be used in descriptions of the basic methodology established at the beginning of the LTCH–PPS that will remain unchanged with the adoption of the MS–LTC–DRGs. Use of “MS–LTC–DRGs” will indicate a discussion of specifics aspects of our adoption of the severity-weighted patient classification system beginning in FY 2008.) Under the LTCH–PPS, relative weights for each MS–LTC–DRG are a primary element used to account for the variations in cost per discharge and resource utilization among the payment groups (§ 412.515). To ensure that Medicare patients classified to each MS–LTC–DRG have access to an appropriate level of services and to encourage efficiency, we calculate a relative weight for each MS–LTC–DRG that represents the resources needed by an average inpatient LTCH case in that MS–LTC–DRG. For example, cases in an MS–LTC–DRG with a relative weight of 2 will, on average, cost twice as much to treat as cases in an MS–LTC–DRG with a weight of 1. 
                        ( print page 47282) b. Data In the FY 2008 IPPS proposed rule (72 FR 24757), to calculate the proposed MS–LTC–DRG relative weights for FY 2008, we obtained total Medicare allowable charges from FY 2006 Medicare LTCH bill data from the December 2006 update of the MedPAR file, which were the best available data at that time, and we used the proposed Version 25.0 of the CMS GROUPER proposed for use under the IPPS to classify cases. We also proposed that if more recent data were available, we would use those data and the finalized Version 25.0 of the CMS GROUPER. Consistent with that proposal, to calculate the MS–LTC–DRG relative weights for FY 2008 in this final rule with comment period, we obtained total Medicare allowable charges from FY 2006 Medicare LTCH bill data from the March 2007 update of the MedPAR file, which are the best available data at this time, and we used the Version 25.0 of the CMS GROUPER used under the IPPS (as discussed in section II.B. of the preamble of this final rule with comment period) to classify cases. As we discussed in the FY 2007 IPPS final rule (71 FR 47974), we have excluded the data from LTCHs that are all-inclusive rate providers and LTCHs that are reimbursed in accordance with demonstration projects authorized under section 402(a) of Pub. L. 90–248. Data from demonstration projects authorized under section 222(a) of Pub. L. 92–603 are also excluded. Therefore, in the development of the FY 2008 MS–LTC–DRG relative weights in this final rule with comment period, we have excluded the data of the 17 all inclusive rate providers and the 2 LTCHs that are paid in accordance with demonstration projects that had claims in the FY 2006 MedPAR file. c. Hospital-Specific Relative Value Methodology By nature, LTCHs often specialize in certain areas, such as ventilator-dependent patients and rehabilitation and wound care. Some case types (DRGs) may be treated, to a large extent, in hospitals that have, from a perspective of charges, relatively high (or low) charges. This nonarbitrary distribution of cases with relatively high (or low) charges in specific MS–LTC–DRGs has the potential to inappropriately distort the measure of average charges. To account for the fact that cases may not be randomly distributed across LTCHs, as we proposed, in this final rule with comment period, we use a hospital specific relative value (HSRV) method to calculate the MS–LTC–DRG relative weights instead of the methodology used to determine the MS–DRG relative weights under the IPPS described in section II.H. of the preamble of this final rule with comment period. We believe this method will remove this hospital specific source of bias in measuring LTCH average charges. Specifically, we reduce the impact of the variation in charges across providers on any particular MS–LTC–DRG relative weight by converting each LTCH's charge for a case to a relative value based on that LTCH's average charge. Under the HSRV method, we standardize charges for each LTCH by converting its charges for each case to hospital-specific relative charge values and then adjusting those values for the LTCH's case-mix. The adjustment for case-mix is needed to rescale the hospital-specific relative charge values (which, by definition, average 1.0 for each LTCH). The average relative weight for a LTCH is its case-mix, so it is reasonable to scale each LTCH's average relative charge value by its case-mix. In this way, each LTCH's relative charge value is adjusted by its case- mix to an average that reflects the complexity of the cases it treats relative to the complexity of the cases treated by all other LTCHs (the average case-mix of all LTCHs). In accordance with the methodology established under § 412.523, as implemented in the August 30, 2002 LTCH–PPS final rule (67 FR 55989 through 55991), we continue to standardize charges for each case by first dividing the adjusted charge for the case (adjusted for short-stay outliers under § 412.529 as described in section II.I.4. (step 3) of the preamble of this final rule with comment period) by the average adjusted charge for all cases at the LTCH in which the case was treated. Short stay outliers are cases with a length of stay that is less than or equal to five sixths the average length of stay of the MS–LTC (see § 412.529 and § 412.503). (As discussed above, we are revising the regulations at § 412.503 to specify that regulatory references to LTC–DRGs for policy descriptions and/or payment calculations shall be considered as references to the MS–LTCs for LTCH discharges occurring on or after October 1, 2007). The average adjusted charge reflects the average intensity of the health care services delivered by a particular LTCH and the average cost level of that LTCH. The resulting ratio is multiplied by that LTCH's case-mix index to determine the standardized charge for the case. Multiplying by the LTCH's case-mix index accounts for the fact that the same relative charges are given greater weight at a LTCH with higher average costs than they would at a LTCH with low average costs, which is needed to adjust each LTCH's relative charge value to reflect its case-mix relative to the average case-mix for all LTCHs. Because we standardize charges in this manner, we count charges for a Medicare patient at a LTCH with high average charges as less resource intensive than they would be at a LTCH with low average charges. For example, a $10,000 charge for a case at a LTCH with an average adjusted charge of $17,500 reflects a higher level of relative resource use than a $10,000 charge for a case at a LTCH with the same case-mix, but an average adjusted charge of $35,000. We believe that the adjusted charge of an individual case more accurately reflects actual resource use for an individual LTCH because the variation in charges due to systematic differences in the markup of charges among LTCHs is taken into account. d. Treatment of Severity Levels in Developing Relative Weights With the implementation of the LTCH–PPS for FY 2003, we established a procedure to address setting relative weights for LTC–DRG “pairs” that were differentiated on the presence or absence of CCs (71 FR 47979). Beginning with FY 2008, as we proposed, we are adopting a severity-based patient classification system for the LTCH–PPS, the MS–LTC–DRGs described above, which requires us to adapt our existing procedures for dealing with setting relative weights for the severity levels within a specific base MS–LTC–DRG. As proposed, we are also modifying our existing methodology for maintaining monotonicity when setting relative weights for the MS–LTC–DRGs. As under the existing procedure, under the MS–LTC–DRGs, for purposes of the annual setting of the relative weights, there continue to be three different categories of DRGs based on volume of cases within specific MS–LTC–DRGs. MS–LTC–DRGs with at least 25 cases are each assigned a unique relative weight; low-volume MS LTC–DRGs (that is, MS–LTCs that contain between one and 24 cases annually) are grouped into quintiles (described below) and assigned the weight of the quintile. No-volume MS–LTC–DRGs (that is, no cases in the databases were assigned to those MS LTC–DRGs) are crosswalked to other MS–LTC–DRGs based on the clinical similarities and assigned the weight of the quintile that is closest to the relative weight of the crosswalked MS–LTC–DRG. (We provide in-depth discussions of our policy regarding 
                        ( print page 47283)
                        weight setting for low volume MS–LTCs in section II.I.3.e. of the preamble of this final rule with comment period and for no-volume MS–LTC–DRGs, under Step 5 in section II.I.4. of the preamble of this final rule with comment period.) As described above, in response to the need to account for severity and pay appropriately for cases, we have developed a severity-adjusted patient classification system which we are adopting for both the IPPS and the LTCH PPS. As described in greater detail above, the MS–LTC–DRG system can accommodate three severity levels: “with MCC” (most severe); “with CC,” and “without CC/MCC” (the least severe) with each level assigned an individual MS–LTC–DRG number. In cases with two subdivisions, the levels are either “with CC/MCC” and “without CC/MCC” or “with MCC” and “without MCC”. Two parallel numbering systems have been developed to describe MS–LTC–DRGs, which are identical to the MS DRGs numbers under the IPPS. That is, while each severity level in each DRG category gets a unique MS–LTC–DRG number, in conjunction, each of the severity levels in a single DRG category are also assigned the same “base-DRG” number. Therefore, under the system, multiple sclerosis and cerebellar ataxia with MCC is MS–LTC–DRG 58; multiple sclerosis and cerebellar ataxia with CC is MS–LTC–DRG 59; and multiple sclerosis and cerebellar ataxia without CC/MCC is MS–LTC–DRG 60. As noted above, beginning with FY 2008, while the LTCH PPS and the IPPS will use the same patient classification system, the methodology that is used to set the DRG weights for use in each payment system differs because the overall volume of cases in the LTCH PPS is much less than in the IPPS. As a general rule, as proposed, we are determining the relative weights for the MS–LTC–DRGs using the following steps: (1) If an MS–LTC–DRG has at least 25 cases, it is assigned its own relative weight; (2) if an MS–LTC–DRG has between 1 and 24 cases, it is assigned to a quintile to which we will assign a relative weight; and (3) if an MS–LTC–DRG has no cases, it is crosswalked to another MS–LTC–DRG based upon clinical similarities to assign an appropriate relative weight (as described in detail in Step 5 of the Steps for Determining the FY 2008 MS–LTC–DRG Relative Weights, below). Furthermore, in determining the MS–LTC–DRG relative weights, as proposed, when necessary, adjustments were made to account for nonmonotonicity, as explained below. Theoretically, as with the existing LTC–DRG system, cases under the MS–LTC–DRG system that are more severe require greater expenditure of medical care resources and will result in higher average charges. Therefore, in the three severity levels, weights should increase with severity, from lowest to highest. If the weights do not increase (that is, if based on the relative weight calculation outlined above, an MS–LTC–DRG with MCC would have a lower relative weight than one with CC, or the MS–LTC–DRG without CC/MCC would have a higher relative weight than either of the others), there is a problem with monotonicity. Since the start of the LTCH PPS for FY 2003 (67 FR 55990), we have adjusted the setting of the LTC–DRG relative weights in order to maintain monotonicity by grouping both sets of cases together and establishing a new relative weight that is assigned to both LTC–DRGs. We continue to believe that utilizing nonmonotonic relative weights to adjust Medicare payments would result in inappropriate payments. This is because when nonmonotonicity exists, cases that are more severe and require greater expenditure of medical care resources would be paid based on a lower relative weight than cases that are less severe and require lower resource use. Similarly, as proposed, we are establishing a procedure for dealing with nonmonotonicity under the MS–LTC–DRG classification system, which is discussed in greater detail below in section II.I.4. (Step 6) of the preamble of this final rule with comment period. e. Low-Volume MS–LTC–DRGs In order to account for LTC–DRGs with low volume (that is, with fewer than 25 LTCH cases), under current policy, in accordance with the methodology established in the August 30, 2002 LTCH PPS final rule (67 FR 55984—55995), we group those “low-volume LTC–DRGs” (that is, DRGs that contained between 1 and 24 cases annually) into one of five categories (quintiles) based on average charges, for the purposes of determining relative weights. For this FY 2008 IPPS final rule, as we proposed, we are continuing to employ this treatment of low-volume MS–LTC–DRGs with a modification to combine MS–LTC–DRGs for the purpose of computing a relative weight in cases where necessary to maintain monotonicity in determining the FY 2008 MS–LTC–DRG relative weights using the best available LTCH data. In this final rule with comment period, using LTCH cases from the March 2007 update of the FY 2006 MedPAR file, we identified 303 MS–LTC–DRGs that contained between 1 and 24 cases. This list of MS–LTC–DRGs was then divided into one of the 5 low-volume quintiles, each containing a maximum of 61 MS–LTC–DRGs (303/5 = 60, with a remainder of 3 MS–LTC–DRGs). Consistent with our current methodology, as proposed, we are making an assignment to a specific low-volume quintile by sorting the low-volume MS–LTC DRGs in ascending order by average charge. For this final rule with comment period, this results in an assignment to a specific low-volume quintile of the sorted 303 low-volume MS–LTC–DRGs by ascending order by average charge. Because the number of low-volume MS–LTC–DRGs for FY 2008 is not evenly divisible by five, to determine the composition of the low-volume quintiles in accordance with our established methodology, the average charge of the low-volume MS–LTC–DRG was used to determine which low-volume quintile received the additional MS–LTC–DRGs. After sorting the 303 low-volume MS–LTC–DRGs in ascending order, we grouped the first fifth (1st through 60th) of low volume MS–LTC–DRGs (with the lowest average charge) into Quintile 1. Because the average charge of the 61st MS–LTC–DRG in the sorted list is closer to the 60th MS–LTC–DRGs average charge (assigned to Quintile 1) than to the average charge of the 62nd MS–LTC–DRG in the sorted list (to be assigned to Quintile 2), we placed the 61st MS–LTC–DRG into Quintile 1. This process was repeated through the remaining low-volume MS–LTC–DRGs so that 3 low volume quintiles contain 61 MS–LTC–DRGs and 2 low-volume quintiles contain 60 MS–LTC–DRGs. The highest average charge cases were grouped into Quintile 5. In order to determine the relative weights for the MS–LTC–DRGs with low-volume for FY 2008, based on the methodology established in the August 30, 2002 LTCH PPS final rule (67 FR 55984), as proposed, we are using the five low-volume quintiles described above. In addition, as proposed, in cases where the initial assignment of the low-volume MS–LTC–DRGs to quintiles results in nonmonotonicity within a base DRG, in order to ensure appropriate Medicare payments, we make adjustments to the treatment of low-volume MS–LTC–DRGs to preserve monotonicity, as discussed in detail in section II.I.4 (Step 6 of the methodology for determining the FY 2008 MS–LTC–DRG relative weights). The composition of each of the five low-volume quintiles shown in the chart below was used in determining the MS–LTC–DRG relative weights for FY 2008. We determine a 
                        ( print page 47284)
                        relative weight and (geometric) average length of stay for each of the five low-volume quintiles using the methodology that we apply to the regular MS–LTC–DRGs (25 or more cases), as described below in section II.I.4. of the preamble of this final rule with comment period. We are assigning the same relative weight and average length of stay to each of the MS–LTC–DRGs that make up an individual low-volume quintile. We note that, as this system is dynamic, it is possible that the number and specific type of MS–LTC–DRGs with a low volume of LTCH cases will vary in the future. We use the best available claims data in the MedPAR file to identify low-volume MS–LTC–DRGs and to calculate the relative weights based on our methodology. Composition of Low-Volume Quintiles for FY 2008
MS–LTC–DRG
MS–LTC–DRG (version 25) description**QUINTILE 1 (Version 25 relative weight = 0.4739)**30
Spinal procedures w/o CC/MCC.32
Ventricular shunt procedures w CC.33
Ventricular shunt procedures w/o CC/MCC.60
Multiple sclerosis  cerebellar ataxia w/o CC/MCC.66
Intracranial hemorrhage or cerebral infarction w/o CC/MCC.67
Nonspecific cva  precerebral occlusion w/o infarct w MCC.68
Nonspecific cva  precerebral occlusion w/o infarct w/o MCC.69
Transient ischemia.72
Nonspecific cerebrovascular disorders w/o CC/MCC.76
Viral meningitis w/o CC/MCC.79
Hypertensive encephalopathy w/o CC/MCC.88
Concussion w MCC***.122
Acute major eye infections w/o CC/MCC.123
Neurological eye disorders.133
Other ear, nose, mouth  throat O.R. procedures w CC/MCC***.149
Dysequilibrium.159
Dental  Oral Diseases w/o CC/MCC.182
Respiratory neoplasms w/o CC/MCC.183
Major chest trauma w MCC.184
Major chest trauma w CC**.201
Pneumothorax w/o CC/MCC.261
Cardiac pacemaker revision except device replacement w CC.313
Chest pain.328
Stomach, esophageal  duodenal proc w/o CC/MCC.331
Major small  large bowel procedures w/o CC/MCC.349
Anal  stomal procedures w/o CC/MCC.376
Digestive malignancy w/o CC/MCC.379
G.I. hemorrhage w/o CC/MCC.434
Cirrhosis  alcoholic hepatitis w/o CC/MCC.446
Disorders of the biliary tract w/o CC/MCC.505
Foot procedures w/o CC/MCC.512
Shoulder,elbow or forearm proc,exc major joint proc w/o CC/MCC.544
Pathological fractures  musculoskelet  conn tiss malig w/o CC/MCC.547
Connective tissue disorders w/o CC/MCC.563
Fx, sprn, strn  disl except femur, hip, pelvis  thigh w/o MCC.645
Endocrine disorders w/o CC/MCC.661
Kidney  ureter procedures for non-neoplasm w/o CC/MCC.688
Kidney  urinary tract neoplasms w/o CC/MCC.696
Kidney  urinary tract signs  symptoms w/o MCC.714
Transurethral prostatectomy w/o CC/MCC.718
Other male reproductive system O.R. proc exc malignancy w/o CC/MCC.724
Malignancy, male reproductive system w/o CC/MCC.726
Benign prostatic hypertrophy w/o MCC.756
Malignancy, female reproductive system w/o CC/MCC.759
Infections, female reproductive system w/o CC/MCC.761
Menstrual  other female reproductive system disorders w/o CC/MCC.825
Lymphoma  non-acute leukemia w other O.R. proc w/o CC/MCC.836
Acute leukemia w/o major O.R. procedure w/o CC/MCC.869
Other infectious  parasitic diseases diagnoses w/o CC/MCC.880
Acute adjustment reaction  psychosocial dysfunction.881
Depressive neuroses.882
Neuroses except depressive.883
Disorders of personality  impulse control.886
Behavioral  developmental disorders.894
Alcohol/drug abuse or dependence, left ama.95
Alcohol/drug abuse or dependence w rehabilitation therapy.897
Alcohol/drug abuse or dependence w/o rehabilitation therapy w/o MCC.906
Hand procedures for injuries.916
Allergic reactions w/o MCC.922
Other injury, poisoning  toxic effect diag w MCC.923
Other injury, poisoning  toxic effect diag w/o MCC.( print page 47285)965
Other multiple significant trauma w/o CC/MCC.**QUINTILE 2 (Version 25 relative weight = 0.6478)**42
Periph  cranial nerve  other nerv syst proc w/o CC/MCC.58
Multiple sclerosis  cerebellar ataxia w MCC.75
Viral meningitis w CC/MCC.77
Hypertensive encephalopathy w MCC.78
Hypertensive encephalopathy w CC**.83
Traumatic stupor  coma, coma 1 hr w MCC.84
Traumatic stupor  coma, coma 1 hr w/o CC/MCC.99
Non-bacterial infect of nervous sys exc viral meningitis w/o CC/MCC.102
Headaches w MCC***.113
Orbital procedures w CC/MCC.121
Acute major eye infections w CC/MCC.133
Other ear, nose, mouth  throat O.R. procedures w CC/MCC**.134
Other ear, nose, mouth  throat O.R. procedures w/o CC/MCC**.148
Ear, nose, mouth  throat malignancy w/o CC/MCC.152
Otitis media  URI w MCC.153
Otitis media  URI w/o MCC.156
Nasal trauma  deformity w/o CC/MCC.157
Dental  Oral Diseases w MCC***.184
Major chest trauma w CC***.188
Pleural effusion w/o CC/MCC*.200
Pneumothorax w MCC.245
AICD lead  generator procedures.282
Circulatory disorders w AMI, discharged alive w/o CC/MCC.284
Circulatory disorders w AMI, expired w CC*.311
Angina pectoris.336
Peritoneal adhesiolysis w MCC.382
Complicated peptic ulcer w/o CC/MMCC.384
Uncomplicated peptic ulcer w/o MCC.433
Cirrhosis  alcoholic hepatitis w CC*.437
Malignancy of hepatobiliary system or pancreas w/o CC/MCC.443
Disorders of liver except malig,cirr,alc hepa w/o CC/MCC.499
Local excision  removal int fix devices of hip  femur w/o CC/MCC.514
Hand or wrist proc, except major thumb or joint proc w/o CC/MCC.534
Fractures of femur w/o MCC.535
Fractures of hip  pelvis w MCC.555
Signs  symptoms of musculoskeletal system  conn tissue w MCC.556
Signs  symptoms of musculoskeletal system  conn tissue w/o MCC.578
Skin graft /or debrid exc for skin ulcer or cellulitis w/o CC/MCC.598
Malignant breast disorders w MCC.599
Malignant breast disorders w/o CC/MCC**.600
Non-malignant breast disorders w CC/MCC.601
Non-malignant breast disorders w/o CC/MCC.630
Other endocrine, nutrit  metab O.R. proc w/o CC/MCC.642
Inborn errors of metabolism.660
Kidney  ureter procedures for non-neoplasm w MCC.687
Kidney  urinary tract neoplasms w CC.693
Urinary stones w/o esw lithotripsy w MCC.694
Urinary stones w/ot esw lithotripsy w/o MCC**.723
Malignancy, male reproductive system w CC.730
Other male reproductive system diagnoses w/o CC/MCC.769
Postpartum  post abortion diagnoses w O.R. procedure.803
Other O.R. proc of the blood  blood forming organs w CC.815
Reticuloendothelial  immunity disorders w CC.816
Reticuloendothelial  immunity disorders w/o CC/MCC**.842
Lymphoma  non-acute leukemia w/o CC/MCC.848
Chemotherapy w/o acute leukemia as secondary diagnosis w/o CC/MCC.855
Infectious  parasitic diseases w O.R. procedure w/o CC/MCC.864
Fever of unknown origin.876
O.R. procedure w principal diagnoses of mental illness.903
Wound debridements for injuries w/o CC/MCC.905
Skin grafts for injuries w/o CC/MCC.917
Poisoning  toxic effects of drugs w MCC.918
Poisoning  toxic effects of drugs w/o MCC.929
Full thickness burn w skin graft or inhal inj w/o CC/MCC.956
Limb reattachment, hip  femur proc for multiple significant trauma.964
Other multiple significant trauma w CC.977
HIV w or w/o other related condition.( print page 47286)**QUINTILE 3 (Version 25 relative weight = 0.7790)**78
Hypertensive encephalopathy w CC***.102
Headaches w MCC**.103
Headaches w/o MCC**.125
Other disorders of the eye w/o MCC.157
Dental  Oral Diseases w MCC**.158
Dental  Oral Diseases w CC.199
Pneumothorax w MCC.238
Major cardiovascular procedures w/o MCC.246
Percutaneous cardiovascular proc w drug-eluting stent w MCC.250
Perc cardiovasc proc w/o coronary artery stent or AMI w MCC.254
Other vascular procedures w/o CC/MCC.263
Vein ligation  stripping 285 Circulatory disorders w AMI, expired w/o CC/MCC*.287
Circulatory disorders except AMI, w card cath w/o MCC.294
Deep vein thrombophlebitis w CC/MCC.304
Hypertension w MCC.348
Anal  stomal procedures w CC.352
Inguinal  femoral hernia procedures w/o CC/MCC.354
Hernia procedures except inguinal  femoral w CC.358
Other digestive system O.R. procedures w/o CC/MCC.380
Complicated peptic ulcer w MCC.381
Complicated peptic ulcer w CC.383
Uncomplicated peptic ulcer w MCC.387
Inflammatory bowel disease w/o CC/MCC*.390
G.I. obstruction w/o CC/MCC*.421
Hepatobiliary diagnostic procedures w CC.424
Other hepatobiliary or pancreas O.R. procedures w CC.494
Lower extrem  humer proc except hip,foot,femur w/o CC/MCC.502
Soft tissue procedures w/o CC/MCC.504
Foot procedures w CC.507
Major shoulder or elbow joint procedures w CC/MCC.517
Other musculoskelet sys  conn tiss O.R. proc w/o CC/MCC.533
Fractures of femur w MCC.553
Bone diseases  arthropathies w MCC.597
Malignant breast disorders w MCC.599
Malignant breast disorders w/o CC/MCC***.604
Trauma to the skin, subcut tiss  breast w MCC.618
Amputat of lower limb for endocrine,nutrit, metabol dis w/o CC/MCC.619
O.R. procedures for obesity w MCC.620
O.R. procedures for obesity w CC**.624
Skin grafts  wound debrid for endoc, nutrit  metab dis w/o CC/MCC.644
Endocrine disorders w CC.657
Kidney  ureter procedures forneoplasm w CC.662
Minor bladder procedures w MCC.665
Prostatectomy w MCC.694
Urinary stones w/ot esw lithotripsy w/o MCC***.695
Kidney  urinary tract signs  symptoms w MCC.722
Malignancy, male reproductive system w MCC.744
DC, conization, laparascopy  tubal interruption w CC/MCC.746
Vagina, cervix  vulva procedures w CC/MCC.749
Other female reproductive system O.R. procedures w CC/MCC.755
Malignancy, female reproductive system w CC.809
Major hematol/immun diag exc sickle cell crisis  coagul w CC.810
Major hematol/immun diag exc sickle cell crisis  coagul w/o CC/MCC.816
Reticuloendothelial  immunity disorders w/o CC/MCC***.821
Lymphoma  leukemia w major O.R. procedure w CC.826
Myeloprolif disord or poorly diff neopl w maj O.R. proc w MCC.835
Acute leukemia w/o major O.R. procedure w CC.838
Chemo w acute leukemia as sdx or w high dose chemo agent w CC.843
Other myeloprolif dis or poorly diff neopl diag w MCC***.844
Other myeloprolif dis or poorly diff neopl diag w CC***.896
Alcohol/drug abuse or dependence w/o rehabilitation therapy w MCC.909
Other O.R. procedures for injuries w/o CC/MCC.989
Non-extensive O.R. proc unrelated to principal diagnosis w/o CC/MCC.**QUINTILE 4**
                                 (Version 25 relative weight = 1.0810)28
Spinal procedures w MCC.29
Spinal procedures w CC.38
Extracranial procedures w CC.( print page 47287)53
Spinal disorders  injuries w/o CC/MCC*.88
Concussion w MCC**.89
Concussion w CC.103
Headaches w/o MCC***.124
Other disorders of the eye w MCC.168
Other resp system O.R. procedures w/o CC/MCC.241
Amputation for circ sys disorders exc upper limb  toe w/o CC/MCC.242
Permanent cardiac pacemaker implant w MCC***.244
Permanent cardiac pacemaker implant w/o CC/MCC.257
Upper limb  toe amputation for circ system disorders w/o CC/MCC*.286
Circulatory disorders except AMI, w card cath w MCC.347
Anal  stomal procedures w MCC.351
Inguinal  femoral hernia procedures w CC.368
Major esophageal disorders w MCC.369
Major esophageal disorders w CC.370
Major esophageal disorders w/o CC/MCC**.407
Pancreas, liver  shunt procedures w/o CC/MCC.408
Biliary tract proc except only cholecyst w or w/o c.d.e. w MCC***.412
Cholecystectomy w c.d.e. w CC.414
Cholecystectomy except by laparoscope w/o c.d.e. w MCC.415
Cholecystectomy except by laparoscope w/o c.d.e. w CC.418
Laparoscopic cholecystectomy w/o c.d.e. w CC.420
Hepatobiliary diagnostic procedures w MCC.423
Other hepatobiliary or pancreas O.R. procedures w MCC.476
Amputation for musculoskeletal sys  conn tissue dis w/o CC/MCC*.478
Biopsies of musculoskeletal system  connective tissue w CC.479
Biopsies of musculoskeletal system  connective tissue w/o CC/MCC.482
Hip  femur procedures except major joint w/o CC/MCC.486
Knee procedures w pdx of infection w CC.487
Knee procedures w pdx of infection w/o CC/MCC.490
Back  neck procedures except spinal fusion w CC/MCC or disc devices493
Lower extrem  humer proc except hip, foot, femur w CC.497
Local excision  removal int fix devices exc hip  femur w/o CC/MCC.503
Foot procedures w MCC.511
Shoulder,elbow or forearm proc,exc major joint proc w CC.516
Other musculoskelet sys  conn tiss O.R. proc w CC.562
Fx, sprn, strn  disl except femur, hip, pelvis  thigh w MCC.577
Skin graft /or debrid exc for skin ulcer or cellulitis w CC.584
Breast biopsy, local excision  other breast procedures w CC/MCC.620
O.R. procedures for obesity w CC***.659
Kidney  ureter procedures for non-neoplasm w MCC.667
Prostatectomy w/o CC/MCC.675
Other kidney  urinary tract procedures w/o CC/MCC.709
Penis procedures w CC/MCC.711
Testes procedures w CC/MCC.717
Other male reproductive system O.R. proc exc malignancy w CC/MCC.725
Benign prostatic hypertrophy w MCC.754
Malignancy, female reproductive system w MCC.760
Menstrual  other female reproductive system disorders w CC/MCC.776
Postpartum  post abortion diagnoses w/o O.R. procedure.781
Other antepartum diagnoses w medical complications.823
Lymphoma  non-acute leukemia w other O.R. proc w MCC.824
Lymphoma  non-acute leukemia w other O.R. proc w CC.834
Acute leukemia w/o major O.R. procedure w MCC.843
Other myeloprolif dis or poorly diff neopl diag w MCC**.844
Other myeloprolif dis or poorly diff neopl diag w CC**.845
Other myeloprolif dis or poorly diff neopl diag w/o CC/MCC**.928
Full thickness burn w skin graft or inhal inj w CC/MCC.958
Other O.R. procedures for multiple significant trauma w CC.983
Extensive O.R. procedure unrelated to principal diagnosis w/o CC/MCC.985
Prostatic O.R. procedure unrelated to principal diagnosis w CC.986
Prostatic O.R. procedure unrelated to principal diagnosis w/o CC/MCC.**QUINTILE 5**
                                 (Version 25 relative weight = 1.5863)12
Tracheostomy for face,mouth  neck diagnoses w CC.26
Craniotomy  endovascular intracranial procedures w CC.31
Ventricular shunt procedures w MCC.37
Extracranial procedures w MCC.131
Cranial/facial procedures w CC/MCC.134
Other ear, nose, mouth  throat O.R. procedures w/o CC/MCC***.( print page 47288)137
Mouth procedures w CC/MCC.139
Salivary gland procedures 164 Major chest procedures w CC.226
Cardiac defibrillator implant w/o cardiac cath w MCC.227
Cardiac defibrillator implant w/o cardiac cath w/o MCC.237
Major cardiovascular procedures w MCC.242
Permanent cardiac pacemaker implant w MCC**.243
Permanent cardiac pacemaker implant w CC.248
Percutaneous cardiovasc proc w non-drug-eluting stent w MCC.258
Cardiac pacemaker device replacement w MCC.260
Cardiac pacemaker revision except device replacement w MCC.327
Stomach, esophageal  duodenal proc w CC.329
Major small  large bowel procedures w MCC.330
Major small  large bowel procedures w CC.335
Peritoneal adhesiolysis w MCC.350
Inguinal  femoral hernia procedures w MCC.370
Major esophageal disorders w/o CC/MCC***.405
Pancreas, liver  shunt procedures w MCC.406
Pancreas, liver  shunt procedures w CC.408
Biliary tract proc except only cholecyst w or w/o c.d.e. w MCC**.409
Biliary tract proc except only cholecyst w or w/o c.d.e. w CC.417
Laparoscopic cholecystectomy w/o c.d.e. w MCC.454
Combined anterior/posterior spinal fusion w CC.456
Spinal fusion exc cerv w spinal curv, malig or 9+ fusions w MCC.459
Spinal fusion except cervical w MCC.460
Spinal fusion except cervical w/o MCC.466
Revision of hip or knee replacement w MCC.467
Revision of hip or knee replacement w CC.469
Major joint replacement or reattachment of lower extremity w MCC.470
Major joint replacement or reattachment of lower extremity w/o MCC.471
Cervical spinal fusion w MCC.472
Cervical spinal fusion w CC.477
Biopsies of musculoskeletal system  connective tissue w MCC.480
Hip  femur procedures except major joint w MCC.481
Hip  femur procedures except major joint w CC.485
Knee procedures w pdx of infection w MCC.488
Knee procedures w/o pdx of infection w CC/MCC.492
Lower extrem  humer proc except hip, foot, femur w MCC.498
Local excision  removal int fix devices of hip  femur w CC/MCC.513
Hand or wrist proc, except major thumb or joint proc w CC/MCC.576
Skin graft /or debrid exc for skin ulcer or cellulitis w MCC.582
Mastectomy for malignancy w CC/MCC.664
Minor bladder procedures w/o CC/MCC.668
Transurethral procedures w MCC.669
Transurethral procedures w CC.691
Urinary stones w esw lithotripsy w CC/MCC.713
Transurethral prostatectomy w CC/MCC.715
Other male reproductive system O.R. proc for malignancy w CC/MCC.802
Other O.R. proc of the blood  blood forming organs w MCC.829
Myeloprolif disord or poorly diff neopl w other O.R. proc w CC/MCC.837
Chemo w acute leukemia as sdx or w high dose chemo agent w MCC.845
Other myeloprolif dis or poorly diff neopl diag w/o CC/MCC***.933
Extensive burns or full thickness burns w MV 96+ hrs w/o skin graft.957
Other O.R. procedures for multiple significant trauma w MCC.963
Other multiple significant trauma w MCC.969
HIV w extensive O.R. procedure w MCC.984
Prostatic O.R. procedure unrelated to principal diagnosis w MCC.*One of the original 303 low-volume MS LTC–DRGs initially assigned to this low-volume quintile; removed from this low-volume quintile in addressing nonmonotonicity (see step 6 in section II.I.4.below).**One of the original 303 low-volume MS LTC–DRGs initially assigned to a different low-volume quintile but moved to this low-volume quintile in addressing nonmonotonicity (see step 6 in section II.I.4 below).***One of the original 303 low-volume MS LTC–DRGs initially assigned to this low-volume quintile but moved to a different low-volume quintile in addressing nonmonotonicity (see step 6 in section II.I.4 below).
 We note that we will continue to monitor the volume (that is, the number of LTCH cases) in these low-volume quintiles to ensure that our quintile assignment results in appropriate payment for such cases and does not result in an unintended financial incentive for LTCHs to inappropriately admit these types of cases. 4. Steps for Determining the FY 2008 MS–LTC–DRG Relative Weights As we noted previously, although the adoption of the MS–LTC–DRGs with three severity levels results in some 
                        ( print page 47289)
                        slight modifications of existing procedures for assigning weights in cases of zero volume and/or nonmonotonicity, described in detail elsewhere in this section, as proposed, the FY 2008 MS–LTC–DRG relative weights in this final rule with comment period are based on the methodology established in the August 30, 2002 LTCH PPS final rule (67 FR 55989 through 55991). In summary, for FY 2008, LTCH cases are grouped to the appropriate MS–LTC–DRG, while taking into account the low volume MS–LTC–DRGs as described above, before the FY 2008 MS–LTC–DRG relative weights can be determined. After grouping the cases to the appropriate MS–LTC–DRG, we calculate the relative weights for FY 2008 by first removing statistical outliers and cases with a length of stay of 7 days or less, as discussed in greater detail below. Next, we adjust the number of cases in each MS–LTC–DRG for the effect of short-stay outlier cases, as also discussed in greater detail below. The short-stay adjusted discharges and corresponding charges are used to calculate “relative adjusted weights” in each MS–LTC–DRG using the HSRV method described above. Below we discuss in detail the steps for calculating the FY 2008 MS–LTC–DRG relative weights. We note that, as we stated above in section II.I.3.b. of the preamble of this final rule with comment period, we have excluded the data of all-inclusive rate LTCHs and LTCHs that are paid in accordance with demonstration projects that had claims in the FY 2006 MedPAR file. *Step 1*
                        —Remove statistical outliers. The first step in the calculation of the FY 2008 MS–LTC–DRG relative weights is to remove statistical outlier cases. We define statistical outliers as cases that are outside of 3.0 standard deviations from the mean of the log distribution of both charges per case and the charges per day for each MS–LTC–DRG. These statistical outliers are removed prior to calculating the relative weights. As noted above, we believe that they may represent aberrations in the data that distort the measure of average resource use. Including those LTCH cases in the calculation of the relative weights could result in an inaccurate relative weight that does not truly reflect relative resource use among the MS–LTC–DRGs. *Step 2*
                        —Remove cases with a length of stay of 7 days or less. The FY 2008 MS–LTC–DRG relative weights reflect the average of resources used on representative cases of a specific type. Generally, cases with a length of stay of 7 days or less do not belong in a LTCH because these stays do not fully receive or benefit from treatment that is typical in a LTCH stay, and full resources are often not used in the earlier stages of admission to a LTCH. As explained above, if we were to include stays of 7 days or less in the computation of the FY 2008 MS–LTC–DRG relative weights, the value of many relative weights would decrease and, therefore, payments would decrease to a level that may no longer be appropriate. We do not believe that it would be appropriate to compromise the integrity of the payment determination for those LTCH cases that actually benefit from and receive a full course of treatment at a LTCH, by including data from these very short-stays. Thus, as explained above, in determining the FY 2008 MS–LTC–DRG relative weights, as we proposed, we remove LTCH cases with a length of stay of 7 days or less. *Step 3*
                        —Adjust charges for the effects of short-stay outliers. After removing cases with a length of stay of 7 days or less, we are left with cases that have a length of stay of greater than or equal to 8 days. The next step in the calculation of the FY 2008 MS–LTC–DRG relative weights is to adjust each LTCH's charges per discharge for those remaining cases for the effects of short-stay outliers (as defined in § 412.529(a) in conjunction with § 412.503 for LTCH discharges occurring on or after October 1, 2007). (We note that even if a case was removed in Step 2 (that is, cases with a length of stay of 7 days or less), it was paid as a short-stay outlier if its length of stay was less than or equal to five-sixths of the average length of stay of the MS–LTC–DRG, in accordance with § 412.529. As discussed above, we are revising the regulations at § 412.503 to specify that regulatory references to LTC–DRGs for policy descriptions and/or payment calculations shall be considered as references to the MS–LTC–DRGs for LTCH discharges occurring on or after October 1, 2007.) We make this adjustment by counting a short-stay outlier as a fraction of a discharge based on the ratio of the length of stay of the case to the average length of stay for the MS–LTC–DRG for non-short-stay outlier cases. This has the effect of proportionately reducing the impact of the lower charges for the short-stay outlier cases in calculating the average charge for the MS–LTC–DRG. This process produces the same result as if the actual charges per discharge of a short-stay outlier case were adjusted to what they would have been had the patient's length of stay been equal to the average length of stay of the MS–LTC–DRG. As we explained in the FY 2008 IPPS proposed rule (72 FR 24765), counting short-stay outlier cases as full discharges with no adjustment in determining the MS–LTC–DRG relative weights would lower the MS–LTC–DRG relative weight for affected MS–LTC–DRGs because the relatively lower charges of the short-stay outlier cases would bring down the average charge for all cases within an MS–LTC–DRG. This would result in an “underpayment” for non-short-stay outlier cases and an “overpayment” for short-stay outlier cases. Therefore, as we proposed, we adjust for short-stay outlier cases under § 412.529 in this manner because it results in more appropriate payments for all LTCH cases. *Step 4*
                        —Calculate the FY 2008 MS–LTC–DRG relative weights on an iterative basis. The process of calculating the MS–LTC–DRG relative weights using the HSRV methodology is iterative. First, for each LTCH case, we calculate a hospital-specific relative charge value by dividing the short-stay outlier adjusted charge per discharge (see step 3) of the LTCH case (after removing the statistical outliers (see step 1)) and LTCH cases with a length of stay of 7 days or less (see step 2) by the average charge per discharge for the LTCH in which the case occurred. The resulting ratio is then multiplied by the LTCH's case-mix index to produce an adjusted hospital-specific relative charge value for the case. An initial case-mix index value of 1.0 is used for each LTCH. For each MS–LTC–DRG, as we proposed, the FY 2008 relative weight is calculated by dividing the average of the adjusted hospital-specific relative charge values (from above) for the MS–LTC–DRG by the overall average hospital-specific relative charge value across all cases for all LTCHs. Using these recalculated MS–LTC–DRG relative weights, each LTCH's average relative weight for all of its cases (case-mix) is calculated by dividing the sum of all the LTCH's MS–LTC–DRG relative weights by its total number of cases. The LTCHs' hospital-specific relative charge values above are multiplied by these hospital-specific case-mix indexes. These hospital-specific case-mix adjusted relative charge values are then used to calculate a new set of MS–LTC–DRG relative weights across all LTCHs. This iterative process is continued until there is convergence between the weights produced at adjacent steps, for example, when the maximum difference is less than 0.0001. *Step 5*
                        —Determine an FY 2008 relative weight for MS–LTC–DRGs with no LTCH cases. 
                        ( print page 47290) As we stated above, we determine the relative weight for each MS–LTC–DRG using total Medicare allowable charges reported in the best available LTCH claims data (that is, the March 2007 update of the FY 2006 MedPAR file for this final rule with comment period). Of the FY 2008 MS–LTC–DRGs, we identified a number of MS–LTC–DRGs for which there were no LTCH cases in the database. That is, based on data from the FY 2006 MedPAR file used in this final rule with comment period, no patients who would have been classified to those MS–LTC–DRGs were treated in LTCHs during FY 2006 and, therefore, no charge data were reported for those MS–LTC–DRGs. Thus, in the process of determining the MS–LTC–DRG relative weights, we are unable to determine weights for these MS–LTC–DRGs with no LTCH cases using the methodology described in Steps 1 through 4 above. However, because patients with a number of the diagnoses under these MS–LTC–DRGs may be treated at LTCHs beginning in FY 2008, for this final rule with comment period, as we proposed, we are assigning relative weights to each of the no-volume MS–LTC–DRGs based on clinical similarity and relative costliness with the exception of “transplant” MS–LTC–DRGs and “error” MS–LTC–DRGs (as discussed below). In general, as we proposed, we determined relative weights for the MS–LTC–DRGs with no LTCH cases in the FY 2006 MedPAR file used in this final rule with comment period by crosswalking these MS–LTC–DRGs to other MS–LTC–DRGs and then assigning them the relative weight of the appropriate low-volume quintile (as described in greater detail below). Specifically, as we stated above, we determine the relative weight for each MS–LTC–DRG using total Medicare allowable charges reported in the March 2007 update of the FY 2006 MedPAR file. Of the 745 MS–LTC–DRGs for FY 2008, we identified 185 MS–LTC–DRGs for which there were no LTCH cases in the database. For this final rule with comment period, as noted above, we are assigning relative weights to each of the 185 no volume MS–LTC–DRGs (with the exception of 8 “transplant” MS–LTC–DRGs and 2 “error” MS–LTC–DRGs, as discussed below) based on clinical similarity and relative costliness to one of the remaining 560 (745 − 185 = 560) MS–LTC–DRGs for which we are able to determine relative weights, based on FY 2006 LTCH claims data. Then we assigned them the relative weight of the appropriate low-volume quintile, as discussed below. (As explained below in Step 7, when necessary, we made adjustments to account for nonmonotonicity.) As we proposed, our methodology for determining the relative weights for the no-volume MS–LTC–DRGs is as follows: We crosswalk the no-volume MS–LTC–DRG to an MS–LTC–DRG for which there are LTCH cases in the FY 2006 MedPAR file and to which it is similar clinically and in intensity of use of resources as determined by criteria such as care provided during the period of time surrounding surgery, surgical approach (if applicable), length of time of surgical procedure, postoperative care, and length of stay. If the MS–LTC–DRG to which it is crosswalked is grouped to one of the low-volume quintiles, we assign the relative weight for the applicable low-volume quintile to the no-volume MS–LTC–DRG. However, if the MS–LTC–DRG to which the no-volume MS–LTC–DRG is crosswalked is not one of the MS–LTC–DRGs in a low-volume quintile, we do the following: (1) Compare the relative weight of the MS–LTC–DRG to which the no-volume MS–LTC–DRG is crosswalked to the relative weights of each of the five quintiles; (2) assign the no-volume MS–LTC–DRG the relative weight of the low-volume quintile with the relative weight that is closest to the MS–LTC–DRG to which the no-volume MS–LTC–DRG is crosswalked. As stated above, assigning the relative weight of a quintile to a no-volume MS–LTC–DRG that is cross-walked to a MS–LTC–DRGs that has 25 or more cases and, therefore, is not in a low-volume quintile is consistent with our methodology used in determining relative weights for MS–LTC–DRGs that have a low-volume of LTCH cases (that is, 24 or fewer cases), which is discussed above in section II.I.e. of this preamble. (As we noted above, in the infrequent case where nonmonotonicity involving a no-volume MS–LTC–DRG results, additional measures as described in Step 6 are required in order to maintain monotonically increasing relative weights.) For this final rule with comment period, a list of the no-volume FY 2008 MS–LTC–DRGs and the FY 2008 MS–LTC–DRG to which it is crosswalked is shown in the chart below. No-Volume MS–LTC–DRG Crosswalk for FY 2008
MS–LTC–DRG
MS–LTC–DRG description
Cross-walked MS–LTC–DRG9
Bone marrow transplant
82311
Tracheostomy for face, mouth  neck diagnoses w MCC
1213
Tracheostomy for face, mouth  neck diagnoses w/o CC/MCC
1220
Intracranial vascular procedures w PDX hemorrhage w MCC
3121
Intracranial vascular procedures w PDX hemorrhage w CC
3222
Intracranial vascular procedures w PDX hemorrhage w/o CC/MCC
3323
Craniotomy w major device implant or acute complex CNS PDX w MCC
3124
Craniotomy w major device implant or acute complex CNS PDX w/o MCC
3325
Craniotomy  endovascular intracranial procedures w MCC
2627
Craniotomy  endovascular intracranial procedures w/o CC/MCC
2634
Carotid artery stent procedure w MCC
3735
Carotid artery stent procedure w CC
3836
Carotid artery stent procedure w/o CC/MCC
3839
Extracranial procedures w/o CC/MCC
3861
Acute ischemic stroke w use of thrombolytic agent w MCC
7062
Acute ischemic stroke w use of thrombolytic agent w CC
7163
Acute ischemic stroke w use of thrombolytic agent w/o CC/MCC
7290
Concussion w/o CC/MCC
89114
Orbital procedures w/o CC/MCC
113115
Extraocular procedures except orbit
125116
Intraocular procedures w CC/MCC
125117
Intraocular procedures w/o CC/MCC
125129
Major head  neck procedures w CC/MCC or major device
146( print page 47291)130
Major head  neck procedures w/o CC/MCC
148132
Cranial/facial procedures w/o CC/MCC
131135
Sinus  mastoid procedures w CC/MCC
133136
Sinus  mastoid procedures w/o CC/MCC
133138
Mouth procedures w/o CC/MCC
137150
Epistaxis w MCC
152151
Epistaxis w/o MCC
153165
Major chest procedures w/o CC/MCC
164185
Major chest trauma w/o CC/MCC
184215
Other heart assist system implant
238216
Cardiac valve  oth maj cardiothoracic proc w card cath w MCC
237217
Cardiac valve  oth maj cardiothoracic proc w card cath w CC
238218
Cardiac valve  oth maj cardiothoracic proc w card cath w/o CC/MCC
250219
Cardiac valve  oth maj cardiothoracic proc w/o card cath w MCC
237220
Cardiac valve  oth maj cardiothoracic proc w/o card cath w CC
238221
Cardiac valve  oth maj cardiothoracic proc w/o card cath w/o CC/MCC
250222
Cardiac defib implant w cardiac cath w AMI/HF/shock w MCC
242223
Cardiac defib implant w cardiac cath w AMI/HF/shock w/o MCC
243224
Cardiac defib implant w cardiac cath w/o AMI/HF/shock w MCC
242225
Cardiac defib implant w cardiac cath w/o AMI/HF/shock w/o MCC
243228
Other cardiothoracic procedures w MCC
252229
Other cardiothoracic procedures w CC
253230
Other cardiothoracic procedures w/o CC/MCC
254231
Coronary bypass w PTCA w MCC
237232
Coronary bypass w PTCA w/o MCC
238233
Coronary bypass w cardiac cath w MCC
237234
Coronary bypass w cardiac cath w/o MCC
238235
Coronary bypass w/o cardiac cath w MCC
237236
Coronary bypass w/o cardiac cath w/o MCC
238247
Percutaneous cardiovascular proc w drug-eluting stent w/o MCC
246249
Percutaneous cardiovasc proc w non-drug-eluting stent w/o MCC
248251
Perc cardiovasc proc w/o coronary artery stent or AMI w/o MCC
250259
Cardiac pacemaker device replacement w/o MCC
258262
Cardiac pacemaker revision except device replacement w/o CC/MCC
261295
Deep vein thrombophlebitis w/o CC/MCC
294296
Cardiac arrest, unexplained w MCC
283297
Cardiac arrest, unexplained w CC
284298
Cardiac arrest, unexplained w/o CC/MCC
285332
Rectal resection w MCC
356333
Rectal resection w CC
357334
Rectal resection w/o CC/MCC
358337
Peritoneal adhesiolysis w/o CC/MCC
336338
Appendectomy w complicated principal diag w MCC
371339
Appendectomy w complicated principal diag w CC
372340
Appendectomy w complicated principal diag w/o CC/MCC
373341
Appendectomy w/o complicated principal diag w MCC
371342
Appendectomy w/o complicated principal diag w CC
372343
Appendectomy w/o complicated principal diag w/o CC/MCC
373344
Minor small  large bowel procedures w MCC
371345
Minor small  large bowel procedures w CC
372346
Minor small  large bowel procedures w/o CC/MCC
373353
Hernia procedures except inguinal  femoral w MCC
354355
Hernia procedures except inguinal  femoral w/o CC/MCC
354410
Biliary tract proc except only cholecyst w or w/o c.d.e. w/o CC/MCC
409411
Cholecystectomy w c.d.e. w MCC
412413
Cholecystectomy w c.d.e. w/o CC/MCC
412416
Cholecystectomy except by laparoscope w/o c.d.e. w/o CC/MCC
415419
Laparoscopic cholecystectomy w/o c.d.e. w/o CC/MCC
418422
Hepatobiliary diagnostic procedures w/o CC/MCC
421425
Other hepatobiliary or pancreas O.R. procedures w/o CC/MCC
424453
Combined anterior/posterior spinal fusion w MCC
454455
Combined anterior/posterior spinal fusion w/o CC/MCC
454457
Spinal fusion exc cerv w spinal curv, malig or 9+ fusions w CC
456458
Spinal fusion exc cerv w spinal curv, malig or 9+ fusions w/o CC/MCC
456461
Bilateral or multiple major joint procs of lower extremity w MCC
480462
Bilateral or multiple major joint procs of lower extremity w/o MCC
482468
Revision of hip or knee replacement w/o CC/MCC
467473
Cervical spinal fusion w/o CC/MCC
472483
Major joint  limb reattachment proc of upper extremity w CC/MCC
480484
Major joint  limb reattachment proc of upper extremity w/o CC/MCC
482489
Knee procedures w/o pdx of infection w/o CC/MCC
488( print page 47292)491
Back  neck procedures except spinal fusion w/o CC/MCC
490506
Major thumb or joint procedures
514508
Major shoulder or elbow joint procedures w/o CC/MCC
507509
Arthroscopy
505510
Shoulder, elbow or forearm proc, exc major joint proc w MCC
511537
Sprains, strains,  dislocations of hip, pelvis  thigh w CC/MCC
505538
Sprains, strains,  dislocations of hip, pelvis  thigh w/o CC/MCC
505583
Mastectomy for malignancy w/o CC/MCC
582585
Breast biopsy, local excision  other breast procedures w/o CC/MCC
584614
Adrenal  pituitary procedures w CC/MCC
629615
Adrenal  pituitary procedures w/o CC/MCC
630621
O.R. procedures for obesity w/o CC/MCC
620625
Thyroid, parathyroid  thyroglossal procedures w MCC
628626
Thyroid, parathyroid  thyroglossal procedures w CC
629627
Thyroid, parathyroid  thyroglossal procedures w/o CC/MCC
630653
Major bladder procedures w MCC
659654
Major bladder procedures w CC
660655
Major bladder procedures w/o CC/MCC
661656
Kidney  ureter procedures for neoplasm w MCC
657658
Kidney  ureter procedures for neoplasm w/o CC/MCC
657663
Minor bladder procedures w CC
662666
Prostatectomy w CC
665670
Transurethral procedures w/o CC/MCC
665671
Urethral procedures w CC/MCC
687672
Urethral procedures w/o CC/MCC
688692
Urinary stones w esw lithotripsy w/o CC/MCC
691697
Urethral stricture
688707
Major male pelvic procedures w CC/MCC
660708
Major male pelvic procedures w/o CC/MCC
661710
Penis procedures w/o CC/MCC
709712
Testes procedures w/o CC/MCC
711716
Other male reproductive system O.R. proc for malignancy w/o CC/MCC
715734
Pelvic evisceration, rad hysterectomy  rad vulvectomy w CC/MCC
717735
Pelvic evisceration, rad hysterectomy  rad vulvectomy w/o CC/MCC
718736
Uterine  adnexa proc for ovarian or adnexal malignancy w MCC
754737
Uterine  adnexa proc for ovarian or adnexal malignancy w CC
755738
Uterine  adnexa proc for ovarian or adnexal malignancy w/o CC/MCC
756739
Uterine, adnexa proc for non-ovarian/adnexal malig w MCC
754740
Uterine, adnexa proc for non-ovarian/adnexal malig w CC
755741
Uterine, adnexa proc for non-ovarian/adnexal malig w/o CC/MCC
756742
Uterine  adnexa proc for non-malignancy w CC/MCC
755743
Uterine  adnexa proc for non-malignancy w/o CC/MCC
756745
DC, conization, laparascopy  tubal interruption w/o CC/MCC
744747
Vagina, cervix  vulva procedures w/o CC/MCC
746748
Female reproductive system reconstructive procedures
749750
Other female reproductive system O.R. procedures w/o CC/MCC
749765
Cesarean section w CC/MCC
744766
Cesarean section w/o CC/MCC
769767
Vaginal delivery w sterilization /or DC
769768
Vaginal delivery w O.R. proc except steril /or DC
769770
Abortion w DC, aspiration curettage or hysterotomy
769774
Vaginal delivery w complicating diagnoses
769775
Vaginal delivery w/o complicating diagnoses
769777
Ectopic pregnancy
769778
Threatened abortion
759779
Abortion w/o DC
759780
False labor
759782
Other antepartum diagnoses w/o medical complications
759789
Neonates, died or transferred to another acute care facility
761790
Extreme immaturity or respiratory distress syndrome, neonate
761791
Prematurity w major problems
760792
Prematurity w/o major problems
761793
Full term neonate w major problems
760794
Neonate w other significant problems
760795
Normal newborn
761799
Splenectomy w MCC
423800
Splenectomy w CC
424801
Splenectomy w/o CC/MCC
424804
Other O.R. proc of the blood  blood forming organs w/o CC/MCC
803820
Lymphoma  leukemia w major O.R. procedure w MCC
821822
Lymphoma  leukemia w major O.R. procedure w/o CC/MCC
821( print page 47293)827
Myeloprolif disord or poorly diff neopl w maj O.R. proc w CC
826828
Myeloprolif disord or poorly diff neopl w maj O.R. proc w/o CC/MCC
826830
Myeloprolif disord or poorly diff neopl w other O.R. proc w/o CC/MCC
829839
Chemo w acute leukemia as sdx or w high dose chemo agent w/o CC/MCC
837887
Other mental disorder diagnoses
881915
Allergic reactions w MCC
916927
Extensive burns or full thickness burns w MV 96+ hrs w skin graft
933955
Craniotomy for multiple significant trauma
26959
Other O.R. procedures for multiple significant trauma w/o CC/MCC
958970
HIV w extensive O.R. procedure w/o MCC
969
 To illustrate this methodology for determining the relative weights for the 185 MS–LTC–DRGs with no LTCH cases, we are providing the following example, which refers to the no volume MS–LTC–DRGs crosswalk information for FY 2008 provided in the chart above. *Example:* There were no cases in the FY 2006 MedPAR file used for this final rule with comment period for MS–LTC–DRG 22 (Intracranial vascular procedures w PDX hemorrhage w/o CC/MCC). We determined that MS–LTC–DRG 33 (Ventricular shunt procedures w/o CC/MCC), which is assigned to low-volume Quintile 1 for the purpose of determining the FY 2008 MS–LTC–DRG relative weights, is similar clinically and based on resource use to MS–LTC–DRG 22. Therefore, we are assigning the same relative weight of MS–LTC–DRG 33 of 0.4739 (Quintile 1) for FY 2008 (see the Composition of Low-Volume Quintiles for FY 2008 chart above in section II.I.3.e. of this preamble) to MS–LTC–DRG 22. Furthermore, for FY 2008 as proposed, we are establishing MS–LTC–DRG relative weights of 0.0000 for the following transplant MS–LTC–DRGs: Heart transplant or implant of heart assist system w MCC (MS–LTC–DRG 1); Heart transplant or implant of heart assist system w/o MCC (MS–LTC–DRG 2); Liver transplant w MCC or intestinal transplant (LTC–DRG 5); Liver transplant w/o MCC (MS–LTC–DRG 6); Lung transplant (MS–LTC–DRG 7); Simultaneous pancreas/kidney transplant (MS–LTC–DRG 8); Pancreas transplant (MS–LTC–DRG–10) and Kidney transplant (MS–LTC–DRG 652). (We note that in the FY 2008 IPPS proposed rule (72 FR 24768), we inadvertently neglected to include proposed MS–LTC–DRG 652 (Kidney transplant) in the list of transplant MS–LTC–DRGs for which we proposed to assign a relative weight of 0.0000 for FY 2008. However, the proposed relative weight of 0.0000 for MS–LTC–DRG 652 was correctly shown in Table 11 of the FY 2008 IPPS proposed rule and was also correctly footnoted as being one of the proposed MS–LTC–DRGs that was assigned a proposed relative weight of 0.0000 (see 72 FR 25109). We also note that this is consistent with our treatment of the current LTC–DRG for a kidney transplant (LTC–DRG 302 (see 71 FR 47984)). This is because Medicare will only cover these procedures if they are performed at a hospital that has been certified for the specific procedures by Medicare and presently no LTCH has been so certified. Based on our research, we found that most LTCHs only perform minor surgeries, such as minor small and large bowel procedures, to the extent any surgeries are performed at all. Given the extensive criteria that must be met to become certified as a transplant center for Medicare, we believe it is unlikely that any LTCHs will become certified as a transplant center. In fact, in the nearly 20 years since the implementation of the IPPS, there has never been a LTCH that even expressed an interest in becoming a transplant center. If in the future a LTCH applies for certification as a Medicare-approved transplant center, we believe that the application and approval procedure would allow sufficient time for us to determine appropriate weights for the MS–LTC–DRGs affected. At the present time, we would only include these eight transplant MS–LTC–DRGs in the GROUPER program for administrative purposes only. Because we use the same GROUPER program for LTCHs as is used under the IPPS, removing these MS–LTC–DRGs would be administratively burdensome. In this final rule with comment period, as we proposed in Table 11 of the FY 2008 IPPS proposed rule (72 FR 25114), we are assigning a relative weight of 0.0000 for the 2 “error” MS–LTC–DRGs: MS–LTC–DRG–998 (Principal diagnosis invalid as discharge diagnosis) and MS–LTC–DRG 999 (Ungroupable), (We note that in the discussion of proposed MS–LTC–DRGs with no LTCH cases in the FY 2008 IPPS proposed rule) (72 FR 24766 247769), we inadvertently neglected to include the 2 proposed “error” MS–LTC–DRGs (i.e., MS–LTC–DRGs 998 and 999) in the list of MS–LTC–DRGs for which we proposed to assign a relative weight of 0.0000 for FY 2008. However, as stated above, the proposed relative weight of 0.0000 for MS–LTC–DRGs 998 and 999 were correctly shown in Table 11 of the FY 2008 IPPS proposed rule and were also correctly footnoted as being one of the proposed MS–LTC–DRGs that was assigned a proposed relative weight of 0.0000 (see 72 FR 25114). We also note that this is consistent with our treatment of the current “error” LTC–DRGs (that is, LTC–DRG 469 (Principal Diagnosis Invalid as Discharge Diagnosis) and LTC–DRG 470 (Ungroupable)) (see 71 FR 48328)). Again, we note that, as this system is dynamic, it is entirely possible that the number of MS–LTC–DRGs with no volume of LTCH cases based on the system will vary in the future. We used the most recent available claims data in the MedPAR file to identify no volume MS–LTC–DRGs and to determine the relative weights in this final rule with comment period. *Step 6*
                        —Adjust the FY 2008 MS–LTC–DRG relative weights to account for nonmonotonically increasing relative weights. As explained in section II.B. of the preamble of this final rule with comment period, the IPPS FY 2008 MS–DRGs, on which the FY 2008 MS–LTC–DRGs are based, provide a significant improvement in the DRG system's recognition of severity of illness and resource usage. The MS–DRGs contain base DRGs that have been subdivided into one, two, or three severity levels. Where there are three severity levels, the most severe level has at least one code that is referred to as an MCC. The next lower severity level contains cases with at least one code that is a CC. 
                        ( print page 47294)
                        Those cases without a MCC or a CC are referred to as without CC/MCC. When data did not support the creation of three severity levels, the base was divided into either two levels or the base was not subdivided. The two-level subdivisions could consist of the CC/MCC and without the CC/MCC. Alternatively, the other type of two level subdivision could consist of the MCC and without MCC. In base MS–LTC–DRGs with two levels, cases classified into a “without CC/MCC” MS–LTC–DRG are expected to have lower resource use (and lower costs) than the “with CC/MCC” and “with MCC.” That is, theoretically, cases that are more severe typically require greater expenditure of medical care resources and will result in higher average charges. Therefore, in the three severity levels, relative weights should increase by severity, from lowest to highest. If the weights do not increase (that is, if within a base MS–LTC–DRG, an MS–LTC–DRG with MCC has a lower relative weight than one with CC, or the MS–LTC–DRG without CC/MCC has a higher relative weight than either of the others, they are nonmonotonic. We continue to believe that utilizing nonmonotonic relative weights to adjust Medicare payments would result in inappropriate payments. Consequently, as proposed, in general, we combine MS–LTC–DRG severity levels within a base MS–LTC–DRG for the purpose of computing a relative weight when necessary to ensure that monotonicity is maintained. Specifically, under each of the example scenarios provided below, we would combine severity levels within a base MS–LTC–DRG as follows: The first example of nonmonotonically increasing relative weights for MS–LTC–DRG pertains to base MS–LTC–DRGs with a three-level split and each of the three levels has 25 or more LTCH cases and, therefore, did not fall into one of the five low volume quintiles. If nonmonotonicity is detected in the relative weights of MS–LTC–DRGs in adjacent severity levels (for example, the relative weight of the “with MCC” (the highest severity level) is less than the “with CC” (the middle level), or the “with CC” is less than the “without CC/MCC”), we combine the adjacent MS–LTC–DRGs and determine one relative weight based on the case weighted average of the combined LTCH cases of the nonmonotonic MS–LTC–DRG. The case-weighted average charge is determined by dividing the total charges for all LTCH cases in both severity levels by the total number of LTCH cases for the combined MS–LTC–DRGs. We apply this relative weight to both affected levels of the base MS–LTC–DRG. If nonmonotonicity remains an issue because the above process results in a relative weight that is still nonmonotonic to the remaining MS–LTC–DRG within the base MS–LTC–DRG, we combine all three of the severity levels to determine one relative weight based on the case-weighted average charge of the combined severity levels which is assigned to each of the MS–LTC–DRGs in that base MS–LTC–DRG. A second example of nonmonotonically increasing relative weights for an MS–LTC–DRG pertains to the situation where there are three severity levels and one or more of the severity levels within a base MS–LTC–DRG has less than 25 LTCH cases (that is, low volume). If nonmonotonicity occurs in the case where either the highest or lowest severity level (“with MCC” or “without CC/MCC”) has 25 LTCH cases or more and the other two severity levels are low volume (and therefore the other two severity levels would otherwise be assigned the relative weight of the applicable quintile(s)), we combine the data for the cases in the two adjacent low volume MS–LTC–DRGs for the purpose of determining a relative weight. If the combination results in at least 25 cases, we calculate one relative weight based on the case-weighted average charge of the combined severity levels and assign it to both of the severity levels. If the combination results in less than 25 cases, based on the case weighted average charge of the combined low-volume MS–LTC–DRGs, both MS–LTC–DRGs are assigned the relative weight of the quintile that has the closest relative weight to the case-weighted average charge of the combined low volume MS–LTC–DRGs. If nonmonotonicity persists, we combine all three severity levels and one relative weight would be assigned to all three levels based on the case-weighted average charge of the combined severity levels. Similarly, in nonmonotonic cases where the middle level has 25 cases or more but either or both the lowest or highest severity level has less than 25 cases (that is, low volume), we combine the nonmonotonic low-volume MS–LTC–DRG with the middle level MS–LTC–DRG of the base DRG. We calculate one relative weight based on the case-weighted average charge of the combined severity levels and apply it to both of the affected MS–LTC–DRGs. If the nonmonotonicity persists, we combine all three levels for the purpose of determining a relative weight based on the case-weighted average charge of the combined severity levels, and apply that relative weight to all three levels. A third example of nonmonotonicity involves a base MS–LTC–DRG with three severity levels where at least one of the severity levels has no cases. As discussed in greater detail in Step 5, based on clinical similarity, we initially cross-walk the no-volume MS–LTC–DRG to an MS–LTC–DRG to which it is similar clinically and in intensity of resource use and then assign the no-volume MS–LTC–DRG the relative weight of the quintile with the relative weight closest to that of the MS–LTC–DRG to which the no-volume MS–LTC–DRG had been cross-walked. If this results in nonmonotonicity, in the case where the no-volume MS–LTC–DRG is either the lowest or highest severity level, we assign to the no-volume MS–LTC–DRG the same relative weight that is assigned to the middle level of the MS–LTC–DRG in that base DRG. If nonmonotonicity persists, all three severity levels are combined for the purpose of calculating one relative weight based on the case-weighted average charge of the combined severity levels which is applied to each of the three levels. In the proposed rule, we noted that this is a departure from our current treatment of no-volume LTC–DRGs which results in an ultimate assignment to a quintile. However, this was not accurate. In fact, this policy is consistent with our existing policy. We believe this treatment achieves monotonically increasing relative weights while providing appropriate payment for the no-volume MS–LTC–DRG because the relative weight assigned to the no-volume MS–LTC–DRG is based on the average charges of services rendered within the same base MS–LTC–DRG. We apply the same process where the base MS–LTC–DRG contains a two-level split. For example, if nonmonotonicity occurs in a base MS–LTC–DRG with two severity levels (that is, the higher severity level relative weight is less than the lower severity level), where both of the MS–LTC–DRGs have at least 25 cases or where one or both of the MS–LTC–DRGs is low volume, we combine the two MS–LTC–DRGs of that base MS–LTC–DRG for the purpose of determining a case-weighted relative weight. If the combination results in at least 25 cases, we calculate one relative weight and assign it to both of the MS–LTC–DRGs. If the combination results in less than 25 cases, we calculate the case-weighted average charge for the combined MS–LTC–DRG. After we calculate the case-weighted average charge for the combined MS LTC DRGs, we compare that weight to the weights 
                        ( print page 47295)
                        of the quintiles and apply the quintile weight closest to that case-weighted average weight to both of these MS–LTC–DRGs. *Step 7*
                        —Calculate MS–LTC–DRG transition blended relative weights for FY 2008. As discussed above in section II.I.2.a. of this preamble, we are implementing the MS–LTC–DRGs with a 2-year transition beginning in FY 2008. For FY 2008, the first year of the transition, 50 percent of the relative weight for a MS–LTC–DRG will be based on the average LTC–DRG relative weight under Version 24.0 of the LTC–DRG GROUPER. The remaining 50 percent of the relative weight will be based on the MS–LTC–DRG relative weight under Version 25.0 of the MS–LTC–DRG GROUPER. In FY 2009, the MS–LTC–DRG relative weights will be based on 100 percent of the MS–LTC–DRG relative weights. We used the following methodology to calculate the transition blended MS–LTC–DRG relative weights for FY 2008. To determine the payment for a particular case under the MS–LTC–DRGs in FY 2008, we will group cases to MS–LTC–DRGs (using the Version 25.0 GROUPER), but the relative weight for each case will be determined based on a 50/50 blend of the MS–LTC–DRG relative weight applying steps 1–6 above and the LTC–DRG relative weight applying steps 1–6 above. Thus, we determined a blended weight for each MS–LTC–DRG in the Version 25.0 GROUPER. Using LTCH claims in the FY 2006 MedPAR file, we grouped each case to an LTC–DRG (using the Version 24.0 GROUPER) and an MS–LTC–DRG (using the Version 25.0 GROUPER) and applied steps 1–6 above to each set of grouped claims to determine a set of LTC–DRG relative weights and a set of MS–LTC–DRG relative weights. Commonly, a set of cases that grouped to a single MS–LTC–DRG grouped to two or more LTC–DRGs. Therefore, we determined an average LTC–DRG relative weight using the Version 24.0 GROUPER for all cases that grouped to each MS–LTC–DRG. Specifically, we summed the LTC–DRG relative weights of all the cases that grouped to each MS–LTC–DRG and then divided that number by the number of LTCH cases. To establish the final transition blended weight for each MS–LTC–DRG in the Version 25.0 GROUPER, we added 50 percent of the MS–LTC–DRG relative weight to 50 percent of the average LTC–DRG relative weight for that MS–LTC–DRG. We also note that after calculating the transition blended relative weights, we adjusted the FY 2008 MS–LTC–DRG relative weights to account for nonmonotonically increasing relative weights using the method described above in Step 6. As noted above, we continue to believe that utilizing nonmonotonic relative weights to adjust Medicare payments would result in inappropriate payments. Therefore, in general, we combine MS–LTC–DRG severity levels within a base MS–LTC–DRG for the purpose of determining the transition blended relative weight when necessary to ensure that monotonicity is maintained. (For specific details on how severity levels within a base MS–LTC–DRG are combined when nonmonotonicity occurs, refer to Step 6 above.) *Step 8*
                        —Calculate the FY 2008 budget neutrality factor. As we established in the RY 2008 LTCH PPS final rule (72 FR 26882), under the broad authority conferred upon the Secretary under section 123 of Pub. L. 106–113 as amended by section 307(b) of Pub. L. 106–554 to develop the LTCH PPS, beginning with the MS–LTC–DRG update for FY 2008, the annual update to the MS–LTC–DRG classifications and relative weights will be done in a budget neutral manner such that estimated aggregate LTCH PPS payments would be unaffected, that is, would be neither greater than nor less than the estimated aggregate LTCH PPS payments that would have been made without the MS–LTC–DRG classification and relative weight changes. Historically, we have not updated the LTC–DRGs in a budget neutral manner because we believed that past fluctuations in the LTC–DRG relative weights were primarily due to changes in LTCH coding practices. We believe that changes in the LTCH PPS payment rates, including the LTC–DRG relative weights, should accurately reflect changes in LTCHs' true cost of treating patients (real CMI increase), and should not be influenced by changes in coding practices (apparent CMI increase). As we explained in the RY 2008 LTCH PPS final rule (72 FR 26882), because LTCH 2006 claims data does not appear to significantly reflect changes in LTCH coding practices in response to the implementation of the LTCH PPS, we believe that, beginning with FY 2008, it is appropriate to update the MS–LTC–DRGs so that estimated aggregate LTCH PPS payments will neither increase nor decrease. Thus, in that same final rule, we established under § 412.517(b) that the annual update to the MS–LTC–DRG classifications and relative weights be done in a budget neutral manner. (As discussed above, we are revising the regulations at § 412.503 to specify that “MS–LTC–DRG” is used in place of “LTC–DRG” for discharges occurring on or after October 1, 2007. For a detailed discussion on the establishment of the requirement to update the MS–LTC–DRG classifications and relative weights in a budget neutral manner, refer to the RY 2008 LTCH PPS final rule (72 FR 26880 through 26884). Updating the MS–LTC–DRGs in a budget neutral manner will result in an annual update to the individual MS–LTC–DRG classifications and relative weights based on the most recent available data to reflect changes in relative LTCH resource use, and the MS–LTC–DRG relative weights will be uniformly adjusted to ensure that estimated aggregate payments under the LTCH PPS would not be affected (that is, decreased or increased). Consistent with that provision, we are updating the MS–LTC–DRG classifications and relative weights for FY 2008 based on the most recent available data and include a budget neutrality adjustment. To ensure budget neutrality in updating the MS–LTC–DRG classifications and relative weights under new § 412.517(b), as we proposed, we are using a method that is similar to the methodology used under the IPPS. (A discussion of the IPPS DRG budget neutrality adjustment can be found in the FY 2007 IPPS final rule (71 FR 47970).) We note that, in this final rule with comment period, we have modified our proposed methodology for ensuring budget neutrality in updating the MS–LTC–DRG classifications and relative weights for FY 2008 to accommodate the use of blended transition relative weights (discussed in Step 7 above). Specifically, after recalibrating the MS–LTC–DRG relative weights, as we do under the methodology as described in detail in Steps 1 through 7 above, we calculate and apply a normalization factor to the MS–LTC–DRG relative weights to ensure that estimated payments are not influenced by changes in the composition of case types or changes made to the classification system. That is, the normalization adjustment is intended to ensure that the recalibration of the MS–LTC–DRG relative weights (that is, the process itself) neither increases nor decreases total estimated payments. To calculate the normalization factor for FY 2008, as proposed (with modifications to accommodate the use of blended transition relative weights) we use the following steps: (1) We use the most recent available claims data (FY 2006) and the MS–LTC–DRG transition blended relative weights (determined above in Step 7 of the Steps for Determining the FY 2008 MS–LTC–DRG 
                        ( print page 47296)
                        Relative Weights) to calculate the average CMI; (2) we group the same claims data (FY 2006) using the FY 2007 GROUPER (Version 24.0) and FY 2007 relative weights (established in the FY 2007 IPPS final rule (71 FR 47971–47984 and 48321–48331) and calculate the average CMI; and (3), we compute the ratio of these average CMIs by dividing the average CMI determined in step (2) by the average CMI determined in step (1). In determining the MS–LTC–DRG relative weights for FY 2008, based on the latest available data, the normalization factor is estimated as 1.020905, which is applied to each MS–LTC–DRG transition blended relative weight. That is, each MS–LTC–DRG transition blended relative weight is multiplied by 1.020905 in the first step of the budget neutrality process. Accordingly, the relative weights in Table 11 in the Addendum of this final rule with comment period reflect this normalization factor. We also ensure that estimated aggregate LTCH PPS payments (based on the most recent available LTCH claims data) after reclassification and recalibration (the new (i.e., FY 2008) relative weights) are equal to estimated aggregate LTCH PPS payments (for the same most recent available LTCH claims data) before reclassification and recalibration (the existing (i.e., FY 2007) relative weights). Therefore, in general, we calculate the budget neutrality adjustment factor by simulating estimated total payments under both sets of GROUPERs and relative weights using current LTCH PPS payment policies (RY 2008) and the most recent available claims data (from the FY 2006 MedPAR file). (We note, in the FY 2008 IPPS proposed rule (72 FR 24770), we proposed to simulate estimated total payments for purposes of determining the proposed FY 2008 budget neutrality adjustment using current LTCH PPS payment policies, which at that time, were RY 2007 LTCH PPS rates and policies. Since the publication of the proposed rule, we have established RY 2008 LTCH PPS rates and policies in the RY 2008 LTCH PPS final rule (72 FR 26870–27029). Accordingly, we are using RY 2008 LTCH PPS rates and policies in determining the FY 2008 budget neutrality adjustment in this final rule with comment period.) In this final rule with comment period, the budget neutrality adjustment was determined using the following steps: (1) We simulate estimated total payments using the normalized transition-blended relative weights under GROUPER Version 25.0 (as described above in Step 7); (2) we simulate estimated total payments using the FY 2007 GROUPER (Version 24.0) and FY 2007 LTC–DRG relative weights (as established in the FY 2007 IPPS final rule (71 FR 47971–47984 and 48321–48331); and (3) we calculate the ratio of these estimated total payments by dividing the estimated total payments determined in step (2) by the estimated total payments determined in step (1). Then, for FY 2008, each of the normalized transition-blended relative weights is multiplied by the budget neutrality factor to determine the budget neutral relative weight for each MS–LTC–DRG. Accordingly, in determining the MS–LTC–DRG relative weights for FY 2008, based on the most recent available data, we are establishing a budget neutrality factor of 0.996467, which is applied to the transition blended relative weights after normalizing. The FY 2008 MS–LTC–DRG relative weights in Table 11 in the Addendum of this final rule with comment period reflect this budget neutrality factor. Table 11 in the Addendum to this final rule with comment period lists the MS–LTC–DRGs and their respective transition-blended budget neutral relative weights, geometric mean length of stay, and five-sixths of the geometric mean length of stay (used in the determination of short stay outlier payments under § 412.529) for FY 2008. The “IPPS Comparable Threshold” (that is, the IPPS geometric average length of stay plus one standard deviation) for each MS–LTC–DRG (used in the determination of short stay outlier payments under § 412.529(c)(3) as established in the RY 2008 LTCH PPS final rule (72 FR 26904–26918)) for FY 2008 is also included in Table 11 in the Addendum to this final rule with comment period. In determining the proposed MS–LTC–DRG relative weights for FY 2008, in the FY 2008 IPPS proposed rule (72 FR 24771), we proposed to apply a case mix budget neutrality factor to the MS–LTC–DRG relative weight to eliminate the effect of changes in coding or classification of discharges that do not reflect real change in case mix. The budget neutrality factor was proposed because we believed that adoption of the MS–LTC–DRGs would create a risk of increased aggregate levels of payment as a result of increased documentation and coding. We believed this adjustment would be necessary for FY 2008 and FY 2009 to ensure that estimated aggregate LTCH PPS payments would be neither greater than nor less than the estimated aggregate LTCH PPS payments that would have been made without the adoption of the MS–LTC–DRG patient classification system. Accordingly, in the proposed rule each proposed MS–LTC–RG relative weights presented in Table 11 was multiplied by a factor of 0.976 to account for improvements in coding and documentation resulting from the adoption of the new patient classification system. In this final rule with comment period, as discussed in the responses below, we are not implementing the proposed case-mix budget neutrality factor to the MS–LTC–DRG relative weights. Accordingly, the MS–LTC–DRG relative weights in Table 11 of the Addendum to this final rule with comment period do not reflect any adjustment to account for changes in coding and documentation that do not reflect real change in case mix. *Comment:*
                         While several commenters supported the adoption of a patient classification system that recognizes differences in patient acuity in LTCHs, a number of commenters opposed CMS' proposal to apply a budget neutrality adjustment factor to the MS–LTC–DRG relative weights in anticipation of changes in coding or classification of discharges resulting from the adoption of the MS–LTC–DRGs. Commenters expressed doubt that the adoption of the proposed MS–LTC–DRGs would lead to the coding changes CMS expects. Specifically, these commenters believed that in certain situations, such as where there are corresponding and equivalent subclassifications under both the proposed and existing systems, there may not be any real opportunity for coding improvements for those groups. For instance, one commenter cited MS–LTC–DRG 207 and 208 (LTC–DRGs 565 and 566) as an example of a DRG group that would not experience upcoding. Consequently, several commenters opposed the application of the adjustment for improved coding practices across all MS–LTC–DRGs and requested that CMS refrain from applying an adjustment to any MS–LTC–DRG for which they believed coding changes are inapplicable. A commenter asserted specifically that for the DRGs in which upcoding is impossible, CMS would be “imposing a payment penalty for these cases.” One commenter, a LTCH trade association group, commissioned a report to evaluate the proposed “coding adjustment” to the MS–LTC–DRG relative weights to account for changes in coding or classification of discharges resulting from the adoption of the new patient classification system. CMS had stated in the proposed rule that the “coding adjustment” is necessary in order to maintain budget neutrality. Based on the commissioned report, the 
                        ( print page 47297)
                        commenter concluded that the magnitude of the proposed “coding adjustment” is inappropriate for LTCHs because it would not result in budget neutrality, rather, it would result in an overall reduction in aggregate LTCH payments. The commenter noted that since approximately 34 percent of LTCH cases are paid under the short-stay outlier policy where cases are paid at or below costs, there is no opportunity for upcoding in those cases. Furthermore, according to the commissioned report, approximately 61 percent of current LTCH discharges already are coded at what would be the highest severity level under the new MS–LTC–DRG system. That is, the commenter asserted that there is no opportunity to up-code these cases because they are either in a base MS–DRG with only one severity level or these cases are already coded in the highest severity level of a base MS–DRG with multiple severity levels. The report noted that according to their own analysis, this number of LTCH cases is almost triple the number of IPPS discharges that appear in the highest severity level MS–DRGs. The commissioned report further attempted to analyze LTCH discharges and for the potential for upcoding within a base MS–DRG (“MS–DRG family”) by calculating what the report terms as “upcode ratios.” The report defines an “upcode ratio” as the ratio of the relative weight of the MS–DRG with the highest severity level within the MS–DRG family to the relative weight of the base MS–DRG with the lowest severity level. Presumably, the higher the “upcode ratio,” the greater the incentive for upcoding into the highest severity level since the upcoding would result in a higher payment. Based on the “upcode ratios,” the report contrasted the potential for upcoding by LTCHs and IPPS hospitals. The report concluded that since 97 percent of LTCH discharges are distributed in the lowest “upcode ratio” quartile versus 25 percent of IPPS discharges, LTCHs therefore have less incentive to upcode within the same base MS–DRG than IPPS hospitals. The report also estimated that if every LTCH upcoded every discharge to the highest possible severity level, LTCHs' maximum potential for upcoding would result in a 3.61 percent increase in the case mix index. The report translated this finding to mean that 66 percent of all LTCH cases would have to be upcoded to the highest severity level in order to make the proposed adjustment to the LTCH relative weights budget neutral. The commenter believed it was unreasonable for CMS to assume that LTCHs could improve coding to that extent. Finally, the report also predicted that a significant number of LTCH discharges would be subjected to the 25 percent rule and thus paid at rates that are similar to IPPS rates and not based on MS–LTC–DRGs. The report noted that IPPS hospitals are not subject to the 25 percent rule, implying that the magnitude of the “coding adjustment” which was based on primarily IPPS data, is inappropriate for LTCHs. The commenter concludes that “the vast majority of LTCH discharges present no opportunity to upcode and most of the remaining LTCH discharges provide little potential to do so.” Another commenter stated that the significant year-to-year changes in LTCH payments due to both policy changes and routine rate and weighting adjustments which results in large payment fluctuations for some DRGS, creates a challenge to LTCHs to effectively operate, plan for the future, and maintain quality care for Medicare patients. In particular, one commenter using MedPAR 2005 claims data compared estimated payments under the proposed MS–DRG system (with the “coding adjustment” included) to estimated payment under the current system and asserted that according to their analysis, large payment changes would result in the ten most common LTC–DRGs. The commenter cited specifically that the change in payment for the top ten DRGs ranges from over a 25 percent reduction in some cases to over a 30 percent increase in others. In light of the volatility apparent in adopting the new MS–LTC–DRG system, the commenter recommended that CMS delay making an adjustment for improved coding practices until after a transition to the MS–LTC–DRG system has occurred. The commenter suggested that once the transition has fully occurred, CMS could apply an appropriate adjustment based on actual, rather than anticipated, coding change. *Response:*
                         In the proposed rule, we indicated that we believe that adoption of the proposed MS–LTC–DRGs would create a risk of increased aggregate levels of payment as a result of increased documentation and coding. MedPAC noted that “refinements in DRG definitions have sometimes led to substantial unwarranted increase in payments to hospitals, reflecting more complete reporting of patients' diagnoses and procedures.” MedPAC further noted that “refinements to the DRG definitions and weights would substantially strengthen providers' incentives to accurately report patients' comorbidities and complications.” To address this issue, MedPAC recommended that the Secretary “project the likely effect of reporting improvements on total payments and make an offsetting adjustment to the national average base payment amounts” [Report to Congress on Physician-Owned Specialty Hospitals, March 2005, p. 42]. While we modeled the changes to the DRG system and relative weights to ensure budget neutrality, we are concerned that the large increase in the number of DRGs and refinements of severity levels will provide opportunities for hospitals to do more accurate documentation and coding of information contained in the medical record. Coding that has no effect on payment under the current LTC–DRGs may result in a case being assigned to a higher paid DRG under the proposed MS–LTC–DRGs. We note that while the commenters have attempted to analyze the potential for improvements in documentation and coding to affect the MS–LTC–DRG assignment within a base MS–LTC–DRG, improved documentation may also result in a case being assigned from a lower paid MS–LTC–DRG into a higher paid MS–LTC–DRG of a completely different base MS–LTC–DRG. In particular, the commissioned report submitted by the LTCH trade association demonstrated to us that commenters are pre-occupied with focusing on the potential for improving documentation and coding where the MS–LTC–DRG assignment would change from a lower severity level to a higher severity level within the same base MS–LTC–DRG. We are emphasizing here that in addition to the potential for improvements in documentation and coding to change the severity level within a base DRG (“intra-DRG change”), the potential for improvements in documentation and coding to result in the assignment of a case into a higher paid MS–LTC–DRG outside of the base MS–LTC–DRG (“inter-DRG documentation and coding changes”) is also a likely consequence of more accurate and complete documentation and possible for LTCH discharges because patients are admitted with multiple CCs. In general, the commenters expressed the belief that “the vast majority of LTCH discharges present 
                        *no*
                         opportunity to upcode” (emphasis added). We disagree with this belief since generally, the commenters have provided arguments based on examples which focus entirely on “intra-DRG change” without accounting for the “inter-DRG change” potential which may be possible for LTCH discharges because patients are 
                        ( print page 47298)
                        admitted with multiple complications and comorbidities. One commenter cited two MS–LTC–DRGs for patients on ventilators, MS–LTC–DRG 207 and 208 (previously LTC–DRG 565 and 566), as MS–LTC–DRGs that would not experience “intra-DRG change” because the classification groups under the old and new classification systems for these ventilator patients remains unchanged. We acknowledge that for MS–LTC–DRG 207, which is a high paying MS–LTC–DRG, there appears to be no incentive for improvements in documentation and coding that result in “intra-DRG change” from the lower paid MS–LTC–DRG 208 to the higher paid MS–LTC–DRG 207 or for documentation and coding improvements that affect “inter-DRG change” because this DRG is already such a high paying DRG. However, for patients that were classified in MS–LTC–DRG 208, there may be some opportunity for documentation and coding improvements that affect “inter-DRG change,” depending on the existence of specific CCs. While we take issue with some of the commenters' generalizations, we agree that there are significant differences in the distribution of patients among the severity DRGs between those in IPPS hospitals and those in LTCHs. Accordingly, we agree with the comments that it would be appropriate to further adjust the proposed budget neutrality adjustment that we are utilizing for IPPS hospitals to reflect the experiences of the LTCHs. However, due to the complexity of the interactions, at this time we are unable to determine the extent to which MS–LTC–DRGs are susceptible to increased case-mix improvements in documentation and coding in order to estimate an appropriate adjustment for such improvements that would be applicable to LTCHs. Accordingly, we are not finalizing the proposed case-mix budget neutrality factor to the MS–LTC–DRG relative weights at this time. While some commenters have noted that not all MS–LTC–DRGs are equally susceptible to improvements in documentation and coding and suggested that we apply the adjustment for such improvements to only those MS–LTC–DRGs for which improvements in documentation and coding are possible, we note that in general, we apply adjustments to the LTCH PPS on a system-wide basis since the LTCH PPS is a system devised upon averages. We also note that some commenters attempted to analyze the impact of the short-stay outlier policy and the 25 percent rule on improvements in documentation and coding. As we stated previously in this final rule, we continue to believe that payment adjustments that were finalized in the RY 2008 LTCH PPS final rule, among which was the revision to the short-stay outlier policy (§ 412.529(c)) noted by the commenters, will result in more appropriate Medicare payments to LTCHs. The revised short-stay outlier policy addresses the issue of LTCH discharges that are comparable to an acute care IPPS hospital discharge based on the length of stay for that discharge. That policy is not tied to or affected by the adoption of the MS–LTC–DRGs. Nor do we believe that the extension of the 25 percent threshold adjustment that we finalized for RY 2008 at revised 412.534 and new 412.536, which governs Medicare payments for patients discharged from LTCHs who were admitted from specific referring hospitals, is tied to or affected by the adoption of the MS–LTC–DRGs. Furthermore, as noted above, since the MS–LTC–DRGs are so structurally similar to the LTC–DRGs, we do not believe that postponing the adoption of the severity-weighted DRGs in order to evaluate the interaction of the policy changes implemented for the LTCH PPS for RY 2008 would confer any significant advantage to stakeholders. However, we agree with the commenters that the fact that a large number of LTCH discharges are paid as short-stay outliers based on cost could have an effect on the budget neutrality adjustment applicable to LTCHs as compared to the adjustment we are finalizing for the IPPS and the LTCH budget neutrality would need to be adjusted accordingly. In response to the commenter's concern that our policy changes and routine rate and weighting adjustments result in large payment fluctuations for some DRGs, we note that fluctuations are seen year to year resulting from refinements to the LTC PPS that are necessary in order to pay appropriately for LTCH cases. Each year, we recalibrate the relative weights based on the most recent available LTCH claims data, which reflect current LTCH patient mix and coding practices. The annual recalibration of the relative weights to which LTCH cases are assigned will appropriately reflect more or less resource use than the previous year's LTC–DRG relative weights. We understand the concerns expressed by the commenters regarding the fluctuations in payments for certain MS–LTC–DRGs based on the proposed FY 2008 reweighting of the MS–LTC–DRGs. However, we remind the commenters that the existing budget neutrality requirement for changes in DRGs and recalibrating the relative weights mitigates any effect of the change to MS–LTC–DRGs on estimated aggregate LTCH PPS payments. Additionally, as we have discussed earlier, transitioning the relative weights for FY 2008 should further mitigate the effects from adoption of the MS–LTC–DRG system. For the reasons discussed in the comments and responses section of this final rule with comment period, we will not be implementing the proposed case-mix budget neutrality factor to the MS–LTC–DRG relative weights at this time. While we agree that the IPPS adjustment would need to be adjusted to be applicable to LTCHs, we continue to believe more accurate and complete documentation and coding will occur because it will result in higher aggregate payments under the MS–LTC–DRG system. We have every reason to expect that hospitals will respond to the adoption of MS–LTC–DRGs in much the same way as they have responded to similar events in the past. They will improve their documentation and coding of diagnoses and procedures, and this change will lead to increases in reported case mix. The reason to make offsetting adjustments is also the same. Although hospitals' efforts to improve the specificity and accuracy of documentation and coding are perfectly legitimate, the increases in payments that result are not warranted because the increase in measured case-mix does not reflect any real change in illness severity or the cost of care for the patients being treated. Therefore, offsetting adjustments to the PPS payment rates are needed to protect the Medicare program from unwarranted increases in spending. We believe the question is not 
                        *whether*
                         documentation and coding will improve, resulting in higher case mix and payments, rather, the question is only 
                        *how much*
                         will coding change when the incentives to code particular secondary diagnoses change with the adoption of MS–LTC–DRGs, and how long will these changes continue. Section 123 of the BBRA, as amended by section 307(b) of the BIPA, provides that the Secretary may specify appropriate adjustments to the long-term care hospital payment system, including updates. This broad discretionary authority includes our ability to make adjustments and updates for case mix changes due to improved coding and documentation changes that do not reflect real change in case mix regardless of whether such adjustment 
                        ( print page 47299)
                        is for anticipated case-mix changes or case mix changes that occurred in a previous time period. We remain convinced that an adjustment is needed to eliminate the effect of changes in coding or classification of LTCH discharges that do not reflect real change in case mix resulting from the adoption of the proposed MS–LTC–DRGs. However, as discussed above, after revisiting this issue, we believe that the adjustment for anticipated improvements in coding and documentation adopted in this final rule with comment period for IPPS hospitals needs to be adjusted to apply to LTCHs. At this time, CMS has not been able to determine an appropriate adjustment to the factor used for IPPS hospitals in order to make it applicable to LTCHs; however, we will continue to monitor LTCHs' response to the MS–LTC–DRG transition. Beginning with RY 2009, if CMS is able to estimate an appropriate adjustment factor applicable to LTCHs, CMS would propose an adjustment factor to LTCHs to account prospectively for coding and documentation changes. We note that in previous years, we have adjusted the annual update to the LTCH PPS standardized rate for case-mix changes due to coding and documentation changes to recoup payments made in a 
                        *prior*
                         period by making a prospective adjustment during the rate setting cycle. Specifically, the adjustments for coding and documentation changes implemented in the RY 2007 and RY 2008 regulations were based on actual LTCH case mix data from FY 2004 and FY 2005, respectively (71 FR 27820–2 and 72 FR 26887–90). Since we have an established mechanism to adjust LTCH payments to account for the effect of changes in coding and documentation which is based on actual LTCH data and since we cannot determine an appropriate adjustment factor applicable to LTCHs at this time, we believe it is appropriate to continue using this established process rather than making an adjustment at this time based on an estimate of projected LTCH specific case mix change due to improved coding and documentation. Therefore, at this time, we are not finalizing the proposed case-mix budget neutrality factor to the MS–LTC–DRG relative weights in FY 2008. Instead, consistent with past LTCH payment policy, we could propose to make future adjustments to account for improvements in coding and documentation that do not reflect real changes in case sa mix during these years that we are implementing MS–LTC–DRGs. *Comment:*
                         Finally, one commenter believed that CMS' proposal for FY 2008 would effectively penalize LTCHs twice for the same case-mix changes. That is, the commenter noted that in RY 2008, CMS finalized a retrospective adjustment to account for past coding improvements by reducing the expected update (
                        *i.e.*, full market basket) to the standard payment rate by 2.49 percent in order to recoup payments made in a prior period (FY 2005). The commenter further noted that the reduction in the market basket update reduces the base rate and therefore has a permanent prospective effect. The commenter stated that “the effect of the case-mix reduction to the market basket of 2.49 percent is applicable to payments in RY 2008 and each rate year thereafter. It is never made up.” The commenter concluded that the “additional downward coding adjustment factor of 2.4 percent in each of two years, or any other adjustment that is not borne out by careful retrospective analyses after the full transition to MS–LTC–DRGs, to payments to LTCHs in future years, is redundant and unsupported.” *Response:*
                         As discussed above, we are not implementing the proposed case-mix budget neutrality factor to the MS–LTC–DRG relative weights in FY 2008. Where CMS ultimately determines that an adjustment is necessary, CMS will propose adjustments to the LTCH PPS in order to account for changes to coding or documentation that do not reflect real changes in case-mix. J. Add-On Payments for New Services and Technologies 1. Background Sections 1886(d)(5)(K) and (L) of the Act establish a process of identifying and ensuring adequate payment for new medical services and technologies (sometimes collectively referred to in this section as “new technologies”) under the IPPS. Section 1886(d)(5)(K)(vi) of the Act specifies that a medical service or technology will be considered new if it meets criteria established by the Secretary after notice and opportunity for public comment. Section 1886(d)(5)(K)(ii)(I) of the Act specifies that the process must apply to a new medical service or technology if, “based on the estimated costs incurred with respect to discharges involving such service or technology, the DRG prospective payment rate otherwise applicable to such discharges under this subsection is inadequate.” The regulations implementing this provision establish three criteria for new medical services and technologies to receive an additional payment. First, § 412.87(b)(2) states that a specific medical service or technology will be considered new for purposes of new medical service or technology add-on payments until such time as data are available to reflect the cost of the technology in the DRG weights through recalibration. There is a lag of 2 to 3 years from the point a new medical service or technology is first introduced on the market (generally on the date that the technology receives FDA approval) and when data reflecting the use of the medical service or technology are used to calculate the DRG weights. For example, data from discharges occurring during FY 2006 are used to calculate the FY 2008 DRG weights in this final rule with comment period. Section 412.87(b)(2) provides that, “a medical service or technology may be considered new within 2 or 3 years after the point at which data begin to become available reflecting the ICD–9–CM code assigned to the new medical service or technology (depending on when a new code is assigned and data on the new medical service or technology become available for DRG recalibration). After CMS has recalibrated the DRGs based on available data to reflect the costs of an otherwise new medical service or technology, the medical service or technology will no longer be considered ‘new’ under the criterion for this section.” The 2-year to 3 year period during which a medical service or technology can be considered new would ordinarily begin with FDA approval, unless there was some documented delay in bringing the product onto the market after that approval (for instance, component production or drug production has been postponed until FDA approval due to shelf life concerns or manufacturing issues). After the DRGs have been recalibrated to reflect the costs of an otherwise new medical service or technology, the special add-on payment for new medical services or technologies ceases (§ 412.87(b)(2)). For example, an approved new technology that received FDA approval in October 2006 and entered the market at that time may be eligible to receive add-on payments as a new technology until FY 2010 (discharges occurring before October 1, 2009), when data reflecting the costs of the technology could be used to recalibrate the DRG weights. Because the FY 2009 DRG weights would be calculated using FY 2007 MedPAR data, the costs of such a new technology would be reflected in the FY 2009 DRG weights. Section 412.87(b)(3) further provides that new medical services or technologies must be inadequately paid 
                        ( print page 47300)
                        otherwise under the DRG system to receive the add-on payment. To assess whether technologies would be inadequately paid under the DRGs, we establish thresholds to evaluate applicants for new technology add-on payments. In the FY 2004 IPPS final rule (68 FR 45385), we established the threshold at the geometric mean standardized charge for all cases in the DRG plus 75 percent of 1 standard deviation above the geometric mean standardized charge (based on the logarithmic values of the charges and transformed back to charges) for all cases in the DRG to which the new medical service or technology is assigned (or the case weighted average of all relevant DRGs, if the new medical service or technology occurs in many different DRGs). However, section 503(b)(1) of Pub. L. 108–173 amended section 1886(d)(5)(K)(ii)(I) of the Act to provide for “applying a threshold * * * that is the lesser of 75 percent of the standardized amount (increased to reflect the difference between cost and charges), or 75 percent of 1 standard deviation for the diagnosis-related group involved.” The provisions of section 503(b)(1) apply to classification for fiscal years beginning with FY 2005. (We refer readers to section IV.D. of the preamble to the FY 2005 IPPS final rule (69 FR 49084) for a discussion of the revision of the regulations to incorporate the change made by section 503(b)(1) of Pub. L. 108–173.) Table 10 of the Addendum to the FY 2007 IPPS final rule (71 FR 48319) contained the final thresholds that are being used to evaluate applications for new technology add-on payments for FY 2008. An applicant must demonstrate that the cost threshold is met using information from inpatient hospital claims. We were recently asked to revisit the issue of whether the HIPAA Privacy Rule at 45 CFR Parts 160 and 164 applies to claims information that providers submit with applications for new technology add-on payments. We previously addressed this issue in the September 7, 2001 final rule (66 FR 46917) that established the new technology add on payment regulations. In the preamble to that final rule, we explained that health plans, including Medicare, and providers that conduct certain transactions electronically, including the hospitals that would be receiving payment under the FY 2001 IPPS final rule, are required to comply with the HIPAA Privacy Rule. We further explained how such entities could meet the applicable HIPAA requirements by discussing how the HIPAA Privacy Rule permitted providers to share with health plans information needed to ensure correct payment, if they had obtained consent from the patient to use that patient's data for treatment, payment, or health care operations. We also explained that because the information to be provided within applications for new technology add-on payment would be needed to ensure correct payment, no additional consent would be required. The HHS Office of Civil Rights has since amended the HIPAA Privacy Rule, but the results remain. The HIPAA Privacy Rule no longer requires covered entities to obtain consent from patients to use or disclose protected health information for treatment, payment, or health care operations, and expressly permits such entities to use or to disclose protected health information for any of these purposes. (We refer readers to 45 CFR 164.502(a)(1)(ii), and 506(c)(1) and (c)(3) and the Standards for Privacy of Individually Identifiable Health Information published in the 
                        **Federal Register**
                         on August 14, 2002, for a full discussion of changes in consent requirements). Section 412.87(b)(1) of our existing regulations provides that a new technology is an appropriate candidate for an additional payment when it represents “an advance that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries.” For example, a new technology represents a substantial clinical improvement when it reduces mortality, decreases the number of hospitalizations or physician visits, or reduces recovery time compared to the technologies previously available. (We refer readers to the September 7, 2001 final rule (66 FR 46902) for a complete discussion of this criterion.) The new medical service or technology add-on payment policy provides additional payments for cases with high costs involving eligible new medical services or technologies while preserving some of the incentives under the average-based payment system. The payment mechanism is based on the cost to hospitals for the new medical service or technology. Under § 412.88, Medicare pays a marginal cost factor of 50 percent for the costs of a new medical service or technology in excess of the full DRG payment. If the actual costs of a new medical service or technology case exceed the DRG payment by more than the 50-percent marginal cost factor of the new medical service or technology, Medicare payment is limited to the DRG payment plus 50 percent of the estimated costs of the new technology. Section 1886(d)(4)(C)(iii) of the Act requires that the adjustments to annual DRG classifications and relative weights must be made in a manner that ensures that aggregate payments to hospitals are not affected. Further, the Congressional report language accompanying section 533 of Pub. L. 106–554 indicated Congress' intent to require the Secretary to implement the new mechanism on a budget neutral basis (H.R. Conf. Rep. No. 106–1033, 106th Cong., 2nd Sess. at 897 (2000)). Therefore, in the past, we accounted for projected payments under the new medical service and technology provision during the upcoming fiscal year at the same time we estimated the payment effect of changes to the DRG classifications and recalibration. The impact of additional payments under this provision was then included in the budget neutrality factor, which was applied to the standardized amounts and the hospital-specific amounts. Section 1886(d)(5)(K)(ii)(III) of the Act, as amended by section 503(d)(2) of Pub. L. 108–173, provides that there shall be no reduction or adjustment in aggregate payments under the IPPS due to add-on payments for new medical services and technologies. Therefore, add-on payments for new medical services or technologies for FY 2005 and later years have not been budget neutral. Applicants for add-on payments for new medical services or technologies for FY 2009 must submit a formal request, including a full description of the clinical applications of the medical service or technology and the results of any clinical evaluations demonstrating that the new medical service or technology represents a substantial clinical improvement, along with a significant sample of data to demonstrate the medical service or technology meets the high-cost threshold. Complete application information, along with final deadlines for submitting a full application, will be available on our Web site after the publication of this FY 2008 IPPS final rule at: 
                        *http://www.cms.hhs.gov/​AcuteInpatientPPS/​08_​newtech.asp.*
                         To allow interested parties to identify the new medical services or technologies under review before the publication of the proposed rule for FY 2009, the Web site will also list the tracking forms completed by each applicant. 2. Public Input Before Publication of a Notice of Proposed Rulemaking on Add-On Payments Section 1886(d)(5)(K)(viii) of the Act, as amended by section 503(b)(2) of Pub. L. 108–173, provides for a mechanism 
                        ( print page 47301)
                        for public input before publication of a notice of proposed rulemaking regarding whether a medical service or technology represents a substantial clinical improvement or advancement. The process for evaluating new medical service and technology applications requires the Secretary to— Provide, before publication of a proposed rule, for public input regarding whether a new service or technology represents an advance in medical technology that substantially improves the diagnosis or treatment of Medicare beneficiaries.
                    Make public and periodically update a list of the services and technologies for which applications for add-on payments are pending.
                    Accept comments, recommendations, and data from the public regarding whether a service or technology represents a substantial clinical improvement.
                    Provide, before publication of a proposed rule, for a meeting at which organizations representing hospitals, physicians, manufacturers, and any other interested party may present comments, recommendations, and data regarding whether a new medical service or technology represents a substantial clinical improvement to the clinical staff of CMS. In order to provide an opportunity for public input regarding add-on payments for new medical services and technologies for FY 2008 before publication of the FY 2008 IPPS proposed rule, we published a notice in the 
                        **Federal Register**
                         on December 22, 2006 (71 FR 77031), and held a town hall meeting at the CMS Headquarters Office in Baltimore, MD, on February 22, 2007. In the announcement notice for the meeting, we stated that the opinions and alternatives provided during the meeting would assist us in our evaluations of applications by allowing public discussion of the substantial clinical improvement criterion for each of the FY 2008 new medical service and technology add on payment applications before the publication of the FY 2008 IPPS proposed rule. Approximately 70 individuals attended the town hall meeting in person, while additional participants listened over an open telephone line. Boston Scientific presented data on how its product (Wingspan® Stent System with GatewayTM
                         PTA Balloon Catheter) meets the substantial clinical improvement criterion, as well as the need for additional payments to ensure its access to Medicare beneficiaries. No other attendees at the town hall meeting made a presentation with regard to the Wingspan® new technology add-on payment application. In the FY 2008 IPPS proposed rule, we considered Boston Scientific's presentation made at the town hall meeting, as well as written comments submitted with their application, in our evaluation of the Wingspan® new technology application for FY 2008 in the FY 2008 IPPS proposed rule. We have summarized these comments under section I.4. of the preamble of this final rule with comment period. At the Town Hall meeting, we did not receive any other comments regarding substantial clinical improvement of Wingspan®. There were a number of public comments made at the Town Hall meeting suggesting that CMS provide more specific detail about how it would apply the substantial clinical improvement criterion. For example, the public commenters at the Town Hall meeting suggested that CMS provide clear guidance with respect to the type of data that applicants should submit to support an application for add-on payments for new medical services and technologies. We were asked to work with stakeholders, including researchers, clinicians, representatives of patients, and manufacturers, to develop specific criteria and data quality standards that would make determinations of “substantial clinical improvement” more predictable and transparent. In the FY 2008 IPPS proposed rule, we welcomed public comment on this issue. In particular, we indicated that we were interested in any “specific criteria or data quality standards” that the commenters believed we should adopt to improve the new technology add-on application process, or any concerns or challenges that commenters believed we may encounter in undertaking this effort. Again, as we stated at the new technology Town Hall meeting, we indicated that we continue to be interested in working with our stakeholders to improve the inpatient new technology add-on payment process. We stated that we were interested in ensuring that the latest medical technology that improves care for the Medicare patient population continues to be available to our beneficiaries. *Comment:*
                         One commenter supported how CMS currently evaluates whether a technology represents a substantial clinical improvement over existing technologies. Specifically, the commenter stated, “we believe the new technology add-on payment mechanism is structured fairly and provides technologies that truly improve care with a challenging yet reasonable opportunity to qualify for enhanced payment status * * * the criteria articulated by CMS to prove substantial clinical improvement offer significant discretion and flexibility on the parts of both applicants and CMS to, respectively, demonstrate and decide whether a new technology truly represents an advancement in care.” *Response:*
                         We appreciate the commenter's support of our application of the criteria we currently use to determine whether a new technology merits an add-on payment. The commenter noted that the current standards allow us an opportunity to be both fair and flexible and for each individual application to be evaluated on a case-by-case basis rather than by a stringent set of inflexible criteria. We believe the commenter raises a reasonable concern that establishing specific data standards may make it more difficult for an applicant to qualify for a new technology add-on payment because such standards cannot account for the various types of new technologies that may become available in the future and the types of requirements that those novel technologies may or may not be able to meet. *Comment:*
                         Several commenters suggested that CMS revise or alter the standards we use to determine whether a technology meets the substantial clinical improvement criterion. One commenter requested that CMS “quickly announce its proposed data standards for a showing of substantial clinical improvement” and stated that, in the past, CMS did not provide clear guidance on the type of data that applicants would need to submit. The commenter applauded CMS' recent endeavor to provide clear guidance on the issue. Another commenter supported the provision of more detailed criteria for the types of data and documentation that would help to demonstrate whether a new technology was a substantial clinical improvement, but did not recommend any specific standards that CMS could use. The commenter did, however, recommend that applicants utilize credentialed coding professionals to ensure correct codes and DRGs are identified prior to submitting a detailed cost analysis. *Response:*
                         The purpose of us asking for public input on how to improve the substantial clinical improvement criterion was to garner information and ideas from the public and stakeholders about how that specific criterion could be improved. We note that we did not propose any specific standards for substantial clinical improvement, but 
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                        instead, we were anticipating that members of the public, including those who recommended we revise our standards, would suggest some ideas that we could consider adopting in a subsequent notice of proposed rule-making. Our goal was to present the ideas submitted by the public commenters to learn whether past or potential future applicants would find them useful. In response to the comment suggesting that an applicant seek coding advice before submitting a new technology application, our regulations neither require nor prohibit an applicant from using the any specific type of expertise available in the health care community in preparing its application. We certainly encourage applicants to make the best possible case for why the technology that interests them should receive an add-on payment. If that effort involves use of a medical coder, we encourage the applicant to seek that expertise. *Comment:*
                         One commenter recommended that CMS deem the “drugs and biologicals for which the FDA has granted fast track approval or approval based on surrogate endpoints to represent substantial clinical improvements.” The commenter also suggested that CMS deem a device to be a substantial clinical improvement “* * * if it has been granted a humanitarian device exemption or priority review based on the fact that it represents breakthrough technologies, that offer significant advantages over existing approved alternatives, for which no alternatives exist, or the availability of which is in the best interests of the patients.” *Response:*
                         The FDA provides a number of different types of approvals to devices, drugs and other medical products. At this time, we do not believe that any particular type of FDA approval alone would automatically demonstrate a substantial clinical improvement for the Medicare population. However, as noted in previous final rules, we do take FDA approval into consideration in our evaluation of new technology applications. We note that an Humanitarian Device Exemption (HDE) approval only requires an approval threshold of safety and probable benefit as opposed to the safety and effectiveness standard that exists for pre-market approval (PMA). Among other requirements, the labeling of a humanitarian use device must state that the effectiveness of the device for the specific indication has not been demonstrated. While an HDE approval certainly does not preclude us from considering a technology for an add-on payment (as we do in this final rule with comment period for Wingspan®), neither does it suggest that the product automatically meets the requirement to be judged a substantial clinical improvement. We will continue to evaluate products receiving an HDE approval by measuring it against the specific criteria we listed for determining substantial clinical improvement at 66 FR 46914. *Comment:*
                         One commenter stated that our current administration of the substantial clinical improvement criterion is “inconsistent and unnecessarily opaque.” The commenter recommended that CMS “convene a panel of stakeholders, including researchers, clinicians, industry representatives and patient groups to develop specific, generally applicable criteria for determining whether a new product represents a substantial clinical improvement, including the creation of objective standards for the use of external data.” The commenter specifically recommended that we convene a panel to consider, as a starting point for developing more specific standards on substantial clinical improvement, the following criteria: Clinical Effectiveness: The expected magnitude of improvement in patient health outcomes, including mortality, morbidity, quality of life, and functional status.
                    Clinical and Organizational Efficiency: The expected impact of the technology on resource utilization, assessed at the level of individual patients. CMS would consider improvements in the timely and efficient delivery of care, as well as short and long-term savings across various settings of care. In addition, CMS would weigh the expected impact of the technology on resource utilization, assessed at the level of health care institutions and the health care system. This would include the impact on worker productivity, the extent to which the technology increases the capacity of existing facilities, etc.
                    Strength and Consistency of Evidence: The level of confidence that the judgments about clinical effectiveness and clinical efficiency are reliable and based on scientific studies, pathophysiologic reasoning, economic modeling, clinical judgment and other sources of information. The assessment of evidence should be undertaken with recognition of the practical and economic challenges to proving definitively the benefits of novel technologies.
                    Safety: The degree to which the technology may reduce the risk of adverse events for patients and health care providers. *Response:*
                         In response to the comment that suggested that our application of the substantial clinical improvement criterion is “inconsistent and unnecessarily opaque,” we again note that the intent of soliciting comments on this topic in the proposed rule was to obtain ideas for how to make improvements in our policy from those who are dissatisfied with it. Nevertheless, we reiterate that CMS has been committed to providing ample opportunity for applicants and other interested parties to make their views known to us through the application process, at the annual public meeting, and during the comment period on the proposed rule. We encourage interested parties to contact CMS staff for more information about the new technology add-on application process. Interested parties may contact Tiffany Swygert at (410) 786–4642 or Michael Treitel at (410) 786–4552. In response to the comment about convening a panel of stakeholders, we believe the commenter is suggesting that we establish an advisory panel under the Federal Advisory Committee Act (FACA). Although we believe it may be unnecessary to establish a FACA committee solely for this purpose, we do not have objections to having a one-time public meeting specifically to consider ideas that are raised on this topic. We convened a new technology and coding workshop this past year prior to the New Technology Town Hall meeting. We received favorable feedback from the many attendees at that meeting and we would consider having a similar meeting intended to garner ideas for addressing the topic of specific data standards. In response to the ideas offered in the public comments that could be used as a basis of developing more specific and transparent criteria for evaluating whether a technology represents a substantial clinical improvement, it is exactly these kinds of ideas for which we would like further public reaction—potentially through a forum like the public meeting noted above. We are interested in public comments from past or potential future new technology applicants and other stakeholders whether these ideas would improve the new technology application process and if they should be developed further. *Comment:*
                         A number of commenters addressed topics relating to the marginal cost factor for new technology, implementation of ICD–10–CM, external 
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                        data, and changing our standards under the newness criterion. *Response:*
                         We did not request comment nor propose to make any changes to any of the issues addressed by the commenters. As the comments are unrelated to any of the provisions in the proposed rule, we are not responding to them in this final rule with comment period. 3. FY 2008 Status of Technologies Approved for FY 2007 Add-On Payments a. Endovascular Graft Repair of the Thoracic Aorta W. L. Gore  Associates, Inc., submitted an application for consideration of its Endovascular Graft Repair of the Thoracic Aorta (GORE TAG) for new technology add-on payments for FY 2006. The manufacturer argued that endovascular stent-grafting of the descending thoracic aorta provides a less invasive alternative to the traditional open surgical approach required for the management of descending thoracic aortic aneurysms. The GORE TAG device is a tubular stent-graft mounted on a catheter-based delivery system, and it replaces the synthetic graft normally sutured in place during open surgery. The device was initially identified using ICD–9–CM procedure code 39.79 (Other endovascular repair (of aneurysm) of other vessels). The applicant also requested a unique ICD–9–CM procedure code. As noted in Table 6B of the FY 2006 IPPS final rule (70 FR 47637), new procedure code 39.73 (Endovascular implantation of graft in thoracic aorta) was assigned to this technology. In the FY 2006 IPPS final rule (70 FR 47356), we approved the GORE TAG device for new technology add-on payment for FY 2006. FDA approved GORE TAG on March 23, 2005. Because the technology remained within the 2-to 3-year period during which it could be considered new for FY 2007, we continued add-on payments for the endovascular graft repair of the thoracic aorta in the FY 2007 IPPS final rule (71 FR 47999). GORE TAG will have been on the market for more than 3 years as of March 23, 2008, or less than 6 months of FY 2008. Our practice has been to begin and end new technology add-on payments on the basis of a fiscal year. In general, we extend add-on payments for an additional year only if the 3-year anniversary date of the product's entry on the market occurs in the latter half of the fiscal year (70 FR 47362). Because the 3-year anniversary date of GORE TAG's entry onto the market was in the first half of the fiscal year, in the FY 2008 IPPS proposed rule, we proposed to discontinue its new technology add-on payment for FY 2008. In response to the proposed rule, we received the following public comments: *Comment:*
                         One commenter recommended that we continue to make add-on payments for GORE TAG since the approval date of the device is only 8 days away from being in the second half of FY 2008. The commenter requested that CMS should consider the possible delay in making this technology available on the market since devices can routinely take several months to enter the general provider population. Another commenter, the manufacturer of GORE TAG, also requested that we continue to make the new technology add-on payments for an additional year and noted that the technology remains inadequately paid under the MS–DRGs. *Response:*
                         As we stated in the proposed rule, GORE TAG received FDA approval on March 23, 2005 which falls in the first half of FY 2005. The 3-year anniversary of the product's FDA approval will be during the first half of FY 2008. Our policy is that we only provide an additional year of new technology add-on payment if the 3-year anniversary of FDA approval is during the second half of the fiscal year unless we receive evidence of a documented delay in making the product available on the market. The manufacturer did not provide a documented delay in marketing of the device. Therefore, our policy is not to allow the product to receive an additional year of new technology add-on payments. Although we are not extending an additional year of new technology add-on payments to GORE TAG, we note that cases where a thoracic aortic stent is placed through an endovascular procedure will be reassigned from MS–DRG 238 (Major Cardiovascular Procedures without MCC) to MS–DRG 237 (Major Cardiovascular Procedures without MCC). For more information, we refer readers to section II.D. of the preamble of this final rule with comment period. Because the technology no longer meets the newness criterion, we are finalizing our proposal to discontinue new technology add-on payments for GORE TAG for FY 2008. b. Restore® Rechargeable Implantable Neurostimulator Medtronic Neurological submitted an application for new technology add-on payments for its Restore® Rechargeable Implantable Neurostimulator for FY 2006. The Restore® Rechargeable Implantable Neurostimulator is designed to deliver electrical stimulation to the spinal cord to block the sensation of pain. The technology standard for neurostimulators uses internal sealed batteries as the power source to generate the electrical current. These internal batteries have finite lives, and require replacement when their power has been completely discharged. According to the manufacturer, the Restore® Rechargeable Implantable Neurostimulator “represents the next generation of neurostimulator technology, allowing the physician to set the voltage parameters in such a way that fully meets the patient's requirements to achieve adequate pain relief without fear of premature depletion of the battery.” The applicant stated that the expected life of the Restore® rechargeable battery is 9 years, compared to an average life of 3 years for conventional neurostimulator batteries. We approved new technology add-on payments for all rechargeable, implantable neurostimulators for FY 2006 and FY 2007. Cases involving these devices, made by any manufacturer, are identified by the presence of newly created ICD–9–CM code 86.98 (Insertion or replacement of dual array rechargeable neurostimulator pulse generator). The FDA approved the Restore® Rechargeable Implantable Neurostimulator in 2005. However, as noted in the FY 2006 IPPS final rule (70 FR 47358), at least one similar product was approved by the FDA as early as April 2004. Because the Restore® Rechargeable Implantable Neurostimulator will be beyond the 2- to 3-year period during which it can be considered new for FY 2008, in the FY 2008 IPPS proposed rule, we proposed to discontinue add-on payments for the technology in FY 2008. In response to the proposed rule, we received the following public comments: *Comment:*
                         The manufacturer of Restore® recommended that we continue to make add-on payments for rechargeable implantable neurostimulators for an additional year. The commenter indicated that an additional year of the add-on payment, “maintains the hospital payment level for rechargeable neurostimulator devices until data reflects the market volume and costs associated with rechargeable technology.” The commenter stated that “rechargeable neurostimulators were launched in 2005 in a limited fashion and the majority were sold during the second half of FY 2005.” The commenter also noted that Restore® was launched on the market on April 8, 2005 and that a unique ICD–9–
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                        CM procedure code to identify rechargeable neurostimulators was not created until FY 2006. According to the commenter, prior to the date for which a unique ICD–9–CM code was effective, “there was no way to identify rechargeable neurostimulators separately from non-rechargeable ones.” The manufacturer stated that there were 12,801 rechargeable neurostimulators sold in FY 2006, but its analysis of FY 2006 MedPAR data showed that only 0.3 percent of all rechargeable neurostimulators sold in the United States were implanted in Medicare patients in the inpatient hospital setting. Therefore, the manufacturer suggested, the low utilization of rechargeable stimulators in FY 2005 may be justification for extending the add-on payment period because they “still fall within the 2–3 year period of newness to qualify for add-on.” *Response:*
                         Implantable rechargeable neurostimulators do not qualify for an additional year of new technology add-on payments. As we indicated in the FY 2006 final rule, the Advanced Bionics Precision® Rechargeable Neurostimulator was approved by the FDA on April 2004 (70 FR 47358). Thus, the FDA approved a substantially similar rechargeable neurostimulator product more than 3 years ago. No commenters provided documentation or even asserted that there was a delay in the marketing of the Advanced Bionics Precision® Rechargeable Neurostimulator. Therefore, we are finalizing our proposal to discontinue new technology add-on payments for rechargeable implantable neurostimulators for FY 2008. Although we are not extending an additional year of new technology add-on payments for rechargeable implantable neurostimulators, we are making the following DRG reassignments: MDC 1—Spinal neurostimulators from MS–DRG 30 (Spinal Procedures without CC) to MS–DRG–29 (Spinal Procedures with CC);
                    MDC 1—Peripheral neurostimulators from MS–DRG 42 (Peripheral and Cranial Nerve and Other Nervous System Procedures without CC) to MS–DRG 41 (Peripheral and Cranial Nerve and Other Nervous System Procedures with CC);
                    MDC 8—Full system spinal cord neurostimulators from MS–DRG 491 (Back and Neck Procedures Except Spinal Fusion without CC/MCC) to MS–DRG 490 (Back and Neck Procedures Except Spinal Fusion with CC/MCC or Disc Devices). For more information on DRG reassignments for rechargeable implantable neurostimulators, we refer readers to section II.G.2. of the preamble of this final rule with comment period. c. X STOP Interspinous Process Decompression System St. Francis Medical Technologies submitted an application for new technology add-on payments for the X STOP Interspinous Process Decompression System (X STOP) for FY 2007. Lumbar spinal stenosis describes a condition that occurs when the spaces between bones in the spine become narrowed due to arthritis and other age-related conditions. This narrowing, or stenosis, causes nerves coming from the spinal cord to be compressed, thereby causing symptoms including pain, numbness, and weakness. It particularly causes symptoms when the spine is in extension, when a patient stands fully upright or leans back. The X STOP device is inserted between the spinous processes of adjacent vertebrae in order to provide a minimally invasive alternative to conservative treatment (exercise and physical therapy) and invasive surgery (spinal fusion). It works by limiting the spine's extension that compresses the nerve's roots while still preserving as much motion as possible. The device is inserted in a relatively simple, primarily outpatient procedure using local anesthesia. However, in some circumstances, the physician may prefer to admit the patient for an inpatient stay. The manufacturer described the device as providing “a new minimally invasive, stand-alone alternative treatment for lumbar spinal stenosis.” The X STOP Interspinous Process Decompression system received pre-market approval from the FDA on November 21, 2005. The device was initially described by ICD–9–CM code 84.58 (Implantation of Interspinous process decompression device) (excluding: fusion of spine (codes 81.00 through 81.08, and 81.30 through 81.39)). This ICD–9–CM code went into effect on October 1, 2005. As noted in section II.G.4.c. of this preamble of this final rule with comment period, X STOP will be identified by ICD–9–CM code 84.80 (Insertion or replacement of interspinous process device(s)), effective October 1, 2007. In the FY 2007 final rule, with respect to substantial clinical improvement, we noted our concern that, during the FDA approval process, the Center for Devices and Radiological Health Advisory Panel voted against pre-market approval of X STOP because of concerns about proper patient selection, as well as the lack of objective endpoints. The applicant addressed our concerns by demonstrating that the mechanism of effect on the spine in cadavers with in vivo clinical radiographic data. That is, the applicant was able to show that the X STOP device limits spine extension that compresses the nerve. Thus, we indicated that we believed the technology has promise for providing a less invasive alternative to procedures such as laminectomy or fusion for patients that have failed conservative treatment (exercise, physical therapy, and medication). The X STOP system represents a new level of treatment on the continuum of care for patients with lumbar spinal stenosis that previously did not exist. Accordingly, after consideration of the comments received, we approved the X STOP Interspinous Process Decompression System for new technology add-on payment for FY 2007. For FY 2007, cases involving X STOP were identified by ICD–9–CM code 84.58 (Implantation of interspinous process decompression device). These cases were generally included in CMS DRG 499 (Back and Neck Procedures Except Spinal Fusion with CC) and CMS DRG 500 (Back and Neck Procedures Except Spinal Fusion without CC) for FY 2007. As noted in section II.G.4.c. of the preamble of this final rule with comment period, beginning FY 2008, cases involving X STOP will be identified with ICD–9–CM code 84.80 and will generally be included in MS–DRG 490 (Back and Neck Procedures Except Spinal Fusion with CC/MCC or Disc Devices or Neurostimulator). The X STOP Interspinous Process Decompression System is still within the 2- to 3-year period during which it can be considered new for FY 2008. However, in the proposed rule, we noted that we were concerned that it may no longer meet the cost-threshold criterion. In section II.G.4.c. of the preamble of the FY 2008 IPPS proposed rule (72 FR 24734), we proposed to adopt MS–DRGs for FY 2008 and assign cases with procedure codes 84.58 (replaced by procedure code “84.80” in this final rule with comment period) into proposed MS–DRG 490. Proposed MS–DRG 490 would include back and neck procedures except spinal fusion with a CC or MCC. As indicated earlier, we did a comprehensive review of the spinal fusion and nonspinal fusion DRGs. Based on this review, we proposed to further modify MS–DRG 490 to also include the higher cost of cases where the patient receives a spinal disc device such as an artificial spinal disc prosthesis, or an interspinous process decompression system. Our earlier analysis of the spinal and nonspinal fusion DRGs showed that the 
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                        average charge per case for cases involving X STOP is $29,162. The average charge per case for MS–DRG 490 is $29,656. Therefore, cases that use X STOP have a lower average charge per case than all cases in MS–DRG 490. The data show that the technology is not inadequately paid under the revised MS–DRGs, and it no longer meets the cost threshold for new technology add-on payment. For this reason, we proposed to discontinue new technology add-on payments for X STOP in FY 2008 and correlate the payments under MS–DRG 490. In the FY 2008 IPPS proposed rule, we noted that the high costs for cases using X STOP that necessitated an add-on payment under the CMS DRGs would no longer be necessary if we were to adopt MS–DRGs because of the higher payment that would be made under MS–DRG 490 (72 FR 24734). We received the following public comments on this proposal: *Comment:*
                         One commenter supported our recommendation to discontinue add-on payment for X STOP since it would no longer meet the cost threshold under the MS–DRG system. However, the commenter noted that it would expect the add-on payment to continue if the MS–DRG system was not finalized as proposed. *Response:*
                         In this final rule with comment period, we are finalizing our proposals to discontinue new technology add-on payments for X STOP in FY 2008 and to correlate the payments under MS–DRG 490. 4. FY 2008 Application for New Technology Add-On Payments Boston Scientific submitted an application for the Wingspan® Stent System with GatewayTM
                         PTA Balloon Catheter (Wingspan®) for new technology add-on payments for FY 2008. The device is designed for the treatment of patients with significant intracranial arterial stenosis who are refractory to medical management. The device consists of the following: a self-expanding nitinol stent; a multilumen over wire delivery catheter; and a GatewayTM
                         PTA Balloon Catheter. The device is used to treat stenoses that occur in the intracranial vessels. Prior to stent placement, the GatewayTM
                         PTA Balloon is inflated to dilate the target lesion, and then the stent is deployed across the lesion to restore and maintain luminal patency. Effective October 1, 2004, two new ICD–9–CM procedure codes were created to code intracranial angioplasty and intracranial stenting procedures: procedure codes 00.62 (Percutaneous angioplasty or atherectomy of intracranial vessels) and 00.65 (Percutaneous insertion of intracranial vascular stents). On August 3, 2005, the Wingspan® was approved by the FDA as an HDE. We note that the applicant submitted an application for new technology add-on payment in FY 2006 but was not approved for add-on payment because it had not yet received FDA approval. In November 2006, we issued a national coverage determination (NCD) on intracranial stents. The NCD stated that the treatment of cerebral artery stenosis in patients with intracranial atherosclerotic disease with intracranial percutaneous transluminal angioplasty (PTA) and stenting is reasonable and necessary when furnished in accordance with the FDA-approved protocols governing Category B Investigational Device Exemption (IDE) clinical trials. Currently, there are no clinical trials in place for the Wingspan®. However, because the technology is covered by Medicare, if it is used in the setting of a clinical trial, in the FY 2008 IPPS proposed rule, we evaluated whether the Wingspan® met the criteria for an inpatient new technology add-on payment. Wingspan® has been available on the market since August 3, 2005. Therefore, we believe that the technology meets the newness criterion. The applicant noted in its application that cases of intracranial angioplasty and stenting cases are currently grouped to CMS DRGs 533 (Extracranial Procedure with CC) and 534 (Extracranial Procedure Without CC). However, the applicant believes these cases should be assigned to CMS DRGs 1 (Craniotomy Age 17 with CC), 2 (Craniotomy Age 17 without CC), and 543 (Craniotomy with Major Device Implant or Acute Complex Central Nervous System Principal Diagnosis) based on resource use and for clinical consistency with other endovascular intracranial procedures assigned to these DRGs. As discussed in section II.D. of the preamble of the proposed rule and this final rule with comment period, we proposed to move procedure code 00.62 to MS–DRGs 25, 26, and 27 (Craniotomy  Endovascular Intracranial Procedures with MCC, with CC, and without CC/MCC, respectively) and MS–DRGs 23 and 24 (Craniotomy with Major Device Implant or Acute Complex Central Nervous System Principal Diagnosis with MCC or without MCC, respectively) under the MS–DRG system, which are comparable to DRGs 1, 2, and 543 under the current CMS DRG system. To demonstrate that the Wingspan® meets the cost threshold, the manufacturer submitted data from MedPAR and non-MedPAR databases. Using the FY 2005 MedPAR data, the applicant identified cases of intracranial angioplasty that had a procedure code of 39.50 (Angioplasty or atherectomy of other noncoronary vessels) in combination with one of the following principal diagnosis codes: any principal diagnosis code that begins with the prefix of 433 (Occlusion and stenosis of precerebral arteries), excluding 433.10 (Carotid artery without mention of cerebral infarction) and 433.11 (Carotid artery with cerebral infarction); any principal diagnosis code that begins with the prefix of 434 (Occlusion of cerebral arteries), 437.0 (Cerebral atherosclerosis), 437.1 (Other generalized ischemic cerebrovascular disease), or 437.9 (Unspecified). The applicant noted that procedure code 39.50 is the predecessor code for identifying cases of intracranial angioplasty. The applicant explained that, given the newness of procedure codes 00.62 and 00.65 that were implemented beginning October 1, 2005, it believes there are still cases being coded with the predecessor procedure codes. Using this methodology, the applicant found 577 cases in DRG 533 and 179 cases in DRG 534. The applicant noted that charges in the MedPAR file do not include the total costs of devices, drugs, and medical supplies associated with the Wingspan®, so the applicant conducted an estimate of the charges associated with the Wingspan®. The applicant determined that costs associated with the Wingspan® are approximately $10,073. Because we use charges to determine if a technology meets the threshold, it is necessary to inflate the costs to charges. Using the national average CCR of 0.47, the applicant inflated the costs associated with the Wingspan® to $21,432 in charges. After adding the charges associated with the Wingspan®, the average standardized charge per case was $76,416 and $51,277 for DRGs 533 and 534, respectively. In the proposed rule, we stated our concern that the cases identified by the applicant may not be a useful proxy to identify cases of intracranial angioplasty. Procedure code 39.50 describes cases of angioplasty in any artery of the body except the heart. Intracranial angioplasty with stenting was not covered by Medicare in any circumstance prior to October 2006. Therefore, the Medicare cases submitted by the applicant under procedure code 39.50 should not involve intracranial angioplasty because they are neither described by the code nor covered by Medicare. Furthermore, procedure code 
                        ( print page 47306)
                        00.62 is assigned to the Non-Covered Procedure edit of the MCE. The applicant supplied Medicare data from FY 2005 for claims coded with procedure code 00.62. It is unclear to us how these claims were processed despite the Non-Covered Procedure edit. Because these data appear to be based on claims that may not have been coded or processed correctly, we question the reliability and validity of these data. In the FY 2008 IPPS proposed rule, we noted our concern that it may not be appropriate to rely on these data for purposes of determining whether the technology meets the cost threshold (72 FR 24775). As stated above, the applicant also submitted non-Medicare data. The applicant used the 2005 patient discharge data from California's Office of Statewide Health Planning and Development database for hospitals in California and the 2005 patient data from Florida's Agency for Health Care Administration for hospitals in Florida. Similar to the analysis above, the applicant identified cases of intracranial angioplasty using procedure code 39.50 in combination with the diagnosis codes listed above. The applicant identified 43 cases in DRG 533, and 21 cases in DRG 534. These cases already included charges associated with Wingspan® so it was not necessary to further increase them to include the cost of the technology like the applicant did with the Medicare data. The average standardized charge per case was $89,697 and $40,475 for DRGs 533 and 534, respectively. As discussed above, we are concerned about whether these cases actually represent cases of intracranial angioplasty and are concerned about our inability to validate non-Medicare data. In addition, similar to the analysis described above, the applicant also identified cases of intracranial angioplasty using procedure code 00.62. The applicant found 30 cases in DRG 533, and 23 cases in DRG 534. The average standardized charge per case was $93,215 and $31,479 for DRGs 533 and 534, respectively. Based on these data, the applicant maintains that the technology meets the cost threshold. As noted above, the applicant has requested that cases of the Wingspan® be reassigned to CMS DRGs 1, 2 and 543. In section II.G.2. of the preamble of the proposed rule, we proposed to assign procedure code 00.62 to proposed MS–DRGs 23, 24, 25, 26 and 27, which we proposed to replace DRGs 1, 2, and 543 of the CMS DRGs. The thresholds in Table 10 of the Addendum of the FY 2007 IPPS final rule (as corrected at 71 FR 60040) for DRGs 1, 2 and 543 are $53,969, $37,116 and $64,397, respectively. Analyzing the same Medicare and non-Medicare data that the applicant used to demonstrate that the Wingspan® exceeds the cost threshold for DRGs 533 and 534, the applicant compared the average standardized charge per case to the thresholds for DRGs 1, 2, and 543. The applicant maintains that the Wingspan® would still exceed the cost threshold even if it were reassigned to DRGs 1, 2, and 543. However, for the reasons described above, it was not clear to us at the time of the proposed rule whether Wingspan® met the cost threshold for new technology add-on payment. In the proposed rule, we welcomed public comments on this issue. In response, we received the following public comments: *Comment:*
                         One commenter was concerned that the technology will not meet the cost criterion unless CMS accepts the external data submitted by the applicant. The commenter raised further concerns that CMS' narrow application of the cost criterion combined with the proposed MS–DRGs will prevent technologies from being approved and discourage manufacturers from seeking add-on payments in the future. The commenter urged CMS to implement new technology add-on payments in a manner that encourages continued innovation and access to advanced technologies. The applicant supported our decision to reassign the technology from the MS–DRGs for extracranial procedures to the MS–DRGs for craniotomy. However, it stated that CMS should accept the MedPAR and non-MedPAR analyses to evaluate whether the technology meets the cost criterion. The commenter explained that the analysis is based on claims with unique codes which describe intracranial angioplasty and stenting and the economic results are consistent with analogous neuroendovascular procedures. The commenter also noted that two years of MedPAR data showed consistency in resources, mean length of stay and mean standardized charges. Additionally, the costs for cases of intracranial angioplasty with stenting (including resources such as hours spent in radiology, clinical monitoring, and advance imaging evaluations, among others) are consistent with unruptured brain aneurysm treatments with craniotomy assigned to CMS DRGs 1 and 2. The commenter stated that the MedPAR data currently reflect a low volume of cases of intracranial angioplasty because procedures using the technology have not been covered by Medicare. However, the applicant anticipates the volume of cases to increase now that Medicare coverage has been expanded to include the Wingspan ® HDE population. In addition, due to the newness of procedure code 00.62, the applicant supplemented the MedPAR data with external data that includes intracranial angioplasty and stenting which it asserts demonstrates the technology meets the cost criterion. In addition, the applicant submitted FY 2005 and FY 2006 MedPAR data that included any paid or unpaid cases where procedure code 00.62 was coded. In the FY 2005 MedPAR, the applicant found 21 cases in DRG 533 and fewer than 11 cases in DRG 534. The average standardized charge per case including an additional $21,432 for charges related to the device was $90,312 and $47,144 for DRGs 533 and 534 respectively. In the FY 2006 MedPAR, the applicant found 15 cases in DRG 533 and fewer than 11 cases in DRG 534. The average standardized charge per case including an additional $21,432 for charges related to the device was $75,032 and $55,759 for DRGs 533 and 534 respectively. Based on the data it submitted, the applicant maintains that the Wingspan ® meets the cost criteria for MS–DRGs 23, 24, 25, 26 and 27—the MS–DRGs to which the technology is assigned beginning in FY 2008. *Response:*
                         Without further detail from the commenter, we cannot respond to the comment suggesting that we have applied the cost criterion too narrowly. However, we note that CMS policy is to accept external data to determine whether a technology meets the cost criterion provided that it can be validated. Although our preference is to evaluate the cost criterion using data that reflect the cost of cases using the technology in Medicare patients, we do have a policy that permits us to use external data. We continue to have concerns about validity and reliability of the claims for Medicare cases submitted by the applicant because of Medicare's policy of not covering intracranial angioplasty with stenting at all or only through an FDA approved clinical trial. We note that there is currently no clinical trial in place for Wingspan ® in the United States. Therefore, Medicare should not have paid for any case of intracranial angioplasty with stenting during the time period for which the applicant submitted claims. With respect to the external data submitted by the applicant, we believe it is a useful proxy to determine whether the average standardized charge per case exceeds the thresholds in Table 10. As the 
                        ( print page 47307)
                        applicant notes, the external data show that the average cost of these cases including the technology exceeds the cost thresholds shown in the IPPS rule for MS–DRGs 23 through 27. The applicant also maintains that the technology meets the substantial clinical improvement criterion. In the past there has been no surgical or medical treatment available for recurrent strokes that occur despite optimal medical management. The applicant asserts that the Wingspan ® provides a new treatment option for these patients. The applicant submitted three studies to support this position. First, the applicant cites data derived from a series of cases of 45 patients who received the Wingspan ® that demonstrate 4.4 percent composite ipsilateral stroke or death at 30 days, 7.0 percent composite ipsilateral stroke or death at 6 months, and 9.3 percent ipsilateral stroke or death at 13 months. The applicant then used patients in the well known Warfarin-Aspirin Symptomatic Intracranial Disease (WASID) trial as a historical control against which to compare patients who received Wingspan ®. The WASID trial compared the warfarin vs. aspirin therapy in treating symptomatic intracranial arterial stenosis, and it demonstrated a 23 percent stroke/death rate at one year in patients with severe (70 percent or greater) stenosis, and a 21 percent stroke/death rate at 2 years in patients with 50 percent or greater stenosis. The applicant also submitted data from an ongoing Wingspan ® registry of patients that demonstrate a 4.8 percent stroke/death rate at 30 days, and a 9.7 percent stroke/death rate at 3 to 6 month follow up in 72 patients. In addition, the applicant submitted data from a multicenter NIH registry of 131 patients with 70 percent or greater stenosis that demonstrate an 8.4 percent rate of stroke, intracerebral hemorrhage or death at 30 days and a 9.9 percent rate of stroke and death at the mean 3.2 months followup. As we noted in the FY 2008 IPPS proposed rule, while we recognize that Wingspan ® may represent a promising technology in patients with significant intracranial arterial stenosis who are refractory to medical management, we are concerned that, to date, there has been no controlled, randomized trial to demonstrate its clinical efficacy (72 FR 24775). We are also concerned that the Wingspan ® data did not compare patients over the same followup periods as WASID. In addition, we are concerned over the use of WASID patients as a control group against which to compare Wingspan ® patients. The current FDA Humanitarian Device Exemption, in combination with the current CMS NCD, while providing access to this technology for very ill patients with generally poor prognoses who have few other options, also effectively designates the technology as investigational, and in need of further studies to prove its effectiveness. We would prefer that the product's effectiveness be demonstrated before we judge whether the product represents a substantial clinical improvement. For these reasons, we are concerned that there may not be sufficient evidence that Wingspan ® represents an advance that substantially improves the diagnosis or treatment of Medicare beneficiaries. However, in the proposed rule, we welcomed public comments that may pertain to this matter. *Comment:*
                         Some commenters recommended that CMS approve Wingspan ®. None of the comments, except for a comment from the manufacturer, contained any data or analysis in response to our concerns regarding the substantial clinical improvement criterion. However, the manufacturer did submit a detailed comment, including two studies which were not published at the time of the initial application. One study was the original Wingspan ® study used to achieve HDE status with the FDA; this study was discussed in the FY 2008 IPPS proposed rule (72 FR 24774–24775) and does not contain any new information regarding the efficacy of intracranial stenting. The second study involved a registry of 78 patients with 50 percent stenosis treated at four U.S. institutions, and it was designed to evaluate the acute results of intracranial stenting with the Wingspan ® device. Findings include a 6.1 percent major peri-procedural morbidity and mortality (5 of 78), of which 4 of 78 resulted in death within 30 days. The technical success rate was found to be 98.8% (81/82). The authors of the study concluded that Wingspan ® has a high degree of technical success, that it has an acceptable risk of peri-procedural morbidity and mortality, and that it is a viable endovascular treatment option. The manufacturer asserted again that the Wingspan ® device “addresses a treatment need for a patient population, who are unresponsive or inappropriate for other available options and otherwise face a high risk of stroke and death, if left untreated,” and also that “Wingspan's self-expanding stent design represents a substantial clinical improvement over off-label balloon expandable stents because of improved access, superior conformability in curved intracranial vessels, and atraumatic deployment to reduce the risk of vessel rupture.” Finally, the manufacturer asserts significantly improved outcomes in patients receiving Wingspan ® compared to patients treated medically in the WASID study. *Response:*
                         We acknowledge that the Wingspan ® technology has the potential to provide a new treatment option for patients who have severe intracranial arterial disease and who are failing currently available medical therapy. The FDA recognized the technology's potential by granting HDE status, and CMS did so by extending limited Medicare coverage in the context of an FDA approved clinical trial. However, neither FDA's HDE approval nor CMS's coverage with evidence development decision prove the technology's effectiveness. As we stated in the FY 2008 IPPS proposed rule, we would prefer that the product's effectiveness be demonstrated before we judge whether Wingspan ® is a substantial clinical improvement in patients that otherwise would have no treatment options. We note that the studies provided by the applicant articulate the need for controlled, randomized prospective studies to determine the effectiveness of the device. Therefore, even information submitted by the applicant raises the concern that it may be premature to find the technology to be a substantial clinical improvement because its effectiveness is yet to be determined. We remain concerned that in the absence of compelling data such as a prospective, randomized controlled study comparing similar groups of patients, there is not sufficient data to demonstrate that Wingspan ® patients have better outcomes than those who receive medical treatment. Similarly, the data presented also did not demonstrate Wingspan ® patients will not have worse outcomes than those who receive medical treatment. In addition, we do not believe that the currently available data adequately demonstrate effectiveness to qualify as a substantial clinical improvement over existing treatment, particularly in light of the very serious potential adverse events associated with the device. For these reasons, we are not approving the Wingspan ® for new technology add-on payments for FY 2008. 5. Technical Correction Section 1886(d)(5)(K)(i) of the Act requires that the Secretary establish a mechanism to recognize the costs of new medical services and technologies under subsection (d) of section 1886 of the Act. As made clear under section 1886(d)(1)(A) of the Act, subsection (d) 
                        ( print page 47308)
                        provides the methodology for payment with respect to the operating costs of inpatient hospital services. Section 1886(g) of the Act provides for payment of capital costs of inpatient hospital services. Although it has always been our policy that new technology add-on payment is available only with respect to operating costs, § 412.88(a)(2) of our regulations does not specifically refer to operating costs or the operating CCR. Therefore, we proposed to revise § 412.88(a)(2) to clarify that the new technology add-on payment is available only for operating costs, and that we estimate the costs of a case by applying the hospital's operating CCR to the billed charges. We did not receive any public comment on this proposal. Therefore, we are finalizing the proposed revision of § 412.88(a)(2) to clarify that the new technology add on payment is available only for operating costs. This correction will not have an impact on new technology add-on payments because, to the best of our knowledge, MACs already correctly apply only the operating CCR to calculate new technology add-on payments. III. Changes to the Hospital Wage Index A. Background Section 1886(d)(3)(E) of the Act requires that, as part of the methodology for determining prospective payments to hospitals, the Secretary must adjust the standardized amounts “for area differences in hospital wage levels by a factor (established by the Secretary) reflecting the relative hospital wage level in the geographic area of the hospital compared to the national average hospital wage level.” In accordance with the broad discretion conferred under the Act, we currently define hospital labor market areas based on the definitions of statistical areas established by the Office of Management and Budget (OMB). A discussion of the FY 2008 hospital wage index based on the statistical areas, including OMB's revised definitions of Metropolitan Areas, appears under section III.B. of the preamble of this final rule with comment period. Beginning October 1, 1993, section 1886(d)(3)(E) of the Act requires that we update the wage index annually. Furthermore, this section provides that the Secretary base the update on a survey of wages and wage-related costs of short-term, acute care hospitals. The survey must exclude the wages and wage-related costs incurred in furnishing skilled nursing services. This provision also requires us to make any updates or adjustments to the wage index in a manner that ensures that aggregate payments to hospitals are not affected by the change in the wage index. The adjustment for FY 2008 is discussed in section II.B. of the Addendum to this final rule with comment period. As discussed below in section III.I. of the preamble of this final rule with comment period, we also take into account the geographic reclassification of hospitals in accordance with sections 1886(d)(8)(B) and 1886(d)(10) of the Act when calculating IPPS payment amounts. Under section 1886(d)(8)(D) of the Act, the Secretary is required to adjust the standardized amounts so as to ensure that aggregate payments under the IPPS after implementation of the provisions of sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act are equal to the aggregate prospective payments that would have been made absent these provisions. The budget neutrality adjustment for FY 2008 is discussed in section II.A.4.b. of the Addendum to this final rule with comment period. Section 1886(d)(3)(E) of the Act also provides for the collection of data every 3 years on the occupational mix of employees for short-term, acute care hospitals participating in the Medicare program, in order to construct an occupational mix adjustment to the wage index. A discussion of the occupational mix adjustment that we are applying beginning October 1, 2007 (the FY 2008 wage index) appears under section III.C. of the preamble of this final rule with comment period. B. Core-Based Statistical Areas for the Hospital Wage Index The wage index is calculated and assigned to hospitals on the basis of the labor market area in which the hospital is located. In accordance with the broad discretion under section 1886(d)(3)(E) of the Act, beginning with FY 2005, we define hospital labor market areas based on the Core-Based Statistical Areas (CBSAs) established by OMB and announced in December 2003 (69 FR 49027). For a discussion of OMB's revised definitions of CBSAs and our implementation of the CBSA definitions, we refer readers to the preamble of the FY 2005 IPPS final rule (69 FR 49026 through 49032). The revised area designations established by OMB resulted in a higher wage index for some areas and a lower wage index for others. Further, some hospitals that were previously classified as urban became classified as rural. Given the significant payment impacts upon some hospitals because of these changes, we provided a transition period to the new labor market areas in the FY 2005 IPPS final rule. As part of that transition, we allowed urban hospitals that became rural under the new definitions to maintain their assignment to the Metropolitan Statistical Area (MSA) where they were previously located for the 3 year period of FY 2005, FY 2006, and FY 2007. For a discussion of the transition, we refer readers to the FY 2005 IPPS final rule (69 FR 49032 through 49034). FY 2007 was the last year of the transition period for urban hospitals that became classified as rural. Therefore, for discharges on or after October 1, 2007 (FY 2008), these hospitals will receive their statewide rural wage index or their FY 2008 MGCRB reclassified wage index. (These hospitals were and are eligible to apply for reclassification by the MGCRB both during the transition period and in subsequent years. These hospitals are considered rural for reclassification purposes.) Consistent with the FY 2005, FY 2006, and FY 2007 IPPS final rules, for FY 2008 we are providing that hospitals receive 100 percent of their wage index based upon the CBSA configurations. Specifically, for each hospital, we will determine a wage index for FY 2008 employing wage index data from FY 2004 hospital cost reports and using the CBSA labor market definitions. We consider CBSAs that are MSAs to be urban, and CBSAs that are Micropolitan Statistical Areas as well as areas outside of CBSAs to be rural. In addition, where an MSA has been divided into Metropolitan Divisions, we consider the Metropolitan Division to comprise the labor market areas for purposes of calculating the wage index (69 FR 49029). On December 18, 2006, OMB announced the inclusion of two new CBSAs and the revision of designations for six areas (OMB Bulletin No. 07–01). The new CBSAs are as follows: Lake Havasu-Kingman, Arizona (CBSA 29420). This CBSA comes from Mohave County, Arizona.
                    Palm Coast, Florida (CBSA 37380). This CBSA comes from Flager County, Florida. The revised CBSA designations are as follows: Mauldin, South Carolina and Easley, South Carolina qualify as new principal cities of the Greenville-Mauldin-Easley, South Carolina CBSA.
                    Conway, Arkansas qualifies as a new principal city of the Little Rock-North Little Rock-Conway, Arkansas CBSA.
                    Goleta, California qualifies as a new principal city of the Santa Barbara-Santa Maria-Goleta, California CBSA.( print page 47309)
                    Franklin, Tennessee qualifies as a new principal city of the Nashville-Davidson-Murfreesboro-Franklin, Tennessee CBSA.
                    Fort Pierce, Florida no longer qualifies as a principal city of the Port St. Lucie-Fort Pierce, Florida CBSA; the new designation is Port St. Lucie, Florida CBSA. (We note also that OMB renamed the Essex County, Massachusetts Metropolitan Division as the Peabody, Massachusetts Metropolitan Division. OMB also changed the CBSA code from 21604 to 37764.) The OMB bulletin is available on the OMB Web site at 
                        *http://www.whitehouse.gov/​OMB*
                        —go to “Bulletins” or “Statistical Programs and Standards.” CMS will apply these changes to the IPPS beginning October 1, 2007. *Comment:*
                         One commenter stated that the term “Core-Based Statistical Area” actually includes both Metropolitan Statistical Areas (MSAs) and Micropolitan Statistical Areas (Micropolitan). The commenter also noted that Micropolitan Areas are considered by CMS to be part of statewide rural areas. The commenter agreed that, for the FY 2005 proposed and final rules, it was a good idea for CMS to differentiate between the old and new Census definitions by utilizing the term CBSA rather than MSA. However, the commenter suggested that, to be technically correct, CMS should now return to using the term MSAs when referring to urban areas. *Response:*
                         We disagree with the commenter that we should now use the term “MSA” rather than “CBSA” when referring to urban areas. As the commenter noted, CBSA is the broader classification for MSAs and Micropolitan Areas. Therefore, it is technically correct to refer to either MSA or Micropolitan Areas as CBSAs. Further, when it is necessary for CMS to distinguish between urban and rural areas, we specify “urban” or “rural”. In addition, we believe that our labor market area terminology and definitions are explained clearly enough in the preamble of our proposed and final rules to minimize confusion. C. Occupational Mix Adjustment to the FY 2008 Wage Index As stated earlier, section 1886(d)(3)(E) of the Act provides for the collection of data every 3 years on the occupational mix of employees for each short-term, acute care hospital participating in the Medicare program, in order to construct an occupational mix adjustment to the wage index, for application beginning October 1, 2004 (the FY 2005 wage index). The purpose of the occupational mix adjustment is to control for the effect of hospitals’ employment choices on the wage index. For example, hospitals may choose to employ different combinations of registered nurses, licensed practical nurses, nursing aides, and medical assistants for the purpose of providing nursing care to their patients. The varying labor costs associated with these choices reflect hospital management decisions rather than geographic differences in the costs of labor. 1. Development of Data for the FY 2008 Occupational Mix Adjustment On October 14, 2005, we published a notice in the 
                        **Federal Register**
                         (70 FR 60092) proposing to use a new survey, the 2006 Medicare Wage Index Occupational Mix Survey (the 2006 survey) to apply an occupational mix adjustment to the FY 2008 wage index. In the proposed 2006 survey, we included several modifications based on the comments and recommendations we received on the 2003 survey, including (1) allowing hospitals to report their own average hourly wage rather than using BLS data; (2) extending the prospective survey period; and (3) reducing the number of occupational categories but refining the subcategories for registered nurses. We made the changes to the occupational categories in response to MedPAC comments to the FY 2005 IPPS final rule (69 FR 49036). Specifically, MedPAC recommended that CMS assess whether including subcategories of registered nurses would result in a more accurate occupational mix adjustment. MedPAC believed that including all registered nurses in a single category may obscure significant wage differences among the subcategories of registered nurses, for example, the wages of surgical registered nurses and floor registered nurses may differ. Also, to offset additional reporting burden for hospitals, MedPAC recommended that CMS should combine the general service categories that account for only a small percentage of a hospital's total hours with the “all other occupations” category because most of the occupational mix adjustment is correlated with the nursing general service category. In addition, in response to the public comments on the October 14, 2005 notice, we modified the 2006 survey. On February 10, 2006, we published a 
                        **Federal Register**
                         notice (71 FR 7047) that solicited comments and announced our intent to seek OMB approval on the revised occupational mix survey (Form CMS 10079 (2006)). OMB approved the survey on April 25, 2006. The 2006 survey provides for the collection of hospital specific wages and hours data, a 6-month prospective reporting period (that is, January 1, 2006, through June 30, 2006), the transfer of each general service category that comprised less than 4 percent of total hospital employees in the 2003 survey to the “all other occupations” category (the revised survey focuses only on the mix of nursing occupations), additional clarification of the definitions for the occupational categories, an expansion of the registered nurse category to include functional subcategories, and the exclusion of average hourly rate data associated with advance practice nurses. The 2006 survey included only two general occupational categories: nursing and “all other occupations.” The nursing category has four subcategories: registered nurses, licensed practical nurses, aides, orderlies, attendants, and medical assistants. The registered nurse subcategory includes two functional subcategories: management personnel and staff nurses or clinicians. As indicated above, the 2006 survey provided for a 6-month data collection period, from January 1, 2006 through June 30, 2006. However, we allowed flexibility for the reporting period begin and end dates to accommodate some hospitals' bi-weekly payroll and reporting systems. That is, the 6-month reporting period had to begin on or after December 25, 2005, and end before July 9, 2006. We are using the 6-month 2006 survey data to calculate the occupational mix adjustment for the FY 2008 wage index. We used the 1st quarter of 2006 survey data in the FY 2007 wage index to comply with a court decision in 
                        *Bellevue Hosp. Center*
                         v. 
                        *Leavitt*, 443 F.3d 163 (2nd Cir. 2006). For a discussion of our use of the 2006 survey data in the FY 2007 wage index, in compliance with the 
                        *Bellevue*
                         decision, we refer readers to the FY 2007 IPPS final rule (71 FR 48007) as well as the FY 2007 IPPS final notice (71 FR 59886). However, as stated above, we are using the entire 6-month 2006 survey data (that is, from the period January 1, 2006 through June 30, 2006) to calculate the occupational mix adjustment for the FY 2008 wage index. 2. Timeline for the Collection, Review, and Correction of the Occupational Mix Data In a Joint-Signature Memorandum that we issued on April 21, 2006 (JSM–06412), and in the FY 2007 IPPS final rule (71 FR 48008), we discussed the 
                        ( print page 47310)
                        schedule for the 1st quarter 2006 occupational mix survey data that would be used in the FY 2007 wage index. The schedule included deadlines for— Hospitals to submit 1st quarter occupational mix data. The deadline was June 1, 2006.
                    Fiscal intermediary/MAC review of the submitted 1st quarter data. The deadline was June 22, 2006.
                    Availability of the submitted first quarter data on the CMS Web site. The deadline was June 29, 2006.
                    Hospitals to submit requests to their fiscal intermediary/MAC for corrections to their 1st quarter occupational mix data. The deadline was July 13, 2006.
                    Fiscal intermediaries/MAC to submit corrected 1st quarter occupational mix survey data to CMS. The deadline was July 27, 2006. In the Joint-Signature Memorandum, we also indicated that hospitals were to submit their 2nd quarter 2006 occupational mix survey data to their fiscal intermediary/MAC by August 31, 2006. On October 6, we published on our Web site both the audited 1st quarter and unaudited 2nd quarter 2006 occupational survey data and Worksheet S–3 wage data to be used in calculating the FY 2008 wage index. In addition, we sent a letter to hospitals through their fiscal intermediary/MAC (dated October 6, 2006) that discussed the timeframe for reviewing and correcting Worksheet S–3 wage data and the 2nd quarter 2006 survey data, and an opportunity for hospitals to request additional adjustments to their 1st quarter 2006 survey data for the FY 2008 wage index. The revision and correction process for all of the data used for computing the FY 2008 wage index is discussed in detail in section III.K. of the preamble of this final rule with comment period. 3. Calculation of the Occupational Mix Adjustment for FY 2008 For FY 2008 (as we did for FY 2007), we are calculating the occupational mix adjustment factor using the following steps: *Step 1*
                        —For each hospital, determine the percentage of the total nursing category attributable to a nursing subcategory by dividing the nursing subcategory hours by the total nursing category's hours (registered nurse management personnel and registered nurse staff nurses or clinicians are treated as separate nursing subcategories). Repeat this computation for each of the five nursing subcategories: registered nurse management personnel; registered nurse staff nurses or clinicians; licensed practical nurses; nursing aides, orderlies, and attendants; and medical assistants. *Step 2*
                        —Determine a national average hourly rate for each nursing subcategory by dividing a subcategory's total salaries for all hospitals in the occupational mix survey database by the subcategory's total hours for all hospitals in the occupational mix survey database. *Step 3*
                        —For each hospital, determine an adjusted average hourly rate for each nursing subcategory by multiplying the percentage of the total nursing category (from Step 1) by the national average hourly rate for that nursing subcategory (from Step 2). Repeat this calculation for each of the five nursing subcategories. *Step 4*
                        —For each hospital, determine the adjusted average hourly rate for the total nursing category by summing the adjusted average hourly rate (from Step 3) for each of the nursing subcategories. *Step 5*
                        —Determine the national average hourly rate for the total nursing category by dividing total nursing category salaries for all hospitals in the occupational mix survey database by total nursing category hours for all hospitals in the occupational mix survey database. *Step 6*
                        —For each hospital, compute the occupational mix adjustment factor for the total nursing category by dividing the national average hourly rate for the total nursing category (from Step 5) by the hospital's adjusted average hourly rate for the total nursing category (from Step 4). If the hospital's adjusted average hourly rate is less than the national average hourly rate (indicating the hospital employs a less costly mix of nursing employees), the occupational mix adjustment factor is greater than 1.0000. If the hospital's adjusted average hourly rate is greater than the national average hourly rate, the occupational mix adjustment factor is less than 1.0000. *Step 7*
                        —For each hospital, calculate the occupational mix adjusted salaries and wage-related costs for the total nursing category by multiplying the hospital's total salaries and wage-related costs (from Step 5 of the unadjusted wage index calculation in section III.F. of the preamble of this final rule with comment period) by the percentage of the hospital's total workers attributable to the total nursing category (using the occupational mix survey data, this percentage is determined by dividing the hospital's total nursing category salaries by the hospital's total salaries for “nursing and all other”) and by the total nursing category's occupational mix adjustment factor (from Step 6 above). The remaining portion of the hospital's total salaries and wage-related costs that is attributable to all other employees of the hospital is not adjusted by the occupational mix. A hospital's all other portion is determined by subtracting the hospital's nursing category percentage from 100 percent. *Step 8*
                        —For each hospital, calculate the total occupational mix adjusted salaries and wage related costs for a hospital by summing the occupational mix adjusted salaries and wage-related costs for the total nursing category (from Step 7) and the portion of the hospital's salaries and wage-related costs for all other employees (from Step 7). To compute a hospital's occupational mix adjusted average hourly wage, divide the hospital's total occupational mix adjusted salaries and wage-related costs by the hospital's total hours (from Step 4 of the unadjusted wage index calculation in section III.F. of the preamble of this final rule with comment period). *Step 9*
                        —To compute the occupational mix adjusted average hourly wage for an urban or rural area, sum the total occupational mix adjusted salaries and wage-related costs for all hospitals in the area, then sum the total hours for all hospitals in the area. Next, divide the area's occupational mix adjusted salaries and wage-related costs by the area's hours. *Step 10*
                        —To compute the national occupational mix adjusted average hourly wage, sum the total occupational mix adjusted salaries and wage-related costs for all hospitals in the Nation, then sum the total hours for all hospitals in the Nation. Next, divide the national occupational mix adjusted salaries and wage-related costs by the national hours. The FY 2008 final occupational mix adjusted national average hourly wage is $30.9133. *Step 11*
                        —To compute the occupational mix adjusted wage index, divide each area's occupational mix adjusted average hourly wage (Step 9) by the national occupational mix adjusted average hourly wage (Step 10). *Step 12*
                        —To compute the Puerto Rico specific occupational mix adjusted wage index, follow Steps 1 through 11 above. The FY 2008 final occupational mix adjusted Puerto Rico specific average hourly wage is $13.5536. The table below is an illustrative example of the occupational mix adjustment. 
 
  
 
  
 
  
 
 Because the occupational mix adjustment is required by statute, all hospitals that are subject to payments under the IPPS, or any hospital that would be subject to the IPPS if not granted a waiver, must complete the occupational mix survey, unless the hospital has no associated cost report wage data that are included in the FY 2008 wage index. For the FY 2007 wage index, if a hospital did not respond to the occupational mix survey, or if we determined that a hospital's submitted data were too erroneous to include in the wage index, we assigned the hospital the average occupational mix adjustment for the labor market area (71 FR 48013). We believed this method had the least impact on the wage index for other hospitals in the area. For areas where no hospital submitted data for purposes of calculating the occupational mix adjustment, we applied the national occupational mix factor of 1.0000 in calculating the area's FY 2007 occupational mix adjusted wage index. We indicated in the FY 2007 IPPS final rule that we reserve the right to apply a different approach in future years, including potentially penalizing nonresponsive hospitals. For the FY 2008 wage index, we are handling the data for hospitals that did not respond to the occupational mix survey (neither the 1st quarter nor 2nd quarter data) in the same manner as discussed above for the FY 2007 wage index. In addition, if a hospital submitted survey data for either the 1st quarter or 2nd quarter, but not for both quarters, we used the data the hospital submitted for one quarter to calculate the hospital's FY 2008 occupational mix adjustment factor. Lastly, if a hospital submitted a survey(s), but that survey data could not be used because we determined it to be aberrant, we also assigned the hospital the average occupational mix adjustment for its labor market area. For example, if a hospital's individual nurse category average hourly wages were out of range (that is, unusually high or low), and the hospital did not provide sufficient documentation to explain the aberrancy, or the hospital did not submit any registered nurse staff salaries or hours data, we assigned the hospital the average occupational mix adjustment for the labor market area in which it is located. In calculating the average occupational mix adjustment factor for a labor market area, we replicated Steps 1 through 6 of the calculation for the occupational mix adjustment. However, instead of performing these steps at the hospital level, we aggregated the data at the labor market area level. In following these steps, for example, for CBSAs that contain providers that did not submit occupational mix survey data, the occupational mix adjustment factor ranged from a low of 0.8971 (CBSA 39820, Redding, CA), to a high of 1.0731 (CBSA 19, Rural Louisiana). Also, in computing a hospital's occupational mix adjusted salaries and wage-related costs for nursing employees (Step 7 of the calculation), in the absence of occupational mix survey data, we multiplied the hospital's total salaries and wage-related costs by the percentage of the 
                        *area's*
                         total workers attributable to the 
                        *area's*
                         total nursing category. For FY 2008, there is one CBSA in which none of the providers submitted the occupational mix survey (CBSA 49740, Yuma, AZ). In the absence of any data in this labor market area, we applied an occupational mix adjustment factor of 1.0 to all provider(s). In the FY 2007 IPPS final rule, we also indicated that we would give serious consideration to applying a hospital-specific penalty if a hospital does not comply with regulations requiring submission of occupational mix survey data in future years. We stated that we believe that section 1886(d)(5)(I)(i) of the Act provides us with the authority to penalize hospitals that do not submit occupational mix survey data. That section authorizes us to provide for exceptions and adjustments to the payment amounts under IPPS as the Secretary deems appropriate. We also indicated that we would address this issue in the FY 2008 IPPS proposed rule. In the FY 2008 IPPS proposed rule, we solicited comments and suggestions for a hospital-specific penalty for hospitals that do not submit occupational mix survey. In response to the FY 2007 IPPS proposed rule, some commenters suggested a 1-percent to 2-percent reduction in the hospital's wage index value or a set percentage of the standardized amount. We note that any penalty that we would determine for nonresponsive hospitals would apply to a future wage index, not the FY 2008 wage index. Below is a summary of the public comments we received on the FY 2008 IPPS proposed rule and our responses: *Comment:*
                         Commenters supported CMS's proposal for the FY 2008 wage index to handle the occupational mix data for nonresponsive hospitals in the same manner as the data were handled for the FY 2007 wage index. The commenters also opined that full participation in the occupational mix survey is critical, and hospitals that do not participate should not benefit from the participation of others. Several commenters encouraged CMS to develop a methodology that encourages hospitals to report but does not unfairly penalize neighboring hospitals. In addition, two commenters recommended that, for future surveys, CMS should not simply provide substitute data for nonresponsive hospitals, because that data will also have an impact on other hospitals. One commenter suggested that CMS should consider a penalty for hospitals that do not respond to the occupational mix survey that would either reduce the hospital's wage index value by no more than 0.5 percentage points, or reduce the hospital's standardized amount by no more than 0.4 percentage points (the original penalty applied to hospitals that did not submit quality data). The commenter noted that, since CMS began imposing the penalty for not reporting quality data, the rate of reporting that data has increased. Another commenter suggested a penalty of a 2-percent reduction in a hospital's wage index value for nonsubmission or submission of aberrant occupational mix data. Several commenters also suggested that, if CMS decides to adopt a penalty for non-responsive hospitals, CMS should also establish an appeal process for hospitals with extenuating circumstances (for example, hospitals affected by Hurricane Katrina). *Response:*
                         As proposed, in the FY 2008 final wage index in this rule, we have assigned nonresponsive hospitals the average occupational mix adjustment for the labor market area. For areas where no hospital submitted survey data, we applied the national occupational mix adjustment factor of 1.0000 in calculating the area's FY 2008 occupational mix adjusted wage index. We appreciate the suggestions we received regarding future penalties for hospitals that do not submit occupational mix survey data. We may consider proposing a policy to penalize hospitals that do not submit occupational mix survey data for FY 2010, the first year of the application of the new 2007–2008 occupational mix survey. One option we may consider is paying hospitals that do not submit occupational mix survey data at the same reduced IPPS rate that currently applies to hospitals that do not submit quality data (or an update to the standardized amount that equals the market basket less 2.0 percentage points). We agree that hospitals may have extenuating circumstances that preclude them from submitting occupational mix survey data and they should not be subject to a nonresponse 
                        ( print page 47315)
                        penalty. For instance, hospitals that do not begin operations until after the survey period would clearly be unable to provide occupational mix survey data. There may be other extenuating circumstances as well that warrant special consideration. The survey period for the FY 2010 occupational mix adjustment is July 1, 2007 to June 30, 2008. Hospitals will be required to submit occupational mix survey data from that time period to their fiscal intermediaries (or MAC) by September 1, 2008, or one month prior to the first day of FY 2009. Therefore, we would have more than a year to address any potential extenuating circumstances that could apply to hospitals that do not submit survey data. If we decide to adopt a policy that will penalize hospitals for not responding to the occupational mix survey, we will announce it in the FY 2009 IPPS proposed rule so hospitals will be aware of the policy prior to the deadline for submitting the data. The FY 2009 IPPS final rule will be made available to the public by August 1, 2008. 4. 2007–2008 Occupational Mix Survey for the FY 2010 Wage Index As stated earlier, section 304(c) of Pub. L. 106–554 amended section 1886(d)(3)(E) of the Act to require CMS to collect data every 3 years on the occupational mix of employees for each short-term, acute care hospital participating in the Medicare program. We used occupational mix survey data collected in 2006 in the FY 2007 IPPS. Since we implemented the 2006 survey, we received several public comments suggesting further improvements to the occupational mix survey instructions and definitions. Specifically, some commenters recommended that we include certain employees, such as surgical technicians and paramedics in the occupational mix adjustment. The commenters indicated that these occupations perform similar functions, and in some cases, are used as substitutes for nursing staff. Therefore, they recommended that CMS include these occupations with the nursing categories on the survey. (On the 2003 and 2006 surveys, these categories were included in the “All Other Occupations” category.) The commenters also recommended that CMS expand the list of cost centers for the survey to include additional cost centers that contain a significant number of nursing personnel. Some commenters suggested that CMS not collect occupational mix data for the “Registered Nurse” subcategories (that is, Management Personnel and Staff Nurse/Clinician). The commenters expressed concern that requiring the subcategories led to errors and inconsistencies in reporting, and added to the hospitals' collection burden. The commenters did not believe that this level of specificity significantly affects the adjustment. Therefore they recommended that CMS eliminate the registered nurse subcategories. In addition, commenters recommended that CMS provide for a 1-year data collection period rather than a 6-month data collection period for the next survey collection. The commenters suggested that a 1-year data collection period would provide a better representation of a hospital's employment mix, which can vary during different times of the year. The commenters also indicated that a 1-year data collection period would allow hospitals to verify their wages and hours to year-end payroll reports and contractor invoices. In response to these suggestions we have modified the occupational mix survey. The revised 2007–2008 occupational mix survey will provide for the collection of hospital-specific wages and hours data for a 1-year prospective reporting period from July 1, 2007, through June 30, 2008, additional clarifications to the survey instructions, the elimination of the registered nurse subcategories, some refinements to the definitions of the occupational categories, and the inclusion of additional cost centers that typically provide nursing services. The revised 2007–2008 Medicare occupational mix survey will be applied beginning with the FY 2010 wage index. On February 2, 2007, we published a notice soliciting comments on the proposed revisions to the occupational mix survey (Form CMS–10079 (2006)) (72 FR 5055). The comment period for the proposed survey ended on April 3, 2007. We are in the process of developing a final notice for publication in the 
                        **Federal Register**
                        . D. Worksheet S–3 Wage Data for the FY 2008 Wage Index The FY 2008 wage index values (to be effective for hospital discharges occurring on or after October 1, 2007, and before October 1, 2008) in section II.B. of the Addendum to this final rule with comment period are based on the data collected from the Medicare cost reports submitted by hospitals for cost reporting periods beginning in FY 2004 (the FY 2007 wage index was based on FY 2003 wage data). 1. Included Categories of Costs The FY 2008 wage index includes the following categories of data associated with costs paid under the IPPS (as well as outpatient costs): Salaries and hours from short-term, acute care hospitals (including paid lunch hours and hours associated with military leave and jury duty).
                    Home office costs and hours.
                    Certain contract labor costs and hours (which includes direct patient care, certain top management, pharmacy, laboratory, and nonteaching physician Part A services, and certain indirect patient care as discussed in section III.D.2. of the preamble of this final rule with comment period).
                    Wage-related costs, including pensions and other deferred compensation costs. 2. Contract Labor for Indirect Patient Care Services In the FY 2003 IPPS final rule (67 FR 50022), we discussed the inclusion of contract labor cost in calculating the wage index. Our policy has evolved over the years with the increasing role of contract labor in meeting special personnel needs of hospitals. In response to suggestions that we further expand our definition of contract labor for the wage index, we indicated our intent to begin collecting data in future Medicare cost reports on the following overhead services: administrative and general (AG); housekeeping; and dietary. We selected these three overhead services for consideration because they are provided at all hospitals, either directly or through contracts, and together they comprise about 60 percent of a hospital's overhead hours. Consistent with our consideration of contract AG services, we also stated that we would begin collecting costs and hours data associated with other contract management services that would not be included on the cost report as overhead AG and are not top management contracts (that is, the chief executive officer, chief financial officer, chief operating officer, and nurse administrator) that are included on Line 9 of Worksheet S–3, Part II. We revised the cost report, beginning October 1, 2003 (the FY 2004 cost report), to provide for the collection of cost and hours data for the four identified contract indirect patient care services. We added four new line items to Worksheet S–3, Part II: Line 9.03 (Contract management and administrative services); Line 22.01 (Contract AG services); Line 26.01 (Contract housekeeping services); and Line 27.01 (Contract dietary services). We stated in the FY 2003 final rule that our decision on whether to include these costs in calculating the wage 
                        ( print page 47316)
                        index would depend on our analyses of the data and public comments. The FY 2008 wage index, which is based on FY 2004 cost report data, is the first year that we can assess the impact of including these costs in the wage index. As part of the FY 2008 wage index desk review program, we required the fiscal intermediaries (or, if applicable, the MAC) to verify the accuracy of the data reported on the new Lines 9.03, 22.01, 26.01, and 27.01. As we discussed in the FY 2008 IPPS proposed rule, after completion of these reviews, some hospitals continued to fail our edits for reasonableness. Many of these edit failures were for wage data that were not to be included in the wage index and would be excluded through the wage index calculation. Some hospitals that continued to critically fail edits related to contract labor were also designated for removal from the FY 2008 wage index due to failure of other critical wage edits. In addition, some of the aberrant data were resolved through the correction process described in section III.K. of the preamble of this final rule with comment period. Ultimately, we believe that the amount of aberrant data on these new line items is minimal and will have little impact on area wage index values. In addition, we have simulated the effect of including these wage data for contract indirect patient care services on the wage index. We note that the results of these simulations differ from those specified in the FY 2008 IPPS proposed rule (72 FR 24782) not only because we used more updated and accurate wage data for the final rule analysis, but also because of changes we incorporated into Step 2 and Step 4 of the wage index calculation for this final rule with comment period to more accurately account for the wages and hours of contract labor. (We refer readers to section III.G., Computation of the FY 2008 Unadjusted Wage Index, of this preamble for a more detailed explanation of the changes to the wage index calculation). Under this simulation, we found that the resulting average hourly wage will not be affected for 3,032 hospitals (85.0 percent), will decrease for 327 hospitals (9.2 percent), and will increase for 209 hospitals (5.9 percent). The average hourly wage for 12 hospitals will decline by 5 percent or greater (the largest being 7.8 percent). The average hourly wage for 67 hospitals will decline between 1 and 5 percent. Twenty-one hospitals are experiencing an increase of 1 percent or greater in average hourly wage from this policy, with the increase for 2 of these hospitals being larger than 5 percent (the largest increase is 7.8 percent.) At the labor market area level, we found that the resulting average hourly wage will not affect 232 areas (53.3 percent), will decrease for 132 areas (30.3 percent), and will increase for 71 areas (16.3 percent). The wage index of 13 areas will decrease between 1 percent and 5 percent, with the largest decrease for an urban area being 4.07 percent and the largest decrease for a rural area being 0.63 percent. The largest increase in an area's wage index is 0.69 percent for an urban area and 0.30 percent for a rural area. As a result of the correction, and using the final data, the combined effect on the FY 2008 wage index of including the new contract labor lines 9.03, 22.01, 26.01, and 27.01 is the following for hospitals: Percent change to wage index
Number of hospitalsGreater than −5 percent
0−1 percent to −5 percent
47Between −1 percent and +1 percent
3,522+1 percent to +5 percent
0Greater than +5 percent
0
 The wage index values for 98.7 percent of all hospitals will change by less than 1 percent, and 119 hospitals (3.3 percent) will experience no change as a result of including the new contract labor lines. We believe that the combined effect of including these costs in the wage index is negligible because the higher labor costs associated with contract management and AG services are offset by the lower labor costs associated with contract housekeeping and dietary services. Public commenters have expressed interest in including in the wage index the costs and hours for contract management, AG, housekeeping, and dietary services. We also believe that including a more comprehensive measure of area differences in the cost of labor will improve the accuracy of the wage index. For these reasons, we are including these contract services in the wage index, beginning with FY 2008. In the FY 2008 IPPS proposed rule, we invited public comment on whether we should revise a future cost report to collect contract labor data for the remaining indirect patient care cost centers on Worksheet S–3, Part II for possible inclusion in the wage index. We indicated that we would consider these comments in the context of potential reforms of the IPPS wage index for FY 2009 and subsequent years. As indicated in section III.M. of the preamble of this final rule with comment period, section 106(b) of the MIEACMS–TRHCA (Pub. L. 109–432) requires the Secretary to consider a MedPAC study and nine specific aspects of the wage index in making one or more proposals for revisions in FY 2009. *Comment:*
                         Several commenters stated that they supported including salaries and hours for contract indirect patient care services in the wage index, as it discourages hospitals from outsourcing in order to raise their average hourly wage for the wage index. However, they noted that CMS had made an error in computing the wage index in the proposed rule with regards to lines 22.01, 26.01, and 27.01. The new lines were included in Step 4 of the calculation (the step that allocates a portion of overhead wages and wage related costs to excluded areas, and then subtracts the associated amount from total wages and wage-related costs). However, lines 22.01, 26.01, and 27.01 were not included in total wages in Step 2. Therefore, an amount for overhead wages and wage related costs for excluded areas was subtracted from total wages that did not include those costs. The commenters requested that CMS correct the calculation and reassess the impact on hospitals of including the new contract indirect patient care services in the wage index. Some commenters recommended that CMS provide a transition if the impact of including overhead contract labor costs in the wage index on any hospital is great. One commenter suggested that CMS should provide a 2–3 year transition for labor market areas that have more than a 2 percent reduction in the wage index. In addition, the commenter urged CMS to revise future cost reports to collect the remaining contract labor indirect patient care costs on Worksheet S–3, Part II for possible inclusion in the wage index. *Response:*
                         We appreciate the commenters bringing to our attention the error in the proposed wage index calculation. As indicated above, we have corrected the calculation. As discussed above, we believe the impact of this policy is generally very minor, and we do not believe the additional complexity of a transition wage index is warranted for an impact this small. Further, we continue to believe it is prudent policy to include in the wage index the costs for these contract indirect patient care services. Therefore, we are adopting this policy, beginning with the FY 2008 wage index. We will consider the inclusion of contract labor costs associated with the remaining indirect cost centers on Worksheet S–3, Part II, in our study of 
                        ( print page 47317)
                        wage index reforms for FY 2009 and future years. 3. Excluded Categories of Costs Consistent with the wage index methodology for FY 2007, the wage index for FY 2008 also excludes the direct and overhead salaries and hours for services not subject to IPPS payment, such as SNF services, home health services, costs related to GME (teaching physicians and residents) and certified registered nurse anesthetists (CRNAs), and other subprovider components that are not paid under the IPPS. The FY 2008 wage index also excludes the salaries, hours, and wage-related costs of hospital-based rural health clinics (RHCs), and Federally qualified health centers (FQHCs) because Medicare pays for these costs outside of the IPPS (68 FR 45395). In addition, salaries, hours, and wage-related costs of CAHs are excluded from the wage index, for the reasons explained in the FY 2004 IPPS final rule (68 FR 45397). 4. Use of Wage Index Data by Providers Other Than Acute Care Hospitals Under the IPPS Data collected for the IPPS wage index are also currently used to calculate wage indices applicable to other providers, such as SNFs, home health agencies, and hospices. In addition, they are used for prospective payments to IRFs, IPFs, and LTCHs, and for hospital outpatient services. We note that, in the IPPS rules, we do not address comments pertaining to the wage indices for non-IPPS providers. Such comments should be made in response to separate proposed rules for those providers. E. Verification of Worksheet S–3 Wage Data The wage data for the FY 2008 wage index were obtained from Worksheet S–3, Parts II and III of the FY 2004 Medicare cost reports. Instructions for completing the Worksheet S–3, Parts II and III are in the Provider Reimbursement Manual, Part I, sections 3605.2 and 3605.3. The data file used to construct the wage index includes FY 2004 data submitted to us as of February 26, 2007. As in past years, we performed an intensive review of the wage data, mostly through the use of edits designed to identify aberrant data. We asked our fiscal intermediaries/MAC to revise or verify data elements that resulted in specific edit failures. For the proposed FY 2008 wage index, we identified and excluded 23 hospitals with data that were too aberrant to include in the proposed wage index, although we stated that if these data elements were corrected, we intended to include some of these providers in the FY 2008 final wage index. However, because some unresolved data elements were included in the calculation of the proposed FY 2008 wage index, we instructed fiscal intermediaries/MAC to complete their data verification of questionable data elements and to transmit any changes to the wage data no later than April 13, 2007. While the data for some hospitals were resolved, the data for some other hospitals were identified as too aberrant to include in the final wage index. Therefore, we determined that the data for 30 hospitals should not be included in the FY 2008 final wage index. In constructing the FY 2008 wage index, we include the wage data for facilities that were IPPS hospitals in FY 2004, even for those facilities that have since terminated their participation in the program as hospitals, as long as those data do not fail any of our edits for reasonableness. We believe that including the wage data for these hospitals is, in general, appropriate to reflect the economic conditions in the various labor market areas during the relevant past period. However, we exclude the wage data for CAHs as discussed in 68 FR 45397. For this final rule with comment period, we removed 19 hospitals that converted to CAH status between February 17, 2006, the cut-off date for CAH exclusion from the FY 2007 wage index, and February 16, 2007, the cut-off date for CAH exclusion from the FY 2008 wage index. After removing hospitals with aberrant data and hospitals that converted to CAH status, the FY 2008 wage index is calculated based on 3,569 hospitals. F. Wage Index for Multicampus Hospitals As discussed earlier under section III.B. of the preamble of this final rule with comment period, effective October 1, 2004, for the IPPS, CMS implemented new labor market areas based on the CBSA definitions of MSAs. As a result of these labor market areas, there are multicampus hospitals previously located in a single MSA that are now located in more than one CBSA. A multicampus hospital is a single integrated institution. For this reason, the multicampus hospital has one provider number and submits a single cost report that combines the total wages and hours of each of its campuses. When campuses of a multicampus hospital are located in the same CBSA, the wages and hours for the entire institution are included in the calculation of the wage index for that labor market area and there is no need to separate the data by campus. However, when a multicampus hospital has campuses located in different labor market areas, wages and hours are reported in a single CBSA even though the hospital's staff is working at campuses in more than one labor market area. The wage data are reported in the labor market area of the hospital campus associated with the provider number. Wages and hours are not reported separately for each campus and no data from the multicampus hospital are used in determining the wage index for the labor market area(s) where the other campus(es) are located. Under § 412.64(b)(5) of our regulations, the wage-adjusted standardized amount is based on geographic location of the hospital facility at which the discharge occurred. Therefore, the wage index for each hospital campus used to make the IPPS payment is based on its geographic location, while the wage data from all of the campuses, including those that may be located in a different geographic area, are applied to one area only. We have received inquiries from several hospitals suggesting that we should adopt a policy that results in an allocation of a multicampus hospital's wages and hours across the different labor market areas where its campuses are located. The wage index was developed to adjust the IPPS standardized amount to reflect area differences in hospital wage levels in the hospital's geographic area compared to the national hospital wage level as required under section 1886(d)(3)(E) of the Act. Although we acknowledge that reporting the wage data into a single labor market area when individual campuses of a multicampus hospital are located in different labor market areas may not allocate wage data with exact precision, the Medicare cost report, in its current form, does not enable a multicampus hospital to separately report its costs by location. The fact that a multicampus hospital submits a single cost report reflects that it is an integrated institution with one accounting structure. Nevertheless, we agree with the comments brought to our attention that we should consider a policy that allocates a multicampus hospital's wages and hours among the different labor market areas where it is located. That is, rather than giving 100 percent of the hospital's wage data to the labor market area associated with its provider number, we believe that an allocation of its wage data should be made to each campus. We considered three alternative methods of apportionment: beds, discharges, or FTE staff. A hospital's number of discharges can fluctuate from 
                        ( print page 47318)
                        year to year and may be an unstable data source to use in allocating a hospital's wages and hours among the different campuses. Alternatively, while a hospital's number of beds is a more static number, it likely does not correlate well with how a hospital incurs its wage costs. Furthermore, neither of these numbers is available on a campus-specific basis in Medicare's data systems. (While an individual campus of a multicampus hospital located in a different labor market area than the remainder of the institution is required to indicate a suffix on its provider number when submitting a claim in order to receive payment using the wage index for its geographic location, the suffix is only used by the fiscal intermediary (or, if applicable, the MAC) and is not retained in Medicare's historical data files that we use to determine IPPS rates). Given the unavailability of beds and discharges and their respective drawbacks for allocating wages and hours across multiple campuses, in the FY 2008 IPPS proposed rule, we proposed to apportion wages and hours for each campus of a multicampus hospital based on FTE staff. For example, a multicampus hospital may have three campuses located in two different labor market areas. Campuses A and B are located in labor market area 1 and have 50 and 25 FTEs, respectively. Campus C is located in labor market area 2 and has an additional 25 FTEs. Therefore, 75 percent of the hospital's FTEs work in labor market 1 and 25 percent in labor market area 2. Under the proposed policy, we would apportion 75 percent of the hospital's occupational mix adjusted total salaries, wage-related costs and hours to labor market 1 and 25 percent to labor market 2. We believe that the number of FTEs will provide the best method of apportioning wages and hours among the different campuses, thereby allowing the apportioned wage data to be included in each geographic area where the hospital has employees working. We indicated that the proposed policy would require the identification of all multicampus hospitals located in more than one CBSA, the county, State, and zip code of each campus, and the campus-specific number of FTEs. Based on our comprehensive interactions with our fiscal intermediaries since adopting the revised labor market areas beginning in FY 2005, we are only aware of three multicampus hospitals that are located in more than one labor market area. We are beginning the process to make updates and refinements to the cost report for the future. We are currently planning to add additional lines to Worksheet S–2 of the cost report that will allow a multicampus hospital to report the locations of its different campuses (county, State, and zip code) and number of FTE staff by location so this information would become part of the cost report submission process. The effective date of the revised cost report is not expected until FY 2009. Therefore, we would not have data from multicampus hospitals under our normal wage data collection process to be able to allocate wages to each labor market area by FTEs until at least the FY 2013 wage index. In the interim, we proposed to collect this information from multicampus hospitals on a small survey form through our fiscal intermediaries/MAC as part of the wage index desk review process beginning with the FY 2009 wage index. In the proposed rule, we indicated that we will not be able to apply this policy to the FY 2008 wage index unless we have this information from multicampus hospitals prior to the close of the comment period for the proposed rule. Therefore, for the FY 2008 wage index, we indicated that multicampus hospitals with campuses located in more than one geographic area should submit the information during the comment period on the proposed rule for the county, State, and zip code of its campuses, and the FTE number, including contract labor, per campus along with supporting documentation. We stated that the hospitals should submit data from their FY 2004 cost reporting period to match the same data that will be used for the FY 2008 wage index. However, if unavailable, the hospital may submit the data for a subsequent cost reporting period that is closest to the FY 2004 reporting period that provides the information in order to apportion the hospital's wage data among its campuses. These data will enable CMS to apportion the wages and hours of the multicampus hospital among its different campuses for use in the FY 2008 wage index calculations should the proposal become final. As stated earlier, we are only aware of three hospitals that would be affected by this information collection request. As stipulated under 5 CFR 1320.3(c)(4), the proposed information collection request is exempt from the Paperwork Reduction Act (PRA) as it does not affect 10 or more persons within a 12-month period. In the proposed rule, we stated that if, during the IPPS rule comment period, we determine the number of affected persons surpasses the threshold of 10 as specified in 5 CFR 1320.3(c)(4), we would not adopt the policy until FY 2009 in order for us to seek the requisite approval from OMB under the PRA. As we discuss below, only two hospitals are affected by the data submission. Therefore, the information collection is exempt from the PRA. *Comment:*
                         Several commenters were supportive of our proposed policy to include the wages and hours of each campus of a multicampus hospital in the wage index calculation of its respective CBSA, as opposed to the current situation where all wages and hours for the entire hospital are included in the CBSA where the campus associated with the provider number is located. However, the commenters urged that we exercise flexibility with respect to the basis for allocating the wage data among the campuses. Some commenters stressed the difficulty for hospitals with fully integrated operations to collect data and determine an FTE count for each campus, particularly in light of the short timeframe to submit this information. One commenter suggested three alternative approaches to allocating wage data that may be much less administratively burdensome than collecting FTE information: Medicare discharges; Medicare inpatient and outpatient reimbursement; and number of beds. Another commenter, a multicampus hospital, believed that providing FTEs for each campus is extremely burdensome, given the fully integrated structure of its organization. The commenter stated that over half of the organization's employees have responsibilities at two and three of its campuses. The commenter indicated that some types of employees, such as those involved with information services and human resources, spend time at all three campuses and nurses move from facility to facility depending on need. While this commenter offered support for CMS' proposal, the commenter also suggested that there are better, simpler, and easier methods to consider. The commenter suggested that CMS allow discharges as the basis for allocating salaries and hours among campuses. Another multicampus hospital recommended that, in order to determine the FTEs per campus, CMS should allow multicampus hospitals to use a methodology that allocates the wages and hours of staff not directly assigned to a single campus using the same proportions as the staff that are directly assigned to a single campus. There was consensus among the commenters that the benefit of having more accuracy in the wage index calculations should outweigh concerns over which alternative methods to use 
                        ( print page 47319)
                        in of allocating salaries and hours, particularly as it relates to FY 2008 and the time constraints involved. Moreover, one commenter believed that discharge data from its campuses would be a more accurate means of allocating at this point because there was not enough time to accurately assign FTEs to each campus. Another commenter pointed out that to not allocate salaries and hours to each campus runs contrary to Congress' intent when it established the area wage adjustment and the method is not as important as is the result. *Response:*
                         For the FY 2008 wage index, we received the requested data from one multicampus hospital. Although the hospital stated some of the concerns summarized in the comments above about the difficulty of providing these data, it was able to provide FTEs per campus by the close of the comment period on June 12, 2007. We appreciate the efforts this multicampus hospital made to provide the requested data, given the short timeframe and the difficulty it reported in collecting the data. Another commenter submitted a multicampus hospital's number of beds and suggested that CMS use this information to allocate the multicampus hospital's wages and hours by campus in the absence of the number of FTEs if the multicampus hospital did not provide the requested information. We continue to believe that using FTE data is the most appropriate methodology for apportioning salaries and hours among the campuses. However, in light of the comments and after further consideration, we have concluded that, given the time constraints, it is reasonable to use Medicare discharge data in the absence of FTE data until we have a routine process for collecting this information via Worksheet S–3 of the Medicare cost report. Although we stated in the proposed rule that discharge data are not available on a campus-specific basis in Medicare's data systems, we have since determined that the data can be obtained through the local systems of the fiscal intermediaries/MAC. We believe that Medicare discharge data, although not ideal for allocating salaries and hours, provide a reasonable indication of staffing requirements for each campus. We continue to believe that the number of beds does not correlate well with how a hospital incurs its wage costs. A hospital's bed size alone, without its occupancy rate, does not necessarily reflect a hospital's staffing needs, whereas the number of discharges does provide a more accurate measure of a hospital's staffing requirements. Therefore, we have chosen not to use the number of beds as an alternative method for allocating wage data to the campuses of multicampus hospitals in the absence of FTE data. Therefore, as our final policy, and as reflected in the FY 2008 wage index in this final rule with comment period, we are using FTEs or Medicare discharge data to allocate salaries and hours to the campuses of multicampus hospitals that are located in different labor markets. We will continue the policy of using annually reported FTEs or Medicare discharges to allocate wage data by campus until revisions are made to Worksheet S–3 of the Medicare cost report to require reporting of FTE data by campus, and until such data in the cost report can be used to calculate the wage index, at which time the wage data of a multicampus hospital will be allocated among its campuses based only on reported FTE counts by campus. Once Worksheet S 3 of the Medicare cost report is revised to require reporting of FTE data by campus, all multicampus hospitals that cross labor market area boundaries will have to provide the FTE data by campus on the cost report. We agree with the commenter that suggested that hospitals should be allowed to report the number of directly assigned staff to each campus, and all other employees can be allocated to each campus using the same proportions as the directly assigned staff. Once revisions to the cost report have been made, we will provide further detailed instructions for how to report FTE data by campus. Also, until the cost report data can be used to allocate wages and hours, multicampus hospitals having campuses that are located in more than one labor market are to report their FTEs or Medicare discharge data to CMS during the comment period for the respective IPPS update. Therefore, for the FY 2009 wage index, such hospitals are to report their FTEs or Medicare discharge data during the FY 2009 comment period. If a multicampus hospital that crosses labor market areas fails to submit FTE or Medicare discharge data, and CMS is aware that the hospital meets this criteria, CMS will automatically allocate the hospital's wages and hours to its campuses based on Medicare discharge data obtained from the intermediary/MAC. Given the consensus among commenters that the benefit of having more accuracy in the wage index calculations outweighs concerns over which alternative methods to use in allocating wage data, we believe that it is a reasonable policy to automatically allocate a hospital's wage and hours based on discharge data in the absence of FTE data. For the FY 2008 wage index, we allocated salaries and hours to the campuses of two multicampus hospitals. One Illinois hospital submitted FTEs per campus. Two of their three campuses are located in Cook County, the Chicago-Naperville-Joliet, IL CBSA, with 60.61 percent of their FTEs at one of the campuses and 17.18 percent of the FTEs at the other campus. The third campus is located in Lake County, Lake County-Kenosha County, IL–WI CBSA, and has 22.21 percent of the hospital's FTEs. As recommended by the second multicampus hospital, which is located in Massachusetts, we used Medicare discharge data to allocate salaries and hours to its campuses. The hospital also has three campuses with two of them located in Bristol County, the Providence-New Bedford-Fall River, RI–MA CBSA, and the third campus located in Plymouth County, the Boston-Quincy CBSA. The two campuses in Bristol County have 90 percent of the Medicare discharges, while the campus in the Boston-Quincy area has 10 percent of Medicare discharges. Based on the above proportions, we allocated the hospitals’ salaries and hours to the respective CBSAs of each campus. For wage index calculation purposes, we created two new records for each of these providers, one record for each CBSA allocation. Although we are not including a separate entry for each campus in Table 2, as discussed in section III.I.7. of the preamble of this final rule with comment period, each campus's wage data will be included in a public use file, “Three Year MGCRB Reclassification Data for FY 2009 Application,” that will be posted on the CMS Web site at: 
                        *http://www.cms.hhs.gov/​AcuteInpatientPPS/​WIFN/​list.asp#TopOfPage,*
                         concurrent with the publication of this final rule with comment period. As discussed in section III.I.7. of the preamble of this final rule with comment period, these campus-specific data will be considered appropriate wage data for reclassification under §§ 412.230. 412.232 and 412.234 because they will be part of the CMS hospital wage survey used to construct the wage index. We consider these data to constitute “published hospital wage survey data” under section 1886(d)(10)(D)(vi) of the Act. The wage indices for the four affected CBSAs were recalculated with the following results: 
                        ( print page 47320) FY 2008 Final Pre-Reclassification Occupational Mix Adjusted Wage Index
CBSA
Wage and hour allocation(%)
Wage index (without allocation)
Wage index (with allocation)MassachusettsBoston-Quincy, MA (14484)
10.0
1.1736
1.1883Providence-New Bedford-Falls River, RI-MA (39300)
90.0
1.0645
1.0567Total
100IllinoisChicago-Naperville-Naperville, IL (16974)
77.8
1.0643
1.0623Lake County-Kenosha County, IL-WI (29404)
22.2
1.0341
1.0618Total
100*The final FY 2008 post-reclassified wage indices are included in Table 4A of the Addendum to this final rule with comment period.
 G. Computation of the FY 2008 Unadjusted Wage Index 1. Method for Computing the FY 2008 Unadjusted Wage Index The method used to compute the FY 2008 wage index without an occupational mix adjustment follows: *Step 1*
                        —As noted above, we based the FY 2008 wage index on wage data reported on the FY 2004 Medicare cost reports. We gathered data from each of the non Federal, short-term, acute care hospitals for which data were reported on the Worksheet S–3, Parts II and III of the Medicare cost report for the hospital's cost reporting period beginning on or after October 1, 2003, and before October 1, 2004. In addition, we include data from some hospitals that had cost reporting periods beginning before October 2003 and reported a cost reporting period covering all of FY 2004. These data are included because no other data from these hospitals would be available for the cost reporting period described above, and because particular labor market areas might be affected due to the omission of these hospitals. However, we generally describe these wage data as FY 2004 data. We note that, if a hospital had more than one cost reporting period beginning during FY 2004 (for example, a hospital had two short cost reporting periods beginning on or after October 1, 2003, and before October 1, 2004), we include wage data from only one of the cost reporting periods, the longer, in the wage index calculation. If there was more than one cost reporting period and the periods were equal in length, we include the wage data from the later period in the wage index calculation. *Step 2*
                        —Salaries—The method used to compute a hospital's average hourly wage excludes certain costs that are not paid under the IPPS. (We note that, as we stated in section III.D.2. of this final rule with comment period, we are including lines 22.01, 26.01, and 27.01 of Worksheet S–3, Part II for overhead services in the wage index beginning in FY 2008. However, because these lines were only used for purposes of data collection up to this point, and had not been incorporated into the wage index or onto line 101 of Worksheet A, the electronic cost reporting software had not been modified to incorporate these 3 line items, for wages and hours respectively, into line 1 of Worksheet S–3, Part II. Therefore, the first step in the wage index calculation for FY 2008 is to compute a “revised” Line 1, by adding to the Line 1 on Worksheet S–3, Part II (for wages and hours respectively) the amounts on Lines 22.01, 26.01, and 27.01.) In calculating a hospital's average salaries plus wage related costs, we subtract from Line 1 (total salaries) the GME and CRNA costs reported on Lines 2, 4.01, 6, and 6.01, the Part B salaries reported on Lines 3, 5 and 5.01, home office salaries reported on Line 7, and exclude salaries reported on Lines 8 and 8.01 (that is, direct salaries attributable to SNF services, home health services, and other subprovider components not subject to the IPPS). We also subtract from Line 1 the salaries for which no hours were reported. To determine total salaries plus wage related costs, we add to the net hospital salaries the costs of contract labor for direct patient care, certain top management, pharmacy, laboratory, and nonteaching physician Part A services (Lines 9 and 10), home office salaries and wage-related costs reported by the hospital on Lines 11 and 12, and nonexcluded area wage-related costs (Lines 13, 14, and 18). We note that contract labor and home office salaries for which no corresponding hours are reported are not included. In addition, wage-related costs for nonteaching physician Part A employees (Line 18) are excluded if no corresponding salaries are reported for those employees on Line 4. *Step 3*
                        —Hours—With the exception of wage-related costs, for which there are no associated hours, we compute total hours using the same methods as described for salaries in Step 2. *Step 4*
                        —For each hospital reporting both total overhead salaries and total overhead hours greater than zero, we then allocate overhead costs to areas of the hospital excluded from the wage index calculation. First, we determine the ratio of excluded area hours (sum of Lines 8 and 8.01 of Worksheet S–3, Part II) to revised total hours (Line 1 minus the sum of Part II, Lines 2, 3, 4.01, 5, 5.01, 6, 6.01, 7, and Part III, Line 13 of Worksheet S–3). We then compute the amounts of overhead salaries and hours to be allocated to excluded areas by multiplying the above ratio by the total overhead salaries and hours reported on Line 13 of Worksheet S–3, Part III. Next, we compute the amounts of overhead wage-related costs to be allocated to excluded areas using three steps: (1) we determine the ratio of overhead hours (Part III, Line 13 minus the sum of lines 22.01, 26.01, and 27.01) to revised hours excluding the sum of lines 22.01, 26.01, and 27.01 (Line 1 minus the sum of Lines 2, 3, 4.01, 5, 5.01, 6, 6.01, 7, 8, 8.01, 22.01, 26.01, and 27.01). (We note that for the FY 2008 and subsequent wage index calculations, we are excluding the sum of lines 22.01, 26.01, and 27.01 from the determination of the ratio of overhead hours to revised hours, since hospitals typically do not provide fringe benefits (wage-related costs) to contract personnel. Therefore, it is not necessary for the wage index calculation to exclude overhead wage-related costs 
                        ( print page 47321)
                        for contract personnel. Further, if a hospital does contribute to wage-related costs for contracted personnel, the instructions for lines 22.01, 26.01, and 27.01 require that associated wage-related costs be combined with wages on the respective contract labor lines.); (2) we compute overhead wage-related costs by multiplying the overhead hours ratio by wage-related costs reported on Part II, Lines 13, 14, and 18; and (3) we multiply the computed overhead wage-related costs by the above excluded area hours ratio. Finally, we subtract the computed overhead salaries, wage-related costs, and hours associated with excluded areas from the total salaries (plus wage-related costs) and hours derived in Steps 2 and 3. *Step 5*
                        —For each hospital, we adjust the total salaries plus wage-related costs to a common period to determine total adjusted salaries plus wage-related costs. To make the wage adjustment, we estimate the percentage change in the employment cost index (ECI) for compensation for each 30-day increment from October 14, 2003, through April 15, 2005, for private industry hospital workers from the BLS' 
                        *Compensation and Working Conditions.*
                         We use the ECI because it reflects the price increase associated with total compensation (salaries plus fringes) rather than just the increase in salaries. In addition, the ECI includes managers as well as other hospital workers. This methodology to compute the monthly update factors uses actual quarterly ECI data and assures that the update factors match the actual quarterly and annual percent changes. We also note that, since April 2006 with the publication of March 2006 data, the BLS' ECI uses a different classification system, the North American Industrial Classification System (NAICS), instead of the Standard Industrial Codes (SICs), which no longer exist. We have consistently used the ECI as the data source for our wages and salaries and other price proxies in the IPPS market basket and are not making any changes to the usage at this time. However, in the proposed rule, we solicited comments on our continued use of the BLS ECI data in light of the BLS change in system usage to the NAICS-based ECI. The factors used to adjust the hospital's data were based on the midpoint of the cost reporting period, as indicated below. Midpoint of Cost Reporting Period
After
Before
Adjustment factor10/14/2003
11/15/2003
1.0574311/14/2003
12/15/2003
1.0535512/14/2003
01/15/2004
1.0496401/14/2004
02/15/2004
1.0457802/14/2004
03/15/2004
1.0419803/14/2004
04/15/2004
1.0383004/14/2004
05/15/2004
1.0348205/14/2004
06/15/2004
1.0315306/14/2004
07/15/2004
1.0282107/14/2004
08/15/2004
1.0246608/14/2004
09/15/2004
1.0208609/14/2004
10/15/2004
1.0170510/14/2004
11/15/2004
1.0134411/14/2004
12/15/2004
1.0100312/14/2004
01/15/2005
1.0067101/14/2005
02/15/2005
1.0033602/14/2005
03/15/2005
1.0000003/14/2005
04/15/2005
0.99663
 For example, the midpoint of a cost reporting period beginning January 1, 2004, and ending December 31, 2004, is June 30, 2004. An adjustment factor of 1.02821 would be applied to the wages of a hospital with such a cost reporting period. In addition, for the data for any cost reporting period that began in FY 2004 and covered a period of less than 360 days or more than 370 days, we annualize the data to reflect a 1-year cost report. Dividing the data by the number of days in the cost report and then multiplying the results by 365 accomplishes annualization. *Step 6*
                        —Each hospital is assigned to its appropriate urban or rural labor market area before any reclassifications under section 1886(d)(8)(B), section 1886(d)(8)(E), or section 1886(d)(10) of the Act. Within each urban or rural labor market area, we add the total adjusted salaries plus wage-related costs obtained in Step 5 for all hospitals in that area to determine the total adjusted salaries plus wage-related costs for the labor market area. *Step 7*
                        —We divide the total adjusted salaries plus wage-related costs obtained under both methods in Step 6 by the sum of the corresponding total hours (from Step 4) for all hospitals in each labor market area to determine an average hourly wage for the area. *Step 8*
                        —We add the total adjusted salaries plus wage related costs obtained in Step 5 for all hospitals in the Nation and then divide the sum by the national sum of total hours from Step 4 to arrive at a national average hourly wage. Using the data as described above, the national average hourly wage (unadjusted for occupational mix) is $30.9346. *Step 9*
                        —For each urban or rural labor market area, we calculate the hospital wage index value, unadjusted for occupational mix, by dividing the area average hourly wage obtained in Step 7 by the national average hourly wage computed in Step 8. *Step 10*
                        —Following the process set forth above, we develop a separate Puerto Rico-specific wage index for purposes of adjusting the Puerto Rico standardized amounts. (The national Puerto Rico standardized amount is adjusted by a wage index calculated for all Puerto Rico labor market areas based on the national average hourly wage as described above.) We add the total adjusted salaries plus wage related costs (as calculated in Step 5) for all hospitals in Puerto Rico and divide the sum by the total hours for Puerto Rico (as calculated in Step 4) to arrive at an overall average hourly wage (unadjusted for occupational mix) of $13.5584 for Puerto Rico. For each labor market area in Puerto Rico, we calculate the Puerto Rico-specific wage index value by dividing the area average hourly wage (as calculated in Step 7) by the overall Puerto Rico average hourly wage. *Step 11*
                        —Section 4410 of Pub. L. 105–33 provides that, for discharges on or after October 1, 1997, the area wage index applicable to any hospital that is located in an urban area of a State may not be less than the area wage index applicable to hospitals located in rural areas in that State. For FY 2008, this change affects 340 hospitals in 68 urban areas. The areas affected by this provision are identified by a footnote in Table 4A in the Addendum of this final rule with comment period. 2. Expiration of the Imputed Floor Section 4410 of Pub. L. 105–33 provides that the area wage index applicable to any hospital that is located in an urban area of a State may not be less than the area wage index applicable to hospitals located in rural areas of that State (“the rural floor”). There are two States that have no rural areas (New Jersey and Rhode Island) and one State that has rural areas but no IPPS hospitals located in the rural areas of the State (Massachusetts). In the FY 2005 IPPS final rule (69 FR 49109), we temporarily adopted an “imputed” floor measure to address a concern by some individuals that hospitals in all-urban States were disadvantaged by the absence of rural areas, because there is no floor within the State. We limited application of the policy to FYs 2005, 2006, and 2007 and indicated our intent to make additional changes to the policy or eliminate it for fiscal years after FY 2007. In FY 2008, the rural floor will apply to 340 hospitals in 24 States. If the imputed rural floor were to continue into FY 2008, it would apply to an 
                        ( print page 47322)
                        additional 30 hospitals in New Jersey. In FY 2007, 40 hospitals in 10 urban areas received higher wage indices due to the imputed floor policy: Massachusetts (10 hospitals in 2 areas); New Jersey (30 hospitals in 8 areas); Rhode Island (no areas and no hospitals). In Massachusetts, the imputed rural floor will no longer apply because one hospital acquired rural status under § 412.103. We note that if a State has a hospital reclassified as rural under § 412.103, the State will be considered to have IPPS hospitals located in rural areas because, in this case, the reclassified hospital is treated as being located in a rural area in accordance with section 1886(d)(8)(E) of the Act. This policy also accords with how we defined an “all-urban State” under § 412.64(h)(5) of the regulations, which specifies that “A State with rural areas and with hospitals reclassified as rural under § 412.103 is not an all-urban State.” Therefore, in the case where a State has no hospitals that are geographically located in its rural areas, and one or more hospitals in the State are reclassified as rural under § 412.103, the data for the reclassified rural hospitals will be used to set the rural floor for the State until a new geographically located rural hospital opens and data are available from that hospital (as noted above, 4 years later) to compute the rural floor. In the FY 2008 IPPS proposed rule, we proposed to discontinue the imputed floor policy after the FY 2007 wage index. We stated that after further considering the issue, we do not believe that it is necessary to have an “imputed” rural floor in States that have no rural areas or no rural hospitals. As discussed above, the imputed floor would not apply to two of the three States: it is not necessary for Rhode Island and it is no longer necessary for Massachusetts. In addition, we stated that the imputed rural floor methodology creates a disadvantage in the application of the wage index to hospitals in States with rural hospitals but no urban hospitals receiving the rural floor. Because the application of a rural floor requires a transfer of payments from hospitals in States with rural hospitals but where the rural floor is not applied to hospitals in States where either a rural or imputed floor is applied, we stated that we believed the policy should apply only when required by statute. Thus, only States with both rural areas and hospitals located in such areas (including any hospital reclassified under § 412.103) would benefit from the rural floor, as required by Congress. However, in light of the public comments, we believe it appropriate to transition the expiration of the imputed rural floor over a 2-year period. We will continue the imputed rural floor for FY 2008, but allow it to expire in FY 2009. Thus, beginning in FY 2009, only States with both rural areas and hospitals located in such areas (including any hospital reclassified under § 412.103) would benefit from the rural floor, as required by Congress. As in past years, we applied a budget neutrality adjustment to the standardized amount to ensure that payments remained constant to payments that would have occurred in the absence of the imputed rural floor policy. *Comment:*
                         Several commenters in States affected (and potentially affected) by the imputed floor policy questioned whether CMS has given enough reason to allow the imputed floor provision to expire. They mentioned that the imputed floor was created to protect all-urban States by offering them a wage index protection similar to that offered to other States with a rural floor. The commenters noted that the rationale behind creating the imputed floor still exists and that hospitals benefiting from the policy were counting on it to continue. The commenters added that because CMS has used its broad authority to enact other policies absent statutory authority, many of them disagreed with CMS' contention that an imputed floor system should be applied only if required by statute. The commenters requested that CMS consider the severe negative financial impact of its proposed policy on several New Jersey hospitals, and requested a rationale to justify the estimated 0.2 percent decrease in urban hospital reimbursement rates resulting from the expiration of the imputed floor. Other commenters explained that about 8 Massachusetts hospitals would experience a decrease in Medicare payments of $8 million, or 3.9 percent of their Medicare inpatient and outpatient revenue, if CMS no longer imputes a rural floor for that State. Some commenters stated that as the number of States utilizing the imputed floor decreases, the original rationale of protecting States with “unique circumstances” holds more true today than when originally proposed. One commenter supported CMS's proposal to discontinue the imputed floor because it agreed that this type of floor should only apply when required by statute. *Response:*
                         With respect to the impact on payment for Massachusetts hospitals from discontinuing the imputed rural floor, we note that an urban hospital applied to be redesignated as rural under 42 CFR § 412.103. Therefore, as this hospital was approved for an urban-to-rural designation, it is now considered to be rural for purposes of its IPPS payments. Therefore, its wage index will set the rural floor for Massachusetts, and the imputed rural floor would no longer apply in Massachusetts. Thus, the payment impact of concern to the commenter about hospitals in Massachusetts would occur irrespective of whether we continued the imputed rural floor. (We refer readers to the next comment/response for more information about this issue.) The imputed floor was originally authorized for only 3 years. In the FY 2005 IPPS final rule (69 FR 49110), we indicated that during the 3 years that the policy is in effect, we would determine whether to make additional changes to the policy or eliminate it. Given that we had indicated in the FY 2005 IPPS final rule that the provision was set to expire after 3 years, we believe that hospitals in all urban States should not have been relying on the policy to continue. Hospitals in these States were given a reasonable expectation that the policy would expire after 3 years. The intent of the imputed floor was to create a protection for all-urban States similar to the protection offered to urban-rural mixed States by the rural floor. However, about 50 percent of urban-rural mixed States do not benefit from the rural floor provision because, in those States, the urban wage indices are all above the rural floor. Thus, like hospitals in all urban States prior to the creation of the imputed rural floor, hospitals in these States do not receive any benefit from a rural floor. We further note that the imputed rural floor provides a guaranteed benefit for certain all-urban States that is not guaranteed to hospitals in urban-rural mixed States. Specifically, the imputed rural floor methodology creates a mathematical certainty that New Jersey hospitals will benefit from the imputed rural floor and Rhode Island hospitals will not. The imputed rural floor is based on a comparison of the average of the ratios of the lowest-to-highest wage indices of all of the all-urban States to the ratio of the lowest-to-highest wage index of each of those States individually. For each State, we then take the higher of the State-specific ratio and the average of the ratios of the all-urban States and multiply it by the highest area wage index applicable in the State. The product becomes the imputed floor below which no wage 
                        ( print page 47323)
                        index in the State could fall. The ratio of the lowest-to-highest wage index within each State multiplied by the highest wage index will never provide any benefit to hospitals within an individual State. This calculation will only set the floor equal to the wage index that is already the lowest within the State. The methodology can only have a benefit to hospitals within a State if its State-specific ratio of the lowest-to-highest wage index is lower than the average of these ratios across all of the all-urban States. New Jersey will always have a lowest-to-highest wage index ratio of less than 1.0 because it has more than one labor market area. Rhode Island has only one labor market area so the ratio of its lowest-to-highest wage index will always be 1.0. As long as Rhode Island has only one labor market area, New Jersey will always have the lower ratio of the lowest-to-highest wage index among these two States, and thus New Jersey's ratio of the lowest-to-highest wage index will always be lower than the average of these ratios for New Jersey and Rhode Island. By contrast, Rhode Island's ratio of the lowest-to-highest wage index will always be higher than the average of these two States (and all three all-urban States if the imputed rural floor were still applicable in Massachusetts) and it can never obtain any benefit. Thus, the provision, as currently formulated, provides a guaranteed benefit to New Jersey hospitals that is not afforded to mixed urban-rural States, and no protection at all for Rhode Island hospitals. The imputed floor was never intended to provide an exclusive and unending benefit to a single state. Because, in the current system, New Jersey would always have hospitals benefiting from the imputed floor, and only slightly more than half of all urban-rural mixed States have hospitals benefiting from the rural floor, we no longer view the imputed floor as being a protective measure. However, in light of the public comments, we believe it appropriate to transition the expiration of the imputed rural floor over a 2-year period. We will continue the imputed rural floor for FY 2008, but beginning with the FY 2009 wage index, we will no longer apply an imputed floor policy for all-urban States. *Comment:*
                         One commenter questioned whether Massachusetts should indeed lose its imputed floor due to a hospital acquiring an urban-to-rural reclassification under 42 CFR 412.103. The commenter noted that the “hold harmless” provisions (in section 1886(d)(8)(C) of the Act) protect a State's rural floor from being unduly reduced due to the effects of reclassification/redesignation. The commenter believed the imputed floor should be treated in a similar manner. *Response:*
                         As discussed in section III.I.2. of the preamble of this final rule with comment period, we have a policy that precludes an urban-to-rural redesignation under § 412.103 from reducing the rural wage index. However, when no hospitals are geographically located in a rural area, or when no rural hospitals' wage data can be used to calculate the rural wage index, there is no rural wage index. Therefore, the urban-to-rural redesignation is not reducing the rural wage index. Rather, the data of the redesignated hospital establish the rural wage index. The imputed floor was intended to be applied in states where a rural floor could not be calculated and is rendered moot when an urban-to-rural redesignation within a State establishes a situation where a rural floor can be calculated. Therefore, we disagree with this commenter and are calculating a rural wage index for Massachusetts based on the average hourly wage for the one hospital that has been redesignated as rural. This rural wage index will become the rural floor for Massachusetts hospitals for FY 2008. For all of the reasons stated above, we are not continuing the imputed rural floor in fiscal years after FY 2008. Nevertheless, we recognize that we still need a policy for determining the rural wage index when a new IPPS hospital opens in a State that has rural areas, but no IPPS hospitals. There is a lag between the time a hospital opens or becomes an IPPS provider and when the hospital's cost report wage data are available to include in calculating the area wage index. For example, if a hospital files its first Medicare cost report as an IPPS provider with a beginning date of January 1, 2007, and an ending date of December 31, 2007, the hospital's FY 2007 wage data would not be included in the wage index until the FY 2011 IPPS update. Therefore, when a rural IPPS hospital opens in a State that has rural areas, but no wage data are available to calculate a rural wage index, in the FY 2008 proposed rule, we proposed to apply a wage index to that hospital using the same methodology that we currently use for home health and other postacute care providers in rural Massachusetts (71 FR 65906). That is, we will use the unweighted average of the wage indices from all CBSAs that are contiguous to the rural counties of the State. (We define contiguous as sharing a border.) *Comment:*
                         One organization commented that CMS should allow data from a new hospital that opens in a rural area to be included in the rural wage index as soon as a full year's cost report is available for the hospital. The commenter stated that it is “unfair, inconsistent, and unnecessary to have to wait 4 years” for a new hospital's data to be included in the rural wage index. However, this commenter and others stated that they supported the use of data from contiguous counties to establish the rural wage index when a new rural hospital opens and there are no data available to calculate the rural wage index. *Response:*
                         We note that we did not receive any comments opposing our proposal to use data from contiguous counties to establish the rural wage index when a new rural hospital opens and there are no data available to calculate the rural wage index. The IPPS final rule for FY 2007 provides a detailed response to a similar comment explaining why the wage data submission and review process occurs over a 4-year time period (71 FR 48016). As we stated, the 4-year time period is necessary to allow time for hospitals to complete and submit their wage data for the fiscal year, for the fiscal intermediaries to present the results of their review to hospitals, for hospitals to review any potential errors in the wage index files, for us to resolve any disputes between the fiscal intermediary and the hospital, and, finally, for the wage indices to be calculated and published in advance of the fiscal year. The commenter suggested that we use wage data for a new rural hospital that are from a later time period than all other hospitals that does not go through this rigorous collection, review and correction process. We have two concerns about the commenter's suggestion. First, we would be concerned about the consistency of using wage data from a new rural hospital that does not undergo the same rigorous collection, review and correction process as wage data for other hospitals. Second, as the wage index is a relative measure of area differences in wage levels, it is imperative that the data included in the calculation are from the same time period, particularly because wage costs are subject to inflationary effects and hospital employment trends fluctuate over time (for example, outsourcing is more common now than it was several years ago). Therefore, our methodology would be flawed if we used data from very different time periods. We appreciate the commenters’ support of our proposal to use the 
                        ( print page 47324)
                        unweighted average of the wage indices from all CBSAs that are contiguous to the rural counties of the State to compute the rural wage index when a new hospital opens and there are no other data available to calculate the rural wage index. Because we received no comments that oppose this proposal, we are adopting this policy as final in this final rule with comment period. The policy affects no rural areas for the FY 2008 wage index. We will apply the wage index calculated above until the new IPPS hospital files a cost report for the base year that is used in calculating the wage index. (In the above example, the rural hospital's wage index will be calculated for FYs 2008, 2009, and 2010 using urban area data.) Further, under section 4410 of Pub. L. 105–33, the wage index for this rural hospital would become the State's rural floor. As stated above, however, if a State has rural areas, and a hospital is reclassified as rural under § 412.103, then there would be no need to apply the above policy. The reclassified hospital would set the rural floor, and the wage data of the newly opened rural hospitals would be included in the calculation of the wage index of the rural area only once their wage data correlated with the survey year used to establish the wage index (4 years after wage data are reported). 3. CAHs Reverting Back to IPPS Hospitals and Raising the Rural Floor Medicare payments to CAHs are based on 101 percent of reasonable costs and are generally greater than the payments Medicare would make if the same hospitals were paid under the IPPS, which pays hospitals a fixed rate per discharge. Also, as a CAH, a hospital is guaranteed to recover its costs, while under the IPPS, it is not. We are aware of a situation where two rural hospitals in a State are considering converting from CAH status back to IPPS even though they continue to be CAH eligible. The CAHs would convert back to IPPS even though it would not directly benefit them. As IPPS providers, the hospitals’ wage data would eventually set the rural floor for the State (that is, in 4 years when the hospitals’ first IPPS cost reports would be included in a base year used in calculating the State's rural wage index). In this case, we are concerned that these hospitals are converting solely in order to take advantage of the rural floor provisions for the other hospitals in the State, but not for any reasons that are intrinsic to the two specific hospitals. Because the hospitals' wage levels are higher than most, if not all, of the urban IPPS hospitals in the State, including one hospital in the State that acquired rural status under § 412.103, the wage indices for most, if not all, of the State's urban hospitals would increase as a result of the rural floor provision if the CAHs convert to IPPS status. Such an arrangement would increase payments to the hospitals in the State at the expense of every other IPPS hospital in the nation. The two rural hospitals that are currently CAHs were last paid under the IPPS in FY 2003. We simulated the effect of allowing these two hospitals to set the State's rural floor with the same data used to calculate the FY 2003 wage index as would occur in FY 2011 if these hospitals were to convert to IPPS status in FY 2007 and no other hospitals were to open in the rural area of the State. Based on this simulation, all hospitals except two would be paid using the rural floor, increasing payments in excess of $220 million for a single year. If the average hourly wage for these two hospitals increased faster than the national average, the increase in payments would be even higher. It seems likely that over 5 years, Medicare payments to hospitals in this State would increase by more than $1 billion. Again, these increased payments would be budget neutralized at the expense of all other IPPS hospitals nationwide. Given that the hospitals continue to be eligible for the higher paying CAH status, we are concerned that hospitals are converting to IPPS status solely in order to raise the State's rural floor. We are concerned about the propriety of such an arrangement if the intent is to manipulate the State's area wage index values to receive higher Medicare reimbursement. Section 1886(d)(5)(I)(i) of the Act allows the Secretary the authority to “provide by regulation for such other exceptions and adjustments * * * as the Secretary deems appropriate.” In the FY 2008 IPPS proposed rule, we solicited public comments regarding whether it would be appropriate for CMS to establish a policy under this authority to preclude the arrangement described above and, if so, how such a policy would be applied. We believe that any policy should only apply to a CAH that continues to meet the CAH certification requirements and should not apply if a CAH no longer met those requirements and converted to an IPPS provider. *Comment:*
                         Several commenters shared the concerns of CMS about the possibility of intentional gaming of the CAH conversion system in order to achieve greater payments through the establishment of a state rural floor. The commenters in general were supportive of CMS developing a policy to prevent or mitigate the impacts of a situation where a State will gain benefits at the expense of all other IPPS hospitals nationwide. Some commenters suggested that CMS should consider this issue in the broader context of wage index reform planned for the FY 2009 IPPS proposed rule. Some commenters provided suggestions to assist in determining what CAH conversions should or should not be precluded based on historical data. Other commenters were concerned that CMS may be overreaching its authority by granting itself the ability to restrict a hospital's ability to choose the type of Medicare provider it wishes to be. The commenters were also concerned with CMS attempting to determine the intent of hospitals seeking conversion. One commenter added that as long as a hospital is essentially the same provider as when it was previously an IPPS hospital, CMS should reinstate the provider as an IPPS hospital. Another commenter suggested that “Section 1886(d)(5)(I)(i) does not provide CMS the authority to adopt a policy that precludes qualified CAHs from converting to IPPS”, and even if CMS has the authority, the policy would be “discriminatory and constitutes bad public policy.” Some commenters also suggested that CMS was inappropriately “singling out” hospitals in one State to apply this policy. *Response:*
                         We appreciate the commenters' ideas and contributions to this matter for consideration. While we have proposed no policy pertaining to this issue at this time, we will consider all of these comments as we develop the FY 2009 IPPS proposed rule. One approach that we will explore in the context of wage index reform is to apply the rural floor budget neutrality adjustment at the State level. Such an application would protect hospitals in other States from being harmed by potential gaming associated with the rural floor. Thus, in the scenario of concern to us, the CAHs would convert to IPPS status and set a rural floor that would raise the wage index for most or all urban hospitals within the State. However, budget neutrality would be achieved by adjusting the wage index for all hospitals within the State rather than all hospitals nationwide. Under such a policy, we would no longer be concerned about the scenario of CAHs converting to IPPS status to raise the rural floor. While the former CAHs that pay high wages in this circumstance would continue to set the rural floor, the policy would be redistributive within the State rather than across States. Under such a policy, we would not have to address the concern raised in the 
                        ( print page 47325)
                        comments of having to determine the motives of the CAH converting to IPPS status because the within State budget neutrality adjustment would provide no advantage to the State's hospitals in the aggregate and would merely redistribute existing Medicare payments differently within the State. The new policy that we intend to explore in next year's IPPS rule would also resolve the concern that CMS is “singling out” one State because we would propose to apply the new policy (that is, applying budget neutrality within a State rather than across all hospitals nationwide) in any State that benefits from the rural floor. Again, we look forward to addressing this issue in next year's IPPS proposed rule as we develop a proposal (or proposals) to reform the IPPS wage index as required under section 106(b) of the MIEA–TRHCA. 4. Application of Rural Floor Budget Neutrality Section 4410 of the Balanced Budget Act of 1997 (BBA) established the rural floor by requiring that the wage index for a hospital in any urban area cannot be less than the area wage index determined for the State's rural area. Since FY 1998, we have implemented the budget neutrality requirement of this provision by adjusting the standardized amounts. A discussion and illustration of the calculation of the standardized amounts is shown in the Addendum of every year's IPPS rule.[27] In the FY 2008 IPPS proposed rule, we proposed a prospective change to how budget neutrality is applied to implement the rural floor for FY 2008 and subsequent years. Section 4410(a) of the BBA indicates that “the area wage index applicable * * * to any hospital which is not located in a rural area * * * may not be less than the area wage index applicable * * * to hospitals located in rural areas in the State in which the hospital is located.” Section 4410(b) of the BBA imposes the budget neutrality requirement and states that the Secretary shall “adjust the area wage index referred to in subsection (a) for hospitals not described in such subsection.” One possible interpretation of section 4410(b) of the BBA is that the budget neutrality adjustment would be applied only to those hospitals that do not receive the rural floor. In other words, the wage index of an urban hospital subject to the rural floor would be increased to the level of the rural wage index in the same State, but would not be adjusted for budget neutrality. Thus, urban hospitals receiving the rural floor would receive a higher wage index than the rural hospitals within the same State (because rural floor hospitals would not be subject to budget neutrality, whereas rural hospitals would be). We believe such a reading would not be in accordance with Congressional intent, which was to set a floor for urban hospitals, not to pay urban hospitals a wage index higher than the wage index applicable to rural hospitals. In order to avoid the apparent contradiction between raising an urban hospital's wage index to the rural floor and not applying budget neutrality to its wage index, we also believe the statute could be read to allow an iterative calculation of budget neutrality and wage indices. Under such iterative calculations (consistent with section 4410(a) of the BBA), we would raise the wage index for urban hospitals to the level of the pre-budget neutrality rural wage index. Consistent with section 4410(b) of the BBA, we would adjust the wage index for all nonrural floor hospitals to achieve budget neutrality. However, such an adjustment would result in an urban hospital that would receive the rural floor having a higher wage index than a rural hospital in the same State. Therefore, we would then decrease wage indices for the rural floor hospitals so they are equal to the adjusted rural wage index in the same State. At this point, payments would be less in the aggregate than they were prior to applying the rural floor. Accordingly, a new budget neutrality adjustment would have to be calculated to raise the wage indices and total payments for rural hospitals and nonrural floor urban hospitals. The rural wage index would now be higher than the wage index for the rural floor hospitals in the same State. Therefore, the wage index for rural floor hospitals would then be increased again to the level of the State's rural wage index, leading to budget neutrality being recalculated again, the wage index reduced for rural floor hospitals, and so forth until the wage index and the budget neutrality adjustment stabilize. We have determined that the iterative method is substantively equivalent to simply adjusting all area wage indices by a uniform percentage. We have performed the iterative calculation using provider-level data based on FY 2007 MedPAR data and the first half of FY 2007 wage index data. Using such data, we determined that the iterative method results in the same final wage indices through four decimal places that would result if a uniform budget neutrality factor were applied to all hospitals’ wage indices. Furthermore, an iterative method, which requires adjusting only the wage index values of nonrural floor providers, reassigning the lowered rural floor value to rural floor providers, and reiterating the budget neutrality factor applied to the nonrural floor providers would require an excessive number of iterations and computer processing, which is not necessary if we simply apply a uniform budget neutrality adjustment to all wage index values. The latter method is accomplished more quickly, is less complex, and arrives at the same final wage index values. Because the IPPS schedule is relatively condensed, with a proposed rule issued in April, a 60-day comment period until June, and then only 2 months to analyze comments, respond to them, determine final policies and calculate final rates prior to the August 1 publication, we believe it would not be practical to require such multiple layers of calculations, when a uniform adjustment would produce substantively identical results. Therefore, we proposed to implement the rural floor budget neutrality requirement by applying a uniform budget neutrality adjustment to all hospital wage indices rather than the more complicated iterative process illustrated below. The following hypothetical example, which includes a series of nine iterations, illustrates how the iterative process works. The example assumes three IPPS hospitals in one State. Hospital A is rural and Hospitals B and C are urban. 
                        ( print page 47326) Pre-Floor Wage Index
Hospital A
Hospital B
Hospital C
TotalWage Index
0.9500
1.1700
0.8600Relative Weights
100
200
150Location
Rural
Urban
UrbanStandardized Amounts
$1,000
$1,000
$1,000Payments
$95,000
$234,000
$129,000
$458,000**Note:**
                             Hospital C is urban and has a lower wage index than Hospital A which is rural.
 Post-Floor Wage Index; Pre-Budget Neutrality
Hospital A
Hospital B
Hospital C
TotalWage Index
0.9500
1.1700
0.9500Relative Weights
100
200
150Location
Rural
Urban
UrbanStandardized Amounts
$1,000
$1,000
$1,000Payments
$95,000
$234,000
$142,500
$471,500**Note:**
                             Hospital C's wage index is raised to the same level as Hospital A.
 Post Floor—Budget Neutrality Process—Iteration 1
[Step 1: Apply budget neutrality to Hospital A and Hospital B.]
Hospital A
Hospital B
Hospital C
TotalWage index
0.9110
1.1220
0.9500
BN Factor.Relative weights
100
200
150
0.95897.Location
Rural
Urban
Urban
Target.Standardized amounts
$1,000
$1,000
$1,000
$458,000.Payments
$91,102
$224,398
$142,500
$458,000.
 [Step 2: Reduce Hospital C's wage index to Hospital A's level.]
Hospital A
Hospital B
Hospital C
TotalWage index
0.9110
1.1220
0.9110
BN Factor.Relative weights
100
200
150
0.95897.Location
Rural
Urban
Urban
Target.Standardized amounts
$1,000
$1,000
$1,000
$458,000.Payments
$91,102
$224,398
$136,653
$452,153.
 Iteration 2
[Step 1: Apply budget neutrality to Hospital A and Hospital B.]
Hospital A
Hospital B
Hospital C
TotalWage index
0.9279
1.1428
0.9110
BN Factor.Relative weights
100
200
150
1.01853.Location
Rural
Urban
Urban
Target.Standardized amounts
$1,000
$1,000
$1,000
$458,000.Payments
$92,790
$228,557
$136,653
$458,000.
 [Step 2: Increase Hospital C's wage index to Hospital A's level.]
Hospital A
Hospital B
Hospital C
TotalWage index
0.9279
1.1428
0.9279
BN Factor.Relative weights
100
200
150
1.01854.Location
Rural
Urban
Urban
Target.Standardized amounts
$1,000
$1,000
$1,000
$458,000.Payments
$92,790
$228,557
$139,185
$460,532.
 
 
 Iteration 3
[Step 1: Apply budget neutrality to Hospital A and Hospital B.]
Hospital A
Hospital B
Hospital C
TotalWage index
0.9206
1.1338
0.9279
BN Factor.Relative weights
100
200
150
0.99212.Location
Rural
Urban
Urban
Target.Standardized amounts
$1,000
$1,000
$1,000
$458,000.Payments
$92,059
$226,756
$139,185
$458,000.
 [Step 2: Reduce Hospital C's wage index to Hospital A's level.]
Hospital A
Hospital B
Hospital C
TotalWage index
0.9206
1.1338
0.9206
BN Factor.Relative weights
100
200
150
0.99212.Location
Rural
Urban
Urban
Target.Standardized amounts
$1,000
$1,000
$1,000
$458,000.Payments
$92,059
$226,756
$138,088
$456,903.
 Iteration 4
[Step 1: Apply budget neutrality to Hospital A and Hospital B.]
Hospital A
Hospital B
Hospital C
TotalWage index
0.9238
1.1377
0.9206
BN Factor.Relative weights
100
200
150
1.00344.Location
Rural
Urban
Urban
Target.Standardized amounts
$1,000
$1,000
$1,000
$458,000.Payments
$92,376
$227,536
$138,088
$458,000.
 [Step 2: Increase Hospital C's wage index to Hospital A's level.]
Hospital A
Hospital B
Hospital C
TotalWage index
0.9238
1.1377
0.9238
BN Factor.Relative weights
100
200
150
1.00344.Location
Rural
Urban
Urban
Target.Standardized amounts
$1,000
$1,000
$1,000
$458,000.Payments
$92,376
$227,536
$138,563
$458,475.
 Iteration 5
[Step 1: Apply budget neutrality to Hospital A and Hospital B.]
Hospital A
Hospital B
Hospital C
TotalWage index
0.9224
1.1360
0.9238
BN Factor.Relative weights
100
200
150
0.99852.Location
Rural
Urban
Urban
Target.Standardized amounts
$1,000
$1,000
$1,000
$458,000.Payments
$92,238
$227,198
$138,563
$458,000.
 [Step 2: Reduce Hospital C's wage index to Hospital A's level.]
Hospital A
Hospital B
Hospital C
TotalWage index
0.9224
1.1360
0.9224
BN Factor.Relative weights
100
200
150
0.99852.Location
Rural
Urban
Urban
Target.Standardized amounts
$1,000
$1,000
$1,000
$458,000.Payments
$92,238
$227,198
$138,358
$457,794.
 
 
 Iteration 6
[Step 1: Apply budget neutrality to Hospital A and Hospital B.]
Hospital A
Hospital B
Hospital C
TotalWage index
0.9230
1.1367
0.9224
BN Factor.Relative weights
100
200
150
1.00064.Location
Rural
Urban
Urban
Target.Standardized amounts
$1,000
$1,000
$1,000
$458,000.Payments
$92,298
$227,344
$138,358
$458,000.
 [Step 2: Increase Hospital C's wage index to Hospital A's level.]
Hospital A
Hospital B
Hospital C
TotalWage index
0.9230
1.1367
0.9230
BN Factor.Relative weights
100
200
150
1.00064.Location
Rural
Urban
Urban
Target.Standardized amounts
$1,000
$1,000
$1,000
$458,000.Payments
$92,298
$227,344
$138,447
$458,089.
 Iteration 7
[Step 1: Apply budget neutrality to Hospital A and Hospital B.]
Hospital A
Hospital B
Hospital C
TotalWage index
0.9227
1.1364
0.9230
BN Factor.Relative weights
100
200
150
0.99972.Location
Rural
Urban
Urban
Target.Standardized amounts
$1,000
$1,000
$1,000
$458,000.Payments
$92,272
$227,281
$138,447
$458,000.
 [Step 2: Reduce Hospital C's wage index to Hospital A's level.]
Hospital A
Hospital B
Hospital C
TotalWage index
0.9227
1.1364
0.9227
BN Factor.Relative weights
100
200
150
0.99972.Location
Rural
Urban
Urban
Target.Standardized amounts
$1,000
$1,000
$1,000
$458,000.Payments
$92,272
$227,281
$138,408
$457,961.
 Iteration 8
[Step 1: Apply budget neutrality to Hospital A and Hospital B.]
Hospital A
Hospital B
Hospital C
TotalWage index
0.9228
1.1365
0.9227
BN Factor.Relative weights
100
200
150
1.00012.Location
Rural
Urban
Urban
Target.Standardized amounts
$1,000
$1,000
$1,000
$458,000.Payments
$92,283
$227,308
$138,408
$458,000.
 [Step 2: Increase Hospital C's wage index to Hospital A's level.]
Hospital A
Hospital B
Hospital C
TotalWage index
0.9228
1.1365
0.9228
BN Factor.Relative weights
100
200
150
1.00012.Location
Rural
Urban
Urban
Target.Standardized amounts
$1,000
$1,000
$1,000
$458,000.Payments
$92,283
$227,308
$138,425
$458,016.
 
 
 Iteration 9
[Step 1: Apply budget neutrality to Hospital A and Hospital B.]
Hospital A
Hospital B
Hospital C
TotalWage index
0.9228
1.1365
0.9228
BN Factor.Relative weights
100
200
150
0.99995.Location
Rural
Urban
Urban
Target.Standardized amounts
$1,000
$1,000
$1,000
$458,000.Payments
$92,279
$227,297
$138,425
$458,000.
 In the example above, the wage indices are shown only to the 4th decimal place even though they are not rounded. However, the actual wage indices that we calculate for the IPPS are rounded to 4 decimal places. In the 9th and final iteration of the budget neutrality adjustment shown above, there was no change to the wage indices through the 4th decimal place relative to the 8th iteration. Therefore, because the wage indices stopped changing, we could not obtain further precision in the budget neutrality and wage index calculations in the example shown above with further iterations. We note that the example above produces the same result as simply applying a uniform adjustment to hospital wage indices. Using the same data as the above hypothetical example, we show this result below: Pre-Floor Wage Index
Hospital A
Hospital B
Hospital C
TotalWage Index
0.9500
1.1700
0.8600Relative Weights
100
200
150Location
Rural
Urban
UrbanStandardized Amounts
$1,000
$1,000
$1,000Payments
$95,000
$234,000
$129,000
$458,000**Note:**
                             Hospital C is urban and has a lower wage index than Hospital A which is rural.
 Post-Floor Wage Index; Pre-Budget Neutrality
Hospital A
Hospital B
Hospital C
TotalWage Index
0.9500
1.1700
0.9500Relative Weights
100
200
150Location
Rural
Urban
UrbanStandardized Amounts
$1,000
$1,000
$1,000Payments
$95,000
$234,000
$142,500
$471,500**Note:**
                             Hospital C's wage index is raised to the same level as Hospital A.
 Post Floor—Budget Neutrality
Hospital A
Hospital B
Hospital C
TotalWage Index
0.9228
1.1365
0.9228
BN Factor.Relative Weights
100
200
150
0.971368.Location
Rural
Urban
Urban
Target.Standardized Amounts
$1,000
$1,000
$1,000
$458,000.Payments
$92,280
$227,300
$138,420
$458,000.
 We note that, as proposed, our change applies the budget neutrality adjustment to the wage index, and not to the standardized amount. In previous years, we applied a budget neutrality adjustment to the standardized amount to ensure that payments remained constant to payments that would have occurred in the absence of the rural floor requirement in section 4410 of the BBA. We believe such an adjustment is in keeping with the statute, which requires that the rural floor not result in aggregate payments that are greater or less than those that would have been made in the absence of a rural floor. We believe that an adjustment to the wage index would result in a substantially similar payment as an adjustment to the standardized amount, as both involve multipliers to the standardized amount, and both would be based upon the same modeling parameters. We do note that because hospitals have different labor-related shares (62 percent for hospitals with wage indices less than or equal to 1; 69.7 percent for hospitals with wage indices greater than 1), an adjustment to the wage index would have slightly different effects from an adjustment to the standardized amount, as each wage index would be adjusted by a uniform percentage. For FY 2008, we are using FY 2006 discharge data and FY 2008 wage indices to simulate IPPS payments without the rural floor. We compare these simulated payments to simulated payments using the same data with a rural floor. We believe that the statute supports either an adjustment to the standardized amount or the wage indices because under either methodology, the rural floor would not result in aggregate 
                        ( print page 47330)
                        payments that were greater or less than those that would have been made in the absence of a rural floor. *Comment:*
                         Many commenters requested additional information as to the purpose and method CMS is proposing for applying the rural floor budget neutrality adjustment to the wage index. Most commenters were supportive of CMS’ proposal. Other commenters expressed concern that CMS acknowledged that because the labor-related share is higher for hospitals with a wage index greater than 1.0000, an adjustment to the wage index, as opposed to the standardized amount, will treat hospitals in an inequitable manner. One commenter did not view it to be appropriate to intentionally move from an equitable adjustment system to one known to be potentially problematic. Another commenter stated that, for past years, the methodology for applying the adjustment was flawed because the adjustment was a cumulative adjustment (that is, previous year adjustments were not removed before making current year adjustments), causing an “inappropriate duplicating effect” to be “permanently built into the standardized amount.” Commenters requested clarification as to whether the proposed one-time 1.002214 adjustment is meant to address a single year transition to a new system of budget neutrality adjustment, or is meant to reverse effects of prior year cumulative adjustments. One commenter requested CMS to more clearly explain and fully disclose any known errors in the calculation from past years’ methodologies, as well as report standardized amount adjustment figures from 1999 through 2007. Several commenters suggested that besides removing any compounding effect on the standardized amount (which some deemed to be “budget-negative”) for the current year, a positive adjustment should also be implemented in FY 2008 to retroactively reimburse hospitals. Some commenters claimed that the proposed adjustment is not adequate to fix the effects of past data errors, nor adequate to reimburse hospitals for past underpayments. *Response:*
                         We appreciate that most commenters supported our proposal to apply the rural floor budget neutrality adjustment to the wage index rather than the standardized amount. For FY 2008, we will apply budget neutrality for application of the rural floor to the wage index rather than the standardized amounts. With respect to the concern that the budget neutrality adjustment will have a greater impact on hospitals with a labor-related share of 69.7, we believe that this policy is consistent with the intent of section 403 of Pub. L. 108–173. Under section 403 of Pub. L. 108–103, CMS must use a labor-related share of 62 percent for hospitals with a wage index less than or equal to 1, unless application of a labor-related share of 62 percent would result in lower payments to a hospital than would otherwise be made. We believe that Congress intended that the wage index adjustment should have less of an impact on hospitals with lower wage indexes. Thus, although we could evenly distribute the effect of the budget neutrality adjustment across all hospitals by applying one budget neutrality factor to the wage indexes of hospitals with a labor-related share of 69.7 and a different factor to the wage indexes of hospitals with a labor-related share of 62 percent, we do not believe such an adjustment would be as consistent with the intent of Congress. Regarding the cumulative nature of the budget neutrality adjustment, the rural floor budget neutrality adjustment previously was a cumulative adjustment, similar to the adjustments we currently make for updates to the wage index and DRG reclassification and recalibration. Beginning in FY 2008, the rural floor budget neutrality adjustment will be noncumulative. However, we do not believe that our prior policy of cumulatively adjusting for rural floor budget neutrality was improper. The commenters are correct that the one-time 1.002214 adjustment is meant to address a single year transition to a noncumulative system of budget neutrality adjustment. With regard to alleged errors in FYs 1999 through 2007, our calculation of budget neutrality in past fiscal years is not within the scope of this rulemaking. Even if errors were made in prior fiscal years, we would not make an adjustment to make up for those errors when setting rates for FY 2008. It is our longstanding policy that finality is critical to a prospective payment system. Although errors in ratesetting are inevitable, we believe the need to establish final prospective rates outweighs the greater accuracy we might gain if we retroactively recomputed rates whenever an error is discovered. H. Analysis and Implementation of the Occupational Mix Adjustment and the FY 2008 Occupational Mix Adjusted Wage Index As discussed in section III.C. of the preamble of this final rule with comment period, for FY 2008, we apply the occupational mix adjustment to 100 percent of the FY 2008 wage index. We calculated the occupational mix adjustment using data from the 2006 occupational mix survey data, using the methodology described in section III.C.3. of the preamble of this final rule with comment period. Using the first and second quarter occupational mix survey data and applying the occupational mix adjustment to 100 percent of the final FY 2008 wage index results in a national average hourly wage of $30.9133 and a Puerto-Rico specific average hourly wage of $13.5536. After excluding data of hospitals that either submitted aberrant data that failed critical edits, or that do not have FY 2004 Worksheet S–3 cost report data for use in calculating the FY 2008 wage index, we calculated the FY 2008 wage index using the occupational mix survey data from 3,367 hospitals. Using the Worksheet S–3 cost report data of 3,569 hospitals and occupational mix first and/or second quarter survey data from 3,367 hospitals represents a 94.3 percent survey response rate. The FY 2008 national average hourly wages for each occupational mix nursing subcategory as calculated in Step 2 of the occupational mix calculation are as follows: 4. Occupational mix nursing subcategory
5. Average hourly wage ($)National RN Management
38.6202National RN Staff
33.4705National LPN
19.2209National Nurse Aides, Orderlies, and Attendants
13.6938National Medical Assistants
15.7737National Nurse Category
28.7329
 The national average hourly wage for the entire nurse category as computed in Step 5 of the occupational mix calculation is $28.7329. Hospitals with a nurse category average hourly wage (as calculated in Step 4) of greater than the national nurse category average hourly wage receive an occupational mix adjustment factor (as calculated in Step 6) of less than 1.0. Hospitals with a nurse category average hourly wage (as calculated in Step 4) of less than the national nurse category average hourly wage receive an occupational mix adjustment factor (as calculated in Step 6) of greater than 1.0. Based on the January through June 2006 occupational mix survey data, we determined (in Step 7 of the occupational mix calculation) that the national percentage of hospital employees in the Nurse category is 42.96 percent, and the national percentage of hospital employees in the 
                        ( print page 47331)
                        All Other Occupations category is 57.04 percent. At the CBSA level, the percentage of hospital employees in the Nurse category ranged from a low of 27.26 percent in one CBSA, to a high of 85.30 percent in another CBSA. We compared the final FY 2007 occupational mix adjusted wage indices for each CBSA to the final FY 2008 wage indices adjusted for occupational mix. In implementing an occupational mix adjusted wage index based on the above calculation using 6 months of survey data for FY 2008 as opposed to 3 months of survey data used for FY 2007, the final wage index values for 20 rural areas (42.5 percent) and 188 urban areas (48.4 percent) will decrease as a result of the adjustment. Eleven rural areas (23.4 percent) and 120 urban areas (30.9 percent) will experience a decrease of 1 percent or greater in their wage index values. The largest negative impacts will be 5.91 percent and 14.85 percent for a rural and urban area, respectively. In addition, 26 rural areas (55.3 percent) and 198 urban areas (51.0 percent) will experience an increase in their wage index values. Eleven rural areas (23.4 percent) and 134 urban areas (34.5 percent) will experience an increase of 1 percent or greater in their wage index values. The largest increase for a rural area will be 13.28 percent and the largest increase for an urban area will be 11.56 percent. One rural area will be unaffected. These results indicate that a larger percentage of rural areas (55.3 percent) benefit from an occupational mix adjustment than do urban areas (51.0 percent), although the difference in these percentages is smaller than it has been in past years. Furthermore, while approximately one-third of rural CBSAs have experienced a decrease in their wage indices as a result of the occupational mix adjustment from the time the occupational mix adjustment was first implemented in FY 2005 until FY 2007, this percentage has grown to 42.5 percent for FY 2008. The wage index values for FY 2008 (except those for hospitals receiving wage index adjustments under section 1886(d)(13) of the Act) are shown in Tables 4A, 4B, 4C, and 4F in the Addendum to this final rule with comment period. Tables 3A and 3B in the Addendum to this final rule with comment period list the 3-year average hourly wage for each labor market area before the redesignation of hospitals based on FYs 2006, 2007, and 2008 cost reporting periods. Table 3A lists these data for urban areas and Table 3B lists these data for rural areas. In addition, Table 2 in the Addendum to this final rule with comment period includes the adjusted average hourly wage for each hospital from the FY 2002 and FY 2003 cost reporting periods, as well as the FY 2004 period used to calculate the FY 2008 wage index. The 3-year averages are calculated by dividing the sum of the dollars (adjusted to a common reporting period using the method described previously) across all 3 years, by the sum of the hours. If a hospital is missing data for any of the previous years, its average hourly wage for the 3-year period is calculated based on the data available during that period. The wage index values in Tables 2, 4A, 4B, 4C, and 4F and the average hourly wages in Tables 2, 3A, and 3B in the Addendum to this final rule with comment period include the occupational mix adjustment as well as the budget neutrality adjustment for the rural floor. I. Revisions to the Wage Index Based on Hospital Redesignations 1. General Under section 1886(d)(10) of the Act, the Medicare Geographic Classification Review Board (MGCRB) considers applications by hospitals for geographic reclassification for purposes of payment under the IPPS. Hospitals must apply to the MGCRB to reclassify by September 1 of the year preceding the year during which reclassification is sought. Generally, hospitals must be proximate to the labor market area to which they are seeking reclassification and must demonstrate characteristics similar to hospitals located in that area. The MGCRB issues its decisions by the end of February for reclassifications that become effective for the following fiscal year (beginning October 1). The regulations applicable to reclassifications by the MGCRB are located in §§ 412.230 through 412.280. Section 1886(d)(10)(D)(v) of the Act provides that, beginning with FY 2001, a MGCRB decision on a hospital reclassification for purposes of the wage index is effective for 3 fiscal years, unless the hospital elects to terminate the reclassification. Section 1886(d)(10)(D)(vi) of the Act provides that the MGCRB must use the 3 most recent years' average hourly wage data in evaluating a hospital's reclassification application for FY 2003 and any succeeding fiscal year. Section 304(b) of Pub. L. 106–554 provides that the Secretary must establish a mechanism under which a statewide entity may apply to have all of the geographic areas in the State treated as a single geographic area for purposes of computing and applying a single wage index, for reclassifications beginning in FY 2003. The implementing regulations for this provision are located at § 412.235. Section 1886(d)(8)(B) of the Act requires the Secretary to treat a hospital located in a rural county adjacent to one or more urban areas as being located in the MSA to which the greatest number of workers in the county commute, if the rural county would otherwise be considered part of an urban area under the standards for designating MSAs and if the commuting rates used in determining outlying counties were determined on the basis of the aggregate number of resident workers who commute to (and, if applicable under the standards, from) the central county or counties of 
                        *all*
                         contiguous MSAs. In light of the new CBSA definitions and the Census 2000 data that we implemented for FY 2005 (69 FR 49027), we undertook to identify those counties meeting these criteria. The eligible counties are identified under section III.I.8. of the preamble of this final rule with comment period. 2. Effects of Reclassification/Redesignation Section 1886(d)(8)(C) of the Act provides that the application of the wage index to redesignated hospitals is dependent on the hypothetical impact that the wage data from these hospitals would have on the wage index value for the area to which they have been redesignated. These requirements for determining the wage index values for redesignated hospitals are applicable both to the hospitals located in rural counties deemed urban under section 1886(d)(8)(B) of the Act and hospitals that were reclassified as a result of the MGCRB decisions under section 1886(d)(10) of the Act. Therefore, as provided in section 1886(d)(8)(C) of the Act, the wage index values were determined by considering the following: If including the wage data for the redesignated hospitals would reduce the wage index value for the area to which the hospitals are redesignated by 1 percentage point or less, the area wage index value determined exclusive of the wage data for the redesignated hospitals applies to the redesignated hospitals.
                    If including the wage data for the redesignated hospitals reduces the wage index value for the area to which the hospitals are redesignated by more than 1 percentage point, the area wage index determined inclusive of the wage data for the redesignated hospitals (the combined wage index value) applies to the redesignated hospitals.
                    If including the wage data for the redesignated hospitals increases the( print page 47332)
                        wage index value for the urban area to which the hospitals are redesignated, both the area and the redesignated hospitals receive the combined wage index value. Otherwise, the hospitals located in the urban area receive a wage index excluding the wage data of hospitals redesignated into the area. Rural areas whose wage index values would be reduced by excluding the wage data for hospitals that have been redesignated to another area continue to have their wage index values calculated as if no redesignation had occurred (otherwise, redesignated rural hospitals are excluded from the calculation of the rural wage index). The wage index value for a redesignated rural hospital cannot be reduced below the wage index value for the rural areas of the State in which the hospital is located. CMS has also adopted the following policies: The wage data for a reclassified urban hospital is included in both the wage index calculation of the area to which the hospital is reclassified (subject to the rules described above) and the wage index calculation of the urban area where the hospital is physically located.
                    In cases where urban hospitals have reclassified to rural areas under42 CFR 412.103, the urban hospital wage data are: (a) included in the rural wage index calculation, unless doing so would reduce the rural wage index; and (b) included in the urban area where the hospital is physically located. 3. FY 2008 MGCRB Reclassifications Under section 1886(d)(10) of the Act, the MGCRB considers applications by hospitals for geographic reclassification for purposes of payment under the IPPS. The specific procedures and rules that apply to the geographic reclassification process are outlined in § 412.230 through § 412.280. At the time this final rule with comment period was constructed, the MGCRB had completed its review of FY 2008 reclassification requests. There were 365 hospitals approved for wage index reclassifications by the MGCRB for FY 2008. Because MGCRB wage index reclassifications are effective for 3 years, hospitals reclassified during FY 2006 or FY 2007 are eligible to continue to be reclassified based on prior reclassifications to current MSAs during FY 2008. There were 299 hospitals approved for wage index reclassifications in FY 2006 and 214 hospitals approved for wage index reclassifications in FY 2007. Some of the hospitals that reclassified for FY 2006 and FY 2007 have elected not to continue their reclassifications in FY 2008 because, under the revised labor market area definitions, they are now physically located in the areas to which they previously reclassified. Of all of the hospitals approved for reclassification for FY 2006, FY 2007, and FY 2008, 866 hospitals are in a reclassification status for FY 2008. Prior to FY 2004, hospitals had been able to apply to be reclassified for purposes of either the wage index or the standardized amount. Section 401 of Pub. L. 108–173 established that all hospitals will be paid on the basis of the large urban standardized amount, beginning with FY 2004. Consequently, all hospitals are paid on the basis of the same standardized amount, which made such reclassifications moot. Although there could still be some benefit in terms of payments for some hospitals under the DSH payment adjustment for operating IPPS, section 402 of Pub. L. 108–173 equalized DSH payment adjustments for rural and urban hospitals, with the exception that the rural DSH adjustment is capped at 12 percent (except that rural referral centers and, effective for discharges occurring on or after October 1, 2006, MDHs have no cap). (A detailed discussion of this application appears in section IV.I. of the preamble of the FY 2005 IPPS final rule (69 FR 49085). The exclusion of MDHs from the 12 percent DSH cap under Pub. L. 109–171 was discussed under section IV.F.4. of the preamble of the FY 2007 IPPS final rule (71 FR 48066).) Under § 412.273, hospitals that have been reclassified by the MGCRB were permitted to withdraw their applications within 45 days of the publication of the proposed rule. The request for withdrawal of an application for reclassification or termination of an existing 3-year reclassification that would be effective in FY 2008 had to be received by the MGCRB within 45 days of the publication of the proposed rule, that is, by June 18, 2007. If a hospital elected to withdraw its wage index application after the MGCRB had issued its decision, but prior to the above date, it could later cancel its withdrawal in a subsequent year and request the MGCRB to reinstate its wage index reclassification for the remaining fiscal year(s) of the 3-year period (§ 412.273(b)(2)(i)). The request to cancel a prior withdrawal or termination had to be in writing to the MGCRB no later than the deadline for submitting reclassification applications for the following fiscal year (§ 412.273(d)). For further information about withdrawing, terminating, or canceling a previous withdrawal or termination of a 3-year reclassification for wage index purposes, we refer the reader to § 412.273, as well as the August 1, 2002, IPPS final rule (67 FR 50065) and the August 1, 2001 IPPS final rule (66 FR 39887). Changes to the wage index that result from withdrawals of requests for reclassification, wage index corrections, appeals, and the Administrator's review process are incorporated into the wage index values published in this final rule with comment period. These changes affect not only the wage index value for specific geographic areas, but also the wage index value redesignated hospitals receive; that is, whether they receive the wage index that includes the data for both the hospitals already in the area and the redesignated hospitals. Further, the wage index value for the area from which the hospitals are redesignated may have been affected. Applications for FY 2009 reclassifications are due to the MGCRB by September 4, 2007 (the first working day of September 2007). We note that this is also the deadline for canceling a previous wage index reclassification withdrawal or termination under § 412.273(d). Applications and other information about MGCRB reclassifications were available, beginning in mid July 2007, via the CMS Internet Web site at: 
                        *http://cms.hhs.gov/​providers/​prrb/​mgcinfo.asp*, or by calling the MGCRB at (410) 786–1174. The mailing address of the MGCRB is: 2520 Lord Baltimore Drive, Suite L, Baltimore, MD 21244–2670. *Comment:*
                         Several commenters stated that, although the reclassification rules provide some flexibility, there is a problem when a hospital qualifies for reclassification to two different areas. The commenters stated that, with fluctuations in area wage indices, the primary area might not be the higher wage index for each year of the 3-year reclassification. Thus, the commenter suggested that CMS allow hospitals to reclassify to the best eligible location based on the proposed post-reclassified wage index published in Tables 4A, 4B, and 4C in the applicable IPPS proposed rule. *Response:*
                         The Medicare regulations at § 412.230(a)(5)(ii) state that “a hospital may not be redesignated to more than one area.” Although wage index values may fluctuate from year to year, a hospital cannot be reclassified to a primary and secondary area at the same time in order to choose the higher area wage index value for the current year. Instead, we allow hospitals to decide, on a yearly basis, whether to withdraw, terminate, reinstate, or fallback to their existing reclassification based on the higher of the published 
                        ( print page 47333)
                        area wage indices. We believe that the current policy allows hospitals enough flexibility to select the wage index that would benefit them the most during each fiscal year. Therefore, we are making no changes to our policies with regards to this matter. 4. Hospitals That Applied for Reclassification Effective in FY 2008 and Reinstating Reclassifications in FY 2008 Applications for FY 2008 reclassifications were due to the MGCRB by September 1, 2006. We note that this deadline also applied for canceling a previous wage index reclassification withdrawal or termination under § 412.273(d). The MGCRB, in evaluating a hospital's request for reclassification for FY 2008 for the wage index, utilized the official data used to develop the FY 2007 wage index. The wage data used to support the hospital's wage comparisons were from the CMS hospital wage survey. Generally, the source for these data is the IPPS final rule to be published on or before August 1, 2006. However, the wage tables identifying the 3-year average hourly wage of hospitals were not available in time to include them in the FY 2007 IPPS final rule. Therefore, we made the data available subsequent to the publication of the FY 2007 IPPS final rule. Section 1886(d)(10)(C)(ii) of the Act indicates that a hospital requesting a change in geographic classification for a fiscal year must submit its application to the MGCRB not later than the first day of the 13-month period ending on September 30 of the preceding fiscal year. Thus, the statute requires that FY 2008 reclassification applications were to be submitted to the MGCRB by no later than September 1, 2006. For this reason, we required hospitals to file an FY 2008 reclassification application by the September 1, 2006 deadline even though the average hourly wage data used to develop the final FY 2007 wage indices were not yet available. However, as outlined in § 412.256(c)(2), we also allowed hospitals with incomplete applications submitted by the deadline to request an extension beyond September 1, 2006, to complete their applications. We also allowed hospitals 30 days from the date the final wage data were posted on the CMS Web site to request to cancel a withdrawal or termination in order to reinstate a reclassification for FY 2008 or FY 2009, or both fiscal years. For a more detailed discussion of the procedures used for the FY 2008 MGCRB applications, we refer readers to the FY 2007 IPPS final rule (71 FR 48022–48023). *Comment:*
                         One commenter requested that CMS provide a special 30-day period from the publication date of the FY 2008 IPPS final rule to allow hospitals to reinstate or withdraw their reclassification requests, as CMS provided in the FYs 2005 and 2007 IPPS final rules. The commenter requested this special accommodation due to the unexpected change in the wage index calculation (see section III.G. of this preamble for the correction to Step 2 of the calculation) and the published corrections to the proposed out-migration adjustments (72 FR 31510). *Response:*
                         We understand the commenter's concern, but we believe that no additional time period is needed for hospitals to determine whether they should reinstate or withdraw their reclassifications for FY 2008 wage index. The FYs 2005 and 2007 IPPS final rules included provisions necessary to allow hospitals additional time to analyze the wage data and reassess their reclassification decisions with respect to significant changes in policies and the wage index that occurred in those years. We included a provision in the FY 2005 IPPS final rule that established an extra 30-day period after the final rule was published to allow hospitals more time to assess their situations with regards to the change in the labor market area definitions and the new policies for implementing that change. In the FY 2007 IPPS final rule, due to changes in the wage index as a result of a court decision (
                        *Bellevue Hosp. Center*
                         v. 
                        *Leavitt*, 443 F.3d 163, 179 (2nd Cir. 2006), CMS made reclassification decisions on behalf of hospitals and allowed hospitals a 30-day period, after the final wage data were posted on CMS's Web site, to reverse a withdrawal or to terminate a reclassification. In the current situation, regarding the post-publication corrections to the proposed FY 2008 out-migration adjustments, CMS published these corrections on June 7, 2007. With the 45-day period for reclassification withdrawals and terminations ending on June 18, 2007, we believe that hospitals had sufficient time to reevaluate their reclassifications based on the revised published data. Regarding the correction to Step 2 of the wage index calculation, this change generally had a minor effect on area average hourly wages and wage index values. Although the average hourly wages for some hospitals were more significantly impacted, hospitals could have determined their correct average hourly wages using the wage data that were posted on our Web site and by adding the correction to Step 2 in the calculator that was also posted on our Web site. We note that the national and state hospital associations and many hospitals commented that they were aware of an error in the calculation. Therefore, we do not believe it is necessary and will not provide a 30-day period from publication of the FY 2008 IPPS final rule to allow hospitals to reinstate or withdraw their reclassification requests. *Comment:*
                         One commenter requested clarification on whether the 45-day period to withdraw reclassification requests runs from the posting of the display version of the IPPS proposed rule on the CMS Web site or from the date of its publication in the 
                        **Federal Register**
                        . *Response:*
                         We appreciate the commenter's concern. We are clarifying in this final rule with comment period that the 45-day period to withdraw or terminate reclassification requests begins the day the proposed rule is published in the 
                        **Federal Register**
                        . 5. Clarification of Policy on Reinstating Reclassifications Under § 412.273(a) of our regulations, a hospital or group of hospitals may withdraw its application for reclassification at any time before the MGCRB issues its decision or, if after the MGCRB issues its decision, within 45 days after publication of CMS's annual notice of proposed rulemaking for the upcoming fiscal year. In addition, a hospital may terminate a reclassification that is already in effect within 45 days after publication of the notice of proposed rulemaking for the upcoming fiscal year. Once a withdrawal or termination has been made, the hospital or group of hospitals will not be reclassified for purposes of the wage index to the same area for that year. The hospital also will not be reclassified to the withdrawn or terminated reclassification area in subsequent fiscal years unless the hospital subsequently cancels its withdrawal or termination. The procedures for making a withdrawal or termination, as well as for canceling a withdrawal or termination are specified at § 412.273. In the FY 2003 IPPS final rule (67 FR 50065–50066), we clarified our existing policy stating that a previous 3-year reclassification may not be reinstated after a subsequent 3-year reclassification to another area takes effect. Therefore, a hospital can only have one active 3-year reclassification at a time. We have been asked whether a hospital (or group of hospitals) can reinstate the two remaining years of a previously approved 3-year 
                        ( print page 47334)
                        reclassification to one area, while at the same time the individual hospital (or group) request a new 3-year reclassification from the MGCRB to a different area and be approved for both at the same time. In this case, the hospital or group of hospitals is permitted to apply to a different area than the previously approved reclassification but, as stated in § 412.273(b)(2), once they accept a newly approved reclassification, a previously terminated and reinstated 3-year reclassification would be permanently terminated. Following the policy set forth at § 412.273(d), a hospital may cancel a previous withdrawal or termination by submitting written notice of its intent to the MGCRB no later than September 1 for reclassifications effective at the start of the second following fiscal year 13 months later. At the same time (because the deadline for geographic reclassification applications for the second following fiscal year 13 months later is also September 1), a hospital or group of hospitals could apply for reclassification to a different area. If the application is denied, the hospital or group of hospitals can select between the reinstated geographic reclassification and the home area wage index for the following fiscal year. The hospital or group of hospitals must file a written request to the MGCRB within 45 days after publication of the notice of proposed rulemaking to terminate the reinstated reclassification and receive the home area wage index. If the hospital or group of hospitals takes no action, the pending geographic reclassification will go into effect. If the new geographic reclassification application is approved, the hospital or group of hospitals will have 45 days from publication of the notice of proposed rulemaking to accept either of the two pending geographic reclassifications or revert to the home area wage index. If the hospital or group of hospitals takes no action, the most recent approved geographic reclassification will go into effect and the prior reclassification will be permanently terminated. Alternatively, the hospital or group of hospitals can withdraw the most recent approved reclassification and accept the previously approved and reinstated reclassification within 45 days of publication of the notice of proposed rulemaking. Such an action will permanently terminate the most recently approved geographic reclassification. Finally, the hospital or group hospitals can write to the MGCRB within 45 days of publication of the notice of proposed rulemaking to withdraw both geographic reclassifications in order to receive the home area wage index. In this case, the hospital or group of hospitals can only reinstate one of the two geographic reclassifications. The other geographic reclassification is permanently terminated. Once a hospital or group of hospitals makes a decision for the following fiscal year within 45 days of publication of the notice of proposed rulemaking, the hospital or group of hospitals cannot change the decision for that fiscal year. It is also important to note that the reinstatement of a reclassification only applies to those withdrawals which were made after the MGCRB issued an approved 3-year decision, not a withdrawal made prior to the MGCRB issuing an approval decision. For example, a hospital has been reclassified to area “A” for FYs 2007 through 2009. The hospital accepts this geographic reclassification for FY 2007. The hospital also applies for reclassification to a different area “B” for FYs 2008 through 2010 by September 1, 2006. If reclassification to area “B” is denied, the hospital can either withdraw or terminate its reclassification to area “A” within 45 days of publication of the proposed rule for FY 2008 and receive the home area wage index for FY 2008 or receive the reclassification to area “A” for FY 2008. If the hospital does nothing, it will receive the area “A” reclassification. If the hospital's reclassification application to area “B” is approved by the MGCRB, the hospital can (1) do nothing (and, therefore, receives the reclassification to area “B” for FY 2008, permanently terminating the reclassification to area “A”); (2) within 45 days of publication of the notice of proposed rulemaking, withdraw the reclassification to area “B” and receive the reclassification to area “A” for FY 2008 (permanently terminating the reclassification to area “B”); or (3) withdraw or terminate both the reclassifications to both areas “A” and “B” and receive the home area wage index for FY 2008. If the latter option is selected, the hospital can only reinstate one of the withdrawn/terminated reclassifications by September 1, 2007 (to take effect for FY 2009). Upon the sunset of the 45-day window, the reclassification selection is final and the hospital will receive that wage index for the fiscal year, in this case for FY 2008. 6. “Fallback” Reclassifications As indicated in section III.I.3. of the preamble of this final rule with comment period, the regulations at § 412.273 provide the process that a hospital wishing to withdraw or terminate a reclassification must follow. If a hospital has an existing reclassification and then applies to the MGCRB to a second area and is approved, it has a choice between two reclassifications and its home area wage index for the following fiscal year. We have been asked a procedural question about how the hospital accepts its previously approved reclassification (its “fall back” reclassification) or how it can “fall back” to its home area wage index. As the example provided in the section III.I.5. of the preamble of this final rule with comment period illustrates, a hospital will automatically be given its most recently approved reclassification (thereby permanently terminating any previously approved reclassifications) unless it provides written notice to the MGCRB within 45 days of publication of the notice of proposed rulemaking that it wishes to withdraw its most recently approved reclassification and “fall back” to either its prior reclassification or its home area wage index for the following fiscal year. If the hospital wishes to accept its home area wage index in preference to its previous “fall back” reclassification, the hospital must also state in its request to the MGCRB that it is not only withdrawing its most recently approved reclassification but also terminating its previously approved reclassification. 7. Geographic Reclassification Issues for Multicampus Hospitals In FY 2005, we modified the reclassification rules at § 412.230(d)(2)(iii) to allow campuses of multicampus hospitals located in separate wage index areas to support a reclassification application to the geographic area in which another campus is located using the average hourly wage data submitted on the cost report for the entire hospital. This special rule applies for applications for reclassifications effective in FY 2006 through FY 2008. In the FY 2007 IPPS final rule, we decided not to extend this special rule for multicampus hospitals. However, we believe that the change to how we allocate a multicampus hospital's wage data has implications for multicampus hospitals' reclassification requests. As stated above, we proposed to allocate the multicampus hospital's wage data across the different labor market areas where the campuses are located based upon FTEs. After consideration of the public comments received on the proposed rule, as discussed in section III.F. of the preamble of this final rule with 
                        ( print page 47335)
                        comment period, we are finalizing the policy that we will use FTEs or Medicare discharge data to allocate salaries and hours to the campuses of multicampus hospitals that are located in different labor market areas (although we note that, as discussed in section III.F. of the preamble of this final rule with comment period, once the cost report is revised to require reporting of FTE data by campus and such data are available for use in calculating the wage index, the wage data of a multicampus hospital will be allocated among its campuses based only on reported FTEs). For this reason, an individual campus located in a geographic area distinct from the geographic area associated with the provider number of the multicampus hospital will now have published, hospital-specific wage data that it may use to support a request for an individual reclassification. The campus' wage data will be included in a public use file, titled, “Three Year MGCRB Reclassification Data for FY 2009 Applications”, that will be posted on the Internet at 
                        *http://www.cms.hhs.gov/​AcuteInpatientPPS/​WIFN/​list.asp#TopOfPage,*
                         concurrent with the publication of this final rule with comment period. The campus-specific data will also be provided to the MGCRB. These data will be considered appropriate wage data under § 412.230, because they will be part of the CMS hospital wage survey used to construct the wage index. Furthermore, we consider these data to constitute “published hospital wage survey data” under section 1886(d)(10)(D)(vi) of the Act. We received no public comments regarding our proposal in the proposed rule. Therefore, we are finalizing the policy that a hospital may use this campus-specific data (derived from allocating hospital wage data among campuses based on Medicare discharges or FTEs) to support a request for reclassification. Thus, our policy allowing the allocation of wage data using FTE or Medicare discharge data is somewhat different from our prior policy on multicampus hospitals because under the policy being finalized in this final rule with comment period, an individual campus of a multicampus hospital will be considered to have campus-specific data to support an individual reclassification request. In addition, we note that when a multicampus hospital's wage data are divided by FTEs or Medicare discharges, the ratio of wages to hours remains constant. Thus, the effect of our policy, in some sense, is that the individual campus of a multicampus hospital effectively uses the average hourly wage of the entire multicampus institution to support its individual reclassification request (see campus-specific average hourly wages in Table 2 of the Addendum to this final rule with comment period). However, as stated above, an individual campus of a multicampus hospital will now be considered to have hospital-specific data to support an individual reclassification request. We are revising our regulations at § 412.230(d)(2) to reflect this final policy. In the FY 2008 IPPS proposed rule, we noted that where a multicampus hospital spanning two or more geographic areas does not provide us with appropriate FTE data, its campus-specific data would not be included in the public use file we use to construct the wage index. We stated that, for this reason, unless a multicampus hospital has provided us with FTE data, we would not have appropriate campus-specific wage data that could be used to support an individual reclassification under § 412.230, and the reclassification request for the individual campus would be denied. However, because we have decided to automatically allocate a multicampus hospital's wages and hours among its campuses based on discharge data if a hospital fails to submit FTE or discharge data to us (as discussed in section III.F. of the preamble of this final rule with comment period), a hospital campus located in a geographic area distinct from the geographic area associated with the provider number of the multicampus hospital will now automatically have appropriate campus-specific wage data that could be used to support an individual reclassification. Under current policy, an individual campus of a multicampus hospital located in a different area than the one associated with the provider number does not have to provide any official wage index data to join a group reclassification. However, given that we are allocating a portion of the average hourly wage of the hospital's data to the labor market area that includes this campus, we also proposed that this same data be used as part of a group reclassification application. We are adopting this policy as final in this final rule with comment period. Again, these data will be published in a public use file and will be considered appropriate wage data under §§ 412.232 and 412.234. We are amending our regulations at § 412.232 and § 412.234 to reflect this final policy. As we stated above, because we have decided to automatically allocate a multicampus hospital's wages and hours among its campuses based on discharge data if a hospital fails to submit FTE or discharge data to us (as discussed in section III.F. of the preamble of this final rule with comment period), a hospital campus located in a geographic area distinct from the geographic area associated with the provider number of the multicampus hospital will now automatically have official wage data to include in a group reclassification application. 8. Redesignations of Hospitals Under Section 1886(d)(8)(B) of the Act Beginning October 1, 1988, section 1886(d)(8)(B) of the Act required us to treat a hospital located in a rural county adjacent to one or more urban areas as being located in the MSA if certain criteria were met. Prior to FY 2005, the rule was that a rural county adjacent to one or more urban areas would be treated as being located in the MSA to which the greatest number of workers in the county commute, if the rural county would otherwise be considered part of an urban area under the standards published in the 
                        **Federal Register**
                         on January 3, 1980 (45 FR 956) for designating MSAs (and New England County Metropolitan Areas (NECMAs)), and if the commuting rates used in determining outlying counties (or, for New England, similar recognized areas) were determined on the basis of the aggregate number of resident workers who commute to (and, if applicable under the standards, from) the central county or counties of 
                        *all*
                         contiguous MSAs (or NECMAs). Hospitals that met the criteria using the January 3, 1980 version of these OMB standards were deemed urban for purposes of the standardized amounts and for purposes of assigning the wage data index. Effective beginning FY 2005, we use OMB's 2000 CBSA standards and the Census 2000 data to identify counties qualifying for redesignation under section 1886(d)(8)(B) for the purpose of assigning the wage index to the urban area. Hospitals located in these counties have been known as “Lugar” hospitals and the counties themselves are often referred to as “Lugar” counties. We provide the chart below with the listing of the rural counties designated as urban under section 1886(d)(8)(B) of the Act that we are using for FY 2008. For discharges occurring on or after October 1, 2007, hospitals located in the rural county in the first column of this chart will be redesignated for purposes of using the wage index of the urban area listed in the second column. 
                        ( print page 47336) Rural Counties Redesignated as Urban Under Section 1886(
                            d
                            )(8)(B) of the Act (Based on CBSAs and Census 2000 Data)
Rural county
CBSACherokee, AL
Rome, GA.Macon, AL
Auburn-Opelika, AL.Talladega, AL
Anniston-Oxford, AL.Hot Springs, AR
Hot Springs, AR.Windham, CT
Hartford-West Hartford-East Hartford, CT.Bradford, FL
Gainesville, FL.Hendry, FL
West Palm Beach-Boca Raton-Boynton, FL.Levy, FL
Gainesville, FL.Walton, FL
Fort Walton Beach-Crestview-Destin, FL.Banks, GA
Gainesville, GA.Chattooga, GA
Chattanooga, TN-GA.Jackson, GA
Atlanta-Sandy Springs-Marietta, GA.Lumpkin, GA
Atlanta-Sandy Springs-Marietta, GA.Morgan, GA
Atlanta-Sandy Springs-Marietta, GA.Peach, GA
Macon, GA.Polk, GA
Atlanta-Sandy Springs-Marietta, GA.Talbot, GA
Columbus, GA-AL.Bingham, ID
Idaho Falls, ID.Christian, IL
Springfield, IL.DeWitt, IL
Bloomington-Normal, IL.Iroquois, IL
Kankakee-Bradley, IL.Logan, IL
Springfield, IL.Mason, IL
Peoria, IL.Ogle, IL
Rockford, IL.Clinton, IN
Lafayette, IN.Henry, IN
Indianapolis-Carmel, IN.Spencer, IN
Evansville, IN-KY.Starke, IN
Gary, IN.Warren, IN
Lafayette, IN.Boone, IA
Ames, IA.Buchanan, IA
Waterloo-Cedar Falls, IA.Cedar, IA
Iowa City, IA.Allen, KY
Bowling Green, KY.Assumption Parish, LA
Baton Rouge, LA.St. James Parish, LA
Baton Rouge, LA.Allegan, MI
Holland-Grand Haven, MI.Montcalm, MI
Grand Rapids-Wyoming, MI.Oceana, MI
Muskegon-Norton Shores, MI.Shiawassee, MI
Lansing-East Lansing, MI.Tuscola, MI
Saginaw-Saginaw Township North, MI.Fillmore, MN
Rochester, MN.Dade, MO
Springfield, MO.Pearl River, MS
Gulfport-Biloxi, MS.Caswell, NC
Burlington, NC.Davidson, NC
Greensboro-High Point, NC.Granville, NC
Durham, NC.Harnett, NC
Raleigh-Cary, NC.Lincoln, NC
Charlotte-Gastonia-Concord, NC–SC.Polk, NC
Spartanburg, NC.Los Alamos, NM
Santa Fe, NM.Lyon, NV
Carson City, NV.Cayuga, NY
Syracuse, NY.Columbia, NY
Albany-Schenectady-Troy, NY.Genesee, NY
Rochester, NY.Greene, NY
Albany-Schenectady-Troy, NY.Schuyler, NY
Ithaca, NY.Sullivan, NY
Poughkeepsie-Newburgh-Middletown, NY.Wyoming, NY
Buffalo-Niagara Falls, NY.Ashtabula, OH
Cleveland-Elyria-Mentor, OH.Champaign, OH
Springfield, OH.Columbiana, OH
Youngstown-Warren-Boardman, OH-PA.Cotton, OK
Lawton, OK.Linn, OR
Corvallis, OR.Adams, PA
York-Hanover, PA.Clinton, PA
Williamsport, PA.Greene, PA
Pittsburgh, PA.Monroe, PA
Allentown-Bethlehem-Easton, PA-NJ.Schuylkill, PA
Reading, PA.Susquehanna, PA
Binghamton, NY.Clarendon, SC
Sumter, SC.Lee, SC
Sumter, SC.Oconee, SC
Greenville, SC.Union, SC
Spartanburg, SC.Meigs, TN
Cleveland, TN.Bosque, TX
Waco, TX.Falls, TX
Waco, TX.Fannin, TX
Dallas-Plano-Irving, TX.Grimes, TX
College Station-Bryan, TX.Harrison, TX
Longview, TX.Henderson, TX
Dallas-Plano-Irving, TX.Milam, TX
Austin-Round Rock, TX.Van Zandt, TX
Dallas-Plano-Irving, TX.Willacy, TX
Brownsville-Harlingen, TX.Buckingham, VA
Charlottesville, VA.Floyd, VA
Blacksburg-Christiansburg-Radford, VA.Middlesex, VA
Virginia Beach-Norfolk-Newport News, VA.Page, VA
Harrisonburg, VA.Shenandoah, VA
Winchester, VA-WV.Island, WA
Seattle-Bellevue-Everett, WA.Mason, WA
Olympia, WA.Wahkiakum, WA
Longview, WA.Jackson, WV
Charleston, WV.Roane, WV
Charleston, WV.Green, WI
Madison, WI.Green Lake, WI
Fond du Lac, WI.Jefferson, WI
Milwaukee-Waukesha-West Allis, WI.Walworth, WI
Milwaukee-Waukesha-West Allis, WI.
 As in the past, hospitals redesignated under section 1886(d)(8)(B) of the Act are also eligible to be reclassified to a different area by the MGCRB. Affected hospitals are permitted to compare the reclassified wage index for the labor market area in Table 4C in the Addendum to this final rule with comment period into which they have been reclassified by the MGCRB to the wage index for the area to which they are redesignated under section 1886(d)(8)(B) of the Act. Hospitals could withdraw from an MCGRB reclassification within 45 days of the publication of the proposed rule. *Comment:*
                         One hospital commented that its county should have been listed as a Lugar county in the proposed rule and inquired about their absence on the Lugar county list. The commenter stated it had used 2002 and 2003 Census data to calculate the commuting exchange between counties. *Response:*
                         Section 1886(d)(8)(B) of the Act requires the Secretary of Health and Human Services to determine Lugar counties using the standards published in the 
                        **Federal Register**
                         by the Director of the Office of Management and Budget based on the most recent decennial census. The most recent decennial census was completed in 2000. The law does not permit us to use 2003 Census data to determine the Lugar status for FY 2008. Davidson County must qualify for Lugar status based on 2000 Census data. We reviewed the 2000 Census data and determined that Davidson County, NC does meet the criteria to be a Lugar county. Therefore, in this final rule with comment period, we added Davidson County, NC to the above list of rural counties that are redesignated as urban for FY 2008 under section 1886(d)(8)(B) of the Act. Thus, for FY 2008, the hospitals in Davidson County, NC will receive the wage index for hospitals that are reclassified to Greensboro-High Point, NC in Table 4C of the Addendum to this final rule with comment period. 9. Reclassifications Under Section 1886(d)(8)(B) of the Act We have been asked whether Lugar hospitals and counties (discussed above in section III.H.8. of the preamble of this final rule with comment period) are considered urban or rural for MGCRB reclassification purposes. As stated in the regulations at 42 CFR 412.64(b)(3), as well as in section 1886(d)(8)(B) of the Act, Lugar hospitals are deemed to be located in an urban area. Therefore, because they are physically located in a rural area and are deemed urban, they receive the reclassified wage index (Table 4C in the Addendum to this final rule with comment period) for the urban area to which they have been redesignated. Because Lugar hospitals are treated like reclassified hospitals, when they are seeking reclassification by the MCGRB, they are subject to the rural reclassification rules set forth at 
                        ( print page 47337)
                        § 412.230. The procedural rules set forth at § 412.230 list the criteria which a hospital must meet in order to reclassify as a rural hospital. Lugar hospitals will be subject to the proximity criteria and payment thresholds that apply to rural hospitals. Specifically, the hospital will have to be no more than 35 miles from the area to which it seeks reclassification (§ 412.230(b)(1)); the hospital will have to show that its average hourly wage is at least 106 percent of the average hourly wage of all other hospitals in the area in which the hospital is located (§ 412.230(d)(1)(iii)(C)); and the hospital will have to demonstrate that its average hourly wage is equal to at least 82 percent of the average hourly wage of hospitals in the area to which it seeks redesignation (§ 412.230(d)(1)(iv)(C)). Hospitals not located in a Lugar county seeking reclassification to the urban area where the Lugar hospitals have been redesignated are not permitted to measure to the Lugar county to demonstrate proximity (no more than 15 miles for an urban hospital, and no more than 35 miles for a rural hospital or the closest urban or rural area for RRCs or SCHs) in order to be reclassified to such urban area. These hospitals must measure to the urban area exclusive of the Lugar County to meet the proximity or nearest urban or rural area requirement. 10. New England Deemed Counties Our regulations at 42 CFR 412.64(b)(1)(ii)(B) list New England counties that are deemed to be parts of urban areas under section 601(g) of the Social Security Amendments of 1983 (Pub. L. 98–21, 42 U.S.C. 1395ww(note)). These counties include Litchfield County, Connecticut; York County, Maine; Sagadahoc County, Maine; Merrimack County, New Hampshire; and Newport County, Rhode Island. OMB standards designate and define two categories of CBSAs: Metropolitan Statistical Areas (MSAs) and Micropolitan Statistical Areas (65 FR 82235). For our labor market area definitions, we treat micropolitan areas as rural. Of these five counties, three (York County, Sagadahoc County, and Newport County) are also included in metropolitan areas by OMB, whereas the remaining two, Litchfield County and Merrimack County, are located in micropolitan statistical areas and would be treated as rural under our labor market area definitions were they not deemed urban under § 412.64(b)(1)(ii)(B) of the regulations. Litchfield County and Merrimack County have been listed as being part of urban CBSA 25540 Hartford-West Hartford East Hartford, CT, and urban CBSA 31700 Manchester-Nashua, NH, respectively. Even though hospitals located in Litchfield County and Merrimack County are in micropolitan statistical areas, they have been treated as urban for reclassification purposes. Under our regulations, we have deemed both of these two New England counties and the hospitals within them as urban. Because the counties themselves were deemed urban, the hospitals within them have also been treated as urban for reclassification purposes, even though Litchfield and Merrimack counties are in micropolitan statistical areas. However, upon further consideration of this issue, we believe the hospitals located within these New England counties should be treated the same as Lugar hospitals. That is, the area would be considered rural but the hospitals within them would be deemed to be urban. *Comment:*
                         Many commenters opposed the proposed change to treat the two New England deemed counties (Litchfield, CT and Merrimack, NH) as rural. The commenters stated that the statute requires continuing the 1979 urban classifications of these New England hospitals in determining if a hospital is in an urban or rural area for purposes of section 1886(d) of the Act. Most of the commenters believed the change is not warranted and is contrary to the meaning of the statute. However, some commenters stated that they would be willing to accept the policy change if their published proposed statewide rural wage index does not change in the final rule as a result of this policy change. *Response:*
                         We appreciate the commenters’ concerns regarding our proposed policy. We believe that our proposed policy change is consistent with section 601(g) of Pub. L. 98–21, which requires certain hospitals located in New England to be classified as being located in an urban area. The statute does not require that the counties in which these hospitals are located be deemed urban. Furthermore, the proposed change to how New England deemed counties are to be treated in the wage index calculation was not designed to reduce the statewide rural floor. Rather, it was to promote consistency within the regulations with regard to how we treat rural hospitals that are redesignated to urban areas for purposes of the wage index. That is, we found that there is no practical difference between the purpose of the “Lugar” and deemed urban counties provisions of the statute with regard to the IPPS. Both provisions treat hospitals that are geographically rural as urban for the purposes of section 1886(d) of the Act. For this reason, we believe that Medicare should have a consistent policy between these two types of rural counties with respect to how the hospitals located in such counties are treated for geographic reclassification purposes and for purposes of calculating pre- and post-reclassified wage indices. We note that section 1886(d)(8)(C) of the Act protects rural area IPPS wage indices from reductions that will occur due to the effects of reclassifications. That is, a rural area IPPS wage index can not decrease as a result of hospitals reclassifying in or out of the area. Therefore, the rural IPPS wage index will not change as a result of this policy change. However, we cannot ensure that the IPPS wage index that is published in the proposed rule will not change in the final rule. The wage index correction process is not finalized each year until after the proposed rule is published. During the correction process, a hospital's wage index data can change and cause the area wage index to fluctuate up or down. Therefore, any change to the area or national average hourly wage as a result of the wage data correction process may cause a change between the proposed and final rule in an area wage index. If any change occurred between the proposed and final rule in the wage index for rural Connecticut or New Hampshire, it happened as a result of corrections to the wage data and not this policy. After consideration of the public comments received, we are adopting as final, without modification, the proposed policy to treat New England deemed counties that are still considered rural by OMB as rural under IPPS, and the hospitals within them as being reclassified to their deemed urban area and subject to the rural reclassification rules. As we proposed, we are changing our policy and considering Litchfield County and Merrimack County as rural but will continue to consider the hospitals within them as being redesignated to urban CBSA 25540 Hartford-West Hartford-East Hartford, CT, and urban CBSA 31700 Manchester-Nashua, NH, respectively. Under our policy, hospitals located in these counties—like the Lugar hospitals described in section III.I.8. of the preamble of this final rule with comment period—must meet the rural requirements set forth at § 412.230 for individual reclassifications and § 412.232 for group reclassifications. We are revising § 412.64(b)(1)(ii)(B) accordingly. Hospitals not located inside one of these deemed New 
                        ( print page 47338)
                        England counties are not permitted to measure to these counties to demonstrate close proximity in order to be reclassified to the CBSA(s) to which the hospitals in Litchfield and Merrimack counties are redesignated. Due to policies in place that protect the rural wage index from decreasing as a result of hospital reclassifications, the proposed policy would have no effect on the rural wage index for IPPS hospitals. However, non-IPPS payment systems (SNF, IRF, and HHA, among others) that use the pre-reclassified wage index may be affected by this policy change. However, we are limiting this policy change for deemed New England counties only to IPPS hospitals because it was only discussed in the FY 2008 IPPS proposed rule. Any change to non-IPPS provider wage indices would be addressed in the respective payment rules for those payment systems. 11. Reclassifications under Section 508 of Pub. L. 108–173 Under section 508 of Pub. L. 108–173, a qualifying hospital could appeal the wage index classification otherwise applicable to the hospital and apply for reclassification to another area of the State in which the hospital is located (or, at the discretion of the Secretary, to an area within a contiguous State). We implemented this process through notices published in the 
                        **Federal Register**
                         on January 6, 2004 (69 FR 661), and February 13, 2004 (69 FR 7340). Such reclassifications were applicable to discharges occurring during the 3-year period beginning April 1, 2004, and ending March 31, 2007. Section 106(a) of the MIEA–TRHCA (Pub. L. 109–432), extended any geographic reclassifications of hospitals that were made under section 508 and that would expire on March 31, 2007, by 6 months until September 30, 2007. On March 23, 2007, we published a notice in the 
                        **Federal Register**
                         (72 FR 13799) that indicated how we are implementing section 106(a) of the MIEA–TRHCA through September 30, 2007. Because the section 508 provision will expire on September 30, 2007, and will not be applicable in FY 2008, in this final rule with comment period, we are not making any changes related to the provision. *Comment:*
                         A number of commenters expressed support for the reclassification opportunities provided by provisions in section 508 of Pub. L. 108–173 (MMA). The commenters highlighted the necessity to preserve these provisions to allow certain hospitals to continue to compete for labor in markets they would not be able to reclassify to under prior reclassification standards. *Response:*
                         Provisions in section 508 of Pub. L. 108–173 allocated a capped amount of funding to allow some hospitals that otherwise would not qualify to do so to seek a form of geographic reclassification. The section 508 provisions were mandated by Congressional action and were originally set to expire on March 31, 2007. However, section 106(a) of the MIEA–TRHCA extended any geographic reclassifications that were set to expire on March 31, 2007, by 6 months, through September 30, 2007. Further extension of section 508 would require a change in the Medicare statute. *Comment:*
                         One commenter addressed the use of our special exceptions and adjustment authority under section 1886(d)(5)(I)(i) in the FY 2007 IPPS final rule to grant a hospital a reclassified wage index for FY 2008 (we refer readers to 71 FR 48070 for more information). The commenter stated that a special exception was granted to this hospital because it was not reclassified under section 508 of Pub. L. 108–173, although multiple hospitals in neighboring areas were so reclassified. (In FY 2007, the Secretary invoked the special exceptions and adjustments authority to allow this hospital to receive the same reclassified wage index as the neighboring hospitals on the grounds that the reclassifications of neighboring hospitals under section 508 of Pub. L. 108–173, in combination with other factors, created unique circumstances making such an exception appropriate in this situation.) The commenter believed that, while this special exception allowed the hospital to increase employee salaries, another one-year extension is necessary to allow the hospital to further overcome competitive disadvantages. The commenter added that, prior to the Secretary's action, neighboring hospitals had a period of 2
                        1/2
                         years of enhanced wage indices due to section 508 provisions. Because the hospital has limited ability under current rules to seek a higher wage index reclassification, the commenter stated that further action is needed to allow the hospital to compete with its peers. *Response:*
                         In the FY 2007 final rule, CMS cited the unique circumstances surrounding the section 508 reclassifications in granting the adjustment to this hospital. We stated that it was appropriate to give the hospital in the single hospital urban area the same wage index as the nearby section 508 hospitals until the expiration of the provision on March 31, 2007. As the MIEA–TRHCA extended any geographic reclassifications that were set to expire on March 31, 2007, by 6 months, through September 30, 2007, we also extended the special exception and gave this hospital the same wage index as the neighboring section 508 hospitals through the end of FY 2007. By law, the section 508 reclassifications will expire on September 30, 2007. Therefore, the basis for providing this hospital with a special wage index will end with the expiration of section 508 on September 30, 2007. 12. Other Issues We have been advised of a reclassification scenario of concern to a particular hospital. In this scenario, two hospitals were approved by the Medicare Geographic Classification Review Board (MGCRB) for a 3-year group reclassification. Prior to the second year of the 3-year reclassification, one of the hospitals reclassified individually to another area. Consistent with our policy, the second hospital retained its group geographic reclassification for the two remaining years (66 FR 39888, August 1, 2001). However, once the group reclassification expires, the second hospital does not qualify to reclassify individually to another area. We have been asked to consider potential regulatory options that would allow this hospital to either reclassify or receive a declining blend of its home area and reclassified wage index as a transition to its post-reclassified wage index. In the proposed rule, we indicated that there are no options under our current regulations that would allow this hospital to reclassify individually or as a group. The hospital does not meet the well established wage data comparison criteria to reclassify as an individual hospital. In order for a group reclassification to be approved, all hospitals in the county must apply as a group. We have been informed that one hospital will not join the group reclassification because it qualifies individually to reclassify to a different area with a higher wage index than where the group applied. We considered whether to change our regulations for this type of situation. However, we decided not to propose a change to our regulations, given the need to gather additional information and better understand the policy issues in such a case. In this regard, we solicited public comments on whether such a situation is consistent with the purpose of reclassification. In particular, we requested comments on how a hospital that is applying to reclassify would demonstrate similarity to 
                        ( print page 47339)
                        hospitals in the neighboring area when the hospital would qualify to be part of a group reclassification if all other hospitals in the county in which the hospital is located agreed to apply. In addition, we requested comments on how we could make a determination that a hospital's own area wage index is inappropriate when the hospital does not meet the current criteria for reclassification on its own, but would meet the criteria for a group reclassification in the event all hospitals in the county in which the hospital is located would agree to submit a group application. Finally, given that reclassifications are in effect for three years, we requested comments on whether or how we could address this situation while simultaneously maintaining the distinction between group and individual reclassifications—particularly the rule that all members of a group must apply for a group reclassification. For all the above reasons, we decided, as noted, not to propose changes to the regulations to address the situation brought to our attention. Rather, we believe it is appropriate to gather additional information and seek comment on this or similar situations. We indicated that if commenters wished to raise issues with the points described in this section or comment on other issues we did not consider in the questions raised above, we welcomed such public comments. *Comment:*
                         One commenter requested that CMS exercise caution when expanding reclassification options or adding exceptions to the current wage index process. The commenter suggested that CMS collect additional information on similar situations and should consider the matter when considering global wage index reform for FY 2009. *Response:*
                         We appreciate the commenter's suggestions. At this time, CMS has made no policy proposal to address this particular issue. As indicated above, section 106(b)(2) of Pub. L. 109–432 instructs the Secretary of Health and Human Services, taking into account MedPAC's recommendations on the Medicare wage index classification system, to include in the FY 2009 IPPS proposed rule one or more proposals to revise the wage index adjustment applied under section 1886(d)(3)(E) of the Act for purposes of the IPPS. The proposal (or proposals) must consider a variety of issues including “the modification or elimination of geographic reclassifications and other adjustments.” We will consider this issue and many others as part of our comprehensive review of the wage index and geographic reclassification for FY 2009. Under section 1886(d)(10)(C)(iii) of the Act, the MGCRB's decision may be appealed to the Secretary and the “decision of the Secretary shall be final and shall not be subject to judicial review.” Under § 412.276(b) of our regulations, the decision of the MGCRB is final and binding on the parties unless it is reviewed by the Administrator and the decision is changed by the Administrator based on the hospital's appeal or the Administrator's discretionary review of the decision. Under the statute and regulations, the Administrator's review must take place within certain timeframes. After those timeframes have expired, the decision is final. We are concerned about the role that an error in the average hourly wage might have had on a reclassification decision by the MGCRB. We seek comment on the appropriateness of prospectively addressing situations where there is an error made in a hospital's average hourly wage that is later used for a geographic reclassification application. For example, if we became aware or were made aware through subsequent public input that an error existed in the average hourly wage of a hospital that can be used in a geographic reclassification application prior to it being awarded, we might republish the wage data from the IPPS final rule. If significant, we might also consider prospective adjustments to the 3-year average hourly wage for future reclassifications if some or all of those 3 years span the time period that the hospital was reclassified based on erroneous data. We welcome ideas from the public on this and other suggestions for addressing this issue. J. FY 2008 Wage Index Adjustment Based on Commuting Patterns of Hospital Employees In accordance with the broad discretion under section 1886(d)(13) of the Act, as added by section 505 of Pub. L. 108–173, beginning with FY 2005, we established a process to make adjustments to the hospital wage index based on commuting patterns of hospital employees. The process, outlined in the FY 2005 IPPS final rule (69 FR 49061), provides for an increase in the wage index for hospitals located in certain counties that have a relatively high percentage of hospital employees who reside in the county but work in a different county (or counties) with a higher wage index. Such adjustments to the wage index are effective for 3 years, unless a hospital requests to waive the application of the adjustment. A county will not lose its status as a qualifying county due to wage index changes during the 3-year period, and counties will receive the same wage index increase for those 3 years. However, a county that qualifies in any given year may no longer qualify after the 3-year period, or it may qualify but receive a different adjustment to the wage index level. Hospitals that receive this adjustment to their wage index are not eligible for reclassification under section 1886(d)(8) or section 1886(d)(10) of the Act. Adjustments under this provision are not subject to the budget neutrality requirements under section 1886(d)(3)(E) of the Act. Hospitals located in counties that qualify for the wage index adjustment are to receive an increase in the wage index that is equal to the average of the differences between the wage indices of the labor market area(s) with higher wage indices and the wage index of the resident county, weighted by the overall percentage of hospital workers residing in the qualifying county who are employed in any labor market area with a higher wage index. To date, we have used pre-reclassified wage indices when determining the out-migration adjustment. In the FY 2005 IPPS final rule (69 FR 49061 through 49063), we stated that it was reasonable to interpret the term “wage index” in section 1886(d)(13)(D) of the Act to mean the pre-reclassified, pre-adjusted wage index. At the time, we stated that it was unclear whether to use the pre- or post-reclassified wage index as the basis for comparison to determine the out-migration adjustment. We also cited complicating factors such as the use of blended wage indices as a result of the labor market area transition as another reason to base the out-migration adjustment on the pre-reclassified wage index. However, we indicated that we will continue to examine the possibility of employing post-reclassification wage indices as we refine our policy for future adjustments. We have reconsidered our policy in this final rule with comment period and as proposed, we are calculating the out-migration adjustment using the post-reclassified wage index. First, the labor-market area transition has ended and the use of blended wage indices is no longer a complicating factor in determining whether to use pre- or post-reclassified wage indices to determine the out-migration adjustment. Second, we are applying budget neutrality for application of the rural floor to area wage indices rather than to the standardized amount beginning in FY 2008. The budget neutrality adjustment 
                        ( print page 47340)
                        for the rural floor is being applied to the post-reclassification wage indices and is a component of the wage index that is being used to adjust for area differences in wages. Therefore, we believe the out-migration adjustment should be determined using the post-reclassified wage index that reflects the budget neutrality adjustment for application of the rural floor. We are using the same formula described in the FY 2005 final rule (69 FR 49064), with the addition of now using the post-reclassified wage indices, to calculate the out-migration adjustment. This adjustment is calculated as follows: *Step 1.*
                         Subtract the wage index for the qualifying county from the wage index of each of the higher wage area(s) to which hospital workers commute. *Step 2.*
                         Divide the number of hospital employees residing in the qualifying county who are employed in such higher wage index area by the total number of hospital employees residing in the qualifying county who are employed in any higher wage index area. For each of the higher wage areas, multiply this result by the result obtaining in Step 1. *Step 3.*
                         Sum the products resulting from Step 2 (if the qualifying county has workers commuting to more than one higher wage area). *Step 4.*
                         Multiply the result from Step 3 by the percentage of hospital employees who are residing in the qualifying county and who are employed in any higher wage index area. These adjustments will be effective for each county for a period of 3 fiscal years. Hospitals that received the adjustment in FY 2007 will be eligible to retain that same adjustment for FY 2008. For hospitals in newly qualified counties, adjustments to the wage index are effective for 3 years, beginning with discharges occurring on or after October 1, 2007. Hospitals receiving the wage index adjustment under section 1886(d)(13)(F) of the Act are not eligible for reclassification under sections 1886(d)(8) or (d)(10) of the Act unless they waive the out-migration adjustment. Consistent with our FY 2005, 2006, and 2007 final rules, we are specifying that hospitals redesignated under section 1886(d)(8) of the Act or reclassified under section 1886(d)(10) of the Act will be deemed to have chosen to retain their redesignation or reclassification. Section 1886(d)(10) hospitals that wish to receive the out-migration adjustment, rather than their reclassification, had to follow the termination/withdrawal procedures specified in 42 CFR 412.273 and section III.I.3. of the preamble of this final rule with comment period. Otherwise, they were deemed to have waived the out-migration adjustment. Hospitals redesignated under section 1886(d)(8) of the Act were deemed to have waived the out-migration adjustment, unless they explicitly notified CMS that they elected to receive the out-migration adjustment instead within 45 days from the publication of the proposed rule. *Comment:*
                         Several commenters expressed concern about using post-reclassified wage data instead of the current policy of using pre-reclassified wage data for the out-migration adjustment. The commenters stated that the out-migration adjustment is not subject to budget neutrality requirements set forth at section 1886(d)(3)(E) of the Act and using pre-reclassified wage data is more technically correct. Another commenter suggested that use of the post-reclassified wage indices would result in a “mismatch of the wage indices compared to the commuting patterns of employees.” According to the commenters, the use of the attaching area wage index that includes the wage data of reclassified hospitals would mean that the adjustment includes “counties that are not included in the underlying census data.” *Response:*
                         The out-migration adjustments are not included in any budget neutrality calculations and there is no adjustment to either the standardized amount or the wage index to make the additional payments under section 1886(d)(13) of the Act budget neutral. Under section 1886(d)(13) of the Act, the home area wage index for hospitals eligible for an out-migration adjustment is increased based on the weighted average of the difference between the wage index for the higher wage index MSA(s) to which its hospital employees commute and the wage index of the labor market area in which the qualifying county is located, multiplied by the overall percentage of hospital workers residing in the qualifying county who are employed in any MSA with a higher wage index. This adjustment to the wage index for all eligible hospitals increases aggregate Medicare payments and does not result in any redistribution of payments as would occur if there were a budget neutrality adjustment to either the standardized amount or the wage index like there is for revisions to area wage indices, geographic reclassification, and application of the rural floor. Application of the out-migration adjustment remains a nonbudget neutral policy as it has always been in the past. Use of a post-reclassified area wage index does have the potential to result in the out-migration adjustment being determined using wage data for hospitals geographically located in the labor market area as well as other hospitals reclassified into the area. Under section 1886(d)(8)(C) of the Act, an area wage index may increase as a result of including the wage data of hospitals that are reclassified to the area (the same section precludes an area wage index from decreasing as a result of hospitals reclassifying into the area). However, for most labor market areas, the post-reclassified area wage index and the pre-reclassified area wage index are the same and reflect only the wage data of hospitals that are geographically located in the area. This result occurs because hospitals generally reclassify to areas that have similar wage levels as their own, so the data for reclassifying hospitals rarely affect the area wage index. Therefore, we believe that the post-reclassified wage index accurately reflects an area's wage levels, even though it may sometimes include the data for hospitals that are reclassified to the area. We also believe that using the post-reclassified wage index instead of the pre-reclassified wage index is technically more appropriate for computing the out-migration adjustment. Because the out-migration adjustment is an add-on to the post-reclassified wage index adjusted for rural floor budget neutrality, consistently, the out-migration adjustment itself should be computed using post-reclassified wage indices adjusted for rural floor budget neutrality. Under the new policy that we are adopting in this final rule with comment period, the out-migration adjustment is calculated based on the post-reclassified area wage index values in Tables 4A and 4B of the Addendum to this final rule with comment period. The attaching area wage index values in Table 4C of the Addendum to this final rule with comment period are not used in computing the adjustment. Further, we note that in the FY 2005 final rule (69 FR 49063), we originally stated that we were concerned about using the post-reclassification wage index as a basis for determining the out-migration adjustment because, in some counties, not all hospitals are receiving the same wage index due to individual hospital reclassifications (for example, in the FY 2005 final rule, we stated that, in one county, there may be two hospitals that receive different wage indexes because one hospital has been reclassified). We stated that, given the differing wage indexes in this situation, 
                        ( print page 47341)
                        it was unclear which wage index would be most appropriate to use as the basis for comparison for this county. After further considering this issue, we no longer believe that use of the post reclassification wage index presents a concern in this situation. If a hospital reclassifies to another labor market area, the reclassified hospital may raise the wage index of that labor market area (creating a new, higher post-reclassification wage index), but there is still only one wage index for each county in that specific geographic area. Under section 1886(d)(8)(C) of the Act, a reclassified hospital may receive a separate wage index that is different from the wage index of the area to which the hospital reclassified. However, under section 1886(d)(13)(G) of the Act, a reclassified hospital is not eligible to receive the out-migration adjustment. Therefore, it is not possible for two hospitals in the same county to qualify for the out-migration adjustment and yet have different wage indices. In addition, we acknowledge that, due to the application of the rural floor, a CBSA could have more than one wage index value. Specifically, if a CBSA crosses State lines, and the rural floor is applied in some counties and not others in the CBSA, hospitals in the CBSA could receive different wage indices, depending on the State in which they are geographically located. However, even in this situation, there is only one wage index for a particular county. For labor market areas that have more than one wage index, both the computation and the application of the out-migration adjustment would be based on the wage index of the qualifying county in which the hospital workers reside and the county to which the workers are commuting. *Comment:*
                         Commenters expressed concern about a New England hospital not qualifying to receive an out-migration adjustment. The commenters stated that the reason for a change in the county's eligibility for the out-migration adjustment is due to CMS’ proposed policy to use the post-reclassified wage data instead of pre-reclassified wage data. *Response:*
                         Some hospitals that previously qualified for an out-migration adjustment may not qualify in FY 2008 because we recalculate the out-migration adjustment every 3 years for all hospitals. In recalculating the out-migration adjustment, there is a possibility that a hospital that previously received an out-migration adjustment may no longer qualify for the adjustment because its count no longer meets the 10-percent commuting threshold to a higher wage index area (that is, less than 10 percent of the county's hospital employees commute to a labor market area with a higher wage index (or wage indices)). Another criterion for qualifying for the out-migration adjustment is that the 3-year average hourly wage of the hospital(s) in the county where the hospital is located must equal or exceed the 3-year average hourly wage of all hospitals in the labor market area in which the county is located. The New England hospital in question is in a single county CBSA. Therefore, the 3-year average hourly wage of the hospitals in the county equals the 3-year average hourly wage of all hospitals in the CBSA in which the county is located. However, the county does not meet the 10-percent threshold, which requires that at least 10 percent of the county's hospital employees commute to higher wage index areas. The county no longer qualifies for the out-commuting adjustment because of changes in the wage indices for the areas to where its hospital workers commute. The use of post-reclassified wage index had no effect on this hospital no longer qualifying for an out-migration adjustment. *Comment:*
                         One commenter expressed confusion regarding a county that was once eligible for the out-migration adjustment but, for FY 2008, the county is no longer eligible. *Response:*
                         We understand the concern for counties that previously were eligible for the out-migration adjustment but were not included on Table 4J of the Addendum to the proposed rule to receive an adjustment. Eligibility for the out-migration adjustment is affected by the percentage of a county's hospital employees who commute to areas with higher wage indices, and the difference between the 3-year average hourly wage of the hospitals in the county and the 3-year average hourly wage of all hospitals in the labor market area in which the county is located. The amount of the out-migration adjustment is affected by the percentage of hospital employees who commute to areas with higher wage indices, and the difference between the wage index of each higher wage index area to which the county's hospital employees commute and the wage index of the labor market area in which the county is located. Thus, eligibility for the out-migration adjustment and the out-migration percentage for each county is a function of both the commuting data and changes in the wage index values. Because the wage indices associated with each resident county and the labor market areas to which county residents commute change each year, a county's out-migration percentage can vary each 3-year period that a county is qualified for the out-migration adjustment because a higher wage index area in one year might not be a higher wage index area in the next year. These normal changes in wage index values could also result in a county not deemed a qualifying county in one year becoming a qualifying county at a later point, or vice versa. A county could, therefore, not be listed in the proposed rule and be listed in the final rule due to the county wage data fluctuating. Therefore, if a county is not listed as eligible for receiving the out-migration adjustment on Table 4J of the Addendum to this final rule with comment period, the county's wage data or commuting patterns did not warrant an adjustment. Table 4J in the Addendum to this final rule with comment period lists the out-migration wage index adjustments for FY 2008. Hospitals that are not otherwise reclassified or redesignated under section 1886(d)(8) or section 1886(d)(10) of the Act will automatically receive the listed adjustment. In accordance with the procedures discussed above, redesignated/reclassified hospitals were deemed to have waived the out-migration adjustment unless CMS was otherwise notified. Hospitals that were eligible to receive the out-migration wage index adjustment and that withdrew their application for reclassification will automatically receive the wage index adjustment listed in Table 4J in the Addendum to this final rule with comment period. K. Process for Requests for Wage Index Data Corrections The preliminary Worksheet S–3 wage data and occupational mix survey data files (1st and 2nd quarter 2006) for the FY 2008 wage index were made available on October 6, 2006, through the Internet on the CMS Web site at: 
                        *http://www.cms.hhs.gov/​AcuteInpatientPPS/​WIFN/​list.asp#TopOfPage.*
                         In a memorandum dated October 6, 2006, we instructed all fiscal intermediaries/MAC to inform the IPPS hospitals they service of the availability of the wage index data files and the process and timeframe for requesting revisions (including the specific deadlines listed below). We also instructed the fiscal intermediaries/MAC to advise hospitals that these data were also made available directly through their representative hospital organizations. If a hospital wished to request a change to its data as shown in the October 6, 2006 wage and occupational mix data files, the hospital was to submit corrections along with complete, 
                        ( print page 47342)
                        detailed supporting documentation to its fiscal intermediary by December 4, 2006. Hospitals were notified of this deadline and of all other possible deadlines and requirements, including the requirement to review and verify their data as posted on the preliminary wage index data file on the Internet, through the October 6, 2006 memorandum referenced above. In the October 6, 2006 memorandum, we also specified that a hospital could request revisions to 1st and/or 2nd quarter occupational mix survey data if they missed the previous deadlines (June 1, 2006, for the 1st quarter data collection and August 31, 2006, for the 2nd quarter collection) for submitting occupational mix survey data to their fiscal intermediaries. A hospital requesting revisions to its 1st and/or 2nd quarter occupational mix survey data was to copy its record(s) from the CY 2006 occupational mix preliminary files posted to our Web site in October, highlight the revised cells on its spreadsheet, and submit its spreadsheet(s) and complete documentation to its fiscal intermediary no later than December 4, 2006. The fiscal intermediaries (or, if applicable, the MAC) notified the hospitals by mid-February 2007 of any changes to the wage index data as a result of the desk reviews and the resolution of the hospitals” early-December revision requests. The fiscal intermediaries/MAC also submitted the revised data to CMS by mid-February 2007. CMS published the proposed wage index public use files that included hospitals’ revised wage data on February 23, 2007. In a memorandum also dated February 23, 2007, we instructed fiscal intermediaries/MAC to notify all hospitals regarding the availability of the proposed wage index public use files and the criteria and process for requesting corrections and revisions to the wage index data. Hospitals had until March 12, 2007 to submit requests to the fiscal intermediaries/MAC for reconsideration of adjustments made by the fiscal intermediaries/MAC as a result of the desk review, and to correct errors due to CMS's or the fiscal intermediary's (or, if applicable, the MAC's) mishandling of the wage index data. Hospitals were also required to submit sufficient documentation to support their requests. After reviewing requested changes submitted by hospitals, fiscal intermediaries/MAC were required to transmit any additional revisions resulting from the hospitals’ reconsideration requests by April 13, 2007. The deadline for a hospital to request CMS intervention in cases where the hospital disagreed with the fiscal intermediary's (or, if applicable, the MAC's) policy interpretations was April 20, 2007. Hospitals were given the opportunity to also examine Table 2 in the Addendum to the proposed rule. Table 2 of the proposed rule contained each hospital's adjusted average hourly wage used to construct the wage index values for the past 3 years, including the FY 2004 data used to construct the proposed FY 2008 wage index. We noted that the hospital average hourly wages shown in Table 2 only reflected changes made to a hospital's data and transmitted to CMS by February 21, 2007. We released the final wage index data public use files in early May 2007 on the Internet at 
                        *http:/www.cms.hhs.gov/​AcuteInpatientPPS/​WIFN/​list.asp#TopOfPage.*
                         The May 2007 public use files were made available solely for the limited purpose of identifying any potential errors made by CMS or the fiscal intermediary/MAC in the entry of the final wage index data that result from the correction process described above (revisions submitted to CMS by the fiscal intermediaries/MAC by April 13, 2007). If, after reviewing the May 2007 final files, a hospital believed that its wage or occupational mix data were incorrect due to a fiscal intermediary or MAC or CMS error in the entry or tabulation of the final data, the hospital had to send a letter to both its fiscal intermediary or MAC and CMS that outlined why the hospital believed an error existed and to provide all supporting information, including relevant dates (for example, when it first became aware of the error). CMS and the fiscal intermediaries (or, if applicable, the MAC) had to receive these requests no later than June 8, 2007. Each request also had to be sent to the fiscal intermediary or the MAC. The fiscal intermediary or the MAC reviewed requests upon receipt and contacted CMS immediately to discuss its findings. At this point in the process, that is, after the release of the May 2007 wage index data files, changes to the wage and occupational mix data were only made in those very limited situations involving an error by the fiscal intermediary or the MAC or CMS that the hospital could not have known about before its review of the final wage index data files. Specifically, neither the fiscal intermediary or the MAC nor CMS approved the following types of requests: Requests for wage index data corrections that were submitted too late to be included in the data transmitted to CMS by fiscal intermediaries or the MAC on or before April 13, 2007.
                    Requests for correction of errors that were not, but could have been, identified during the hospital's review of the February 23, 2007 wage index public use files.
                    Requests to revisit factual determinations or policy interpretations made by the fiscal intermediary or the MAC or CMS during the wage index data correction process. Verified corrections to the wage index data received timely by CMS and the fiscal intermediaries or the MAC (that is, by June 8, 2007) were incorporated into the final wage index in this final rule with comment period, which will be effective October 1, 2007. We created the processes described above to resolve all substantive wage index data correction disputes before we finalize the wage and occupational mix data for the FY 2008 payment rates. Accordingly, hospitals that did not meet the procedural deadlines set forth above will not be afforded a later opportunity to submit wage index data corrections or to dispute the fiscal intermediary's (or, if applicable the MAC's) decision with respect to requested changes. Specifically, our policy is that hospitals that do not meet the procedural deadlines set forth above will not be permitted to challenge later, before the Provider Reimbursement Review Board, the failure of CMS to make a requested data revision. (See 
                        *W. A. Foote Memorial Hospital*
                         v. 
                        *Shalala,*
                         No. 99–CV–75202–DT (E.D. Mich. 2001) and 
                        *Palisades General Hospital*
                         v.
                        *Thompson,*
                         No. 99–1230 (D.D.C. 2003).) We refer the reader also to the FY 2000 final rule (64 FR 41513) for a discussion of the parameters for appealing to the PRRB for wage index data corrections. Again, we believe the wage index data correction process described above provides hospitals with sufficient opportunity to bring errors in their wage and occupational mix data to the fiscal intermediary's (or, if applicable, the MAC's) attention. Moreover, because hospitals had access to the final wage index data by early May 2007, they had the opportunity to detect any data entry or tabulation errors made by the fiscal intermediary or the MAC or CMS before the development and publication of the final FY 2008 wage index by August 1, 2007, and the implementation of the FY 2008 wage index on October 1, 2007. If hospitals availed themselves of the opportunities afforded to provide and make corrections to the wage and occupational mix data, the wage index implemented on October 1 should be accurate. Nevertheless, in the event that 
                        ( print page 47343)
                        errors are identified by hospitals and brought to our attention after June 8, 2007, we retain the right to make midyear changes to the wage index under very limited circumstances. Specifically, in accordance with § 412.64(k)(1) of our existing regulations, we make midyear corrections to the wage index for an area only if a hospital can show that: (1) the fiscal intermediary or the MAC or CMS made an error in tabulating its data; and (2) the requesting hospital could not have known about the error or did not have an opportunity to correct the error, before the beginning of the fiscal year. For purposes of this provision, “before the beginning of the fiscal year” means by the June deadline for making corrections to the wage data for the following fiscal year's wage index. This provision is not available to a hospital seeking to revise another hospital's data that may be affecting the requesting hospital's wage index for the labor market area. As indicated earlier, since CMS makes the wage index data available to hospitals on the CMS Web site prior to publishing both the proposed and final IPPS rules, and the fiscal intermediaries or the MAC notify hospitals directly of any wage index data changes after completing their desk reviews, we do not expect that midyear corrections will be necessary. However, under our current policy, if the correction of a data error changes the wage index value for an area, the revised wage index value will be effective prospectively from the date the correction is made. In the FY 2006 IPPS final rule (70 FR 47385), we revised § 412.64(k)(2) to specify that, effective on October 1, 2005, that is beginning with the FY 2006 wage index, a change to the wage index can be made retroactive to the beginning of the Federal fiscal year only when: (1) the fiscal intermediary (or, if applicable, the MAC) or CMS made an error in tabulating data used for the wage index calculation; (2) the hospital knew about the error and requested that the fiscal intermediary (or if applicable the MAC) and CMS correct the error using the established process and within the established schedule for requesting corrections to the wage index data, before the beginning of the fiscal year for the applicable IPPS update (that is, by the June 08, 2007 deadline for the FY 2008 wage index); and (3) CMS agreed that the fiscal intermediary (or if applicable, the MAC) or CMS made an error in tabulating the hospital's wage index data and the wage index should be corrected. In those circumstances where a hospital requested a correction to its wage index data before CMS calculates the final wage index (that is, by the June deadline), and CMS acknowledges that the error in the hospital's wage index data was caused by CMS's or the fiscal intermediary's (or, if applicable, the MAC's) mishandling of the data, we believe that the hospital should not be penalized by our delay in publishing or implementing the correction. As with our current policy, we indicated that the provision is not available to a hospital seeking to revise another hospital's data. In addition, the provision cannot be used to correct prior years’ wage index data; it can only be used for the current Federal fiscal year. In other situations where our policies would allow midyear corrections, we continue to believe that it is appropriate to make prospective-only corrections to the wage index. We note that, as with prospective changes to the wage index, the final retroactive correction will be made irrespective of whether the change increases or decreases a hospital's payment rate. In addition, we note that the policy of retroactive adjustment will still apply in those instances where a judicial decision reverses a CMS denial of a hospital's wage index data revision request. *Comment:*
                         One commenter suggested that, for future wage indices, CMS should provide an additional public use file that reflects the data that are actually used in computing the wage index that is published in the proposed rule. The commenter noted that after CMS posts the February public use file, CMS makes revisions and corrections to the file and includes the updates in the proposed wage index. The commenter expressed support for CMS’ decision to use the latest available data to compute the proposed wage index and for the timing and purpose of the February and May public use files. However, the commenter opined that a data file that matches the proposed wage index would be particularly helpful to the public for review and comments on the proposed rule, and CMS could release the file strictly for this purpose. The commenter also noted that releasing this new wage data file would be consistent with CMS releasing an up-to-date version of the MedPAR file along with each proposed rule. *Response:*
                         We believe that the commenter's suggestion is reasonable. In the interest of meeting the data needs of the public, beginning with the FY 2009 wage index, we will post an additional public use file on our Web site that reflects the actual data that are used in computing the proposed wage index. The release of this new file will not alter the current wage index process or schedule. We will notify the hospital community of the availability of these data as we do with the current public use wage data files through our Hospital Open Door forum. We encourage hospitals to sign up for automatic notifications of information about hospital issues and the scheduling of the Hospital Open Door forums at: 
                        *http://www.cms.hhs.gov/​OpenDoorForums/​.* L. Labor-Related Share for the Wage Index for FY 2008 Section 1886(d)(3)(E) of the Act directs the Secretary to adjust the proportion of the national prospective payment system base payment rates that are attributable to wages and wage-related costs by a factor that reflects the relative differences in labor costs among geographic areas. It also directs the Secretary to estimate from time to time the proportion of hospital costs that are labor-related: “The Secretary shall adjust the proportion (as estimated by the Secretary from time to time) of hospitals’ costs which are attributable to wages and wage-related costs of the DRG prospective payment rates * * *” We refer to the portion of hospital costs attributable to wages and wage-related costs as the labor-related share. The labor-related share of the prospective payment rate is adjusted by an index of relative labor costs, which is referred to as the wage index. Section 403 of Pub. L. 108–173 amended section 1886(d)(3)(E) of the Act to provide that the Secretary must employ 62 percent as the labor-related share unless this “would result in lower payments to a hospital than would otherwise be made.” However, this provision of Pub. L. 108–173 did not change the legal requirement that the Secretary estimate “from time to time” the proportion of hospitals’ costs that are “attributable to wages and wage-related costs.” We believe that this reflected Congressional intent that hospitals receive payment based on either a 62-percent labor-related share, or the labor-related share estimated from time to time by the Secretary, depending on which labor-related share resulted in a higher payment. We have continued our research into the assumptions employed in calculating the labor-related share. Our research involves analyzing the compensation share separately for urban and rural hospitals, using regression analysis to determine the proportion of costs influenced by the area wage index, and exploring alternative methodologies to determine whether all or only a portion of professional fees and 
                        ( print page 47344)
                        nonlabor intensive services should be considered labor-related. In the FY 2006 IPPS final rule (70 FR 47392), we presented our analysis and conclusions regarding the frequency and methodology for updating the labor-related share for FY 2006. We also recalculated a labor-related share of 69.731 percent, using the FY 2002 based PPS market basket for discharges occurring on or after October 1, 2005. In addition, we implemented this revised and rebased labor-related share in a budget neutral manner, but consistent with section 1886(d)(3)(E) of the Act, we did not take into account the additional payments that would be made as a result of hospitals with a wage index less than or equal to 1.0 being paid using a labor-related share lower than the labor-related share of hospitals with a wage index greater than 1.0. The labor-related share is used to determine the proportion of the national PPS base payment rate to which the area wage index is applied. In this final rule with comment period, we are not making any changes to the national average proportion of operating costs that are attributable to wages and salaries, fringe benefits, professional fees, contract labor, and labor intensive services. Therefore, we are continuing to use a labor-related share of 69.731 percent for discharges occurring on or after October 1, 2007. Tables 1A and 1B in the Addendum to this final rule with comment period reflect this labor-related share. We note that section 403 of Pub. L. 108–173 amended sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act to provide that the Secretary must employ 62 percent as the labor-related share unless this employment “would result in lower payments to a hospital than would otherwise be made.” We also are continuing to use a labor-related share for the Puerto Rico specific standardized amounts of 58.7 percent for discharges occurring on or after October 1, 2007. Consistent with our methodology for determining the national labor-related share, we added the Puerto Rico-specific relative weights for wages and salaries, fringe benefits, contract labor, nonmedical professional fees, and other labor intensive services to determine the labor-related share. Puerto Rico hospitals are paid based on 75 percent of the national standardized amounts and 25 percent of the Puerto Rico-specific standardized amounts. For Puerto Rico hospitals, the national labor-related share will always be 62 percent because the wage index for all Puerto Rico hospitals is less than 1.0. A Puerto Rico-specific wage index is applied to the Puerto Rico-specific portion of payments to the hospitals. The labor-related share of a hospital's Puerto Rico specific rate will be either 62 percent or the Puerto Rico-specific labor-related share depending on which results in higher payments to the hospital. If the hospital has a Puerto Rico-specific wage index of greater than 1.0, we will set the hospital's rates using a labor-related share of 62 percent for the 25 percent portion of the hospital's payment determined by the Puerto Rico standardized amounts because this amount will result in higher payments. Conversely, a hospital with a Puerto Rico-specific wage index of less than 1.0 will be paid using the Puerto Rico-specific labor-related share of 58.7 percent of the Puerto Rico-specific rates because the lower labor-related share will result in higher payments. The Puerto Rico labor-related share of 58.7 percent for FY 2007 is reflected in the Table 1C of the Addendum to this final rule with comment period. M. Wage Index Study Required Under Pub. L. 109–432 Section 106(b)(1) of the MIEA–TRHCA (Pub. L. 109–432) requires MedPAC to submit to Congress, not later than June 30, 2007, a report on the Medicare wage index classification system applied under the Medicare Inpatient Prospective Payment System. Section 106(b) of MIEA-TRHCA requires the report to include any alternatives that MedPAC recommends to the method to compute the wage index under section 1886(d)(3)(E) of the Act. In addition, section 106(b)(2) of the MIEA TRHCA instructs the Secretary of Health and Human Services, taking into account MedPAC's recommendations on the Medicare wage index classification system, to include in the FY 2009 IPPS proposed rule one or more proposals to revise the wage index adjustment applied under section 1886(d)(3)(E) of the Act for purposes of the IPPS. The proposal (or proposals) must consider each of the following: Problems associated with the definition of labor markets for the wage index adjustment;
                    The modification or elimination of geographic reclassifications and other adjustments;
                    The use of Bureau of Labor of Statistics data or other data or methodologies to calculate relative wages for each geographic area;
                    Minimizing variations in wage index adjustments between and within MSAs and statewide rural areas;
                    The feasibility of applying all components of CMS’ proposal to other settings;
                    Methods to minimize the volatility of wage index adjustments while maintaining the principle of budget neutrality;
                    The effect that the implementation of the proposal would have on health care providers on each region of the country;
                    Methods for implementing the proposal(s) including methods to phase in such implementations; and
                    Issues relating to occupational mix such as staffing practices and any evidence on quality of care and patient safety including any recommendation for alternative calculations to the occupational mix. In the proposed rule, we indicated that we look forward to reviewing the MedPAC report on the wage index later this year. As required by the law, we will consider MedPAC's recommendations and each of the factors specified above in making a proposal (or proposals) in the FY 2009 IPPS proposed rule. *Comment:*
                         Many commenters provided comments and suggestions on the MIEA–TRHCA requirements to study the wage index. *Response:*
                         We appreciate the commenters' ideas and suggestions on the wage index in response to the statutory requirements under Pub. L. 109–432. We plan to consider all of the comments we received when developing our FY 2009 proposed rule. We note that MedPAC released its June 2007 report to Congress on June 15, 2007. As the statute requires, the report includes MedPAC's analysis and recommendations on alternatives to the method to compute the wage index. The full report can be downloaded from MedPAC's Web site at 
                        *http://www.medpac.gov/​documents/​Jun07_​EntireReport.pdf*. N. Proxy for the Hospital Market Basket In the FY 2006 IPPS final rule (70 FR 47387), we changed the base year cost structure for the IPPS hospital index for the hospital market basket for operating costs from FY 1997 to FY 2002. As discussed in that final rule, the IPPS hospital index primarily uses the BLS data as price proxies, which are grouped in one of the three BLS categories. The categories are Producer Price Indexes (PPIs), Consumer Price Indexes (CPIs), and Employment Cost Indexes (ECIs), discussed in detail in the FY 2006 IPPS final rule (70 FR 47388 through 47391). We evaluate the price proxies using the criteria of reliability, timeliness, availability, and relevance. The PPIs, CPIs, and ECIs selected by us and used for this proposed rule meet these criteria as described in the FY 2006 IPPS final 
                        ( print page 47345)
                        rule. We believe they continue to be the best measures of price changes for the cost categories. Beginning April 2006 with the publication of March 2006 data, the BLS' ECI began using a different classification system, the North American Industrial Classification System (NAICS), instead of the Standard Industrial Codes (SIC), which no longer exist. We have consistently used the ECI as the data source for our wages and salaries and other price proxies in the IPPS market basket and are not making any changes to the usage at this time. Thus, we used the BLS–NAICS-based ECIs as price proxies in the market basket. IV. Other Decisions and Changes to the IPPS for Operating Costs and GME Costs A. Reporting of Hospital Quality Data for Annual Hospital Payment Update (§ 412.64(d)(2)) 1. Background Section 5001(a) of the Deficit Reduction Act of 2005, Pub. L. 109–171 (DRA), set out new requirements for the Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) program. We established the RHQDAPU program in order to implement section 501(b) of Pub. L. 108–173. It builds on our ongoing voluntary Hospital Quality Initiative, which is intended to empower consumers with quality of care information to make more informed decisions about their health care while also encouraging hospitals and clinicians to improve their quality of care. Section 5001(a) of the DRA revised the mechanism used to update the standardized amount for payment for hospital inpatient operating costs. Specifically, sections 1886(b)(3)(B)(viii)(I) and (II) of the Act provide that the payment update for FY 2007 and each subsequent fiscal year be reduced by 2.0 percentage points for any “subsection (d) hospital” (that is, a hospital paid under the IPPS) that does not submit certain quality data in a form and manner, and at a time, specified by the Secretary. Sections 1886(b)(3)(B)(viii)(III) and (IV) of the Act required that we expand the “starter set” of 10 quality measures established by the Secretary as of November 1, 2003, provided that certain requirements were met. In expanding this set of measures, section 1886(b)(3)(B)(viii)(IV) of the Act provides that we must begin to adopt the baseline set of performance measures as set forth in a 2005 report issued by the Institute of Medicine (IOM) of the National Academy of Sciences under section 238(b) of the MMA,[28]
                        
                         effective for payments beginning with FY 2007. The IOM measures include: Hospital Quality Alliance (HQA) quality measures (the HQA is a public-private collaboration to improve the quality of care provided by the nation's hospitals by measuring and publicly reporting on that care), the HCAHPS patient perspective survey, and three structural measures. The structural measures are: (1) implementation of computerized provider order entry for prescriptions, (2) staffing of intensive care units with intensivists, and (3) evidence-based hospital referrals. These structural measures constitute the Leapfrog Group's original “three leaps,” and are part of the National Quality Forum's 30 Safe Practices for Better Healthcare. Sections 1886(b)(3)(B)(viii)(V) and (VI) of the Act require that, effective for payments beginning with FY 2008, we add other quality measures that reflect consensus among affected parties, and provide the Secretary with the discretion to replace any quality measures or indicators in appropriate cases, such as where all hospitals are effectively in compliance with a measure, or the measures or indicators have been subsequently shown to not represent the best clinical practice. Thus, the Secretary has broad discretion to replace measures on the basis that they are not appropriate. Section 1886(b)(3)(B)(viii)(VII) of the Act requires that we establish procedures for making quality data available to the public after ensuring that a hospital has the opportunity to review, in advance, its data that are to be made public. In addition, this section requires that we report quality measures of process, structure, outcome, patients’ perspective on care, efficiency, and costs of care that relate to services furnished in inpatient settings on the CMS Web site. Section 1886(b)(3)(B)(viii)(I) of the Act also provides that any reduction in a hospital's payment update will apply only with respect to the fiscal year involved, and will not be taken into account for computing the applicable percentage increase for a subsequent fiscal year. The “starter set” of 10 quality measures we established as of November 1, 2003 are as follows: Heart Attack (Acute Myocardial Infarction or AMI) Was aspirin given to the patient upon arrival to the hospital?
                    Was aspirin prescribed when the patient was discharged?
                    Was a beta-blocker given to the patient upon arrival to the hospital?
                    Was a beta-blocker prescribed when the patient was discharged?
                    Was an ACE inhibitor given for the patient with heart failure? Heart Failure (HF) Did the patient get an assessment of his or her heart function?
                    Was an ACE inhibitor given to the patient? Pneumonia (PNE) Was an antibiotic given to the patient in a timely way?
                    Had the patient received a pneumococcal vaccination?
                    Was the patient's oxygen level assessed? We adopted these measures after the Secretary of HHS joined in a partnership with several collaborators intended to promote hospital quality improvement and public reporting of hospital quality information. These collaborators included the American Hospital Association, the Federation of American Hospitals, the Association of American Medical Colleges, the Joint Commission on Accreditation of Healthcare Organizations (the Joint Commission), the National Quality Forum (NQF), the American Medical Association, the Consumer-Purchaser Disclosure Project, the AARP, the American Federation of Labor-Congress of Industrial Organizations, the Agency for Healthcare Research and Quality (AHRQ), as well as CMS and others. This collaboration, originally known as the National Voluntary Hospital Reporting Initiative, is now known as the HQA. This starter set of 10 quality measures was endorsed by the NQF. The NQF is a voluntary consensus standard setting organization established to standardize health care quality measurement and reporting through its consensus development process. In addition, this starter set is a subset of measures currently collected for the Joint Commission as part of its certification program. We chose these 10 quality measures in order to collect data that will: (1) provide useful and valid information about hospital quality to the public; (2) provide hospitals with a sense of predictability about public reporting expectations; (3) begin to standardize 
                        ( print page 47346)
                        data and data collection mechanisms; and (4) foster hospital quality improvement. Hospitals submit quality data through the QualityNet Exchange secure Web site (
                        *www.qnetexchange.org*). We believe that this Web site meets or exceeds all current Health Insurance Portability and Accountability Act requirements for security of personal health information. Data from this initiative are used to populate the 
                        *Hospital Compare*
                         Web site, 
                        *www.hospitalcompare.hhs.gov.*
                         This Web site assists beneficiaries and the general public by providing information on hospital quality of care for consumers who need to select a hospital. It further serves to encourage consumers to work with their doctors and hospitals to discuss the quality of care they provide to patients, thereby providing an additional incentive to improve the quality of care they provide. In the FY 2007 IPPS final rule (71 FR 48137), we amended our regulations at § 412.64(d)(2) to reflect the 2.0 percentage point reduction in the payment update for FY 2007 and subsequent fiscal years for hospitals that do not comply with requirements for reporting quality data as provided for under section 5001(a) of the DRA. We also added 11 additional quality measures to the 10 measure starter set to establish an expanded set of 21 quality measures (71 FR 48029 through 48037). These 21 measures are as follows: Topic
Quality measureHeart Attack (Acute Myocardial Infarction)
• Aspirin at arrival.*• Aspirin prescribed at discharge.*• ACE inhibitor (ACE–I) or Angiotensin Receptor Blocker (ARBs) for left ventricular systolic dysfunction.*• Beta blocker at arrival.*• Beta blocker prescribed at discharge.*• Fibrinolytic (thrombolytic) agent received within 30 minutes of hospital arrival.• Percutaneous Coronary Intervention (PCI) received within 120 minutes of hospital arrival.• Adult smoking cessation advice/counseling.Heart Failure (HF)
• Left ventricular function assessment.*• ACE inhibitor (ACE–I) or Angiotensin Receptor Blocker (ARBs) for left ventricular systolic dysfunction.*• Discharge instructions.• Adult smoking cessation advice/counseling.Pneumonia (PNE)
• Initial antibiotic received within 4 hours of hospital arrival.*• Oxygenation assessment.*• Pneumococcal vaccination status.*• Blood culture performed before first antibiotic received in hospital.• Adult smoking cessation advice/counseling.• Appropriate initial antibiotic selection.• Influenza vaccination status.*Surgical Care Improvement Project (SCIP)—named SIP for discharges prior to July 2006 (3Q06)
• Prophylactic antibiotic received within 1 hour prior to surgical incision.• Prophylactic antibiotics discontinued within 24 hours after surgery end time.*Measure included in 10 measure starter set.
 In addition, in the FY 2007 IPPS final rule (71 FR 48031 through 48044), we set out RHQDAPU program procedures for data submission, program withdrawal, data validation, attestation, public display of hospitals’ quality data, and reconsiderations. In response to public comments, we required that reporting of the expanded quality measures begin with discharges occurring on or after the third calendar quarter of 2006 (July through September discharges). We also responded to public comments regarding whether we should establish more structured reconsideration procedures for FY 2008 and what such procedures might include. Under section 1886(b)(3)(B)(viii)(V) of the Act, for payments beginning with FY 2008, we are required to add other measures that reflect consensus among affected parties, and, to the extent feasible and practicable, we must include measures set forth by one or more national consensus building entities. 2. FY 2008 Quality Measures Commenters on the FY 2007 IPPS proposed rule requested that we notify the public as far in advance as possible of any proposed expansions of the measurement set and program procedures in order to encourage broad collaboration and to give hospitals time to prepare for any anticipated change. Taking these concerns into account, in the CY 2007 OPPS final rule (71 FR 68201), we adopted additional quality measures for the FY 2008 update. The six additional measures we adopted are as follows: HCAHPS survey
                    SCIP Quality Measures —SCIP–VTE 1: Venous thromboembolism (VTE) prophylaxis ordered for surgery patient —SCIP–VTE 2: VTE prophylaxis within 24 hours pre/post surgery —SCIP Infection 2: Prophylactic antibiotic selection for surgical patients Mortality (Medicare Patients) —Acute Myocardial Infarction 30-day mortality Medicare patients —Heart Failure 30-day mortality Medicare patients For the FY 2008 payment determination, we are requiring hospitals to report the following 27 measures: 
                        ( print page 47347) Topic
Quality measureHeart Attack (Acute Myocardial Infarction)
• Aspirin at arrival.*• Aspirin prescribed at discharge.*• ACE inhibitor (ACE–I) or Angiotensin Receptor Blocker (ARBs) for left ventricular systolic dysfunction.*• Beta blocker at arrival.*• Beta blocker prescribed at discharge.*• Fibrinolytic (thrombolytic) agent received within 30 minutes of hospital arrival.**• Percutaneous Coronary Intervention (PCI) received within 120 minutes of hospital arrival.**• Adult smoking cessation advice/counseling.**Heart Failure (HF)
• Left ventricular function assessment.*• ACE inhibitor (ACE–I) or Angiotensin Receptor Blocker (ARBs) for left ventricular systolic dysfunction.• Discharge instructions.**• Adult smoking cessation advice/counseling.**Pneumonia (PNE)
• Initial antibiotic received within 4 hours of hospital arrival.*• Oxygenation assessment.*• Pneumococcal vaccination status.*• Blood culture performed before first antibiotic received in hospital.**• Adult smoking cessation advice/counseling.**• Appropriate initial antibiotic selection.**• Influenza vaccination status.**Surgical Care Improvement Project (SCIP)—named SIP for discharges prior to July 2006 (3Q06)
• Prophylactic antibiotic received within 1 hour prior to surgical incision.**• Prophylactic antibiotics discontinued within 24 hours after surgery end time.**• SCIP–VTE 1: Venous thromboembolism (VTE) prophylaxis ordered for surgery patients.***• SCIP–VTE 2: VTE prophylaxis within 24 hours pre/post surgery.***• SCIP Infection 2: Prophylactic antibiotic selection for surgical patients.***Mortality Measures (Medicare patients)
• Acute Myocardial Infarction 30-day mortality Medicare patients.***• Heart Failure 30-day mortality Medicare patients.***Patients' Experience of Care
• HCAHPS patient survey.****Measure included in 10 measure starter set.**Measure included in 21 measure expanded set.***Measure added in CY 2007 OPPS final rule.
 *Comment:*
                         One commenter stated that CMS' proposal to expand the surgical infection set, add a 30-day mortality measure, and add patient experience (HCAHPS) are consistent with priorities it suggested for the hospital measure set. *Response:*
                         CMS adopted the SCIP Infection 2 measure, the HCAHPS survey measure, AMI and Heart Failure 30-Day Mortality for Medicare Patients in the CY 2007 OPPS final rule (71 FR 68201) for the FY 2008 update. *Comment:*
                         One commenter applauded CMS' decision to add two additional SCIP measures, SCIP–VTE 1 and SCIP–VTE 2, to the RHQDAPU program. The commenter believed that the addition of these measures will help improve quality of care for Medicare beneficiaries and reduce the risk of postoperative complications associated with VTE (venous thromboembolism) occurring after approximately 25 percent of all major surgical procedures performed without prophylaxis. The commenter noted that VTE is preventable through the use of well-researched measures of established efficacy and believed such prophylactic measures should be applied in settings beyond surgical ones. For example, the commenter encouraged CMS to include safety measures relating to VTE as medical prophylaxis to the RHQDAPU program. *Response:*
                         We appreciate the commenter's support of CMS’ decision to add SCIP VTE–1 and SCIP VTE–2 to the RHQDAPU program. CMS recognizes the commenter's suggestion that CMS should include safety measures relating to VTE as medical prophylaxis to the RHQDAPU program. The NQF is currently conducting an evaluation of VTE measures that was sponsored by the Joint Commission. A variety of VTE measures are currently being evaluated and tested and we are supportive of this evaluation to test additional VTE measures. CMS hopes that these evaluations will result in VTE measures that may be considered for RHQDAPU in the future. *Comment:*
                         One commenter asked that CMS clarify the AMI topic. The commenter stated that under the Joint Commission's requirements, starting with 3rd quarter 2006, hospitals are required to submit data on PCI received within 90 minutes of hospital arrival versus the 120 minute criteria for the AMI topic. However, the current document lists RHQDAPU program measures for 2007 (72 FR 24804) and 2008 and 2009 (72 FR 24804) and includes the criteria of 120 minutes instead of 90 minutes. *Response:*
                         We acknowledge NQF has changed its endorsement of the PCI measure from 120 minutes to 90 minutes of hospital arrival. We also acknowledge that the Joint Commission has changed its reporting requirement for the PCI measure to correspond with the NQF endorsement. Although we generally look to the NQF as an appropriate consensus-building entity that endorses many quality measures we believe would be appropriate for inclusion in the RHQDAPU program, NQF endorsement of a particular measure, or an NQF change regarding endorsement of a particular measure, does not automatically lead to an immediate adoption of a measure or a change in our definition of a measure for purposes of the RHQDAPU program. At this time, we are not adopting this change in this final rule with comment period. However, if we believe that the 
                        ( print page 47348)
                        NQF change is an appropriate change for the RHQDAPU program, we would expect to adopt this change through a future rulemaking. *Comment:*
                         One commenter commended CMS for publishing the FY 2008 reporting measures as part of the CY 2007 OPPS final rule. The commenter finds the ability to comment and plan a year in advance very helpful. The FY 2008 IPPS proposed rule included five new measures for FY 2009—four process and one outcome measure. The commenter commended CMS for putting these measures forth in the proposed rule because it will give hospitals time to plan and establish proper data collection mechanisms. *Response:*
                         We appreciate the commenter's support and we will continue to provide the public with as much notice as possible when adopting new measures in the future. *Comment:*
                         One commenter believed that the current Heart Attack (Acute Myocardial Infarction) measures do not reflect the current standard of care. The commenter believes that these measures require some modification in order to reflect available clinical evidence. The commenter also encouraged CMS to consider adopting a system whereby hospitals that participate in heart registries are deemed to have submitted and met necessary baselines for the AMI measures. *Response:*
                         The current performance measures for assessing quality of care for acute myocardial infarction were endorsed by the National Quality Forum, and based on the joint performance measurement recommendations of the American College of Cardiology and the American Heart Association, two well-respected consensus-building entities. As clinical science changes, CMS will align and modify our performance measures. We agree that registries hold much potential to reduce data collection burden. However, before we could “deem” a hospital that participates in a registry to have met the RHQDAPU requirements for the AMI measures, as the commenter suggests, we would have to ensure that the specifications, including data definitions of the registry were sufficiently comparable to those used in the RHQDAPU program. *Comment:*
                         One commenter stated that although the RHQDAPU AMI measures are important in improving AMI outcomes, studies have shown that they are not very effective at capturing the variation in short-term 30-day mortality rates. *Response:*
                         We acknowledge that many of the current process of care measures, including the AMI measures, are based on studies showing the relationship between the process of care and long-term patient outcomes (not necessarily 30-day mortality rates). We believe that, at the patient level, the measures are very important because they are positively related to outcomes. One reason why the current RHQDAPU program process measures are weakly correlated with the 30-day mortality measures is because there is a low variation of the process measures to explain the variation of the mortality measures. More importantly, the current set of process measures is only a small part of a broad spectrum of measures or factors that are relevant to outcomes. They are not expected to capture completely the variation in 30-day mortality rates. *Comment:*
                         One commenter stated that in addition to the current process measures, CMS should consider adopting measures that reflect a greater variety of processes and also outcomes. To that end, the commenter suggested that CMS should take a leadership role with stakeholders to develop consensus recommendations regarding the addition of new AMI quality measures under the RHQDAPU program. As the leading Federal agency in the development of quality measures for hospitals, the commenter believed CMS has a responsibility to keep abreast of changes in the standard of care, bring together the relevant stakeholders to build consensus, and act quickly and appropriately to update the quality measures for the RHQDAPU program. *Response:*
                         In selecting the measures for the RHQDAPU program, CMS makes every effort to remain abreast of changes in clinical guidelines and standards of care. We work closely with the Joint Commission, the HQA, and the NQF, among others, in this effort. Specifically, we collaborate with technical expert panels that include clinician experts, specialty societies, practice guideline committees, and others. We work with relevant stakeholders in developing performance measures that reflect current standards of care. For example, the performance measures selected by CMS for inclusion in the RHQDAPU program to assess quality of care for acute myocardial infarction not only were endorsed by the National Quality Forum, but CMS also considered the recommendations of a joint performance measurement committee of the American College of Cardiology and the American Heart Association. Similar technical panels exist for all of the current RHQDAPU process measure sets. We are not adopting any other new RHQDAPU measures for FY 2008. 3. New Quality Measures and Program Requirements for FY 2009 and Subsequent Years a. New Quality Measures for FY 2009 and Subsequent Years In the FY 2008 IPPS proposed rule (72 FR 24805), we proposed to add 1 outcome measure and 4 process measures to the existing 27 measure set to establish a new set of 32 quality measures to be used for the FY 2009 annual payment determination. We proposed to adopt these measures a year in advance in order to provide additional time for hospitals to prepare for changes related to the RHQDAPU program. We proposed to add the following quality measures for the FY 2009 RHQDAPU program: Pneumonia 30-day Mortality (Medicare patients)
                    SCIP Infection 4: Cardiac Surgery Patients with Controlled 6AM Postoperative Serum Glucose
                    SCIP Infection 6: Surgery Patients with Appropriate Hair Removal
                    SCIP Infection 7: Colorectal Patients with Immediate Postoperative Normothermia
                    SCIP Cardiovascular 2: Surgery Patients on a Beta-Blocker Prior to Arrival Who Received a Beta-Blocker During the Perioperative Period We stated that the above measures reflect our continuing commitment to quality improvement in both clinical care and patient safety. These additional measures also demonstrate our commitment to include in the RHQDAPU program only those quality measures that reflect consensus among the affected parties and that have been reviewed by a consensus building process. The proposed measures have been put forth by the HQA for inclusion in its public reporting set, contingent on endorsement by the NQF. (In the case of SCIP Infection 7, the HQA recently withdrew its previous support unless the measure receives NQF endorsement.) We stated that we anticipated that the NQF would endorse these measures prior to the publication of this final rule with comment period. Notwithstanding, we indicated that any measure that was not endorsed by that time would not be finalized in this final rule with comment period. We requested public comment on these five measures and indicated that we would finalize the FY 2009 RHQDAPU measure set in this final rule with comment period. However, as we explained, at this time we are only finalizing one of the additional measures we proposed to add as part of the complete FY 2009 measure set. We will further address adding additional 
                        ( print page 47349)
                        measures to the final FY 2009 measure set for the RHQDAPU program in the CY 2008 Outpatient Prospective Payment System (OPPS) final rule scheduled for publication in November 2007 and, if necessary, in the FY 2009 IPPS proposed and final rules. *Comment:*
                         Numerous commenters stated that they support CMS’ continued focus on quality measures and value-based purchasing. In addition, the commenters stated that they were aware that the Deficit Reduction Act of 2005 expanded quality reporting requirements for hospitals and provided the Secretary with the discretion to add additional quality measures that reflect consensus among affected parties. In the proposed rule, CMS proposed to add five new measures and described the process for adding additional measures, and the commenters supported CMS’ proposed addition of these five measures because they align with CMS’ focus on measures that can be implemented successfully and which represent aspects of care that are important to patients, efficiency, effectiveness, and patient-centered care. *Response:*
                         We appreciate the commenters’ support of our continued focus on quality measures and value-based purchasing. Indeed, in adopting additional measures, we aim to choose measures that promote efficiency, effectiveness, and patient-centered care. *Comment:*
                         One commenter stated that including four more SCIP measures will be time-consuming and will require more training for the data collectors and medical records coders. As for the fifth measure, Pneumonia 30-day mortality, the commenter noted that this will require no additional effort on its part since the data will come from Medicare claims data. The new risk adjustment methodology utilized for the AMI and HF 30-day mortality measures is an improvement on earlier methodology used for CMS mortality measures published in the 1980's. The commenter assumed the new risk adjustment methodology will be utilized for Pneumonia mortality. *Response:*
                         We appreciate the time and effort required to abstract medical record information for quality measures while recognizing the vital utility of the information derived from abstraction to improve our nation's healthcare services. Throughout, we have encouraged hospitals to leverage the primary intent of the SCIP measures, namely, systems level change through the institution. For this reason, we believe that the optimal effect of SCIP will be to change the processes of care for surgical patients making the act of data acquisition a consequence of the delivery of care rather than an afterthought. To be specific, the additional measures require the answer to 10 questions: The answers to six questions are known prior to incision, the answers to two more are known in the post-anesthesia care unit (PACU), and the answers to the final two, required only for cardiac surgery patients, are known by postoperative day number two. In brief, the documentation of these questions should be coordinated with the entire surgical team to make collection easier and to serve as checks on the quality of surgical services. The commenter's assumption that AMI, HF, and pneumonia measures share common new risk adjustment methodology and confidence intervals for estimating three possible categories for calculation is correct. The three categories into which a hospital can fall based on this methodology are displayed on 
                        *Hospital Compare*
                         as “Better than U.S. National Rate,” “No Different than U.S. National Rate,” and “Worse than U.S. National Rate.” *Comment:*
                         Several commenters appreciated and supported the focus on quality but opined strongly that CMS does not understand the resources and internal systems requirements not only to report but to actually do the work of improving care. The commenters stated that the number of measures is growing too quickly, from 10 to 21 to 27 to 32, in 4 years time, without any recognition for the work it takes to report and improve care. While the commenters appreciated the full year notice for new measures, the commenters were very concerned about the number of new measures added each year and suggested that CMS consider what it means for hospitals to garner the resources necessary to assess and improve care processes and to influence clinical practice changes to align with the evidence and to be able to report the measures. *Response:*
                         We are aware of the burden on hospitals to abstract data to report the current measures of quality. There are ongoing efforts to define measures that can be based on claims (for example, AMI mortality), to reduce the burden of data collection on current process of care measures, and to learn how currently reported measures might be collected from a functional electronic medical record system. However, it is important for hospitals to continue to incorporate the process of data collection for the current measures into their routine of care. The incorporation of data collection into the hospitals’ daily routine will ultimately reduce their overall burden. When making decisions about future measure requirements, CMS intends to continue to carefully consider the resources and internal systems a hospital will need to report measures and implement them into their standard of care. *Comment:*
                         One commenter stated that adding monitoring of these measures does not help improve patient care, instead, it just makes sure that hospitals have good documentation. The commenter believed that organizations with small sample size can be at a disadvantage with the implementation of these measures. *Response:*
                         We believe that careful and complete documentation is a very important facet of delivering quality and safe health care. Many quality improvement experts believe that even a few performance measure “failures” provide enough information to develop quality improvement interventions. A single case that fails a performance measure may identify a flaw in the system of care that prevented the patient from receiving evidence-based care. In addition, we continue to look for ways to address concerns related to small sample sizes. *Comment:*
                         One commenter did not believe that quality improvement has been addressed with the first set of 27 measures and that the data collection burdens of the current 27 and the five additional proposed for FY 2009 had not been addressed. The commenter noted that not every provider has all of this documentation electronically and that to gather this data requires more time and cost. The commenter requested that CMS evaluate whether the quality of care has been improved with the current measures before adding additional measures that may or may not improve quality. *Response:*
                         We believe that there is substantial evidence that quality of care and patient outcomes have improved over the years that CMS has focused on hospital quality. Multiple published studies as well as the annual National Healthcare Quality Report that the Agency for Healthcare Research and Quality produces for Congress have highlighted the improvements in processes of care. These processes are very important at the patient-level in reducing mortality, improving quality of life, and reducing readmission. The NQF endorsement process also considers the impact of process measures on outcomes. NQF endorses process measures that possess a considerable evidence base between the process measure and patient outcomes. There has been a steady decline in hospital and 30-day rates of mortality for conditions such as AMI and 
                        ( print page 47350)
                        pneumonia which may be due in part to improvements in care for the current RHQDAPU process measures. We are aware that there is a burden of data collection for all of the RHQDAPU process measures. Few institutions have the ability to capture this data electronically and even those with fully integrated electronic medical records often have to resort to manual data collection to capture the information for the performance measures. There are ongoing efforts to work with vendors of electronic record systems to incorporate the data elements for the RHQDAPU process measures into their tools. *Comment:*
                         Two commenters stated that CMS should continue to allow private sector organizations to have full access to provider performance information (numerator and denominator) from the 
                        *Hospital Compare*
                         Web site. Many plans rely heavily on the all-payer data to populate their provider selection tools; withholding or limiting access to granular performance data would impose additional reporting requirements on providers. *Response:*
                         A downloadable Microsoft Access database is available on 
                        *Hospital Compare*
                         Web site and it is updated on a quarterly basis. It contains counts of each hospital's patients actually receiving each measure's process of care (that is, numerators) and counts of each hospital's patients eligible to receive each measure's process of care (that is, denominators) for hospitals represented on 
                        *Hospital Compare.*
                         There are no plans to discontinue this service. *Comment:*
                         One commenter supported the CMS RHQDAPU program that provides hospitals the opportunity to submit quality data. The commenter continued to support the reportable measures under the pneumonia topic, in particular the provision of adult smoking cessation counseling services, a clinical intervention in which respiratory therapists are acknowledged experts. *Response:*
                         CMS continues to believe that the provision of preventive services such as smoking cessation counseling are important to improving patient outcomes and we encourage hospitals to develop systems approaches that would include team members such as respiratory therapists to provide this patient education. *Comment:*
                         One commenter proposed that CMS study application of an exclusionary criterion to the 30-day pneumonia mortality measure in the presence of this ICD–9 Diagnosis Code for the index admission for pneumonia. Otherwise, the commenter believed that a hospital's pneumonia 30-day mortality rate will be unfairly represented in public reporting and annual payment determination because they may be caring for many pneumonia patients who are actually receiving CMO (comfort measures only). *Response:*
                         We addressed this concern by taking each patient's health status on admission into consideration. Using inpatient and outpatient claims data for the year prior to admission, the pneumonia 30-day mortality measure model adjusts for a number of factors associated with the likelihood that patients are at the end of their lives, including protein-calorie malnutrition, metastatic cancer, dementia, and age. Hospitals with very sick patients, therefore, will be expected to have more deaths, and the model will adjust their risk-standardized mortality rate (RSMR) accordingly. In addition, we were careful in our approach to include information about each patient's status at admission and to not adjust for possible complications of the admission. Although some codes, by definition, represent conditions that are present before admission (for example cancer), other codes and conditions cannot be differentiated from complications that occur during the hospitalization (for example infection, shock, and transition to comfort care-only or hospice status). Excluding patients from the analysis who transition to comfort care or hospice may inadvertently reward hospitals that poorly manage their patients. *Comment:*
                         One commenter supported CMS' decision to add a SCIP measure related to glycemic control, SCIP Infection 4: Cardiac Surgery Patients with Controlled 6AM Postoperative Serum Glucose and noted that there is clinical evidence to support the importance and contribution of postoperative glycemic control for cardiac surgery patients. The commenter also suggested that CMS work with the quality organizations and other stakeholders to develop measures to assess glycemic control in all hospital inpatients. *Response:*
                         We appreciate the supportive comment and we look forward to continuing to review the evidence base for glycemic control to potentially expand the suite of measures to accommodate other patient populations. With respect to SCIP infection 4, we are deferring finalizing this measure until it receives NQF endorsement and will further address its inclusion in the FY 2009 RHQDAPU measurement set (effective with discharges CY 2008 discharges) in the CY 2008 OPPS final rule which is scheduled for publication in November 2007. *Comment:*
                         Two commenters strongly supported the expansion of the quality items to include additional anti-infection process measures. For FY 2008, the commenter supported the inclusion of SCIP Infection 4, SCIP Infection 6, and SCIP Infection 7. *Response:*
                         We appreciate the comment and support for the proposed inclusion of SCIP Infection 4, SCIP Infection 6, and SCIP Infection 7 in the FY 2009 RHQDAPU measurement set (effective with CY 2008 discharges). However, we are not adding these measures in this final rule with comment period, because they have yet received the endorsement of a consensus building entity such as the NQF, which we rely upon to ensure that our selection of each RHQDAPU measure is an appropriate one for the program. We intend to add SCIP Infection 4 and SCIP Infection 6 to the FY 2009 measurement set (effective with CY 2008 discharges) in the CY 2008 OPPS final rule which is scheduled for publication in November 2007, if these measures have received NQF endorsement. With regard to SCIP Infection 7, we believe it is feasible and appropriate to wait to adopt this measure until the NQF endorses it. *Comment:*
                         Three commenters recommend that SCIP Infection 7 be withheld from the RHQDAPU program until it is NQF approved. *Response:*
                         We appreciate the importance of relying on the endorsement of a consensus building entity such as the NQF to assure broad consensus and reliability for our measures. SCIP Infection 7 is still pending NQF endorsement, and as a result, we are not finalizing the adoption of this measure for the RHQDAPU program at this time. We believe it is feasible and appropriate to wait to adopt this measure until a consensus building entity such as the NQF endorses it. When CMS determines adoption of this measure is timely, we will do so through the rulemaking process. We will address the status of this measure in the CY 2008 OPPS final rule. *Comment:*
                         One commenter requested that SCIP-Cardiovascular-2 not be required. The commenter indicated that this measure has good intentions but, as written, is very difficult to abstract. The commenter added that if the definition of perioperative end time is edited to be more consistent, the commenter would welcome this measure. Until then, the commenter feared it would only cause more problems then it would solve. The commenter gives beta-blockers after 
                        ( print page 47351)
                        surgery—but not likely within the nebulous end time of the perioperative period. Because the commenter believed that this definition was a convoluted definition, it stated that there was no easy way to create policies or procedures to address this measure in a reasonable and logical manner. *Response:*
                         We are not adopting this measure at this time because it has not yet received the endorsement of a consensus building entity such as the NQF. However, we continue to believe that this measure is appropriate because the peri-operative period for the SCIP cardiac measures is defined as 24 hours prior to surgical incision through discharge from the post anesthesia care/recovery area. Beta blockers have been shown to reduce complications in patients at risk for cardiovascular complications. Patients with a history of myocardial infarction who have beta blocker therapy initiated and maintained show a 20–30 percent reduction in subsequent cardiac events. Studies show that mortality from cardiac events is reduced substantially when beta blocker therapy is given in the peri-operative period. If SCIP Cardiovascular-2 receives NQF endorsement, we intend to add it for purposes of the FY 2009 RHQDAPU program in the CY 2008 OPPS final rule. After careful consideration of the public comments received, we are taking the following actions with respect to the five proposed measures: We are adopting as final the Pneumonia 30-day Mortality measure we proposed. We intend to add SCIP Infection 4, SCIP Infection 6 and SCIP Cardiovascular-2 to the FY 2009 RHQDAPU measurement set (effective with CY 2008 discharges) in the CY 2008 OPPS final rule which is scheduled for publication in November 2007 if these measures have received NQF endorsement. We are not adopting the proposed SCIP Infection 7 measure in this final rule with comment period. We believe it is feasible and appropriate to wait to adopt this measure until the NQF endorses it. When CMS determines adoption of this measure is timely, we will finalize its adoption for the RHQDAPU program through the rulemaking process. The following table contains a list of 18 measures and 8 measure sets from which we proposed that additional quality measures could be selected for inclusion in the RHQDAPU program. It includes measures and measure sets that highlight CMS' interest in improving patient safety and outcomes of care, with a particular focus on the quality of surgical care and patient outcomes. In order to engender a broad review of potential performance measures, the list includes measures that have not yet been considered for approval by the HQA or received endorsement by the NQF consensus review process for public reporting. It also includes measures developed by organizations other than CMS as well as measures that are to be derived from administrative data (such as claims) that may need to be modified for specific use by the Medicare program if implemented under the RHQDAPU program. We solicited public comment from a broad set of stakeholders on the measures and measure sets that were listed, as well as any critical gaps or “missing” measures or measure sets. We specifically requested input concerning the following: Which of the measures or measure sets should be included in the FY 2009 RHQDAPU program or in subsequent years?
                    What challenges for data collection and reporting are posed by the identified measures and measure sets? What improvements could be made to data collection or reporting that might offset or otherwise address those challenges? Possible Measures and Measure Sets for the RHQDAPU Program for FY 2009 and Subsequent Years Measure
Measure
Clinical condition**Intensive Care Unit (ICU) Critical Care Measures**1
Stress Ulcer Disease Prophylaxis
ICU/critical care.2
Urinary Catheter-Associated Urinary Tract Infection For Intensive Care Unit (ICU) Patients
ICU/critical care.**Readmission Measures**3
Readmission Heart Failure (HF) Within 30 Days Rate—Medicare Only (CMS Methodology)
Efficiency/HF.4
Readmission (same hospital) Acute Myocardial Infarction (AMI) Within 30 Days Rate
Efficiency/AMI.5
Readmission (same hospital) PNE Within 30 Days Rate
Efficiency/PNE.6
Readmission Within 30 Days Of Surgery—Medicare Only (SCIP Global-2)
Surgical Care.**NQF—Nursing Sensitive Condition Set (Outcomes Measures Only)**7
Failure To Rescue—Nursing Sensitive Measure
Patient centered.8
Pressure Ulcer Prevalence—Nursing Sensitive Measure
Patient centered.9
Patient Falls Prevalence—Nursing Sensitive Measure
Patient centered.10
Patient Falls With Injury—Nursing Sensitive Measure
Patient centered.**Cancer (Inpatient) Measures**11
Patients With Early Stage Breast Cancer Who Have Evaluation Of The Axilla
Cancer—Breast.12
College Of American Pathologists Breast Cancer Protocol
Cancer—Breast.13
Surgical Resection Includes At Least 12 Nodes (ACOS–02)
Cancer—Colon.14
College Of American Pathologists Colon And Rectum Protocol
Cancer—Colon.15
Completeness Of Pathologic Reporting (CCO–04)
Cancer—Colon.**Leapfrog Leaps, identified by IOM and Deficit Reduction Act**16
Use Of Computerized Physician Order Entry (CPOE) Systems
Patient Safety.17
Use of Intensivists in ICUs/ ICU Physician Staffing (IPS)
Patient Safety.18
Evidence-Based Hospital Referrals
Patient Safety.( print page 47352)**Measure Sets of Potential Interest Sets Under Active Review by National Quality Forum (NQF)**1
Healthcare-Associated Infection measures—under consideration by the NQF National Voluntary Consensus Standards for Reporting of Healthcare-associated Infections Data Project
Patient Safety.2
Readmission Rates by Condition—under consideration by NQF National Voluntary Consensus Standards for Hospital Care: Additional Priorities, 2007 Project
Efficiency.3
Average Length of Stay (ALOS) by Condition—under consideration by NQF National Voluntary Consensus Standards for Hospital Care: Additional Priorities, 2007 Project
Efficiency.4
AHRQ Quality Indicators, including Patient Safety Indicators—under consideration by NQF National Voluntary Consensus Standards for Hospital Care: Additional Priorities, 2007 Project
Patient Safety, various conditions.**Measure Sets/Practices Previously Endorsed by NQF**5
Safe Practices for Better Healthcare
Patient Safety.6
Serious Reportable Events in Healthcare (“Never Events”)
Patient Safety.**Other Hospital Measure Sets**7
Hospital Emergency Department Measures
Various.8
Vascular Surgery Complications (for Carotid Endarterectomy, Lower Extremity Bypass, Open Surgery Abdominal Aortic Aneurysm Repair, Endovascular Abdominal Aortic Aneurysm Repair)
Surgical Care.
 *Comment:*
                         Numerous commenters stated that CMS should only choose measures that have been selected by these two groups (NQF-endorsed, HQA-adopted). *Response:*
                         We are committed to adopting NQF-endorsed and HQA-adopted measures whenever possible. Currently, the only measures that are publicly reported or tied to the annual payment update are those measures that are NQF-endorsed and HQA-adopted. *Comment:*
                         Numerous commenters stated that CMS should look to the NQF goals as a framework for the types of measures that should be included in the RHQDAPU program. *Response:*
                         NQF goals, priorities and measurement frameworks have been, and will continue to be, considered when we select measures to adopt for the RHQDAPU program. *Comment:*
                         One commenter stated that CMS should also reiterate that it will follow the goals of the NQF in considering new measures in connection with future reporting under other voluntary initiatives. Included for future consideration should be measures that span multiple populations, for instance, pediatric asthma measures. By including these measures on the list of reportable measures, hospitals can submit the data to the Quality Improvement Organization (QIO) Clinical Warehouse, and report them on Hospital Compare even though the measures will not be included in the RHQDAPU program. *Response:*
                         It is our intent to consider NQF goals and priorities when identifying measures for future reporting. In terms of reporting measures that are not RHQDAPU-required, we have in the past, and will most likely in the future, make public on 
                        *Hospital Compare*
                         data pertaining to measures that we have asked hospitals to report under another voluntary reporting initiative but that are not, at the time, RHQDAPU-required. Since CMS plays an important role in the provision of health care services to multiple populations though the Medicare and Medicaid programs, the development of standardized performance measures that promote care for all populations is important, whether or not those measures are included in the RHQDAPU program. *Comment:*
                         One commenter fully supported the mortality rate reporting and would like to see mortality measures for additional diagnoses included in the RHQDAPU program. The commenter stated that its hospitals would appreciate receiving reports on a quarterly basis to further inform care improvement efforts. *Response:*
                         The methodology used to calculate the current risk-standardized mortality rates requires one year of inpatient Medicare claims data plus one year of data on the patient's prior hospitalizations and outpatient care (Part A and Part B data). Quarterly reporting using the current methodology is not feasible and would likely not provide useful information on trends in mortality. Additional work is also needed to include additional diagnoses beyond AMI, HF, and pneumonia to validate the risk adjustment models using claims-based data. *Comment:*
                         One commenter was concerned that CMS has not yet implemented hospital reporting for three Leapfrog Leap measures identified by the Institute of Medicine and included in the DRA—use of computerized physician order entry (CPOE) systems, use of intensivists in ICUs/ICU physician staffing, and evidence-based hospital referrals. The commenter urged that CMS implement these important measures of patient safety in FY 2008. *Response:*
                         The Leapfrog measures are under consideration for inclusion in the RHQDAPU program in FY 2010 and subsequent years. However, while we believe that these measures are important in large institutions or academic centers, it is unclear that they are broadly applicable to the more than 3000 PPS hospitals that participate in the RHQDAPU program. In addition, these measures of structure have broad financial implications for hospitals such as the costs of implementing CPOE systems, the availability of trained intensivists in many communities, and the need for access to healthcare services in many regions of the country. For the majority of surgical services and almost all medical diagnoses, there is limited evidence to support improved patient outcomes based on hospital referral to high-volume hospitals. For a small number of operations or diagnoses, it may be reasonable to develop metrics for “evidence-based referrals.” We will continue to study these issues and will propose to adopt the Leapfrog measures if we believe they 
                        ( print page 47353)
                        are appropriate for the RHQDAPU program. *Comment:*
                         Two commenters opposed the inclusion of the three structural measures supported by The Leapfrog Group. They indicated that these structural standards are best viewed as “aspirational best practices” (as The Leapfrog Group itself intended), as opposed to a national standard of care. Because the proposed standards represent “leaps” beyond normal practices, the commenters stated that rural hospitals have not been asked by the Leapfrog Group to comply with the standards. In addition, they indicated that these measures are not NQF endorsed and HQA recommended for inclusion in the program. *Response:*
                         We appreciate this comment. The purpose of the list of possible measures for FY 2009 and beyond is to elicit comment from a wide array of stakeholders. As we have stated, we are committed to using measures that are endorsed by a consensus building entity such as the NQF and supported by the HQA. We will consider this comment in future decisions about measures expansion. *Comment:*
                         One commenter stated that it is not clear from the information provided in the proposed rule, how the patient safety measures 16, 17, and 18 would be reported and whether they would be reported on an annual basis. The commenter also stated that all measures currently reported for RHQDAPU are at the patient level, and these Leapfrog Leap Measures address structural components and, therefore, would require a different infrastructure to collect. *Response:*
                         We appreciate these comments, and they highlight important operational questions that CMS must answer before it considers adding these measures in the future. We will consider data collection frequency and data infrastructure needs of these structural measures in our future measures expansion decisions. *Comment:*
                         One commenter stated that it is critical to include the Joint Commission Mortality measure for ICUs in the RHQDAPU measure set. The Leapfrog Group Intensivist Physician Staffing Leap could be augmented by use of the Joint Commission ICU mortality measure now in the field. *Response:*
                         We do not believe that the Joint Commission ICU mortality measure has been endorsed by a consensus building entity such as the NQF. CMS strives to use consensus based measures for inclusion in the RHQDAPU measure set, and NQF endorsement is only one of many possible methods to demonstrate this consensus basis. *Comment:*
                         One commenter stated that a glaring weakness of the Leapfrog data is that they are self-reported and becoming ever more complicated, which will certainly lead to disparities in data interpretation. While it is a useful exercise for an individual provider to work through the Leapfrog questions, the commenter believed that it was ridiculous to assume that providers’ responses can be compared to each other meaningfully. *Response:*
                         The Leapfrog survey data is not one of the measures recommended by the IOM report, and we are not otherwise considering adopting it for the RHQDAPU program. *Comment:*
                         Two commenters asked that as CMS moves forward with the initial expansion of these quality measures, as well as future measures, CMS be cognizant of the need for appropriate recognition of imaging technology within these measures. For example, the commenters supported CMS’ efforts in adopting the current quality measures, such as the measure requiring that patients receiving a percutaneous coronary intervention receive the intervention within the first 120 minutes of admission for myocardial infarction. The commenters state that Medicare beneficiaries can benefit greatly from this life-saving procedure and imaging equipment is intrinsic to performing this procedure. As CMS looks to the future and implements its value based purchasing program for Medicare, the commenters asked that appropriate imaging used during specific diagnostic and therapeutic procedures be properly addressed within the measures. *Response:*
                         We are aware of the role that imaging technology can play in the delivery of quality healthcare and will, as appropriate, consider these technologies as measure sets and priority areas expand in the future. However, we are not aware of specific quality metrics that have focused on the type of imaging equipment that is used related to the current performance measures for hospital quality. *Comment:*
                         One commenter believed that wherever possible, quality measures developed as part of the RHQDAPU program should be applied in other care settings through inclusion in the Physician Quality Reporting Initiative (PQRI) and the outpatient quality reporting program measure sets. The commenter believed it made sense for CMS’ quality measures to be consistent across provider settings. *Response:*
                         We agree and are involved in efforts to do just that. In particular, we are participating in an NQF group dealing with harmonization of measures across settings. In the future, we intend, as often as possible, to adopt measures that have been developed for one setting (for example, physician practices) in other appropriate and feasible settings (for example, hospital outpatient department). It makes sense to align the incentives for high quality care. *Comment:*
                         One commenter urged CMS to take the leadership role with stakeholders to develop consensus recommendations for care coordination quality measures for adoption into the RHQDAPU program. In the absence of care coordination, patient safety issues, medication errors, and miscommunication can lead to suboptimal outcomes and increased costs, as documented by numerous studies. Care coordination is particularly important for vulnerable populations that have chronic health care needs, although everyone that suffers acute illness will need at least temporary care coordination on some level. The commenter believed that CMS should take the lead in encouraging the development of measures in this area because it likely would improve the outcomes among patients who receive care across different types of facilities and also should help reduce unnecessary expenditures for duplicative care as patients move between care settings. *Response:*
                         This is an important comment and we could not agree more. There are ongoing efforts to develop a standard framework for quality improvement and quality assessment that addresses care transitions that is in part based on recently NQF-endorsed measures of care transition. Hospital performance on the 30-day mortality measures reflects both the quality of care during patients” hospitalizations and the coordination of their care at discharge or transfer. By addressing 30-day (rather than in-hospital) mortality and assigning the outcome for transfer patients to the first admitting hospital, the measures hold hospitals accountable for transitions in care to other settings and discharge planning. Actions taken at the admitting hospital, during a transfer, at a receiving hospital, and in outpatient settings after discharge all can affect 30-day mortality. CMS hopes this approach will encourage coordination between hospitals and their provider networks. CMS is also developing a readmission measure that will complement the mortality measure by promoting efforts to reduce unnecessary readmissions. Readmission rates are influenced by the quality of inpatient and outpatient care, 
                        ( print page 47354)
                        availability and use of effective disease management programs and the capacity of the health care system. Short-term readmission is almost always an adverse event for patients and expensive for the health care system. Measurement and dissemination of readmission rates, which are the joint responsibility of hospitals and clinicians, will create incentives to invest in interventions to facilitate transitions in care and improve patient outcomes. *Comment:*
                         One commenter recommended that in order to ensure that patient needs are met across multiple providers, CMS should encourage consensus organizations to develop appropriate measures at the practice, group, hospital, or organizational level and that CMS should encourage the development of measures that address each of the following areas, identified by the NQF as “essential components and subcomponents for which performance measures should be developed if care coordination is to be comprehensively measured and improved:” Medical home for each patient;
                    Proactive plan of care and follow-up for each patient;
                    Use of standardized, integrated information systems;
                    Standardized data elements for patient's personal medication records;
                    Standardized data elements for medication reconciliation; and
                    Standardized care guidelines for transitions between care settings that include medication reconciliation and care plan and communication plan between medical team members, patients, and caregivers. *Response:*
                         We appreciate this thoughtful comment. Although the recommendations are challenging to implement, we are committed to moving forward to develop measures that incorporate these types of goals and frameworks. Again, there are ongoing efforts to develop a standard quality framework based on measures of care transition between the hospital and the post-acute setting that are endorsed by one or more consensus building entities such as the NQF. *Comment:*
                         One commenter stated that from an administrative point of view, it was worth pointing out that not all the potential new measures are included in the medical records consistently, for example, Stress Ulcer Disease Prophylaxis, Community Acquired Pneumonia, and American College of Surgeons protocols. Readmission rates would have to be captured from Medicare claims data. *Response:*
                         For stress ulcer prophylaxis, since these medications do require a physician's signed order, we believe that they can always be found in the chart. Antibiotics for pneumonia or for prevention of surgical site infections also require a physician's order and we also believe they can be found in the chart. We agree that readmission rates would most likely be captured from Medicare claims data. *Comment:*
                         One commenter stated that among the AHRQ data measures, Failure to Rescue is a poor measure of quality. The data come from administrative files, are subject to coding disparities, and do not adequately consider co-morbid or chronic conditions. *Response:*
                         We proposed this measure and other AHRQ data measures for potential inclusion in future years to solicit public comment. We thank the commenter and will consider this comment in measure selection for future years. *Comment:*
                         One commenter stated that for some of the possible measures identified for inclusion in the RHQDAPU program for FY 2009 and subsequent years, the documentation exists in the medical record now but is not currently being abstracted. Thus, it would take considerable extra effort to find and report it. Another commenter had concerns regarding two ICU critical care measures—stress ulcer disease prophylaxis and urinary catheter-associated urinary tract infection. The commenter agreed that both are worthy subjects. However, in this commenter's institution, this information is on the medical chart and would require chart extraction, which is time-consuming and costly. The commenter stated that as CMS continues to expand the measures for hospital quality, it is import that it be recognized that there are costs to this process. *Response:*
                         We recognize the burden and resources required for collection of data to report the measures of hospital quality included in the RHQDAPU program and will consider the burden when we select additional measures to adopt in the future. We also note that there are ongoing efforts to develop measures that do not require chart abstraction (for example, claims-based measures of mortality), efforts to streamline data collection tools, and efforts to incorporate the data requirements for many of these performance measures into electronic medical record tools. *Comment:*
                         One commenter urged CMS to proceed to adopt additional infection prevention measures, regardless of whether they have been formally agreed to through the sometimes over-lengthy consensus process. Specifically, the commenter supported the inclusion of urinary catheter-associated urinary tract infection (UTI) for ICU patients as an outcome measure. *Response:*
                         Whenever possible, we use measures that are based on high-quality scientific evidence, widely accepted clinical guidelines, and consensus recommendations endorsed by the National Quality Forum. We realize that at times this can create delays in implementing measures, but it ensures that all the relevant stakeholders, including relevant medical experts, have adequately reviewed the measures. *Comment:*
                         One commenter urged CMS to turn its focus on outcome measures relating to issues other than hospital-acquired infections. The commenter supported the 30 day morality measures for AMI and Heart Failure for inclusion in the FY 2008 rule. The commenter also supported the other outcome measures listed for possible inclusion in FY 2009 and future. Specifically, the commenter supported the 30-day Pneumonia mortality measure, the four 30-day readmission measures, and the AHRQ quality and patient safety indicators. *Response:*
                         This year, CMS will be publicly reporting data on measures of 30-day mortality for AMI and HF, and beginning next year will report the hospital 30-day pneumonia mortality we are adopting as final in this rule. There are ongoing efforts to develop measures of outcome such as hospital readmission and measures of inpatient care that focus on patient safety. *Comment:*
                         One commenter was concerned about the readmission measures for acute myocardial infarction and pneumonia within 30 days at the same hospital and believed that by restricting these measures to the same hospital, an inappropriate incentive is created for these cases to be referred to a different hospital. The commenter believed that these measures should apply to both readmission to the same hospital or to another hospital where the readmission has occurred and believed that only by reviewing both statistics will one have a balanced view of what is happening with patients returning to any hospital within 30 days for the same condition. *Response:*
                         We are considering readmission to any hospital in connection with the readmission measures that were identified in the proposed rule as possible measures for the RHQDAPU program for FY 2009 and subsequent years. *Comment:*
                         One commenter stated that, as with previous measures now being reported under the RHQDAPU program, it is important to have an initial data 
                        ( print page 47355)
                        collection period prior to a public reporting period to assess the reliability and validity of the measures and data collection processes. During the initial data collection period, many problems are uncovered and details can be worked through. The commenter believed that a number of the measures listed for consideration, however, remain far from being ready for field-testing. *Response:*
                         We agree that the measures and measure set in the list of possible measures for FY 2009 and beyond are at different stages of development, and that not all can be used as early as FY 2009 without additional development. *Comment:*
                         Two commenters requested that CMS address the deficit of measures relating to medical prophylaxis of VTE. Given the effectiveness of available prophylactic measures, the commenter also asks that CMS promote the development of a measure relating to VTE readmission. The commenters also asked CMS to promote the development of measures related to glycemic control for all inpatients. In recognition of the importance of coordinating care for a single patient across an array of providers, the commenters encouraged CMS to consider taking an active role in encouraging the development of measures relating to care coordination. *Response:*
                         We appreciate this comment. The NQF is currently conducting an evaluation of VTE measures that was sponsored by the Joint Commission. A variety of VTE measures are being evaluated and tested and CMS is supportive of this effort. *Comment:*
                         Several commenters strongly encouraged CMS to adopt measure 13, one of the possible cancer (inpatient) measures, for implementation under the RHQDAPU program in FY 2009, if not sooner. The commenters believed that incorporation of measure 13 would send the message that adequate lymph node evaluation of at least 12 nodes is critical to patient care and would result in better outcome with increased survival for stage II and III colon cancer patients and noted that the evaluation of at least 12 lymph nodes is critical in determining colon cancer patient prognosis, planning for treatment options, and is associated with increased survival. One commenter supported the consideration of the number of lymph nodes evaluated as a measure of the quality of colon cancer care. *Response:*
                         We appreciate these comments, and agree that this measure shows much potential for future adoption in the program to improve quality of care for colon cancer patients. As we have stated, we are committed to using measures that are endorsed by a consensus building entity such as the NQF and supported by the HQA. Our current process for measure adoption includes consideration of measures that can be implemented nationally and have been endorsed by the NQF. We are constantly reviewing and updating our portfolio of quality measures to incorporate such new and innovative measures that speak directly to our goal of improving the quality of care for our beneficiaries. *Comment:*
                         Two commenters stated that CMS should consider computer-assisted navigation of surgical procedure measures. The commenters also state that CMS encourages hospitals to report the computer assisted surgery codes (00.31; 00.32; 00.33; and 00.34) when the technology is used with total joint procedures. The commenters also encouraged CMS to remind hospitals to code for computer-assisted navigation surgery when it is used to encourage more accurate billing and charges for computer-assisted surgery for total joint procedures and more complete data for analysis and DRG assignment. This is important because of the need for more accurate data to analyze the impact of navigation on improved patient outcomes. *Response:*
                         We will consider this measure in future measures expansion decisions. Computer-assisted surgery is in its infancy and we are sure there will be opportunity to design quality measures for this adjunctive technique as the evidence base grows. We encourage complete and accurate coding for all procedures and CMS has a very proactive program to promote that at many levels. Accurate coding is also critical to producing valid measure estimates of surgical process measures, since these surgical procedure codes are used as one data element to define the population of patients eligible to receive surgical processes of care measured. We agree that the claims database represents a tremendous opportunity to understand clinical patterns in computer-assisted surgery. *Comment:*
                         One commenter stated that in keeping with the continued expansion of quality measures and the appropriate criteria that CMS has specified, CMS should add computer-assisted surgery to the list of inpatient quality measures. The commenter indicated that computer-assisted surgery improves outcomes and often reduces length of stay. However, the commenter added, the capital equipment needed for these procedures requires an initial investment from the hospital. The commenter believed that the new quality measures are therefore ideally suited for this situation; creating a quality measure for computer-assisted surgery will award hospitals for prioritizing patient care, clinical outcomes, and long-term efficiency over short term financial interests. *Response:*
                         Computer-assisted surgery is in its infancy and we are sure there will be opportunity to design quality measures for this adjunctive technique as the evidence-base grows. For the most part, CMS SCIP measures are designed to improve the quality of systems of perioperative care delivery. As we have stated, we are committed to adopting consensus-based and evidence-based measures for the RHQDAPU program. *Comment:*
                         Three commenters recommended that CMS evaluate whether the measures currently utilized are capturing improvements in quality and ensure that additional measures will result in meaningful quality improvements rather than merely increased administrative burden by hospitals without measurable improvement in patient care or results. *Response:*
                         The current RHQDAPU process measures are based on strong evidence linking the process measure (for example, giving an aspirin at arrival) to improved patient outcomes. The individual process of care measures are based on studies that have shown, at the patient level, that providing the process improves patient outcomes. The 30-day mortality measures have been validated against medical record based estimates of 30-day patient mortality. The HCAHPS measures have been extensively tested in pilot studies. All of the process and mortality measures that are currently utilized have been reviewed through technical expert panels made up of representatives of topic-specific specialty societies and clinical experts in the field. The NQF has endorsed all the current RHQDAPU measures that are publicly reported. We agree that there is a need to focus on additional measures that evaluate overall quality of the entire system providing care to the patient (for example, readmission, care transitions). *Comment:*
                         Two commenters strongly agreed with CMS' consideration of the ICU measures for FY 2009 and subsequent years, however, they strongly disagreed with the following measures: Readmission Measures—this represents a burdensome data collection for hospitals. Data must be derived from medical records as there is not an effective mechanism for identifying readmissions using administrative data.( print page 47356)
                    Nursing Sensitive Condition Set—these measures require chart abstraction to verify and are far from ready for implementation.
                    Inpatient Cancer Measures—inpatient cancer treatment is low volume and would result in small numbers of reported cases. This leads to low statistical value.
                    Leapfrog Measures—hospitals have been reporting these measures for some time, yet they have limited value in assessing quality. *Response:*
                         The readmission measures will most likely be produced using Medicare administrative data. We are considering the other issues raised by the commenters as we evaluate these measures for subsequent years. *Comment:*
                         One commenter believed that health care quality improvement programs should adopt standard quality measures that are developed with the involvement of pharmacists, are evidence-based, and promote the demonstrated role of pharmacists in improving patient outcomes. *Response:*
                         We agree that pharmacists play an important role in the provision of high quality care to patients. Representatives of the American Society of Healthsystem Pharmacists have played an important role in the development of the Surgical Infection Prevention Project and the subsequent Surgical Care Improvement Project. Pharmacists play an important role on many of the guideline committees upon which many of the evidence-based performance measures for national implementation are developed. *Comment:*
                         Three commenters urged CMS to carefully evaluate the value of the measures considered for future reporting and recommended that measures be evidence-based, contribute to the comprehensiveness of performance measurement, be under a hospital's control, and account for potential unintended consequences. *Response:*
                         Whenever possible, we use only measures which have a strong evidence base and have been endorsed by a consensus building entity such as the NQF. We maintain the evidence base by conducting frequent literature reviews. If new literature shows the measure is no longer valid or is leading to unintended consequences, we will take appropriate action to modify or suppress the measure or to retire the measure through future rulemaking. We maintain a process for continued enhancements and updates as clinical evidence changes. *Comment:*
                         One commenter commended CMS for considering whether to include breast cancer as one of the clinical conditions under the proposed new quality measures for FY 2009 and subsequent years and requested that CMS allow manufacturers of advanced therapies involved in the treatment of breast cancer to be involved in the development of the quality measures. *Response:*
                         Any performance measures that are developed will be based on published evidence and guidelines for care, with the input of clinical experts. *Comment:*
                         One commenter encouraged the development and application of measures of resource use, such as the 30-day readmission rates that are included in the proposed table of possible measures and measure sets for FY 2009 and subsequent years. The commenter believed that reducing potentially avoidable readmissions should be a part of the efforts to increase the value of health care because it reduces unnecessary spending for the Medicare program and enhances the quality of care for beneficiaries. *Response:*
                         We agree that measures such as readmission rate provide additional information, in combination with the other quality measures, on the quality of care provided in hospitals. *Comment:*
                         One commenter was concerned about the choice of length of stay as a resource use measure because it does not necessarily align with improving transitions from the inpatient setting to other care settings or to home. The commenter believed that, ideally, Medicare's payment systems should provide an incentive to use the most efficient mix of services possible during and after a hospital stay. The commenter added that rewarding below-average hospital lengths of stay through a quality incentive payment program would strengthen the incentive to transfer patients to a post-acute setting as quickly as possible, without regard for whether this is the most efficient course of treatment for the overall episode of care. The commenter believed that such a measurement may conflict with hospitals’ efforts to avoid readmissions, if doing so would lengthen patients’ initial stays. *Response:*
                         We appreciate this comment, and will consider in future measures expansion decisions. We understand that a comprehensive estimate of hospital quality and efficiency would assess both length of stay and balancing measures that addressed hospital readmission and utilization of ambulatory care resources. *Comment:*
                         One commenter recommended that HQA determine the measures or measure sets to be included in FY 2009, and develop an implementation schedule for subsequent years. One commenter believed that in order for it to provide comments and recommendations on measure sets of potential interest within the table, more information would be needed than was available in the proposed rule (for example, Nursing Sensitive Condition Set). *Response:*
                         CMS ultimately decides on the measures for inclusion in the RHQDAPU program. However, CMS solicits input from the HQA before setting selected priorities for hospital performance measure implementation in the RHQDAPU program. The HQA has proposed to CMS potential measures on a timeline for implementation in the future. *Comment:*
                         One commenter urged CMS to rapidly incorporate additional measures for FY 2009 to offer a more robust dashboard of publicly reported measures and strongly supported the infusion of efficiency, outcome, outpatient, care coordination, patient safety, and structural measures into the RHQDAPU program. The commenter also strongly supported the development of measures to assess equity in order to reduce health care disparities and encouraged the provision of quality care for at-risk populations. *Response:*
                         We agree with the commenter. There are ongoing efforts to develop new measures to address efficiency of care, outpatient department performance, care coordination, and patient safety. Because there are few measures that have been developed and thoroughly tested for validity and reliability on a national scale, it will take some time to adequately test new measures and obtain the endorsement of these measures from a consensus building entity. We also have considerable interest in reducing disparities in care through performance measurements and incentives. There are ongoing evaluations to determine if some of the disparities on performance for the hospital quality measures represent disparities by group within a specific hospital, or disparities across all groups between hospitals. *Comment:*
                         One commenter stated that composite measures increase the meaningfulness of health care performance information and are critical to help consumers integrate complex information into their decision making and that CMS should move rapidly to report composite measures on the 
                        *Hospital Compare*
                         Web site while retaining the “drill down” function to permit a more granular assessment of performance. *Response:*
                         We interpret the term composite measures to mean single combined measures calculated from 
                        ( print page 47357)
                        multiple individual measures submitted by hospitals. Composite measures might include both measures listed in RHQDAPU requirements and non-RHQDAPU measures voluntarily reported by hospitals. While it seems that composite measures may provide information that is more meaningful to consumers, there has not been extensive testing of this premise. CMS is soliciting input from the HQA on the issue of reporting composite measures of care on the 
                        *Hospital Compare*
                         Web site. For the RHQDAPU program, CMS expects to continue to require hospitals to submit individual measures that would comprise any composite measure calculated from these individual measures. CMS and its partners expect to benefit from the work on composite measures that has been done in the Premier Hospital Quality Incentive Demonstration and elsewhere. *Comment:*
                         Two commenters stated that the NQF Nursing Sensitive Measurement Set and measures that access the care provided to “transfer patients” may be applicable to small and rural hospitals, and hoped that CMS will act favorably on such measures to broaden the ability of all hospitals to participate in public reporting and to increase the consumer appeal of the Web site. The commenter also believed that reporting measures for the outpatient setting-Emergency Room and ambulatory surgery on the
                        *Hospital Compare*
                         Web site would be responsive to consumer and purchaser needs. *Response:*
                         We are engaged in efforts to broaden the hospital quality measure set to include measures appropriate to the outpatient hospital setting, including care provided to “transfer patients” currently excluded from RHQDAPU heart care measures. We believe that these measures are useful for all hospitals that treat and subsequently transfer, regardless of hospital size and urban/rural setting. CMS plans to begin reporting outpatient/ambulatory care measure results on the 
                        *Hospital Compare*
                         Web site in the near future. *Comment:*
                         One commenter believed that CMS needed to evaluate the resource impact on providers by requiring the collection and reporting of additional abstracted measures such as the Intensive Care and Cancer measures and that these specifications are old and were not implemented due to complexity of data extraction. The commenter believed that CMS should not require hospitals to collect additional measures on top the current requirements. The commenter stated that hospital spend all available resources to collect data on Heart Attack, Heart Failure, Pneumonia, and SCIP measures. The commenter wanted CMS to consider the retirement and/or rotation of measures to lessen future data collection burden on hospitals. *Response:*
                         We are aware of the burden of data collection for all of the RHQDAPU measures. The burden of data collection is considered with the implementation of any new measure set. Few institutions have the ability to capture most quality data electronically and even those with fully integrated electronic medical records often have to resort to manual data collection to capture the information for the performance measures. There are ongoing efforts to work with vendors of electronic record systems to incorporate the data elements for the RHQDAPU measures into their tools. There are ongoing discussions about how to retire measures from reporting when high rates of improvement have been achieved. *Comment:*
                         One commenter stated that CMS should consider prioritizing the implementation of administrative measures over measures requiring abstracted data from the medical record and that CMS needs to continue to test these administrative measures prior to the public reporting. The commenter believed that the process for introducing public reporting with a dry run hospital preview period for Heart Attack (AMI) and Heart Failure 30-day mortality measures should continue as standard practice. *Response:*
                         We recognize that adopting measures for the RHQDAPU program that use administrative data, instead of abstracted data, has its advantages, including decreased data collection cost. However, there are also many challenges associated with using administrative data for quality measurement and reporting, including risk adjustment, differentiating performance between hospitals, and minimizing time lag between delivery of care and public reporting. We plan to develop additional administrative data-based measures. *Comment:*
                         One commenter asks that CMS consider adding the stroke measure set developed by the Stroke Performance Measures Consensus Group to the RHQDAPU program for FY 2009 and to the new hospital value based purchasing program when it is approved and implemented by CMS. *Response:*
                         We agree that the stroke measure set is a potentially useful addition to the RHQDAPU program. The quality measurement collaboration between the American Heart Association/American Stroke Association, along with CDC and the Joint Commission has agreed to a common set of 10 performance measures that were designed for certification of stroke centers. We are currently evaluating the list of 10 measures to determine if any are suitable for inclusion in the RHQDAPU program and the 
                        *Hospital Compare*
                         Web site. We note, however, that the RHQDAPU program applies to all IPPS hospitals, not just certified stroke centers. *Comment:*
                         One commenter urged CMS to develop a policy to harmonize measures which relate to payment, such as the NQF's move from a four hour timeframe for initial antibiotic administration for pneumonia patients to a six hour timeframe. The commenter believed that CMS is still requiring four hours. NQF made this change due to clinical concerns that patients whose pneumonia diagnoses were not yet confirmed were receiving unnecessary antibiotics, which is a national healthcare problem. *Response:*
                         We appreciate this comment, and are aware of the current NQF endorsement status of the six hour pneumonia measure. This endorsement occurred after publication of the FY 2008 IPPS proposed rule. CMS will evaluate this change, and if we believe it is an appropriate one for the RHQDAPU program, will align this measure with the NQF's current endorsed measure. *Comment:*
                         Several commenters expressed concerns with the abstraction instruction in the CMS/The Joint Commission National Hospital Quality Measure Specifications Manual that the medical charts be abstracted at “face-value.” The medical chart is written for medical persons and should be taken in the context of medical care. The most troublesome aspect of the “face value” rule is that the commenter was alerted to it in April and told that it would apply back to October discharges. The rule change caused substantial rework for the chart abstractors. A commenter suggested that providers receive the specifications for abstraction before the time period for which they apply. *Response:*
                         The “face value” instruction cited by the commenter was included in the specifications manual published in June 2006, approximately 120 days prior to the initial October 1, 2006 discharges. The later communication by CMS was intended to alert hospitals about the existing abstraction instructions already published on the QualityNet Web site. The RHQDAPU chart audit validation requirement uses independent reabstraction of medical charts by CMS contractor abstractors to assess abstraction accuracy. The CMS 
                        ( print page 47358)
                        abstraction contractor is not associated with the hospital and is not intimately involved in providing the care to the patient referenced in the medical chart, and must abstract the data elements using only the documentation included in the medical record. CMS and The Joint Commission coauthor the specifications manual to provide the same set of explicit instructions to all parties, hospitals and CMS abstraction contractors. The “face value” provides explicit instruction that matches the instructions that CMS provides to its abstractors. *Comment:*
                         One commenter suggested that CMS add the NQF-endorsed measure “Anti-platelet medications at discharge for Cardiac Surgery” to the hospital data reporting requirements for FY 2008. This measure is very different from the measures SCIP Cardiovascular-2: Surgery Patients on a Beta-Blocker Prior to Arrival, and the two AMI measures Aspirin at Arrival, and Aspirin Prescribed at Discharge. Aspirin and anti-platelet therapy are clinically very different. NQF has endorsed “Anti-platelet medications at discharge for Cardiac Surgery.” *Response:*
                         We will consider this comment in our future decisions to expand the RHQDAPU program's list of measures. We understand that current SCIP initiatives related to cardiac surgery do not focus on discharge medications at this time, and must consider factors including the following: the number of surgeries affected by the measure; the relative strength of evidence related to improving outcomes, and relative data collection burden. *Comment:*
                         One commenter recommended that CMS continue to expand to new disease states (cancer measures) as well as focus on efficiency measures (Average Length of Stay by Condition), surgical care, and patient safety measurement. *Response:*
                         CMS is continuously working on developing new measures and is considering the pros and cons of expanding RHQDAPU measures to include measures related to disease processes such as ESRD, diabetes, asthma, and cancer. After careful consideration of the comments received regarding the 18 measures and eight measure sets we set out in the FY 2008 IPPS proposed rule that could be included in the RHQDAPU program for FY 2009 or subsequent years, we have decided not to adopt any of these measures or measure sets for FY 2009. As discussed above, we will continue to consider some of these measures and measure sets for future years. b. Data Submission In order to be eligible for the full FY 2009 market basket update, we proposed that hospitals be required to submit data on 32 measures (the 27 existing measures plus the 5 proposed new measures). The technical specifications for this requirement are published in the CMS/Joint Commission Specifications Manual for National Hospital Quality Measures. This manual can be found on the QualityNet.org Web site. For the additional SCIP measures that we proposed to add in the FY 2008 IPPS proposed rule, (SCIP Infection 4, 6, and 7 and SCIP-Cardiovascular-2), hospitals would be required to submit data to the QIO Clinical Warehouse starting with discharges that occur in CY 2008. We proposed that the deadline for hospitals to submit this data for first calendar quarter of 2008 would be August 15, 2008. Data must be submitted for each subsequent quarter by 4.5 months after the end of the quarter. We proposed this time period to allow hospitals sufficient time to prepare for the data collection. The three SCIP Infection measures that we proposed to include for FY 2009 were added to the Manual in version 2.0, effective with third calendar quarter of 2006 (3Q06) and the proposed SCIP Cardiovascular measure was added in version 2.1d of the Manual, effective with fourth calendar quarter of 2006 (4Q06). Hospitals may report data on these measures for discharges prior to CY 2008 discharges, if they so choose. For the proposed Pneumonia 30-day mortality measure, we proposed to use claims data that are already being collected for index hospitalizations to calculate the mortality rates. As is the case with the other 30-day mortality (outcome) measures already associated with the RHQDAPU program (AMI, HF), hospitals would not need to submit additional data. Claims data submitted to CMS for index hospitalizations occurring from July 2006 through June 2007 (3Q06 through 2Q07) would be used to calculate the Pneumonia 30-day mortality rate that will be used for FY 2009 annual payment determination. As noted above, we are not adopting the SCIP infection or cardiovascular measures for the FY 2009 RHQDAPU program at this time, but intend to adopt SCIP Infection 4, SCIP Infection 6 and SCIP Cardiovascular 2 measures in the CY 2008 OPPS final rule, if these measures have been NQF endorsed. If the measures are endorsed, we intend to finalize our proposal to require their reporting under the RHQDAPU program effective with CY 2008 discharges and we anticipate that the submission deadlines for the first quarter of CY 2008 discharges will be August 15, 2008. We are not adopting the proposed SCIP Infection 7 in this final rule with comment period. We intend to adopt this measure after the NQF endorses it. When we determine to adopt this measure, we will do so through the rulemaking process and we will include data submission timeframes. We are finalizing our proposal to use the claims data submitted to CMS for index hospitalizations occurring from July 2006 through June 2007 (3Q06 through 2Q07) to calculate the Pneumonia 30-day mortality rate that will be used for FY 2009 annual payment determination. *Comment:*
                         One commenter did not believe it was reasonable to assume billing, including the reprocessing and resubmission of any corrected bills, will be complete for 100 percent of cases to allow for data submission to begin within 60 days post-discharge. *Response:*
                         We appreciate this comment. We interpret your comment to refer to the 60 day submission deadline as proposed in the Value Based Purchasing listening session held in April 2007. The current CMS RHQDAPU quarterly submission deadline is currently about 135 days after the last discharge date of the quarter. This submission deadline schedule is published on the QualityNet Web site. All measures that we have previously finalized, and that we finalize in the future through the rulemaking process, will be required for the RHQDAPU program annual payment determination each year until further notice. CMS, working in conjunction with the Joint Commission, maintains the specifications for the set of measures used both for the RHQDAPU program and for reporting under the HQA initiative. The specifications are updated semiannually and changes are made prospectively, except in exceptional circumstances. Revised specifications can be found at 
                        *www.qualitynet.org.* 4. Retiring or Replacing RHQDAPU Program Quality Measures Over time, CMS expects that the set of measures used for the RHQDAPU program will evolve and change. New measures will be added to reflect clinical and other program goals. Measures that are no longer supported by clinical evidence will be modified or dropped. Through its public reporting and RHQDAPU program activities, CMS seeks to balance the competing goals of assuring the development of a comprehensive yet parsimonious set of 
                        ( print page 47359)
                        quality measures while reducing the reporting burden on hospitals. Section 1886(b)(3)(B)(viii)(VI) of the Act gives the Secretary authority to replace any measures or indicators in appropriate cases, such as where all hospitals are effectively in compliance, or the measures or indicators have been subsequently shown not to represent the best clinical practice. CMS recognizes the need to develop a process related to the retirement and/or replacement of measures that comprise the RHQDAPU program measure set. In the FY 2008 IPPS proposed rule (72 FR 24807), we solicited public comment and suggestions concerning the criteria and mechanism for a process that would identify and, where appropriate, retire or replace measures that comprise the RHQDAPU program measure set. *Comment:*
                         Two commenters recognized the need to retire or replace measures. However, in doing so, they stated that CMS should guard against a decrease in hospital measure rates once a theoretical or real maximum has been achieved, since the removal of public reporting might lessen hospital attention on these processes of care. *Response:*
                         We also understand that there is a risk in retiring measures that have “topped out” and will attempt to mitigate that risk if any measures are retired, including possible monitoring of these measure rates to ensure continued high performance. *Comment:*
                         One commenter stated that CMS should decide to drop a measure if it finds that hospitals have exhibited and maintained a high quality of care per that particular quality measure. *Response:*
                         We appreciate this comment and will consider the comment when it makes future proposals regarding the RHQDAPU measure set. In the future, CMS and its contractors plan to periodically review measures and make recommendations regarding, among other possibilities, retirement of measures for future proposed RHQDAPU measure sets. *Comment:*
                         Numerous commenters stated that CMS should develop a policy for suspending measure when there is a change in science or an implementation issue arises during a reporting period and needs to be addressed immediately. *Response:*
                         We have a history of suspending measures for public reporting purposes only due to changes in science or implementation issues. Examples include suspending public reporting of the influenza vaccination measure at times of national shortage or national delays in vaccine delivery, and suspension of SCIP Infection 2 (prophylactic antibiotic selection for surgery) when there were shortages of recommended antimicrobials for colorectal surgery prophylaxis. Specifically, we review measures on a continuous basis and can react if there is a change in science or if an error in the technical specifications is identified. If immediate revision of the measure is not feasible, we would suspend the measure for public reporting purposes until it can be reintroduced into the measure set. CMS utilizes the Measure Management System to maintain and retire measures. There are currently no plans to retire any measures utilized for RHQDAPU. *Comment:*
                         One commenter stated that some measures that may no longer differentiate top performers from low performance over time, continue to have value for public reporting. Sustainability for key quality measures is important from a patient and a hospital perspective. For this reason, the commenter recommended that measures that are closely linked to patient outcomes, such as measures related to drug treatment of acute myocardial infarction and congestive heart failure, be retained and not retired, despite improved performance on these measures. *Response:*
                         We are aware of these issues, in particular, the idea that a measure may be suited for one purpose but not another. CMS will take into consideration the clinical importance of a measure when continued, across the board high performance occurs. CMS currently does not have any plans to retire any of the process measures. *Comment:*
                         One commenter stated that the primary goal is to ensure that the measures are keeping pace with the science and that a process is developed that can respond to these changes in a timely manner. At the same time, there is also a need to balance the yearly requirements for the payment programs based on these exact measures. The commenter recommended that a multi-stakeholder group be convened to identify an appropriate and equitable process. This group should be tasked with developing a process for when a measure needs to be temporarily removed from public reporting as well as eliminated from any payment determination due to changes in clinical science. *Response:*
                         CMS, with input from the Joint Commission and in cooperation with the HQA of which the NQF is a member, devotes a large amount of resources to measure maintenance. Currently, updating performance measure is a continuous process that is based on concurrent reviews of medical literature, input from topic-specific technical expert panels, and input from specialty societies and practice guideline committees. We evaluate all proposed changes, in part by vetting them through a joint committee made up of representatives of CMS, CMS contractors and the Joint Commission, with input from the HQA. There are a number of examples where we have temporarily removed from public reporting hospital quality measures because of circumstances outside of the control of hospitals (for example, delays in influenza vaccine delivery, shortages of antibiotics for surgical prophylaxis). *Comment:*
                         One commenter suggested that CMS remove from the RHQDAPU program measures that have been topped out, that is, measures where the data shows that a large majority of the participating hospitals have achieved very high levels of performance. However, the commenter recommended that hospitals continue to report results on 
                        *Hospital Compare.*
                         By taking the measures out of the RHQDAPU program, it allows hospitals and CMS to focus their respective resources on those areas where patient care can benefit most. *Response:*
                         We appreciate this comment. While it is true that some measures appear to have “topped out” for some hospitals, we still see considerable variation in performance between top performers and low performers for most measures. It is also not clear how having a hospital continue to report results on 
                        *Hospital Compare*
                         for topped out measures would reduce resource requirements for an individual hospital. For example, the three RHQDAPU SCIP infection measures on timing, appropriate administration, and discontinuation of antibiotic prophylaxis use many of the same data elements, such as a list of antibiotics and their administration times. More relative data collection burden is saved when measures with no duplicative data elements are removed, as opposed to measures using many of the same data elements as other RHQDAPU measures. We are also continuing to consider how we may be able to develop a process to decide when to retire a performance measure that has truly topped out. 5. Procedures for the RHQDAPU Program for FY 2008 and FY 2009 a. Procedures for Participating in the RHQDAPU Program The “Reporting Hospital Quality Data for Annual Payment Update Reference Checklist” section of the QualityNet Exchange Web site contains all of the forms to be completed by hospitals participating in the program. In order to 
                        ( print page 47360)
                        participate in the hospital reporting initiative for FY 2008, hospitals must follow these steps: Identify a QualityNet Exchange Administrator who will follow the registration process and submit the information through the QIO Clinical Warehouse. This must be done regardless of whether the hospital uses a vendor for transmission of data.
                    Complete the revised “Reporting Hospital Quality Data for Annual Payment Update Notice of Participation” form. Hospitals must send this form to their QIO, no later than August 15, 2007. In an effort to alleviate the burden associated with submitting this form annually, we consider that a hospital that submits this form is an active RHQDAPU program participant until such time as the hospital submits a withdrawal form to CMS. In addition, before participating hospitals initially begin reporting data, they must register with the QualityNet Exchange, regardless of the method used for submitting data. Collect and report data for each of the required measures except the Medicare mortality measures (Acute Myocardial Infarction, Heart Failure, and Pneumonia 30-day Mortality for Medicare Patients). A hospital must report these data for discharges occurring in or after first quarter CY 2007. Hospitals must submit the data to the QIO Clinical Warehouse using the CMS Abstraction Reporting Tool (CART), the JCAHO ORYX® Core Measures Performance Measurement System, or another third party vendor tool that has met the measurement specification requirements for data transmission to QualityNet Exchange. All submissions will be executed through QualityNet Exchange. Because the information in the QIO Clinical Warehouse is considered QIO information, it is subject to the stringent QIO confidentiality regulations in42 CFR Part 480. The QIO Clinical Warehouse will submit the data to CMS on behalf of the hospitals.
                    For each quality measure that requires hospitals to collect and report data, submit complete data regarding the quality measures in accordance with the joint CMS/Joint Commission sampling requirements located on the QualityNet Exchange Web site. These requirements specify that hospitals must submit a random sample or complete population of cases for each of the topics covered by the quality measures. Hospitals must meet the sampling requirements for these quality measures for discharges in each quarter.
                    Submit to CMS on a quarterly basis aggregate population and sample size counts for Medicare and non-Medicare discharges for the four topic areas (AMI, HF, PNE, and SCIP)).
                    Continuously collect HCAHPS data, beginning with July 2007 discharges, in accordance with the HCAHPS Quality Assurance Guidelines, Version 2.0, located at*www.hcahpsonline.org.*
                         The CY 2007 OPPS rule required HCAHPS-eligible hospitals to participate in the March 2007 dry run of the HCAHPS survey, if they had not already participated in a previous dry run. Hospitals must submit HCAHPS dry run data to the QIO Clinical Warehouse by July 13, 2007. As part of the March 2007 dry run, hospitals were required to survey HCAHPS-eligible discharges between 48 hours and 6 weeks following hospital discharge. CMS has become aware that, because they treat very few patients, a very small percentage of hospitals might not have had any HCAHPS-eligible discharges in March 2007. Similarly, such hospitals might not have any HCAHPS-eligible discharges in any month from July 2007 forward. The clinical data warehouse is being modified to accept zero HCAHPS-eligible discharges in the future but until this modification is complete, these hospitals should contact CMS by sending an email to 
                        *hcahps@azqio.sdps.org.*
                    For the AMI 30-day and HF 30-day mortality measures, CMS uses Part A and Part B claims for Medicare fee-for-service patients to calculate the mortality measures. For FY 2008, hospital inpatient claims (Part A) from July 1, 2005 to June 30, 2006, will be used to identify the relevant patients and the index hospitalizations. Inpatient claims for the index hospitalizations and Part A and Part B claims for all inpatient, outpatient, and physician services received 1 year prior to the index hospitalizations are used to determine patient comorbidity, which is used in the risk adjustment calculation (see*http://www.qualitynet.org/​dcs/​ContentServer?​cid=​1163010398556​pagename=​QnetPublic%2FPage%2FQnetTier2​c=​Page*). No other hospital data submission is required to calculate the mortality rates. *Comment:*
                         Several commenters stated that CMS needs to release new and revised measure and programming specifications in an expedited manner. Specifically, the data specifications need to be articulated well in advance of the start of data collection so that both the vendors that assist hospitals in collecting and formatting data for submission and the QIO Clinical Warehouse have an appropriate amount of time to adjust their software and test it to ensure it functions properly. *Response:*
                         The current 120 day advance release of the specification manual is jointly implemented by CMS and the Joint Commission. We will consider adding more time to this advance release in the future. Additionally, we will strive to minimize the number of post-update clarifications that further reduce the lead time needed for vendor software programming. We believe that a continued coordination with the Joint Commission is the most efficient and feasible method to ensure that hospitals and data vendors receive measures specifications with sufficient advance notice. *Comment:*
                         One commenter supported coordination among vendors, CMS, and the Joint Commission, including the need for clear and definitive alignment. Hospitals and vendors will require extremely detailed guidance on what should be included in each reporting period. The commenter urged CMS to recognize the time constraints in applying the validation requirement for the FY 2008 update for the three SCIP measures that are to be included in the RHQDAPU measure set. *Response:*
                         We are continuing to work on coordinating measures updates and selection with the Joint Commission in an effort to minimize the reporting burden on hospitals. We understand the need to coordinate measure selection and corresponding abstraction and processing burden on vendors and hospitals. However, measures selection must also consider the requests by consumer groups, purchasers, and other stakeholders to increase the public reporting measure set. We also appreciate the comment on applying the validation requirement for the FY 2008 update. *Comment:*
                         Two commenters stated that when amending measures, CMS should take into account the ability of hospitals, the QIO Clinical Warehouse, and data vendors to successfully and quickly implement changes in reporting measures and that CMS should seek input from hospital data collection personnel as a part of the measure review process to understand the effects that reporting changes have on hospitals. *Response:*
                         We understand the need to consider the abstraction and processing burden on vendors and hospitals when selecting measures for the RHQDAPU program. We will consider greater vendor and hospital participation into our measure testing and development program in the future. 
                        ( print page 47361) b. Procedures for Participating in the RHQDAPU Program for FY 2009 In the FY 2008 IPPS proposed rule (72 FR 24807), we stated that for FY 2009, the requirements for FY 2008 discussed above would apply, except that hospitals would be required to collect and report data on any additional measures that we finalize through the rulemaking process, and for which we specify that data submission is required. We also stated that mortality measures will be expanded to include pneumonia when this measure received final NQF endorsement. This measure has received NQF endorsement and, as we discussed above, we are adopting as final in this FY 2008 IPPS final rule the proposed pneumonia 30-day mortality measure for Medicare patients for the FY 2009 RHQDAPU program. c. Chart Validation Requirements (1) FY 2008 Chart Validation Requirements In the FY 2008 IPPS proposed rule (72 FR 24808), we stated that for the FY 2008 update, and until further notice, we would continue to require that hospitals meet the chart validation requirements that we implemented in the FY 2006 IPPS final rule. There were no chart-audit validation criteria in place for FY 2005. Based upon our experience with the FY 2005 submissions, and our requirement for reliable and validated data, in the FY 2006 IPPS final rule we discussed additional requirements that we had established for the data that hospitals were required to submit in order to receive the full FY 2006 payment update (70 FR 47421 and 47422). These requirements, as well as additional information on validation requirements, continue and are being placed on the QualityNet Exchange Web site. We also stated that for the FY 2008 payment update, and until further notice, hospitals must pass our validation requirement that requires a minimum of 80-percent reliability, based upon our chart-audit validation process, for the first three quarters of data from CY 2006. These data were due to the QIO Clinical Warehouse by August 15, 2006 (first quarter CY 2006 discharges), November 15, 2006 (second quarter CY 2006 discharges), and February 15, 2007 (third quarter CY 2006 discharges). We use confidence intervals to determine if a hospital has achieved an 80-percent reliability aggregated over the three quarters. The use of confidence intervals allows us to establish an appropriate range below the 80-percent reliability threshold that demonstrates a sufficient level of reliability to allow the data to still be considered validated. We estimate the percent reliability based upon a review of five charts, and then calculate the upper 95-percent confidence limit for that estimate. If this upper limit is above the required 80-percent reliability, the hospital data are considered validated. We are using the design-specific estimate of the variance for the confidence interval calculation, which, in this case, is a stratified single stage cluster sample, with unequal cluster sizes. (For reference, see Cochran, William G.: 
                        *Sampling Techniques,*
                         John Wiley  Sons, New York, chapter 3, section 3.12 (1977); and Kish, Leslie.: 
                        *Survey Sampling,*
                         John Wiley  Sons, New York, chapter 3, section 3.3 (1964).) Each quarter is treated as a stratum for variance estimation purposes. We will use a two-step process to determine if a hospital is submitting valid data. In the first step, we calculate the percent agreement for all of the variables submitted in all of the charts. If a hospital falls below the 80-percent cutoff, we proceed to the second step and restrict the comparison to those variables associated with payment. For first and second quarter CY 2006 discharges (1Q06, 2Q06), that means we limit the calculations to the 10-measure starter set. For third quarter CY 2006 discharges (3Q06), we include 21 measures. We recalculate the percent agreement and the estimated 95-percent confidence interval, and again compare the sum to the 80-percent cutoff point. If a hospital passes under this restricted set of variables, the hospital is considered to be submitting valid data for purposes of the RHQDAPU program. Due to time constraints, we will not apply the validation requirement for the FY 2008 update to 3 SCIP measures that are included in the RHQDAPU measure set: Infection 2, VTE 1 and VTE 2. *Comment:*
                         Three commenters stated that improvements need to be made to the validation process. They indicated that many hospitals have been notified that there have been problems validating the data they submitted. The commenters stated that in several instances, these validation problems have been due to inconsistencies in the definitions of some variables used by CMS’ contractors who are re-abstracting patient-level data and comparing it to the data submitted by the hospitals. They believed that while the re-abstraction of five charts per quarter for each hospital may have been a sufficient validation strategy when only 10 measures were being collected and reported, it is insufficient to ensure the reliability of the data as we continue to expand the number of measures and the number of patients on whom data are being collected. The commenters believed that a more resilient and less resource intensive method of validation is needed. The commenters indicated that they are working with a well known research and data enterprise to explore alternatives and will share their recommendations about more effective, less cumbersome validation processes with CMS in the next few weeks. *Response:*
                         We appreciate this comment and are interested in receiving alternative proposals to improve the validation process in terms of burden and accuracy of abstracted data. The current validation process has been in place for several years, and we believe that improvements should be thoroughly tested and submitted to hospitals before we adopt them for the RHQDAPU program. We are currently considering these options and others for their burden of hospitals, resource implications for CMS, and impact on accuracy of the data. *Comment:*
                         In the event hospitals are notified of problems with their data submissions, one commenter suggested that it should have the ability to appeal those notices. The commenter stated that often these problems are a result of inconsistencies in some of the variables used by CMS’ contractors and abstractors. The commenter believed that the small number of charts being abstracted also is insufficient to ensure reliability. Consequently, the commenter suggested that hospitals should be permitted to file an appeal if there is a validation problem. Any appeals process should also be timely with a clearly defined process that is published in the final rule. *Response:*
                         Hospitals falling below 80 percent agreement rate for quarterly validation are eligible to appeal their mismatched elements if they believed that the CMS CDAC contractor incorrectly abstracted the data element. This validation appeals process is outlined on the QualityNet Web site (
                        *www.qualitynet.org*), and contains clearly defined timeframes for hospital appeals request and subsequent QIO appeals review. *Comment:*
                         One commenter stated that the quarterly submission of data would be a hardship on small providers that only have one person collecting and reporting quality measures. Nonetheless, the commenter believed that quarterly submission makes sense. *Response:*
                         We appreciate and understand the abstraction and submission burden of smaller hospitals. The quarterly submission deadline 
                        ( print page 47362)
                        weighs the need to frequently update the publicly reported data, data reliability, against the abstraction and submission burden placed on hospitals. We continue to coordinate these requirements with The Joint Commission for their accredited hospitals to attempt in minimizing the incremental burden placed on Joint Commission accredited hospitals, which comprise over 80 percent of all hospitals operating under the hospital IPPS payment system. *Comment:*
                         With respect to validation of data being submitted by hospitals, one commenter understood that in FY 2008, CMS would not be applying the validation requirement to three SCIP anti-infection measures (Infection 2, VTE 1 and 2). The commenter stated that since these data come from the hospitals and it can impact their business, it is imperative to include validation for these measures to assure the public that the information is accurate. *Response:*
                         We appreciate the comment. CMS proposed in the FY 2008 IPPS proposed rule (72 FR 24808) to apply the validation requirements to these measures using 2nd quarter 2007 and 3rd quarter CY 2007 discharges. *Comment:*
                         One commenter stated that CMS should consider alternative methods of data validation such as using monthly data points of each clinical measure and not relying on chart abstraction. The commenter indicated that such a method of validation might employ a process similar to the quarterly Outlier validation that the Joint Commission requires of its core measure vendors. A monthly data point that exceeds three (3) standard deviations is considered an outlier. When an outlier is identified, the hospital is requested to verify that the data are accurate. This validation process relies on inter-hospital variability. *Response:*
                         We appreciate this comment and are interested in incorporating the Joint Commission's outlier validation methodology into our current chart audit validation process of abstracted data. The two methodologies assess important and different aspects of data quality. CMS’ validation methodology assesses abstraction accuracy at the element level, and The Joint Commission's methodology assesses aberrant aggregate data patterns. The current CMS validation process has been in place for several years, and we believe that improvements should be thoroughly tested and submitted to hospitals through advance notice in future proposed rules posted in the 
                        **Federal Register**
                        . *Comment:*
                         One commenter stated that validation frequently does not relate to the quality of care provided, especially for many of the validation failures that are keying errors. The commenter stated that these errors are classified as “invalid record selections” which are not abstracted by CMS and not subject to appeal. *Response:*
                         The current validation methodology is designed to measure the abstraction accuracy of the hospital, not the quality of care provided. All elements that are part of the RHQDAPU measures are subject to validation. However, before validating the data elements, CMS must ensure that the chart submitted by the hospital represents the patient sampled for validation. CMS does not abstract charts in cases where the information used to identify the patient's stay contradicts the electronic submission data. CMS must definitively determine that the submitted medical record is the patient as identified in the submitted data. The patient name, admission or discharge date must match for CMS to definitively determine the medical record is the same episode of care as the submitted patient level data. *Comment:*
                         One commenter stated that all hospitals should have the ability to appeal all validation cases regardless of whether scores are below 80 percent, whenever the validation scores could affect a potential loss of the APU. The commenter believed that hospitals must have the opportunity to appeal human errors in transcription, copying or mailing medical records to the CDAC for validation. *Response:*
                         We appreciate this comment, but resources do not allow CMS to review requests from all 3,500 hospitals that participate in the RHQDAPU program for reconsideration regarding validation results if those results did not affect payment. We restrict our review to only hospitals not meeting the 80 percent threshold because payment is much more likely to be affected for these hospitals. *Comment:*
                         One commenter agreed with including “measure match” accuracy as part of the validation process but also asked if the hospital can correctly identify which cases received the process of care (i.e., the numerator) and belong in the process of care (i.e., the denominator), which is how the data is displayed on 
                        *Hospital Compare,*
                         what additional value does verification of individual data element match provide? The commenter recommended that CMS evaluate only the verification of the accuracy of the cases placed into the numerator and denominator. From a patient care perspective, the commenter was interested in knowing if a patient received antibiotics in a timely manner, not if the abstractor correctly entered a specific data element. *Response:*
                         We appreciate this comment. We will consider this proposed approach in the future for the RHQDAPU program, and the lessened burden associated with this proposal. We must also consider the relative amount of information that CMS is able to provide the hospital under the proposed approach, because CMS would not be definitively able to provide the hospital with the exact data element that resulted in the validation failure for that measure. We must evaluate the need to provide this detailed information to the hospitals in our future RHQDAPU proposed validation methodology. After careful consideration of the comments received, we are adopting in this FY 2008 IPPS final rule the validation process we proposed in the FY 2008 IPPS proposed rule. However, we will further address the final list of process measures which will be validated for the FY 2009 RHQDAPU program in the CY 2008 OPPS final rule. For HCAHPS, hospitals and survey vendors must participate in a quality oversight process conducted by the HCAHPS project team. Prior to July 2007, the purpose of the oversight activities was to provide feedback to hospitals and survey vendors on data collection procedures. Starting in July 2007, we ask hospitals/survey vendors to correct any problems that are found and provide follow-up documentation of corrections for review within a defined time period. If the HCAHPS project team finds that the hospital has not made these corrections, CMS may determine that the hospital is not submitting HCAHPS data that meets the requirements for the RHQDAPU program. As part of these activities, HCAHPS project staff will review and discuss with survey vendors and hospitals self-administering the survey their specific Quality Assurance Plans, survey management procedures, sampling and data collection protocols, and data preparation and submission procedures. This review may take place in-person or through other means of communication. (2) FY 2009 Chart Validation Requirements In the FY 2008 IPPS proposed rule (72 FR 24808), we indicated that for the FY 2009 update, all FY 2008 requirements would apply, except for the following 
                        ( print page 47363)
                        modifications. We would modify the validation requirement to pool the quarterly validation estimates for 4th quarter CY 2006 through 3rd quarter 2007 discharges. We would also expand the list of validated measures in the FY 2009 update to add SCIP Infection-2, SCIP VTE–1, and SCIP VTE–2 starting with 4th quarter CY 2006 discharges. We would also drop the current two-step process to determine if the hospital is submitting valid data. We proposed for the FY 2009 update to pool validation estimates covering the 4 quarters (4th quarter CY 2006 discharges through 3rd quarter 2007 discharges) in a similar manner to the current 3 quarter pooled confidence interval. *Comment:*
                         One commenter recommended that CMS go to a four (4) quarter validation instead of three (3) quarters. The commenter suggested that the approach needs to be consistent for all measures, otherwise it will be administratively very difficult for the vendors. *Response:*
                         We appreciate this comment, and proposed in the FY 2008 IPPS proposed rule that we would use four quarters of validation results starting with the FY 2009 update. We made this proposal a year in advance to give hospitals ample notice of this new requirement. We will consider the consistency of our validation approach as we make improvements to this process in future years. (3) Validation and Submission Requirements In the FY 2008 IPPS proposed rule (72 FR 24808), we stated that we planned to apply the validation and submission requirements for the FY 2008 and FY 2009 payment determination to the quality measures. For the validation and submission requirements for the FY 2008 payment year, we stated that we plan to use the following criteria: The 10 measure starter set for both submission and validation for 1st through 3rd quarters CY 2006 discharges.
                    The additional 11 measures that make up the expanded measure set for both submission and validation for 3rd quarter CY 2006 discharges.
                    SCIP VTE 1, 2, and SCIP Infection 2 submissions only for 1Q 2007 discharges only.
                    HCAHPS measures, both submission of dry run data and continuous submissions beginning with July 2007 discharges.
                    AMI and HF 30-day mortality measures as described previously. For FY 2009 payment year, we plan to use the following criteria: The 21 expanded measure set for submission and validation starting with 4th quarter CY 2006 (4Q06) through 3rd quarter CY 2007 (3Q07) discharges.
                    SCIP VTE 1, 2, and SCIP Infection 2 submission and validation for 2nd quarter CY 2007 and 3rd Quarter CY 2007 discharges.
                    HCAHPS measures, continuous submission.
                    AMI, HF, and PN 30-day mortality measures as described previously. As we have previously stated, at this time we are not finalizing the SCIP Infection 4, SCIP Infection 6, SCIP Infection 7 and SCIP Cardiovascular-2 measures for the FY 2009 RHQDAPU program because they have not yet been endorsed by the NQF. We anticipate that three of these measures will be endorsed by the NQF in the next few months (SCIP Infection 4, SCIP Infection 6 and SCIP Cardiovascular-2) and, if they are, we intend to adopt these measures in the CY 2008 OPPS final rule. We will await NQF action on SCIP Infection 7, and if it is endorsed and we determine to adopt this measure, we will do so through the rulemaking process. As additional measures are finalized for inclusion in the FY 2009 payment decision, we stated that we would anticipate making further changes to the above plan to incorporate those measures. *Comment:*
                         Several commenters urged immediate adoption of an effective mechanism for allowing hospitals and their vendors to resubmit quality measure data if they discover an error. *Response:*
                         Quality measure data can be resubmitted before the data submission deadline; however, measure data resubmissions after the deadline and the QIO Clinical Warehouse lockdown are currently rejected. We will, however, take into consideration the commenter's suggestion to allow quality measure resubmissions to occur after the data submission deadline for public reporting purposes. For payment purposes, we believe that the requirement of submission deadlines is necessary to ensure a proper audit trail to ensure that annual requirements were accurately calculated in a timely manner. *Comment:*
                         One commenter continued to support expanding the number of measures to be included in the RHQDAPU program. However, the commenter was concerned that the program is constrained in how quickly it can expand given the capacity and capability of the current QIO Clinical Warehouse. The commenter suggested that CMS should give serious consideration to competitively bidding the QIO Clinical Warehouse to an entity with greater capacity. The commenter indicated that, ideally, the entity must be able to receive, aggregate, and calculate reliable and valid data on performance measures across all patient populations on a timely basis, supply such data to CMS, public and private payers, accreditation organizations, and entities representing providers, practitioners, and consumers, conduct ongoing assessments and make adjustments and changes to address any deficiencies. The commenter also recommended that this entity should provide effective technical assistance to entities submitting data to, and entities using data from, the QIO Clinical Warehouse. *Response:*
                         We are continuing to evaluate the capacity of our data infrastructure and contractor resources and will continue to assess and make adjustments to the QIO Clinical Warehouse in order to provide an efficient system, in a timely manner, for the submission, storage, and calculation of quality measure data. CMS will consider the commenter's suggestion as we evaluate the warehouse. *Comment:*
                         One commenter urged CMS to allow vendors access to the data during the CDAC validation process so that the vendors and hospitals together can analyze the data. The commenter indicated that shortened timeframe for reporting is acceptable so long as CMS communicates technical changes in programming in a timely manner and coordinates with the QIOs so that messages are consistent across all aspects of the agency. *Response:*
                         We will investigate and study the issues related to the possibility of allowing vendors access to these data. *Comment:*
                         Two commenters requested that CMS continue improving the ability of vendors to help their hospital clients to the fullest extent by permitting vendors to access the data of their client hospitals on Q-net with a single sign on. The commenters also believed that hospitals and vendors should be able to resubmit data in the event a problem is found during the validation process and assuming the resubmission can take place prior to the closing of the reporting period. Often the problems are technical in nature and are related to straight programming errors, not to errors or omissions by hospitals. *Response:*
                         We agree that vendors should provide efficient data submission for their hospitals. Currently, there is a single sign on for a vendor to upload data for all those providers for which the vendor is authorized to submit data. There is also 
                        ( print page 47364)
                        a single sign on to access the submission reports for all those providers who have given their vendor authorization to view their reports. Regarding resubmission of data, if an error is found before the data submission deadline, hospitals and vendors can resubmit their data. *Comment:*
                         One commenter noted that recently, many hospitals have had difficulties with their data submission. The commenter indicated that these problems commonly have been due to errors in the software at the QIO Clinical Warehouse, and have caused an undue administrative burden for hospitals. The commenter believed that these difficulties have focused staff attention on data collection and reporting and away from quality improvement initiatives to provide better care to patients. *Response:*
                         The contractor responsible for the QIO Clinical Warehouse is continuing its efforts to improve warehouse processes and has added an independent verification and validation step to the testing phase in order to further ensure accuracy and reliability. *Comment:*
                         One commenter stated that it is not clear from the proposed rule what data transmission mechanism hospitals should use if they do not use the CART application. The commenter encouraged consideration of ORYX performance measurement systems for data processing and abstraction software as an existing, well-established reporting infrastructure. *Response:*
                         CART (CMS Abstraction  Reporting Tool) is a software application created by CMS, and is designed to allow hospitals, QIOs, and other organizations to abstract, edit, export, and report on the quality measures. CART and the QIO Clinical Warehouse infrastructure may be used across data collection programs and is available at no charge. Hospitals are allowed to use CART or to use ORYX vendor software to abstract data. ORYX vendor software and data processing must be purchased by hospitals. d. Data Validation and Attestation In the FY 2008 IPPS proposed rule we stated that for the FY 2008 update and in subsequent years, we would revise and post up to date confidence interval information on the QualityNet Exchange Web site explaining the application of the confidence interval to the overall validation results. The data are being validated at several levels. There are consistency and internal edit checks to ensure the integrity of the submitted data; there are external edit checks to verify expectations about the volume of the data received. We also stated that we would require for FY 2008 and subsequent years that hospitals attest each quarter to the completeness and accuracy of their data, including the volume of data, submitted to the QIO Clinical Warehouse in order to improve aspects of the validation checks. We proposed to provide additional information to explain this attestation requirement, as well as provide the relevant form to be completed on the QualityNet Exchange Web site at the same time as the publication of this final rule with comment period. *Comment:*
                         One commenter supported the attestation process for the new SCIP measures. Another commenter stated that it is critical that CMS gives every provider the opportunity to attest each quarter to the completeness and accuracy of their data. *Response:*
                         We appreciate the comments. We believe that the attestation requirement for all measures for which hospitals submit data under the RHQDAPU program will increase awareness among hospitals about the abstraction and submission of accurate data because it demands explicit acknowledgement from hospitals that its data is complete and accurate. At this time, we are not finalizing the SCIP Infection 4, SCIP Infection 6, SCIP Infection 7, and SCIP Cardiovascular 2 measures. We plan to address the status of these measures in the CY 2008 OPPS final rule. *Comment:*
                         One commenter stated that without automated electronic records that interface with the billing system, the quarterly attestation of data completeness is difficult to ensure. *Response:*
                         We appreciate this comment. We will consider this comment in our future efforts to improve the attestation component of the RHQDAPU program. e. Public Display We proposed that we would continue to display quality information for public viewing as required by section 1886(b)(3)(B)(viii)(VII) of the Act. Before we display this information, hospitals will be permitted to review their information as recorded in the QIO Clinical Warehouse. Currently, hospitals that share the same Medicare Provider Number (MPN) must combine data collection and submission across their multiple campuses (for both clinical measures and for HCAHPS). These measures are then publicly reported as if they apply to a single hospital. We estimate that approximately 5 to 10 percent of the hospitals reported on the 
                        *Hospital Compare*
                         Web site share MPNs. For FY 2008 and subsequent years, we proposed that we would require hospitals to begin to report the name and address of each hospital that shares the same MPN. This information would be gathered through the RHQDAPU program Notice of Participation form, which hospitals would submit to their QIOs by August 15, 2007. To increase transparency in public reporting and improve the usefulness of the 
                        *Hospital Compare*
                         Web site, we would note on the Web site where publicly reported measures combine results from two or more hospitals. *Comment:*
                         One commenter supported CMS’ efforts to increase transparency in public reporting and the disclosure of hospitals that collectively report quality data under the same MPN and supported CMS’ proposals regarding new hospital participation under the RHQDAPU program as well as the expanded quality measures for FY 2009. *Response:*
                         We agree that, by collecting information about which MPNs are being shared by multiple hospitals and publicly reporting where the quality indicators combine the experience of two or more hospitals, it can create greater transparency and increase the utility and value of the 
                        *Hospital Compare*
                         Web site. *Comment:*
                         Two commenters stated that CMS should provide comparative performance at a hospital level on the 
                        *Hospital Compare*
                         Web site. The commenters believed that the proposal to indicate which data reflect the performance of two or more hospitals is inadequate to aid in provider selection. *Response:*
                         We agree that, to increase the utility and value of the hospital quality information on the 
                        *Hospital Compare*
                         Web site, information should be collected and reported at the hospital campus level. Our first step in this direction is to determine which hospitals share the same MPN. This will allow us to indicate on the Web site where the quality indicators currently combine the experience of two or more hospitals. Eventually, we intend to collect and report hospital quality information at the campus level. *Comment:*
                         One commenter believed that CMS’ proposal to require hospitals to begin to report the name and address of each hospital campus that shares the same MPN would be extremely cumbersome in practice and strongly encouraged CMS to be consistent across all environments and data requirements within CMS. The commenter, therefore, recommended that only the main campus address be listed, for consistency. Although it recognized the constraints this places on 
                        *Hospital Compare*
                         Web site and the ability to 
                        ( print page 47365)
                        compare specific hospital measures; the commenter believed that just including a note on the Web site where hospital scores have been combined will avoid much of the current confusion. *Response:*
                         Currently, we do not have information about which hospitals share an MPN. Thus, we cannot note that hospitals share an MPN on 
                        *Hospital Compare*
                         without gathering this information from hospitals. *Comment:*
                         With respect to public reporting, one commenter stated that combining data across multiple campuses hides from consumers serious quality problems at a single facility. The commenter believed that as long as this grouping is in place, the public must be informed as to which facilities are falling into these groups. However, the commenter added, it is ultimately more important to address the underlying problem that is preventing CMS from reporting the performance of each individual hospital. The commenter urged CMS to report the quality measure for each specific hospital campus. *Response:*
                         We agree that ultimately to make the information most useful it should be collected and reported at the campus level. Our first step in this direction is to determine which hospitals are combining data across hospitals on 
                        *Hospital Compare*. This will allow us to indicate on the Web site where the quality indicators currently combine the experience of two or more hospitals. Eventually, we intend to collect and report hospital quality information at the campus level. f. Reconsideration and Appeal Procedures In the FY 2008 IPPS proposed rule, we stated that if we deny a hospital the full market basket update, the hospital may submit a request that we reconsider our decision that the hospital did not meet the RHQDAPU program requirements. For FY 2008, a hospital must submit such a request for reconsideration on or before November 1, 2007. We also are establishing additional procedural rules that will govern RHQDAPU program reconsiderations. We will post these rules on the QualityNet Exchange Web site at the same time as the publication of this final rule with comment period. In the FY 2008 IPPS proposed rule (72 FR 24809), we again solicited public comment and suggestions related to reconsideration decisions. *Comment:*
                         Three commenters stated that CMS should use the experience in FY 2007 to construct a process (reconsideration) for adjudicating appeals in a timely fashion and should clearly lay out that process for all hospitals to see prior to publication of the final rule. *Response:*
                         We will use the experience from the FY 07 reconsideration period to develop a process that will streamline and expedite this annual process that potentially affects hospital payment. We are concurrently posting more detailed procedural rules regarding the FY 2008 reconsideration process on the QualityNet Exchange Web site. We are also describing these rules below in this final rule with comment period. In order to receive a reconsideration, the hospital must: Submit via QualityNet Exchange a Reconsideration Request form (available on the QualityNet Exchange Web site), containing the following information, to CMS: ○ Hospital Medicare ID number ○ Hospital Name ○ CMS identified reason for failure (as provided in the CMS notification of failure letter to the hospital) ○ Hospital basis for requesting reconsideration; ■ This must identify the hospital's specific reason(s) for believing it met the RHQDAPU requirements and should receive the full FY 2008 IPPS annual payment update. ○ CEO contact information, including name, email address, telephone number, and mailing address (must include physical address, not just PO box) ○ QualityNet System Administrator contact information, including name, email address, telephone number, and mailing address (must include physical address, not just PO box) ■ The request must be signed by the hospital's CEO. For FY 2008, a hospital must submit via QualityNet Exchange such a request for reconsideration on or before November 1, 2007. Following receipt of a request for reconsideration, CMS will: Provide an email acknowledgement, using the contact information provided in the reconsideration request, to the CEO and the QualityNet Administrator that the letter has been received.
                    Provide a formal response to the hospital CEO, using the contact information provided in the reconsideration request, notifying the facility of the outcome of the reconsideration process. CMS expects the process to take 60–90 days from the due date of November 1, 2007. If a hospital is dissatisfied with the result of a RHQDAPU program reconsideration decision, the hospital may file a claim under 42 CFR part 405, Subpart R (a Provider Reimbursement Review Board (PRRB) appeal). g. RHQDAPU Program Withdrawal Requirements For the FY 2008 update, hospitals may withdraw from the RHQDAPU program at any time up until August 15, 2007. If a hospital withdraws from the program, it will receive a 2.0 percentage point reduction in its annual payment update. 6. Electronic Medical Records In the FY 2006 IPPS final rule, we encouraged hospitals to take steps toward the adoption of electronic medical records (EMRs) that will allow for reporting of clinical quality data from the EMRs directly to a CMS data repository (70 FR 47420). We intend to begin working toward creating measures’ specifications, and a system or mechanism, or both, that will accept the data directly without requiring the transfer of the raw data into an XML file as is currently done. The Department continues to work cooperatively with other Federal agencies in the development of Federal health architecture data standards. We encouraged hospitals that are developing systems to conform them to both industry standards, and when developed, the Federal Health Architecture Data standards; taking measures to ensure that the data necessary for quality measures is captured. Ideally, such systems will also provide point-of-care decision support that enables detection of high levels of performance on the measures. Hospitals using EMRs to produce data on quality measures will be held to the same performance expectations as hospitals not using EMRs. Due to the low volume of comments we received on this issue in response to the FY 2006 proposed IPPS rule, in the proposed IPPS rule for FY 2007 (71 FR 24095), we again invited public comment on these requirements and related options. In the FY 2007 IPPS final rule (71 FR 48045), we summarized and addressed the additional comments we received. In the FY 2008 IPPS proposed rule (72 FR 24809), we noted that we would welcome additional comments on this issue. *Comment:*
                         One commenter supported encouraging the use of electronic medical records (EMRs). The commenter indicated that the use of the EMR could assist in the initial collection of information. However, the commenter added, CMS must recognize the clear distinction between tools that are used at the point of care to record and improve medical interventions and those that are used to report and 
                        ( print page 47366)
                        validate quality measures. At this point, EMRs are best suited to only the former functions and not the latter of the functions. The reality is that the specifications for reporting measures change too quickly to enable EMRs to be the vehicle for quality data and reporting. Moreover, the appetite among EMR vendors to constantly update their products to incorporate new specifications is costly in terms of both time and dollars. The commenter was pleased to continue to work with CMS through the American Health Information Community (AHIC) and other agencies to develop processes through which an EMR could speed the collection and minimize the resources necessary for quality reporting. *Response:*
                         We appreciate the feedback from the commenter. We note that the AHIC is a federal advisory body, chartered in 2005 to make recommendations to the Secretary of the HHS on how to accelerate the development and adoption of health information technology. CMS plans to continue working through the AHIC and other entities to develop processes through which an EMR could speed the collection and minimize the resources necessary for quality reporting. We acknowledge the current differentiation between tools used to record and medical intervention and the current tools used to report and validate quality measures. CMS will continue to participate in appropriate HHS studies and workgroups, as mentioned by the GAO report about hospital quality data and their use of information technology. As appropriate, CMS will inform interested parties regarding progress in the implementation of HIT for the collection and submission of hospital quality data as specific steps, including timeframes and milestones, are identified. Current mechanisms include publication in the 
                        **Federal Register**
                         as well as ongoing collaboration with external stakeholders such as the Hospital Quality Alliance, the American Hospital Association, the Federation of American Hospitals, the Association of American Medical Colleges; and The Joint Commission. We further anticipate that as HIT is implemented, a formal plan, including training, will be developed to assist providers in understanding and utilizing HIT in reporting. In addition, we will assess the effectiveness of our communications with providers and stakeholders as it relates to all information dissemination pertinent to collecting hospital quality data as part of an independent and comprehensive external evaluation of the RHQDAPU program. 7. New Hospitals In the FY 2008 IPPS proposed rule (72 FR 24809), we also proposed a minor change to our policies regarding new hospitals. In the FY 2006 IPPS final rule, we noted that a new hospital should begin collecting and reporting data immediately, and to complete the registration requirements for the RHQDAPU program quality measures (70 FR 47421 and 47428). We also explained that a new hospital would be held to the same standards as other established facilities when determining the expected number of discharges for the calendar quarters covered for each fiscal year. We also stated that fiscal intermediaries would provide information on new hospitals to the QIO in the state in which the hospital opened for operations as a Medicare provider, as soon as possible, so that the QIO could enter the provider information into its Program Resource System (PRS), and follow through with ensuring provider participation as the requirements for quality data reporting under this rule stipulate. We believe that some new hospitals have found it difficult to start reporting RHQDAPU measures immediately after signing up to participate in the RHQDAPU program. Therefore, we proposed to modify our policy to reduce the burden on new hospitals. We proposed that fiscal intermediaries would continue to provide information on the new hospital to the QIO in the state in which the hospital is located, as soon as possible, so that the QIO can enter the provider information into its PRS, and follow through with ensuring provider compliance with the requirements for quality data reporting. For a new hospital that receives a provider number on or after October 1 of each year (beginning with October 1, 2007), we proposed that the hospital be required to report RHQDAPU data beginning with the first day of the quarter following the date the hospital registered to participate in the RHQDAPU program. For example, a hospital that receives its MPN on October 2, 2007, and signs up to participate in RHQDAPU on November 1, 2007, will be expected to meet all of the data submission requirements for discharges on or after January 1, 2008. In addition, for HCAHPS we strongly recommend the hospital participants in a dry run, if feasible, prior to beginning to collect HCAHPS data on an on-going basis to meet the RHQDAPU requirements. We refer readers to the Web site at 
                        *http//www.hcahpsonline.org*
                         for a schedule of upcoming dry runs. *Comment:*
                         One commenter supported the plan for new hospitals joining the RHQDAPU program. It is reasonable to have the hospitals begin reporting the first full quarter after inclusion in the program. The commenter recommended, however, that a clear appeals process be established should a hospital be unable to meet this standard. *Response:*
                         We appreciate the commenter's support. As we continue to assess the RHQDAPU program, we plan to consider the commenter's suggestion. In summary, for the validation and submission requirements for the FY 2008 payment year, we plan to use the following criteria: The 10 measure starter set for both submission and validation for 1st through 3rd quarters CY 2006 discharges
                    The additional 11 measures that make up the expanded measure set for both submission and validation for 3rd quarter CY 2006 discharges
                    SCIP VTE 1, 2, and SCIP Infection 2 submissions only for 1Q 2007 discharges only
                    HCAHPS measures, both submission of dry run data and continuous submissions beginning with July 2007 discharges
                    AMI and HF 30-day mortality measures **
                        For FY 2009 payment year, we plan to use the following criteria: The 21 expanded measure set for submission and validation starting with 4th quarter CY 2006 (4Q06) through 3rd quarter CY 2007 (3Q07) discharges
                    SCIP VTE 1, 2, and SCIP Infection 2 submission and validation for 2nd quarter CY 2007 and 3rd Quarter CY 2007 discharges
                    HCAHPS measures, continuous submission
                    AMI, HF, and PN 30-day mortality measures As we previously stated, we are not finalizing at this time the following measures that we proposed in the proposed IPPS FY 2008 rule: SCIP Infection 4: Cardiac Surgery Patients with Controlled 6AM Postoperative Serum Glucose
                    SCIP Infection 6: Surgery Patients with Appropriate Hair Removal
                    SCIP Infection 7: Colorectal Patients with Immediate Postoperative Normothermia
                    SCIP Cardiovascular-2: Surgery Patients on a Beta-Blocker Prior to Arrival Who Received a Beta-Blocker During the Perioperative Period As previously stated, we are adopting the validation process we proposed in the FY 2008 IPPS proposed rule in this FY 2008 IPPS final rule. We are also finalizing the proposed chart validation 
                        ( print page 47367)
                        requirements covering FY 2009 discharges for all of the FY 2009 measures that we are finalizing in this final rule with comment period. Specifically, we will drop the current two-step process to determine if the hospital is submitting valid data starting with 1st quarter 2007 discharges. Starting with FY 2009, we will also begin to pool validation estimates covering the 4 quarters (4th quarter CY 2006 discharges through 3rd quarter 2007 discharges) in a similar manner to the current 3 quarter pooled confidence interval. We will include the SCIP Infection 4, SCIP Infection 6, and SCIP Cardiovascular 2 measures in our chart validation requirements for FY 2009 if we finalize those measures in the CY 2008 OPPS final rule to be published in the 
                        **Federal Register**
                         later this year. As discussed above, we also intend to adopt proposed SCIP Infection 7 if it is endorsed by NQF. When we determine to adopt this measure, we will do so through the rulemaking process. For FY 2008 and subsequent years, we are finalizing our proposal to require hospitals to begin to report the name and address of each hospital that shares the same MPN. This information would be gathered through the RHQDAPU program Notice of Participation form, which hospitals would submit to their QIOs by August 15, 2007. To increase transparency in public reporting and improve the usefulness of the 
                        *Hospital Compare*
                         Web site, we will note on the Web site where publicly reported measures combine results from two or more hospitals. For FY 2008, a hospital must submit such a request for reconsideration on or before November 1, 2007. We are also establishing additional procedural rules that will govern RHQDAPU program reconsiderations. In addition to including information in this final rule with comment period, we will also post these rules on the QualityNet Exchange Web site at the same time as the publication of this final rule with comment period. If a hospital is dissatisfied with the result of a RHQDAPU program reconsideration decision, the hospital may file a claim under 42 CFR part 405, Subpart R (a Provider Reimbursement Review Board (PRRB) appeal). We are also finalizing our proposal that fiscal intermediaries will continue to provide information on the new hospital to the QIO in the state in which the hospital is located, as soon as possible, so that the QIO can enter the provider information into its PRS, and follow through with ensuring provider compliance with the requirements for quality data reporting. For a new hospital that receives a provider number on or after October 1 of each year (beginning with October 1, 2007), we are finalizing our proposal that the hospital will be required to report RHQDAPU data for clinical and outcome measures beginning with the first day of the quarter following the date the hospital registered to participate in the RHQDAPU program. For example, a hospital that receives its MPN on October 2, 2007, and signs up to participate in RHQDAPU on November 1, 2007, will be expected to meet all of the data submission requirements for discharges on or after January 1, 2008. In addition, for HCAHPS we strongly recommend the hospital participates in a dry run, if feasible, prior to beginning to collect HCAHPS data on an ongoing basis to meet RHQDAPU requirements. We refer readers to the Web site at 
                        *http://www.hcahpsonline.org*
                         for a schedule of upcoming dry runs. B. Development of the Medicare Hospital Value-Based Purchasing Plan Section 5001(b) of the Deficit Reduction Act of 2005 (DRA) requires the Secretary of Health and Human Services to “develop a plan to implement a value-based purchasing program for payments under the Medicare program for subsection (d) hospitals beginning with fiscal year 2009.” Congress specified that the plan include consideration of the following issues: The ongoing development, selection, and modification process for measures of quality and efficiency in hospital inpatient settings.
                    The reporting, collection, and validation of quality data.
                    The structure of value-based payment adjustments, including the determination of thresholds or improvements in quality that would substantiate a payment adjustment, the size of such payments, and the sources of funding for the value-based payments.
                    The disclosure of information on hospital performance. In developing the plan, the Secretary must consult with relevant affected parties, and consider experience with demonstrations that are relevant to the value-based purchasing program. To develop the mandated plan on behalf of the Secretary, CMS created an internal Hospital Value-Based Purchasing (VBP) Workgroup. The Workgroup was organized into four subgroups to address each of the required planning issues: (1) measures; (2) data collection and validation; (3) incentive structure; and (4) public reporting. CMS hosted two public “Listening Sessions” in early 2007 to solicit comments from relevant affected parties on outstanding questions associated with the development of a plan. The first Listening Session was held on January 17, 2007, to consider design questions. The second Listening Session was held on April 12, 2007, to consider plan options. The perspectives expressed by stakeholders, including hospitals, consumers, and purchasers, during these sessions and in writing were used to assist the Workgroup in drafting the Medicare Hospital VBP Plan Report to Congress. Once the Report is submitted to Congress, CMS will post it on the CMS Web site. *Comment:*
                         Numerous commenters were supportive of the basic concepts included in the plan options and many commended CMS on its efforts to obtain stakeholder input during the planning process. The commenters urged CMS to continue this active dialogue once the Medicare Hospital VBP Plan is publicly released. The commenters addressed five principal themes: Proposed Measure Set. Several commenters stressed the importance of maintaining a stable measure set and measure specifications to provide a consistent basis for measuring improvement. A few commenters addressed the value of focusing on health outcomes and on evaluating resource consumption in achieving desired outcomes. A number of commenters made recommendations on specific measures and on establishing thresholds and benchmarks.
                    Data Submission and Validation Process. A few commenters expressed concern about the proposed accelerated timeframe for data submission, and several commenters had suggestions for further strengthening the proposed new approach to data validation.
                    Phased Approach to Transition from RHQDAPU to VBP. A number of commenters stressed the importance of a phased transition so that hospitals will have notice before the first “measurement year” begins.
                    Proposed Incentive Structure. Several commenters urged that the dollars at risk be limited, given the limited experience with VBP and encouraged CMS to distribute all unearned incentives to hospitals.
                    Possible Roles for Medicare Quality Improvement Organizations (QIOs) in VBP. A few commenters recommended that QIOs support performance improvement in lower-performing( print page 47368)
                        hospitals to ensure that successful practices are shared. *Response:*
                         These comments are similar to those that CMS received on the plan options during the April 12, 2007 Listening Session and in written comments. We appreciate the careful thought, and in one instance detailed analysis, devoted to providing these comments. The comments will be useful as we consider a Medicare Hospital VBP Plan. We welcome continued dialog with stakeholders regarding the challenges and opportunities in the development of a plan to implement a Medicare VBP program for hospitals. C. Rural Referral Centers (RRCs) (§ 412.96) Under the authority of section 1886(d)(5)(C)(i) of the Act, the regulations at § 412.96 set forth the criteria that a hospital must meet in order to qualify under the IPPS as an RRC. For discharges occurring before October 1, 1994, RRCs received the benefit of payment based on the other urban standardized amount rather than the rural standardized amount. Although the other urban and rural standardized amounts are the same for discharges occurring on or after October 1, 1994, RRCs continue to receive special treatment under both the DSH payment adjustment and the criteria for geographic reclassification. Section 402 of Pub. L. 108–173 raised the DSH adjustment for other rural hospitals with less than 500 beds and RRCs. Other rural hospitals with less than 500 beds are subject to a 12-percent cap on DSH payments. RRCs are not subject to the 12 percent cap on DSH payments that is applicable to other rural hospitals (with the exception of rural hospitals with 500 or more beds). RRCs are not subject to the proximity criteria when applying for geographic reclassification, and they do not have to meet the requirement that a hospital's average hourly wage must exceed 106/108 percent of the average hourly wage of the labor market area where the hospital is located. Section 4202(b) of Pub. L. 105–33 states, in part, “[a]ny hospital classified as an RRC by the Secretary * * * for fiscal year 1991 shall be classified as such an RRC for fiscal year 1998 and each subsequent year.” In the August 29, 1997 final rule with comment period (62 FR 45999), we reinstated RRC status for all hospitals that lost the status due to triennial review or MGCRB reclassification, but did not reinstate the status of hospitals that lost RRC status because they were now urban for all purposes because of the OMB designation of their geographic area as urban. However, subsequently, in the August 1, 2000 final rule (65 FR 47089), we indicated that we were revisiting that decision. Specifically, we stated that we would permit hospitals that previously qualified as an RRC and lost their status due to OMB redesignation of the county in which they are located from rural to urban to be reinstated as an RRC. Otherwise, a hospital seeking RRC status must satisfy the applicable criteria. We used the definitions of “urban” and “rural” specified in Subpart D of 42 CFR Part 412. 1. Annual Update of RRC Status Criteria One of the criteria under which a hospital may qualify as RRC is to have 275 or more beds available for use (§ 412.96(b)(1)(ii)). A rural hospital that does not meet the bed size requirement can qualify as an RRC if the hospital meets two mandatory prerequisites (a minimum CMI and a minimum number of discharges), and at least one of three optional criteria (relating to specialty composition of medical staff, source of inpatients, or referral volume) (§ 412.96(c)(1) through (c)(5) and the September 30, 1988 
                        **Federal Register**
                         (53 FR 38513)). With respect to the two mandatory prerequisites, a hospital may be classified as an RRC if— The hospital's CMI is at least equal to the lower of the median CMI for urban hospitals in its census region, excluding hospitals with approved teaching programs, or the median CMI for all urban hospitals nationally; and
                    The hospital's number of discharges is at least 5,000 per year, or, if fewer, the median number of discharges for urban hospitals in the census region in which the hospital is located. (The number of discharges criterion for an osteopathic hospital is at least 3,000 discharges per year, as specified in section 1886(d)(5)(C)(i) of the Act.) a. Case-Mix Index Section 412.96(c)(1) provides that CMS establish updated national and regional CMI values in each year's annual notice of prospective payment rates for purposes of determining RRC status. The methodology we used to determine the national and regional CMI values is set forth in the regulations at § 412.96(c)(1)(ii). The national median CMI value for FY 2008 includes all urban hospitals nationwide, and the regional values for FY 2008 are the median CMI values of urban hospitals within each census region, excluding those hospitals with approved teaching programs (that is, those hospitals receiving indirect medical education payments as provided in § 412.105(f)). These values are based on discharges occurring during FY 2006 (October 1, 2005 through September 30, 2006), and include bills posted to CMS' records through March 2007. In the FY 2008 IPPS proposed rule (72 FR 24811), we proposed that, in addition to meeting other criteria, if rural hospitals with fewer than 275 beds are to qualify for initial RRC status for cost reporting periods beginning on or after October 1, 2007, they must have a CMI value for FY 2006 that is at least— 1.2258; or
                    The median CMI value (not transfer-adjusted) for urban hospitals (excluding hospitals with approved teaching programs as identified in § 412.105(f)) calculated by CMS for the census region in which the hospital is located. Based on the latest available data (FY 2006 bills received through March 2007), in addition to meeting other criteria, if rural hospitals with fewer than 275 beds are to qualify for initial RRC status for cost reporting periods beginning on or after October 1, 2007, they must have a CMI value for FY 2006 that is at least— 1.4049; or
                    The median CMI value (not transfer-adjusted) for urban hospitals (excluding hospitals with approved teaching programs as identified in § 412.105(f)) calculated by CMS for the census region in which the hospital is located. The final median CMI values by region are set forth in the following table: Region
Case-mix index value1. New England (CT, ME, MA, NH, RI, VT)
1.23482. Middle Atlantic (PA, NJ, NY)
1.26653. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV)
1.35154. East North Central (IL, IN, MI, OH, WI)
1.33935. East South Central (AL, KY, MS, TN)
1.29046. West North Central (IA, KS, MN, MO, NE, ND, SD)
1.28697. West South Central (AR, LA, OK, TX)
1.40108. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)
1.42609. Pacific (AK, CA, HI, OR, WA)
1.3772
 Hospitals seeking to qualify as RRCs or those wishing to know how their CMI value compares to the criteria should obtain hospital-specific CMI values (not transfer-adjusted) from their fiscal intermediaries. Data are available on the Provider Statistical and Reimbursement 
                        ( print page 47369)
                        (PSR) System. In keeping with our policy on discharges, these CMI values are computed based on all Medicare patient discharges subject to the IPPS DRG-based payment. b. Discharges Section 412.96(c)(2)(i) provides that CMS set forth the national and regional numbers of discharges in each year's annual notice of prospective payment rates for purposes of determining RRC status. As specified in section 1886(d)(5)(C)(ii) of the Act, the national standard is set at 5,000 discharges. In the FY 2008 IPPS proposed rule, we proposed to update the regional standards based on discharges for urban hospitals’ cost reporting periods that began during FY 2004 (that is, October 1, 2003 through September 30, 2004), which was the latest available cost report data we had at that time. Therefore, in the FY 2008 IPPS proposed rule (72 FR 24811), we proposed that, in addition to meeting other criteria, a hospital, if it is to qualify for initial RRC status for cost reporting periods beginning on or after October 1, 2007, must have as the number of discharges for its cost reporting period that began during FY 2004 a figure that is at least — 5,000 (3,000 for an osteopathic hospital); or
                    The median number of discharges for urban hospitals in the census region in which the hospital is located. (See the table set forth in the FY 2008 IPPS proposed rule at72 FR 24811.) Based on the latest discharge data available at this time, that is, for cost reporting periods that began during FY 2004, the final median number of discharges for urban hospitals by census region are set forth in the following table: Region
Number of
                                 discharges1. New England (CT, ME, MA, NH, RI, VT)
7,7582. Middle Atlantic (PA, NJ, NY)
10,6033. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV)
10,6274. East North Central (IL, IN, MI, OH, WI)
9,3255. East South Central (AL, KY, MS, TN)
7,9666. West North Central (IA, KS, MN, MO, NE, ND, SD)
7,9867. West South Central (AR, LA, OK, TX)
7,2258. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)
9,0829. Pacific (AK, CA, HI, OR, WA)
8,439
 We note that the median number of discharges for hospitals in each census region is greater than the national standard of 5,000 discharges. Therefore, 5,000 discharges is the minimum criterion for all hospitals. We reiterate that, if an osteopathic hospital is to qualify for RRC status for cost reporting periods beginning on or after October 1, 2007, the hospital would be required to have at least 3,000 discharges for its cost reporting period that began during FY 2004. *Comment:*
                         Two commenters asked about the CMI values, stating that the values seem to have risen inexplicably in recent years, and the proposed FY 2008 national value is higher than the regional values, which is counter-intuitive given the national value includes teaching hospitals and the regional values do not. *Response:*
                         The method for calculating the CMI values for the RRC criteria has not changed. The rise in CMI values over the years may be due to an increase in the severity of inpatient cases and perhaps to improvements in the coding of such cases. Regarding the proposed FY 2008 national CMI value being lower than the regional CMI values, the national CMI value in the proposed rule was erroneous. The proposed FY 2008 national median CMI value should have read 1.4039. The final FY 2008 national median CMI value (1.4049) is higher than each of the regional median CMI values, except the Mountain region median CMI value, set forth in the table above. With respect to the national median CMI value being slightly lower than the Mountain region CMI value, we note that these values are medians, not means. Therefore, the national and regional medians are affected by the distribution of each hospital's CMI within each region and nationally. 2. Acquired Rural Status and RRCs (§ 412.103(g)) With the following exceptions, a hospital must be rural to qualify as an RRC: Consistent with section 4202(b) of Pub. L. 105–33, any hospital designated as an RRC in FY 1991 retains that status for FY 1998 and each subsequent year.
                    Hospitals located in a rural county that would have lost their RRC status as a result of an OMB redesignation of the area from rural to urban were permitted to remain as RRCs (69 FR 49056).
                    Hospitals located in urban areas that apply for reclassification as rural under § 412.103 (that is, the hospital is located in an urban area but it “acquires” rural status under the regulations) also may qualify as an RRC. Under § 412.103(g), a hospital may cancel its rural reclassification by submitting a written request to the CMS Regional Office no less than 120 days prior to the end of its current cost reporting period. A hospital may choose to cancel its acquired rural status if it determines that it may be more financially beneficial to return to urban status and the associated IPPS payments rather than remain rural and receive the special treatments of certain rural providers such as RRCs, SCHs and CAHs. The hospital's acquired rural status is canceled beginning with its next cost reporting period. We have received inquiries asking whether a hospital retains its RRC status once it voluntarily cancels its acquired rural status. As indicated above, a hospital generally must be rural to be classified as an RRC. However, a hospital may retain its RRC status in the special circumstances where it would have lost status due to OMB redesignation of its area from rural to urban, or where it was already designated as an RRC in 1991. In these situations, there were either special statutory provisions that require the hospital to retain its RRC status or the hospital's geographic status changed from rural to urban through no action of its own. We do not believe that an urban hospital that acquires rural status under § 412.103 and subsequently is approved as an RRC should be able to retain the benefits of being an RRC when it voluntarily cancels that acquired rural status. In our view, it follows from the requirement that an RRC must be located in a rural area that cancellation of acquired rural status negates a hospital's RRC designation. Therefore, we believe that Medicare's policy should be that a hospital cannot continue to be classified as an RRC once it cancels acquired rural status under § 412.103. For this reason in the FY 2008 IPPS proposed rule (72 FR 24812), we stated that a hospital that cancels its acquired rural status, received under § 412.103, would also lose its RRC designation under § 412.96. In this situation, the hospital would lose its RRC designation under § 412.96 as of the date the cancellation of its acquired rural status takes effect. As indicated above, RRCs are not subject to a maximum DSH adjustment of 12 percent that applies to other rural hospitals with less than 500 beds. Further, RRCs are not subject to the proximity criteria when applying for geographic reclassification (§ 412.230(a)(3)), and they do not have to meet certain wage comparison tests for reclassification (§ 412.230(d)(1)(iii)). 
                        ( print page 47370)
                        A hospital located in an urban area that cancels its acquired rural status under § 412.103 would lose its RRC status and become subject to a 12-percent cap on the DSH adjustment applicable to urban hospitals with less than 100 beds (if the hospital has 100 beds or more, it would not be subject to the cap on the DSH adjustment). Further, the hospital would also have to meet the proximity requirement for geographic reclassification at § 412.230(a)(3). We note that the hospital would maintain the benefit of being exempt from the average hourly wage criterion for geographic reclassification requiring the comparison of the hospital's wages to the wages of the area in which it is located, as stated in section 1886(d)(10)(D)(iii) of the Act. *Comment:*
                         One commenter stated that a hospital located in an urban area may also qualify as an RRC if it meets the criteria set forth in 42 CFR 412.96(b)(2). These criteria specify referral patterns the hospital's patients must meet in order for an urban hospital to be a referral center. The commenter requested that the final rule confirm that an urban hospital may also qualify as an RRC under § 412.96(b)(2). *Response:*
                         The regulations at § 412.96(b)(2) do specify criteria for a hospital to qualify as a “referral center,” with no requirement to be rural. However, an urban hospital that qualifies as a referral center under § 412.96(b)(2) is not a “rural” referral center (RRC). Section 1886(d)(5)(C)(i) of the Act states that a hospital that is classified as a “rural hospital” may apply to the Secretary to be classified as an RRC. Thus, an urban hospital that meets the criteria under § 412.96(b)(2) qualifies as a referral center but does not qualify as an RRC because it is not rural (unless it first reclassifies as rural under § 412.103). *Comment:*
                         One commenter stated that this policy would prohibit urban hospitals that acquire rural status from maintaining their RRC designation if they are subsequently reclassified as urban by the MGCRB. The commenter indicated that the policy creates a significant disadvantage for urban hospitals that acquire rural status and to the Medicare beneficiaries they serve, relative to their RRC counterparts that retain the status of RRC even though physically located in an urban area. *Response:*
                         We believe the commenter is generally concerned with the policy that an urban hospital that has acquired rural status cannot retain its RRC designation once it cancels its acquired rural status. As indicated above, a hospital generally must be rural to be classified as an RRC. For this reason, we believe that Medicare's policy should be that a hospital cannot continue to be classified as an RRC once it cancels acquired rural status under § 412.103. In our view, it follows from the requirement that an RRC must be located in a rural area that cancellation of acquired rural status negates a hospital's RRC designation. As discussed above, a hospital may retain its RRC status in the special circumstances where it would have lost status due to OMB's designation of its area from rural to urban, or where it was already designated as an RRC in 1991. In these situations, there were either special statutory provisions that require the hospital to retain its RRC status or the hospital's geographic status changed from rural to urban through no action of its own. Again, we do not believe that an urban hospital that acquires rural status under § 412.103 and subsequently is approved as an RRC should be able to retain the benefits of being an RRC when it voluntarily cancels that acquired rural status. Furthermore, in response to the commenter's statement that this policy prohibits urban hospitals that acquire rural status from maintaining their RRC designation if they are subsequently reclassified as urban by the MGCRB, we note that § 412.230(a)(5)(iii) of the regulations prohibits an urban hospital that has been granted rural status under § 412.103 from receiving an additional reclassification by the MGCRB based on this acquired rural status for a year in which such redesignation under § 412.103 is in effect. Therefore, under our current regulations, an urban hospital that has acquired rural status cannot be reclassified by the MGCRB. As discussed above, if an RRC with acquired rural status cancels its acquired rural status so that it can be reclassified by the MGCRB, the hospital would lose its RRC status once it cancels its acquired rural status. *Comment:*
                         Some commenters pointed to language in the 
                        **Federal Register**
                         (August 1, 2000; 65 FR 47087) regarding section 401 of Pub. L. 106–113, on which the regulations at 42 CFR 412.103 are based. The commenters stated that certain discussions in the preamble to that August 1, 2000 rule demonstrate that a hospital acquiring rural status should retain RRC status for all purposes, even if it subsequently cancels the acquired rural status. In addition, the commenters stated that our previous amendment of § 412.96 to eliminate the triennial review requirement indicates an intent to allow all hospitals to retain RRC status indefinitely once obtained under § 412.96. *Response:*
                         The discussion in the August 1, 2000 
                        **Federal Register**
                         referenced by the commenters was targeted at hospitals that had lost their RRC status through an OMB change in geographic area definitions, through triennial review, or through an MGCRB reclassification for purposes of the standardized amount. Thus, in the August 1, 2000 
                        **Federal Register**
                        , we discussed grandfathering into RRC status any hospital that lost RRC designation as a result of OMB's new geographic areas, due to an MGCRB standardized amount reclassification, or through triennial review. At the time, the discussion did not address hospitals that, in the future, would acquire rural status under § 412.103, only to voluntarily cancel such acquired status at a later date. In addition, the discussion addressed the rule that hospitals acquiring rural status under § 412.103 cannot receive an additional reclassification by the MGCRB based on this acquired rural status for a year in which such a redesignation is in effect. This rule prevents an urban to rural reclassification under § 412.103 from becoming a vehicle by which a hospital navigates from one geographic location and special status as a rural provider for the purpose of a more advantageous reclassification via the MGCRB process. The prohibition against a hospital that acquires rural status from exploiting such status to further seek an MGCRB reclassification demonstrates our longstanding view that section 401 of Pub. L. 106–113 should not be used as a way of acquiring special status solely to benefit from MGCRB rules. Similarly, we do not believe that acquiring rural status and then subsequently canceling it should be used as a way to exploit MGCRB reclassification rules. Rather, in the August 1, 2000 rulemaking, we implemented section 401 of Pub. L. 106–113 by specifying three categories of hospitals which would essentially be grandfathered in as RRCs: those that lost RRC status due to (a) triennial review, (b) MGCRB standardized amount reclassification, or (c) OMB redesignation of the county in which they were located from rural to urban. The first and second categories of hospitals no longer exist, as we do not conduct triennial review and there are no MGCRB reclassifications for purposes of the standardized amount. As for the third category of hospitals, we have retained the rule that hospitals redesignated as urban through no action of their own, and solely through an OMB redesignation of an area as urban would continue to be considered RRCs if they were RRCs prior to the change in 
                        ( print page 47371)
                        geographic areas. Our rulemaking from August 1, 2000 was intended to ensure that the hospitals for which Congress intended to preserve RRC status (that is, those that lost RRC designation through an OMB geographic area redefinition, triennial review, or MGCRB standardized amount reclassification) would continue their RRC status. However, it was not intended to allow hospitals to exploit acquired rural status in order to seek the most advantageous MGCRB reclassification. Indeed, the rule we added to § 412.230 limiting hospitals that reclassify under § 412.103 from further reclassifying (65 FR 47087 through 47089) demonstrates this policy. Therefore, we believe the policy we discussed in this year's proposed rule—that a hospital that voluntarily cancels acquired rural status can no longer be considered a “rural” referral center—is fully consistent with our August 1, 2000 rulemaking. Furthermore, our amendment to the regulations eliminating the triennial review requirement was not intended to allow hospitals to retain RRC status indefinitely once obtained under § 412.96. We eliminated the triennial review requirement in the August 29, 1997 final rule (62 FR 45998 through 46000). In that rule, we addressed section 4202(b)(1) of Pub. L. 105–33, which states in part, “Any hospital classified as a rural referral center by the Secretary * * * for FY 1991 shall be classified as such a rural referral center for fiscal year 1998 and each subsequent fiscal year.” In the August 29, 1997 rule, we noted that section 4202(b)(1) of Pub. L. 105–33 provided reinstatement to only those hospitals that were classified as RRCs during FY 1991. As a result, those hospitals that were RRCs in FY 1991 and lost RRC status due to triennial review would be reinstated to RRC status; whereas, those hospitals that were classified as RRCs after FY 1991 and lost that status due to triennial review would not be protected. We stated that we did not believe that it was equitable or administratively practical to maintain two lists of referral centers; that is, (a) a list of those hospitals that lost RRC status due to triennial review but were then reinstated under section 4202(b)(1) of Pub. L. 105–33 because they were approved as RRCs in FY 1991; and (b) a list of those hospitals that lost RRC status due to triennial review, but were not protected by section 4202(b)(1) because they were approved as RRCs after FY 1991. Therefore, we terminated the triennial review requirement and reinstated all hospitals that lost RRC status due to triennial review. In addition, in the August 29, 1997 final rule, we stated that we could still reinstate some type of annual or periodic qualifying criteria and remove a hospital's RRC status if we discovered that some hospital or class of hospitals should not be allowed to retain referral center status because they fail to meet some basic requirement that we believe is essential to receiving this special designation. As indicated above, a hospital generally must be rural to be classified as an RRC. It follows from the requirement that an RRC must be located in a rural area that cancellation of acquired rural status negates a hospital's RRC designation. *Comment:*
                         One commenter agreed with the policy discussed in the proposed rule that a hospital that cancels its acquired rural status should no longer qualify to be an RRC. *Response:*
                         We appreciate the commenter's support. In this FY 2008 IPPS final rule, we are again announcing our policy that a hospital that cancels its acquired rural status under § 412.103 would also lose its RRC designation under § 412.96. Under this final policy, any hospital that submits a written request on or after October 1, 2007, to cancel its acquired rural status under § 412.103(g) will lose RRC status (obtained based on rural status acquired under § 412.103) as of the same date that the cancellation of acquired rural status under § 412.103(g) takes effect. We are amending the regulations text at § 412.96 by adding a paragraph (g)(4) that states: “A hospital that submits a written request on or after October 1, 2007, to cancel its reclassification under § 412.103(g) is deemed to have cancelled its status as a rural referral center effective on the same date the cancellation under § 412.103(g) takes effect. This provision of this paragraph (g)(4) applies to hospitals that qualify as rural referral centers under § 412.96 based on rural status acquired under § 412.103.” We note that the policy set forth in § 412.96(g)(4) applies only to hospitals that obtain RRC status based on rural status acquired under § 412.103. For example, in the FY 2001 IPPS final rule (65 FR 47089) and the FY 2005 IPPS final rule (69 FR 49056), we permitted a hospital that previously qualified as an RRC and lost its status as an RRC due to OMB's redesignation of the county in which it is located from rural to urban to be reinstated as an RRC (even though the area in which it is geographically located is now urban). Section 412.96(g)(4) would not apply to a hospital that has RRC status based on this policy regarding OMB redesignations and that also has acquired rural status under § 412.103 for other purposes (for example, to become an SCH). In this situation, the hospital did not obtain RRC status based on acquired rural status under § 412.103, but instead based on the policies described in our FY 2001 and FY 2005 final rules regarding OMB redesignations. In the FY 2008 IPPS proposed rule (72 FR 24812), we also proposed to revise the regulations at § 412.103(g) with respect to when cancellation of acquired rural status becomes effective. Currently, § 412.103(g)(2) states, “The hospital's cancellation of the classification is effective beginning with the hospital's next full cost reporting period following the date of its request for cancellation.” To address concerns that some IPPS hospitals are acquiring rural status solely to benefit from reclassification rules applying to hospitals that were once RRCs, and then canceling that rural status within a short period of time, such as a few months, we proposed to require IPPS hospitals to retain acquired rural status for at least one 12-month cost reporting period. In the FY 2008 IPPS proposed rule, we stated that if the hospital chooses to cancel its rural reclassification, the effective date of that cancellation would occur both after at least one 12-month cost reporting period and at the start of the next Federal fiscal year. Thus, for example, if a hospital with a cost reporting period from July 1, 2008 to June 30, 2009, becomes rural on May 30, 2008, its acquired rural status under § 412.103 would remain in effect from May 30, 2008, through at least September 30, 2009 (that is, the date it acquired rural status through the end of the fiscal year containing a 12-month cost reporting period). We stated that we believed this policy was reasonable, given that acquired rural status for IPPS hospitals should be a considered decision for hospitals that truly wish to be considered as rural, and not purely as a mechanism for reclassifying. We did not propose a duration requirement for hospitals paid under cost reimbursement because we are not aware of similar manipulations of rural status in these cases. We proposed to change our current policy by revising § 412.103(g) to specify that a hospital's cancellation of its acquired rural status under § 412.103 is effective for hospitals under reasonable cost reimbursement (such as CAHs) with the hospital's next cost reporting period and for hospitals under the IPPS after at least one 12-month cost reporting period as rural, and not until the beginning of a Federal fiscal year following both the request for cancellation and the 12-month cost 
                        ( print page 47372)
                        reporting period. Under the proposed revised regulations, an IPPS hospital (such as an RRC or SCH) that cancels its acquired rural status would continue to be paid as rural until the beginning of the next Federal fiscal year after at least one 12-month cost reporting period as rural. In addition, for these IPPS hospitals, the deadline for seeking cancellation of the acquired rural status would be no less than 120 days before the end of the fiscal year. *Comment:*
                         One commenter raised concerns regarding the proposed requirement that a hospital maintain rural status for at least a full 12 months, stating that the rate as a rural SCH may be only slightly higher than the urban Federal rate. The commenter believes that changes that positively impact the hospital's urban payment rate or negatively impact the rural payment rate could cause a hospital the need to cancel its rural status, and that in these cases, it seems that the proposed time lag/expansion could cause a hospital to be harmed. *Response:*
                         After considering the commenter's concerns regarding hospitals that acquire rural status to become SCHs, and considering that our primary purpose in revising the policy is to address concerns regarding hospitals that acquire rural status to become RRCs and then cancel RRC status after a brief period of time, such as a few months, in order to take advantage of favorable reclassification rules under § 412.230 applicable to hospitals that were ever RRCs, we have decided to limit our final policy to IPPS hospitals that obtain RRC status based on rural status acquired under § 412.103. Therefore, in this final rule, we are requiring an IPPS hospital that is classified as an RRC based on rural status acquired under § 412.103 to maintain its acquired rural status under § 412.103 for at least one 12-month cost reporting period and until the next Federal fiscal year following both its request for cancellation of acquired rural status and at least one 12-month cost reporting period as rural. RRCs benefit only from special provisions in the statute relating to geographic reclassification and DSH. A hospital that is in acquired rural status cannot be geographically reclassified by the MGCRB (§ 412.230). Therefore, the only benefit to an RRC in acquired rural status relates to DSH (and only if the hospital has less than 100 beds). Thus, there is limited or no benefit to a hospital acquiring rural status in order to become an RRC, except when the acquired rural status is subsequently canceled. Thus, the issue is that hospitals should not be permitted to obtain rural status solely for the purpose of canceling such status as soon as possible in order to benefit from favorable MGCRB reclassification rules, but, rather, should be required to retain rural status for a reasonable period of time. Therefore, we believe that a policy requiring an IPPS hospital that acquires rural status under § 412.103, in order to become an RRC, to maintain acquired rural status for at least one 12-month cost reporting period and until the next Federal fiscal year is reasonable. *Comment:*
                         Two commenters questioned the CMS statement that this proposed change would be consistent with IPPS policy that makes changes prospectively based on the Federal fiscal year. They stated that many rural elections under IPPS are not based on the Federal fiscal year, such as acquiring SCH or MDH status, among others. They stated they do not see how this proposed revision serves the Medicare program, and do not believe CMS has adequately explained the need for such a revision. They requested CMS not adopt this provision in the final rule. *Response:*
                         Section 1886(d)(8)(E) of the Act specifies that the effective date of acquired rural status is not later than 60 days after the receipt of the hospital's application. Therefore, under the statute, a hospital paid under the IPPS may acquire rural status in the middle of a Federal fiscal year, and then receive any payment advantages (or disadvantages) that accompany rural status. In most cases, a hospital will acquire rural status because of the long-term financial benefits it expects to reap. We recognize that for hospitals paid under the IPPS system, there may be a short-term cost if the hospital must accept a lower rural wage index from the time the hospital acquires rural status to the time the hospital is approved as an RRC, SCH or MDH. However, we note that acquiring rural status is a voluntary choice, and presumably hospitals balance the long-term financial benefits that accrue from RRC, SCH or MDH status against the costs arising from a lower rural wage index. As we discussed above, our primary concern is with IPPS hospitals that acquire rural status to become RRCs and then cancel acquired rural status after a brief period of time in order to take advantage of special MGCRB reclassification rules. Therefore, we have decided to apply our new policy only to IPPS hospitals that obtain RRC status based on acquired rural status under § 412.103. As noted above, there is limited or no benefit to a hospital acquiring rural status in order to become an RRC, except when the acquired rural status is subsequently cancelled. Thus, the issue is that such hospitals should not be permitted to obtain rural status solely for the purpose of canceling such status as soon as possible in order to benefit from favorable MGCRB reclassification rules, but, rather, should be required to retain rural status for a reasonable period of time. We believe that a policy requiring an IPPS hospital that acquires rural status under § 412.103 in order to become an RRC, to maintain acquired rural status for at least one 12-month cost reporting period and until the next Federal fiscal year is reasonable. As noted above, acquiring rural status is a voluntary choice. A hospital should make a decision on whether to acquire rural status to become an RRC based on its own assessment of the financial impact on the hospital in the long term. There is administrative burden to both the hospital and CMS from acquiring rural status, and we do not believe that such hospitals should be able to change their status after only a short period of time, such as a few months. Furthermore, we believe that requiring such hospitals to maintain acquired rural status, and the associated wage index change, until the beginning of the next Federal fiscal year (after at least one 12-month cost reporting period as rural), rather than the beginning of the next cost reporting period, is consistent with the IPPS that generally makes changes prospectively on a Federal fiscal year basis. Finally, we note that while section 1886(d)(8)(E) of the Act governs the start-date of acquiring rural status (that is, not later than 60 days after receipt of an application in a form and manner determined by the Secretary), it does not address the end-date of such acquired rural status. We believe we have the general rulemaking authority (including under section 1871 of the Act) to specify the required longevity of acquired rural status, especially when it has become apparent that hospitals may be acquiring rural status for a very short period of time solely in order to take advantage of special MGCRB reclassification rules that accrue to hospitals that were ever an RRC. Therefore, in light of the comments and after further consideration, we are finalizing the policy announced in the proposed rule with the revisions discussed above limiting the policy to IPPS hospitals that become RRCs based on rural status acquired under § 412.103. We are finalizing a revision to § 412.103(g) to specify that for a hospital that obtains RRC status based on acquired rural status under § 412.103, the hospital's cancellation of its 
                        ( print page 47373)
                        acquired rural status under § 412.103 is effective after at least one 12 month cost reporting period as rural, and not until the beginning of a Federal fiscal year following both the request for cancellation and the 12-month cost reporting period. Under the revised regulations, if an IPPS hospital that obtained its RRC status based on rural status acquired under § 412.103 cancels its acquired rural status, it would continue to be paid as rural until the beginning of the next Federal fiscal year after at least one 12 month cost reporting period as rural. In addition, for these RRCs, the deadline for seeking cancellation of the acquired rural status would be no less than 120 days before the end of the current Federal fiscal year. This rule applies to all such hospitals (that is, hospitals that became RRCs based on rural status acquired under § 412.103) that submit a written request on or after October 1, 2007, to cancel their acquired rural status, whether they are in acquired rural status before October 1, 2007, or acquire rural status on or after October 1, 2007. Thus, if such a hospital submits a written request on or after October 1, 2007, to cancel its acquired rural status, the effective date of cancellation would be after at least one 12 month cost reporting period as rural and at the beginning of the next Federal fiscal year. If such a hospital submits a written request before October 1, 2007, to cancel its acquired rural status, the hospital is subject to the pre-FY 2008 rule, and the effective date of cancellation would be the beginning of its next cost reporting period (given it submits the written request not less than 120 days prior to the end of its current cost reporting period). For all other hospitals (that is, hospitals other than IPPS hospitals that became RRCs based on acquired rural status under § 412.103), the effective date of cancellation of acquired rural status under § 412.103 will continue to be the beginning of the hospital's next full cost reporting period following the date of its request for cancellation (given it submits the written request not less than 120 days prior to the end of its current cost reporting period). D. Indirect Medical Education (IME) Adjustment (§ 412.105) 1. Background Section 1886(d)(5)(B) of the Act provides for an additional payment amount under the IPPS for hospitals that have residents in an approved graduate medical education (GME) program in order to reflect the higher indirect patient care costs of teaching hospitals relative to nonteaching hospitals. The regulations regarding the calculation of this additional payment, known as the indirect medical education (IME) adjustment, are located at § 412.105. The Balanced Budget Act of 1997 (Pub. L. 105–33) established a limit on the number of allopathic and osteopathic residents that a hospital may include in its full-time equivalent (FTE) resident count for direct GME and IME payment purposes. Under section 1886(h)(4)(F) of the Act, for cost reporting periods beginning on or after October 1, 1997, a hospital's unweighted FTE count of residents for purposes of direct GME may not exceed the hospital's unweighted FTE count for its most recent cost reporting period ending on or before December 31, 1996. Under section 1886(d)(5)(B)(v) of the Act, a similar limit on the FTE resident count for IME purposes is effective for discharges occurring on or after October 1, 1997. 2. IME Adjustment Factor for FY 2008 The IME adjustment to the DRG payment is based in part on the applicable IME adjustment factor. The IME adjustment factor is calculated by using a hospital's ratio of residents to beds, which is represented as r, and a formula multiplier, which is represented as c, in the following equation: c x [{1 + r} .405
                         −1]. The formula is traditionally described in terms of a certain percentage increase in payment for every 10 percent increase in the resident to-bed ratio. Section 502(a) of Pub. L. 108–173 modified the formula multiplier (c) to be used in the calculation of the IME adjustment. Prior to the enactment of Pub. L. 108 173, the formula multiplier was fixed at 1.35 for discharges occurring during FY 2003 and thereafter. Section 502(a) modified the formula multiplier beginning midway through FY 2004 and provided for a new schedule of formula multipliers for FY 2005 and thereafter. In the FY 2005 IPPS final rule, we announced the schedule of formula multipliers to be used in the calculation of the IME adjustment and incorporated the schedule in our regulations at § 412.105(d)(3)(viii) through (d)(3)(xii). In the FY 2008 IPPS proposed rule, we specified that, for any discharges occurring during FY 2008, the statutorily mandated formula multiplier is 1.35. Previously, for discharges occurring during FY 2007, the mandated formula multiplier was 1.32. We estimate that application of the mandated formula multiplier for FY 2008 will result in an increase of 5.5 percent in IME payment for every approximately 10 percent increase in the resident to bed ratio. *Comment*: One commenter expressed satisfaction that CMS is increasing the formula multiplier for FY 2008 and recommended that CMS maintain the formula multiplier at 1.35. *Response*: The provision for the IME formula multiplier for FY 2008 specified in the proposed rule is mandated by section 1886(d)(5)(B) of the Act, which establishes that, for discharges occurring during FY 2008 and thereafter, the formula multiplier is 1.35. As noted in the proposed rule and above, we have incorporated the statutorily mandated schedule of formula multipliers in our regulations. 3. Time Spent by Residents on Vacation or Sick Leave and in Orientation a. Background In the FY 2007 IPPS final rule (71 FR 48080), we clarified our policy with respect to the time that residents spend in nonpatient care activities (such as conferences and seminars) as part of approved residency programs. We amended our regulations concerning the FTE resident count at 42 CFR § 412.105(f)(1)(iii)(C) to state, “In order to be counted, a resident must be spending time in patient care activities, as defined in § 413.75(b) * * *” The regulations at § 413.75(b) define patient care activities as “the care and treatment of particular patients, including services for which a physician or other practitioner may bill.” In light of this clarification, during the past year, we have received questions from the teaching hospital community as to whether the time that residents spend on vacation or sick leave, and in orientation activities that typically occur at the beginning of a residency training program, is counted for IME payment purposes. Historically, time spent by residents on vacation or sick leave and in initial orientation activities has been included in the FTE resident count for IME and direct GME. (The sick leave we are referring to throughout this discussion is sick leave that does 
                        *not*
                         require the resident to make up for his or her absence by adding additional training time at the end of the program.) The practice of allowing vacation and sick leave to be included in the IME count appears to be based on a provision in the Provider Reimbursement Manual, Part I, at section 2405.3.H.2. This manual provision discusses the treatment of residents who are on vacation or sick leave in the context of 
                        ( print page 47374)
                        our prior “one day count” policy for counting residents for IME payment. Generally, effective with cost reporting periods beginning on or after October 1, 1984, and before July 1, 1991, residents were counted for IME purposes on a uniform reporting date of September 1. A hospital's FTE residents were counted based on their assignment to that hospital's IPPS or outpatient areas on September 1 of an academic year. Because it was possible that a resident might not actually be present in the hospital on September 1 because he or she was on approved vacation or sick leave, to ensure that the hospital's IME FTE count would not be understated for the entire year, section 2405.3.H.2 of the PRM–I states that “interns and residents using vacation and sick leave on the day of the count may be included in the count.” Although the regulations were changed effective for cost reporting periods beginning on or after July 1, 1991 (55 FR 36059) to reflect the current resident-counting methodology (that is, to count the number of FTE residents based on the amount of time required to fill a residency slot as specified at § 412.105(f)(1)(iii)(A)), the fiscal intermediaries (or, if applicable, the MAC) have continued to include time spent by residents on vacation and sick leave in the FTE resident counts for purposes of both IME and direct GME payments. Orientation time is time spent by residents in activities that typically take place at the beginning of a resident's training program, and include orientation regarding hospital employment, the hospital's policies and procedures in general, as well as policies and procedures specific to the residency training program. As is the case for vacation and sick leave, time spent by residents in orientation has continued to be included by fiscal intermediaries/MAC in the FTE resident counts for purposes of both IME and direct GME. We understand why we have received numerous questions regarding whether FTE resident time spent on vacation or sick leave, or in orientation activities, should be counted for purposes of IME payment. The time a resident spends on vacation or sick leave is not addressed within the current definition of “patient care activities” at § 413.75(b). In fact, time spent on vacation or sick leave would not be spent at the hospital location at all, so no patient care activities would occur during this time. Time spent in orientation might be spent in the hospital complex (or at a nonhospital setting), but would not involve the care and treatment of particular patients. Thus, although time spent by residents on vacation or sick leave or in orientation has historically been included in the IME and direct GME FTE counts, it seems apparent that this time should be carefully considered in light of our clarified policy and current regulations. We believe these types of activities (vacation time, sick leave, and orientation) are inherently different from the types of “patient care activities” and “nonpatient care activities” we have discussed in depth in previous rules, and most recently in the FY 2007 IPPS final rule. We believe the aforementioned activities should be distinguished from other activities, patient care or otherwise, in which the resident participates as part of the approved program. b. Vacation and Sick Leave Time We believe that approved vacation time and sick leave are not appropriately categorized as patient care activities, or as didactic, research, or other nonpatient care activities. In addition, although the Accreditation Council for Graduate Medical Education (ACGME) has some rules regarding resident duty hours and work environment, the ACGME is not explicit regarding resident vacation and sick leave policies. Rather, vacation and sick leave policies are determined by the resident's employer and can vary by residency training program. Consequently, although vacation and sick leave are fringe benefits to which every employee, hospital or otherwise, is typically entitled, vacation and sick leave are not, in fact, part of the training time spent by residents in an approved program. Therefore, we believe vacation and sick leave are not properly considered as either patient care time or nonpatient care time, but are within a distinct third category of time. As we noted above, it has been our policy to include the time spent by residents on vacation or sick leave in the FTE resident count for IME and direct GME. However, we do not believe the continuation of this policy is appropriate in light of our current policy as clarified in the FY 2007 IPPS final rule, and expressed in revised regulations, that permit only time spent by residents in patient care activities to be counted for purposes of IME. We initially considered proposing a policy to no longer count the time spent by residents on vacation or sick leave for purposes of IME on the grounds that this time is not spent in patient care activities in accordance with our regulations. However, we do not believe such a policy would have recognized the unique character of vacation and sick time as time that is not spent in any aspect of residency training patient care or nonpatient care. Because we believe time spent by residents on vacation and sick leave is not properly considered patient care time or nonpatient care time, but fits within a distinct third category of time that is neither patient care nor nonpatient care, we believe it would be more appropriate to remove the time altogether from the FTE calculation for each resident for both IME and direct GME payment purposes. Accordingly, in the FY 2008 IPPS proposed rule (72 FR 24814), we proposed to remove vacation and sick leave from the total time considered to constitute an FTE resident for purposes of IME payments, effective for cost reporting periods beginning on or after October 1, 2007. Further, in order to have a consistent conception of an FTE resident for purposes of IME and direct GME payment, we proposed to remove vacation and sick leave from the total FTE resident time for purposes of direct GME payment as well effective for cost reporting periods beginning on or after October 1, 2007. We acknowledged that removing vacation and sick leave time from the denominator of the FTE count for both IME and direct GME could have some impact on the FTE count, but noted that the impact is fact-specific. In some cases, it would result in a lower FTE count, and in some cases, it would result in a higher FTE count. In addition, we noted that under our current policy, residents who are on maternity leave or other approved sick leave of extended duration that prolongs the total time a resident is participating in the approved program beyond the normal duration of the program are not counted while they are out on extended sick or maternity leave. This is because the FTE time spent by such residents is counted in accordance with our FTE counting policies during the training time they spend to make up for their absence. For example, a resident in an internal medicine program who takes 3 months of approved maternity leave, and therefore, must stay an additional 3 months beyond the normal 3 years to complete her training, would not be counted while she is on maternity leave for IME and direct GME payment purposes. Rather, time spent during the additional 3 months of training in which she must participate to make up for her 3 month absence will be counted in accordance with our FTE-counting policies for IME and direct GME. We did not propose to change our policy with respect to time spent by residents on maternity leave or other approved sick leave of extended duration. We proposed to amend the regulations at 
                        ( print page 47375)
                        §§ 412.105(f)(1)(iii)(A) and 413.78(b) to specify that “Vacation and sick leave are not included in the determination of full-time equivalency.” c. Orientation Activities As discussed above, we believe that orientation activities in which residents participate, often prior to the start of their residency training program, are also distinct from the typical “patient care” and “nonpatient care” activities in which residents participate as part of their training program. For example, before residents begin training in an approved residency program, the hospital (or in many cases, the medical school as the employer of the residents) is required to provide orientation for their residents. Most of these orientation activities involve neither patient care nor the typical didactic or research activities that comprise the residency training program. Instead, such orientation activities consist of basic informational sessions in which all new employees, residents, and other staff must participate at the beginning of employment. There could also be other orientation activities designed specifically to prepare residents to furnish patient care in a particular setting, or to participate in a particular approved residency training program. We recognize that certain portions of orientation activities are specific to residents in particular approved programs and are required by the accrediting organizations. Other components of orientation activities relate to employment and are common to all employees. Still other components of orientation activities may involve training regarding particular hospital policies and procedures, some of which would relate to patient care and safety. In many ways, these orientation activities resemble “didactic” activities. However, we believe there are important differences between the “didactic” activities that are part of orientation and the other conferences and seminars in which the residents engage throughout the course of their training. That is, we do not envision orientation activities as including scholarly didactic activities such as conferences or seminars that may occur throughout a residency training program. Rather, we believe orientation activities would occur either at the beginning of a particular specialty program, or when a resident goes to another facility for training. In orientation sessions, much of the information being imparted to the residents is essential knowledge for the residents in order to furnish patient care services in a particular hospital facility or approved program. Thus, the information furnished during orientation is not information that merely enhances the resident's patient care delivery knowledge and skills during the residency program, but it is a necessary prerequisite for the residents as they commence (or continue) their training program, and is often required as a term of employment. Because we recognize the distinct character of orientation activities as essential to the provision of patient care by residents, and the fundamental differences between orientation and the typical didactic activities in which a resident may participate throughout a residency training program, in the FY 2008 IPPS proposed rule (72 FR 24814), we proposed to continue to count the time spent by residents in orientation activities, whether they occur in the hospital or nonhospital setting, and proposed to amend our regulations accordingly. (We note that orientation activities in the hospital setting have historically been counted for direct GME payment purposes in accordance with the regulations at § 413.78(a) which states “Residents in an approved program working in all areas of the hospital complex may be counted.”) We also proposed to amend § 413.75(b) to add a definition of the term “orientation activities,” to mean “activities that are principally designed to prepare an individual for employment as a resident in a particular setting, or for participation in a particular specialty program and patient care activities associated with that particular specialty program.” We understand that orientation activities typically occur at the beginning of a resident's first program year. However, in the FY 2008 IPPS proposed rule, we noted that we were interested in hearing from commenters on whether orientation activities typically occur during other times during an approved residency training program. We proposed to amend the definition of “patient care activities” at § 413.75(b) as follows: “the care and treatment of particular patients, including services for which a physician or other practitioner may bill, and orientation activities as defined at § 413.75(b).” *Comment:*
                         Many commenters expressed appreciation of CMS’ efforts to clarify its policies concerning the time that residents spend in orientation activities in the determination of an FTE. Several commenters also stated their appreciation that CMS did not attempt to penalize hospitals for offering vacation and sick leave; that is, they were appreciative that CMS did not propose to remove vacation and sick leave from only the numerator of the FTE. One commenter stated “We can agree with the proposed removal of vacation and sick time from both the numerator and denominator in the FTE calculation.” The commenter stated that any benefit time such as holidays should also be removed. The commenter also stated that CMS should clarify its expectations in order to “* * * eliminate an overzealous reading * * *” of policy so that between the effective date of FY 2007 final rule and this year's final rule, days spent by residents on vacation or sick leave would not be viewed as days spent in nonpatient care and, therefore, removed from the numerator of the FTE count. The commenter further requested that the policy change be made retroactive to FY 2007 to coincide with CMS’ clarification in the FY 2007 final rule concerning nonpatient care activities. The commenter also indicated that other benefit time should be removed from the numerator and denominator so as to avoid leaving a gap in policy that is open to interpretation for FY 2007 FTE resident counts. However, numerous commenters viewed the proposed policy as “operationally impractical” and stated that it would impose significant documentation and administrative burdens. Many commenters requested that the regulations remain unchanged—that vacation and sick leave continue to be included in the determination of an FTE. Commenters also asserted that there are many issues and questions that CMS must consider and determine before finalizing such a policy; otherwise, the policy will be subject to interpretation and could be applied inconsistently by providers. Several commenters stated that the proposed rule would be administratively burdensome for the following reasons: each hospital would be required to track vacation and sick time for each resident and allocate that vacation and sick leave time for every hospital in which the resident is training; it is difficult for hospitals that share residents to discern whether the residents actually take their allotted vacation time; and residents may rollover their unused vacation from one year to another. One commenter expressed concerns regarding the “intellectual and administrative difficulty” of trying to parse resident time and indicate whether it should be included in the FTE count with orientation or be removed from the FTE count with vacation and sick leave. Several commenters stated that hospitals do not have sick leave and vacation records for each resident for 
                        ( print page 47376)
                        the entire year, and hospitals would have to communicate up front and on a continual basis with all other hospitals in which an individual resident is training in order to determine the correct FTE count for that particular resident. One commenter stated that records of sick time and vacation are kept by the sponsoring institution and actual scheduling and tracking of time off is organized at the department level. Another commenter stated that up to this point, sick leave has not been recorded, while another commented that hospitals often require residents to make up sick days due to the educational demands of the residency program, and that residents may also swap days to cover for someone who is sick. One commenter stated that hospital record keeping requirements should be established prior to the implementation of the proposed policy so that both hospitals and fiscal intermediaries have a consistent understanding of what documentation is required to comply with the policy. Another commenter stated that the purpose of the rotation schedule is to identify and document residency training and not to duplicate the detail kept by the payroll system. Several commenters also stated that the proposed policy would prove to be burdensome because vacation time is usually decided between the resident and supervising physician and, therefore, the recordkeeping requirements would need to be modified. In addition, commenters noted that vacation days are allotted based on the residency program year which may be different than the cost reporting year. Commenters also noted that residents may rotate to different hospitals which have different fiscal year ends. Therefore, the other hospitals to which the residents rotate, may not know the residents’ vacation and sick leave until each hospital's cost report has been filed. One commenter stated “[t]he Graduate Medical Education Committee's (GMEC) responsibilities as stated in the Accreditation Council for Graduate Medical Education (ACGME) ‘Green’ book indicate that monitoring of duty-hours and call schedules for excessive service demands and/or resident fatigue must be included. It also states that each program must ensure that adequate time for rest and personal activities must be provided.” Several commenters expressed concerns that the proposed rule will lead to other areas of time being reviewed, to the point where residents will be spending more time tracking their time for lunches and meetings than being involved with patient care. One commenter noted that CMS’ proposed policy will be a significant challenge for the teaching hospital community because of the fluid nature of residency training. One commenter stated that CMS did not provide a policy justification for why vacation and sick time should be removed from the FTE count for direct GME. The commenter mentioned that although CMS may be trying to reduce the administrative burden, a simpler way of reducing the administrative burden would be to retain the current policy. The commenter noted that, in the last few years, the administrative burdens associated with receiving Medicare payments for GME “have grown exponentially” and that with the proposed rule on vacation, sick leave, and orientation, the teaching hospital community has reached a “breaking point.” Commenters also noted that the administrative cost of instituting the proposed policy would exceed the potential savings. One commenter requested that CMS confirm and clarify that the proposal is to remove vacation and sick time from both the numerator and denominator. Another commenter stated that CMS' proposed policy “* * * suggests CMS is interested in supporting [the resident's] role on an hourly basis and if this is correct, hospitals should be able to count all after-hours, weekend and holiday time the residents spend with patients.” The commenter maintained that if CMS supports GME on an hourly basis, the commenter would expect a net increase in its FTE count because of the long hours of resident-related patient care. One commenter stated that CMS correctly noted that the outcome of the proposed rule would depend on specific facts. However, the commenter noted that CMS failed to acknowledge that the effect of the proposed rule would be to decrease FTE counts in every instance in which the FTE resident is counted at less than one FTE; that is, in every instance where there is also disallowed time, such as didactic time. The commenter also noted that “[e]liminating time spent in didactic teaching from the denominator of the fraction prior to removing vacation time from the equation would exacerbate even further this drop in hospital FTE counts.” Commenters also provided examples of cases where a resident rotates to more than one hospital and takes vacation while assigned to one of the hospitals. The commenters noted that each hospital to which the resident rotates, as a result of the proposed policy, would experience a change in its FTE count even though no hospital has modified its rotation arrangement. Commenters were concerned that although the proposed policy would have minimal effects nationally, the policy has major implications at the local level. A number of commenters noted their facilities provided training for hundreds of interns and residents, and stated the cost of tracking the vacation and sick time of interns and residents at their facilities would be in the thousands of dollars, and, in some cases, would decrease a provider's reimbursement. Many commenters stated that if the proposed policy is finalized, it cannot be done until the IRIS system is modified to change the denominator of an FTE, since the commenter believes IRIS currently is based on a denominator of 365 days. One commenter stated that in order to document that no double counting is occurring, hospitals use up to 60 lines on IRIS to document each resident's time. However, hospitals have noted that 60 lines is not enough to account for the residents’ time and therefore hospitals must “ * * * consolidate training time frames which can create additional overlap potentials which must be investigated by the hospitals involved.” The commenter stated if hospitals need to account for vacation and sick leave, IRIS will require significant modification. The commenter noted that CMS needs to further study the impact of its proposed policy on IRIS submissions and it would be unfair and wrong for CMS to “prematurely implement” the vacation and sick leave policy if IRIS cannot accommodate it. Another commenter stated that it had previously commented on the need to update IRIS and that teaching hospitals have needed to purchase “workaround software,” “Compu-max,” to meet the regulatory and audit requirements of Medicare. The commenter further stated that “Compu-max” software generates FTE counts on the basis of a 365 day year and this process is how most of the teaching hospitals generate IRIS reports for Medicare purposes. Because vacation and sick leave varies among hospitals and among residents, IRIS would now require an additional field for each resident which would include a resident-specific number of countable days. The commenter questioned where this information would be stored since IRIS currently has both a Master Record database and an Assignment Record database. The commenter believed that “extensive updating and testing of a new version” of IRIS will be required to make certain that providers and fiscal 
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                        intermediaries can use the program, and that provider payments will not be jeopardized. The Master Record includes demographic and other permanent information and remains unchanged during the residents’ training years, while the Assignment Record database includes the residents’ assignments (with beginning and end dates) at the hospital which is completing the IRIS report. The commenter stated that the denominator could not be locked in the databases because it would differ among hospitals depending on the cost reporting year and it would change when the resident changes programs. As previously noted, the commenter maintained that the administrative burden would be significant when the cost reporting year differs from the residency training year and the resident is training at more than one hospital. Another commenter stated that the commenter's facility, prior to instituting a costly resident tracking system, had to devote over 300 personnel hours to entering over 1,000 residents into IRIS. The commenter urged CMS to review the IRIS program and make recommendations for updating the software. The commenter further noted that IRIS has not changed significantly since it was updated for Y2K in 1999, and that it currently uses MS–DOS which is no longer the industry standard and needs to be updated to reflect “current operating environments.” *Response:*
                         We believe our proposed policy on the exclusion of vacation and sick leave from both the numerator and denominator of the FTE calculation is consistent with the clarification of our policy regarding patient care activities expressed in the FY 2007 IPPS final rule, that permits only time spent by residents in patient care activities to be counted for purposes of IME for training that occurs in hospital settings and for purposes of both IME and direct GME for training that occurs in nonhospital settings (71 FR 48080). We believe that approved leave, including vacation time and sick leave, are not appropriately categorized as patient care activities, or as didactic, research, or other nonpatient care activities. Rather, these activities fall into a distinct third category that is neither patient care nor nonpatient care. Furthermore, vacation, sick leave, and other types of approved leave are discrete periods of time that are not spent as training time in the approved residency program and do not take place in either the hospital complex or a nonhospital site. Therefore, we believe vacation, sick leave, and other types of approved leave should be removed from the FTE calculation for direct GME purposes, and not just for IME purposes. Despite our continued belief that vacation, sick leave, and other approved leave is neither a patient care nor a non-patient care activity, we acknowledge the significant concerns raised by the commenters regarding the administrative burdens associated with the implementation of the proposed policy. Therefore, we will 
                        *not*
                         be finalizing the proposed policy to remove vacation and sick leave from the FTE calculation at this time. However, we will continue to consider ways to finalize the proposed policy, or something similar to it, but in a more administratively feasible manner. For example, since commenters pointed out that one major difficulty with the proposed policy is that it would require hospitals that cross-train residents to obtain information regarding the amounts of time off taken by each resident from the other hospital(s), such that the same denominator would be used for the resident at each hospital in which he/she trains, we are considering a policy that would require a hospital to be aware of only the vacation, sick leave, and other types of approved leave a resident takes while training at that specific hospital. That is, under the approach we are considering, hospitals would 
                        *not*
                         be required to account for vacation, sick leave, and other types of approved leave occurring at another hospital(s). Each hospital would only be responsible for excluding time off from the numerator and denominator that occurred while the particular resident was assigned to its hospital. Hospitals that train the same resident would not need to obtain information about the time off taken by the resident at the other hospital(s), nor would the same denominator need to be used by both hospital(s) for that FTE resident. However, in no case would a resident be counted as more than 1.0 FTE in total. Another option we are considering is, given that all residents take vacation and most take some sick leave, to establish a standard amount of “approved leave” which must be excluded from the FTE calculation of all residents. We are interested in receiving feedback on these alternative approaches to implementing this policy. With respect to time spent in orientation activities, the current policy on orientation activities occurring in the hospital complex will continue to be effective for IME and direct GME payment purposes, and a new policy with respect to orientation occurring in certain nonhospital settings (explained in greater detail in response to comments below) will be effective for cost reporting periods beginning on or after October 1, 2007. That is, time spent in orientation activities (as that term is defined in the revised regulation at § 413.75(b)) occurring in the hospital complex is currently counted, and will continue to be counted on or after October 1, 2007. Time spent by residents in orientation activities occurring in nonhospital settings such as physicians offices or clinics where patient care is routinely provided and a hospital is permitted to count the time spent by residents in accordance with §§ 412.105(f)(1)(ii)(C) and 413.78(f) may be counted only for cost reporting periods beginning on or after October 1, 2007. We would also like to note that in response to the statement by a commenter that “[e]liminating time spent in didactic teaching from the denominator of the fraction prior to removing vacation time from the equation would exacerbate even further this drop in hospital FTE counts,” under CMS’ policy as expressed in the August 18, 2006 
                        **Federal Register**
                        , entire workdays that are spent in didactic activities must be identified and removed only from the 
                        *numerator*
                         of the FTE calculation, and not from the denominator. *Comment:*
                         One commenter described a methodology using an example for counting residents which the commenter believes, from a mathematical standpoint, is the correct way to implement CMS’ proposed policy. The applicable portion of the example is as follows: Dr. Z spends 334 days in total of the 365-day cost reporting period at Hospital A. This time at Hospital A includes 261 days of non-vacation/non-sick time, 28 days of vacation time, and 45 days of Medicare time nonreimbursable for IME purposes. Under current rules, Hospital A's reporting of its resident FTE count for IME purposes for Dr. Z would usually be represented as 289 days/365 days = 0.792 FTE. However, this can be thought of as comprised of the following two components as noted in the formula: (a/b) × (c/a) The first term represents the hospital's share of the resident's total time in the cost reporting period and the second term represents the resident's share of reimbursable days at that hospital. In the formula, a = # of countable days at the hospital, b = # of days in the cost reporting period, and c = number of Medicare-reimbursable days. Applying this formula in the case of Dr. Z training at Hospital A, 
 
 (334/365) × (289/334) = 0.792 FTE. Applying this formula yields the same result as the usual formula (289 days/365 days). Now, if one were to implement the CMS proposed policy on a hospital-specific basis and remove the 28 vacation days from a, the “# of countable days at the hospital,” which is represented in the numerator of the first term and the denominator of the second term above, it would yield the following calculation: (306/365) × (289/306) = 0.792 FTE. One can see that the calculation yields exactly the same resident FTE count for Hospital A as performing the calculation while including the vacation time. So, by removing the vacation days from the numerator and denominator in this manner, which would be the correct way to do it mathematically, Hospital A's resident FTE count has been preserved from its previous level. While the financial impact of this methodology would be neutral, if CMS were to still require that vacation and sick time be tracked, we believe it should be rejected because of the significant administrative challenges that would be imposed on the teaching hospital community. Imposing such additional burdens to implement a policy that has zero effect on resident FTE counts at teaching hospitals makes no sense and should be rejected. *Response:*
                         We appreciate the commenter sharing this proposed methodology with us. However, we do not agree with the commenter that the methodology presented in the example above would be the correct way, from a mathematical standpoint, to implement CMS' proposed policy. The commenter provided the following equation: (306/365) × (289/306) = 0.792 FTE. We do not agree that 289 should be the numerator of the second part of the equation because, although it excludes the 45 days of nonreimbursable time, it still includes vacation time; the correct number to use for the numerator would be 261. Furthermore, the denominator that should be used is 337, which is calculated by subtracting the 28 days of vacation from the total of 365 days. We believe the mathematically correct interpretation of the proposed policy would be to calculate the FTE resident's time as 261/337, which results in .774 FTE. *Comment:*
                         One commenter stated that, in regard to the vacation and sick leave policy, the commenter can only see examples where providers' FTE resident counts would be reduced, not increased. Another commenter stated that the proposed rule did not include examples of calculations which illustrate CMS' thinking. The commenter also provided examples where FTE resident counts changed for both hospitals at which a resident trains despite the fact that neither party modified the rotation arrangement in any way. *Response:*
                         Since we are not finalizing the proposed policy on vacation and sick leave, we will not be providing any detailed examples to illustrate how the proposed policy would have been implemented. However, as previously mentioned, we are considering a policy alternative under which a hospital would only have to keep track of vacation, sick leave, and other types of approved leave that the residents take while training at that specific hospital (or while training at a nonhospital site for which that hospital is counting the FTE residents in accordance with § 413.78(f)). For example, assume the total number of days in a certain residency program is 320 days and the resident is assigned for 200 days at Hospital A and 120 days at Hospital B. The resident takes 10 days of vacation while assigned to Hospital B. Under the alternative policy we are considering, the resident's time could be calculated as follows: Hospital A: 200/320 = 0.625, Hospital B: (120−10)/(320−10) = 0.355. If the hospitals track time off in hourly increments, rather than days, another example of this alternative policy would be: Assume that the resident is now taking 36 
                        *hours*
                         of vacation while assigned to Hospital B and the specific residency program in which the resident is training considers each workday to be 12 hours. Again, as in the previous example, there are 320 days during the residency training year. The resident is assigned for 200 days at Hospital A and 120 days at Hospital B. The resident's time under the alternative policy could be calculated for each hospital as follows: Hospital A: 2400/3840 = 0.625, Hospital B: (1440−36)/(3840 − 36) = 0.369. We are interested in hearing feedback on this alternative policy approach. *Comment:*
                         One commenter stated that an FTE is determined by “* * * the amount of time it takes to fill one approved slot”; thus, the FTE resident denominator may differ for different specialty training programs. The commenter also asked how one day of sick leave would be removed from the FTE count when the FTE resident may be measured in terms of days, weeks, or months. The commenter noted that the resulting “FTE” could be different based on how the denominator is determined. *Response:*
                         The commenter is correct that an FTE is determined based on the total time necessary to fill a residency slot (see § 412.105(f)(1)(iii)(A) and also § 413.78(b)), and therefore, an FTE resident's denominator could vary for different specialty programs. We refer the commenter to the examples in the previous response to see how time off in daily or hourly increments might be removed from the FTE count. For a program that uses 52 weeks as the program year, the time off would be identified in weekly increments and excluded from the 52 weeks in the numerator and denominator. We note that it is possible to deduct fractions of days or weeks from the FTE calculation as well (i.e., if a resident takes 10.5 days off, or 2.5 weeks off, then these amounts would be removed from the numerator and denominator of the applicable FTE calculation). *Comment:*
                         Several commenters stated that residents work more than 40 hours a week, and CMS should take residents' actual work week hours into consideration when determining whether vacation and sick leave should be removed from the determination of an FTE. One commenter specifically stated that CMS has not yet defined a “work week,” and because a resident usually works more than 40 hours per week, that time should be taken into consideration in the proposal to remove vacation and sick leave. The commenter further noted that hospitals continue to compensate the residents when they are on vacation and therefore they should be able to count that time. Another commenter asked whether an FTE consists of 40 hours per week or 60 hours per week and stated that it is difficult to determine an FTE because there is no consistent regulatory definition of what amount of work/training is required to count a resident as 1.0 FTE or how the appropriate amount of time can be substantiated with a Medicare auditor. Several commenters asserted that vacation and sick leave provides time away from the stress and rigors of the residency program and allows residents to focus on patient care. One commenter contended that hospitals would be incentivized to offer minimal vacation and restrict maternity and paternity leave, and that the proposed policy would burden residents who are already overworked. The commenter noted further that the proposed policy would also negatively affect female residents because they are more likely to carry over vacation time from year to year to be used as a maternity benefit. One commenter stated that hospitals cannot attract quality employees if they do not offer vacation and sick leave, and that the same goes for residents. Another commenter stated that vacation leave 
                        ( print page 47379)
                        and sick leave are an essential element of hospital employment and therefore “* * * an integral part of the patient care process.” The commenter stated that CMS has interpreted the term “patient care activities” without considering any complementary activities that contribute to effective “patient care activities.” Commenters stated that teaching hospitals accept patients for medical treatment contingent on their ability to provide medical coverage with both staff physicians and residents, and that teaching hospitals will continue to have the additional financial burden of providing coverage when residents are on vacation and sick leave. The commenters stated that by including vacation and sick leave in the determination of an FTE, CMS would be “* * * ensuring a ‘minimal’ payment to help offset costs for care coverage that must be provided by another medical professional.” Another commenter stated the context for CMS' proposal is flawed because the government should not be tampering with employee benefits, and the proposal may cause providers to consider changing their benefit rules because of potential loss of funds due to maintaining benefits. *Response:*
                         As we have stated in response to comments above, there is a consistent regulatory definition of what constitutes 1.0 FTE, and this should be used by hospitals and fiscal intermediaries/MAC alike to determine the unit of an FTE for each specialty program. In terms of calculating a resident's “work week,” a hospital's allowable FTE count is “based on the total time necessary to fill a residency slot” (§ 412.105(f)(1)(iii)(A)). The regulations at § 413.78(b) add that “a part time resident counts as a partial FTE based on the proportion of allowable time worked compared to the total time necessary to fill a full-time internship or residency slot.” As the regulations state, the concept of the total time necessary to fill a residency slot is used to determine the part-time or full-time status of the resident. If it is determined that, among all the hospitals and nonhospital sites in which the resident is training, the resident is not working the number of hours necessary to fill a residency slot, the resident would be considered part-time, and the proportion of total time the resident is working in all training sites would be adjusted accordingly. Therefore, we would consider a “work week” to be dependent on the specific residency program in which the resident is training and the resident's full- or part-time status. For example, if 60 hours per week (including vacation time) is established as the total time necessary to fill the residency slot for a particular program, and a resident in this program works 60-hour weeks (full time) consisting of 30 hours per week at each of two hospitals, in allowable/countable activities or areas, then each hospital would count “0.5” of an FTE for this resident. Since in this example, the time necessary to fill a residency slot is 60 hours per week (including vacation time) rather than 40 hours per week, any leave taken would be excluded from the FTE unit based on a 60-hour work week (or a program year consisting of 3,120 hours (that is, 52 weeks × 60 hours)). In response to the commenters' concerns regarding maternity leave and the provision of leave as essential to attracting quality employees and providing quality patient care, maternity leave is typically a leave of extended duration and we did not propose any changes to policies concerning leave of extended duration in the proposed rule. Furthermore, it is important to note that the intent of the proposed rule was not to suggest that hospitals should change their benefit policies. We see no reason that hospitals would not continue to offer the same benefits they offered prior to our proposed policy. Additionally, we note that the proposed rule would not have 
                        *disallowed*
                         vacation, sick leave, and other types of approved leave, which would have required the time to be excluded only from the numerator of the FTE calculation; it proposed to exclude the time from both the numerator and denominator of the FTE calculation. In response to the comment that hospitals accept patients for treatment contingent on their ability to provide medical coverage, other commenters have stated that residents often cover for each other when a resident is sick or on vacation; therefore, we do not agree that the exclusion of vacation, sick leave, and other types of approved leave from the numerator and denominator of the FTE calculation would limit the hospital's ability to provide medical coverage. However, as we stated in response to previous comments, we are not finalizing the proposed policy to remove vacation and sick leave from the FTE calculation at this time. *Comment:*
                         Several commenters stated that vacation and sick leave were included in the base year costs for determination of PRAs. Therefore, in order to maintain consistency between base year and current year FTE counts, the commenter suggested that vacation and sick leave should be included in the determination of an FTE. *Response:*
                         We acknowledge that the costs and FTEs associated with vacation and sick leave were included in the determination of the base year PRAs. This is because prior to the implementation of the IPPS, under the reasonable cost system of reimbursement, vacation leave and sick leave were reimbursed as a Medicare allowable cost. Since implementation of the IPPS, however, we have only permitted hospitals to count for purposes of direct GME the time spent by residents training in GME activities within the hospital complex. Since the time spent by residents on approved leave is not spent in the hospital complex, we believe that, from a policy perspective, it would be appropriate to not include vacation and sick leave in the FTE count for direct GME purposes. However, as we noted above, we have decided not to finalize our proposal to remove vacation and sick leave from the FTE calculation at this time. *Comment:*
                         Many commenters disagreed with removing vacation and sick leave from the determination of an FTE because these fringe benefits are included under other forms of hospital reimbursement. For example, several commenters stated that Medicare regulations allow fringe benefits for all employees as Medicare allowable costs and there should be no exception made for residents. Another commenter stated that when CMS requires hospitals to pay for the costs of residents in nonhospital settings, CMS requires that fringe benefits such as vacation and sick leave be included. The commenter requested “* * * clarification on the justification for considering vacation and sick time non-patient care related given the apparent inconsistency this proposal would create with respect to both * * *” the GME nonhospital site policy and non-GME policies. Commenters also recommended that, because vacation and sick leave are included in wage index calculations, they should be included in the determination of an FTE. One commenter specifically stated the Provider Reimbursement Manual (CMS Pub. 15–2) Section 3605.2, treats amounts paid for vacation and sick leave as included in wages and salaries. Therefore, to maintain consistency between wage index and GME, the commenter indicated that vacation and sick leave should be included. The commenter further noted that 42 CFR 412.105(f)(1)(iii)(A) states FTE status “* * * is based on the total time necessary to fill a residency slot,” and therefore vacation and sick leave should continue to be included in the determination of an FTE. Another 
                        ( print page 47380)
                        commenter provided additional reasons as to why the commenter believed the determination of an FTE should include vacation and sick leave, including: CMS recognizes vacation and sick leave when paid to an outside supplier as stated in PRM–I, section 1402.2; the American Medical Group Association's (AMGA) 2006 Compensation Survey Data Report includes fringe benefits in compensation; and there are several instances “* * * where CMS recognizes that fringe benefits (including vacation and sick leave) are an allowable cost when services being provided are related to patient care activities”—for example: CMS Pub. 15, Part I, Section 2144.4; CMS Pub. 15, Part I, Section 2182.6; CMS Pub. 15, Part I, Section 2144.9; CMS Pub. 15, Part I, Section 1402.2; and CMS Pub. 15, Part II, Section 3605.2. The commenter also noted that in establishing reasonable compensation equivalents (RCEs), CMS recognized compensation for a full-time physician at 2,080 hours per year, “* * * including a reasonable amount of time devoted to vacation and sick leave * * *” as stated in PRM–I, Section 2182.6. The commenter further noted that the PRM “* * * goes on to note that the intermediary considers the general practice of the hospitals it serves in determining the reasonableness of a hospital-compensated physician's time devoted to vacation and sick leave” and includes CMS' response to a comment regarding the development of the RCE in the March 2, 1983 
                        **Federal Register**
                         (48 FR 8902). The commenter stated that, based on the comment and response, it was evident that CMS believed vacation time should be included in compensation for hospital-based physicians. *Response:*
                         We agree with the commenters that the costs of vacation and sick leave have always been considered allowable under Medicare, for both hospital employees in general, and for residents and teaching physicians. However, with respect to the treatment of vacation, sick leave, and other types of approved leave in the GME context, the issue is not the allowability of the 
                        *cost*, but rather whether this time should be included in the determination of an FTE, considering that such time is not spent in any aspect of residency training. From a policy perspective, we do not believe that vacation, sick leave, and other types of approved leave, where the residents are not engaged in activities that are part of the approved program, and are not even present in the hospital or any nonhospital site, should be included in the determination of an FTE, for both IME and direct GME purposes. However, as we stated previously, because of the concerns regarding the administrative burden surrounding implementation of this policy, we have decided not to finalize the proposed policy to remove vacation, sick leave, and other approved leave from the FTE calculation as proposed, and we are asking for feedback on a method of dealing with some of the “burden.” With respect to the inclusion of vacation and sick leave in the wage index calculations, we note that salaries and hours of residents and teaching physicians are carved out of the IPPS wage index. Also, as explained in the August 18, 2006 
                        **Federal Register**
                         (71 FR 48085), the salaries and hours of residents historically used in the wage index calculation are irrelevant for purposes of determining a GME FTE count. We also note that for purposes of counting FTE time for determining direct GME and IME payments, a resident that trains in a hospital is counted by that hospital regardless of whether that hospital makes any payments for the resident's salary and fringe benefits. Therefore, we do not find persuasive the commenter's argument that vacation and sick time should be counted by the hospital that pays for that time. Our policy is consistent in that FTE counts at each hospital are based on what the resident is doing and not on whether the hospital is paying for the resident's salary and fringe benefits. *Comment:*
                         Several commenters expressed additional concerns regarding the removal of vacation and sick leave for purposes of the FTE resident count for IME. One commenter stated that academic centers are dependent on direct and indirect GME payments to cover the costs of the residents' education, salaries, and research, and they must also face the increased burden of indigent care and “medically complex” patients. The commenter further noted that IME covers fixed costs such as employee benefits which are in place even when the resident is on sick leave. A couple of commenters stated that residents' participation in research and other academic activities will be adversely affected by the proposed policy and more dialogue and stakeholder input is needed on such a rule. Another commenter asked whether Medicare may potentially disallow vacation and sick leave from cost reporting in totality. The commenter suggested that if CMS' intent is to reduce payments to hospitals, CMS should use mechanisms found on the cost report to achieve its goals—such as adjustments to the PRA for GME and the formula multiplier for IME. *Response:*
                         We note, again, that we did not propose to 
                        *disallow*
                         vacation, sick leave, and other types of approved leave from the IME count (or direct GME count) and that the intent of the proposed rule was not to reduce Medicare GME payments to teaching hospitals. A disallowance would mean excluding the vacation, sick leave, and other types of approved leave from the numerator of the FTE calculation, but not the denominator, as is done for IME for research and for time spent in distinct part units that are excluded from the IPPS. By excluding vacation, sick leave, and other types of approved leave from both the numerator and denominator of the FTE resident calculation, the effect on the FTE resident count for a hospital would be limited, if there would be any at all. *Comment:*
                         Several commenters expressed their concerns regarding the effect of the proposed policy on hospitals that rotate residents and participate in Medicare GME affiliation agreements. One commenter stated that the proposed policy does not resolve the inequalities that result when residents rotate to different hospitals. The commenter further maintained that the proposed policy may unfairly increase FTE time at another hospital to which a resident rotates because time off is allocated to the hospital in which the resident was assigned. One commenter stated “[s]ince the receiving institution usually is accepting the residents because of a desire to provide more medical staff coverage, they will not allow residents to take vacations when scheduled at their facility. Then, if the resident's vacation is excluded from the FTE calculation (as proposed), the receiving facility will be getting more of an FTE than they are paying for.” The commenter suggested that the proposed policy is “inherently flawed” because it would produce a redistribution of FTE residents that is inconsistent with multiple base year policies. Other commenters provided an example where there is an affiliation agreement between Hospital A and Hospital B, Hospital A rotates a 
                        *different*
                         resident to Hospital B each month, and each resident does 
                        *not*
                         take vacation while training a Hospital B. In this case, Hospital B's total resident FTE count for the entire year would be greater than one, since the vacation time would be excluded from the denominator of Hospital B and not from the numerator. The commenter stated that this is a fundamental problem of CMS' proposal because a hospital that was at its hospital-specific cap may now find 
                        ( print page 47381)
                        itself training over its cap while another hospital may find itself training under its cap. The commenter noted that an additional burden would be created because a hospital would probably not know its resident FTE count until the very end of the training year and would have to wait until the last minute to amend its Medicare GME affiliation agreements. Another commenter stated that the rule is not clear on which hospital should claim the sick or vacation time when a resident rotates between hospitals. The commenter recommended that if vacation or sick leave occurs during an assigned rotation at a specific hospital, that hospital should claim the vacation and sick time. However, if the vacation and sick leave occurs between rotations, the hospital claiming the time associated with the rotation immediately prior to the vacation or sick leave should account for the sick or vacation leave. If the sick leave or vacation occurs during the residents' rotation to a nonhospital site, the hospital counting the resident's time at the nonhospital site should account for the vacation and sick time. Another commenter stated that a hospital that absorbs the vacation payment will be hurt by the proposed rule, “* * * thereby not matching third party reimbursement to the cost incurred. The policy of matching costs to reimbursement is an inherent principle of third party reimbursement and should have been considered when CMS proposed this change.” *Response:*
                         We are sympathetic to the points raised by the commenters concerning shifts in FTE counts among hospitals that cross-train resident, and we will explore options of mitigating this effect in the context of reducing the overall administrative burden of the proposed policy. In the interim, as we stated above, we are not finalizing the proposed policy. *Comment:*
                         Several commenters stated that the proposed rule is not clear as to whether a change would relate to scheduled time off or actual time off. One commenter stated that it would be inappropriate to exclude all scheduled time off since residents usually do not take all of their vacation or sick time. The commenter further noted that, if the hospital were to exclude time from the denominator of the FTE calculation because that time was scheduled time off, but include that time in the numerator of the FTE calculation because other documentation shows that the resident actually worked during that time, the resulting FTE would be greater than 1.0 and disallowed by the fiscal intermediary on that basis. However, the commenter also asserted that if CMS were to require that 
                        *actual*
                         time off be excluded, this would be a substantial administrative burden because the hospital would have to determine: whether the resident actually used scheduled vacation leave, or whether the resident worked at the hospital, even for a brief period of patient care, during the vacation period; and whether the resident switched days off with another resident so that the time was made up at a later point. We also received comments regarding the mathematical counting of FTEs, particularly when a resident takes a half day of vacation or sick leave. Another commenter stated that vacation time of one or more weeks is likely to be documented on the rotation schedule, while one or two days of vacation may not always be included. One commenter stated that the American Board for Internal Medicine requires that residents make up sick time but CMS does not allow this make-up time to be reflected in the cost report. *Response:*
                         The commenters pointed out correctly that we did not specify in the proposed rule whether we intended that scheduled time off or actual time off should be removed from the calculations of an FTE. In considering this, we agree that had we finalized the proposed policy in this final rule, it would be more appropriate to instruct hospitals to only exclude actual vacation, sick leave, and other types of approved leave taken, since it is understandable that residents may not use all of their allotted approved leave. Accordingly, under the alternative approach on which we are considering and seeking feedback, a hospital would track 
                        *actual*
                         time off taken by residents assigned to it (but not be responsible for deducting time off while the resident is assigned to another hospital). Concerning the comment about the requirements of the American Board of Internal Medicine, we are not sure if the commenter is referring to leave of short duration or extended leave. However, we note that the proposed rule did not include any proposals regarding extended leave. *Comment:*
                         Several commenters disapproved of CMS’ recent rules on GME, including the recent proposed rule on Medicaid GME. Commenters expressed their concern regarding how these rules have disallowed pieces of residents’ training time and imposed significant administrative burdens. One commenter requested that CMS limit its application of policy regarding “patient care activities” to that of didactic activities “* * * to prevent going down a policy ‘slippery slope’ that ends up with parsing every aspect of residents’ training time into a ‘patient care,’ or ‘nonpatient care’ bucket.” The commenter noted that the proposed policy on vacation and sick leave illustrates “* * * the downward spiral that starts to occur if CMS attempts to extend its ‘patient care’ analysis beyond didactic activities.” One commenter stated that with the exception of bench research, all other resident training time should be included in the determination of an FTE for Medicare direct GME and IME payment purposes. The commenter stated that CMS should discontinue its efforts to parse out residents’ time; instead the goal should be for Medicare to pay its fair share of GME costs. Another commenter stated that CMS’ policy that only permits residents to be counted for IME payment purposes if they are involved in patient care has no statutory basis, and CMS “* * * apparently excludes time spent in didactic activities based on assumption that because IME is an adjustment to the DRG system, it is inherently related to patient care.” *Response:*
                         We do not believe that the proposed rule, if finalized, would have contributed to an inappropriate “parsing” of a resident's training into patient care and nonpatient care time. Particularly for IME purposes, this is an important distinction to make, given that the IME adjustment is intended to account for the higher patient care costs experienced by teaching hospitals relative to nonteaching hospitals. We refer readers to the August 18, 2006 
                        **Federal Register**
                         (71 FR 48080) for a more detailed discussion on the distinction between patient care and nonpatient care activities. With respect to the proposed policy to exclude vacation and sick leave from the FTE resident calculation, as we stated above, we believe vacation, sick leave, and other types of approved leave are neither patient care nor nonpatient care, but fall into a third category of time that is not spent in any aspect of residency training. *Comment:*
                         One commenter stated that “[i]n 
                        *University Medical Center*
                         v. 
                        *Blue Cross/Blue Shield Association, 2005–D36, June 7, 2005*, the CMS Administrator concurred with the findings of the Provider Reimbursement Review Board (PRRB Decision No. 2005–D36, dated April 12, 2005) that held that the critical factor related to vacation time was `consistency' in its treatment by the fiscal intermediary for each provider.” The commenter stated that, currently, the provider includes vacation time when the resident's rotation is to a site owned by the provider and excludes vacation time when the resident's rotation is to a site 
                        ( print page 47382)
                        not related to the provider. The commenter stated that its fiscal intermediary has accepted this process and that this method is consistent with the Administrator's decision in the aforementioned case. Furthermore, the commenter asserted that treating vacation and sick leave differently from orientation, is inconsistent with the Administrator's decision in 
                        *University Medical Center*
                         v. 
                        *Blue Cross/Blue Shield Association*. *Response:*
                         We believe the commenter has confused the Administrator's findings in the case of 
                        *University Medical Center*
                         v. 
                        *Blue Cross/Blue Shield Association*
                         with respect to the vacation time at issue. In that case, the Provider (plaintiff) believed that since it continued to pay the residents' salaries while the residents were assigned and took vacation time while at another hospital, the Provider should be allowed to include those FTEs in its direct GME and IME FTE count. The fiscal intermediary disagreed with the Provider, asserting that “it is common practice to include vacation time in the resident count for the hospital where residents are assigned and working when the vacation time is taken.” The Provider Reimbursement Review Board (the Board) concluded that the fiscal intermediary's methodology was proper, but that “ * * * the critical factor is consistency. As long as vacation time is accounted for in the same manner for each hospital, as presented by the Intermediary, each hospital will be properly reimbursed.” We stated that we “acknowledge and concur with the Board's conclusion that 
                        *the Intermediary properly disallowed the FTE time spent on vacation*
                         * * *” (emphasis added). In this case, we did not state that we agree with the Board that the most important factor is 
                        *consistency*. The fiscal intermediary was correct to disallow from the provider's FTE count the vacation time that occurred at another hospital because of the longstanding Medicare policy that “a hospital cannot claim the time spent by residents training at another hospital” (42 CFR 412.105(f)(1)(iii)(A) for IME and § 413.78(b) for direct GME). A method for counting FTEs is 
                        *not*
                         correct merely because hospitals, or fiscal intermediaries, for that matter, apply it consistently. As the Administrator concluded in the case, “the Intermediary properly disallowed the vacation time from the Provider's FTE counts, since that FTE was not spent training at the Provider, nor were those FTEs assigned to the Provider during the vacation time in question.” Thus, under our 
                        *previous*
                         policy (and current policy, since we are not finalizing our proposal at this time), regardless of which hospital is paying the resident's salaries and fringe benefits, the hospital to which the resident is assigned during the time the vacation was taken is the hospital that counts that FTE time for direct GME and IME. If the rotation schedule does not clearly indicate where the resident is assigned during the time the vacation is taken, the hospitals to which the resident rotates over the course of the academic year would divide and count that vacation time proportionately based on the amount of time spent in actual training at the respective hospitals. For example, if during the course of the academic year, a resident spends 25 percent of his time at Hospital A, and 75 percent of his time at Hospital B, and there are two weeks of vacation in which the resident was not assigned to either Hospital A or Hospital B, then it is appropriate for Hospital A to count 25 percent of that vacation time and Hospital B to count 75 percent of the vacation time for that FTE resident. *Comment:*
                         One commenter noted that, unlike the ACGME, the AOA has adopted a clear policy on resident vacations and other leaves of absence; osteopathic programs are required to give interns and residents a minimum of 10 business days of vacation time during each year of training. The commenter stated that the AOA's policy is in place to protect residents and ameliorate stress and fatigue and that CMS' proposal contradicts efforts aimed at establishing limits on time spent in the training environment which have been established to protect the health, safety, and well being of residents and their patients and disregards the need for residents to have personal time away from their program. Another commenter disagreed with the argument for removing vacation and sick leave because the ACGME and Residency Review Committees are not explicit regarding this time which causes the amount of vacation and sick leave to vary from program to program. The commenter stated that there are numerous cases where Residency Review committees “* * * are open-ended or not explicit in number or content, leaving programs to interpret within a range of behavior or activities, what is acceptable for accreditation.” *Response:*
                         Regardless of whether a clear policy on vacation, sick leave, and other types of approved leave has been adopted by any of the accrediting bodies, we believe that vacation, sick leave, and other types of approved leave for purposes of counting residents for Medicare direct GME and IME fit into a third category that is neither patient care nor nonpatient care. Furthermore, under the proposed rule, we were 
                        *not*
                         “
                        *disallowing*
                        ” vacation, sick leave, and other types of approved leave, but rather excluding the time spent by residents on vacation, sick leave, and other types of approved leave from the calculation of an FTE. *Comment:*
                         One commenter requested that if CMS finalizes the proposed policy, it should be made date specific to October 1, 2007, instead of for cost reporting periods beginning on or after October 1, 2007, because hospitals with cost reporting periods beginning October 1, 2007, would be disadvantaged for a longer period of time than hospitals with different cost reporting periods. *Response:*
                         As previously stated, we are 
                        *not*
                         finalizing our proposed policy with respect to vacation and sick leave at this time. *Comment:*
                         One commenter asked CMS to comment on the statement that “[t]he hospital complex consists of the hospital and any hospital based providers * * * and subproviders * * * Therefore, if the orientation takes place in a related medical school, such time could not be counted for GME purposes.” *Response:*
                         The commenter is correct that the hospital complex consists of the hospital, hospital-based providers, and subproviders; that is, facilities that meet the provider-based criteria at § 413.65. The commenter is also correct that orientation activities in a related medical school cannot be counted. As we stated on page 24814 of the May 3, 2007 proposed rule, “Because we recognize the distinct character of orientation activities as essential to the provision of patient care by residents, and the fundamental differences between orientation and the typical didactic activities in which a resident may participate throughout a residency training program, we are proposing to continue to count the time spent by residents in orientation activities, 
                        *whether they occur in the hospital or nonhospital setting*, and are proposing to amend our regulations accordingly” (emphasis added). However, the nonhospital settings we were referring to in which orientation may be counted are those nonprovider settings such as physicians' offices or clinics, where patient care is routinely provided and a hospital is permitted to count the time spent by residents in accordance with our regulations at §§ 412.105(f)(1)(ii)(C) and 413.78(f), 
                        *not*
                         other nonhospital settings where time spent by residents is not permitted to be counted for purposes of direct GME and IME. We 
                        ( print page 47383)
                        note that the policy to allow time spent by residents in orientation activities to be counted if it occurs in nonhospital sites where patient care is routinely provided is new, and will be effective for cost reporting periods beginning on or after October 1, 2007. (In order to count resident training time in orientation activities for IME and direct GME purposes at the nonhospital site, hospitals must comply with the regulations at §§ 413.78(f) and 412.105(f)(1)(ii)(C)). Prior to cost reporting periods beginning on or after October 1, 2007, the effective date of this policy, time spent by residents in orientation was permitted to be counted for direct GME and IME only if it occurred in the hospital complex. *Comment:*
                         One comment addressed Medicare's rules regarding shared programs and residency training at nonhospital sites, when the shared programs are operated by a foundation. The commenter stated that because at least two hospitals may be involved with the foundation, the interns and residents keep time studies to document time spent in patient care in each location so that each hospital is aware of its financial commitment. The foundation bills the hospital monthly for the total costs of educating the interns and residents for training in the hospital and nonhospital site. The commenter stated that its fiscal intermediary considers this a shared program (neither hospital is paying for “all or substantially all” of the costs) and has disallowed the time spent in nonhospital settings. Another commenter urged CMS to “ * * * continue to fund, to the best of your ability, the ongoing education of newly graduated physicians and allow the dedicated medical education professionals the opportunity to continue to make a difference in the future of health care.” We also received comments concerning the counting of didactic time. *Response:*
                         We did not propose to make any changes to our regulations specifically regarding residency training at nonhospital sites or general GME funding mechanisms and counting of didactic time. Therefore, we believe the comments are outside the scope of this rule and we are not responding to them at this time. d. Regulation Changes In the FY 2008 IPPS proposed rule (72 FR 24815), we proposed, for cost reporting periods beginning on or after October, 1, 2007, for direct GME and IME payments, that time spent by residents on vacation or sick leave would not be included in the determination of what constitutes an FTE resident (or would be removed from both the numerator and denominator of the FTE count) for both IME and direct GME payment purposes. In addition, we proposed to continue to count time spent by residents in orientation activities for both IME and direct GME payment purposes. We proposed to amend the regulations at §§ 412.105(f)(1)(iii)(A) and 413.78(b). Lastly, we proposed to amend § 413.75(b) to include the definition of the term “orientation activities” and to amend the definition of “patient care activities” to add “orientation activities.” After consideration of the public comments received, at this time we are 
                        *not*
                         finalizing our proposed policy to remove vacation and sick leave from the determination of the FTE calculation. However, we are adopting as final our proposed policy to continue counting time spent by residents in orientation activities for IME and direct GME in the hospital complex; and, effective for cost reporting periods beginning on or after October 1, 2007, we are finalizing the policy that orientation activities occurring in a nonhospital site where patient care is routinely provided and the hospital complies with the regulations set for at §§ 413.78(f), and 412.105(f)(1)(ii)(C)) may be counted. We are also finalizing our proposal to define “orientation activities” the regulations text at § 413.75(b) as “activities that are principally designed to prepare an individual for employment as a resident in a particular setting, or for participation in a particular specialty program and patient care activities associated with that particular specialty program.” We are also finalizing our proposal to modify the definition of “patient care activities” to mean “the care and treatment of particular patients, including services for which a physician or other practitioner may bill, and orientation activities as defined in this section.” E. Payments to Disproportionate Share Hospitals (DSHs): Technical Correction 1. Background Section 1886(d)(5)(F) of the Act provides for additional payments to subsection (d) hospitals that serve a disproportionate share of low-income patients. The Act specifies two methods for a hospital to qualify for the Medicare disproportionate share hospital (DSH) adjustment. Under the first method, hospitals that are located in an urban area and have 100 or more beds may receive a DSH payment adjustment if the hospital can demonstrate that, during its cost reporting period, more than 30 percent of its net inpatient care revenues are derived from State and local government payments for care furnished to indigent patients. These hospitals are commonly known as “Pickle hospitals.” The second method, which is also the most commonly used method for a hospital to qualify, is based on a complex statutory formula under which payment adjustments are based on the level of the hospital's DSH patient percentage, which is the sum of two fractions: The “Medicare fraction” and the “Medicaid fraction.” The Medicare fraction is computed by dividing the number of patient days that are furnished to patients who were entitled to both Medicare Part A and Supplemental Security Income (SSI) benefits by the total number of patient days furnished to patients entitled to benefits under Medicare Part A. The Medicaid fraction is computed by dividing the number of patient days furnished to patients who, for those days, were eligible for Medicaid but were not entitled to benefits under Medicare Part A by the number of total hospital patient days in the same period.  
 
 2. Technical Correction: Inclusion of Medicare Advantage Days in the Medicare Fraction of the Medicare DSH Calculation In the FY 2005 IPPS final rule (69 FR 49099), we discussed in the preamble our policy change to reflect the inclusion of the days associated with Medicare + Choice (now Medicare Advantage) beneficiaries under Medicare Part C in the Medicare fraction of the DSH calculation. In that rule, we indicated that we were revising the regulation text at § 412.106(b)(2)(i) to incorporate this policy. However, we inadvertently did not make a change in the regulation text to conform to the preamble language. We also inadvertently did not propose to change § 412.106(b)(2)(iii) in the FY 2005 final rule, although we intended to do so. Section 412.106(b)(2)(i) of the regulations discusses the numerator of the Medicare fraction of the Medicare disproportionate patient percentage (DPP) calculation while § 412.106(b)(2)(iii) of the regulations discusses the denominator of the Medicare fraction of the Medicare DPP. We intended to amend the regulation text with respect to both the numerator and the denominator of the Medicare fraction of the Medicare DPP. Therefore, in this final rule with comment period, we are making this technical correction to § 412.106(b)(2)(i) and to § 412.106(b)(2)(iii) to make them consistent with the preamble language of the FY 2005 IPPS final rule and to effectuate the policy iterated in that rule. With respect to the technical correction that we are making to § 412.106(b)(2)(iii), we note that we ordinarily publish a notice of proposed rulemaking in the 
                        **Federal Register**
                         to provide for a period for public comment before a provision such as this would take effect. However, we can waive this procedure if an agency finds good cause that a notice and comment procedure is impracticable, unnecessary, or contrary to the public interest and incorporates a statement of the finding and its reasons in the notice issued. We find it unnecessary to undertake notice and comment rulemaking in this instance for the additional change to § 412.106(b)(2)(iii) because this notice merely provides technical corrections to the regulations and does not make any substantive changes to the regulations or our existing policy. Therefore, under 5 U.S.C. 533(b)(B), for good cause, we waive notice and comment procedures. F. Hospital Emergency Services Under EMTALA (§ 489.24) 1. Background Sections 1866(a)(1)(I), 1866(a)(1)(N), and 1867 of the Act impose specific obligations on certain Medicare-participating hospitals and CAHs. (Throughout this section of this final rule with comment period, when we reference the obligation of a “hospital” under these sections of the Act and in our regulations, we mean to include CAHs as well.) These obligations concern individuals who come to a hospital emergency department and request examination or treatment for medical conditions, and apply to all of these individuals, regardless of whether they are beneficiaries of any program under the Act. The statutory provisions cited above are frequently referred to as the Emergency Medical Treatment and Labor Act (EMTALA), also known as the patient antidumping statute. EMTALA was passed in 1986 as part of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), Pub. L. 99–272. Congress incorporated these antidumping provisions within the Social Security Act to ensure that individuals with emergency medical conditions are not denied essential lifesaving services because of a perceived inability to pay. Under section 1866(a)(1)(I)(i) of the Act, a hospital that fails to fulfill its EMTALA obligations under these provisions may be liable for termination of its Medicare provider agreement, which would result in loss of all Medicare and Medicaid payments. Section 1867 of the Act sets forth requirements for medical screening examinations for individuals who come to the hospital and request examination or treatment for a medical condition. The section further provides that if a hospital finds that such an individual has an emergency condition, it is obligated to provide that individual with either necessary stabilizing treatment or an appropriate transfer to another medical facility where stabilization can occur. The EMTALA statute also outlines the obligation of hospitals to receive appropriate transfers from other hospitals. Section 1867(g) of the Act states that a participating hospital that has specialized capabilities or facilities (such as burn units, shock-trauma units, neonatal intensive care units or (with respect to rural areas) regional referral centers as identified by the Secretary in regulation) shall not refuse to accept an appropriate transfer of an individual who requires these specialized capabilities or facilities if the hospital has the capacity to treat the individual. The regulations implementing section 1867 of the Act are found at 42 CFR 489.24. 2. Recent Legislation Affecting EMTALA Implementation a. Secretary's Authority To Waive Requirements During National Emergencies Section 1135 of the Act authorizes the Secretary to temporarily waive or modify the application of several requirements of titles XVIII, XIX, or XXI of the Act (the Medicare, Medicaid, and State Children's Health Insurance Program provisions), and their implementing regulations in an emergency area during an emergency period. Section 1135(g)(1) of the Act defines an “emergency area” as the geographical area in which there exists an emergency or disaster declared by the President pursuant to the National Emergencies Act or the Robert T. Stafford Disaster Relief and Emergency Assistance Act (subsection A) and a public health emergency declared by the Secretary pursuant to section 247d of Title 42 of the United States Code. Section 1135(g)(1) of the Act also defines an “emergency period” as the period during which such a disaster exists.  Section 1135(b) of the Act lists the actions for which the otherwise applicable statutory provisions and implementing regulations may be waived. Included among these actions are, in subparagraph (b)(3)(A), a transfer of an individual who has not been stabilized in violation of the EMTALA requirements restricting transfer until an individual has been stabilized (section 1867(c) of the Act) and, in subparagraph (b)(3)(B), the direction or relocation of an individual to receive medical screening in an alternate location, in accordance with an appropriate State emergency preparedness plan. Section 1135(b) of the Act further states that a waiver or modification provided for under section 1135(b)(3) of the Act shall be limited to a 72-hour period beginning upon implementation of a hospital disaster protocol. All other waivers arising out of section 1135(b) of the Act (except for section 1135(b)(7)) ordinarily may continue in effect for the duration of the declaration of emergency or disaster, or the declaration of a public health emergency, or for 60-day periods as described in section 1135(e)(1) of the Act. To take into account the effect of section 1135(b)(3)(A) waivers on the EMTALA requirements, § 489.24(a)(2) of our regulations specifies that sanctions 
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                        under the EMTALA regulations for inappropriate transfer during a national emergency do not apply to a hospital with a dedicated emergency department located in an emergency area, as specified in section 1135(g)(1) of the Act. However, the current regulations do not address the Secretary's authority to waive sanctions associated with the direction or relocation of an individual to receive a medical screening examination. For further information about section 1135 of the Act and its applicability, we refer readers to the CMS Web site: 
                        *http://www.cms.hhs.gov/​Emergency/​02_​Hurricanes.asp*. b. Provisions of the Pandemic and All-Hazards Preparedness Act On December 19, 2006, Congress enacted the Pandemic and All-Hazards Preparedness Act, Pub. L. 109–417. Section 302(b) of Pub. L. 109–417 makes two specific changes that affect EMTALA implementation in emergency areas during an emergency period. As noted above, section 1135(b)(3) of the Act authorized the Secretary to waive sanctions for either the transfer of an unstabilized individual in violation of the requirements of section 1867(c) of the Act where such transfer is necessitated by the circumstances of the declared emergency in the emergency area during the emergency period or the direction or relocation of an individual to receive medical screening in an alternate location in accordance with an appropriate State emergency preparedness plan. Section 302(b)(1)(A) of Pub. L. 109–417 amended section 1135(b)(3)(B) of the Act to state that sanctions for the direction or relocation of an individual for screening may be waived where, in the case of a public health emergency that involves a pandemic infectious disease, that direction or relocation occurs pursuant to a State pandemic preparedness plan, or to an appropriate State emergency preparedness plan. In addition, sections 302(b)(1)(B) and (b)(1)(C) of Pub. L. 109–417 amended section 1135(b) of the Act to further state that “if a public health emergency involves a pandemic infectious disease (such as pandemic influenza), the duration of a waiver or modification for such emergency shall be determined in accordance with section 1135(e) of the Act as such subsection applies to public health emergencies.” The amendments to section 1135(b) of the Act made by section 302(b) of Pub. L. 109–417 are effective as of the date of enactment of that legislation (December 19, 2006) and apply to public health emergencies declared pursuant to section 247d of Title 42 of the United States Code. c. Revisions to the EMTALA Regulations Currently, the EMTALA regulation at 42 CFR 489.24(a)(2) specifies that sanctions under this section (§ 489.24) for inappropriate transfers during a national emergency do not apply to a hospital with a dedicated emergency department located in an emergency area, as specified in section 1135(g)(1) of the Act. To implement the changes made by section 302(b) of Pub. L. 109–417 and to ensure that our regulations accurately reflect section 1135 of the Act, in the FY 2008 IPPS proposed rule (72 FR 24816), we proposed to make two changes to paragraph (a)(2) of § 489.24. First, we proposed to specify that the sanctions that do not apply are those for either the inappropriate transfer of an individual who has not been stabilized, or those for the direction or relocation of an individual to receive medical screening at an alternate location. We also proposed to revise § 489.24 by adding a second sentence to paragraph (a)(2) to state that a waiver of these sanctions for EMTALA violations is limited to a 72-hour period beginning upon the implementation of a hospital disaster protocol, except that if a public health emergency involves a pandemic infectious disease (such as pandemic influenza), the duration of the waiver will be determined in accordance with section 1135(e) of the Act as it applies to public health emergencies. This proposed change would clarify that, in the case of public health emergencies involving pandemic infectious diseases, the waiver of EMTALA sanctions is not limited to 72 hours, but will remain in effect until the termination of the applicable declaration of a public health emergency as described in section 1135(e)(1)(B) of the Act. We received several public comments that generally supported the updating of the regulations to reflect the new legislation. These comments did not include any specific recommendations for change. Therefore, we are adopting as final, without modification, the proposed revision to § 489.24 to specify that the sanctions that do not apply are those for either the inappropriate transfer of an individual who has not been stabilized, or those for the direction or relocation of an individual to receive medical screening at an alternate location and to add a second sentence to paragraph (a)(2) to state that a waiver of these sanctions for EMTALA violations is limited to a 72-hour period beginning upon the implementation of a hospital disaster protocol, except that if a public health emergency involves a pandemic infectious disease (such as pandemic influenza), the duration of the waiver will be determined in accordance with section 1135(e) of the Act as it applies to public health emergencies. G. Disclosure of Physician Ownership in Hospitals and Patient Safety Measures 1. Disclosure of Physician Ownership in Hospitals Section 1866 of the Act states that any provider of services (except a fund designated for purposes of section 1814(g) and section 1835(e) of the Act) shall be qualified to participate in the Medicare program and shall be eligible for Medicare payments if it files a Medicare provider agreement and abides by the requirements applicable to Medicare provider agreements. These requirements are incorporated into our regulations in 42 CFR part 489, subparts A and B (Provider Agreements and Supplier Approval). Section 1861(e) of the Act defines the term “hospital.” Section 1861(e)(9) of the Act defines a hospital and authorizes the Secretary to establish requirements as he finds necessary in the interest of patient health and safety. Section 1820(e)(3) of the Act authorizes the Secretary to establish criteria necessary for an institution to be certified as a CAH. Section 5006 of Pub. L. 109–171 (DRA) required the Secretary to develop a “strategic and implementing plan” to address certain issues related to physician investment in “specialty hospitals.” In the strategic and implementing plan included in our “Final Report to the Congress and Strategic and Implementing Plan Required under Section 5006 of the Deficit Reduction Act of 2005” issued on August 8, 2006 (page 69), available on our Web site at: 
                        *http://www.cms.hhs.gov/​PhysicianSelfReferral/​06a_​DRA_​Reports.asp*
                         (hereinafter referred to as the “DRA Report to Congress”), we stated that our plan for addressing issues related to physician investment in specialty hospitals involved promoting transparency of investment. Consistent with that approach, we stated that we would adopt a disclosure requirement that would require hospitals to disclose to patients whether they are physician-owned, and if so, disclose the names of the physician owners. Accordingly, in the FY 2008 IPPS proposed rule (72 FR 24816), we proposed changes to regulations governing Medicare provider agreements to effectuate this 
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                        change, under our authority at sections 1861(e)(9), 1820(e) and 1866 of the Act, and under our rulemaking authority at sections 1871 and 1102 of the Act. We sought comment as to whether these changes would be best effectuated through changes to the Medicare provider agreement regulations or whether it would be more appropriate to include these changes in the conditions of participation (CoPs) applicable to hospitals and CAHs. Specifically, we proposed to amend § 489.3 to define a “physician-owned hospital” as any participating hospital (which, as defined in § 489.24 includes any CAH) in which a physician or physicians have an ownership or investment interest. We solicited comments on whether, for purposes of the ownership disclosure requirements only, the definition of “physician-owned hospital” should exclude certain physician ownership or investment interests based on the nature of the interest, or the relative size of the interest, or the entity's assets (for example, whether the interest would satisfy the exceptions at §§ 411.356(a) and (b) for physician ownership or investment interest in publicly-traded securities and mutual funds). We proposed to add a new provision at § 489.20(u)(1) to require that patients be given written notice that a hospital is physician-owned and that the list of physician owners is available upon request. We proposed to require that the notice, in a manner reasonably designed to be understood by all patients, disclose the fact that the hospital meets the Federal definition of a “physician-owned hospital” and that patients will be provided the list of the hospital's physician owners upon request. In addition, we proposed to add a new provision at § 489.20(u)(2) that would require hospitals to require that all physician owners who are also members of the hospital's medical staff to disclose, in writing, their ownership interest in the hospital to all patients they refer to the hospital, as a condition of continued medical staff membership. Patient disclosure would be required at the time a physician makes a referral. We stated that we believed that these provisions are in the interest of the health and safety of individuals who are furnished services in these institutions. The proposed notice requirement would permit individuals to make more informed decisions regarding their treatment, and to evaluate whether the existence of a financial relationship, in the form of an ownership interest, suggests a conflict of interest that is not in their best interest. In order to enforce these proposed requirements, we proposed to amend § 489.12 to permit CMS to deny a provider agreement to a hospital that does not have procedures in place to notify patients of physician ownership in the hospital. In addition, we proposed to amend § 489.53 to permit CMS to terminate a provider agreement with a physician owned hospital if the hospital fails to comply with the requirements of § 489.20(u). We received a number of comments concerning our proposal. Most came from national and state hospital associations, and a few were received from individual hospitals, and two associations representing physician-owned hospitals. *Comment:*
                         Commenters representing hospital associations were generally supportive of the physician ownership disclosure proposal, but recommended that CMS except from the definition of a “physician-owned hospital” those hospitals in which the physician ownership is limited to holding publicly traded securities or mutual funds that satisfy the requirements of the exceptions under §§ 411.356(a) or (b). *Response:*
                         We agree and are revising the regulatory text at § 489.3 accordingly. *Comment:*
                         Several commenters requested that CMS revise the timing of the hospital's written notice of the disclosure of physician ownership to patients. The commenters requested that CMS clarify that the written notice be given to patients, not only with the provision of a package of information regarding preadmission testing and registration, but also at the time of scheduling. *Response:*
                         We believe that the specific revisions suggested by the commenters would not be feasible. The scheduling of most inpatient or outpatient services is performed by a staff member in the physician's office, rather than the patient. Therefore, the first contact between the hospital and the patient usually will be when the hospital sends a package of information regarding scheduled preadmission testing and registration for a planned hospital admission for inpatient care or outpatient service. We do recognize the benefit to patients of receiving this information at the earliest opportunity, and in those instances where the patient and the hospital are scheduling the inpatient admission or outpatient services, we encourage hospitals to provide the notice at that time. *Comment:*
                         Several commenters noted that the proposal requires physician-owned hospitals to provide patients with a list of the hospital's physician owners or investors upon request, but does not establish any timeframe for the hospital to furnish the list to the patient. The commenters suggested that the list be provided to the patient at the time the request is made. *Response:*
                         While we expect a hospital to make this list available to a patient upon request, and that this should be done at the earliest possible opportunity, we believe that it is important to allow the hospital some degree of flexibility regarding the manner and form by which it meets this requirement. Therefore, we are not revising the provision to include any specific timeframe for making the list available. *Comment:*
                         Many comments addressed the appropriateness of our decision to propose a physician ownership disclosure requirement for all hospitals. Although most commenters supported our proposal, two commenters recommended that the proposed ownership disclosure requirement be limited to those facilities that meet the specialty hospital definition under section 1877(h)(7) of the Act. The commenters contended that the research to date raises concerns about ownership and referrals related to specialty hospitals only, and that similar concerns have not been raised about other types of hospitals with physician ownership. *Response:*
                         We are not adopting the commenters' suggested changes. We believe that it is in the best interests of patients to have available physician ownership information concerning all hospitals. *Comment:*
                         Most commenters agreed with our proposal to effectuate a hospital physician ownership disclosure requirement through changes to the regulations governing Medicare provider agreements. However, one commenter recommended that the proposal be effectuated through changes to the CoPs applicable to hospitals and CAHs. The commenter believed that the use of the CoPs is more practical for enforcement purposes and states that the provider agreement rules are only referenced when a healthcare facility initially enrolls, with no subsequent review of compliance. *Response:*
                         We are finalizing the hospital physician ownership disclosure requirements through the regulations governing Medicare provider agreements. We believe that this approach is better than using the Medicare CoPs, which are centered on quality of care. We also disagree with the commenters' assertion that there is no subsequent review of compliance with the provider agreement rules after 
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                        initial enrollment. CMS reviews compliance with the provider agreement rules after initial enrollment, and, if a provider is out of compliance, CMS may terminate its provider agreement. *Comment:*
                         One commenter urged CMS to make the disclosure requirement applicable to all financial arrangements between physicians and all hospitals, not just ownership and investment interests by physicians in physician-owned hospitals. The commenter encouraged CMS to require disclosure of financial interests such as salaries, bonuses, medical directorships, and consulting arrangements, as well as any other arrangements conferring a material financial benefit upon a physician by a hospital. *Response:*
                         We are not adopting the commenter's suggestions. We believe the physician ownership disclosure proposal focuses on those hospitals whose ownership or investment interests might be most relevant to patients in deciding whether and where to undergo medical treatment. The voluminous amount of information suggested by the commenter would be of little additional benefit to patients in making such decisions. In addition, we believe that our proposal strikes the appropriate balance between providing useful information to the patient and not unnecessarily burdening physicians and hospitals. *Comment:*
                         One commenter strongly opposed physician ownership disclosure as a condition of continued medical staff membership and stated that hospitals have no effective means to police medical staff members in this manner. Another commenter believed that changes must be made to § 482.22(c), which lists requirements for medical staff bylaws, to provide that bylaws of physician-owned hospitals must contain a provision requiring physician ownership disclosure as condition of continued medical staff membership. *Response:*
                         We believe that the overall intent of this physician ownership disclosure requirement is to provide patients with the information that they need to decide whether the existence of a financial relationship, in the form of a physician ownership interest, is in their best interests as a potential patient of the hospital. Therefore, we are not finalizing the proposed provision at § 489.20(u)(2), which ties a physician's continued medical staff membership to this disclosure of ownership, because it would not provide any additional protections for patients that are not already contained under § 489.20(u)(1). Furthermore, the provision at § 489.20(u)(1) allows hospitals much greater flexibility in meeting this disclosure requirement than would be provided by the inclusion of § 489.20(u)(2). For similar reasons, we disagree with the commenter who believed that changes must be made to the medical staff bylaws provision under the CoPs at § 482.22(c). As previously stated, we believe that the appropriate area for the hospital physician ownership disclosure requirement is in the regulations governing Medicare provider agreements. *Comment:*
                         One commenter asserted that the disclosure of physician ownership interests provides no useful information to the patient unless the notice is done in concert with an outreach and educational initiative for patients that provides other information about the hospital so the patient can make an informed decision. *Response:*
                         We believe the disclosure of physician ownership interests does provide useful information. However, we will carefully consider the recommendation to conduct an outreach and educational initiative for patients. *Comment:*
                         One commenter recommended that CMS establish a de minimis level of physician investment below which no notification would be necessary. *Response:*
                         We are not establishing a de minimis level of physician investment. Rather than establishing an arbitrary threshold, we believe that patients should be informed about any level of physician investment. However, as discussed above, we have excluded ownership interests that satisfy the exceptions found in §§ 411.356(a) and (b) from the definition of a physician-owned hospital found at § 498.3. *Comment:*
                         One commenter (a healthcare system) recommended that instead of revoking hospital privileges of physician investors or owners that fail to provide the required disclosure, CMS should deny payments to physicians who fail to disclose their ownership in a hospital at the time the referral is made. *Response:*
                         We are not adopting the commenter's suggestion. We do not believe that we have the statutory authority to take such action. After consideration of the public comments we received, we are revising the proposed changes to § 489.3 by adding a provision to except from the definition of a “physician-owned hospital” those hospitals in which the physician ownership is limited to holding publicly traded securities or mutual funds that satisfy the requirements of the exception under§ 411.356(a) or (b). We are adopting as final, without modification, the proposed revisions to §§ 489.12 and 489.53. We are redesignating proposed paragraph (u)(1) of § 489.20 as paragraph (u) and revising it to specify that the hospital should furnish a list of physician owners to patients at the beginning of their hospital stay or outpatient visit. We are not adopting the proposed regulatory text under § 489.20(u)(2). 2. Patient Safety Measures In the DRA Report to Congress (page 67), we stated that it was appropriate to issue further guidance on what we expect of all hospitals with respect to the appraisal, initial treatment, and referral, when appropriate, of patients with medical emergencies. The Medicare hospital CoP regulations at 42 CFR Part 482 impose requirements on hospitals that have emergency departments, as well as requirements on hospitals without emergency departments. We believe that hospitals should be required to disclose to patients at the time of inpatient admission or registration for an outpatient service information concerning whether a physician is available on the premises 24 hours per day, 7 days per week. In the FY 2008 IPPS proposed rule (72 FR 24817), under the authority at sections 1861(e)(9), 1820(e)(3), 1866, 1871, and 1102 of the Act (described previously), we proposed to add a new provision at § 489.20(v) to require that hospitals furnish all patients notice at the beginning of their hospital stay or outpatient service if a doctor of medicine or a doctor of osteopathy is not present in the hospital 24 hours per day, 7 days per week, and to describe how the hospital will meet the medical needs of any patient who develops an emergency medical condition, at a time when no physician is present in the hospital. We sought comment as to whether this change would be best effectuated through changes to the Medicare provider agreement regulations or whether it would be more appropriate to include this change in the CoP requirements applicable to acute care hospitals and CAHs. It has also come to our attention that some hospitals have called 9–1–1 when a patient has gone into respiratory arrest, a physician has not been on the premises, and the onsite clinical personnel have lacked the requisite equipment or training to provide the required assessment, initial treatment, and referrals that are required of all hospitals. In some cases, required interventions to initiate emergency treatment may be outside the scope of 
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                        practice of the clinical personnel onsite. This has occurred even in hospitals that operate emergency departments. Therefore, in the FY 2008 IPPS proposed rule (72 FR 24817), we solicited comments on whether current requirements for emergency service capability in hospitals with or without emergency departments should be strengthened in certain areas. Specifically, we sought feedback on whether present regulatory provisions should be expanded with respect to the type of clinical personnel that must be present at all times in hospitals with and without emergency departments; the competencies that such personnel must demonstrate, such as training in Advanced Cardiac Life Support, or successful completion of specified professional training programs; the type of emergency response equipment that must be available and the manner in which it must be available, such as in each emergency department, or inpatient unit, among others; and whether emergency departments must be operated 24 hours per day, 7 days per week. We indicated that after evaluating the comments we received, we would consider whether we should amend the Medicare hospital CoPs related to the provision of emergency services in hospitals with and without emergency departments. We received a number of public comments on our proposal. Our response follows each comment summary below. *Comment:*
                         Most of the commenters stated that only physician-owned specialty hospitals should be required to disclose to patients whether or not a physician is on site at all times and how emergencies are handled when a physician is not on-site. The commenters stated that physician-owned specialty hospitals are generally not part of a larger system of care, most often have no transfer agreements with other hospitals, and tend to specialize in one type of care delivery, and that these factors create challenges to their ability to treat the unexpected emergency. The commenters also stated that “full-service community” hospitals are part of a network of care in their community that involves referrals from local physician practices, reliance on local trauma support networks, participation in local emergency medical transport systems, and transfer agreements among facilities. The commenters stated that applying additional requirements to full-service community hospitals is unnecessary and costly. However, they stated that applying them to physician-owned specialty hospitals could be used to assure that such hospitals, in the absence of being part of the broader care network, meet minimum standards for patient safety. In contrast, several other commenters stated that they supported a requirement to disclose onsite physician coverage, so long at it applies to all hospitals, regardless of whether they are physician-owned. Another commenter supported extending the physician onsite disclosure requirement to all hospitals and CAHs, stating that ideally all patients should be informed regarding the level of physician staffing present in the hospital. This commenter stated that patients should know, for example, whether a physician will remain in the hospital until all patients have recovered from anesthesia and are fully conscious. The commenter also stated that patients should be informed of the hospital's emergency response plan when a physician is not on the premises 24 hours per day, 7 days per week. *Response:*
                         Fully informed consumers of hospital and CAH services play an essential role in assuring the quality of health care services. It is important to provide patients information about whether a hospital or CAH has a physician on site at all times, and the provisions for handling emergencies when a physician is not on site. Consumers may have an expectation that a hospital or CAH, as a health care facility that operates 24 hours per day, 7 days per week, always has a physician on site. Therefore, it is important to ensure that consumers are provided accurate information on the availability of physician services at the point when they are about to become patients of a hospital or CAH. All hospitals and CAHs are required to have the basic capabilities to address medical emergencies within their facilities, regardless of whether a physician is always on-site and, in the case of hospitals, regardless of whether or not the hospital offers an emergency department or service. (All CAHs are required to offer emergency services.) In order to be fully informed, consumers also should be made aware of the hospital's or CAH's process for addressing medical emergencies that may occur when a physician is not on-site. Therefore, we have not adopted the suggestion of those commenters who would condition consumers” access to this information on the basis of the ownership structure of the hospital or CAH. Medicare hospital health and safety regulations are the same for all participating hospitals, regardless of their type of ownership. The same is true for the Medicare CAH health and safety regulations. For example, all hospitals are expected to have the capability to assess a medical emergency, provide initial treatment, and refer, or transfer, a patient to another hospital when appropriate. Given the uniform applicability of hospital and CAH requirements to all hospitals or CAHs, there is no basis for requiring only those hospitals or CAHs that are physician-owned to make the proposed physician availability-related disclosures. The disclosure requirement is appropriately triggered when a hospital or CAH does not have a physician on-site 24 hours per day, 7 days per week. As discussed in the regulatory impact statement, this final rule with comment period change will not have any significant economic impact on hospitals or CAHs. Therefore, we disagree with those commenters who stated that the physician-availability disclosure requirement would be costly for hospitals and CAHs. *Comment:*
                         Several commenters addressed whether the physician-availability disclosure requirement should apply to CAHs as well as hospitals. One commenter stated that the problem of hospitals ill-prepared to handle patient emergencies seems confined to specialty hospitals. This commenter stated that the physician-availability disclosure requirement would affect numerous rural hospitals and CAHs, which often do not have physicians on site, and often utilize physician assistants or nurse practitioners, or both, with a supervising physician available by telephone. The commenter stated that, because these hospitals have established referral systems and often serve as staging areas where patients are stabilized for transport, additional requirements would be unnecessary and costly. The commenter also stated that limiting rural hospitals’ and CAHs’ ability to utilize physician assistants and nurse practitioners would create substantial access problems. Similarly, another commenter stated that the proposed change would be a particular problem for CAHs. This commenter stated that the CAH CoPs have been written expressly to provide flexibility for CAHs so they can meet the needs of patients in isolated, rural communities without having a physician in the building at all times. In contrast, another commenter stated that the physician-availability disclosure requirement should include CAHs because there is no clear distinction between the services offered by physician-owned specialty hospitals and CAHs. This commenter stated that, while most CAHs are nonprofit 
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                        hospitals that provide a range of services to small rural communities, some CAHs are for-profit hospitals and some offer specialty services. The commenter stated he was aware of one CAH with a hand surgery focus and another with a cardiac catheterization laboratory. The commenter stated that, because CAHs are not restricted in the services they offer, they should have the same physician-availability disclosure requirements as other hospitals. *Response:*
                         We agree that the physician-availability disclosure requirement should apply equally to hospitals and CAHs. Although we agree with those commenters who stated that many CAHs do not have physicians on-site at all times, and thus would be required to disclose this information to patients, we do not agree that this alone is sufficient reason to exempt CAHs from the physician-availability disclosure requirement. It would not be appropriate to condition patients’ access to information on physician availability on whether or not the patients reside in a rural area. Because we do not require either hospitals or CAHs to have a physician on-site at all times, there is no basis to require only hospitals, but not CAHs, to disclose this information. As one commenter stated, the CAH CoPs provide greater flexibility in many areas when compared to the hospital CoPs. However, this is not the case in all areas. CAHs, for example, must provide emergency services to the public 24 hours per day, while hospitals have the option of operating an emergency department or not. Furthermore, as one commenter stated, there is no restriction on the types of services a CAH may offer. Thus, it may be difficult for consumers to distinguish whether a given provider is a hospital or a CAH. Consumers may not be aware that there are different requirements for CAHs than for facilities participating in Medicare as hospitals. Consumers may make assumptions about physician availability in any “hospital,” because the facility provides services 24 hours per day, 7 days per week, regardless of whether that facility is a CAH or hospital for Medicare purposes. Therefore, it is important for consumers to be informed whether a physician is always on site, and how emergencies will be handled when no physician is available. We do not agree that this requirement limits the ability of rural hospitals or CAHs to utilize physician assistants and nurse practitioners. There is no change to the current requirements in the CoPs for hospitals or CAHs regarding utilization of physician assistants and nurse practitioners. *Comment:*
                         One commenter stated a physician-availability disclosure requirement should apply only to facilities that provide inpatient care 24 hours per day, 7 days per week. The commenter stated that CMS should clarify in the FY 2008 IPPS final rule that the requirement does not apply to provider-based settings that are not open at all times and/or are not providing inpatient services. The commenter stated that disclosure of emergency services capabilities in the registration process will create greater confusion for patients. *Response:*
                         Because the requirement in this final rule with comment period applies to hospitals and CAHs, and because both hospitals and CAHs are required to make inpatient care available on a 24 hours per day, 7 days per week basis, we do not agree that the requirement would be narrowed to fewer facilities by applying it only to facilities providing inpatient care. We do not agree that provider-based locations are subject to a separate standard because they do not participate separately in Medicare. The health and safety standards apply to provider-based locations of hospitals or CAHs. All provider-based locations of a hospital or CAH are considered part of the hospital or CAH, and the provider-based location's clinical services, including the provision of emergency services, must be integrated into those of the hospital or CAH. *Comment:*
                         One commenter stated that the proposed requirement fails to provide timely or useful information to the patient, indicating that the physician-availability disclosure occurs post-admission. The commenter stated that CMS should undertake a comprehensive consumer education initiative prior to imposing this requirement, so that the patient could make an informed choice about any particular facility. *Response:*
                         We do not agree that the patient would, in every instance, already have been admitted before the required physician-availability disclosure would take place. We proposed that, for purposes of this disclosure requirement, the hospital stay or outpatient visit begins with the provision of a package of information regarding scheduled preadmission testing and registration for a planned hospital admission for inpatient care or the provision of a package of information regarding an outpatient service. It is our intent that this information be provided by the hospital to the consumer at the first point of contact related to a particular admission or episode of care, in order to enhance its usefulness. CMS strives, as part of its overall commitment to increasing the transparency of the health care system to consumers, to equip consumers with information that enables them to make informed choices about their care. Education and outreach about our efforts are ongoing. We do not agree that implementation of the physician-availability disclosure requirement should be delayed until a specific educational campaign is concluded. *Comment:*
                         One commenter stated that hospitals are currently required to have a plan in place for how they will provide care, including emergency care. The commenter stated that the physician-availability disclosure requirement is therefore redundant and places an unnecessary burden on the facility. *Response:*
                         We do not agree that having a plan in place for providing emergency care is the same as informing consumers about the availability of physician services and how emergency care will be provided to them when a physician is not on the premises. The physician-availability disclosure required by this final rule with comment period is intended to assure provision of important information to consumers making healthcare decisions. This requirement is separate and distinct from any requirements contained in the hospital and CAH CoPs regarding the provision of emergency services and the care planning for each patient, among others. *Comment:*
                         One commenter stated that the required disclosure “arguably” should be extended to cover the presence or absence of particular equipment, or the level of expertise of the facility's staff, so the patient can understand what to expect depending on the nature of the emergency and the capabilities of the facility, and the likelihood of transfer to another hospital for any particular medical emergency. *Response:*
                         Ideally, an informed consumer would have a comprehensive understanding of the capabilities of any hospital and/or CAH, in terms of both specialized equipment and staff, that the consumer considers using. However, the commenter's suggestion would greatly expand the impact of the physician-availability disclosure requirement. Instead of affecting only those hospitals and CAHs that do not have a physician present 24 hours per day, 7 days per week, the commenter's suggested approach would affect all hospitals and CAHs. It would not only increase the number of hospitals and CAHs affected by the requirement, but would also 
                        ( print page 47390)
                        require them to provide a much more detailed and lengthy disclosure. Therefore, at this time, we will not be mandating an expanded disclosure requirement. Hospitals have the flexibility to provide such additional information to consumers, either as a general policy or in response to questions from consumers. *Comment:*
                         One commenter did not object to informing patients when a physician is not always in the facility. However, the commenter hoped that the required notice of how emergency services would be provided would not imply that patients are receiving less than competent care. The commenter stated that a hospital could make an affirmative statement, such as the following: “This facility provides competent, fully trained staff who are available 24 hours per day. At times when there is no physician present, patients with health care emergencies will be assessed and treated by qualified medical personnel, with physician support available via telephone or pager, and will be transferred to another hospital, when necessary.” *Response:*
                         We are requiring hospitals and CAHs that do not have a physician on site at all times to state this in the notice, as well as how the hospital will meet the needs of any patient who develops an emergency medical condition at a time when there is no physician present. We are not prescribing specific wording for the notice, since the content must be tailored to the circumstances of the individual hospital or CAH, but we note that the commenter's suggested wording lacks explicit notice that the hospital does not provide on-site availability of a physician 24 hours per day, 7 days per week. Adoption of this disclosure requirement does not imply anything about the competency of care provided by other types of practitioners. *Comment:*
                         One commenter stated that many long term care hospitals do not provide on-site, 24-hour physician coverage and asked whether such hospitals are expected to have such on-site physician services. The commenter stated that if this is CMS's interpretation, then this interpretation should be translated into the CoPs. *Response:*
                         In this final rule with comment period, we are requiring hospitals and CAHs that do not have a physician on-site 24 hours per day, 7 days per week to disclose this information to patients, along with information about how they would handle an emergency when no physician is on-site. We are not making any changes to the hospital or CAH CoPs in this final rule with comment period. The current hospital and CAH CoPs do not include a requirement for a physician to be on site at all times. *Comment:*
                         One commenter stated that CMS should clarify whether the disclosure would be required only on those days when a physician is not on-site, or at all times if there is a possibility that a physician might not be on-site. The commenter also stated that CMS should indicate whether it expects a separate, signed notice to be provided to patients or a general notice to be included with other registration/admission documents outlining basic provisions for unexpected emergency care. *Response:*
                         This final rule with comment period requires any hospital or CAH that does not provide for a physician to be on-site 24 hours per day, 7 days per week to disclose this to patients, regardless of whether or not it happens to have 24-hour on-site coverage at the beginning of the patient's hospital or CAH inpatient stay or outpatient visit. A hospital or CAH that is required under this final rule with comment period to make a physician-availability disclosure must do so via a written notice provided to each patient. The required notice must indicate that a physician is not on-site 24 hours per day, 7 days per week, and how the hospital or CAH handles medical emergencies that arise when a physician is not on-site. This final rule with comment period does not require that the hospital have the patient sign the notice. *Comment:*
                         Most of the commenters stated that they supported strengthening requirements concerning emergency services capabilities only for physician-owned specialty hospitals. The commenters stated that applying additional requirements for “full-service community hospitals” is unnecessary and costly, but that applying them to physician-owned facilities could be used to assure that such hospitals, in the absence of being part of the broader care network, meet minimum standards for patient safety. Another commenter also stated that any additional measures should be applied only to physician-owned facilities and not to “full-service community hospitals.” This commenter also stated that State and Federal rules for CAHs already delineate in detail the emergency equipment that must be provided on site, mechanisms to contact on-call practitioners, timeframes within which these practitioners must be available, and written agreements and protocols for transferring patients for further treatment when indicated. In contrast, several other commenters stated that, in the interest of patient safety, they would support a requirement that standardized the type and training of clinical personnel available in any Medicare-certified hospital. These commenters also stated that they endorse setting minimum requirements for equipment. Another commenter stated that the condition of participation for emergency services in both hospitals and CAHs should be strengthened, stating that a hospital should be capable of handling any situation that can reasonably be expected to occur. This commenter also stated that, to develop the precise regulatory provisions in the revised CoPs, CMS should convene an expert panel or, at a minimum, consult with the State agencies and recognized national accrediting bodies, as required by section 1863 of the Act. Finally, one commenter, while stating support for CMS setting minimum emergency service standards, also stated concern that such standards might conflict with, duplicate, or exceed current State requirements. The commenter stated CMS should coordinate development of minimum emergency medical response standards with interested professional organizations as well as State authorities overseeing medical emergency response. *Response:*
                         We disagree with those commenters who supported expanded regulatory requirements for emergency services capabilities only for physician-owned facilities, because Medicare hospital health and safety standards apply to all participating hospitals, regardless of their type of ownership. The same is true for the Medicare CAH health and safety standards. We are not aware of any evidence to support the view that patient safety concerns arise only in physician-owned facilities, and that what the commenters call “full-service community hospitals” always assure that care is provided to patients in the right time and setting, due to these hospitals’ participation in a community network of care. Our oversight experience suggests that patient safety problems can occur in hospitals with any type of ownership structure, or any type of service mix, whether general or specialized. For this reason, any changes to the hospital CoPs that we might propose would apply to all hospitals, and likewise any changes to the CAH CoPs that we might propose would apply to all CAHs. We also note the support of several commenters for a requirement that would standardize the type and training of clinical personnel, as well as minimum requirements for equipment 
                        ( print page 47391)
                        that must be available in any Medicare-certified hospital. With respect to whether strengthening the minimum Medicare requirements related to emergency services would raise issues of conflict with or exceeding State requirements, this potential situation is not unique to emergency services standards. Medicare health and safety standards, unless the regulations specifically state to the contrary, preempt conflicting State requirements. We will consider the commenters' views, including the suggestions about consultation, in undertaking any future rulemaking to strengthen emergency services minimum requirements. We agree with the commenter who pointed out that the existing emergency services requirements for CAHs are detailed. For example, our current regulations at 42 CFR 485.618(a) require CAHs to make emergency services available on a 24-hour per day basis. Section 485.618(b) establishes the standard regarding availability of equipment, supplies, and medication used in treating emergency cases. Our regulations at § 485.618(d) are specific as to the required CAH emergency services clinical personnel, including the types of personnel, as well as the mode and timeframe for their availability. These regulatory standards are more detailed than those found in the comparable hospital emergency services CoP (42 CFR 482.55), or in the applicable hospital standard at 42 CFR 482.12(f)(2) for hospitals that do not have emergency departments. Because hospitals tend to be larger health care facilities than CAHs, it might be reasonable to provide a comparable degree of specificity, appropriate to the hospital setting, in the hospital CoPs. We will consider the commenters' views in undertaking any future rulemaking on this issue. *Comment:*
                         One commenter stated that, if CMS chooses to expand the existing regulatory provisions for clinical personnel that must be present at all times, CMS should use broad terminology. The commenter provided the following examples: “qualified medical personnel,” or “practitioners with appropriate privileges,” or “licensed practitioners,” including the phrase “with/and physician supervision to the extent required by state law.” The commenter also stated CMS should drop its current usage of the term “licensed independent practitioner” in its regulations, stating that this causes “endless headaches” for hospitals that wish to utilize physician assistants. *Response:*
                         We note that the terminology suggested by the commenter is very broad and would not significantly expand upon existing requirements. We will consider these comments in undertaking any future rulemaking on this issue. *Comment:*
                         Two commenters specifically addressed our request for comments on whether we should require hospitals with emergency departments to provide these emergency services 24 hours per day, 7 days per week. They stated that such a requirement would best come from the State or EMS district in which the hospital is located, because these authorities would be in the best position to judge the need for emergency care. *Response:*
                         CAHs are currently required, under the provisions at 42 CFR 485.618(a), to make emergency services available on a 24 hours per day basis. Because hospitals with emergency departments tend to be larger health care facilities than CAHs, it might be reasonable to require hospital emergency departments to also be available to the public on a 24 hour per day basis. We will consider these comments in any future rulemaking on this issue. *Comment:*
                         Two commenters addressed the issue of locating the physician-availability disclosure requirement in the provider agreement rules rather than in the CoPs. One commenter stated it would be more appropriate to include the requirement in the provider agreement rules. The other commenter stated that it would be easier to ensure compliance if CMS implemented the physician-availability disclosure requirement through the CoPs rather than the provider agreement regulations. This commenter further stated that, unlike the CoPs referenced regularly, the provider agreement rules are only referenced when a health care facility initially enrolls [in Medicare], with no subsequent review of compliance. The commenter also stated that placement of the requirement in the CoPs would facilitate the commenter's consultation with Medicare requirements when developing its own practices and policies. *Response:*
                         We agree that the physician-availability disclosure requirement should be included in the provider agreement regulations. We do not agree that the provider agreement regulations are referenced only when a facility initially enrolls in Medicare. Each participating provider must comply with all applicable provisions of the provider agreement regulations found in 42 CFR Part 489, and CMS may terminate its provider agreement if the provider is not in substantial compliance with these requirements. A provider's compliance with applicable provider agreement regulations is reviewed through a variety of means, including on-site investigation of complaints. An example of this mode of compliance review is our enforcement of the special responsibilities of Medicare hospitals in emergency cases, commonly known as EMTALA (EMTALA requirements are addressed in § 489.24, with certain related provisions found in § 489.20). Therefore, we do not agree that the regulatory language we proposed concerning disclosure of physician on-site availability should be moved to the CoPs in order to permit compliance reviews. We do not consider the ease of referencing the regulations containing the CoPs, versus that of referencing those containing the provider agreement regulations, a compelling reason to move the regulatory language from the provider agreement regulations to the CoPs. After consideration of the public comments we received, we are adopting as final, with one technical correction, the addition of a provision at § 489.20(v) to require that hospitals and CAHs furnish all patients written notice at the beginning of their hospital stay or outpatient service if a doctor of medicine or a doctor of osteopathy is not present in the hospital 24 hours per day, 7 days per week, and to describe how the hospital or CAH will meet the medical needs of any patient who develops an emergency medical condition at a time when no physician is present in the hospital. We are correcting a typographical error that appeared in the proposed rule. The proposed regulatory text stated that the required notice must indicate “* * *how the hospital will meet the medical needs of any inpatient who develops an emergency medical condition* * *” We intended to say “patient” instead of “inpatient,” as is clear from the references to outpatient visits in two other places within the regulatory text we originally proposed. H. Rural Community Hospital Demonstration Program In accordance with the requirements of section 410A(a) of Pub. L. 108–173, the Secretary has established a 5-year demonstration program (beginning with selected hospitals' first cost reporting period beginning on or after October 1, 2004) to test the feasibility and advisability of establishing “rural community hospitals” for Medicare payment purposes for covered inpatient hospital services furnished to Medicare beneficiaries. A rural community hospital, as defined in section 410A(f)(1), is a hospital that— 
                        ( print page 47392) Is located in a rural area (as defined in section 1886(d)(2)(D) of the Act) or is treated as being located in a rural area under section 1886(d)(8)(E) of the Act;
                    Has fewer than 51 beds (excluding beds in a distinct part psychiatric or rehabilitation unit) as reported in its most recent cost report;
                    Provides 24-hour emergency care services; and
                    Is not designated or eligible for designation as a CAH. As we indicated in the FY 2005 IPPS final rule (69 FR 49078), in accordance with sections 410A(a)(2) and (a)(4) of Pub. L. 108–173 and using 2002 data from the U.S. Census Bureau, we identified 10 States with the lowest population density from which to select hospitals: Alaska, Idaho, Montana, Nebraska, Nevada, New Mexico, North Dakota, South Dakota, Utah, and Wyoming (Source: 
                        *U.S. Census Bureau Statistical Abstract of the United States: 2003*). Nine rural community hospitals located within these States are currently participating in the demonstration program for FY 2008. (Of the 13 hospitals that participated in the first 2 years of the demonstration program, 4 hospitals located in Nebraska have withdrawn from the program; they have become CAHs.) Under the demonstration program, participating hospitals are paid the reasonable costs of providing covered inpatient hospital services (other than services furnished by a psychiatric or rehabilitation unit of a hospital that is a distinct part), applicable for discharges occurring in the first cost reporting period beginning on or after the October 1, 2004 implementation date of the demonstration program. Payments to the participating hospitals will be the lesser amount of the reasonable cost or a target amount in subsequent cost reporting periods. The target amount in the second cost reporting period is defined as the reasonable costs of providing covered inpatient hospital services in the first cost reporting period, increased by the inpatient prospective payment update factor (as defined in section 1886(b)(3)(B) of the Act) for that particular cost reporting period. The target amount in subsequent cost reporting periods is defined as the preceding cost reporting period's target amount, increased by the inpatient prospective payment update factor (as defined in section 1886(b)(3)(B) of the Act) for that particular cost reporting period. Covered inpatient hospital services are inpatient hospital services (defined in section 1861(b) of the Act), and include extended care services furnished under an agreement under section 1883 of the Act. Section 410A of Pub. L. 108–173 requires that, “in conducting the demonstration program under this section, the Secretary shall ensure that the aggregate payments made by the Secretary do not exceed the amount which the Secretary would have paid if the demonstration program under this section was not implemented.” Generally, when CMS implements a demonstration program on a budget neutral basis, the demonstration program is budget neutral in its own terms; in other words, the aggregate payments to the participating providers do not exceed the amount that would be paid to those same providers in the absence of the demonstration program. This form of budget neutrality is viable when, by changing payments or aligning incentives to improve overall efficiency, or both, a demonstration program may reduce the use of some services or eliminate the need for others, resulting in reduced expenditures for the demonstration program's participants. These reduced expenditures offset increased payments elsewhere under the demonstration program, thus ensuring that the demonstration program as a whole is budget neutral or yields savings. However, the small scale of this demonstration program, in conjunction with the payment methodology, makes it extremely unlikely that this demonstration program could be viable under the usual form of budget neutrality. Specifically, cost-based payments to the nine participating small rural hospitals are likely to increase Medicare outlays without producing any offsetting reduction in Medicare expenditures elsewhere. Therefore, a rural community hospital's participation in this demonstration program is unlikely to yield benefits to the participant if budget neutrality were to be implemented by reducing other payments for these providers. In order to achieve budget neutrality for this demonstration program for FY 2008, we are adjusting the national inpatient PPS rates by an amount sufficient to account for the added costs of this demonstration program. We are applying budget neutrality across the payment system as a whole rather than merely across the participants in this demonstration program. As we discussed in the FY 2005, FY 2006, and FY 2007 IPPS final rules (69 FR 49183; 70 FR 47462; and 71 FR 48100), we believe that the language of the statutory budget neutrality requirements permits the agency to implement the budget neutrality provision in this manner. For FY 2008, using cost report data for FY 2003, adjusted to account for the increased estimated costs for the remaining nine participating hospitals, we estimate that the adjusted amount will be $9,681,893. This estimated adjusted amount reflects the estimated difference between the participating hospitals’ costs and the IPPS payment based on data from the hospitals' cost reports. We discuss the payment rate adjustment that is required to ensure the budget neutrality of the demonstration program for FY 2008 in section II.A.4. of the Addendum to this final rule with comment period. We did not receive any public comments on the provisions of the demonstration project discussed in the proposed rule. V. Changes to the IPPS for Capital-Related Costs (If you choose to comment on issues in this section, please include the caption “Capital IPPS Payment Adjustments” at the beginning of your comment.) A. Background Section 1886(g) of the Act requires the Secretary to pay for the capital-related costs of inpatient acute hospital services “in accordance with a prospective payment system established by the Secretary.” Under the statute, the Secretary has broad authority in establishing and implementing the IPPS for acute care hospital inpatient capital-related costs. We initially implemented the IPPS for capital-related costs in the August 30, 1991 IPPS final rule (56 FR 43358), in which we established a 10-year transition period to change the payment methodology for Medicare hospital inpatient capital-related costs from a reasonable cost-based methodology to a prospective methodology (based fully on the Federal rate). Federal fiscal year (FY) 2001 was the last year of the 10-year transition period established to phase in the IPPS for hospital inpatient capital-related costs. For cost reporting periods beginning in FY 2002, capital IPPS payments are based solely on the Federal rate for most acute care hospitals (other than certain new hospitals and hospitals receiving certain exception payments). The basic methodology for determining capital prospective payments using the Federal rate is set forth in § 412.312. For the purpose of calculating payments for each discharge, the standard Federal rate is adjusted as follows: (Standard Federal Rate) × (DRG Weight) × (Geographic Adjustment Factor (GAF)) × (Large Urban Add-on, if 
                        ( print page 47393)
                        applicable) × (COLA for hospitals located in Alaska and Hawaii) × (1 + Capital DSH Adjustment Factor + Capital IME Adjustment Factor, if applicable). Hospitals also may receive outlier payments for those cases that qualify under the threshold established for each fiscal year as specified in § 412.312(c) of the regulations. The regulations at § 412.348(f) provide that a hospital may request an additional payment if the hospital incurs unanticipated capital expenditures in excess of $5 million due to extraordinary circumstances beyond the hospital's control. This policy was originally established for hospitals during the 10-year transition period, but as we discussed in the August 1, 2002 IPPS final rule (67 FR 50102), we revised the regulations at § 412.312 to specify that payments for extraordinary circumstances are also made for cost reporting periods after the transition period (that is, cost reporting periods beginning on or after October 1, 2001). Additional information on the exception payment for extraordinary circumstances in § 412.348(f) can be found in the FY 2005 IPPS final rule (69 FR 49185 and 49186). During the transition period, under §§ 412.348(b) through (e), eligible hospitals could receive regular exception payments. These exception payments guaranteed a hospital a minimum payment percentage of its Medicare allowable capital related costs depending on the class of the hospital (§ 412.348(c)), but were available only during the 10-year transition period. After the end of the transition period, eligible hospitals can no longer receive this exception payment. However, even after the transition period, eligible hospitals receive additional payments under the special exceptions provisions at § 412.348(g), which guarantees all eligible hospitals a minimum payment of 70 percent of its Medicare allowable capital-related costs provided that special exceptions payments do not exceed 10 percent of total capital IPPS payments. Special exceptions payments may be made only for the 10 years from the cost reporting year in which the hospital completes its qualifying project, and the hospital must have completed the project no later than the hospital's cost reporting period beginning before October 1, 2001. Thus, an eligible hospital may receive special exceptions payments for up to 10 years beyond the end of the capital IPPS transition period. Hospitals eligible for special exceptions payments are required to submit documentation to the intermediary indicating the completion date of their project. (For more detailed information regarding the special exceptions policy under § 412.348(g), refer to the August 1, 2001 IPPS final rule (66 FR 39911 through 39914) and the August 1, 2002 IPPS final rule (67 FR 50102).) Under the IPPS for capital-related costs, § 412.300(b) of the regulations defines a new hospital as a hospital that has operated (under current or previous ownership) for less than 2 years. (For more detailed information, we refer readers to the August 30, 1991 final rule (56 FR 43418).) During the 10-year transition period, a new hospital was exempt from the capital IPPS for its first 2 years of operation and was paid 85 percent of its reasonable costs during that period. Originally, this provision was effective only through the transition period and, therefore, ended with cost reporting periods beginning in FY 2002. Because we believe that special protection to new hospitals is also appropriate even after the transition period, as discussed in the August 1, 2002 IPPS final rule (67 FR 50101), we revised the regulations at § 412.304(c)(2) to provide that, for cost reporting periods beginning on or after October 1, 2002, a new hospital (defined under § 412.300(b)) is paid 85 percent of its Medicare allowable capital related costs through its first 2 years of operation, unless the new hospital elects to receive fully prospective payment based on 100 percent of the Federal rate. (We refer readers to the August 1, 2001 IPPS final rule (66 FR 39910) for a detailed discussion of the statutory basis for the system, the development and evolution of the system, the methodology used to determine capital related payments to hospitals both during and after the transition period, and the policy for providing exception payments.) Section 412.374 provides for the use of a blended payment amount for prospective payments for capital-related costs to hospitals located in Puerto Rico. Accordingly, under the capital IPPS, we compute a separate payment rate specific to Puerto Rico hospitals using the same methodology used to compute the national Federal rate for capital-related costs. In general, hospitals located in Puerto Rico are paid a blend of the applicable capital IPPS Puerto Rico rate and the applicable capital IPPS Federal rate. Prior to FY 1998, hospitals in Puerto Rico were paid a blended capital IPPS rate that consisted of 75 percent of the capital IPPS Puerto Rico specific rate and 25 percent of the capital IPPS Federal rate. However, effective October 1, 1997 (FY 1998), in conjunction with the change to the operating IPPS blend percentage for hospitals located in Puerto Rico required by section 4406 of Pub. L. 105–33, we revised the methodology for computing capital IPPS payments to hospitals in Puerto Rico to be based on a blend of 50 percent of the capital IPPS Puerto Rico rate and 50 percent of the capital IPPS Federal rate. Similarly, in conjunction with the change in operating IPPS payments to hospitals located in Puerto Rico for FY 2005 required by section 504 of Pub. L. 108–173, we again revised the methodology for computing capital IPPS payments to hospitals located in Puerto Rico to be based on a blend of 25 percent of the capital IPPS Puerto Rico rate and 75 percent of the capital IPPS Federal rate effective for discharges occurring on or after October 1, 2004. B. Policy Change As we have noted above, the Secretary has broad authority under the statute in establishing and implementing the IPPS for hospital inpatient capital-related costs. We initially exercised that authority in the August 30, 1991 IPPS final rule (56 FR 43358). Among other provisions of that rule, we established the 10-year transition period to change the payment methodology for Medicare hospital inpatient capital-related costs from a reasonable cost-based methodology to a prospective methodology (based fully on the Federal rate). The purpose of that lengthy transition was to allow hospitals sufficient time to adjust to payment under a fully prospective system based on a uniform national rate. In that rule, we also established the initial standard Federal payment rate for capital related costs, as well as the mechanism for updating that rate in subsequent years. For FY 1992, we computed the standard Federal payment rate for capital-related costs under the IPPS by updating the FY 1989 Medicare inpatient capital cost per case by an actuarial estimate of the increase in Medicare inpatient capital costs per case. Each year after FY 1992, we update the capital standard Federal rate, as provided at § 412.308(c)(1), to account for capital input price increases and other factors. The regulations at § 412.308(c)(2) provide that the capital Federal rate is adjusted annually by a factor equal to the estimated proportion of outlier payments under the capital Federal rate to total capital payments under the capital Federal rate. In addition, § 412.308(c)(3) requires that the capital Federal rate be reduced by an adjustment factor equal to the estimated proportion of payments for (regular and special) exceptions under § 412.348. Section 412.308(c)(4)(ii) requires that 
                        ( print page 47394)
                        the capital standard Federal rate be adjusted so that the effects of the annual DRG reclassification and the recalibration of DRG weights, and changes in the geographic adjustment factor are budget neutral. In the FY 2008 IPPS proposed rule, we noted that since the implementation of the IPPS for hospital inpatient capital-related costs, we have carefully monitored the adequacy of the standard Federal payment rate for capital-related costs and the updates provided under the existing regulations. On several occasions, the standard Federal payment rate has been adjusted. Section 1886(g)(1)(A) of the Act required a 7.4 percent reduction to the capital rate for discharges occurring after September 30, 1993. (We implemented that reduction to the rate in § 412.308(b)(2) of our regulations, effective in FY 1994.) Section 412.308(b)(3) of the regulations describes the 0.28 percent reduction to the capital rate made in FY 1996 as a result of the revised policy of paying for transfers. In FY 1998, we implemented section 4402 of Pub. L. 105–33, which required that, for discharges occurring on or after October 1, 1997, and before October 1, 2002, the unadjusted capital standard Federal rate be reduced by 17.78 percent (above the previous statutory reduction of 7.4 percent). (As a result of that reduction, the FY 1998 standard Federal payment rate for capital-related costs was $371.51, compared to $438.92 in FY 1997.) As we discussed in the FY 2003 IPPS final rule (67 FR 50102) and implemented in § 412.308(b)(6), a small part of that reduction was restored effective October 1, 2002. We also noted that, in general, under a PPS, standard payment rates should reflect the costs that an average, efficient provider would bear to provide the services required for quality patient care. Payment rate updates should also account for the changes necessary to continue providing such services. Updates should reflect, for example, the increased costs that are necessary to provide for the introduction of new technology that improves patient care. Updates should also take into account the productivity gains that, over time, allow providers to realize the same, or even improved, quality outcomes with reduced inputs and lower costs. Hospital margins, the difference between the costs of actually providing services and the payments received under a particular system, thus provide some evidence concerning whether payment rates have been established and updated at an appropriate level over time for efficient providers to provide necessary services. All other factors being equal, sustained substantial positive margins may suggest that payment rates and updates have exceeded what is required to provide those services. It is to be expected, under a PPS, that highly efficient providers might regularly realize positive margins, while less efficient providers might regularly realize negative margins. However, a PPS that is correctly calibrated should not necessarily experience sustained periods in which providers generally realize substantial positive Medicare margins. Under the capital IPPS in particular, it seems especially appropriate that there should not be sustained significant positive margins across the system as a whole. Prior to the implementation of the capital IPPS, Congress mandated that the Medicare program pay only 85 percent of hospitals' inpatient Medicare capital costs. During the first 5 years of the capital IPPS, Congress also mandated a budget neutrality adjustment, under which the standard Federal capital rate was set each year so that payments under the system as a whole equaled 90 percent of estimated hospitals' inpatient Medicare capital costs for the year. Finally, as we discussed in the proposed rule, Congress has twice adjusted the standard Federal capital rate (a 7.4 percent reduction beginning in FY 1994, followed by a 17.78 percent reduction beginning in FY 1998). On the second occasion in particular, the specific congressional mandate was “to apply the budget neutrality factor used to determine the Federal capital payment rate in effect on September 30, 1995* * * to the unadjusted standard Federal capital payment rate” for FY 1998 and beyond. (The designated budget neutrality factor constituted a 17.78 percent reduction.) This statutory language indicates that Congress considered the payment levels in effect during FYs 1992 through 1995, established under the budget neutrality provision to pay 90 percent of hospitals' inpatient Medicare capital costs in the aggregate, appropriate for the capital IPPS. The statutory history of the capital IPPS thus suggests that the system in the aggregate should not provide for continuous, large positive margins. In preparation for the proposed rule, we analyzed the adequacy of the existing capital IPPS rates by conducting a comprehensive review of hospital experience under the IPPS for hospital inpatient capital-related costs, with particular attention to the relationship between acute care hospital capital Medicare costs and payments under the capital IPPS. Specifically, we examined the relationship between the Medicare inpatient capital costs of hospitals that are paid under the IPPS for hospital inpatient capital-related costs and their payments under that system over a number of years. We derived both cost and Medicare payment data from the Medicare cost report. Specifically, cost data were derived from Worksheet D, Part I, columns 10 and 12 and Part II, columns 6 and 8, and Medicare payment data from Worksheet E, Part A, Lines 9 and 10. We began our analysis with FY 1996, the year in which the statutory budget neutrality provision expired. (As we have discussed, for FYs 1992 through 1995, section 1886(g)(1)(A) of the Act required that the capital Federal rate also be adjusted by a budget neutrality factor so that aggregate payments for inpatient hospital capital costs were projected to equal 90 percent of the payments that would have been made for capital-related costs on a reasonable cost basis during the fiscal year. As discussed in section III. of the Addendum to the proposed rule and this final rule with comment period, we employed an actuarial capital cost model (described in Appendix B of the FY 2002 IPPS final rule (66 FR 40099)) to estimate the aggregate payments that would have been made on the basis of reasonable cost in order to determine the required budget neutrality adjustment. As a result of the expiration of the budget neutrality provision, the standard Federal payment rate for capital-related costs increased to $461.96 in FY 1996 from $376.83 in FY 1995.) Our analysis in the proposed rule extended through FY 2004, the most recent year for which we had relatively complete cost report information. We examined data across all hospitals subject to the capital IPPS and across the categories of hospitals (for example, urban and rural, and teaching and nonteaching) that we normally employ in conducting impact analyses. Specifically, we looked at the difference between aggregate hospital payments from the capital IPPS and hospitals' aggregate Medicare inpatient capital costs. We determined the inpatient hospital Medicare capital margins for each year of the period from FY 1996 through FY 2004. (A margin is calculated as the difference between payments and costs, divided by payments.) We similarly calculated the aggregate margins for the period FY 1996 through FY 2004 (the aggregate difference between payments and costs over the period, divided by total payments over the period). We also calculated aggregate margins for the 
                        ( print page 47395)
                        period FY 1998 through FY 2004 (excluding FY 1996 and 1997). As a result of the expiration of the statutory budget neutrality provision, the capital standard Federal rate increased to $461.96 in FY 1996 from $376.83 in FY 1995. The capital standard Federal rate was $438.92 in FY 1997, before it was reduced to $371.51 in FY 1998 under section 4402 of Pub. L. 105–33, which required that the unadjusted capital standard Federal rate be reduced by 17.78 percent. The capital standard Federal rates for FYs 1996 and 1997 were thus substantially higher than the rates for the periods immediately preceding those years, and in the subsequent years (FY 1998 and beyond). The margins for those years are correspondingly higher than the margins for the other years in the period, and thus it could be argued that the margins for FYs 1996 and 1997 are unrepresentative. The table below summarizes the findings of this analysis for the proposed rule. Hospital Inpatient Medicare Capital Margins
1996
1997
1998
1999
2000
2001
2002
2003
2004
Aggregate 
                                 1996–2004
Aggregate 
                                 1998–2004  
                                 (excluding 1996 and 1997)U.S.
17.5
13.4
7.0
6.8
7.3
7.9
8.7
7.7
5.1
9.0
7.2URBAN
17.6
13.8
7.8
7.4
8.3
8.9
10.3
9.1
6.3
9.9
8.3RURAL
17.2
11.1
2.0
2.7
1.3
1.5
−1.7
−1.2
−2.9
3.4
0.3No DSH Payments
16.2
11.8
4.4
4.4
5.6
5.6
5.0
4.8
−0.9
6.9
4.2Has DSH Payments
18.3
14.4
8.5
8.1
8.2
8.7
9.9
8.6
6.7
9.9
8.4$1−$249,999
14.5
12.9
−0.4
3.1
1.6
4.2
2.5
0.6
−3.5
3.3
1.8$250,000−$999,999
15.5
9.3
2.2
1.5
3.0
2.5
−1.2
0.2
−3.8
2.9
0.5$1,000,000−$2,999,999
16.8
12.8
8.5
9.2
8.6
7.2
9.0
4.6
3.0
8.7
7.1$3,000,000 or more
20.1
16.6
10.4
9.1
9.7
11.6
13.4
12.5
10.1
12.4
11.1TEACHING
19.4
15.7
9.8
9.7
11.1
11.7
13.9
13.2
11.3
12.9
11.6NON–TEACHING
15.3
10.5
3.3
2.9
2.2
2.8
1.6
0.2
−3.2
3.9
1.3Census Division:New England (1)
26.9
25.8
17.0
15.1
18.2
20.5
21.3
21.2
20.5
20.9
19.3Middle Atlantic (2)
19.1
15.5
11.0
11.5
13.8
16.3
18.4
17.9
15.0
15.5
15.0South Atlantic (3)
17.9
13.9
5.8
3.9
5.9
5.2
6.3
7.5
4.9
7.9
5.7East North Central (4)
18.2
12.7
6.2
7.2
8.8
8.6
6.3
8.1
7.1
9.2
7.5East South Central (5)
14.8
11.1
3.3
4.1
3.4
2.9
3.0
−1.8
−4.2
3.9
1.4West North Central (6)
14.2
6.9
0.0
−0.4
−1.6
1.9
2.6
3.3
1.1
3.2
1.1West South Central (7)
13.3
8.3
3.4
3.1
0.6
0.1
1.4
−1.2
−4.2
2.5
0.3Mountain (8)
17.3
14.8
8.4
7.6
7.4
6.4
3.2
3.1
0.7
7.2
4.9Pacific (9)
20.5
16.1
12.4
11.3
11.5
12.8
15.5
12.8
9.2
13.5
12.2Code 99
24.1
26.1
14.9
16.7
20.0
20.9
20.6
25.2
22.3
21.4
20.3Bed Size:100 beds
17.7
13.0
4.7
3.5
2.8
2.5
−1.7
−1.3
−5.6
3.5
0.5100–249 beds
15.1
10.6
3.5
4.5
4.7
6.0
6.1
4.5
1.1
6.2
4.4250–499 beds
18.9
14.0
8.7
8.3
10.4
10.5
11.7
11.6
10.6
11.7
10.4500–999 beds
19.7
17.5
11.1
10.3
10.7
10.4
12.5
10.3
6.8
12.0
10.2= 1000 beds
8.2
13.8
2.1
0.2
−6.6
−3.5
8.7
6.3
1.4
3.1
1.8**Notes:**Based on Medicare Cost Report hospital data updated as of the 4th quarter of 2006.Medicare payment is from Worksheet E, Part A, Lines 9 and 10.Expenses are from Worksheet D, Part I, columns 10 and 12 and Part II, columns 6 and 8.We apply the outlier trimming methodology developed by MedPAC.Code 99 applies when census division information was not specified in the Medicare Cost Report hospital data.
 As the table showed, hospital inpatient Medicare capital margins have been very high across all hospitals during the period from FY 1996 through FY 2004. The margin for the entire period was 9.0 percent (7.2 percent, excluding FYs 1996 and 1997). For particular years, margins across all hospitals ranged from a high of 17.5 percent in FY 1996 to a low of 5.1 percent in FY 2004. While the margins fell after a high in FY 1996 of 17.5 to 6.8 percent in FY 1999, they rose again to 8.7 percent in FY 2002 before declining to 5.1 percent in FY 2004. There were similar results among most types of hospitals and groupings of hospitals by geographic region. For example, teaching hospitals have realized margins of 12.9 percent (11.6 percent, excluding FYs 1996 and 1997) during the period from FY 1996 through FY 2004, with a high margin of 19.4 percent in FY 1996 and a low margin of 9.7 percent in FY 1999. Urban hospitals realized margins of 9.9 percent during the period from FY 1996 through FY 2004 (8.3 percent, excluding FYs 1996 and 1997). DSH hospitals realized margins of 9.9 percent over the period (8.4 percent, excluding FYs 1996 and 1997), while non-DSH had aggregate margins of 6.9 percent (4.2 percent, excluding FYs 1996 and 1997). During the period from FY 1996 through FY 2004, every type of hospital and geographic grouping of hospitals has realized a positive aggregate margin from their capital IPPS payments. Of course, the aggregate capital margins for some types of hospitals have been lower than the margins for others. In particular, inpatient hospital Medicare capital margins for rural hospitals have lagged considerably behind the margins for urban hospitals. The aggregate margin for rural hospitals during the period from FY 1996 through FY 2004 was 3.4 percent (0.3 percent, excluding FYs 1996 and 1997), compared to 9.9 percent for urban hospitals and 9.0 percent for all hospitals. Rural hospitals have even experienced negative margins during several years of the period (−1.7 percent in FY 2002, −1.2 percent in FY 2003, and −2.9 percent in FY 2004). Similarly, nonteaching hospitals have 
                        ( print page 47396)
                        experienced lower margins than teaching hospitals. Teaching hospitals have experienced an aggregate margin of 12.9 percent during the period from FY 1996 through FY 2004 (11.6 percent, excluding FYs 1996 and 1997). However, nonteaching hospitals have experienced an aggregate margin of 3.9 percent during that period (1.3 percent, excluding FYs 1996 and 1997). As we discussed in the proposed rule, there may be various factors reflected in these margins. For example, one factor in the lower margins experienced by rural hospitals may be the transition of many rural hospitals to CAHs that are paid outside the IPPS. The number of rural hospitals in our analysis fell from 2,243 in FY 1996 to 1,211 in FY 2004, as the inpatient Medicare capital margins realized by rural hospitals fell from 17.2 percent to −2.9 percent. This suggests that more rural hospitals with relatively higher inpatient Medicare capital margins have made the transition to CAH status. However, it remains to be seen whether this trend in inpatient Medicare capital margins will continue as the relative numbers of CAHs and rural hospitals subject to the IPPS stabilize. We believe that the low aggregate margin for nonteaching hospitals is largely a function of the effect of the low, and for some years even negative, margin of the rural hospitals, as discussed earlier. As we also discussed in the proposed rule, there could be a number of reasons for the relatively high margins that most IPPS hospitals have realized under the capital IPPS. One possibility is that the updates to the capital IPPS rates have been higher than the actual increases in Medicare inpatient capital costs that hospitals have experienced in recent years. As we discuss in section III. of the Addendum to this final rule with comment period, we update the capital standard Federal rate on the basis of an analytical framework that takes into account changes in a capital input price index (CIPI) and several other policy adjustment factors. Specifically, we have adjusted the projected CIPI rate-of-increase as appropriate each year for case-mix index-related changes, for intensity, and for errors in previous CIPI forecasts. Under the framework that we have been using, we had proposed an update factor of 0.8 percent for FY 2008. The final update factor for FY 2008 is 0.9 percent, based on the best data available at this time. That update factor is derived from a projected 1.3 percent increase in the CIPI, a 0.0 percent adjustment for intensity, a 0.0 percent adjustment for case-mix, a −0.4 percent adjustment for the FY 2005 DRG reclassification and recalibration, and a forecast error correction of 0.0 percent. We discuss this update framework, and the computation of the policy adjustment factors, in section III. of the Addendum to this final rule with comment period. We continue to believe that the CIPI is the most appropriate input price index for capital costs to measure capital price changes in a given year. We also believe that the update framework successfully captures several factors that should be taken into account in determining appropriate updates for hospitals subject to the capital IPPS. However, there may be factors affecting the rate-of-increase in capital costs that are not yet captured in our analytical framework. For example, hospitals may be experiencing productivity gains in their use of capital equipment. As productivity increases, hospitals would be able to reduce the number of inputs required to produce a unit of service. MedPAC has taken the position that the payment “rate for health care providers should be set so that the Federal Government benefits from providers' productivity gains, just as private purchasers of goods in competitive markets benefit from the productivity gains of their suppliers.” MedPAC has, therefore, included a productivity improvement target in its framework for updating Medicare hospital payments on the grounds that “as a prudent purchaser, Medicare should also require some productivity gains each year from its providers.” (MedPAC, Report to Congress, March 2006, p. 66) While we have not as yet included a specific productivity factor, such as MedPAC's productivity improvement target, in our analytical frameworks for updating the IPPS payment rates, we will continue to study the appropriateness of adopting such a measure. As we discussed in the proposed rule, another possible reason for the relatively high margins of most capital IPPS hospitals may be that the payment adjustments provided under the system are too high, or perhaps even unnecessary. Specifically, the adjustments for teaching hospitals, disproportionate share hospitals, and large urban hospitals appear to be contributing to excessive payment levels for these classes of hospitals. Since the inception of the capital IPPS in FY 1992, the system has provided adjustments for teaching hospitals (the IME adjustment factor, under § 412.322 of the regulations), disproportionate share hospitals (the DSH adjustment factor, under § 412.320), and large urban hospitals (the large urban location adjustment factor, under § 412.316(b)). The classes of hospitals eligible for these adjustments have been realizing much higher margins than other hospitals under the system. Specifically, teaching hospitals (11.6 percent for FYs 1998 through 2004), urban hospitals (8.3 percent), and disproportionate share hospitals (8.4 percent) have significant positive margins. Other classes of hospitals have experienced much lower margins, especially rural hospitals (0.3 percent for FYs 1998 through 2004) and nonteaching hospitals (1.3 percent). The three groups of hospitals that have been realizing especially high margins under the capital IPPS are, therefore, classes of hospitals that are eligible to receive one or more specific payment adjustments under the system. We believe that the evidence indicates that these adjustments have been contributing to the significantly large positive margins experienced by the classes of hospitals eligible for these adjustments. In the proposed rule, we therefore determined that the data on inpatient hospital Medicare capital margins, as discussed above, provided sufficient evidence that some adjustment of the updates under the capital IPPS was warranted at that time. In light of the significant disparities in the margin performances of different classes of hospitals, we did not believe at that time that an adjustment to the updates for FYs 2008 and 2009 should apply equally to all hospitals that are paid under the capital IPPS. In particular, we believed that an adjustment to the updates should take into account the much lower margins of rural hospitals (0.3 percent for the period from FY 1998 through FY 2004) compared to urban hospitals (8.3 percent during that period). We also believed that any initial adjustment to the rate should be relatively modest. One reason was that any adjustment should avoid unwarranted disruption to hospital finances: Because of the nature of capital spending, long periods of time can be necessary for hospitals to adjust adequately to significant changes in payment. Therefore, in the FY 2008 IPPS proposed rule (72 FR 24822), for FYs 2008 and 2009 we proposed that the update to the capital standard Federal rate for urban hospitals would be 0.0 percent, in place of the 0.8 percent update that would have otherwise been provided in FY 2008 under the update framework that we have been employing. (As discussed above, the final update to the capital standard Federal rate under the capital update framework is 0.9 percent.) However, in light of the margin analysis, we also proposed to give rural hospitals the full 0.8 percent update determined 
                        ( print page 47397)
                        by the update framework in FY 2008. We anticipated that we would provide the full update only to rural hospitals in FY 2009 as well, once we had determined what the update would be under the update framework. We proposed to revise § 412.308(c)(1) of the regulations accordingly. For purposes of the update in FYs 2008 and 2009, we proposed that an urban hospital is any hospital located in an area that meets the definitions under § 412.64(b)(1)(ii)(A) or (b)(1)(ii)(B), or § 412.64(b)(3). A rural hospital is any hospital that does not meet those definitions, or that is reclassified as rural under § 412.103. For subsequent years, we stated that we would continue to analyze the data concerning the adequacy of payments under the capital IPPS, and that we may propose additional adjustments, positive or negative, as they were warranted. We also stated that we would continue to study our update framework and to consider whether adoption of additional or revised adjustments to account for other factors affecting capital cost changes may be warranted. In addition, we also proposed to eliminate, for FYs 2008 and beyond, one of the payment adjustments that has been provided under the capital IPPS. Specifically, we proposed to discontinue the 3.0 percent additional payment that has been provided to hospitals located in large urban areas. In proposing to eliminate this adjustment, we cited the consistent and significant positive margin of hospitals located in urban areas as strong evidence that it was not necessary to continue this adjustment. Therefore, we proposed to amend § 412.316(b) of the regulations to provide that, effective for discharges on or after October 1, 2007, there will no longer be any additional payment for hospitals located in large urban areas, as currently provided under that section. When the payment adjustments were instituted at the inception of the program, the initial standard Federal payment rate was adjusted in a budget-neutral fashion to account for the expenditures that would be required by these adjustments. However, in light of the strong overall positive margins across the system, we proposed not to increase the standard capital rate to account for expenditures otherwise payable due to this adjustment (approximately $147 million). Rather, in light of the excessive capital IPPS payments over the period of FYs 1996 through 2004, we believed that it was appropriate for the program to realize savings from this policy decision. While we formally proposed an update of 0.0 percent for urban hospitals, an update of 0.8 percent for rural hospitals in FY 2008, and elimination of the large urban add-on payments, we also solicited public comment on additional adjustments to the capital payment structure. As we noted in the proposed rule, the margin analysis indicated that several classes of hospitals have experienced continuous, significant positive margins. The analysis indicated that the existing payment adjustments for teaching hospitals and disproportionate share hospitals were contributing to excessive payment levels for these classes of hospitals. Therefore, we stated that it may be appropriate to reduce these adjustments significantly, or even to eliminate them altogether, within the capital IPPS. These payment adjustments, unlike the parallel adjustments under the operating IPPS, were not mandated by the Act. Rather, they were included within the original design of the capital IPPS under the Secretary's broad authority under sections 1886(g)(1)(A) and (g)(1)(B) of the Act to include appropriate adjustments and exceptions within a capital IPPS. We noted that it is difficult to justify indefinite continuation of these adjustments in the light of the continuous, substantial positive margins realized by the classes of hospitals that qualify for them. When the payment adjustments were instituted at the inception of the program, the initial standard Federal payment rate was adjusted in a budget-neutral fashion to account for the expenditures that would be required by these adjustments. Therefore, we indicated that we would also consider whether we should similarly adjust the Federal capital payment rate to account for all or a portion of these adjustments, effectively increasing the base payment rate for all hospitals (including rural, nonteaching, and non-DSH hospitals that do not benefit from these adjustments), while removing these special adjustments for the hospitals that have been eligible to receive them. We also indicated that we were considering whether, in light of the substantial positive margins experienced by these teaching and DSH hospitals, the discontinuation of these adjustments should not result in a change to the standard capital rate and should instead result in savings to the program. We invited comments on these proposals and on other means of appropriately adjusting and targeting payments under the capital IPPS, as well as on the proposals that we formally made in the FY 2008 IPPS proposed rule. *Comment:*
                         Numerous commenters addressed our proposals to eliminate the large urban add-on and to provide a differential update to urban and rural hospitals for 2 years. Many commenters also addressed our discussion about the possibility of significantly reducing or eliminating the existing payment adjustments for teaching hospitals and DSH adjustments within the capital IPPS. Commenters included numerous individual hospitals, hospital associations, and MedPAC. Commenters from the hospital industry were strongly opposed to our proposals to eliminate the large urban add-on and to provide a differential update to urban and rural hospitals for 2 years. Many commenters contended that such reductions in capital payments should not be made without explicit authorization from Congress. Many commenters also objected that the proposals violated fundamental principles of the capital IPPS. Specifically, many commenters asserted that the positive margins reflected the operation of one such fundamental principle, that by responding to the incentives of prospective payment, providers should be able to gain from conducting their operations efficiently. Many of these commenters further contended that the proposals do not take sufficient account of the cyclical nature of capital spending. These commenters pointed out that, under the design of the capital IPPS, hospitals were expected to reserve capital funds in anticipation of future capital needs, similar to how funded depreciation reserves had been used under the prior cost reimbursement system. These funds would permit future capital investment to be funded in part with equity financing rather than borrowing. Thus, it is only to be expected that hospitals would run positive margins during one phase of the capital cycle. Some regional hospital associations provided evidence intended to demonstrate that their hospitals have been experiencing positive margins because they are in a low-spending phase of their capital cycles. For example, one association representing a major metropolitan area submitted an extensive analysis, including data on margins and changes in unit cost and price, suggesting that its member hospitals are in a lower-spending phase of their capital cycle than other hospitals may be. Other commenters contended that, in order to account adequately for the capital spending cycle, it would be necessary to conduct an analysis over a much longer period, such as 20 years. Some commenters contended that the capital IPPS is not a separate payment 
                        ( print page 47398)
                        system but should be considered only part of a broader IPPS embracing both capital and operating payments. These commenters further maintained that the proposed reductions in capital IPPS payments are unwarranted in the light of the negative operating IPPS margins for hospitals in recent years. Several commenters pointed out that the combined operating and capital margin for IPPS hospitals was zero in FY 2004. Other commenters similarly noted that MedPAC estimates an overall hospital Medicare margin in 2007 of negative 5.4 percent. Other commenters pointed out that, even considering capital IPPS margins alone, the trend in recent years has been for the margins to decrease. Many commenters suggested that the proposed reductions could cause serious financial hardships for many hospitals and produce a very negative impact upon the addition and dissemination of newer technologies, health information systems, electronic health records and scanning devices that are a critical part of healthcare delivery systems and improvements to enhance patient safety and quality of care. A number of commenters objected that the cuts would make it much more difficult for hospitals to undertake the capital improvements required by various state mandates, as well as the adoption of the information technologies encouraged by various Federal initiatives. At the same time, many commenters from the hospital industry objected to employing margin analysis at all as the basis for the proposals, or for the possible revisions that we discussed to the other capital IPPS payment adjustments. These commenters contended that revisions to the payment adjustments should not be considered without updating the regression analyses that were employed originally to establish these adjustments. Furthermore, most of these commenters maintained that it would only be appropriate to employ total costs regressions, as opposed to capital cost-only regressions, in these analyses. Commenters advocated using total cost regressions on the grounds that doing so would follow precedent (the analysis that supported the original establishment of the adjustments employed total cost regressions), and would be consistent with treating the capital IPPS as intrinsically part of a broader IPPS embracing both capital and operating payments. Other commenters raised technical issues suggesting that the positive margins in our analysis were not representative of actual capital costs. Several commenters contended that the margins may be overstated because many cost reports, especially for the years 2003 and 2004, have not yet been audited and/or settled. One commenter suggested that the margins could be overstated because of a large backlog of appeals at the PRRB. According to the commenter, the comparison of the hospitals' capital costs from the cost report could be grossly understated, yielding an inflated margin. Another commenter contended that the elimination of the loss on recapture amount by the BBA of 1997 is skewing the calculation of the capital margins, which therefore should not be the basis for our proposals. MedPAC supported the proposal to eliminate the large urban add-on adjustment starting in FY 2008. MedPAC noted that Congress equalized the base rates of urban and rural hospitals under the operating IPPS in the MMA, and that eliminating the 3 percent add-on for large urban hospitals under the capital IPPS will similarly contribute to equalizing the capital base rates. MedPAC cited the fact that urban and rural hospitals' overall Medicare margins, reflecting both operating and capital inpatient payments along with payments for outpatient and hospital-based post-acute services, are roughly equal. However, MedPAC opposed the proposal for different updates for urban and rural hospitals on the grounds that such a differential update is inconsistent with the direction of policy for the acute care IPPS that we proposed to follow in eliminating the large urban add-on. MedPAC noted that, while eliminating the large urban adjustment would contribute to equalizing the base rates for urban and rural hospitals, differential updates would then reintroduce separate base rates. MedPAC recommended that we should use the update framework to determine the appropriate update for capital payments and then apply that update to all capital IPPS hospitals. MedPAC also recommended that we should seriously reexamine the appropriateness of the current capital IME adjustment. In its March 2007 Report to the Congress, MedPAC recommended (based on an analysis of operating and capital costs combined) that the operating IME adjustment be reduced from 5.5 percent to 4.5 percent per 10 percent increment of teaching intensity. MedPAC therefore indicated that some reduction in the capital IME adjustment would be consistent with its finding that the IME adjustment is set too high. *Response:*
                         We do not agree with those commenters who argued that we lack the authority to adopt measures such as those we proposed without specific authorization from Congress. While the statute governs the operating IPPS in highly prescriptive detail (section 1886(d) of the Act), the statutory provision governing the capital IPPS (section 1886(g) of the Act) prescribes only several broad governing principles and otherwise provides the Secretary with broad discretion to design and modify the system within those principles. The statute does not limit the Secretary's authority to update rates and gives the Secretary broad discretion to provide for exceptions. It is true that Congress has, on two occasions, adjusted the rate as originally established and updated by the Secretary. However, we do not believe that such action precludes the Secretary from exercising the discretionary authority otherwise conferred by the statute to make similar revisions to the rates and the adjustments that have been established to account for appropriate variations in costs among classes of hospitals. We do not agree with many of the criticisms of our analysis and the conclusions that we drew from that analysis. We agree that a basic principle of prospective payment systems is that efficient providers should be able to realize positive margins from the payment structure. However, prospective payment systems are generally designed to pay at rates reflecting the costs of hospitals at average levels of efficiency. Under such a system, hospitals of above average efficiency would be expected to realize positive margins, while hospitals of less than average efficiency would be expected to realize negative margins. Therefore, the continuation of significant positive margins across a prospective payment system as a whole (or across classes of hospitals that receive specific adjustments) is an indication that the payment rates (or the adjustments to the rates) may be set at a level higher than necessary to cover the costs of efficient operation. Under such circumstances, we believe that it is appropriate to revise basic payment rates or payment adjustments, or both, to account for such evidence. We also do not agree that, in this context, the capital IPPS should be treated as a component of a larger payment system, embracing both the capital and operating IPPSs. As we have just discussed, the statute governs the operating IPPS in highly prescriptive detail, while the statutory provision governing the capital IPPS provides the Secretary with very broad discretion (within certain governing principles) to design and modify the system. Most especially, the statute specifically 
                        ( print page 47399)
                        defines both the types of adjustments and the formulas for those adjustments under the operating IPPS. However, it gives the Secretary broad authority in providing for appropriate adjustments and exceptions under the capital IPPS. Furthermore, while we adopted approaches on several issues in the development of the capital IPPS that were based on the premise that the capital and operating IPPSs might eventually be merged into one system, the two systems have now operated separately for 15 years without any apparent prospect of integration in the near future. Therefore, we believe that it is appropriate under the current design of the capital and operating IPPSs to base proposals for payment policies under the capital IPPS on analysis that is confined to the data regarding the capital IPPS alone, and that total IPPS margins should not be the controlling factor in the analysis that we are now conducting. For this same reason, we do not agree with commenters who urged us to employ updated versions of the total cost regressions that were originally used to establish the payment adjustments under the capital IPPS. In the long run, we believe that it makes sense to base capital payment adjustments on total cost variations only if similar adjustments under the operating IPPS are also based on total cost regression analysis. We agree with commenters that the capital spending of hospitals tends to occur in cycles, with periods of higher capital investment followed by periods in which capital spending tends to be lower. As some of the commenters noted, we devoted considerable attention to the potential implications of this capital cycle in developing the original design of the capital IPPS. At that time, we decided not to build any specific feature into the system to account for capital cycles, on the grounds that hospitals ought to be able to manage their spending on the basis of the predetermined rates and adjustments under the capital IPPS, conserving funds during lower spending portions (and often high interest rate periods) of the cycle in order to prepare for necessary capital expenditures later. We do not agree with those commenters who suggested that the existence of a capital spending cycle accounts for the persistently high margins for some classes of hospitals that we have observed over the period 1996 through 2004 nationally. There is no reason to suppose that there would be uniformity or regularity among hospitals in the length of time between major capital expenditures or the overall pattern of capital spending. To the degree that a capital cycle exists, it reflects the pattern of spending in individual hospitals or, in some cases, groups of hospitals where the pattern of spending is determined by factors such as common ownership, local regulation, or other factors. There is no uniform or regular capital cycle across IPPS hospitals generally or large classes of hospitals (for example, teaching hospitals) nationally. In any given year, the margins of hospitals generally, and of large classes of hospitals defined nationally, would reflect the experience of many hospitals in the lower spending portions of their capital cycles, and many other hospitals in the higher spending portions of their capital cycles. Therefore, the existence of the persistent positive margins that we identified cannot be explained on the basis of a “capital cycle.” For the same reasons, we do not believe that it is necessary to conduct an analysis of a period of 20 or more years, as suggested by some commenters, in order to account fully for the existence of a capital cycle. We are also not persuaded by the technical objections that some commenters raise to the margin analysis. We have examined the settlement and audit status of cost reports over the period of our analysis and found a normal and expected pattern. Specifically, the data from more recent years (especially 2004 and 2005) reflect more cost reports that have been submitted but not yet settled, and fewer cost reports that have been settled with audit or subjected to reopening and amendment. Conversely, many more cost reports from the earlier part of the period we examined (especially those from 2002 and earlier) have been settled, settled with audit, or reopened and amended. While this analysis suggests that, as is to be expected, the margin data for the last 2 or 3 years of our analysis may be subject to some change as more cost reports are audited and settled, we do not believe that this normal pattern of activity has any significant implications for the validity of our analysis. The general pattern is for settlement and audit activity to reduce, not to increase, the levels of capital and other costs claimed by hospitals on their cost reports. Therefore, we believe that the comparatively lower positive margins of more recent years noted by some commenters are likely, if anything, to be understated compared to the margins that the data will indicate once more of those years’ cost reports are audited and settled. We also do not agree with the commenter who suggested that the margins are skewed by the elimination of the provision to recognize losses or gains on sales. Prior to the BBA of 1997, the Medicare program recognized losses or gains on sales of capital assets in relation to the depreciation that the program for which the program paid under the cost based payment system. Depreciation payments for the years prior to a sale were accordingly adjusted in the cost report submitted for the year of the sale: an additional payment was made for Medicare's portion of the depreciation on the asset if the hospital experienced a loss on the sale (indicating that prior payments for depreciation had been too low). Conversely, a portion of Medicare's payments for the depreciation of the asset was recaptured (by means of reducing payments to the hospital) in case of a gain on the sale (indicating that prior payments for depreciation had been too high). The BBA of 1997 eliminated recognition of such gains and losses on sales under Medicare's cost accounting rules, effective December 1, 1997. In the light of the congressional elimination of this provision, we do not believe that it would be appropriate (even if it were possible) to take any account of the possible effects of this provision on the margin data that we have analyzed. It is worth noting, however, that elimination of the provision to account for gains and losses on sales does not necessarily “skew” the margin data in the manner suggested by the commenter. Because the provision operated both to increase to account for losses on sales, and to decrease payments to account for gains on sales, the overall effect of the provision would not necessarily be (as implied by the commenter) to reduce the positive margins that are evident in the data. Furthermore, we do not believe that a backlog of cases at the PRRB would have a material effect on the level of the margins observed in our analysis. Cases such as those described by the commenter would be taken to the PRRB when reasonable cost determinations have an effect on actual payment amounts. Reasonable cost payments for capital have been a declining factor since the beginning of the capital IPPS transition in FY 1992. Cost payments declined steadily through the transition period, and since the end of the transition reasonable cost payments have been limited to a restricted number of exceptions (for example, new hospitals, extraordinary circumstances, and some large capital projects). 
                        ( print page 47400) We agree with MedPAC that eliminating the large urban add-on adjustment, starting in FY 2008, is warranted. We also agree with MedPAC that following the statutory precedent toward equalizing the base rates of urban and rural hospitals under the IPPS provides sufficient rationale for eliminating this adjustment. Therefore, we are finalizing our proposal to eliminate this adjustment in this final rule with comment period. In light of the strong overall positive margins across the system, we proposed not to increase the standard capital rate to account for expenditures otherwise payable due to this adjustment (approximately $147 million). Rather, in light of the excessive capital IPPS payments over the period of FYs 1996 through 2004, we continue to believe that such an increase to the standard capital rate is not appropriate. We also agree with MedPAC that our proposal for a differential update for urban and rural hospitals during FYs 2008 and 2009 is not entirely consistent with this direction of policy for the capital and operating IPPSs. As MedPAC noted, eliminating the large urban add-on would complete the process of equalizing the base rates of urban and rural hospitals, but our proposal for differential updates would then reintroduce separate base rates. Therefore, we have decided not to finalize that proposal in this final rule with comment period. We also appreciate MedPAC's recommendation that we should seriously reexamine the appropriateness of the current capital IME adjustment. As we noted in the proposed rule, the margin analysis suggested that this adjustment may be too high. MedPAC's previous analysis had also suggested that the adjustment may be too high. In light of MedPAC's comment, we extended the analysis that we discussed in the proposed rule, especially to distinguish the experience of teaching hospitals from the experience of urban and rural hospitals generally. Specifically, in addition to the categories of hospitals that we examined in the proposed rule, we also examined the margins of urban, large urban, and rural teaching hospitals, as opposed to urban, large urban, and rural nonteaching hospitals. In conducting this analysis, we were able to employ updated cost report information, and this updated information allowed us to incorporate the margins for an additional year, FY 2005, into the analysis. The results, for the categories of hospitals that had already been considered in the proposed rule, were very consistent with the previous data. However, the data on the experience of urban, large urban, and rural teaching and nonteaching hospitals provided significant new information, especially in light of MedPAC's recommendation. We reproduce the table showing the new results below. Hospital Inpatient Medicare Capital Margins
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Aggregate
                                 1996–2005
Aggregate
                                 1998–2005 
                                 (excluding 1996 and 1997)U.S.
17.6
13.4
7.0
6.8
7.3
8.1
8.7
7.6
5.3
3.7
8.5
6.8URBAN
17.7
13.8
7.8
7.5
8.4
9.2
10.3
9.0
6.4
4.8
9.4
7.9RURAL
16.8
11.0
2.1
2.4
1.0
1.5
−1.7
−1.4
−2.3
−4.2
2.6
−0.4No DSH Payments
16.2
11.7
4.2
4.3
5.6
5.5
4.7
4.4
−1.3
−4.7
5.9
3.2Has DSH Payments
18.5
14.4
8.6
8.1
8.2
9.0
10.0
8.5
7.0
5.9
9.5
8.1$1–$249,999
14.5
12.9
−0.4
3.1
1.6
4.1
3.2
1.4
−1.7
−4.8
3.2
1.9$250,000–$999,999
15.5
9.0
2.3
1.6
2.8
2.7
−2.4
−1.5
−4.3
−7.3
1.5
−0.9$1,000,000–$2,999,999
16.8
13.0
8.7
9.0
8.7
7.0
10.1
5.2
3.2
2.0
8.2
6.6$3,000,000 or more
20.3
16.6
10.4
9.3
9.7
12.1
13.2
12.5
10.6
9.5
12.2
11.0TEACHING
19.5
15.7
9.8
9.7
11.2
12.1
13.8
13.2
11.7
10.6
12.7
11.6Urban
19.7
15.9
10.2
10.0
11.4
12.5
14.0
13.6
11.9
10.9
13.0
11.9Large Urban
20.5
16.8
11.0
10.1
12.5
13.9
15.2
14.7
12.0
11.9
13.9
12.8Rural
13.9
8.5
1.0
2.9
5.8
3.2
8.2
4.7
5.7
4.0
5.7
4.5NON-TEACHING
15.3
10.5
3.4
2.8
2.2
2.6
1.7
0.0
−3.2
−5.1
2.8
0.3Urban
14.4
10.1
3.8
3.0
3.0
3.1
3.6
0.9
−2.9
−4.9
3.1
0.9Large Urban
15.5
11.3
6.2
6.1
5.7
5.2
5.3
1.7
−0.9
−3.2
5.1
2.9Rural
17.3
11.4
2.3
2.4
0.2
1.2
−3.7
−2.6
−3.9
−6.0
2.0
−1.3Census Division:New England (1)
27.9
25.9
17.1
15.1
18.2
20.7
21.3
21.1
20.5
20.3
21.0
19.5Middle Atlantic (2)
19.1
15.5
11.1
11.6
14.1
16.5
18.7
18.0
14.7
16.0
15.6
15.2South Atlantic (3)
18.1
13.9
5.9
4.0
6.0
5.0
6.6
6.9
5.8
2.8
7.4
5.4East North Central (4)
18.2
12.7
6.4
7.1
8.8
8.5
6.1
7.1
6.6
3.2
8.4
6.7East South Central (5)
14.9
11.1
3.3
4.1
3.8
3.8
3.8
−0.9
−3.4
−5.8
3.2
0.9West North Central (6)
14.3
7.0
0.1
−0.3
−1.5
2.0
1.9
3.4
1.6
−0.4
2.8
0.9West South Central (7)
13.2
8.3
3.3
2.6
−0.7
0.0
1.2
−2.0
−4.0
−6.5
1.2
−1.0Mountain (8)
17.2
14.7
8.5
7.7
7.2
6.4
2.9
3.3
0.8
−4.7
5.8
3.6Pacific (9)
20.4
16.1
12.3
11.3
11.9
13.3
14.7
12.1
9.8
8.8
13.0
11.7Code 99
23.7
24.1
14.5
16.8
19.8
20.7
20.5
25.1
21.6
24.8
21.4
20.8Bed Size:100 beds
17.7
13.0
4.6
3.5
2.7
2.5
−1.8
−1.2
−6.1
−9.6
2.0
−0.9100–249 beds
15.1
10.5
3.7
4.5
4.3
6.1
6.0
4.2
1.5
0.8
5.6
3.8250–499 beds
18.9
14.1
8.9
8.3
10.6
10.7
12.1
11.6
10.3
7.7
11.4
10.1500–999 beds
19.9
17.1
10.7
10.4
11.3
10.8
12.6
10.1
7.3
7.8
11.6
10.1= 1000 beds
8.2
14.0
2.2
−1.3
−6.6
−3.6
6.5
8.1
6.5
2.1
3.5
2.3**Notes:**Based on Medicare Cost Report hospital data updated as of the 1st quarter of 2007.Medicare payments are from Worksheet E, Part A, Lines 9 and 10.Expenses are from Worksheet D, Part I, columns 10 and 12 and Part II, columns 6 and 8.We apply the outlier trimming methodology developed with MedPAC.Code 99 applies when census division information was not specified in the Medicare Cost Report hospital data.
 
 
 As the table indicates, teaching hospitals in each class have been performing significantly better than comparable nonteaching hospitals. For the period FYs 1998 through 2005, urban teaching hospitals have realized an aggregate positive margin of 11.6 percent, compared to a positive margin of 0.9 percent for urban nonteaching hospitals. Similarly, large urban teaching hospitals have realized an aggregate positive margin of 12.8 percent during that period, while large urban nonteaching hospitals have an aggregate positive margin of only 2.9 percent. There is a similar pattern among rural teaching and nonteaching hospitals, although at lower margin levels. Rural teaching hospitals have experienced an aggregate positive margin over the period FYs 1998 through 2005 of 4.5 percent, while rural nonteaching hospitals have an aggregate negative margin of −1.3 percent. Significantly, the positive margins for teaching hospitals do not exhibit decline to the same degree that many commenters observed in the margins for all hospitals, as well the classes of urban hospitals and rural hospitals, under the capital IPPS. The positive margin among all IPPS hospitals declined from 8.7 percent in FY 2002 to 5.3 percent in FY 2004 and 3.7 percent in FY 2005. Similarly, the aggregate margin for urban hospitals declined from 10.3 percent in FY 2002 to 6.4 percent in FY 2004 and 4.8 percent in FY 2005. The aggregate margin for rural hospitals declined from a positive margin of 1.5 percent in FY 2001 to a negative margin, −4.2 percent, in FY 2005. However, the aggregate margin for teaching hospitals was 12.1 percent in FY 2001 and 10.6 percent in FY 2005. Urban teaching hospitals experienced margins of 12.5 percent in FY 2001, 14.0 percent in FY 2002, 13.6 percent in FY 2003, 11.9 percent in FY 2004, and 10.9 percent in FY 2005. The margins for rural teaching hospitals have shown greater variation, but still do not exhibit a pattern of significant decline. Rural teaching hospitals had positive margins of 3.2 percent in FY 2001, 8.2 percent in FY 2002, 4.7 percent in FY 2003, 5.7 percent in FY 2004, and 4.0 percent in FY 2005. As we stated in the proposed rule, the statutory history of the capital IPPS suggests that the system in the aggregate should not provide for continuous, large positive margins. As we also indicated, a possible reason for the relatively high margins of many capital IPPS hospitals may be that the payment adjustments provided under the system are too high, or perhaps even unnecessary. As we stated above, we agree with MedPAC's recommendation that the appropriateness of the teaching adjustment should be seriously reexamined. We believe that the record of relatively high and persistent positive margins for teaching hospitals under the capital IPPS indicates that the current teaching adjustment is unnecessary, and that it is therefore appropriate to exercise our discretion under the capital IPPS to eliminate this adjustment. At the same time, we believe we should mitigate abrupt changes in payment policy and to provide time for hospitals to adjust to changes in the payments that they can expect under the program. Therefore, we are adopting the following policy in this final rule with comment period. We will phase out the adjustment over a 3 year period beginning in FY 2008. Specifically, we will maintain the current adjustment for FY 2008, in order to give teaching hospitals an opportunity to plan and make adjustments to the change. During the second year of the transition, FY 2009, the formula for determining the amount of the teaching adjustment will be revised so that adjustment amounts will be half of the amounts provided under the current formula. For FY 2010 and after, hospitals will no longer receive an adjustment for teaching activity under the capital IPPS. As discussed previously, in implementing the capital IPPS Congress has in fact mandated that payments in the aggregate not exceed 90 percent of Medicare inpatient capital costs. For this reason, and in light of the generally positive margins experienced by virtually all categories of hospitals under the capital IPPS, we believe that it is not necessary to increase the standard Federal capital rate to account for this change in payment policy. While we are formally adopting this final policy in this final rule with comment period, we believe that this change to the structure of payments under the capital IPPS is significant enough that it could be valuable to provide the public with an opportunity for further comment. Therefore, we will accept comments on the policy that we are adopting, to phase out the capital IPPS teaching adjustment over a 3-year period, with a 50-percent reduction beginning in FY 2009. We will accept public comments on this final policy for 90 days after the date of publication of this final rule with comment period. In addition, we will provide additional opportunity for public comment during the FY 2009 proposed rulemaking cycle for the IPPS. We intend to respond to all comments that we receive on this final policy during this period in the FY 2009 final rule for the IPPS. We believe that this will provide a more than adequate opportunity for hospitals, associations, and other interested parties to raise issues and concerns related to this final policy. VI. Changes for Hospitals and Hospital Units Excluded From the IPPS A. Payments to Existing and New Excluded Hospitals and Hospital Units Historically, hospitals and hospital units excluded from the prospective payment system received payment for inpatient hospital services they furnished on the basis of reasonable costs, subject to a rate-of-increase ceiling. An annual per discharge limit (the target amount as defined in § 413.40(a)) was set for each hospital or hospital unit based on the hospital's own cost experience in its base year. The target amount was multiplied by the Medicare discharges and applied as an aggregate upper limit (the ceiling as defined in § 413.40(a)) on total inpatient operating costs for a hospital's cost reporting period. Prior to October 1, 1997, these payment provisions applied consistently to all categories of excluded providers (rehabilitation hospitals and units (now referred to as IRFs), psychiatric hospitals and units (now referred to as IPFs), LTCHs, children's hospitals, and cancer hospitals). Payment for children's hospitals and cancer hospitals that are excluded from the IPPS continues to be subject to the rate-of-increase ceiling based on the hospital's own historical cost experience. (We note that, in accordance with § 403.752(a) of the regulations, RNHCIs are also subject to the rate-of-increase limits established under § 413.40 of the regulations.) In the FY 2008 IPPS proposed rule, we proposed that the percentage increase in the rate-of-increase limits for cancer and children's hospitals and RNHCIs would be the percentage increase in the FY 2008 IPPS operating market basket, then estimated to be 3.3 percent. Consistent with our historical approach, if more recent data are available for the final rule, we use it to calculate the IPPS operating market basket. For this final rule with comment period, we have calculated the IPPS operating market basket for FY 2008 using the most recent data available. For cancer and children's hospitals and RNHCIs, the FY 2008 rate-of-increase percentage that is applied to FY 2007 target amounts in order to calculate FY 2008 target amounts 3.3 percent, based on Global Insight, Inc.'s 2007 second quarter forecast of the IPPS operating market basket increase, in 
                        ( print page 47402)
                        accordance with the applicable regulations in 42 CFR 413.40. IRFs, IPFs, and LTCHs were paid previously under the reasonable cost methodology. However, the statute was amended to provide for the implementation of prospective payment systems for IRFs, IPFs, and LTCHs. In general, the prospective payment systems for IRFs, IPFs, and LTCHs provide transition periods of varying lengths during which time a portion of the prospective payment is based on cost-based reimbursement rules under Part 413 (certain providers do not receive a transition period or may elect to bypass the transition period as applicable under 42 CFR part 412, Subparts N, O, and P). We note that the various transition periods provided for under the IRF PPS, IPF PPS, and LTCH PPS have ended or will soon end. For cost reporting periods beginning on or after October 1, 2002, all IRFs are paid 100 percent of the adjusted Federal rate under the IRF PPS. Therefore, for cost reporting periods beginning on or after October 1, 2002, no portion of an IRF PPS payment is subject to 42 CFR part 413. Similarly, for cost reporting periods beginning on or after October 1, 2006, all LTCHs are paid 100 percent of the adjusted Federal Rate under the LTCH PPS. Therefore, for cost reporting periods beginning on or after October 1, 2006, no portion of the LTCH PPS payment is subject to 42 CFR part 413. (We note that, to the extent a portion of a LTCH's PPS payment was subject to reasonable cost principles, the Secretary utilized his broad authority under section 123 of the BBRA, as amended by section 307 of the BIPA, to make such portion subject to 42 CFR part 413 and various provisions in section 1886(b) of the Act.) However, except as provided in § 412.426(c), IPFs remain under a blended methodology for cost reporting periods beginning on or after January 1, 2005, and before January 1, 2008. Under the broad authority conferred upon the Secretary in section 124(a)(1) of the BBRA, the Secretary provided that, for IPFs paid under the blended methodology, the portion of the IPF PPS payment that is based on reasonable cost principles is subject to the provisions of 42 CFR part 413 and various provisions in section 1886(b) of the Act. In order to calculate the portion of the PPS payment that is based on reasonable cost principles, it is necessary to determine whether the IPF would be considered “existing” for purposes of section 1886(b)(3)(H) of the Act or “new” for purposes of section 1886(b)(7) of the Act. We note that readers should not confuse an IPF that is considered “new” for purposes of section 1886(b)(7) of the Act and § 413.40(f)(2)(ii) of the regulations with an IPF that is considered “new” under § 412.426(c) of the regulations. Any IPF that, under present or previous ownership or both, has its first cost reporting period as an IPF beginning on or after January 1, 2005, is considered “new” for purposes of § 412.426(c). An IPF that is considered “new” under § 412.426(c) is paid based on 100 percent of the Federal per diem payment amount. Consequently, only those IPFs considered “new” under section 1886(b)(7) of the Act, but not “new” under § 412.426(c) of the regulations will be paid under a PPS blended payment methodology. An IPF considered “new” for purposes of § 413.40(f)(2)(ii) would have its “reasonable-cost based” portion of its prospective payment subject to the provisions of §§ 413.40(f)(2)(ii) and 413.40(c)(4)(v), as applicable. An IPF considered “new” for purposes of section 1886(b)(7) of the Act has the target amount for its third cost reporting period determined in accordance with sections 1886(b)(7)(A)(ii) and 1886(b)(3)(A)(ii) of the Act. For the fourth and subsequent cost reporting periods, the target amount is calculated in accordance with section 1886(b)(3)(A)(ii) of the Act. An IPF that would be considered “existing” for purposes of section 1886(b)(3)(H) of the Act has the target amount for the “reasonable-cost based” portion of its prospective payment determined in accordance with section 1886(b)(3)(A)(ii) of the Act and the regulations at § 413.40(c)(4)(ii). In the FY 2008 IPPS proposed rule (72 FR 24823), the applicable percentage increase to update the target amount for the reasonable cost-based portion of the PPS payment of an IPF that is considered “existing” under section 1886(b)(3)(H) of the Act or “new” under section 1886(b)(7) of the Act, but not “new” under § 412.426(c), was 3.4 percent. However, we noted that if more current data became available prior to publication of the final rule, we would use those data for updating the market basket. Based on more current data, the applicable percentage increase to update the target amount for the reasonable cost-based portion of the PPS payment of an IPF that is considered “existing” under section 1886(b)(3)(H) of the Act or “new” under section 1886(b)(7) of the Act, but not “new” under § 412.426(c), is 3.3 percent, based on Global Insight, Inc.'s 2007 second quarter forecast of the excluded hospital market basket increase, in accordance with the applicable regulations at 42 CFR 413.40. We did not receive any public comments on this section of the proposed rule. B. Separate PPS for IRFs Section 1886(j) of the Act, as added by section 4421(a) of Pub. L. 105–33, provided for a phase-in of a case-mix adjusted PPS for inpatient hospital services furnished by IRFs for cost reporting periods beginning on or after October 1, 2000, and before October 1, 2002, with payments based entirely on the adjusted Federal prospective payment for cost reporting periods beginning on or after October 1, 2002. Section 1886(j) of the Act was amended by section 125 of Pub. L. 106–113 to require the Secretary to use a discharge as the payment unit under the PPS for inpatient hospital services furnished by IRFs, and to establish classes of patient discharges by functional-related groups. Section 305 of Pub. L. 106–554 further amended section 1886(j) of the Act to allow IRFs, subject to the blended methodology, to elect to be paid the full Federal prospective payment rather than the transitional period payments specified in the Act. On August 7, 2001, we issued a final rule in the 
                        **Federal Register**
                         (66 FR 41316) establishing the PPS for IRFs, effective for cost reporting periods beginning on or after January 1, 2002. There was a transition period for cost reporting periods beginning on or after January 1, 2002, and ending before October 1, 2002. For cost reporting periods beginning on or after October 1, 2002, payments are based entirely on the adjusted Federal prospective payment rate determined under the IRF PPS. C. Separate PPS for LTCHs On August 30, 2002, we issued a final rule in the 
                        **Federal Register**
                         (67 FR 55954) establishing the PPS for LTCHs, effective for cost reporting periods beginning on or after October 1, 2002. Except for a LTCH that made an election under § 412.533(c) or a LTCH that is defined as new under § 412.23(e)(4), there was a transition period for cost reporting periods beginning on or after October 1, 2002, and ending before October 1, 2007. For cost reporting periods beginning on or after October 1, 2006, total LTCH PPS payments are based on 100 percent of the Federal rate. D. Separate PPS for IPFs In accordance with section 124 of Pub. L. 106–113 and section 405(g)(2) of Pub. L. 108–173, we established a PPS for inpatient hospital services furnished in IPFs. On November 15, 2004, we issued in the 
                        **Federal Register**
                         a final 
                        ( print page 47403)
                        rule (69 FR 66922) that established the IPF PPS, effective for IPF cost reporting periods beginning on or after January 1, 2005. Under the requirements of the final rule, we compute a Federal per diem base rate to be paid to all IPFs for inpatient psychiatric services based on the sum of the average routine operating, ancillary, and capital costs for each patient day of psychiatric care in an IPF, adjusted for budget neutrality. The Federal per diem base rate is adjusted to reflect certain patient characteristics, including age, specified DRGs, selected high-cost comorbidities, days of the stay, and certain facility characteristics, including a wage index adjustment, rural location, indirect teaching costs, the presence of a full-service emergency department, and COLAs for IPFs located in Alaska and Hawaii. We have established a 3 year transition period during which IPFs whose first cost reporting periods began before January 1, 2005, will be paid a PPS payment, a portion of which is based on reasonable cost principles and a portion of the Federal per diem payment amount. For cost reporting periods beginning on or after January 1, 2008, all IPFs will be paid 100 percent of the Federal per diem payment amount. E. Determining LTCH Cost-to-Charge Ratios (CCRs) Under the LTCH PPS In determining both high-cost outlier and short-stay outlier payments under the LTCH PPS (at §§ 412.525(a) and 412.529, respectively), we calculate the estimated cost of the case by multiplying the LTCH's overall CCR by the Medicare allowable charges for the case. (In general, we use the LTCH's overall CCR. In some instances we use an alternative CCR, such as the statewide average CCR in accordance with the regulations at § 412.525(a)(4)(iv)(C) and § 412.529(c)(3)(iv)(C), or a CCR that is specified by CMS or that is requested by the hospital under the provisions of the regulations at § 412.525(a)(4)(iv)(A) and § 412.529(c)(3)(iv)(A).) Under the LTCH PPS, a single prospective payment per discharge is made for both inpatient operating and capital-related costs. Therefore, we compute a single “overall” or “total” LTCH-specific CCR based on the sum of LTCH operating and capital costs (as described in Chapter 3, section 150.24, of the Medicare Claims Processing Manual (CMS Pub. 100 4)) as compared to total charges. Specifically, a LTCH's CCR is calculated by dividing a LTCH's total Medicare costs (that is, the sum of its operating and capital inpatient routine and ancillary costs) by its total Medicare charges (that is, the sum of its operating and capital inpatient routine and ancillary charges) (72 FR 48117). In the June 9, 2003 IPPS high-cost outlier final rule (68 FR 34498), we made revisions to our policies concerning the determination of LTCHs' CCRs and the reconciliation of high-cost outlier and short-stay outlier payments under the LTCH PPS. As we stated in that final rule (68 FR 34507), because the LTCH PPS high-cost outlier and short-stay outlier policies are modeled after the IPPS outlier policy, we believe they are susceptible to the same payment vulnerabilities. In the FY 2007 IPPS final rule (71 FR 48115 through 48122), we amended our regulations and, for discharges occurring on or after October 1, 2006, refined the methodology for determining the annual CCR ceiling and statewide average CCRs for LTCHs. We also codified, with modifications and editorial clarifications, our policy for the reconciliation of high-cost outlier and short-stay outlier payments under the LTCH PPS. We indicated that because, historically, updates to the LTCH PPS CCR ceiling and statewide average CCRs have been effective on October 1, we would make these updates (and include relevant impact data) as a part of the IPPS rulemaking cycle. Specifically, in the FY 2007 IPPS final rule (71 FR 48117 through 48121), under the broad authority of section 123 of Pub. L. 106–113 and section 307(b)(1) of Pub. L. 106–554, we established under the LTCH PPS high-cost outlier policy at § 412.525(a)(4)(iv)(C) and the LTCH PPS short-stay outlier policy at § 412.529(c)(3)(iv)(C), for discharges occurring on or after October 1, 2006, that the fiscal intermediary (or, if applicable, the MAC) may use a statewide average CCR, which is established annually by CMS, if it is unable to determine an accurate CCR for a LTCH in one of the following three circumstances: (1) New LTCHs that have not yet submitted their first Medicare cost report (for this purpose, a new LTCH is defined as an entity that has not accepted assignment of an existing hospital's provider agreement in accordance with § 489.18); (2) LTCHs whose CCR is in excess of the LTCH CCR ceiling; and (3) other LTCHs for whom data with which to calculate a CCR are not available (for example, missing or faulty data). (Other sources of data that the fiscal intermediary (or, if applicable, the MAC) may use to determine a LTCH's CCR instead of the statewide average include data from a different cost reporting period for the LTCH, data from the cost reporting period preceding the period in which the hospital began to be paid as a LTCH (that is, the period of at least 6 months that it was paid as a short-term acute care hospital), or data from other comparable LTCHs, such as LTCHs in the same chain or in the same region.) As noted above, generally, a LTCH is assigned the applicable statewide average CCR if, among other things, a LTCH's CCR is found to be in excess of the applicable maximum CCR threshold (that is, the LTCH CCR ceiling). As we explained in the FY 2007 IPPS final rule (71 FR 48117), CCRs above this threshold are most likely due to faulty data reporting or entry, and, therefore, these CCRs should not be used to identify and make payments for outlier cases. Such data are clearly errors and should not be relied upon. Thus, under our established policy, generally, if a LTCH's calculated CCR is above the applicable ceiling, the applicable LTCH PPS statewide average CCR is assigned to the LTCH instead of the CCR computed from its most recent (settled or tentatively settled) cost report data. Under the broad authority of section 123 of Pub. L. 106–113 and section 307(b)(1) of Pub. L. 106–554, we revised our methodology for determining the annual CCR ceiling and statewide average CCRs under the LTCH PPS effective October 1, 2006, as we explained in the FY 2007 IPPS final rule (71 FR 48117 through 48121), because we believed that those changes were consistent with the LTCH PPS single payment rate for inpatient operating and capital costs. For discharges occurring on or after October 1, 2006, we established that the LTCH CCR ceiling specified under § 412.525(a)(4)(iv)(C)(
                        *2*) for high-cost outliers and under § 412.529(c)(3)(iv)(C)(
                        *2*) for short-stay outliers is calculated as 3 standard deviations above the corresponding national geometric mean total CCR (established and published annually by CMS). (The fiscal intermediary (or, if applicable, the MAC) may use a statewide average CCR if, among other things, a LTCH's CCR is in excess of the LTCH CCR ceiling.) The LTCH total CCR ceiling is determined based on IPPS CCR data, by first calculating the “total” (that is, operating and capital) IPPS CCR for each hospital and then determining the average “total” IPPS CCR for all IPPS hospitals. (Our rationale for using IPPS hospital data is discussed in the FY 2007 IPPS final rule (71 FR 48117).) The LTCH CCR ceiling is then established at 3 standard deviations from the corresponding national geometric mean total CCR. (For further detail on our methodology for annually 
                        ( print page 47404)
                        determining the LTCH CCR ceiling, we refer readers to the FY 2007 IPPS final rule (71 FR 48117 through 48119).) We also established that the LTCH “total” CCR ceiling used under the LTCH PPS would continue to be published annually in the IPPS proposed and final rules, and the public should continue to consult the annual IPPS proposed and final rules for changes to the LTCH total CCR ceiling that would be effective for discharges occurring on or after October 1 of each year. Accordingly, in the FY 2007 IPPS final rule (71 FR 48119), we established a FY 2007 LTCH PPS total CCR ceiling of 1.321, effective for discharges occurring on or after October 1, 2006, and before October 1, 2007. In the FY 2008 IPPS proposed rule, in accordance with § 412.525(a)(4)(iv)(C)(
                        *2*) for high-cost outliers and § 412.529(c)(3)(iv)(C)(
                        *2*) for short-stay outliers, using our established methodology for determining the LTCH total CCR ceiling (described above), based on IPPS total CCR data from the December 2006 update to the Provider-Specific File, we proposed a total CCR ceiling of 1.273 under the LTCH PPS that would be effective October 1, 2007. Furthermore, in the FY 2008 IPPS proposed rule, we stated that, if more recent data became available, we would use such data to determine the final total CCR ceiling under the LTCH PPS for FY 2008 using our established methodology described above. Based on the latest available data (data from the March 2007 update to the Provider-Specific File), for this final rule with comment period the total CCR ceiling of 1.284 under the LTCH PPS will be effective for discharges occurring on or after October 1, 2007, and before October 1, 2008. In addition, under the broad authority of section 123 of Pub. L. 106–113 and section 307(b)(1) of Pub. L. 106–554, in the FY 2007 IPPS final rule (71 FR 48120), we revised our methodology to determine the statewide average CCRs under § 412.525(a)(4)(iv)(C) for high-cost outliers and under § 412.529(c)(3)(iv)(C) for short-stay outliers for use under the LTCH PPS in a manner similar to the way we computed the “total” CCR ceiling using IPPS CCR data. Specifically, we first calculated the total (that is, operating and capital) CCR for each IPPS hospital. We then calculated the weighted average “total” CCR for all IPPS hospitals in the rural areas of the State, and the weighted average “total” CCR for all IPPS hospitals in the urban areas of the State. (For further detail on our methodology for annually determining the LTCH urban and rural statewide average CCRs, we refer readers to the FY 2007 IPPS final rule (71 FR 48119 through 48121).) We also established that the applicable statewide average “total” (operating and capital) CCRs used under the LTCH PPS would continue to be published annually in the IPPS proposed and final rules, and the public should continue to consult the annual IPPS proposed and final rules for changes to the applicable statewide average total CCRs that would be effective for discharges occurring on or after October 1 each year. Accordingly, in the FY 2007 IPPS final rule (71 FR 48122), the FY 2007 LTCH PPS statewide average total CCRs for urban and rural hospitals, effective for discharges occurring on or after October 1, 2006, and before October 1, 2007, were presented in Table 8C of the Addendum of that final rule (71 FR 48303). In the FY 2008 IPPS proposed rule, in accordance with § 412.525(a)(4)(iv)(C) for high-cost outliers and § 412.529(c)(3)(iv)(C) for short-stay outliers, using our established methodology for determining the LTCH statewide average CCRs (described above), based on the most recent complete IPPS total CCR data from the December 2006 update of the Provider-Specific File, we proposed LTCH PPS statewide average total CCRs for urban and rural hospitals that would be effective for discharges occurring on or after October 1, 2007, and before October 1, 2008, presented in Table 8C of the Addendum to the proposed rule. Furthermore, in the FY 2008 IPPS proposed rule, we stated that, if more recent data became available, we would use such data to determine the final statewide average total CCRs for urban and rural hospitals under the LTCH PPS for FY 2008 using our established methodology described above. We did not receive any specific public comments on our proposal. Based on the latest available data (data from the March 2007 update to the Provider-Specific File), for this final rule with comment period, the LTCH PPS statewide average total CCRs for urban and rural hospitals that will be effective for discharges occurring on or after October 1, 2007, and before October 1, 2008, are presented in Table 8C of the Addendum to this final rule with comment period. We note that, for this final rule with comment period, consistent with the proposed rule, as we established when we revised our methodology for determining the applicable LTCH statewide average CCRs in the FY 2007 IPPS final rule (71 FR 48119 through 48121), and as is the case under the IPPS, all areas in the District of Columbia, New Jersey, Puerto Rico, and Rhode Island are classified as urban, and, therefore, there are no rural statewide average total CCRs listed for those jurisdictions in Table 8C of the Addendum to this final rule with comment period. In addition, as we established when we revised our methodology for determining the applicable LTCH statewide average CCRs in that same final rule, and as is the case under the IPPS, although Massachusetts has areas that are designated as rural, there were no short-term acute care IPPS hospitals or LTCHs located in those areas as of December 2006. Therefore, consistent with the proposed rule, for this final rule with comment period there is no rural statewide average total CCR listed for rural Massachusetts in Table 8C of the Addendum of this final rule with comment period. As we also established when we revised our methodology for determining the applicable LTCH statewide average CCRs in the FY 2007 IPPS final rule (71 FR 48120 through 48121), in determining the urban and rural statewide average total CCRs for Maryland LTCHs paid under the LTCH PPS, we use, as a proxy, the national average total CCR for urban IPPS hospitals and the national average total CCR for rural IPPS hospitals, respectively. We use this proxy because we believe that the CCR data on the Provider-Specific File for Maryland hospitals may not be accurate (as discussed in greater detail in that same final rule (71 FR 48120)). F. Report of Adjustment (Exceptions) Payments Section 4419(b) of Pub. L. 105–33 requires the Secretary to publish annually in the 
                        **Federal Register**
                         a report describing the total amount of adjustment payments made to excluded hospitals and units, by reason of section 1886(b)(4) of the Act, during the previous fiscal year. The process of requesting, adjudicating, and awarding an adjustment payment is likely to occur over a 2-year period or longer. First, generally, an excluded hospital or excluded unit of a hospital must file its cost report for a fiscal year with its fiscal intermediary within 5 months after the close of its cost reporting period, in accordance with § 413.24(f)(2). The fiscal intermediary then reviews the cost report and issues a Notice of Program Reimbursement (NPR). If the hospital's operating costs are in excess of the ceiling, the hospital may file a request for an adjustment payment. The hospital's request must be received by the hospital's fiscal intermediary no later than 180 days after the date on the 
                        ( print page 47405)
                        intermediary's initial NPR for the cost reporting period for which the hospital requests an adjustment. The fiscal intermediary (or, if applicable, the MAC), or CMS, depending on the type of adjustment requested, then reviews the request and determines if an adjustment payment is warranted. This determination is sometimes not made until more than 6 months after the date the request is filed because there are times when the applications are incomplete and additional information must be requested in order to have a completed application. However, in an attempt to provide interested parties with data on the most recent adjustments for which we do have data, we are publishing data on adjustment payments that were processed by the fiscal intermediary or CMS during FY 2006. The table below includes the most recent data available from the fiscal intermediaries and CMS on adjustment payments that were adjudicated during FY 2006. As indicated above, the adjustments made during FY 2006 only pertain to cost reporting periods ending in years prior to FY 2005. Total adjustment payments given to excluded hospitals and units during FY 2006 are $19,451,125. The table depicts for each class of hospitals, in the aggregate, the number of adjustment requests adjudicated, the excess operating cost over ceiling, and the amount of the adjustment payments. Class of hospital
Number
Excess cost over ceiling
Adjustment paymentsRehabilitation
4
$2,525,385
$1,352,437Psychiatric
27
$22,016,987
$12,648,694Long-Term CareChildren's
2
$787,708
$726,217Cancer
3
$13,813,000
$4,261,560Religious Nonmedical HealthCare Institution
7
$2,484,149
$462,217
 VII. Services Furnished to Beneficiaries in Custody of Penal Authorities Section 1862(a)(2) of the Act prohibits payment under Medicare Part A or Part B for any items or services for which the beneficiary has no legal obligation to pay, and which no other person or organization (such as a prepayment plan of which the beneficiary is a member) has a legal obligation to provide or pay for the service. Our current regulations at § 411.4(b) specify the special conditions when Medicare payment may be made for services furnished to individuals in custody of penal authorities. These regulatory conditions include: (1) State or local law requires those individuals or groups of individuals to repay the cost of medical services they receive while in custody; and (2) the State or local government entity enforces the requirement to pay by billing all such individuals, whether or not covered by Medicare or any other health insurance, and by pursuing collection of the amounts they owe in the same way and with the same vigor that it pursues the collection of other debts. However, § 411.4(b) does not define “custody” and does not clearly state that CMS will not defer to a particular State or local government's definition (or interpretation) of what constitutes “custody.” In the FY 2008 IPPS proposed rule (72 FR 24825), we proposed to specify that, for purposes of Medicare payment, individuals who are in “custody” include, but are not limited to, individuals who are under arrest, incarcerated, imprisoned, escaped from confinement, under supervised release, required to reside in mental health facilities, required to reside in halfway houses, required to live under home detention, or confined completely or partially in any way under a penal statute or rule. We believe that this definition of “custody” is in accordance with how custody has been defined by Federal courts for purposes of the habeas corpus protections of the Constitution. For example, the term “custody” is not limited solely to physical confinement. (
                        *Sanders*
                         v. 
                        *Freeman, 221 F.3d 846, 850–51 (6th Cir. 2000).*) Individuals on parole, probation, bail, or supervised release may be “in custody.” *Comment:*
                         One commenter stated that the expansion of the definition of “custody” to include individuals who have escaped from confinement, on parole, on probation, or released on bail places an unreasonable burden on hospitals. The commenter stated that there is no incentive for patients with any of these status designations to come forward and honestly disclose their status. Moreover, the commenter pointed out, law enforcement is not in the collection business or overly concerned with billing for medical services. As a result, the commenter believed that the burden of seeking compensation for medical care furnished to patients under penal authority ultimately falls back on the healthcare provider regardless of the Medicare provisions under sections 1862(a)(2) and (a)(3) of the Act. Therefore, the commenter recommended that CMS not expand the definition of “custody” unless there is a means to verify the official status of the patient under penal authority. *Response:*
                         We are not expanding the definition of “custody.” As we indicated in the FY 2008 IPPS proposed rule, we are specifying that, for Medicare payment purposes, “custody” is defined consistent with how the Federal courts have defined custody and that we will not defer to a particular State or local government's definition (or interpretation) of what constitutes “custody.” (We note that the commenter has not explained why it believes we are expanding the definition of “custody.”) Therefore, if a State or local government believes that an individual is not under “custody” for Medicare payment purposes, the State or local government should be prepared to prove to CMS that the Federal courts have ruled (or would rule) that the class or type of individual at issue is not considered (or would not be considered) under “custody.” Moreover, CMS contractors typically receive information from the Social Security Administration's (SSA) Prisoner Update Processing System (PUPS) in order to stop payment for services furnished to individuals in custody of penal authorities. The SSA is required by law to suspend payment of social security benefits when an individual is incarcerated and CMS contractors use that information in order to identify when they should stop Medicare payment. If Medicare denies payment for services on the basis that the individual is in “custody” of penal authorities, the health care provider or supplier will be directed to seek payment from the State or local government (which is similar to other general payment exclusion situations such as when Medicare directs a 
                        ( print page 47406)
                        civilian provider or supplier to bill the Department of Veterans Affairs instead of Medicare for a service). Therefore, there is already a means in place to verify the status of these individuals and health care providers and suppliers will not be financially burdened by our clarification of the definition of “custody” because, in the event that Medicare denies payment, providers and suppliers will be directed to the State or local government for payment. *Comment:*
                         Two commenters were concerned that if the proposed definition of “custody” is adopted, it would present practical problems for hospitals. One of the commenters stated that “custody” should not include individuals who are not under physical confinement, as otherwise it would be extremely difficult to identify individuals in “custody,” and therefore hospitals would be required to seek criminal history information and do background checks on all patients being registered. The commenter also expects that State regulations and law enforcement agencies may have conflicts with the definition as well. The second commenter asserted that, under the proposed definition, unless an individual is brought in by governmental authorities, the treating hospital will not be able to identify many persons in custody (for example, those under supervised release, or required to live under home detention). The commenter pointed out that such individuals are unlikely to identify themselves, and many prison records are protected under Federal, State or local privacy laws. Moreover, the commenter added, even if the treating hospital can identify an individual as being in “custody” under CMS' new definition, it will have no way of knowing whether the authority that has placed the person in custody has a legal obligation to pay for his or her care. The commenter urged CMS to include a safeguard to protect hospitals that act in good faith but mistakenly bill Medicare for services furnished to individuals in custody for whom payment is not reimbursable. *Response:*
                         As we stated in response to the previous comment, we are not expanding the definition of “custody.” Nor are we requiring that hospitals seek criminal histories and do background checks on all patients being registered. If Medicare denies payment for services on the basis that the individual is in “custody” of penal authorities, the provider or supplier will be directed to seek payment from the State or local government (which is similar to other general payment exclusion situations such as when Medicare directs a civilian provider or supplier to bill the Department of Veterans Affairs instead of Medicare for a service). If a State or local government believes that an individual is not under “custody” for Medicare payment purposes, it should be prepared to prove to Medicare that the Federal courts have ruled (or would rule) that the class or type of individual at issue is not considered (or would not be considered) under “custody.” Likewise, if a State or local government believes that it has no legal obligation to pay for the care provided to the individual (see 42 CFR 411.4(b)(1) and (b)(2)), it should be prepared to prove that to Medicare. We are finalizing our proposed changes to § 411.4(b), with one modification. In the FY 2008 IPPS proposed rule, we specified that individuals who are “under supervised release” are in “custody”; however, we did not specify that individuals who are on “medical furlough” are also in “custody” for Medicare payment purposes. Some State or local governments use the term “medical furlough” in order to describe individuals who are “under supervised release.” Therefore, we are adding “medical furlough” to the examples of types of “custody” in order to further clarify that an individual is in custody, for Medicare payment purposes, if he or she is released by the State or local government for the purpose of receiving medical services (or accompanied by a police officer, other penal authority, or other government representative to the location where the medical services are furnished) and required to return to the State or local government facility after the medical services are furnished. VIII. MedPAC Recommendations We are required by section 1886(e)(4)(B) of the Act to respond to MedPAC's recommendations regarding hospital inpatient payments in our annual proposed and final IPPS rules. We have reviewed MedPAC's March 2007 “Report to the Congress: Medicare Payment Policy” and have given it careful consideration in conjunction with the policies set forth in this document. MedPAC's Recommendation 2A–1 states that, “The Congress should increase payment rates for the acute inpatient and outpatient prospective payment systems in 2008 by the projected rate of increase in the hospital market basket index, concurrent with implementation of a quality incentive payment program.” This recommendation is discussed in Appendix B to this final rule with comment period. *Recommendation 2A–2:*
                         MedPAC recommended that, “Concurrent with implementation of severity adjustment to Medicare's diagnosis related group payments, the Congress should reduce the indirect medical education adjustment in fiscal year 2008 by 1 percentage point to 4.5 percent per 10 percent increment in the resident-to-bed ratio. The funds obtained from reducing the indirect medical education adjustment should be used to fund a quality incentive payment system.” MedPAC further states that the IME adjustment is “set above the empirical level which contributes to the large differences between teaching and nonteaching hospitals in financial performance under Medicare.” MedPAC asserts that since there is no accountability for how IME funds are used, and teaching hospitals will benefit from implementation of the severity adjusted DRGs, the IME adjustment should be reduced in FY 2008. *Response:*
                         We note that MedPAC stated in its March 2007 Report that Congress made a conscious decision to fund the IME adjustment above the empirical level due to the concern for how teaching hospitals would fare under the PPS. Because the IME adjustment is set by Congress, as cited in section 1886(d)(5)(B) of the Act, any change to the IME adjustment, whether it is a 1 percentage point reduction or reduction of the IME adjustment to its empirical level, would require a statutory change. Therefore, absent a change to the IME provision in the Medicare statute for FY 2008, the IME adjustment will remain at the current level required by the statute, as specified in section IV.D. of this preamble. We did not receive any public comments regarding Recommendation 2A–2. *Recommendation 2A–3:*
                         MedPAC recommended that, “The Secretary should improve the form and accompanying instructions for collecting data on uncompensated care in the Medicare cost report and require hospitals to report using the revised form as soon as possible.” MedPAC indicated that “accurate data on hospitals’ charity care and bad debts are crucial to any effort to help develop a federal payment mechanism to help hospitals with their uncompensated care.” *Response:*
                         MedPAC convened an “Expert Panel on Measuring Uncompensated Care” on May 5, 2005, to address concerns raised by stakeholders on the usefulness of the S–10 Worksheet data. CMS' representatives participated in the 
                        ( print page 47407)
                        discussions on this expert panel, and listened carefully to the concerns of MedPAC and the stakeholders about the S–10 Worksheet. MedPAC is recommending that we adopt the list of recommended changes to the S–10 Worksheet that resulted from the panel's discussion. CMS is currently undertaking a major update of the hospital cost report and will be making changes to the S–10 Worksheet form and accompanying instructions based on the panel's discussions with MedPAC. *Comment:*
                         One commenter supported CMS' proposal to revise the S–10 Worksheet in response to MedPAC's expert panel recommendations. The commenter stated that its members provide 25 percent of the uncompensated care provided in hospitals nationwide and that it supported CMS' efforts to expand its collection of uncompensated care data. *Response:*
                         We appreciate the commenter's support of our efforts to improve the S–10 Worksheet and accompanying instructions for collecting data on uncompensated care in the Medicare cost report. In sections II.C. through E. of the preamble of this final rule with comment period, we further address the recommendations included in Recommendation 1 and Recommendation 3 in the March 2005 Report to Congress on Physician-Owned Specialty Hospitals. Recommendation 1 relates to refining the DRGs used under the IPPS to more fully capture differences in severity of illness among patients; basing the DRG relative weights on the estimated cost of providing care rather than on charges; and basing the weights on the national average of hospitals' relative values in each DRG. Recommendation 3 recommended that the Secretary implement MedPAC's recommended policies over a transition period. For further information relating specifically to the MedPAC reports or to obtain a copy of the reports, contact MedPAC at (202) 653–7220, or visit MedPAC's Web site at: 
                        *http://www.medpac.gov.* IX. Other Required Information A. Requests for Data From the Public In order to respond promptly to public requests for data related to the prospective payment system, in the proposed rule, we presented our established process under which commenters could gain access to raw data on an expedited basis. Generally, the data were made available in computer tape or cartridge format or on diskette through the Internet at: 
                        *http://www.cms.hhs.gov/​providers/​hipps.*
                         We listed the data files and the cost for each file, if applicable, in the proposed rule. Commenters interested in discussing any data used in constructing the proposed rule or this final rule should contact Nisha Bhat at (410) 786 5320. B. Collection of Information Requirements Under the Paperwork Reduction Act of 1995 (PRA), we are required to provide 60-day notice in the 
                        **Federal Register**
                         and solicit public comment before a collection of information requirement is submitted to the Office of Management and Budget (OMB) for review and approval. In order to fairly evaluate whether an information collection should be approved by OMB, section 3506(c)(2)(A) of the PRA requires that we solicit comment on the following issues: The need for the information collection and its usefulness in carrying out the proper functions of our agency.
                    The accuracy of our estimate of the information collection burden.
                    The quality, utility, and clarity of the information to be collected.
                    Recommendations to minimize the information collection burden on the affected public, including automated collection techniques. In the FY 2008 IPPS proposed rule, we solicited public comment on each of these issues for the following sections of this document that contain information collection requirements. These provisions are discussed in various sections of this final rule with comment period. Special Treatment: Hospitals Located in Urban Areas and That Apply for Reclassifications as Rural. (§ 412.103) Section 412.103(g) states that (1) for hospitals other than rural referral centers (RRCs) described in paragraph (g)(2) of this section, the hospital may cancel its rural reclassification by submitting a written request to the CMS Regional Office not less than 120 days prior to the end of its current cost reporting period, and (2) for hospitals classified as RRCs under § 412.96 based on rural reclassification under this section, the hospital may cancel its rural reclassification by submitting a written request to the CMS Regional Office not less than 120 days prior to the end of a Federal fiscal year and after being paid as rural for at least one 12-month cost reporting period. The burden associated with these requirements is the time and effort required for a hospital to develop, draft, and submit its written request for the cancellation of its rural reclassification. While these requirements are subject to the PRA, we believe the burden is exempt under 5 CFR 1320.3(c)(4). We believe that the information collection requirements in § 412.103(g)(1) and § 412.103(g)(2), respectively, will impact less than 10 entities. The notices will be submitted by individual hospitals and will be reviewed on a case-by-case basis. Basic Commitments. (§ 489.20) Section 489.20(u)(1) requires physician-owned hospitals, as defined in § 489.3, to furnish notice to all patients that the hospital is a physician-owned hospital. The notice must be furnished at the beginning of their hospital stay or outpatient visit. The burden associated with the aforementioned requirements is the time and effort associated with a physician-owned hospital developing a generic notice and providing notice to the patients. Approximately 175 physician-owned hospitals must comply with this requirement. We estimate that it will require a hospital's general counsel 4 hours to develop a standard notice to be furnished to all patients upon admission as an inpatient or an outpatient. The total annual burden for this requirement is 700 hours. In addition, we estimate that it will take 30 seconds to provide the notice to a patient and it will take another 30 seconds to maintain a copy of the disclosure in the patient's medical record. On average, each hospital will be required to make 1,092 disclosures per year. The total burden associated with the inpatient reporting and recordkeeping requirements in § 489.20(u)(1) is 3,185 annual burden hours. Based on public comments received during the 60-day comment period for the 
                        **Federal Register**
                         notice (72 FR 21024) for this information collection request, we revised our burden estimates to include the burden associated with the physician-ownership disclosure and recordkeeping requirement for outpatient visits. We estimate that each hospital will conduct 17,472 disclosures per year. As with the inpatient disclosure requirement, we estimate that the burden associated with complying with the outpatient disclosure requirement to be 30 seconds to disclose the information and 30 seconds to maintain a copy of the disclosure in the patient's medical record. We estimate the annual burden for the reporting and recordkeeping requirements for outpatient visits to be 25,480 hours, respectively, for a total of 50,960 hours. 
                        ( print page 47408) Section 489.20(v) requires all hospitals, as defined in § 489.24(b), to furnish all patients notice, in accordance with § 482.13(b)(2), at the beginning of their hospital stay or outpatient visit if a doctor of medicine or a doctor of osteopathy is not present in the hospital 24 hours per day, 7 days per week. The notice must indicate how the hospital will meet the medical needs of any inpatient who develops an emergency medical condition, as defined in § 489.24(b), at a time when there is no physician present in the hospital. The burden associated with this requirement is the time and effort necessary for each hospital to develop a standard notice to furnish to its patients. We believe 2,504 hospitals will be required to comply with this requirement. Complying with the requirement will require a hospital's general counsel 4 hours to develop a standard notice. The total annual burden associated with the legal review and development of the standard notice is 10,016 hours. We estimate that it will take 30 seconds to provide the notice to a patient, and it will take another 30 seconds to maintain a copy of the disclosure in the patient's medical record. On average, each hospital will be required to make 1,092 disclosures per year. The burden associated with the recordkeeping and reporting requirements for inpatient admissions as stated in § 489.20(v) is 45,573 annual burden hours. Based on public comments received during the 60-day comment period for the 
                        **Federal Register**
                         notice (72 FR 21024) for this information collection request, we revised our burden estimates for § 489.20(v) to include the burden associated with outpatient visits as well. We estimate that each hospital will conduct 17,472 disclosures per year. As with the inpatient disclosure requirement, we estimate that the burden associated with complying with the outpatient disclosure requirement to be 30 seconds to disclose the information and 30 seconds to maintain a copy of the disclosure in the patient's medical record. We estimate the annual burden for the reporting and recordkeeping requirements for outpatient visits to be 364,583 hours, respectively, for a total of 729,165 hours. Estimated Annual Reporting and Recordkeeping Burden
Regulation section
OMB control No.
Respondents
Responses
Burden per response (hours)
Inpatient admission burden (hours)
Outpatient visit burden (hours)
Total annual burden (hours)§ 489.20(u)
0938–New
175
175
4


7003,248,875
.016667
3,185
50,960
54,145§ 489.20(v)
0938–New
2,504
2,504
4


10,01649,735,635
.016667
45,573
729,165
774,738Total Annual Burden (Inpatient+Outpatient)
839,599
 This final rule imposes collection of information requirements as outlined in the regulation text and specified above. However, this final rule also makes reference to several associated information collections that are not discussed in the regulation text. The following is a discussion of these collections, which have already received the Office of Management and Budget's (OMB) approval. Add-on Payments for New Services and Technologies Section II.J.1. of the preamble of this final rule with comment period discusses add-on payments for new services and technologies. Specifically, this section states that applicants for add-on payments for new medical services or technologies for FY 2009 must submit a formal request. A formal request includes a full description of the clinical applications of the medical service or technology and the results of any clinical evaluations demonstrating that the new medical service or technology represents a substantial clinical improvement. In addition, the request must contain a significant sample of the data to demonstrate that the medical service or technology meets the high cost threshold. We also detailed the burden associated with this requirement in a final rule published in the 
                        **Federal Register**
                         on September 7, 2001 (66 FR 46902). As stated in that final rule, we believe the associated burden is exempt from the PRA as stipulated under 5 CFR 1320.3(h)(6). Collection of the information for this requirement will be conducted on an individual case-by-case basis. Occupational Mix Adjustment to the FY 2008 Index (Hospital Wage Index Occupational Mix Survey) Section III. of the preamble of this final rule with comment period details the changes to the hospital wage index for FY 2008. Specifically, section III.C. addresses the occupational mix adjustment to the FY 2008 index. While the preamble does not contain any new information collection requirements, it is important to note that there is an OMB approved collection associated with the hospital wage index. As stated in section III.C. of the preamble of this final rule with comment period, section 304(c) of Pub. L. 106–554 amended section 1886(d) (3) (E) of the Act to require CMS to collect data at least once every 3 years on the occupational mix of employees for each short term, acute care hospital participating in the Medicare program, in order to construct an occupational mix adjustment to the wage index. We collect the data via the occupational mix survey. The burden associated with this information collection request is the time and effort required to collect and submit the data in the Hospital Wage Index Occupational Mix Survey to CMS. While this burden is subject to the PRA, it is already approved under OMB control number 0938–0907, with an expiration date of May 31, 2009. Revisions to the Wage Index Based on Hospital Redesignations (Medicare Geographic Classification Review Board) As noted in section III.I of the preamble of this final rule with comment period, section 1886(d)(10) of the Act established the MGCRB, an entity that has the authority to accept IPPS hospital applications requesting geographic reclassification for wage index or standardized payment amounts and to issue decisions on these requests. It is important for CMS to ensure the accuracy of the MGCRB decisions and remain apprised of potential payment impacts. Our regulations at § 412.256 require a hospital to submit a copy of its MGCRB application to CMS. 
                        ( print page 47409) The burden associated with this requirement is the time and effort associated with a hospital compiling and submitting a copy of its MGCRB application to CMS. While this requirement is subject to the PRA, the burden is approved under OMB control number 0938–0573, with an expiration date of November 30, 2008. Reporting of Hospital Quality Data for Annual Hospital Payment Update As noted in section IV.A.1 of the preamble of this final rule with comment period, section 5001(a) of the DRA sets out new requirements for the RHQDAPU program. The RHQDAPU program was established to implement section 501(b) of Pub. L. 108–173, thereby expanding our Hospital Quality Initiative. The RHQDAPU program originally consisted of a “starter set” of 10 quality measures. Hospitals participating in the hospital quality initiative submit their quality data on the 10 measures to receive an increase in their Medicare Annual Payment Update. The Office of Management and Budget approved the collection of data associated with the original starter set of quality measures under OMB control number 0938–0918, with an expiration date of January 31, 2010. However, we recently submitted a new information collection request containing additional quality measures to OMB for approval. The new measures collect data for the Surgical Care Improvement Project (SCIP) and mortality measures. We announced and sought public comment on the information collection request in both 60-day and 30-day 
                        **Federal Register**
                         notices published on October 13, 2006 (71 FR 60532), and December 22, 2006 (71 FR 77026), respectively. The revised information collection request is currently under review at OMB. Section IV.A.1 of the preamble of this final rule with comment period also discusses the use of the HCAHPS survey to capture quality data. The survey is designed to produce comparable data on the patient's perspective on care that allows objective and meaningful comparisons between hospitals on domains that are important to consumers. The HCAHPS survey is currently approved under OMB control number 0938–0981, with an expiration date of December 31, 2007. Section IV.A.2.h of the preamble of this final rule with comment period addresses the reconsideration and appeal procedures for a hospital that we believe did not meet the RHQDAPU program requirements. If a hospital disagrees with our determination, it may submit a written request to us requesting that we reconsider our decision. The hospital's letter must explain the reasons it believes it did meet the RHQDAPU program requirements. While this is a reporting requirement, the burden associated with it is not subject to the PRA under 5 CFR 1320.4(a)(2). The burden associated with information collection requirements imposed subsequent to an administrative action is not subject to the PRA. If you comment on these information collection and recordkeeping requirements, please mail copies directly to the following: Centers for Medicare  Medicaid Services, Office of Strategic Operations and Regulatory Affairs, Regulations Development Group, Attn: William N. Parham, III, CMS–1533–F Room C4–26–05, 7500 Security Boulevard, Baltimore, MD 21244–1850; and Office of Information and Regulatory Affairs, Office of Management and Budget, Room 10235, New Executive Office Building, Washington, DC 20503, Attn: Carolyn Lovett, CMS Desk Officer, CMS–1533–F, 
                        *carolyn_lovett@omb.eop.gov.*
                         Fax (202) 395 6974. C. Waiver of Notice of Proposed Rulemaking We ordinarily publish a notice of proposed rulemaking in the 
                        **Federal Register**
                         to provide a period for public comment before the provisions of a notice such as this take effect. However, we can waive this procedure if an agency finds good cause that a notice and comment procedure is impracticable, unnecessary, or contrary to the public interest and incorporates a statement of the finding and its reasons in the notice issued. We find it unnecessary to undertake notice and comment rulemaking for the additional change to 42 CFR 412.106(b)(2)(iii) discussed in section IV.E. of the preamble of this final rule with comment period, because this notice merely provides technical corrections to the regulations and does not make any substantive changes to the regulations or our existing policy. Therefore, under 5 U.S.C. 553(b)(B), for good cause, we are waiving notice and comment procedures. In addition, as we discussed in section II.I. of the preamble of this final rule with comment period, we proposed in the FY 2008 IPPS proposed rule ((72 FR 24755 through 24771) to adopt the MS–LTC–DRGs as the patient classification system for the LTCH PPS beginning with discharges on or after October 1, 2007. However, in the proposed rule, we omitted proposed changes to the regulation text reflecting the proposed change from LTC–DRGs to MS–LTC–DRGs. Although we did not propose regulation text, as referenced above, our comprehensive descriptions of our proposed adoption of the MS–LTC–DRGs in the preamble of the proposed rule provided the public with detailed specifics of our proposed policy which was subject to notice and comment procedures. We are finalizing the proposed adoption of the MS–LTC–DRGs for use in the LTCH PPS beginning with discharges on or after October 1, 2007, and we are amending the definitions in the regulations at § 412.503. By adding this omitted regulation text, we are ensuring that the CFR accurately reflects the policies adopted in the FY 2008 IPPS final rule. We find that undertaking further notice and comment procedures for the purposes of adding conforming definitions in the LTCH PPS regulations on this policy is unnecessary as the regulation text merely implements and reflects our proposed policy and final policy which was subject previously to notice and comment procedures. Therefore, under 5 U.S.C. 553(b)(B), for good cause, we are waiving notice and comment procedures. List of Subjects 42 CFR Part 411 Kidney diseases
Medicare
Physician referral
Reporting and recordkeeping requirements 42 CFR Part 412 Administrative practice and procedure
Health facilities
Medicare
Puerto Rico
Reporting and recordkeeping requirements 42 CFR Part 413 Health facilities
Kidney diseases
Medicare
Puerto Rico
Reporting and recordkeeping requirements 42 CFR Part 489 Health facilities
Medicare
Reporting and recordkeeping requirements
 For the reasons stated in the preamble of this final rule, the Centers for Medicare  Medicaid Services is amending 42 CFR Chapter IV as follows: PART 411—EXCLUSIONS FROM MEDICARE AND LIMITATIONS ON MEDICARE PAYMENT
 1.The authority citation for Part 411 continues to read as follows: Authority:
                            Secs. 1102, 1860D–4(e)(6), 1871, and 1877(b)(4) and (5) of the Social Security Act (42 U.S.C. 1302, 1395w–10(e)(6), 1395hh, and 1395nn(b)(4) and (5)). 
 
 2.Section 411.4 is amended by revising the introductory text of paragraph (b) to read as follows: § 411.4
  
 (b) 
                                *Special conditions for services furnished to individuals in custody of penal authorities.*
                                 Individuals who are in custody include, but are not limited to, individuals who are under arrest, incarcerated, imprisoned, escaped from confinement, under supervised release, on medical furlough, required to reside in mental health facilities, required to reside in halfway houses, required to live under home detention, or confined completely or partially in any way under a penal statute or rule. Payment may be made for services furnished to individuals or groups of individuals who are in the custody of police or other penal authorities or in the custody of a government agency under a penal statute only if the following conditions are met:
 PART 412—PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL SERVICES
 3.The authority citation for Part 412 is revised to read as follows: Authority:
                            Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh), and sec. 124 of Pub. L. 106–113 (113 Stat. 1501A–332). 4.Section 412.2 is amended by adding a new paragraph (g) to read as follows: § 412.2
  
 (g) 
                                *Payment adjustment for certain replaced devices.*
                                 CMS makes a payment adjustment for certain replaced devices, as provided under § 412.89.
 5.Section 412.4 is amended by— a.Revising paragraphs (d)(3)(ii)(B) and (d)(3)(ii)(C). b.Adding a new paragraph (d)(3)(ii)(D). c.Revising paragraph (f)(3). d.Revising the introductory text of paragraph (f)(5). e.Revising paragraph (f)(5)(i). f.Revising paragraph (f)(5)(iv). g.Adding a new paragraph (f)(6). The revisions and additions read as follows: § 412.4
  
 (d) * * * (3) * * * 
 (ii) * * * (B) The proportion of short-stay discharges to postacute care to total discharges in the DRG exceeds the 55th percentile for all DRGs; (C) The DRG is paired with a DRG based on the presence or absence of a comorbidity or a complication or major cardiovascular condition that meets the criteria specified under paragraphs (d)(3)(ii)(A) and (d)(3)(ii)(B) of this section; and (D) In the case of MS-DRGs that share the same base MS-DRG, if one MS-DRG meets the criteria specified under paragraph (d)(3)(ii)(B) of this section, every MS-DRG that shares the same base MS-DRG is a qualifying DRG. 
 (f) * * * (3) 
                                *Transfer assigned to DRG for newborns that die or are transferred to another hospital.*
                                 If a transfer is classified into CMS DRG 385 (Neonates, Died or Transferred) prior to October 1, 2007, or into MS-DRG 789 (Neonates, Died or Transferred to Another Acute Care Facility) on or after October 1, 2007, the transferring hospital is paid in accordance with § 412.2(b). 
 (5) 
                                *Special rule for DRGs meeting specific criteria.*
                                 For discharges occurring on or after October 1, 2005, and prior to October 1, 2007, a hospital that transfers an inpatient under the circumstances described in paragraph (c) of this section is paid using the provisions of paragraphs (f)(2)(i) and (f)(2)(ii) of this section if the transfer case is assigned to one of the DRGs meeting the following criteria: (i) The DRG meets the criteria specified in paragraph (d)(3)(i) or (d)(3)(ii) of this section. 
 (iv) If a DRG is paired with a DRG based on the presence or absence of a comorbidity or complication or a major cardiovascular complication that meets the criteria specified in paragraphs (f)(5)(i) through (f)(5)(iii) of this section, that DRG will also be paid under the provisions of paragraphs (f)(2)(i) and (f)(2)(ii) of this section. (6) 
                                *Special rule for DRGs meeting specific criteria.*
                                 For discharges occurring on or after October 1, 2007, a hospital that transfers an inpatient under the circumstances described in paragraph (c) of this section is paid using the provisions of paragraphs (f)(2)(i) and (f)(2)(ii) of this section if the transfer case is assigned to one of the DRGs meeting the following criteria: (i) The DRG meets the criteria specified in paragraph (d)(3)(i) or (d)(3)(ii) of this section; (ii) The average charges of the 1-day discharge cases in the DRG must be at least 50 percent of the average charges for all cases in the DRG; and (iii) The geometric mean length of stay for the DRG is greater than 4 days. (iv) If a DRG is part of an MS-DRG group that meets the criteria specified in paragraphs (f)(6)(i) through (f)(6)(iii) of this section, that DRG will also be paid under the provisions of paragraphs (f)(2)(i) and (f)(2)(ii) of this section.
 6.Section 412.64 is amended by— a.Revising paragraph (b)(1)(ii)(B). b.In paragraph (b)(3), designating the existing text as (b)(3)(i) and adding a new paragraph (b)(3)(ii). c.Adding a new paragraph (e)(3). d.Revising paragraph (i)(2). e.In the introductory text of paragraph (h)(4), removing the date “September 30, 2007” and adding in its place “September 30, 2008”. The revisions read as follows: § 412.64
  
 (b) * * * (1) * * * (ii) * * * (B) For discharges occurring on or after October 1, 1983, and before October 1, 2007, the following New England counties are deemed to be parts of urban areas under section 601(g) of the Social Security Amendments of 1983 (Pub. L. 98–21, 42 U.S.C. 1395ww (note); Litchfield County, Connecticut; York County, Maine; Sagadahoc County, Maine; Merrimack County, New Hampshire; and Newport County, Rhode Island. 
 (3) (i) * * * (ii) For discharges occurring on or after October 1, 2007, hospitals in the following New England counties, if not already located in an urban area, are deemed to be located in urban areas under section 601(g) of the Social Security Amendments of 1983 (Pub. L. 98–21, 42 U.S.C. 1395ww (note): Litchfield County, Connecticut; York County, Maine; Sagadahoc County, Maine; Merrimack County, New Hampshire; and Newport County, Rhode Island. 
 (e) * * * (3) To the extent CMS determines that changes to the DRG classification and recalibrations of the DRG relative weights for a previous year (or estimates that such adjustments for a future fiscal year) did (or are likely to) result in a change in aggregate payments under this subsection during the fiscal year that are a result of changes in coding or 
                                ( print page 47411)
                                classification of discharges that do not reflect real changes in case mix, CMS may adjust the standardized amount for subsequent fiscal years so as to eliminate the effect of such coding and classification changes. 
 (i) * * * (2) 
                                *Amount of adjustment.*
                                 A hospital located in a county that meets the criteria under paragraphs (i)(1)(i) through (i)(1)(iii) of this section will receive an increase in its wage index that is equal to a weighted average of the difference between the postreclassified wage index of the MSA (or MSAs) with the higher wage index (or wage indices) and the postreclassified wage index of the MSA or rural statewide area in which the qualifying county is located, weighted by the overall percentage of the hospital employees residing in the qualifying county who are employed in any MSA with a higher wage index.
 7.The heading of Subpart F is revised to read as follows: Subpart F—Payments for Outlier Cases, Special Treatment Payment for New Technology, and Payment Adjustment for Certain Replaced Devices
 8.Section 412.88 is amended by revising the introductory text of paragraph (a)(2) to read as follows: § 412.88
  (a) * * * (2) If the costs of the discharge (determined by applying the operating cost to charge ratios as described in § 412.84(h)) exceed the full DRG payment, an additional amount equal to the lesser of—
 9.A new undesignated center heading and a new § 412.89 are added under Subpart F following § 412.88 to read as follows: Payment Adjustment for Certain Replaced Devices § 412.89
  (a) 
                                *General rule.*
                                 For discharges occurring on or after October 1, 2007, the amount of payment for a discharge described in paragraph (b) of this section is reduced when— (1) A device is replaced without cost to the hospital; (2) The provider received full credit for the cost of a device; or (3) The provider receives a credit equal to 50 percent or more of the cost of the device. (b) 
                                *Discharges subject to payment adjustment.*
                                 (1) Payment is reduced in accordance with paragraph (a) of this section only if the implantation of the device determines the DRG assignment. (2) CMS lists the DRGs that qualify under paragraph (b)(1) of this section in the annual final rule for the hospital inpatient prospective payment system. (c) 
                                *Amount of reduction.*
                                 (1) For a device provided to the hospital without cost, the cost of the device is subtracted from the DRG payment.
 (2) For a device for which the hospital received a full or partial credit, the amount credited is subtracted from the DRG payment. 10.Section 412.96 is amended by adding a new paragraph (g)(4), to read as follows: § 412.96
  
 (g) * * * (4) A hospital that submits a written request on or after October 1, 2007, to cancel its reclassification under § 412.103(g) is deemed to have cancelled its status as a rural referral center effective on the same date the cancellation under § 412.103(g) takes effect. The provision of this paragraph (g)(4) applies to hospitals that qualify as rural referral centers under § 412.96 based on rural status acquired under § 412.103.
 11.Section 412.103 is amended by revising paragraph (g) to read as follows: § 412.103
  
 (g) 
                                *Cancellation of classification*
                                —(1) 
                                *Hospitals other than rural referral centers.*
                                 Except as provided in paragraph (g)(2) of this section— (i) A hospital may cancel its rural reclassification by submitting a written request to the CMS Regional Office not less than 120 days prior to the end of its current cost reporting period. (ii) The hospital's cancellation of the classification is effective beginning with the next full cost reporting period. (2) 
                                *Hospitals classified as rural referral centers.*
                                 For a hospital that was classified as a rural referral center under § 412.96 based on rural reclassification under this section— (i) A hospital may cancel its rural reclassification by submitting a written request to the CMS Regional Office not less than 120 days prior to the end of a Federal fiscal year and after being paid as rural for at least one 12-month cost reporting period. (ii) The hospital's cancellation of the classification is not effective until it has been paid as rural for at least one 12-month cost reporting period, and not until the beginning of the Federal fiscal year following such 12-month cost reporting period. (iii) The provisions of paragraphs (g)(2)(i) and (g)(2)(ii) of this section are effective for all written requests submitted by hospitals on or after October 1, 2007, to cancel rural reclassifications.
 12.Section 412.106 is amended by— a.Revising paragraph (b)(2)(i). b.Revising paragraph (b)(2)(iii). The revisions read as follows: § 412.106
  
 (b) * * * (2) * * * (i) Determines the number of patient days that— (A) Are associated with discharges occurring during each month; and (B) Are furnished to patients who during that month were entitled to both Medicare Part A (or Medicare Advantage (Part C)) and SSI, excluding those patients who received only State supplementation; 
 (iii) Divides the number determined under paragraph (b)(2)(ii) of this section by the total number of days that— (A) Are associated with discharges that occur during that period; and (B) Are furnished to patients entitled to Medicare Part A (or Medicare Advantage (Part C)).
 13.Section 412.230 is amended by adding a new paragraph (d)(2)(v) to read as follows: § 412.230
  
 (d) * * * (1) * * * (2) * * * (v) For applications submitted for reclassification effective in FY 2009 and thereafter, a campus of a multicampus hospital that is located in a geographic area different from the area associated with the provider number of the entire multicampus hospital may seek reclassification to another CBSA using the composite wage data of the entire multicampus hospital as its hospital-specific data.
 
 
 14.Section 412.232 is amended by adding a new paragraph (d)(2)(iii), to read as follows: § 412.232
  
 (d) * * * (1) * * * (2) * * * (iii) For redesignations effective beginning FY 2009, the wage data of an individual campus of a multicampus hospital will be determined by allocating, on the basis of full-time equivalent staff or discharges, the wage data of the entire multicampus hospital between or among the individual campuses of the multicampus hospital. The provision of this paragraph (d)(2)(iii) applies only in the case where an individual campus is located in a geographic area different from the area associated with the provider number of the entire multicampus hospital.
 15.Section 412.234 is amended by revising paragraph (c) to read as follows: § 412.234
  
 (c) 
                                *Appropriate wage data.*
                                 (1) The hospitals must submit appropriate wage data as provided for in § 412.230(d)(2). (2) For redesignations effective beginning FY 2009, the appropriate wage data of an individual campus located in a geographic area different from the area associated with the provider number of the entire multicampus hospital are the wage data described in § 412.232(d)(2)(iii).
 16.Section 412.316 is amended by— a.Revising the introductory text of paragraph (b). b.Revising paragraph (b)(2). c.Revising paragraph (b)(3). The revisions read as follows: § 412.316
  
 (b) 
                                *Large urban location.*
                                 For discharges occurring on or before September 30, 2007, CMS provides an additional payment to a hospital located in a large urban area equal to 3.0 percent of what would otherwise be payable to the hospital based on the Federal rate. 
 (2) For discharges occurring on or after October 1, 2004, and before October 1, 2007, the definition of large urban areas under § 412.63(c)(6) continues be in effect for purposes of the payment adjustment under this section, based on the geographic classification under § 412.64, except as provided for in paragraph (b)(3) of this section. (3) For purposes of this section, the geographic classifications specified under § 412.64 apply, except that, effective for discharges occurring on or after October 1, 2006, and before October 1, 2007, for an urban hospital that is reclassified as rural as set forth in § 412.103, the geographic classification is rural.
 17.Section 412.322 is amended by adding new paragraphs (c) and (d) to read as follows: § 412.322
  
 (c) 
                                *Payment adjustment factor for FY 2009.*
                                 For discharges occurring on or after October 1, 2008, and before October 1, 2009, the indirect teaching adjustment factor equals one-half the amount computed under paragraph (b) of this section. (d) 
                                *Payment adjustment factor for FY 2010 and subsequent fiscal years.*
                                 For discharges occurring on or after October 1, 2009, CMS makes no separate payment for indirect teaching medical education under the prospective payment system for inpatient capital costs.
 18.Section 412.503 is amended by revising the definition of “LTC–DRG” and adding a definition of “MS–LTC–DRG” in alphabetical order, to read as follows: § 412.503
  
 *LTC–DRG*
                                 stands for the diagnosis-related group used to classify patient discharges from a long-term care hospital based on clinical characteristics and average resource use, for prospective payment purposes. Effective October 1, 2007, long-term care hospital patient discharges occurring on or after October 1, 2007, are classified by a severity-adjusted patient classification system, the MS–LTC–DRGs. Any reference to the term “LTC–DRG” shall be considered a reference to the term “MS–LTC–DRG” when applying the provisions of this subpart for policy descriptions and payment calculations for discharges from a long-term care hospital occurring on or after October 1, 2007. *MS–LTC–DRG*
                                 stands for the severity-adjusted diagnosis-related group used to classify patient discharges from a long-term care hospital based on clinical characteristics and average resource use, for prospective payment purposes for discharges from a long-term care hospital occurring on or after October 1, 2007.
 PART 413—PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR END-STAGE RENAL DISEASE SERVICES; PROSPECTIVELY DETERMINED PAYMENT RATES FOR SKILLED NURSING FACILITIES
 19.The authority citation for Part 413 is revised to read as follows: Authority:
                            Secs. 1102, 1812(d), 1814(b), 1815, 1833(a), (i), and (n), 1861(v), 1871, 1881, 1883, and 1886 of the Social Security Act (42 U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 1395l(a), (i), and (n), 1395x(v), 1395hh, 1395rr, 1395tt, and 1395ww); and sec. 124 of Pub. L. 106–133 (113 Stat. 1501A–332). 20.Section 413.75(b) is amended by— a.Adding in alphabetical order a definition of “orientation activities”. b.Revising the definition of “patient care activities”. The addition and revision read as follows: § 413.75
  
 (b) * * * *Orientation activities*
                                 means activities that are principally designed to prepare an individual for employment as a resident in a particular setting, or for participation in a particular specialty program and patient care activities associated with that particular specialty program. *Patient care activities*
                                 means the care and treatment of particular patients, including services for which a physician or other practitioner may bill, and orientation activities as defined in this section.
 PART 489—PROVIDER AGREEMENTS AND SUPPLIER APPROVAL
 21.The authority citation for Part 489 is amended to read as follows: Authority:
                            Secs. 1102, 1819, 1820(e), 1861, 1864(m), 1866, 1869, and 1871 of the Social Security Act (42 U.S.C. 1302, 1395i–3, 1395x, 1395aa(m), 1395cc, 1395ff, and 1395hh). 22.Section 489.3 is amended by adding a definition of “physician-owned hospital” in alphabetical order to read as follows: § 489.3
  
 *Physician-owned hospital*
                                 means any participating hospital (as defined in § 489.24) in which a physician or physicians have an ownership or investment interest. The ownership or investment interest may be through equity, debt, or other means, and 
                                ( print page 47413)
                                includes an interest in an entity that holds an ownership or investment interest in the hospital. This definition does not include a hospital with physician ownership or investment interests that satisfies the requirements at § 411.356(a) or (b) of this chapter.
 23.Section 489.12 is amended by— a.Revising paragraph (a)(2). b.Redesignating paragraph (a)(3) as paragraph (a)(4). c.Adding a new paragraph (a)(3). The revision and addition read as follows: § 489.12
  (a) * * * (2) The prospective provider has failed to disclose ownership and control interests in accordance with § 420.206 of this chapter; (3) The prospective provider is a physician-owned hospital as defined in § 489.3 and does not have procedures in place for making physician ownership disclosures to patients in accordance with § 489.20(u); or
 24.Section 489.20 is amended by adding new paragraphs (u) and (v) to read as follows: § 489.20
  
 (u) In the case of a physician-owned hospital as defined in § 489.3 to furnish written notice to all patients at the beginning of their hospital stay or outpatient visit that the hospital is a physician-owned hospital in order to assist the patients in making informed decisions regarding their care, in accordance with § 482.13(b)(2) of this subchapter. The notice should disclose, in a manner reasonably designed to be understood by all patients, the fact that the hospital meets the Federal definition of a physician-owned hospital specified in § 489.3 and that the list of the hospital's physician owners or investors is available upon request. For the purposes of this paragraph, the hospital stay or outpatient visit begins with the provision of a package of information regarding scheduled preadmission testing and registration for a planned hospital admission for inpatient care or outpatient service. (v) In the case of a hospital as defined in § 489.24(b), to furnish written notice to all patients at the beginning of their hospital stay or outpatient visit if a doctor of medicine or a doctor of osteopathy is not present in the hospital 24 hours per day, 7 days per week, in order to assist the patients in making informed decisions regarding their care, in accordance with § 482.13(b)(2) of this subchapter. The notice must indicate how the hospital will meet the medical needs of any patient who develops an emergency medical condition, as defined in § 489.24(b), at a time when there is no physician present in the hospital. For purposes of this paragraph, the hospital stay or outpatient visit begins with the provision of a package of information regarding scheduled preadmission testing and registration for a planned hospital admission for inpatient care or outpatient service.
 25.Section 489.24 is amended by revising paragraph (a)(2) to read as follows: § 489.24
  (a) * * * (2) 
                                *Nonapplicability of provisions of this section.*
                                 Sanctions under this section for an inappropriate transfer during a national emergency or for the direction or relocation of an individual to receive medical screening at an alternate location do not apply to a hospital with a dedicated emergency department located in an emergency area, as specified in section 1135(g)(1) of the Act. A waiver of these sanctions is limited to a 72 hour period beginning upon the implementation of a hospital disaster protocol, except that, if a public health emergency involves a pandemic infectious disease (such as pandemic influenza), the waiver will continue in effect until the termination of the applicable declaration of a public health emergency, as provided for by section 1135(e)(1)(B) of the Act.
 26.Section 489.53 is amended by— a.Redesignating paragraph (c) and (d) as paragraphs (d) and (e), respectively. b.Adding a new paragraph (c). c.In newly redesignated paragraph (d)(1), removing the cross reference “paragraph (c)(2) of this section” and adding the reference “paragraph (d)(2) of this section” in its place. The revisions and additions read as follows: § 489.53
  
 (c) 
                                *Termination of agreements with physician-owned hospitals.*
                                 In the case of a physician-owned hospital, as defined at § 489.3, CMS may terminate the provider agreement if the hospital failed to comply with the requirements of § 489.20(u).
 (Catalog of Federal Domestic Assistance Program No. 93.773, Medicare—Hospital Insurance; and Program No. 93.774, Medicare Supplementary Medical Insurance Program) Dated: July 26, 2007. Herb B. Kuhn, Acting Deputy Administrator, Centers for Medicare  Medicaid Services. Dated: July 27, 2007. Michael O. Leavitt, Secretary.
 [editorial Note: The following Addendum and appendixes will not appear in the Code of Federal Regulations.]
 Addendum—Schedule of Standardized Amounts, Update Factors, and Rate of Increase Percentages Effective With Cost Reporting Periods Beginning on or After October 1, 2007 I. Summary and Background In this Addendum, we are setting forth the methods and data we used to determine the prospective payment rates for Medicare hospital inpatient operating costs and Medicare hospital inpatient capital-related costs. We are also setting forth the rate-of-increase percentages for updating the target amounts for certain hospitals and hospital units excluded from the IPPS. In general, except for SCHs, MDHs, and hospitals located in Puerto Rico, each hospital's payment per discharge under the IPPS is based on 100 percent of the Federal national rate, also known as the national adjusted standardized amount. This amount reflects the national average hospital cost per case from a base year, updated for inflation. SCHs are paid based on whichever of the following rates yields the greatest aggregate payment: the Federal national rate; the updated hospital-specific rate based on FY 1982 costs per discharge; the updated hospital-specific rate based on FY 1987 costs per discharge; or the updated hospital-specific rate based on FY 1996 costs per discharge. Under section 1886(d)(5)(G) of the Act, MDHs historically have been paid based on the Federal national rate or, if higher, the Federal national rate plus 50 percent of the difference between the Federal national rate and the updated hospital-specific rate based on FY 1982 or FY 1987 costs per discharge, whichever was higher. (MDHs did not have the option to use their FY 1996 hospital-specific rate.) However, section 5003(a)(1) of Pub. L. 109–171 extended and modified the MDH special payment provision which was previously set to expire on October 1, 2006, to include discharges occurring on or after October 1, 2006, but before October 1, 2011. Under section 5003(b) of Pub. L. 109–171, if the change results in an increase to an MDH's target amount, an MDH must rebase its hospital-specific rates to its FY 2002 cost report. Section 5003(c) of Pub. L. 109–171 further required that 
                        ( print page 47414)
                        MDHs would now be paid based on the Federal national rate or, if higher, the Federal national rate plus 75 percent of the difference between the Federal national rate and the updated hospital-specific rate. Further, based on the provisions of section 5003(d) of Pub. L. 109–171, MDHs are no longer subject to the 12-percent cap on their DSH payment adjustment factor. For hospitals located in Puerto Rico, the payment per discharge is based on the sum of 25 percent of a Puerto Rico rate that reflects the base year average costs per case of Puerto Rico hospitals and 75 percent of the Federal national rate. (See section II.D.3. of this Addendum of this final rule with comment period for a complete description.) As discussed below in section II. of the Addendum to this final rule with comment period, we are finalizing our decision to make changes in the determination of the prospective payment rates for Medicare inpatient operating costs for FY 2008. In section III. of the Addendum to this final rule with comment period, we discuss our policy changes for determining the prospective payment rates for Medicare inpatient capital-related costs for FY 2008. Section IV. of the Addendum to this final rule with comment period sets forth our changes for determining the rate-of-increase limits for certain hospitals excluded from the IPPS for FY 2008. The tables to which we refer in the preamble of this final rule with comment period are presented in section V. of the Addendum of this final rule with comment period. II. Changes to Prospective Payment Rates for Hospital Inpatient Operating Costs for FY 2008 The basic methodology for determining prospective payment rates for hospital inpatient operating costs for FY 2005 and subsequent fiscal years is set forth at § 412.64. The basic methodology for determining the prospective payment rates for hospital inpatient operating costs for hospitals located in Puerto Rico for FY 2005 and subsequent fiscal years is set forth at §§ 412.211 and 412.212. Below we discuss the factors used for determining the prospective payment rates. In summary, the standardized amounts set forth in Tables 1A, 1B, and 1C, of section VI. of the Addendum to this final rule with comment period reflect— Equalization of the standardized amounts for urban and other areas at the level computed for large urban hospitals during FY 2004 and onward, as provided for under section 1886(d)(3)(A)(iv) of the Act, updated by the applicable percentage increase required under sections 1886(b)(3)(B)(i)(XX) and 1886(b)(3)(B)(viii) of the Act.
                    The labor- related share that is applied to the standardized amounts and Puerto Rico-specific standardized amounts to give the hospital the highest payment, as provided for under sections 1886(d)(3)(E), and 1886(d)(9)(C)(iv) of the Act.
                    Updates of 3.3 percent for all areas (that is, the estimated full market basket percentage increase of 3.3 percent), as required by section 1886(b)(3)(B)(i)(XX) of the Act, as amended by section 5001(a)(1) of Pub. L. 109–171, and reflecting the requirements of section 1886(b)(3)(B)(viii) of the Act, as added by section 5001(a)(3) of Pub. L. 109–171, to reduce the applicable percentage increase by 2.0 percentage points for a hospital that fails to submit data, in a form and manner specified by the Secretary, relating to the quality of inpatient care furnished by the hospital.
                    An adjustment to the standardized amount to ensure budget neutrality for DRG recalibration and reclassification, as provided for under section 1886(d)(4)(C)(iii) of the Act.
                    An adjustment to ensure the wage index update and changes are budget neutral, as provided for under section 1886(d)(3)(E) of the Act.
                    An adjustment to ensure the effects of geographic reclassification are budget neutral, as provided for in section 1886(d)(8)(D) of the Act, by removing the FY 2007 budget neutrality factor and applying a revised factor.
                    An adjustment to ensure that the imputed rural floor adopted under section 1886(d)(3)(E) of the Act is budget neutral.
                    An adjustment to remove the FY 2007 outlier offset and apply an offset for FY 2008.
                    An adjustment to ensure the effects of the rural community hospital demonstration required under section 410A of Pub. L. 108–173 are budget neutral, as required under section 410A(c)(2) of Pub. L. 108–173.
                    An adjustment to eliminate the effect of coding or classification changes that do not reflect real changes in case-mix using the Secretary's authority under section 1886(d)(3)(A)(vi) of the Act (as discussed in section II.D.6. of the preamble to this final rule with comment period). We note that two budget neutrality provisions will no longer be applied to the standardized amounts beginning with FY 2008. First, in the FY 2005 IPPS final rule (69 FR 49032 through 49034), we allowed urban hospitals that became rural under the new labor market area definitions to maintain their assignment to the MSA where they were previously located for a 3 year period extending from FY 2005 through FY 2007. In these years, we provided for a budget neutrality adjustment to the standardized amount to ensure that this policy did not increase Medicare expenditures for hospital inpatient services. For FY 2008, this budget neutrality adjustment to the IPPS standardized amounts will no longer be necessary because the provision has expired. Second, in this final rule with comment period, we are making a prospective change to how budget neutrality is applied to implement the rural floor for FY 2008 and subsequent years. As discussed in section III.G.4. of the preamble of this final rule with comment period, we are applying the budget neutrality adjustment to hospital wage indices rather than the standardized amount. However, we are continuing to apply budget neutrality for the imputed rural floor adopted under section 1886(d)(3)(E) of the Act to the standardized amounts. A. Calculation of the Adjusted Standardized Amount 1. Standardization of Base Year Costs or Target Amounts In general, the national standardized amount is based on per discharge averages of adjusted hospital costs from a base period (section 1886(d)(2)(A) of the Act) or, for Puerto Rico, adjusted target amounts from a base period (section 1886(d)(9)(B)(i) of the Act), updated and otherwise adjusted in accordance with the provisions of section 1886(d) of the Act. The September 1, 1983 interim final rule (48 FR 39763) contained a detailed explanation of how base-year cost data (from cost reporting periods ending during FY 1981) were established in the initial development of standardized amounts for the IPPS. The September 1, 1987 final rule (52 FR 33043 and 33066) contains a detailed explanation of how the target amounts were determined, and how they are used in computing the Puerto Rico rates. Sections 1886(d)(2)(B) and (d)(2)(C) of the Act require us to update base year per discharge costs for FY 1984 and then standardize the cost data in order to remove the effects of certain sources of cost variations among hospitals. These effects include case mix, differences in area wage levels, cost-of-living adjustments for Alaska and Hawaii, indirect medical education costs, and costs to hospitals serving a 
                        ( print page 47415)
                        disproportionate share of low-income patients. In accordance with section 1886(d)(3)(E) of the Act, the Secretary estimates, from time to time, the proportion of hospitals' costs that are attributable to wages and wage-related costs. In general, the standardized amount is divided into labor-related and nonlabor-related amounts; only the proportion considered to be the labor-related amount is adjusted by the wage index. Section 1886(d)(3)(E) of the Act requires that 62 percent of the standardized amount be adjusted by the wage index, unless doing so would result in lower payments to a hospital than would otherwise be made. (Section 1886(d)(9)(C)(iv)(II) of the Act extends this provision to the labor-related share for hospitals located in Puerto Rico.) For FY 2008, we are not changing the national and Puerto Rico-specific labor-related and nonlabor-related shares from the percentages established for FY 2007. Therefore, the labor-related share continues to be 69.7 percent for the national standardized amounts and 58.7 percent for the Puerto Rico specific standardized amount. Consistent with section 1886(d)(3)(E) of the Act, we are applying the wage index to a labor-related share of 62 percent for all non-Puerto Rico hospitals whose wage indexes are less than or equal to 1.0000. For all non-Puerto Rico hospitals whose wage indices are greater than 1.0000, we are applying the wage index to a labor-related share of 69.7 percent of the national standardized amount. For hospitals located in Puerto Rico, we are applying a labor-related share of 58.7 percent if its Puerto Rico-specific wage index is less than or equal to 1.0000. For hospitals located in Puerto Rico whose Puerto Rico-specific wage index values are greater than 1.0000, we are applying a labor share of 62 percent. The standardized amounts for operating costs appear in Table 1A, 1B, and 1C of the Addendum to this final rule with comment period. 2. Computing the Average Standardized Amount Section 1886(d)(3)(A)(iv) of the Act requires that, beginning with FY 2004 and thereafter, an equal standardized amount be computed for all hospitals at the level computed for large urban hospitals during FY 2003, updated by the applicable percentage update. Section 1886(d)(9)(A) of the Act equalizes the Puerto Rico-specific urban and rural area rates. Accordingly, we calculated FY 2008 national and Puerto Rico standardized amounts irrespective of whether a hospital is located in an urban or rural location. 3. Updating the Average Standardized Amount In accordance with section 1886(d)(3)(A)(iv)(II) of the Act, we are updating the equalized standardized amount for FY 2008 by the full estimated market basket percentage increase for hospitals in all areas, as specified in section 1886(b)(3)(B)(i)(XX) of the Act, as amended by section 5001(a)(1) of Pub. L. 109–171. The percentage change in the market basket reflects the average change in the price of goods and services purchased by hospitals to furnish inpatient care. The most recent forecast of the hospital market basket increase for FY 2008 is 3.3 percent. Thus, for FY 2008, the update to the average standardized amount is 3.3 percent for hospitals in all areas. The estimated market basket increase of 3.3 percent is based on the 2007 second quarter forecast of the hospital market basket increase (as discussed in Appendix B of this final rule with comment period). Section 1886(b)(3)(B) of the Act specifies the mechanism to be used to update the standardized amount for payment for inpatient hospital operating costs. Section 1886(b)(3)(B)(viii) of the Act, as added by section 5001(a)(3) of Pub. L. 109–171, provides for a reduction of 2.0 percentage points from the update percentage increase (also known as the market basket update) for FY 2007 and each subsequent fiscal year for any “subsection (d) hospital” that does not submit quality data as discussed in section IV.A. of the preamble of this final rule with comment period. The standardized amounts in Tables 1A through 1C of section V. of the Addendum to this final rule with comment period reflect these differential amounts. Although the update factors for FY 2008 are set by law, we are required by section 1886(e)(4) of the Act to recommend, taking into account MedPAC's recommendations, appropriate update factors for FY 2008 for both IPPS hospitals and hospitals and hospital units excluded from the IPPS. Our recommendation on the update factors (which is required by sections 1886(e)(4)(A) and (e)(5)(A) of the Act) is set forth in Appendix B of this final rule with comment period. 4. Other Adjustments to the Average Standardized Amount As in the past, we adjusted the FY 2008 standardized amount to remove the effects of the FY 2007 geographic reclassifications and outlier payments before applying the FY 2008 updates. We then applied budget neutrality offsets for outliers and geographic reclassifications to the standardized amount based on FY 2008 payment policies. We did not remove the prior year's budget neutrality adjustments for reclassification and recalibration of the DRG weights and for updated wage data because, in accordance with sections 1886(d)(4)(C)(iii) and 1886(d)(3)(E) of the Act, estimated aggregate payments after updates in the DRG relative weights and wage index should equal estimated aggregate payments prior to the changes. If we removed the prior year's adjustment, we would not have satisfied these conditions. Budget neutrality is determined by comparing aggregate IPPS payments before and after making changes that are required to be budget neutral (for example, changes to DRG classifications, recalibration of the DRG relative weights, updates to the wage index, and different geographic reclassifications). We included outlier payments in the simulations because they may be affected by changes in these parameters. We also adjusted the standardized amount this year by an estimated amount to ensure that aggregate IPPS payments did not exceed the amount of payments that would have been made in the absence of the rural community hospital demonstration program, as required under section 410A of Pub. L. 108–173. This demonstration is required to be budget neutral under section 410A(c)(2) of Pub. L. 108–173. For FY 2008, we are also applying budget neutrality to the standardized amount for the imputed rural floor adopted under section 1886(d)(3)(E) of the Act. For FY 2008 and FY 2009, we also made an adjustment to eliminate the effect of coding or classification changes that did not reflect real changes in case-mix using the Secretary's authority under section 1886(d)(3)(A)(vi) of the Act. a. Recalibration of DRG Weights and Updated Wage Index—Budget Neutrality Adjustment Section 1886(d)(4)(C)(iii) of the Act specifies that, beginning in FY 1991, the annual DRG reclassification and recalibration of the relative weights must be made in a manner that ensures that aggregate payments to hospitals are not affected. As discussed in section II. of the preamble of this final rule with comment period, we normalized the recalibrated DRG weights by an adjustment factor so that the average case weight after recalibration is equal to the average case weight prior to recalibration. However, equating the average case weight after recalibration to 
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                        the average case weight before recalibration does not necessarily achieve budget neutrality with respect to aggregate payments to hospitals because payments to hospitals are affected by factors other than average case weight. Therefore, as we have done in past years, we made a budget neutrality adjustment to ensure that the requirement of section 1886(d)(4)(C)(iii) of the Act is met. Section 1886(d)(3)(E) of the Act requires us to update the hospital wage index on an annual basis beginning October 1, 1993. This provision also requires us to make any updates or adjustments to the wage index in a manner that ensures that aggregate payments to hospitals are not affected by the change in the wage index. Consistent with current policy, for FY 2008, we adjusted 100 percent of the wage index factor for occupational mix. We describe the occupational mix adjustment in section III.C. of the preamble to this final rule with comment period. To comply with the requirement that DRG reclassification and recalibration of the relative weights and the updated wage index be budget neutral, we used FY 2006 discharge data to simulate payments and compared aggregate payments using the FY 2007 relative weights and wage indexes to aggregate payments using the proposed FY 2008 relative weights and wage indexes. The same methodology was used for the FY 2007 budget neutrality adjustment. Based on this comparison, we computed a budget neutrality adjustment factor equal to 0.996563 to be applied to the national standardized amount. We also adjusted the Puerto Rico-specific standardized amount for the effect of DRG reclassification and recalibration. We computed a budget neutrality adjustment factor of 0.995913 to be applied to the Puerto Rico-specific standardized amount. These budget neutrality adjustment factors are applied to the standardized amounts for FY 2007 without removing the prior year's budget neutrality adjustments. In addition, as discussed in section IV. of the Addendum to this final rule with comment period, we applied the same DRG reclassification and recalibration budget neutrality factor of 0.995913 to the hospital-specific rates that is effective for cost reporting periods beginning on or after October 1, 2007. b. Reclassified Hospitals—Budget Neutrality Adjustment Section 1886(d)(8)(B) of the Act provides that, effective with discharges occurring on or after October 1, 1988, certain rural hospitals are deemed urban. In addition, section 1886(d)(10) of the Act provides for the reclassification of hospitals based on determinations by the MGCRB. Under section 1886(d)(10) of the Act, a hospital may be reclassified for purposes of the wage index. Under section 1886(d)(8)(D) of the Act, the Secretary is required to adjust the standardized amount to ensure that aggregate payments under the IPPS after implementation of the provisions of sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act are equal to the aggregate prospective payments that would have been made absent these provisions. We note that the wage index adjustments provided under section 1886(d)(13) of the Act are not budget neutral. Section 1886(d)(13)(H) of the Act provides that any increase in a wage index under section 1886(d)(13) shall not be taken into account “in applying any budget neutrality adjustment with respect to such index” under section 1886(d)(8)(D) of the Act. To calculate the budget neutrality factor, we used FY 2006 discharge data to simulate payments, and compared total IPPS payments prior to any reclassifications under sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act to total IPPS payments after such reclassifications. Based on these simulations, we calculated an adjustment factor of 0.991695 to ensure that the effects of these provisions are budget neutral, consistent with the statute. The adjustment factor was applied to the standardized amount after removing the effects of the FY 2007 budget neutrality adjustment factor. We note that the FY 2008 adjustment reflects FY 2008 wage index reclassifications approved by the MGCRB or the Administrator. (Section 1886(d)(10)(D)(v) of the Act makes wage index reclassifications effective for 3 years. Therefore, the FY 2008 geographic reclassification could either be the continuation of a 3-year reclassification that began in FY 2006 or FY 2007, or a new one beginning in FY 2008.) c. Imputed Rural Floor—Budget Neutrality Adjustment For FY 2005 through FY 2008, we have adopted an imputed rural floor under the authority of section 1886(d)(3)(E) of the Act. This provision also requires us to make any updates or adjustments to the wage index in a manner that ensures that aggregate payments to hospitals are not affected by the change in the wage index. To calculate the budget neutrality factor, we used FY 2006 discharge data to simulate payments. We compared total IPPS payments before and after the application of the imputed rural floor. Based on these simulations, we calculated an adjustment factor of 0.999318 to ensure that the effect of the imputed rural floor is budget neutral. d. Case-Mix Budget Neutrality Adjustment The MS–DRGs will increase the total number of DRGs from 538 to 745. We believe that such a significant expansion in the number of DRGs will lead hospitals to improve coding and documentation in order to have a case assigned to a DRG with a higher payment. As explained above, we made an adjustment to ensure that the DRG relative weights remain budget neutral assuming constant utilization. However, without an adjustment to the IPPS rates to account for expected case-mix growth due to improved coding rather than to underlying changes in patient severity, the change to MS–DRGs would not be budget neutral. Section 1886(d)(3)(A)(vi) of the Act provides the Secretary with explicit authority to adjust the standardized amounts to account for case-mix growth due to improved documentation and coding. Further, the Secretary may subsequently revisit this adjustment if actual data is different than the projection. Based on the Office of Actuary's analysis (as discussed in more detail in section II.D.6. of the preamble of this final rule with comment period), using the Secretary's authority under section 1886(d)(3)(A)(vi) of the Act to adjust the standardized amount to eliminate the effect of changes in coding or classification of discharges that do not reflect real changes in case-mix, we reduced the IPPS standardized amounts by −1.2 percent for FY 2008. Section 1886(d)(3)(A)(vi) further gives the Secretary authority to revisit adjustments to the standardized amounts for changes in coding or classification of discharges that were based on estimates in a future year. Consistent with the statute, we will compare the actual increase in case-mix due to documentation and coding to our projection once we have actual data for FY 2008. At that time, if necessary, we may make a further adjustment to the standardized amounts to account for the difference between our projection and actual data. e. Outliers Section 1886(d)(5)(A) of the Act provides for payments in addition to the basic prospective payments for “outlier” cases involving extraordinarily high costs. To qualify for outlier payments, a case must have costs greater than the 
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                        sum of the prospective payment rate for the DRG, any IME and DSH payments, any new technology add-on payments, and the “outlier threshold” or “fixed-loss” amount (a dollar amount by which the costs of a case must exceed payments in order to qualify for an outlier payment). We refer to the sum of the prospective payment rate for the DRG, any IME and DSH payments, any new technology add-on payments, and the outlier threshold as the outlier “fixed-loss cost threshold.” To determine whether the costs of a case exceed the fixed-loss cost threshold, a hospital's CCR is applied to the total covered charges for the case to convert the charges to estimated costs. Payments for eligible cases are then made based on a marginal cost factor, which is a percentage of the estimated costs above the fixed-loss cost threshold. The marginal cost factor for FY 2008 is 80 percent, the same marginal cost factor we have used since FY 1995 (59 FR 45367). In accordance with section 1886(d)(5)(A)(iv) of the Act, outlier payments for any year are projected to be not less than 5 percent nor more than 6 percent of total operating DRG payments plus outlier payments. Section 1886(d)(3)(B) of the Act requires the Secretary to reduce the average standardized amount by a factor to account for the estimated proportion of total DRG payments made to outlier cases. Similarly, section 1886(d)(9)(B)(iv) of the Act requires the Secretary to reduce the average standardized amount applicable to hospitals located in Puerto Rico to account for the estimated proportion of total DRG payments made to outlier cases. More information on outlier payments may be found on the CMS Web site at 
                        *http://www.cms.hhs.gov/​AcuteInpatientPPS/​04_​outlier.asp#TopOfPage.* (1) FY 2008 Outlier Fixed-Loss Cost Threshold For FY 2008, we proposed to use the same methodology used for FY 2007 (71 FR 48148 through 484151) to calculate the outlier threshold. Similar to the methodology used in the FY 2007 final rule, for FY 2008, we applied an adjustment factor to the CCRs to account for cost and charge inflation (as explained below). As we have done in the past, to calculate the proposed FY 2008 outlier threshold, we simulated payments by applying FY 2008 rates and policies using cases from the FY 2006 MedPAR files. Therefore, in order to determine the FY 2008 outlier threshold, we inflated the charges on the MedPAR claims by 2 years, from FY 2006 to FY 2008. We proposed to continue to use the refined methodology that takes into account the lower inflation in hospital charges that are occurring as a result of the outlier final rule (68 FR 34494), which changed our methodology for determining outlier payments by implementing the use of more current CCRs. Our refined methodology uses more recent data that reflect the rate-of-change in hospital charges under the new outlier policy. Using the most recent data available, we calculated the 1 year average annualized rate-of-change in charges-per-case from the last quarter of FY 2005 in combination with the first quarter of FY 2006 (July 1, 2005 through December 31, 2005) to the last quarter of FY 2006 in combination with the first quarter of FY 2007 (July 1, 2006 through December 31, 2006). This rate of change was 7.26 percent (1.0726) or 15.04 percent (1.1504) over 2 years. As we have done in the past, we established the proposed FY 2008 outlier threshold using hospital CCRs from the December 2006 update to the Provider Specific File (PSF)—the most recent available data at the time of the proposed rule. This file includes CCRs that reflected implementation of the changes to the policy for determining the applicable CCRs that became effective August 8, 2003 (68 FR 34494). As discussed in the FY 2007 final rule (71 FR 48150), we worked with the Office of Actuary to derive the methodology described below to develop the CCR adjustment factor. For FY 2008, we proposed to use the same methodology to calculate the CCR adjustment by using the FY 2006 operating cost per discharge increase in combination with the actual FY 2006 market basket increase determined by Global Insight, Inc. (we note that the FY 2006 actual (otherwise referred to as “final”) market basket increase reflects historical data whereas the published FY 2006 market basket update factor was based on Global Insight, Inc.’s 2005 second quarter forecast with historical data through the first quarter of 2005), as well as the charge inflation factor described above to estimate the adjustment to the CCRs. By using the market basket rate-of-increase and the increase in the average cost per discharge from hospital cost reports, we are using two different measures of cost inflation. For FY 2008, we determined the adjustment by taking the percentage increase in the operating costs per discharge from FY 2004 to FY 2005 (1.0529) from the cost report and dividing it by the final market basket increase from FY 2005 (1.043) We repeated this calculation for 2 prior years to determine the 3 year average of the rate of adjusted change in costs between the market basket rate of increase and the increase in cost per case from the cost report (FY 2002 to FY 2003 percentage increase of operating costs per discharge of 1.0721 divided by FY 2003 final market basket increase of 1.041, FY 2003 to FY 2004 percentage increase of operating costs per discharge of 1.0624 divided by FY 2004 final market basket increase of 1.04). For FY 2008, we averaged the differentials calculated for FY 2003, FY 2004, and FY 2005 which resulted in a mean ratio of 1.0203. We multiplied the 3 year average of 1.0203 by the 2006 market basket percentage increase of 1.0420, which resulted in an operating cost inflation factor of 6.32 percent or 1.0632. We then divided the operating cost inflation factor by the 1 year average change in charges (1.0726) and applied an adjustment factor of 0.9912 to the operating CCRs from the PSF. As stated in the FY 2007 final rule, we continue to believe it is appropriate to apply only a 1-year adjustment factor to the CCRs. On average, it takes approximately 9 months for fiscal intermediaries (or, if applicable, the MAC) to tentatively settle a cost report from the fiscal year end of a hospital's cost reporting period. The average “age” of hospitals' CCRs from the time the fiscal intermediary or the MAC inserts the CCR in the PSF until the beginning of FY 2007 is approximately 1 year. Therefore, as stated above, we believe a 1-year adjustment factor to the CCRs is appropriate. We used the same methodology for the capital CCRs and applied an adjustment factor of 0.964 (cost inflation factor of 1.0340 divided by a charge inflation factor of 1.0726) to the capital CCRs. We are using the same charge inflation factor for the capital CCRs that was used for the operating CCRs. The charge inflation factor is based on the overall billed charges. Therefore, we believe it is appropriate to apply the charge factor to both the operating and capital CCRs. Using this methodology, we calculated a proposed outlier fixed-loss cost threshold for FY 2008 equal to the prospective payment rate for the DRG, plus any IME and DSH payments, and any add-on payments for new technology, plus $23,015. *Comment:*
                         One commenter believed that the estimate of FY 2007 outlier payments was overstated. The commenter performed its own analysis and determined that outlier payments were 4.63 percent of overall payments 
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                        for FY 2007. The commenter noted that CMS did not use the most recent CCR data to determine the FY 2007 outlier payment estimate. Specifically, the commenter stated, CMS used CCR data from October 1, 2006, while the commenter used CCRs from January 1, 2007. Based on its analysis, the commenter noted that the outlier projection methodology can be improved because a 0.5 percent shortfall in outlier payments for FY 2007 represents $420 million lost by hospitals. As a result, the commenter suggested the following improvements to the outlier projection methodology. First, the commenter suggested that the methodology to develop the adjustment factor to the CCRs is unnecessarily complicated and does not lead to a more accurate result. The commenter urged CMS to adopt a methodology that uses recent historical industry wide average rate of change, similar to the methodology used to develop the charge inflation factor. Another commenter stated that it is not clear if the historical record supports the assumption that costs and the market basket maintain a relatively constant relationship over time. Second, the commenter suggested that the CCRs should be projected over different periods of time, some less or more than one year, based on variations in hospital fiscal year ends. The commenter believed this methodology would more accurately project the decline in CCRs. The commenter also noted that, if CMS does not adopt the MS–DRGs for FY 2008, the threshold will need to be recalculated using the CMS–DRGs. Third, the commenter noted that CMS used the December 2006 CCR update for the proposed rule and has historically used the March update for the final rule. The commenter urged CMS to use the June 2007 update instead of the March 2007 update for the final rule. Other commenters recommended that CMS lower the outlier threshold in addition to what CMS proposed because cases that were outliers under the CMS DRGs will now end up as cases without outlier payments under the MS–DRGs. *Response:*
                         We used the October 2006 PSF to compute the FY 2007 outlier estimate, as these are the CCRs on file at the beginning of the fiscal year. As we have stated in the past, CCRs in the PSF are updated throughout the year and once a CCR is inputed into the PSF, the CCR may be used for payment for a year or more until the next tentative or final cost report is settled (whichever is from the most recent period). Therefore, we do not agree that the January 2007 PSF will necessarily provide more accurate CCRs to compute FY 2007 outlier payments than the October 2006 PSF update. In response to the comment that CCRs should be projected over different periods of time, as we have mentioned in the past, it is possible that some of the CCRs in the March PSF will be used in FY 2008 for actual outlier payments, while other CCRs may be 1 year old. Therefore, we apply a 1-year adjustment to the CCRs. However, we will study and consider this proposal for the future. With respect to the comment on our methodology used to adjust the CCRs, as we stated in the FY 2007 IPPS final rule (71 FR 48151), we believe this calculation of an adjustment to the CCRs is more accurate and stable than the commenter's methodology because it takes into account the costs per discharge and the market basket percentage increase when determining a cost adjustment factor. There are times where the market basket and the cost per discharge will be constant, while other times these values will differ from each other, depending on the fiscal year. Therefore as mentioned above, using the market basket in conjunction with the cost per discharge uses two sources that measure potential cost inflation and ensures a more accurate and stable cost adjustment factor. Additionally, we are continuing to use the March update of the PSF for the final rule as the June PSF update will not be ready for use until the end of July, which is beyond the timetable necessary for us to compute the outlier threshold and publish this final rule with comment period by August 1st. Finally, as noted in sections II.E. and H. in the preamble of this final rule with comment period, we adopted and implemented a blend of CMS and MS–DRG weights for FY 2008. Therefore, the current threshold is based on cases that are grouped and paid using blended MS–DRG weights. Additionally, we address the impact of the MS–DRGs on the outlier threshold below. Because we are not making any changes to our methodology for this final rule with comment period, for FY 2008, we are using the same methodology we proposed to calculate the outlier threshold. Using the most recent data available, we calculated the 1 year average annualized rate of change in charges per case from the first quarter of FY 2006 in combination with the second quarter of FY 2006 (October 1, 2005 through March 31, 2006) to the first quarter of FY 2007 in combination with the second quarter of FY 2007 (October 1, 2006 through March 31, 2007). This rate of change was 6.2 percent (1.062) or 12.78 percent (1.1278) over 2 years. As we have done in the past, we established the FY 2008 outlier threshold using hospital CCRs from the March 2007 update to the PSF—the most recent available data at the time of this final rule with comment period. This file includes CCRs that reflected implementation of the changes to the policy for determining the applicable CCRs that became effective August 8, 2003 (68 FR 34494). For FY 2008, we calculated the CCR adjustment by using the operating cost per discharge increase in combination with the final market basket increase determined by Global Insight, Inc., as well as the charge inflation factor described above to estimate the adjustment to the CCRs. We determined the operating CCR adjustment by taking the percentage increase in the operating costs per discharge from FY 2004 to FY 2005 (1.0564) from the cost report and dividing it by the final market basket increase from FY 2005 (1.043) We repeated this calculation for 2 prior years to determine the 3 year average of the rate of adjusted change in costs between the market basket rate of increase and the increase in cost per case from the cost report (FY 2002 to FY 2003 percentage increase of operating costs per discharge of 1.0715 divided by FY 2003 final market basket increase of 1.041, FY 2003 to FY 2004 percentage increase of operating costs per discharge of 1.0617 divided by FY 2004 final market basket increase of 1.04). For FY 2008, we averaged the differentials calculated for FY 2003, FY 2004, and FY 2005 which resulted in a mean ratio of 1.0210. We multiplied the 3 year average of 1.0210 by the 2006 market basket percentage increase of 1.0430, which resulted in an operating cost inflation factor of 6.49 percent or 1.0649. We then divided the operating cost inflation factor by the 1 year average change in charges (1.062) and applied an adjustment factor of 1.0027 to the operating CCRs from the PSF. We used the same methodology for the capital CCRs and applied an adjustment factor of 0.9744 (cost inflation factor of 1.0348 divided by a charge inflation factor of 1.062) to the capital CCRs. We are using the same charge inflation factor for the capital CCRs that was used for the operating CCRs. The charge inflation factor is based on the overall billed charges. Therefore, we believe it is appropriate to apply the charge factor to both the operating and capital CCRs. Using this methodology, we calculated an outlier fixed-loss cost threshold for FY 2008 equal to the 
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                        prospective payment rate for the DRG, plus any IME and DSH payments, and any add-on payments for new technology, plus $22,635. With this threshold, we project that outlier payments will equal 5.1 percent of total IPPS payments. As we did in establishing the FY 2007 outlier threshold (71 FR 48149), in our projection of FY 2008 outlier payments, we are not making any adjustments for the possibility that hospitals' CCRs and outlier payments may be reconciled upon cost report settlement. We continue to believe that, due to the policy implemented in the outlier final rule (68 FR 34494, June 9, 2003), CCRs will no longer fluctuate significantly and, therefore, few hospitals will actually have these ratios reconciled upon cost report settlement. In addition, it is difficult to predict the specific hospitals that will have CCRs and outlier payments reconciled in any given year. We also noted that reconciliation occurs because hospitals' actual CCRs for the cost reporting period are different than the interim CCRs used to calculate outlier payments when a bill is processed. Our simulations assume that CCRs accurately measure hospital costs based on information available to us at the time we set the outlier threshold. For these reasons, we are not making any assumptions about the effects of reconciliation on the outlier threshold calculation. We note that there are some factors that contributed to a lower fixed loss outlier threshold for FY 2008 compared to FY 2007. First, the case weighted national average operating CCR declined by approximately an additional 1.5 percentage points from the March 2006 update (used to calculate the FY 2007 outlier threshold) to the March 2007 update of the PSF. Additionally, as discussed in section II.D. of the preamble of this final rule with comment period, we are adopting the use of MS–DRGs under the IPPS for FY 2008. The MS–DRG system will increase the number of DRGs from 538 to 745, and better recognize severity of illness than the CMS–DRGs. Better recognition of severity of illness with the MS–DRGs means that nonoutlier payments will compensate hospitals for the higher costs of some cases that previously received outlier payments. As cases are paid more accurately, in order to meet the 5.1 percent target, we need to decrease the fixed-loss outlier threshold so that more cases qualify for outlier payments. Therefore, we believe that the above factors cumulatively contributed to a lower fixed-loss outlier threshold in FY 2008 compared to FY 2007. *Comment:*
                         Similar to its statement in the March 2005 Report to Congress, MedPAC commented there is a need to reform the financing of outlier payments. MedPAC explained that variation in the prevalence of outlier cases contributes to disparities in relative probability across and within DRGs. MedPAC explained that these disparities can penalize hospitals that treat patients in DRGs with a low prevalence of outliers. Therefore, MedPAC recommended that Congress give the Secretary authority to adjust the DRG relative weights to account for differences by DRG in the prevalence of outlier cases. *Response:*
                         As noted in the FY 2007 final rule (71 FR 47921), we do not have the statutory authority to implement MedPAC's recommendation. Therefore, we placed most of our attention and resources on the recommendations related to refinement of the current DRGs. However, we intend to examine MedPAC's recommendation regarding outliers in more detail in the future. *Comment:*
                         One commenter recommended that CMS make a midyear change to the outlier threshold if it appears that the 5.1 percent target will not be met. The commenter suggested that CMS use more recent CCR data for a midyear correction to the outlier threshold and use thresholds such as if outlier payments less than 95 percent or greater than 105 percent of the 5.1 percent target to trigger a midyear adjustment. Other commenters recommended that CMS further lower the threshold because CMS did not spend the total allocated pool of cost outlier funds allocated for outlier payments in FYs 2005, 2006, and 2007. *Response:*
                         With respect to the comments above, we have responded to similar comments in the FY 2006 IPPS final rule (70 FR 47495). We refer readers to that final rule. *Comment:*
                         One commenter recommended that CMS keep the proposed threshold for FY 2008 or use the FY 2007 outlier threshold for FY 2008 because CMS has underpaid the outlier pool for a number of years and has underestimated the outlier threshold as well. *Response:*
                         With respect to the comment above, we have responded to a similar comment in the FY 2007 IPPS final rule (71 FR 48151). We refer readers to that final rule. We further note that the threshold we are finalizing for FY 2008 is lower than the FY 2007 outlier threshold and the FY 2008 proposed outlier threshold. If outlier payments are lower than the 5.1 percent removed from IPPS rates, one would expect that the commenter would be suggesting reducing the outlier threshold so a higher percentage of total payments are made as outliers. (2) Other Changes Concerning Outliers As stated in the FY 1994 IPPS final rule (58 FR 46348), we establish outlier thresholds that are applicable to both hospital inpatient operating costs and hospital inpatient capital-related costs. When we modeled the combined operating and capital outlier payments, we found that using a common set of thresholds resulted in a lower percentage of outlier payments for capital-related costs than for operating costs. We project that the thresholds for FY 2008 will result in outlier payments that will equal 5.1 percent of operating DRG payments and 4.83 percent of capital payments based on the Federal rate. In accordance with section 1886(d)(3)(B) of the Act, we are reducing the FY 2008 standardized amount by the same percentage to account for the projected proportion of payments paid as outliers. The outlier adjustment factors that are applied to the standardized amount for the FY 2008 outlier threshold are as follows: Operating standardized amounts
Capital federal rateNational
0.948980
0.951665Puerto Rico
0.964470
0.956231
 Consistent with current policy, we applied the outlier adjustment factors to FY 2008 rates after removing the effects of the FY 2007 outlier adjustment factors on the standardized amount. To determine whether a case qualifies for outlier payments, we apply hospital-specific CCRs to the total covered charges for the case. Estimated operating and capital costs for the case are calculated separately by applying separate operating and capital CCRs. These costs are then combined and compared with the outlier fixed-loss cost threshold. The outlier final rule (68 FR 34494) eliminated the application of the statewide average CCRs for hospitals with CCRs that fell below 3 standard deviations from the national mean CCR. However, for those hospitals for which the fiscal intermediary or MAC computes operating CCRs greater than 1.238 or capital CCRs greater than 0.152, or hospitals for whom the fiscal intermediary or MAC is unable to calculate a CCR (as described at § 412.84(i)(3) of our regulations), we still use statewide average CCRs to 
                        ( print page 47420)
                        determine whether a hospital qualifies for outlier payments.[29]
                        
                         Table 8A in section V. of the Addendum of this final rule with comment period contains the statewide average operating CCRs for urban hospitals and for rural hospitals for which the fiscal intermediary or MAC is unable to compute a hospital-specific CCR within the above range. Effective for discharges occurring on or after October 1, 2007, these statewide average ratios replace the ratios published in the IPPS final rule for FY 2007 (71 FR 48303). Table 8B in section V. of the Addendum to this final rule with comment period contains the comparable statewide average capital CCRs. Again, the CCRs in Tables 8A and 8B will be used during FY 2008 when hospital-specific CCRs based on the latest settled cost report are either not available or are outside the range noted above. For an explanation of Table 8C, please see section V. of the Addendum to this final rule with comment period. We finally note that we published a manual update (Change Request 3966) to our outlier policy on October 12, 2005, which updated Chapter 3, Section 20.1.2 of the Medicare Claims Processing Manual. The manual update covered an array of topics, including CCRs, reconciliation, and the time value of money. We encourage hospitals that are assigned the statewide average operating and/or capital CCRs to work with their fiscal intermediaries (or MAC if applicable) on a possible alternative operating and/or capital CCR as explained in Change Request 3966. Use of an alternative CCR developed by the hospital in conjunction with the fiscal intermediary or MAC can avoid possible overpayments or underpayments at cost report settlement, thus ensuring better accuracy when making outlier payments and negating the need for outlier reconciliation. We also note that a hospital may request an alternative operating or capital CCR ratio at any time as long as the guidelines of Change Request 3966 are followed. To download and view the manual instructions on outlier and cost-to-charge ratios, please visit the Web site: 
                        *http://www.cms.hhs.gov/​manuals/​downloads/​clm104c03.pdf.* (3) FY 2006 and FY 2007 Outlier Payments In the FY 2007 IPPS final rule (70 FR 47496), we stated that, based on available data, we estimated that actual FY 2006 outlier payments would be approximately 4.62 percent of actual total DRG payments. This estimate was computed based on simulations using the FY 2005 MedPAR file (discharge data for FY 2005 bills). That is, the estimate of actual outlier payments did not reflect actual FY 2006 bills, but instead reflected the application of FY 2006 rates and policies to available FY 2005 bills. Our current estimate, using available FY 2006 bills, is that actual outlier payments for FY 2006 were approximately 4.65 percent of actual total DRG payments. Thus, the data indicate that, for FY 2006, the percentage of actual outlier payments relative to actual total payments is lower than we projected before FY 2006. Consistent with the policy and statutory interpretation we have maintained since the inception of the IPPS, we do not plan to make retroactive adjustments to outlier payments to ensure that total outlier payments for FY 2006 are equal to 5.1 percent of total DRG payments. We currently estimate that actual outlier payments for FY 2007 will be approximately 4.6 percent of actual total DRG payments, 0.5 percentage points lower than the 5.1 percent we projected in setting the outlier policies for FY 2007. This estimate is based on simulations using the FY 2006 MedPAR file (discharge data for FY 2006 bills). We used these data to calculate an estimate of the actual outlier percentage for FY 2007 by applying FY 2007 rates and policies, including an outlier threshold of $24,485 to available FY 2006 bills. We note that our estimate of FY 2007 outlier payments is 0.3 percentage points less than our estimate from the proposed rule. We believe the 1.06 percentage point change in the charge inflation factor from the proposed rule to this final rule with comment period contributed to a lower FY 2007 outlier payment estimate in this final rule with comment period. Additionally, we used a more recent update of the FY 2006 MedPAR claims database and the PSF for this final rule with comment period, which also affects the FY 2007 outlier payment estimate, and could contribute to a lower FY 2007 outlier payment estimate for this final rule with comment period. f. Rural Community Hospital Demonstration Program Adjustment (Section 410A of Pub. L. 108–173) Section 410A of Pub. L. 108–173 requires the Secretary to establish a demonstration that will modify reimbursement for inpatient services for up to 15 small rural hospitals. Section 410A(c)(2) of Pub. L. 108–173 requires that “in conducting the demonstration program under this section, the Secretary shall ensure that the aggregate payments made by the Secretary do not exceed the amount which the Secretary would have paid if the demonstration program under this section was not implemented.” As discussed in section IV.H. of the preamble to this final rule with comment period, we have satisfied this requirement by adjusting national IPPS rates by a factor that is sufficient to account for the added costs of this demonstration. We estimate that the average additional annual payment that will be made to each participating hospital under the demonstration will be approximately $1,075,765. We based this estimate on the recent historical experience of the difference between inpatient cost and payment for hospitals that are participating in the demonstration program. For 9 participating hospitals, the total annual impact of the demonstration program for FY 2008 is $9,681,893. The required adjustment to the Federal rate used in calculating Medicare inpatient prospective payments as a result of the demonstration is 0.999903. In order to achieve budget neutrality, we adjust the national IPPS rates by an amount sufficient to account for the added costs of this demonstration. In other words, we apply budget neutrality across the payment system as a whole rather than merely across the participants of this demonstration, consistent with past practice. We believe that the language of the statutory budget neutrality requirement permits the agency to implement the budget neutrality provision in this manner. The statutory language requires that “aggregate payments made by the Secretary do not exceed the amount which the Secretary would have paid if the demonstration * * * was not implemented,” but does not identify the range across which aggregate payments must be held equal. 5. FY 2008 Standardized Amount The adjusted standardized amount is divided into labor-related and nonlabor-related portions. Tables 1A and 1B in section V. of the Addendum to this final rule with comment period contain the national standardized amounts that we apply to all hospitals, except hospitals located in Puerto Rico, for FY 2008. The Puerto Rico-specific amounts are shown in Table 1C. The amounts shown in Tables 1A and 1B differ only in that the labor-related share applied to the standardized amounts in Table 1A is 69.7 percent, and Table 1B is 62 percent. In accordance with sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act, we apply a labor-related share of 62 percent, unless application of that 
                        ( print page 47421)
                        percentage would result in lower payments to a hospital than would otherwise be made. In effect, the statutory provision means that we apply a labor-related share of 62 percent for all hospitals (other than those in Puerto Rico) whose wage indexes are less than or equal to 1.0000. In addition, Tables 1A and 1B include standardized amounts reflecting the full 3.3 percent update for FY 2008, and standardized amounts reflecting the 2.0 percentage point reduction to the update (a 1.3 percent update) applicable for hospitals that fail to submit quality data consistent with section 1886(b)(3)(B)(viii) of the Act. Under section 1886(d)(9)(A)(ii) of the Act, the Federal portion of the Puerto Rico payment rate is based on the discharge-weighted average of the national large urban standardized amount (this amount is set forth in Table 1A). The labor-related and nonlabor-related portions of the national average standardized amounts for Puerto Rico hospitals for FY 2008 are set forth in Table 1C of section V. of the Addendum to this final rule with comment period. This table also includes the Puerto Rico standardized amounts. The labor-related share applied to the Puerto Rico specific standardized amount is 58.7 percent, or 62 percent, depending on which provides higher payments to the hospital. (Section 1886(d)(9)(C)(iv) of the Act, as amended by section 403(b) of Pub. L. 108–173, provides that the labor-related share for hospitals located in Puerto Rico be 62 percent, unless the application of that percentage would result in lower payments to the hospital.) The following table illustrates the changes from the FY 2007 national average standardized amount. The second and third columns show the changes from the FY 2007 standardized amounts for hospitals that satisfy the quality data submission requirement for receiving the full update (3.3 percent) with the different labor-related shares that apply to hospitals. The fourth and fifth columns show the changes for hospitals receiving the reduced update (1.3 percent) with the different labor-related shares that apply to hospitals. The first row of the table shows the updated (through FY 2007) average standardized amount after restoring the FY 2007 offsets for outlier payments, demonstration budget neutrality, the wage index transition budget neutrality, and the geographic reclassification budget neutrality. The DRG reclassification and recalibration and wage index budget neutrality factor is cumulative. Therefore, the FY 2007 factor is not removed from this table. We have added two additional rows: one for the documentation and coding adjustment and the other for the rural floor adjustment. The rural floor adjustment removes the effect of the budget neutrality adjustment applied in FY 2007 to the standardized amount for application of the rural floor. It is meant to address a single year transition from a cumulative budget neutrality adjustment applied to the standardized amount to a noncumulative adjustment applied to the wage index. (For a complete discussion on the documentation and coding adjustment and the rural floor adjustment, we refer readers to section III.G.4. of the preamble to this final rule with comment period and section II.D. of the Addendum to this final rule with comment period.) Comparison of FY 2007 Standardized Amounts to the FY 2008 Single Standardized Amount With Full Update and Reduced Update
Full update
                                 (3.3 percent); 
                                 Wage index is 
                                 greater than 1.0000
Full update
                                 (3.3 percent); 
                                 Wage index is 
                                 less than 1.0000
Reduced update (1.3 percent); Wage index is greater than 1.0000
Reduced update (1.3 percent); Wage index is less than 1.0000FY 2007 Base Rate, after removing reclassification budget neutrality, demonstration budget neutrality, wage index transition budget neutrality factors and outlier offset (based on the labor and market share percentage for FY 2008):Labor
$3,609.23
$3,609.23
$3,609.23
$3,609.23Nonlabor
$1,569.01
$1,569.01
$1,569.01
$1,569.01FY 2008 Update Factor
1.033
1.033
1.013
1.013FY 2008 DRG Recalibrations and Wage Index Budget Neutrality Factor
0.996563
0.996563
0.996563
0.996563FY 2008 Reclassification Budget Neutrality Factor
0.991695
0.991695
0.991695
0.991695Adjusted for Blend of FY 2007 DRG Recalibration and Wage Index Budget Neutrality Factors:Labor
$3,684.66
$3,277.61
$3,613.33
$3,214.15Nonlabor
$1,601.80
$1,570.99
$1,570.79
$1,969.96Imputed Rural Floor Budget Neutrality Factor
0.999318
0.999318
0.999318
0.999318FY 2008 Outlier Factor
0.948980
0.948980
0.948980
0.948980Rural Demonstration Budget Neutrality Factor
0.999903
0.999903
0.999903
0.999903FY 2008 Documentation and Coding Adjustment
0.988
0.988
0.988
0.988Rural Floor Adjustment
1.002214
1.002214
1.002214
1.002214Rate for FY 2008:Labor
$3,459.66
$3,077.46
$3,392.68
$3,017.87Nonlabor
$1,503.98
$1,886.18
$1,474.86
$1,849.67
 Under section 1886(d)(9)(A)(ii) of the Act, the Federal portion of the Puerto Rico payment rate is based on the discharge-weighted average of the national large urban standardized amount (as set forth in Table 1A). The labor-related and nonlabor-related portions of the national average standardized amounts for hospitals located in Puerto Rico are set forth in Table 1C of section V. of the Addendum of this final rule with comment period. This table also includes the Puerto Rico standardized amounts. The labor-related share applied to the Puerto Rico standardized amount is 58.7 percent, or 62 percent, depending on which results in higher payments to the hospital. (Section 1886(d)(9)(C)(iv) of the Act, as amended by section 403(b) of Pub. L. 108–173, provides that the labor-related 
                        ( print page 47422)
                        share for hospitals located in Puerto Rico be 62 percent, unless the application of that percentage would result in lower payments to the hospital.) B. Adjustments for Area Wage Levels and Cost-of-Living Tables 1A through 1C, as set forth in section V. of the Addendum to this final rule with comment period, contain the labor-related and nonlabor-related shares that we used to calculate the prospective payment rates for hospitals located in the 50 States, the District of Columbia, and Puerto Rico for FY 2008. This section addresses two types of adjustments to the standardized amounts that were made in determining the prospective payment rates as described in this Addendum. 1. Adjustment for Area Wage Levels Sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act require that we make an adjustment to the labor-related portion of the national and Puerto Rico prospective payment rates, respectively, to account for area differences in hospital wage levels. This adjustment is made by multiplying the labor-related portion of the adjusted standardized amounts by the appropriate wage index for the area in which the hospital is located. In section III. of the preamble to this final rule with comment period, we discuss the data and methodology for the FY 2008 wage index. 2. Adjustment for Cost-of-Living in Alaska and Hawaii Section 1886(d)(5)(H) of the Act authorizes the Secretary to make an adjustment to take into account the unique circumstances of hospitals in Alaska and Hawaii. Higher labor-related costs for these two States are taken into account in the adjustment for area wages described above. For FY 2008, we adjusted the payments for hospitals in Alaska and Hawaii by multiplying the nonlabor-related portion of the standardized amount by the applicable adjustment factor contained in the table below. Table of Cost of Living Adjustment Factors: Alaska and Hawaii Hospitals
Area
Cost of
                                 living 
                                 adjustment 
                                 factorAlaska:City of Anchorage and 80-kilometer (50-mile) radius by road
1.24City of Fairbanks and 80-kilometer (50-mile) radius by road
1.24City of Juneau and 80-kilometer (50-mile) radius by road
1.24Rest of Alaska
1.25Hawaii:City and County of Honolulu
1.25County of Hawaii
1.17County of Kauai
1.25County of Maui and County of Kalawao
1.25(The above factors are based on data obtained from the U.S. Office of Personnel Management.)
 C. DRG Relative Weights As discussed in section II. of the preamble of this final rule with comment period, we are adopting a revised classification system for all hospital discharges, assigning them into MS–DRGs, and have developed relative weights for each MS–DRG that reflect the resource utilization of cases in each MS–DRG relative to Medicare cases in other MS–DRGs. Table 5 of section V. of the Addendum to this final rule with comment period contains the relative weights that we will apply to discharges occurring in FY 2008. These factors have been recalibrated as explained in section II. of the preamble of this final rule with comment period. D. Calculation of the Prospective Payment Rates General Formula for Calculation of the Prospective Payment Rates for FY 2008. In general, the operating prospective payment rate for all hospitals paid under the IPPS located outside of Puerto Rico, except SCHs and MDHs, for FY 2008 equals the Federal rate. The prospective payment rate for SCHs for FY 2008 equals the higher of the applicable Federal rate, or the hospital-specific rate as described below. The prospective payment rate for MDHs for FY 2008 equals the higher of the Federal rate, or the Federal rate plus 75 percent of the difference between the Federal rate and the hospital-specific rate as described below. The prospective payment rate for hospitals located in Puerto Rico for FY 2008 equals 25 percent of the Puerto Rico rate plus 75 percent of the applicable national rate. 1. Federal Rate The Federal rate is determined as follows: *Step 1*
                        —Select the applicable average standardized amount depending on whether the hospital submitted qualifying quality data (full update for qualifying hospitals, update minus 2.0 percentage points for nonqualifying hospitals). *Step 2*
                        —Multiply the labor-related portion of the standardized amount by the applicable wage index for the geographic area in which the hospital is located or the area to which the hospital is reclassified. *Step 3*
                        —For hospitals in Alaska and Hawaii, multiply the non-labor-related portion of the standardized amount by the applicable cost-of-living adjustment factor. *Step 4*
                        —Add the amount from Step 2 and the non-labor-related portion of the standardized amount (adjusted, if applicable, under Step 3). *Step 5*
                        —Multiply the final amount from Step 4 by the relative weight corresponding to the applicable MS-DRG (see Table 5 of section V. of the Addendum to this final rule with comment period). The Federal rate as determined in Step 5 is then further adjusted if the hospital qualifies for either the IME or DSH adjustment. In addition, for hospitals that qualify for a low-volume payment adjustment under section 1886(d)(12) of the Act, the payment in Step 5 is increased by 25 percent. 2. Hospital-Specific Rate (Applicable Only to SCHs and MDHs) a. Calculation of Hospital-Specific Rate Section 1886(b)(3)(C) of the Act provides that SCHs are paid based on whichever of the following rates yields the greatest aggregate payment: the Federal rate; the updated hospital-specific rate based on FY 1982 costs per discharge; the updated hospital-specific rate based on FY 1987 costs per discharge; or the updated hospital-specific rate based on FY 1996 costs per discharge. As discussed previously, MDHs are required to rebase their hospital-specific rates to their FY 2002 cost reports if doing so results in higher payments. In addition, effective for discharges occurring on or after October 1, 2006, MDHs are to be paid based on the Federal national rate or, if higher, the Federal national rate plus 75 percent (changed from 50 percent) of the difference between the Federal national rate and the greater of the updated hospital-specific rates based on either FY 1982, FY 1987 or FY 2002 costs per 
                        ( print page 47423)
                        discharge. Further, MDHs are no longer subject to the 12-percent cap on their DSH payment adjustment factor. Hospital-specific rates have been determined for each of these hospitals based on the FY 1982 costs per discharge, the FY 1987 costs per discharge, or, for SCHs, the FY 1996 costs per discharge and for MDHs, the FY 2002 cost per discharge. For a more detailed discussion of the calculation of the hospital-specific rates, we refer the reader to the FY 1984 IPPS interim final rule (48 FR 39772); the April 20, 1990 final rule with comment (55 FR 15150); the FY 1991 IPPS final rule (55 FR 35994); and the FY 2001 IPPS final rule (65 FR 47082). In addition, for both SCHs and MDHs, the hospital-specific rate is adjusted by the budget neutrality adjustment factor as discussed in section IV.C. of the preamble to this final rule with comment period. The resulting rate is used in determining the payment rate an SCH or MDH will receive for its discharges beginning on or after October 1, 2007. *Comment:*
                         One commenter stated that CMS did not formally state a budget neutrality factor for the hospital-specific rate in the proposed rule and omitted it from the final notice of IPPS rates for FY 2007 published in 
                        **Federal Register**
                         on October 11, 2006. The commenter asked that the CMS formally state the budget neutrality factor that will apply to the hospital-specific rates for SCHs and MDHs. Further, the commenter requested that the documentation and coding adjustment not apply to the hospital-specific rate for MDHs and SCHs. *Response:*
                         We regret not publishing the DRG recalibration budget neutrality factor that is applicable to the hospital-specific rate for MDHs and SCHs in the final notice of IPPS rates for FY 2007 published in the 
                        **Federal Register**
                         on October 11, 2007. We will make the annual DRG recalibration budget neutrality factor available in this section of each year's IPPS proposed and final rules. The FY 2008 DRG recalibration factor that will apply to the hospital-specific rate of MDHs and SCHs is 0.983962. This factor includes the −1.2 percent documentation and coding adjustment. Hospitals that are paid under section 1886(d) of the Act based on a hospital-specific rate are subject to the DRG reclassification and recalibration factor component of the budget neutrality adjustment because, as IPPS, hospitals, they are paid based on DRGs. Changes in DRG relative weights from one year to the next affect aggregate SCH and MDH payments, which, in turn, affect total payments to hospitals under section 1886(d) of the Act. Because SCHs and MDHs are paid under section 1886(d) of the Act, we believe their DRG payments should be factored into the DRG reclassification and recalibration factor component of the budget neutrality adjustment to ensure that recalibration does not affect total payments to hospitals under section 1886(d) of the Act. Similarly, we believe the hospital-specific rates for MDHs and SCHs should be subject to the documentation and coding adjustment we are applying under section 1886(d)(3)(A)(vi) of the Act to maintain budget neutrality for the adoption of the MS DRGs. That is, as these hospitals use the same DRG system as all other hospitals, we believe they should be equally subject to the budget neutrality adjustment that we are applying for adoption of the MS–DRGs to all other hospitals. b. Updating the FY 1982, FY 1987, FY 1996, and FY 2002 Hospital Specific Rates for FY 2008 We are increasing the hospital-specific rates by 3.3 percent (the estimated hospital market basket percentage increase) for SCHs and MDHs for FY 2008. Section 1886(b)(3)(C)(iv) of the Act provides that the update factor applicable to the hospital-specific rates for SCHs is equal to the update factor provided under section 1886(b)(3)(B)(iv) of the Act, which, for SCHs in FY 2008, is the market basket rate-of-increase. Section 1886(b)(3)(D) of the Act provides that the update factor applicable to the hospital-specific rates for MDHs also equals the update factor provided under section 1886(b)(3)(B)(iv) of the Act, which, for FY 2008, is the market basket rate-of-increase. For those SCHs and MDHs that fail to submit quality data, the update to the hospital-specific rates is 1.3 percent. 3. General Formula for Calculation of Prospective Payment Rates for Hospitals Located in Puerto Rico Beginning On or After October 1, 2007, and Before October 1, 2008 Section 1886(d)(9)(E)(iv) of the Act provides that, effective for discharges occurring on or after October 1, 2004, hospitals located in Puerto Rico are paid based on a blend of 75 percent of the national prospective payment rate and 25 percent of the Puerto Rico-specific rate. a. Puerto Rico Rate The Puerto Rico prospective payment rate is determined as follows: *Step 1*
                        —Select the applicable average standardized amount considering the applicable wage index (see Table 1C). *Step 2*
                        —Multiply the labor-related portion of the standardized amount by the applicable Puerto Rico-specific wage index. *Step 3*
                        —Add the amount from Step 2 and the nonlabor-related portion of the standardized amount. *Step 4*
                        —Multiply the amount from Step 3 by the applicable MS–DRG relative weight (see Table 5 of section V. of the Addendum to this final rule with comment period). *Step 5*
                        —Multiply the result in Step 4 by 25 percent. b. National Rate The national prospective payment rate is determined as follows: *Step 1*
                        —Select the applicable average standardized amount. *Step 2*
                        —Multiply the labor-related portion of the standardized amount by the applicable wage index for the geographic area in which the hospital is located or the area to which the hospital is reclassified. *Step 3*
                        —Add the amount from Step 2 and the nonlabor-related portion of the national average standardized amount. *Step 4*
                        —Multiply the amount from Step 3 by the applicable MS–DRG relative weight (see Table 5 of section V. of the Addendum to this final rule with comment period). *Step 5*
                        —Multiply the result in Step 4 by 75 percent. The sum of the Puerto Rico rate and the national rate computed above equals the prospective payment for a given discharge for a hospital located in Puerto Rico. This rate is then further adjusted if the hospital qualifies for either the IME or DSH adjustment. III. Changes to Payment Rates for Acute Care Hospital Inpatient Capital-Related Costs for FY 2008 The PPS for acute care hospital inpatient capital-related costs was implemented for cost reporting periods beginning on or after October 1, 1991. Effective with that cost reporting period, hospitals were paid during a 10-year transition period (which extended through FY 2001) to change the payment methodology for Medicare acute care hospital inpatient capital-related costs from a reasonable cost-based methodology to a prospective methodology based fully on the Federal rate. The basic methodology for determining Federal capital prospective rates is set forth in the regulations at 42 CFR 412.308 through 412.352. Below we discuss the factors that we used to 
                        ( print page 47424)
                        determine the capital Federal rate for FY 2008, which is effective for discharges occurring on or after October 1, 2007. The 10-year transition period ended with hospital cost reporting periods beginning on or after October 1, 2001 (FY 2002). Therefore, for cost reporting periods beginning in FY 2002, all hospitals (except “new” hospitals under § 412.304(c)(2)) are paid based on 100 percent of the capital Federal rate. For FY 1992, we computed the standard Federal payment rate for capital-related costs under the IPPS by updating the FY 1989 Medicare inpatient capital cost per case by an actuarial estimate of the increase in Medicare inpatient capital costs per case. Each year after FY 1992, we update the capital standard Federal rate, as provided at § 412.308(c)(1), to account for capital input price increases and other factors. The regulations at § 412.308(c)(2) provide that the capital Federal rate be adjusted annually by a factor equal to the estimated proportion of outlier payments under the capital Federal rate to total capital payments under the capital Federal rate. In addition, § 412.308(c)(3) requires that the capital Federal rate be reduced by an adjustment factor equal to the estimated proportion of payments for (regular and special) exceptions under § 412.348. Section 412.308(c)(4)(ii) requires that the capital standard Federal rate be adjusted so that the effects of the annual DRG reclassification and the recalibration of DRG weights and changes in the geographic adjustment factor are budget neutral. For FYs 1992 through 1995, § 412.352 required that the capital Federal rate also be adjusted by a budget neutrality factor so that aggregate payments for inpatient hospital capital costs were projected to equal 90 percent of the payments that would have been made for capital-related costs on a reasonable cost basis during the fiscal year. That provision expired in FY 1996. Section 412.308(b)(2) describes the 7.4 percent reduction to the capital rate that was made in FY 1994, and § 412.308(b)(3) describes the 0.28 percent reduction to the capital rate made in FY 1996 as a result of the revised policy for paying for transfers. In FY 1998, we implemented section 4402 of Pub. L. 105–33, which required that, for discharges occurring on or after October 1, 1997, the budget neutrality adjustment factor in effect as of September 30, 1995, be applied to the unadjusted capital standard Federal rate and the unadjusted hospital-specific rate. That factor was 0.8432, which was equivalent to a 15.68 percent reduction to the unadjusted capital payment rates. An additional 2.1 percent reduction to the rates was effective from October 1, 1997 through September 30, 2002, making the total reduction 17.78 percent. As we discussed in the FY 2003 IPPS final rule (67 FR 50102) and implemented in § 412.308(b)(6) of the regulations, the 2.1 percent reduction was restored effective October 1, 2002. To determine the appropriate budget neutrality adjustment factor and the regular exceptions payment adjustment during the 10-year transition period, we developed a dynamic model of Medicare inpatient capital-related costs; that is, a model that projected changes in Medicare inpatient capital-related costs over time. With the expiration of the budget neutrality provision, the capital cost model was only used to estimate the regular exceptions payment adjustment and other factors during the transition period. As we explained in the FY 2002 IPPS final rule (66 FR 39911), beginning in FY 2002, an adjustment for regular exception payments is no longer necessary because regular exception payments were only made for cost reporting periods beginning on or after October 1, 1991, and before October 1, 2001 (see § 412.348(b)). Because payments are no longer made under the regular exception policy effective with cost reporting periods beginning in FY 2002, we discontinued use of the capital cost model. The capital cost model and its application during the transition period are described in Appendix B of the FY 2002 IPPS final rule (66 FR 40099). Section 412.374 provides for the use of a blended payment system for payments to hospitals located in Puerto Rico under the IPPS for acute care hospital inpatient capital-related costs. Accordingly, under the capital PPS, we compute a separate payment rate specific to hospitals located in Puerto Rico using the same methodology used to compute the national Federal rate for capital-related costs. In accordance with section 1886(d)(9)(A) of the Act, under the IPPS for acute care hospital operating costs, hospitals located in Puerto Rico are paid for operating costs under a special payment formula. Prior to FY 1998, hospitals located in Puerto Rico were paid a blended operating rate that consisted of 75 percent of the applicable standardized amount specific to Puerto Rico hospitals and 25 percent of the applicable national average standardized amount. Similarly, prior to FY 1998, hospitals located in Puerto Rico were paid a blended capital rate that consisted of 75 percent of the applicable capital Puerto Rico-specific rate and 25 percent of the applicable capital Federal rate. However, effective October 1, 1997, in accordance with section 4406 of Pub. L. 105–33, the methodology for operating payments made to hospitals located in Puerto Rico under the IPPS was revised to make payments based on a blend of 50 percent of the applicable standardized amount specific to Puerto Rico hospitals and 50 percent of the applicable national average standardized amount. In conjunction with this change to the operating blend percentage, effective with discharges occurring on or after October 1, 1997, we also revised the methodology for computing capital payments to hospitals located in Puerto Rico to be based on a blend of 50 percent of the Puerto Rico capital rate and 50 percent of the capital Federal rate. As we discussed in the FY 2005 IPPS final rule (69 FR 49185), section 504 of Pub. L. 108–173 increased the national portion of the operating IPPS payments for hospitals located in Puerto Rico from 50 percent to 62.5 percent and decreased the Puerto Rico portion of the operating IPPS payments from 50 percent to 37.5 percent for discharges occurring on or after April 1, 2004 through September 30, 2004 (see the March 26, 2004 One-Time Notification (Change Request 3158)). In addition, section 504 of Pub. L. 108–173 provided that the national portion of operating IPPS payments for hospitals located in Puerto Rico be equal to 75 percent and the Puerto Rico portion of operating IPPS payments be equal to 25 percent for discharges occurring on or after October 1, 2004. Consistent with that change in operating IPPS payments to hospitals located in Puerto Rico, for FY 2005 (as we discussed in the FY 2005 IPPS final rule), we revised the methodology for computing capital payments to hospitals located in Puerto Rico to be based on a blend of 25 percent of the Puerto Rico capital rate and 75 percent of the capital Federal rate for discharges occurring on or after October 1, 2004. A. Determination of Federal Hospital Inpatient Capital Related Prospective Payment Rate Update In the FY 2007 IPPS final rule (71 FR 48161), we established a tentative capital Federal rate of $427.38 for FY 2007. In the 
                        **Federal Register**
                         notice establishing the occupational mix adjusted payment rates for FY 2007 (71 FR 59891), we established the final FY 2007 Federal rate of $427.03 for FY 2007. In the discussion that follows, we explain the factors that we used to determine the FY 2008 capital Federal rate. In particular, we explain why the FY 2008 capital Federal rate will decrease approximately 0.86 percent, 
                        ( print page 47425)
                        compared to the FY 2007 capital Federal rate. (As discussed in section V. of the preamble of this final rule with comment period, we did not finalize the proposed zero percent update for urban hospitals, which would have resulted in separate capital Federal rates for FY 2008 for rural hospitals and for urban hospitals. Thus, a single capital Federal rate for FY 2008 was determined for all hospitals.) However, taking into account an estimated increase in Medicare fee-for-service discharges in FY 2008 as compared to FY 2007, we estimated aggregate capital payments will increase by approximately 2.9 percent during this same period. Total payments to hospitals under the IPPS are relatively unaffected by changes in the capital prospective payments. Because capital payments constitute about 10 percent of hospital payments, a 1 percent change in the capital Federal rate yields only about a 0.1 percent change in actual payments to hospitals. As noted above, aggregate payments under the capital IPPS are projected to increase in FY 2008 compared to FY 2007. 1. Projected Capital Standard Federal Rate Update a. Description of the Update Framework Under § 412.308(c)(1), the capital standard Federal rate is updated on the basis of an analytical framework that takes into account changes in a capital input price index (CIPI) and several other policy adjustment factors. Specifically, we have adjusted the projected CIPI rate-of-increase as appropriate each year for case-mix index-related changes, for intensity, and for errors in previous CIPI forecasts. The update factor for FY 2008 under that framework is 0.9 percent based on the best data available at this time. The update factor under that framework is based on a projected 1.3 percent increase in the CIPI, a 0.0 percent adjustment for intensity, a 0.0 percent adjustment for case-mix, a −0.4 percent adjustment for the FY 2006 DRG reclassification and recalibration, and a forecast error correction of 0.0 percent. As discussed below in section III.C. of the Addendum to this final rule with comment period, we continue to believe that the CIPI is the most appropriate input price index for capital costs to measure capital price changes in a given year. We also explain the basis for the FY 2008 CIPI projection in that same section of this Addendum. As noted above, and as discussed in greater detail in section V. of the preamble of this final rule with comment period, we are not finalizing the proposed zero percent update for urban hospitals, which would have resulted in separate capital Federal rates for FY 2008 for rural hospitals and for urban hospitals. Therefore, we applied the 0.9 percent FY 2008 update factor to all hospitals. In addition, as also noted below, the capital rates have been further adjusted to account for documentation and coding improvements under the MS–DRGs discussed in section II.D. of the preamble of this final rule with comment period. Below we describe the policy adjustments that have been applied in the update framework for FY 2008. The case-mix index is the measure of the average DRG weight for cases paid under the IPPS. Because the DRG weight determines the prospective payment for each case, any percentage increase in the case-mix index corresponds to an equal percentage increase in hospital payments. The case-mix index can change for any of several reasons: The average resource use of Medicare patients changes (“real” case-mix change);
                    Changes in hospital coding of patient records result in higher weight DRG assignments (“coding effects”); and
                    The annual DRG reclassification and recalibration changes may not be budget neutral (“reclassification effect”). We define real case-mix change as actual changes in the mix (and resource requirements) of Medicare patients as opposed to changes in coding behavior that result in assignment of cases to higher weighted DRGs but do not reflect higher resource requirements. The capital update framework includes the same case-mix index adjustment used in the former operating IPPS update framework (as discussed in the May 18, 2004 IPPS proposed rule for FY 2005 (69 FR 28816)). (We no longer use an update framework to make a recommendation for updating the operating IPPS standardized amounts as discussed in section II. of Appendix B in the FY 2006 IPPS final rule (70 FR 47707).) Absent the change to the MS–DRGs, for FY 2008, we project a 1.0 percent total increase in the case-mix index. We estimate that the real case-mix increase will also equal 1.0 percent for FY 2008. The net adjustment for change in case-mix is the difference between the projected real increase in case-mix and the projected total increase in case-mix. Therefore, the net adjustment for case-mix change in FY 2008 is 0.0 percentage points. The capital update framework also contains an adjustment for the effects of DRG reclassification and recalibration. This adjustment is intended to remove the effect on total payments of prior year's changes to the DRG classifications and relative weights, in order to retain budget neutrality for all case-mix index-related changes other than those due to patient severity. Due to the lag time in the availability of data, there is a 2-year lag in data used to determine the adjustment for the effects of DRG reclassification and recalibration. For example, we adjusted for the effects of the FY 2006 DRG reclassification and recalibration as part of our update for FY 2008. We estimate that FY 2006 DRG reclassification and recalibration resulted in a 0.4 percent change in the case-mix when compared with the case-mix index that would have resulted if we had not made the reclassification and recalibration changes to the DRGs. Therefore, we are making a −0.4 percent adjustment for DRG reclassification in the update for FY 2008 to maintain budget neutrality. The capital update framework also contains an adjustment for forecast error. The input price index forecast is based on historical trends and relationships ascertainable at the time the update factor is established for the upcoming year. In any given year, there may be unanticipated price fluctuations that may result in differences between the actual increase in prices and the forecast used in calculating the update factors. In setting a prospective payment rate under the framework, we make an adjustment for forecast error only if our estimate of the change in the capital input price index for any year is off by 0.25 percentage points or more. There is a 2-year lag between the forecast and the availability of data to develop a measurement of the forecast error. A forecast error of 0.10 percentage point was calculated for the FY 2006 update. That is, current historical data indicate that the forecasted FY 2006 CIPI (0.80 percent) used in calculating the FY 2006 update factor slightly understated the actual realized price increases (0.90 percent) by 0.10 percentage point. This slight underprediction was mostly due to the incorporation of newly available source data for fixed asset prices into the market basket. However, because this estimation of the change in the CIPI is less than 0.25 percentage points, it is not reflected in the update recommended under this framework. Therefore, we are making a 0.0 percent adjustment for forecast error in the update for FY 2008. Under the capital IPPS update framework, we also make an adjustment for changes in intensity. We calculate this adjustment using the same methodology and data that were used in 
                        ( print page 47426)
                        the past under the framework for operating IPPS. The intensity factor for the operating update framework reflects how hospital services are utilized to produce the final product, that is, the discharge. This component accounts for changes in the use of quality-enhancing services, for changes within DRG severity, and for expected modification of practice patterns to remove noncost-effective services. We calculate case-mix constant intensity as the change in total charges per admission, adjusted for price level changes (the CPI for hospital and related services) and changes in real case-mix. The use of total charges in the calculation of the intensity factor makes it a total intensity factor; that is, charges for capital services are already built into the calculation of the factor. Therefore, we have incorporated the intensity adjustment from the operating update framework into the capital update framework. Without reliable estimates of the proportions of the overall annual intensity increases that are due, respectively, to ineffective practice patterns and the combination of quality-enhancing new technologies and complexity within the DRG system, we assume that one-half of the annual increase is due to each of these factors. The capital update framework thus provides an add-on to the input price index rate of increase of one-half of the estimated annual increase in intensity, to allow for increases within DRG severity and the adoption of quality-enhancing technology. We have developed a Medicare-specific intensity measure based on a 5-year average. Past studies of case-mix change by the RAND Corporation (
                        *Has DRG Creep Crept Up? Decomposing the Case Mix Index Change Between 1987 and 1988*
                         by G.M. Carter, J.P. Newhouse, and 
                        *D.A. Relles,*
                         R–4098–HCFA/ProPAC (1991)) suggest that real case-mix change was not dependent on total change, but was usually a fairly steady increase of 1.0 to 1.5 percent per year. However, we used 1.4 percent as the upper bound because the RAND study did not take into account that hospitals may have induced doctors to document medical records more completely in order to improve payment. We calculate case-mix constant intensity as the change in total charges per admission, adjusted for price level changes (the CPI for hospital and related services), and changes in real case-mix. As we noted above, in accordance with § 412.308(c)(1)(ii), we began updating the capital standard Federal rate in FY 1996 using an update framework that takes into account, among other things, allowable changes in the intensity of hospital services. For FYs 1996 through 2001, we found that case-mix constant intensity was declining, and we established a 0.0 percent adjustment for intensity in each of those years. For FYs 2002 and 2003, we found that case-mix constant intensity was increasing, and we established a 0.3 percent adjustment and 1.0 percent adjustment for intensity, respectively. For FYs 2004 and 2005, we found that the charge data appeared to be skewed (as discussed in greater detail below), and we established a 0.0 percent adjustment in each of those years. Furthermore, we stated that we would continue to apply a 0.0 percent adjustment for intensity until any increase in charges can be tied to intensity rather than attempts to maximize outlier payments. As noted above, our intensity measure is based on a 5-year average, and therefore, the intensity adjustment for FY 2008 is based on data from the 5-year period beginning with FY 2002 and extending through FY 2006. We found a dramatic increase in hospital charges for each of those 5 years without a corresponding increase in the hospital case-mix index. These findings are similar to the considerable increase in hospitals' charges, which we found when we were determining the intensity factor in the FY 2004, FY 2005 and FY 2006 update recommendations as discussed in the FY 2004 IPPS final rule (68 FR 45482), the FY 2005 IPPS final rule (69 FR 49285), the FY 2006 IPPS final rule (70 FR 47500), and the FY 2007 IPPS final rule (72 FR 47500), respectively. If hospitals were treating new or different types of cases, which would result in an appropriate increase in charges per discharge, then we would expect hospitals' case-mix to increase proportionally. As we discussed in the FY 2006 IPPS final rule (70 FR 47500) and the FY 2007 IPPS final rule (71 FR 48157), because our intensity calculation relies heavily upon charge data and we believe that these charge data may be inappropriately skewed, we established a 0.0 percent adjustment for intensity for FY 2006 and FY 2007, respectively. On June 9, 2003, we published in the 
                        **Federal Register**
                         revisions to our outlier policy for determining the additional payment for extraordinarily high-cost cases (68 FR 34494 through 34515). These revised policies were effective on August 8, 2003, and October 1, 2003. While it does appear that a response to these policy changes is beginning to occur, that is, the change in charges for FYs 2004 and 2005 are somewhat less than the previous 4 years, and the change in charges for FY 2006 is slightly less than FY 2005, they still show a significant annual increase in charges without a corresponding increase in hospital case-mix. The increase in charges in FY 2004, for example, is approximately 12 percent, which, while less than the increase in the previous 3 years, is still much higher than increases in years prior to FY 2001. In addition, this approximate 12 percent increase in charges for FY 2004 significantly exceeds the case mix increase for the same period. Based on the approximate 12 percent increase in charges for FY 2004, we believe residual effects of hospitals’ charge practices prior to the implementation of the outlier policy revisions established in the June 9, 2003 final rule continue to appear in the data because hospitals may not have had enough time to adopt changes in their behavior in response to the new outlier policy. Thus, we believe that the FY 2004, FY 2005, and FY 2006 charge data may still be skewed. Because the intensity adjustment is based on a 5-year average, and although the new outlier policy was generally effective in FY 2004, we believe the effects of hospitals attempting to maximize outlier payments, while lessening costs, continue to skew the charge data. Therefore, we are making a 0.0 percent adjustment for intensity for FY 2008. In the past (FYs 1996 through 2001) when we found intensity to be declining, we believed a zero (rather than negative) intensity adjustment was appropriate. Similarly, we believe that it is appropriate to apply a zero intensity adjustment for FY 2008 until any increase in charges can be tied to intensity rather than to attempts to maximize outlier payments. Above, we described the basis of the components used to develop the 0.9 percent capital update factor under the capital update framework for FY 2008 as shown in the table below. (As noted above and as discussed in section V. of the preamble of this final rule with comment period, we are not finalizing the proposed zero percent update for urban hospitals. Thus, the 0.9 percent capital update factor discussed above was applied in determining the capital Federal rate for FY 2008 for all hospitals.) CMS FY 2008 Update Factor to the Capital Federal Rate for All Hospitals
Capital Input Price Index
1.3Intensity:
0.0Case-Mix Adjustment Factors:Real Across DRG Change
1.0Projected Case-Mix Change
–1.0( print page 47427)Subtotal
0.0Effect of FY 2005 Reclassification and Recalibration
–0.4Forecast Error Correction
0.0Total Update for Hospitals
0.9
 b. MedPAC Update Recommendation In the past, MedPAC has included update recommendations for capital PPS in a Report to Congress. In its March 2007 Report to Congress, MedPAC did not make an update recommendation for capital IPPS payments for FY 2008. However, in that same report, MedPAC made an update recommendation for hospital inpatient and outpatient services (page 67). MedPAC reviews inpatient and outpatient services together because they are so closely interrelated. For FY 2008, MedPAC recommended an increase in the payment rate for the operating IPPS by the projected increase in the hospital market basket index concurrent with implementation of a quality incentive payment policy. (MedPAC's Report to the Congress: Medicare Payment Policy, March 2007, Section 2A.) 2. Outlier Payment Adjustment Factor Section 412.312(c) establishes a unified outlier payment methodology for inpatient operating and inpatient capital related costs. A single set of thresholds is used to identify outlier cases for both inpatient operating and inpatient capital related payments. Section 412.308(c)(2) provides that the standard Federal rate for inpatient capital related costs be reduced by an adjustment factor equal to the estimated proportion of capital related outlier payments to total inpatient capital related PPS payments. The outlier thresholds are set so that operating outlier payments are projected to be 5.1 percent of total operating DRG payments. *Comment:*
                         One commenter expressed concern regarding the “significant change” to the proposed outlier adjustment factor that has been applied in determining the proposed FY 2008 capital Federal Rate, which would have the effect of decreasing the FY 2008 capital Federal Rate by 0.88 percent (72 FR 24847). The commenter stated that there seems to be a “large change” in the capital outlier adjustment factor, given the fact that both the FY 2008 IPPS proposed rule (72 FR 24837) and the FY 2007 IPPS final rule (71 FR 48151) indicate that estimated capital outlier payments would equal 4.87 percent of capital IPPS payments. The commenter pointed out that, in both the FY 2008 IPPS proposed rule and the FY 2007 IPPS final rule, there appears to be inconsistencies regarding the estimated percentage of capital outlier payments. Specifically, in the FY 2007 IPPS final rule (71 FR 48151), in section II.A.4.c.ii. of the Addendum, it states that capital outlier payments are estimated to be 4.87 percent in FY 2007, while in section III.A.2. of the Addendum of that same final rule (71 FR 48158), it states that we estimate that capital outlier payments would equal 4.32 percent in FY 2007. Similarly, in the FY 2008 IPPS proposed rule (72 FR 24837), in section II.A.4.d.(2). of the Addendum, it states that capital outlier payments are estimated to be 4.87 percent in FY 2008, while in section III.A.1.b. of the Addendum of that same proposed rule (72 FR 24843), it states that we estimate that proposed capital outlier payments would equal 5.16 percent in FY 2008. The commenter requested that CMS explain the inconsistencies in estimated capital outlier payments noted above and that CMS review the calculations to ensure that the correct outlier adjustment is applied in determining the capital Federal rate for FY 2008. *Response:*
                         We appreciate the commenter bringing the inconsistencies in estimated capital outlier payments in the FY 2007 IPPS final rule and the FY 2008 IPPS proposed rule to our attention. After careful review of the calculation of the outlier adjustment factors used in determining the FY 2007 and proposed FY 2008 capital Federal rates, respectively, we have determined that the estimated 4.87 percent of capital outlier payments for both FY 2007 and FY 2008 as stated in section II.A.4.c.ii. of the Addendum of the FY 2007 IPPS final rule (71 FR 48151) and in section II.A.4.d.(2). of the Addendum of the FY 2008 IPPS proposed rule (72 FR 24837), respectively, were typographical errors. The correct estimate of capital outlier payment for FY 2007 was 4.32 percent, and therefore, we applied an outlier adjustment of 0.9568 (1 − 0.0432 = 0.9568) in determining the FY 2007 capital Federal rate, as discussed in section III.A.2. of the Addendum of the FY 2007 IPPS final rule (71 FR 48158). The correct estimate of proposed capital outlier payment for FY 2008 is 5.16 percent, and therefore, we proposed to apply an outlier offset of 0.9484 (1 − 0.0516 = 0.9484) in determining the proposed FY 2008 capital Federal rate, as stated in section III.A.1.b. of the Addendum of the FY 2008 IPPS proposed rule (72 FR 24843). We also note that we estimate that the percentage of capital outlier payments to total capital standard payments for FY 2008 will be slightly higher than the percentages for FY 2007, and that the outlier reduction factors are not applied cumulatively in determining the capital Federal rate. Therefore, the net change in the proposed outlier adjustment to the proposed capital Federal rate for FY 2008 is 0.9912 (0.9484/0.9568) or −0.88 percent. Thus, the proposed outlier adjustment decreases the proposed FY 2008 capital Federal rate by −0.88 percent compared with the FY 2007 outlier adjustment (72 FR 24843). While it may appear that there is a “large change” in the estimate of capital outlier payments (and capital outlier offset) from FY 2007 to FY 2008, we wish to point out that the estimated 5.16 percent proposed for FY 2008 does not appear to be considerably different from our estimate of capital outlier payments for the past several years of 4.87 percent proposed for FY 2007 (71 FR 24196), 4.85 percent established for FY 2006 (70 FR 47501), 5.03 percent proposed for FY 2006 (70 FR 23477) and for FY 2005 (69 FR 28383), 4.94 percent established for FY 2005 (69 FR 49286), 4.77 percent established for the first half of FY 2004 (68 FR 57734), 4.92 percent established for the second half of FY 2004 (Change Request 3158; March 26, 2004), 5.45 percent proposed for FY 2004 (68 FR 27240), 5.31 percent established for FY 2003 (67 FR 50129), and 5.40 percent proposed for FY 2003 (67 FR 31514). We also note, as discussed in the FY 2008 IPPS proposed rule (72 FR 24837), we proposed a lower fixed-loss outlier threshold in FY 2008 compared to FY 2007. We explained that as we are better able to estimate the costs using CCRs and charges, and cases are paid more accurately with better recognition of severity of illness using the proposed MS–DRGS, in order to meet the 5.1 percent target for operating IPPS outlier payments, we proposed to decrease the fixed-loss outlier threshold so that more cases qualify for outlier payments. As explained below, § 412.312(c) provides for a single set of thresholds to identify outlier cases for both operating and inpatient capital IPPS payments. Therefore, we believe it is appropriate that the estimate of capital outlier payments would increase for FY 2008 as compared to FY 2007. As requested by the commenter and as stated above, we have carefully reviewed the calculations to ensure that the correct outlier adjustment, as discussed in greater detail below, is applied in determining the capital Federal rate for FY 2008. (We 
                        ( print page 47428)
                        note that there is usually a change in the outlier adjustment between the proposed and final rules for a given year due to the use of more updated data and any changes between proposed and finalized policies that affect payments. For example, in the FY 2007 proposed rule (71 FR 24196), the proposed FY 2007 outlier offset was 0.9513, while we established an outlier offset for FY 2007 of 0.9568, as discussed below.) In the 
                        **Federal Register**
                         notice establishing the final occupational mix adjusted payment rates for FY 2007 (71 FR 59890), we estimated that outlier payments for capital would equal 4.32 percent of inpatient capital related payments based on the capital Federal rate in FY 2007. Based on the thresholds as set forth in section II.A. of the Addendum to this final rule with comment period, we estimate that outlier payments for capital-related costs will equal 4.83 percent for inpatient capital-related payments based on the Federal rate in FY 2008. Therefore, we are applying an outlier adjustment factor of 0.9517 to the capital Federal rate. Thus, we estimate that the percentage of capital outlier payments to total capital standard payments for FY 2008 will be slightly higher than the percentages for FY 2007. The outlier reduction factors are not built permanently into the capital rates; that is, they are not applied cumulatively in determining the capital Federal rate. The FY 2008 outlier adjustment of 0.9517 is a −0.53 percent change from the FY 2007 outlier adjustment of 0.9568. Therefore, the net change in the outlier adjustment to the capital Federal rate for FY 2008 is 0.9947 (0.9517/0.9568). Thus, the outlier adjustment decreases the FY 2008 capital Federal rate by 0.53 percent compared with the FY 2007 outlier adjustment. 3. Budget Neutrality Adjustment Factor for Changes in DRG Classifications and Weights and the GAF Section 412.308(c)(4)(ii) requires that the capital Federal rate be adjusted so that aggregate payments for the fiscal year based on the capital Federal rate after any changes resulting from the annual DRG reclassification and recalibration and changes in the GAF are projected to equal aggregate payments that would have been made on the basis of the capital Federal rate without such changes. Because we implemented a separate GAF for Puerto Rico, we apply separate budget neutrality adjustments for the national GAF and the Puerto Rico GAF. We apply the same budget neutrality factor for DRG reclassifications and recalibration nationally and for Puerto Rico. Separate adjustments were unnecessary for FY 1998 and earlier because the GAF for Puerto Rico was implemented in FY 1998. In the past, we used the actuarial capital cost model (described in Appendix B of the FY 2002 IPPS final rule (66 FR 40099)) to estimate the aggregate payments that would have been made on the basis of the capital Federal rate with and without changes in the DRG classifications and weights and in the GAF to compute the adjustment required to maintain budget neutrality for changes in DRG weights and in the GAF. During the transition period, the capital cost model was also used to estimate the regular exception payment adjustment factor. As we explain in section III.A. of the Addendum to this final rule with comment period, beginning in FY 2002, an adjustment for regular exception payments is no longer necessary. Therefore, we will no longer use the capital cost model. Instead, we are using historical data based on hospitals' actual cost experiences to determine the exceptions payment adjustment factor for special exceptions payments. To determine the factors for FY 2008, we compared (separately for the national capital rate and the Puerto Rico capital rate) estimated aggregate capital Federal rate payments based on the FY 2007 DRG relative weights and the FY 2007 GAF to estimated aggregate capital Federal rate payments based on the FY 2008 relative weights and the FY 2008 GAF. As we established in the final FY 2007 occupational mix adjusted payment rates' notice (71 FR 59890), the budget neutrality factors were 0.9906 for the national capital rate and 0.9968 for the Puerto Rico capital rate. In making the comparison, we set the exceptions reduction factor to 1.00. To achieve budget neutrality for the changes in the national GAF, based on calculations using updated data, we applied an incremental budget neutrality adjustment of 1.0018 for FY 2008 to the previous cumulative FY 2007 adjustments of 0.9906, yielding an adjustment of 0.9924, through FY 2008. For the Puerto Rico GAF, we applied an incremental budget neutrality adjustment of 1.0008 for FY 2008 to the previous cumulative FY 2007 adjustment of 0.9968, yielding a cumulative adjustment of 0.9976 through FY 2008. We then compared estimated aggregate capital Federal rate payments based on the FY 2007 DRG relative weights and the FY 2007 GAF to estimated aggregate capital Federal rate payments based on the FY 2008 DRG relative weights and the FY 2008 GAF. The incremental adjustment for DRG classifications and changes in relative weights is 0.9979 both nationally and for Puerto Rico. The cumulative adjustments for DRG classifications and changes in relative weights and for changes in the GAF through FY 2008 are 0.9903 nationally and 0.9955 for Puerto Rico. The following table summarizes the adjustment factors for each fiscal year: 
                        ( print page 47429) Budget Neutrality Adjustment for DRG Reclassifications and Recalibration and the Geographic Adjustment Factors
Fiscal Year
National
Puerto RicoIncremental adjustment
Cumulative
Incremental adjustment
CumulativeGeographic adjustment factor
DRG reclassifications and recalibration
Combined
Geographic adjustment factor
DRG reclassifications and recalibration
Combined1992



1.000001993


0.99800
0.998001994


1.00531
1.003301995


0.99980
1.003101996


0.99940
1.002501997


0.99873
1.001231998


0.99892
1.00015



1.000001999
0.99944
1.00335
1.00279
1.00294
0.99898
1.00335
1.00233
1.002332000
0.99857
0.99991
0.99848
1.00142
0.99910
0.99991
0.99901
1.001341
                                2001
0.99782
1.00009
0.99791
0.99933
1.00365
1.00009
1.00374
1.005082
                                2001
3
                                0.99771
3
                                1.00009
3
                                0.99780
0.99922
3
                                1.00365
3
                                1.00009
3
                                1.00374
1.005082002
4
                                0.99666
4
                                0.99668
4
                                0.99335
0.99268
4
                                0.98991
4
                                0.99668
4
                                0.99662
0.991645
                                2003
0.99915
0.99662
0.99577
0.98848
1.00809
0.99662
1.00468
0.996286
                                2003
7
                                0.99896
7
                                0.99662
7
                                0.99558
0.98830
1.00809
0.99662
1.00468
0.996288
                                2004
9
                                1.00175
9
                                1.00081
9
                                1.00256
0.99083
1.00028
1.00081
1.00109
0.9973610
                                2004
9
                                1.00164
9
                                1.00081
9
                                1.00245
0.99072
1.00028
1.00081
1.00109
0.9973611
                                2005
12
                                0.99967
1.00094
12
                                1.00061
0.99137
0.99115
1.00094
0.99208
0.9894613
                                2005
12
                                0.99946
1.00094
12
                                1.00040
0.99117
0.99115
1.00094
0.99208
0.989462006
14
                                1.00185
0.99892
14
                                1.00076
0.99198
1.00762
0.99892
1.00653
0.995922007
1.00000
0.99858
0.99858
0.99057
1.00234
0.99858
1.00092
0.996832008
1.00178
0.99792
0.99970
0.99027
15
                                1.00079
0.99792
0.99870
0.995541
                             Factors effective for the first half of FY 2001 (October 2000 through March 2001).2
                             Factors effective for the second half of FY 2001 (April 2001 through September 2001).3
                             Incremental factors are applied to FY 2000 cumulative factors.4
                             Incremental factors are applied to the cumulative factors for the first half of FY 2001.5
                             Factors effective for the first half of FY 2003 (October 2002 through March 2003).6
                             Factors effective for the second half of FY 2003 (April 2003 through September 2003).7
                             Incremental factors are applied to FY 2002 cumulative factors.8
                             Factors effective for the first half of FY 2004 (October 2003 through March 2004).9
                             Incremental factors are applied to the cumulative factors for the second half of FY 2003.10
                             Factors effective for the second half of FY 2004 (April 2004 through September 2004).11
                             Factors effective for the first quarter of FY 2005 (September 2004 through December 2004).12
                             Incremental factors are applied to average of the cumulative factors for the first half (October 1, 2003 through March 31, 2004) and second half (April 1, 2004 through September 30, 2004) of FY 2004.13
                             Factors effective for the last three quarters of FY 2005 (January 2005 through September 2005).14
                             Incremental factors are applied to average of the cumulative factors for 2005.
 
 
 The methodology used to determine the recalibration and geographic (DRG/GAF) budget neutrality adjustment factor is similar to the methodology used in establishing budget neutrality adjustments under the PPS for operating costs. One difference is that, under the operating PPS, the budget neutrality adjustments for the effect of geographic reclassifications are determined separately from the effects of other changes in the hospital wage index and the DRG relative weights. Under the capital PPS, there is a single DRG/GAF budget neutrality adjustment factor (the national capital rate and the Puerto Rico capital rate are determined separately) for changes in the GAF (including geographic reclassification) and the DRG relative weights. In addition, there is no adjustment for the effects that geographic reclassification has on the other payment parameters, such as the payments for serving low-income patients, indirect medical education payments, or the large urban add-on payments. In the 
                        **Federal Register**
                         notice establishing the final FY 2007 occupational mix adjusted payment rates (71 FR 59890), we calculated a GAF/DRG budget neutrality factor of 0.9986 for FY 2007. For FY 2008, we are establishing a GAF/DRG budget neutrality factor of 0.9997. The GAF/DRG budget neutrality factors are built permanently into the capital rates; that is, they are applied cumulatively in determining the capital Federal rate. This follows the requirement that estimated aggregate payments each year be no more or less than they would have been in the absence of the annual DRG reclassification and recalibration and changes in the GAF. The incremental change in the adjustment from FY 2007 to FY 2008 is 0.9997. The cumulative change in the capital Federal rate due to the adjustment is 0.9903 (the product of the incremental factors for FYs 1994 though 2007 and the incremental factor of 0.9997 for FY 2008). (We note that averages of the incremental factors that were in effect during FYs 2004 and 2005, respectively, were used in the calculation of the cumulative adjustment of 0.9903 for FY 2008.) The factor accounts for DRG reclassifications and recalibration and for changes in the GAF. It also incorporates the effects on the GAF of FY 2008 geographic reclassification decisions made by the MGCRB compared to FY 2007 decisions. However, it does not account for changes in payments due to changes in the DSH and IME adjustment factors, or in the large urban add on. 4. Exceptions Payment Adjustment Factor Section 412.308(c)(3) requires that the capital standard Federal rate be reduced by an adjustment factor equal to the estimated proportion of additional payments for both regular exceptions and special exceptions under § 412.348 relative to total capital PPS payments. In estimating the proportion of regular exception payments to total capital PPS payments during the transition period, we used the actuarial capital cost model originally developed for determining budget neutrality (described in Appendix B of the FY 2002 IPPS final rule (66 FR 40099)) to determine the exceptions payment adjustment factor, which was applied to both the Federal and hospital-specific capital rates. An adjustment for regular exception payments is no longer necessary in determining the FY 2008 capital Federal rate because, in accordance with § 412.348(b), regular exception payments were only made for cost reporting periods beginning on or after October 1, 1991 and before October 1, 2001. Accordingly, as we explained in the FY 2002 IPPS final rule (66 FR 39949), in FY 2002 and subsequent fiscal years, no payments are made under the regular exceptions provision. However, in accordance with § 412.308(c), we still need to compute a budget neutrality adjustment for special exception payments under § 412.348(g). We describe our methodology for determining the exceptions adjustment used in calculating the FY 2007 capital Federal rate below. Under the special exceptions provision specified at § 412.348(g)(1), eligible hospitals include SCHs, urban hospitals with at least 100 beds that have a disproportionate share percentage of at least 20.2 percent or qualify for DSH payments under § 412.106(c)(2), and hospitals with a combined Medicare and Medicaid inpatient utilization of at least 70 percent. An eligible hospital may receive special exceptions payments if it meets the following criteria: (1) a project need requirement as described at § 412.348(g)(2), which, in the case of certain urban hospitals, includes an excess capacity test as described at § 412.348(g)(4); (2) an age of assets test as described at § 412.348(g)(3); and (3) a project size requirement as described at § 412.348(g)(5). Based on information compiled from our fiscal intermediaries, six hospitals have qualified for special exceptions payments under § 412.348(g). Because we have cost reports ending in FY 2006 for all of these hospitals, we calculated the adjustment based on actual cost experience. Using data from cost reports ending in FY 2006 from the December 2006 update of the HCRIS data, we divided the capital special exceptions payment amounts for the six hospitals that qualified for special exceptions by the total capital PPS payment amounts (including special exception payments) for all hospitals. Based on the data from cost reports ending in FY 2006, this ratio is rounded to 0.0003. Because we have not received all cost reports ending in FY 2006, we also divided the FY 2005 special exceptions payments by the total capital PPS payment amounts for all hospitals with cost reports ending in FY 2005. This ratio also rounded to 0.0003. Because special exceptions are budget neutral, we are offsetting the capital Federal rate by 0.03 percent for special exceptions payments for FY 2008. Therefore, the exceptions adjustment factor is equal to 0.9997 (1—0.0003) to account for special exceptions payments in FY 2008. In the FY 2007 IPPS final rule (71 FR 48161), we estimated that total (special) exceptions payments for FY 2007 would equal 0.03 percent of aggregate payments based on the capital Federal rate. Therefore, we applied an exceptions adjustment factor of 0.9997 (1—0.0003) to determine the FY 2007 capital Federal rate. As we stated above, we estimate that exceptions payments in FY 2008 will equal 0.03 percent of aggregate payments based on the FY 2008 capital Federal rate. Therefore, we are applying an exceptions payment adjustment factor of 0.9997 to the capital Federal rate for FY 2008. The exceptions adjustment factor for FY 2008 is the same as the factor used in determining the FY 2007 capital Federal rate in the FY 2007 IPPS final rule (71 FR 48161), and is the same factor used for the occupational mix adjusted payment rates since the adjustments made to the wage index had no effect on capital exceptions payments (71 FR 59890). The exceptions reduction factors are not built permanently into the capital rates; that is, the factors are not applied cumulatively in determining the capital Federal rate. Therefore, the net change in the exceptions adjustment factor used in determining the FY 2008 capital Federal rate is 1.0000 (0.9997/0.9997). 5. Capital Standard Federal Rate for FY 2008 In the 
                        **Federal Register**
                         notice that established the occupational mix adjusted payment rates for FY 2007 (71 FR 59891), we established a capital Federal rate of $427.03 for FY 2007. As discussed above and in section V. of the 
                        ( print page 47431)
                        preamble of this final rule with comment period, we are not finalizing the proposed zero percent update for urban hospitals, which would have resulted in separate capital Federal rates for FY 2008 rural and urban hospitals. Therefore, we are establishing an update of 0.9 percent in determining the FY 2008 capital Federal rate for all hospitals. However, under the statutory authority at section 1886(d)(3)(A)(vi) of the Act, we are applying an additional 1.2 percent reduction to the standardized amounts for both capital and operating Federal payment rates in FY 2008. The 1.2 percent reduction is based on our Actuary's analysis of the effect of changes in coding or classification of discharges that do not reflect real changes in case-mix in light of the adoption of the MS–DRGs. Although the 1.2 percent reduction is outside the established process for developing the capital Federal payment rate, it nevertheless is a factor in the final prospective payment rate to hospitals for capital-related costs. For that reason, the capital Federal payment rates established in this final rule with comment period were determined by applying the 1.2 percent reduction. As a result of the 0.9 percent update, the 1.2 percent reduction to account for improvements in documentation and coding, and the other factors as discussed above, we are establishing a capital Federal rate of $423.34 for all hospitals for FY 2008. The capital Federal rate for FY 2008 was calculated as follows: The FY 2008 update factor is 1.0090, that is, the update is 0.9 percent.
                    The FY 2008 budget neutrality adjustment factor that is applied to the capital standard Federal payment rate for changes in the DRG relative weights and in the GAF (for all hospitals) is 0.9997.
                    The FY 2008 outlier adjustment factor is 0.9517.
                    The FY 2008 (special) exceptions payment adjustment factor is 0.9997.
                    The FY 2008 reduction for improvements in documentation and coding under the MS–DRGs is 1.2 percent. Because the capital Federal rate has already been adjusted for differences in case-mix, wages, cost-of-living, indirect medical education costs, and payments to hospitals serving a disproportionate share of low income patients, we are not making additional adjustments in the capital standard Federal rate for these factors, other than the budget neutrality factor for changes in the DRG relative weights and the GAF. We are providing the following charts that show how each of the factors and adjustments for FY 2008 affected the computation of the FY 2008 capital Federal rate in comparison to the FY 2007 capital Federal rate. The FY 2008 update factor has the effect of increasing the capital Federal rate by 0.90 percent compared to the FY 2007 capital Federal rate. The GAF/DRG budget neutrality factor has the effect of decreasing the capital Federal rate by 0.03 percent. The FY 2008 outlier adjustment factor has the effect of decreasing the capital Federal rate by 0.53 percent compared to the FY 2007 capital Federal rate. The FY 2008 exceptions payment adjustment factor remains unchanged from the FY 2007 exceptions payment adjustment factor, and therefore, has a 0.0 percent net effect on the FY 2008 capital Federal rate. In addition to the factors historically used to determine the capital Federal rate, for FY 2008, we are establishing an adjustment factor to account for improvements in documentation and coding expected to result from the MS–DRGs we are adopting, as discussed above in section III. of the Addendum to this final rule with comment period, in determining the capital Federal rate for FY 2008. The combined effect of all the changes decreases the capital Federal rate by 0.86 percent compared to the FY 2007 capital Federal rate. Comparison of Factors and Adjustments: FY 2007 Capital Federal Rate and FY 2008 Capital Federal Rate
FY 2007
FY 20084
Change
Percent change5Update Factor1
1.0110
1.0090
1.0090
0.00GAF/DRG Adjustment Factor1
0.9986
0.9997
0.9997
−0.03Outlier Adjustment Factor2
0.9568
0.9517
0.9947
−0.53Exceptions Adjustment Factor2
0.9997
0.9997
1.0000
0.00MS–DRG Upcoding Adjustment Factor3

0.9880
0.9880
−1.20Capital Federal Rate
$427.03
$423.34
0.9914
−0.861
                             The update factor and the GAF/DRG budget neutrality factors are built permanently into the capital rates. Thus, for example, the incremental change from FY 2007 to FY 2008 resulting from the application of the 0.9997 GAF/DRG budget neutrality factor for FY 2008 is 0.9997.2
                             The outlier reduction factor and the exceptions adjustment factor are not built permanently into the capital rates; that is, these factors are not applied cumulatively in determining the capital rates. Thus, for example, the net change resulting from the application of the FY 2008 outlier adjustment factor is 0.9517/0.9568, or 0.9947.3
                             Adjustment to FY 2008 IPPS rates to account for upcoding expected to result from the adoption of the MS–DRGs, as discussed above in section III. of the Addendum to this final rule with comment period.4
                             Factors for FY 2008, as discussed above in section III. of the Addendum to this final rule with comment period.5
                             Percent change of individual factors may not sum due to rounding.
 We are also providing the following chart that shows how the final FY 2008 capital Federal rate (for all hospitals) differs from the proposed FY 2008 capital Federal rates for rural hospitals and for urban hospitals as presented in the FY 2008 IPPS proposed rule (72 FR 24847). As noted above, we are not finalizing the proposal that would have resulted in separate capital Federal rates for FY 2008 for rural hospitals and for urban hospitals. Therefore, we applied the 0.9 percent FY 2008 update factor to all hospitals. 
                        ( print page 47432) Comparison of Factors and Adjustments: Proposed FY 2008 Capital Federal Rate and Final FY 2008 Capital Federal Rate
Proposed FY 2008 for rural hospitals
Proposed FY 2008 for urban hospitals
Final FY 2008 for all hospitals*
Percent change for rural hospitals**
Percent change for urban hospitals**Update Factor
1.0080
1.0000
1.0090
0.01
0.90GAF/DRG Adjustment Factor
1.0018
1.0018
0.9997
−0.21
−0.21Outlier Adjustment Factor
0.9484
0.9484
0.9517
0.35
0.35Exceptions Adjustment Factor
0.9997
0.9997
0.9997
0.00
0.00MS–DRG Upcoding Adjustment Factor
0.9760
0.9760
0.9880
1.23
1.23Capital Federal Rate
$417.26
$413.87
$423.34
1.46
2.29* As discussed in section V. of the preamble of this final rule with comment period, we did not finalize the proposed zero percent update for urban hospitals, which would have resulted in different capital Federal rates for FY 2008 for rural hospitals and for urban hospitals. Consequently, in this final rule with comment period, the same update was applied for all hospitals (both urban and rural), and one capital Federal rate was established for FY 2008 for both urban and rural hospitals.** Percent change of individual factors may not sum due to rounding.
 6. Special Capital Rate for Puerto Rico Hospitals Section 412.374 provides for the use of a blended payment system for payments to hospitals located in Puerto Rico under the PPS for acute care hospital inpatient capital-related costs. Accordingly, under the capital PPS, we computed a separate payment rate specific to hospitals located in Puerto Rico using the same methodology used to compute the national Federal rate for capital-related costs. Under the broad authority of section 1886(g) of the Act, as discussed in section V. of the preamble of this final rule with comment period, beginning with discharges occurring on or after October 1, 2004, capital payments to hospitals located in Puerto Rico are based on a blend of 25 percent of the Puerto Rico capital rate and 75 percent of the capital Federal rate. The Puerto Rico capital rate is derived from the costs of Puerto Rico hospitals only, while the capital Federal rate is derived from the costs of all acute care hospitals participating in the IPPS (including Puerto Rico). To adjust hospitals' capital payments for geographic variations in capital costs, we applied a GAF to both portions of the blended capital rate. The GAF is calculated using the operating IPPS wage index, and varies depending on the labor market area or rural area in which the hospital is located. We used the Puerto Rico wage index to determine the GAF for the Puerto Rico part of the capital-blended rate and the national wage index to determine the GAF for the national part of the blended capital rate. Because we implemented a separate GAF for Puerto Rico in FY 1998, we also applied separate budget neutrality adjustments for the national GAF and for the Puerto Rico GAF. However, we applied the same budget neutrality factor for DRG reclassifications and recalibration nationally and for Puerto Rico. As we stated above in section III.A.4. of the Addendum to this final rule with comment period, for Puerto Rico, the GAF budget neutrality factor is 1.0008, while the DRG adjustment is 0.9979, for a combined cumulative adjustment of 0.9987. In computing the payment for a particular Puerto Rico hospital, the Puerto Rico portion of the capital rate (25 percent) is multiplied by the Puerto Rico-specific GAF for the labor market area in which the hospital is located, and the national portion of the capital rate (75 percent) is multiplied by the national GAF for the labor market area in which the hospital is located (which is computed from national data for all hospitals in the United States and Puerto Rico). In FY 1998, we implemented a 17.78 percent reduction to the Puerto Rico capital rate as a result of Pub. L. 105–33. In FY 2003, a small part of that reduction was restored. For FY 2007, before application of the GAF, the special capital rate for hospitals located in Puerto Rico was $203.06 for discharges occurring on or after October 1, 2006, through September 30, 2007. With the changes we are making to the factors used to determine the capital rate, the FY 2008 special capital rate for hospitals in Puerto Rico is $199.80. B. Calculation of the Inpatient Capital-Related Prospective Payments for FY 2008 Because the 10-year capital PPS transition period ended in FY 2001, all hospitals (except “new” hospitals under § 412.324(b) and under § 412.304(c)(2)) are paid based on 100 percent of the capital Federal rate in FY 2007. The applicable capital Federal rate was determined by making the following adjustments: For outliers, by dividing the capital standard Federal rate by the outlier reduction factor for that fiscal year; and
                    For the payment adjustments applicable to the hospital, by multiplying the hospital's GAF, disproportionate share adjustment factor, and IME adjustment factor, when appropriate. For purposes of calculating payments for each discharge during FY 2008, the capital standard Federal rate is adjusted as follows: (Standard Federal Rate) × (DRG weight) × (GAF) × (COLA for hospitals located in Alaska and Hawaii) × (1 + Disproportionate Share Adjustment Factor + IME Adjustment Factor, if applicable). The result is the adjusted capital Federal rate. (As discussed above and in section V. of the preamble of this final rule with comment period, we are eliminating the large urban add-on adjustment in existing regulations at § 412.316, beginning in FY 2008.) Hospitals also may receive outlier payments for those cases that qualify under the thresholds established for each fiscal year. Section 412.312(c) provides for a single set of thresholds to identify outlier cases for both inpatient operating and inpatient capital-related payments. The outlier thresholds for FY 2008 are in section II.A. of the Addendum to this final rule with comment period. For FY 2008, a case qualifies as a cost outlier if the cost for the case plus the IME and DSH payments is greater than the prospective payment rate for the DRG plus the fixed-loss amount of $22,635. An eligible hospital may also qualify for a special exceptions payment under § 412.348(g) up through the 10th year beyond the end of the capital transition period if it meets the following criteria: (1) A project need requirement described at § 412.348(g)(2), which in the case of certain urban hospitals 
                        ( print page 47433)
                        includes an excess capacity test as described at § 412.348(g)(4); and (2) a project size requirement as described at § 412.348(g)(5). Eligible hospitals include SCHs, urban hospitals with at least 100 beds that have a DSH patient percentage of at least 20.2 percent or qualify for DSH payments under § 412.106(c)(2), and hospitals that have a combined Medicare and Medicaid inpatient utilization of at least 70 percent. Under § 412.348(g)(8), the amount of a special exceptions payment is determined by comparing the cumulative payments made to the hospital under the capital PPS to the cumulative minimum payment level. This amount is offset by: (1) Any amount by which a hospital's cumulative capital payments exceed its cumulative minimum payment levels applicable under the regular exceptions process for cost reporting periods beginning during which the hospital has been subject to the capital PPS; and (2) any amount by which a hospital's current year operating and capital payments (excluding 75 percent of operating DSH payments) exceed its operating and capital costs. Under § 412.348(g)(6), the minimum payment level is 70 percent for all eligible hospitals. During the transition period, new hospitals (as defined under § 412.300) were exempt from the capital IPPS for their first 2 years of operation and were paid 85 percent of their reasonable costs during that period. Effective with the third year of operation through the remainder of the transition period, under § 412.324(b) we paid the hospitals under the appropriate transition methodology (if the hold-harmless methodology were applicable, the hold-harmless payment for assets in use during the base period would extend for 8 years, even if the hold-harmless payments extend beyond the normal transition period). Under § 412.304(c)(2), for cost reporting periods beginning on or after October 1, 2002, we pay a new hospital 85 percent of its reasonable costs during the first 2 years of operation unless it elects to receive payment based on 100 percent of the capital Federal rate. Effective with the third year of operation, we pay the hospital based on 100 percent of the capital Federal rate (that is, the same methodology used to pay all other hospitals subject to the capital PPS). C. Capital Input Price Index 1. Background Like the operating input price index, the capital input price index (CIPI) is a fixed-weight price index that measures the price changes associated with capital costs during a given year. The CIPI differs from the operating input price index in one important aspect—the CIPI reflects the vintage nature of capital, which is the acquisition and use of capital over time. Capital expenses in any given year are determined by the stock of capital in that year (that is, capital that remains on hand from all current and prior capital acquisitions). An index measuring capital price changes needs to reflect this vintage nature of capital. Therefore, the CIPI was developed to capture the vintage nature of capital by using a weighted-average of past capital purchase prices up to and including the current year. We periodically update the base year for the operating and capital input prices to reflect the changing composition of inputs for operating and capital expenses. The CIPI was last rebased to FY 2002 in the FY 2006 IPPS final rule (70 FR 47387). 2. Forecast of the CIPI for FY 2008 Based on the latest forecast by Global Insight, Inc. (second quarter of 2007), we forecast that the CIPI will increase to 1.3 percent in FY 2008. This reflects a projected 1.9 percent increase in vintage-weighted depreciation prices (building and fixed equipment, and movable equipment), and a 3.1 percent increase in other capital expense prices in FY 2008, partially offset by a 2.6 percent decline in vintage-weighted interest expenses in FY 2008. The weighted average of these three factors produces the 1.3 percent increase for the CIPI as a whole in FY 2008. IV. Changes to Payment Rates for Excluded Hospitals and Hospital Units: Rate-of-Increase Percentages Historically, hospitals and hospital units excluded from the prospective payment system received payment for inpatient hospital services they furnished on the basis of reasonable costs, subject to a rate-of-increase ceiling. An annual per discharge limit (the target amount as defined in § 413.40(a)) was set for each hospital or hospital unit based on the hospital's own cost experience in its base year. The target amount was multiplied by the Medicare discharges and applied as an aggregate upper limit (the ceiling as defined in § 413.40(a)) on total inpatient operating costs for a hospital's cost reporting period. Prior to October 1, 1997, these payment provisions applied consistently to all categories of excluded providers (rehabilitation hospitals and units (now referred to as IRFs), psychiatric hospitals and units (now referred to as IPFs), LTCHs, children's hospitals, and cancer hospitals). Payment for services furnished in children's hospitals and cancer hospitals that are excluded from the IPPS continues to be subject to the rate-of-increase ceiling based on the hospital's own historical cost experience. (We note that, in accordance with § 403.752(a), RNHCIs are also subject to the rate-of-increase limits established under § 413.40 of the regulations.) We had previously proposed that the FY 2008 rate-of-increase percentage for cancer and children's hospitals and RNHCIs would be the percentage increase in the FY 2008 IPPS operating market basket, estimated to be 3.3 percent. Consistent with our historical approach, if more recent data are available for the final rule, we use it to calculate the IPPS operating market basket. For this final rule with comment period, we have calculated the IPPS operating market basket for FY 2008 using the most recent data available. For cancer and children's hospitals and RNHCIs, the FY 2008 rate-of-increase percentage which is applied to FY 2007 target amounts in order to calculate FY 2008 target amounts is 3.3 percent, based on Global Insight, Inc.'s 2007 second quarter forecast of the IPPS operating market basket increase, in accordance with the applicable regulations at 42 CFR 413.40. IRFs, IPFs, and LTCHs were previously paid under the reasonable cost methodology. However, the statute was amended to provide for the implementation of prospective payment systems for IRFs, IPFs, and LTCHs. In general, the prospective payment systems for IRFs, IPFs, and LTCHs provide transitioning periods of varying lengths of time during which a portion of the prospective payment is based on cost-based reimbursement rules under Part 413 (certain providers do not receive a transitioning period or may elect to bypass the transition as applicable under 42 CFR Part 412, Subparts N, O, and P.) We note that the various transitioning periods provided for under the IRF PPS, IPF PPS, and the LTCH PPS have ended or will soon end. For cost reporting periods beginning on or after October 1, 2002, all IRFs are paid 100 percent of the adjusted Federal rate under the IRF PPS. Therefore, for cost reporting periods beginning on or after October 1, 2002, no portion of an IRF PPS payment is subject to Part 413. Similarly, for cost reporting periods beginning on or after October 1, 2006, all LTCHs are paid 100 percent of the adjusted Federal rate under the LTCH PPS. Therefore, for cost reporting periods beginning on or after October 1, 
                        ( print page 47434)
                        2006, no portion of the LTCH PPS payment is subject to 42 CFR Part 413. (We note that to the extent a portion of a LTCH's PPS payment was subject to reasonable cost principles, the Secretary utilized his broad authority under section 123 of the BBRA, amended by section 307 of BIPA, to make such portion subject to 42 CFR Part 413 and various provisions in 1886(b) of the Act.) Except as provided in § 412.426(c), IPFs remain under a blend methodology for cost reporting periods beginning on or after January 1, 2005, and before January 1, 2008. Under the broad authority conferred upon the Secretary in section 124(a)(1) of the BBRA of 1999, the Secretary provided that, for IPFs paid under the blend methodology, the portion of the IPF PPS payment that is based on reasonable cost principles is subject to the rules of 42 CFR Part 413 and various provisions in section 1886(b) of the Act. In order to calculate the portion of the PPS payment that is based on reasonable cost principles, it is necessary to determine whether the IPF would be considered “existing” for purposes of section 1886(b)(3)(H) of the Act or “new” for purposes of section 1886(b)(7) of the Act. We note that readers should not confuse an IPF that is considered “new” for purposes of section 1886(b)(7) of the Act and § 413.40(f)(2)(ii) of the regulations with an IPF that is considered “new” under § 412.426(c) of the regulations. Any IPF that, under present or previous ownership or both, has its first cost reporting period as an IPF beginning on or after January 1, 2005, is considered “new” for purposes of § 412.426(c). An IPF that is considered “new” under § 412.426(c) is paid based on 100 percent of the Federal per diem payment amount. Consequently, only those IPFs considered “new” under section 1886(b)(7) of the Act, but not “new” under § 412.426(c) will be paid under a PPS blended payment methodology. An IPF considered “new” for purposes of § 413.40(f)(2)(ii) would have its “reasonable-cost based” portion of its prospective payment subject to the provisions of § 413.40(f)(2)(ii) and § 413.40(c)(4)(v), as applicable. An IPF considered “new” for purposes of section 1886(b)(7) of the Act has the target amount for its third cost reporting period determined in accordance with sections 1886(b)(7)(A)(ii) and 1886(b)(3)(A)(ii) of the Act. For the fourth and subsequent cost reporting periods, the target amount is calculated in accordance with section 1886(b)(3)(A)(ii) of the Act. An IPF that would be considered “existing” for purposes of section 1886(b)(3)(H) of the Act would have its target amount for the “reasonable-cost based” portion of its prospective payment determined in accordance with section 1886(b)(3)(A)(ii) of the Act and the provisions of § 413.40(c)(4)(ii) of the regulations. In the FY 2008 IPPS proposed rule (72 FR 24823), the applicable percentage increase to update the target amount for the reasonable cost-based portion of the PPS payment of an IPF that is considered “existing” under section 1886(b)(3)(H) of the Act or “new” under section 1886(b)(7) of the Act, but not “new” under the provisions of § 412.426(c), was 3.4 percent. However, we noted that if more current data became available prior to publication of the final rule, we would use those data for updating the market basket. Based on more recent data, the applicable percentage increase to update the target amount for the reasonable cost-based portion of the PPS payment of an IPF that is considered “existing” under section 1886(b)(3)(H) of the Act or “new” under section 1886(b)(7) of the Act, but not “new” under § 412.426(c), is 3.3 percent, based on Global Insight, Inc.'s 2007 second quarter forecast of the excluded hospital market basket increase, in accordance with the applicable regulations at 42 CFR 413.40. We did not receive any public comments on this section of the proposed rule. V. Tables This section contains the tables referred to throughout the preamble to this final rule with comment period and in this Addendum. Tables 1A, 1B, 1C, 1D, 2, 3A, 3B, 4A, 4B, 4C, 4D, 4F, 4G, 4H, 4J, 5, 6A, 6B, 6C, 6D, 6E, 6F, 6J, 6K, 7A, 7B, 8A, 8B, 8C, 9A, 9C, 10, and 11 are presented below. As explained in sections II.D.2. and II.G.8. of the preamble of this final rule with comment period, Table 6I—Complete List of Complication and Comorbidity (CC) Exclusions, is available only through the Internet on the CMS Web site at: 
                        *http://www.cms.hhs.gov/​AcuteInpatientPPS/​*. The tables presented below are as follows: Table 1A—National Adjusted Operating Standardized Amounts, Labor/Nonlabor (69.7 Percent Labor Share/30.3 Percent Nonlabor Share If Wage Index Is Greater Than 1) Table 1B—National Adjusted Operating Standardized Amounts, Labor/Nonlabor (62 Percent Labor Share/38 Percent Nonlabor Share If Wage Index Is Less Than or Equal To 1) Table 1C—Adjusted Operating Standardized Amounts for Puerto Rico, Labor/Nonlabor Table 1D—Capital Standard Federal Payment Rate Table 2—Hospital Case-Mix Indexes for Discharges Occurring in Federal Fiscal Year 2006; Hospital Wage Indexes for Federal Fiscal Year 2008; Hospital Average Hourly Wages for Federal Fiscal Years 2006 (2002 Wage Data), 2007 (2003 Wage Data), and 2008 (2004 Wage Data); and 3-Year Average of Hospital Average Hourly Wages Table 3A—FY 2008 and 3-Year Average Hourly Wage for Urban Areas by CBSA Table 3B—FY 2008 and 3-Year Average Hourly Wage for Rural Areas by CBSA Table 4A—Wage Index and Capital Geographic Adjustment Factor (GAF) for Urban Areas by CBSA—FY 2008 Table 4B—Wage Index and Capital Geographic Adjustment Factor (GAF) for Rural Areas by CBSA—FY 2008 Table 4C—Wage Index and Capital Geographic Adjustment Factor (GAF) for Hospitals That Are Reclassified by CBSA—FY 2008 Table 4F—Puerto Rico Wage Index and Capital Geographic Adjustment Factor (GAF) by CBSA—FY 2008 Table 4J—Out-Migration Adjustment—FY 2008 Table 5—List of Medicare Severity Diagnosis-Related Groups (MS–DRGs), Relative Weighting Factors, and Geometric and Arithmetic Mean Length of Stay Table 6A—New Diagnosis Codes Table 6B—New Procedure Codes Table 6C—Invalid Diagnosis Codes Table 6D—Invalid Procedure Codes Table 6E—Revised Diagnosis Code Titles Table 6F—Revised Procedure Code Titles Table 6G—Additions to the CC Exclusions List Table 6H—Deletions from the CC Exclusions List Table 7A—Medicare Prospective Payment System Selected Percentile Lengths of Stay:  FY 2006 MedPAR Update—March 2007 GROUPER V24.0 CMS DRGs Table 7B—Medicare Prospective Payment System Selected Percentile Lengths of Stay:  FY 2006 MedPAR Update—March 2007 GROUPER V25.0 MS DRGs Table 8A—Statewide Average Operating Cost-to-Charge Ratios—July 2007 Table 8B—Statewide Average Capital Cost-to-Charge Ratios—July 2007
                        ( print page 47435) Table 8C—Statewide Average Total Cost to Charge Ratios for LTCHs  July 2007 Table 9A—Hospital Reclassifications and Redesignations—FY 2008 Table 9C—Hospitals Redesignated as Rural under Section 1886(d)(8)(E) of the Act—FY 2008 Table 10—Geometric Mean Plus the Lesser of .75 of the National Adjusted Operating Standardized Payment Amount (Increased to Reflect the Difference Between Costs and Charges) or .75 of One Standard Deviation of Mean Charges by Medicare Severity Diagnosis-Related Group (MS–DRG)—July 2007 Table 11—FY 2008 MS–LTC–DRGs, Relative Weights, Geometric Average Length of Stay, Short-Stay Outlier Threshold, and IPPS Comparable Threshold Table 1A.—National Adjusted Operating Standardized Amounts; Labor/Nonlabor
[69.7 Percent Labor Share/30.3 Percent Nonlabor Share if Wage Index Greater Than 1]
Full update (3.3 percent)
Reduced update (1.3 percent)Labor-related
Nonlabor-related
Labor-related
Nonlabor-related$3,459.66
$1,503.98
$3,392.68
$1,474.86
 Table 1B.—National Adjusted Operating Standardized Amounts, Labor/Nonlabor
[62 Percent Labor Share/38 Percent Nonlabor Share if Wage Index Less Than or Equal to 1]
Full update (3.3 percent)
Reduced update (1.3 percent)Labor-related
Nonlabor-related
Labor-related
Nonlabor-related$3,077.46
$1,886.18
$3,017.87
$1,849.67
 Table 1C.—Adjusted Operating Standardized Amounts for Puerto Rico, Labor/Nonlabor
Rates if wage index 
                                 greater than 1
Rates if wage index less than or equal to 1Labor
Nonlabor
Labor
NonlaborNational
$3,459.66
$1,503.98
$3,077.46
$1,886.18Puerto Rico
$1,454.91
$891.72
$1,377.47
$969.16
 Table 1D.—Capital Standard Federal Payment Rate
RateNational
$423.34Puerto Rico
$199.80
 Table 2.—Hospital Case-Mix Indexes for Discharges Occurring in Federal Fiscal Year 2006; Hospital Wage Indexes for Federal Fiscal Year 2008; Hospital Average Hourly Wages for Federal Fiscal Years 2006 (2002 Wage Data), 2007 (2003 Wage Data), and 2008 (2004 Wage Data); and 3-Year Average of Hospital Average Hourly Wages
Provider No.
Case-mix Index
FY 2008 Wage Index
Average 
                                 Hourly Wage  
                                 FY 2006
Average 
                                 Hourly Wage  
                                 FY 2007
Average 
                                 Hourly Wage  
                                 FY 2008
Average 
                                 Hourly Wage  
                                 ** (3 years)010001
1.5191
0.7567
21.6546
22.1989
23.2195
22.3615010005
1.1378
0.8629
22.4906
23.6022
23.0203
23.0415010006
1.5126
0.7692
23.4823
23.4975
23.7502
23.5724010007
1.0207
0.7567
18.2429
19.9329
21.3492
19.8699010008
1.0417
0.7741
20.4591
17.9533
22.0793
19.9268010009
0.9702
0.8629
23.2228
23.5626
25.9011
24.2272010010
1.1043
0.8724
21.4974
27.0385
22.8602
23.5943010011
1.6748
0.8855
27.4850
27.6658
27.4668
27.5393010012
1.2356
0.9388
22.7020
24.4059
25.5767
24.1956010015
1.0427
0.7613
21.5111
22.3383
27.0806
23.3440010016
1.5770
0.8855
25.1502
24.6488
26.8611
25.5444010018
1.7123
0.8855
22.2990
23.7048
24.8974
23.6077010019
1.2722
0.7692
22.0906
22.8766
23.3460
22.7785010021
1.1851
0.7567
18.6785
19.7367
21.0624
19.7975010022
0.9498
0.9812
24.5671
25.8404
27.4318
25.9300010023
1.8506
0.8111
27.6174
25.4272
26.1739
26.4108010024
1.6018
0.8111
20.7265
22.0819
25.0715
22.5306( print page 47436)010025
1.3028
0.8587
21.2674
22.7635
23.6186
22.5541010027
0.7634
0.7567
15.3705
16.4682
17.0513
16.2718010029
1.5710
0.8587
22.6976
23.9007
25.0468
23.9133010032
0.9313
0.7892
19.1555
19.3311
18.5545
19.0122010033
2.0854
0.8855
26.3784
27.4181
29.1471
27.6506010034
1.0453
0.8111
16.9686
17.7457
19.1549
17.9513010035
1.3134
0.8724
22.2870
24.2425
24.2746
23.6062010036
1.1619
0.7567
22.9747
21.5796
24.2887
22.9479010038
1.2689
0.8022
21.4509
23.7039
27.0752
24.1209010039
1.6606
0.9017
25.8820
26.9919
28.6462
27.1994010040
1.6563
0.8144
22.8851
24.3207
24.7657
23.9967010043
1.0807
0.8855
22.5944
21.9774
23.9121
22.8205010044
1.0847
0.8724
21.4036
22.5009
24.4276
22.7205010045
1.2233
0.8724
19.8803
20.4927
23.1695
21.0755010046
1.5335
0.8144
21.6965
23.4219
25.9105
23.5410010047
0.8960
0.7694
21.0605
26.4851
19.7542
21.9502010049
1.1433
0.7567
20.2413
21.7888
22.4248
21.5072010050
1.0408
0.8855
22.1584
22.9620
24.4060
23.1658010051
0.8299
0.8530
15.2207
18.7701
18.0305
17.3881010052
0.8767
0.7670
16.4958
25.9233
36.3638
26.9159010053
***
*
19.0108
*
*
19.0108010054
1.0736
0.8629
22.5554
23.3624
24.4810
23.4780010055
1.6124
0.7567
22.3800
22.5396
22.4145
22.4451010056
1.6378
0.8855
23.7144
23.7398
24.5754
24.0311010058
1.0119
0.8855
18.5538
19.5092
17.0150
18.2415010059
1.0245
0.8629
21.3237
23.0012
24.8199
23.0577010061
0.9828
0.8108
21.9370
24.1185
25.2454
23.7791010062
1.0225
0.7567
18.3435
21.4805
21.7112
20.4976010064
1.6963
0.8855
26.1110
24.8155
27.6149
26.1441010065
1.5265
0.8724
21.3785
23.0477
24.3346
22.9447010066
0.8369
0.7567
17.6152
19.8692
25.4612
20.9377010068
***
*
19.0789
22.7156
24.4145
22.0070010069
1.0252
0.7567
21.3609
23.1243
23.6272
22.6667010072
***
*
21.8169
24.4989
*
23.1419010073
0.9793
0.7567
16.4168
18.3963
19.0046
17.9415010078
1.6180
0.8022
21.6857
23.5279
24.3828
23.2230010079
1.2228
0.9017
21.8199
22.7337
22.3034
22.2840010083
1.1887
0.8123
22.3040
22.4279
24.0036
22.9553010084
1.3254
0.8855
24.7127
26.3238
26.5079
25.8383010085
1.3335
0.8629
24.4710
24.2609
23.6280
24.1072010086
1.0994
0.7567
18.6081
22.2096
21.5584
20.7409010087
1.9947
0.7947
22.5225
22.4318
24.8320
23.2268010089
1.2932
0.8855
22.8448
25.0811
26.2628
24.6788010090
1.7444
0.8539
23.6948
26.0494
26.3957
25.3396010091
0.9568
0.7613
18.6912
23.1310
22.5272
21.3026010092
1.5529
0.8530
24.4592
26.6796
26.9959
26.0279010095
0.8468
0.8530
13.9326
16.5250
17.0024
15.8689010097
0.7113
0.8111
16.7549
19.4511
19.2481
18.5000010098
0.9805
*
14.3076
*
*
14.3076010099
0.9660
0.7567
18.7910
20.8383
20.6736
20.0891010100
1.6851
0.8123
21.2915
23.8919
25.1460
23.5431010101
1.1060
0.8724
21.6593
24.2575
25.0974
23.6323010102
0.9334
0.7567
21.0902
25.6158
26.9859
24.5977010103
1.8910
0.8855
26.1163
27.8272
28.9636
27.5991010104
1.8838
0.8855
24.7394
27.6471
28.3126
26.8465010108
1.0938
0.8111
28.4624
24.6740
25.4325
26.1487010109
0.9828
0.8018
21.6194
17.6733
21.0449
20.0231010110
0.7586
0.7781
17.5957
26.0038
19.8738
20.8832010112
0.9652
0.7567
16.8902
17.1833
20.4027
18.1182010113
1.6646
0.7947
21.4121
22.3282
24.7170
22.7864010114
1.3662
0.8855
22.3752
25.6152
25.7090
24.6272010115
0.6881
*
21.7477
*
*
21.7477010118
1.2151
0.8162
19.7673
21.4630
22.7191
21.2742010120
0.9625
0.7567
20.9450
20.9019
22.1868
21.3553010121
***
*
24.0867
*
*
24.0867010125
1.0635
0.8043
18.4113
21.5123
22.8911
20.8639010126
1.1765
0.8111
23.1381
23.9327
24.4957
23.8552( print page 47437)010128
0.8778
0.7613
21.4200
23.6647
24.9881
23.3836010129
1.0394
0.7701
21.3555
22.1574
21.8502
21.7888010130
1.0252
0.8855
23.2488
23.7528
24.5644
23.8767010131
1.3963
0.9017
25.7837
26.4297
27.2707
26.5327010137
1.2204
0.8855
24.7366
27.5782
28.5843
26.9190010138
0.6023
0.7633
13.8476
16.7602
14.5551
15.1032010139
1.5875
0.8855
25.3014
26.8726
28.1473
26.8270010143
1.2118
0.8724
22.0215
26.2762
24.0674
24.0861010144
1.6376
0.7947
20.8209
22.5133
22.3916
21.9338010145
1.4727
0.8530
24.9531
24.5092
25.8293
25.1083010146
1.0794
0.8022
20.8917
22.6586
22.6879
22.1063010148
0.8692
0.7567
20.5589
23.9246
23.5714
22.6800010149
1.2877
0.8111
26.5854
24.4805
25.4354
25.4861010150
1.0284
0.8111
21.6377
23.6080
24.4098
23.2040010152
1.2978
0.7947
22.6202
22.4075
23.7803
22.9411010157
1.1357
0.7692
24.3559
23.3828
24.2206
23.9837010158
1.1916
0.7832
24.3531
23.5533
25.5905
24.4669010162
***
*
*
33.8777
*
33.8777010163
***
*
*
*
34.0325
34.0325010164
1.1737
0.7975
*
*
23.2447
23.2447010165
***
*
*
*
28.8040
28.8040010166
***
*
*
*
29.7256
29.7256010167
1.4919
0.8855
*
*
*
*010168
1.1249
0.9019
*
*
*
*020001
1.7991
1.2083
32.8120
35.4232
36.5298
34.9510020004
1.1287
*
32.0966
31.8004
*
31.9467020006
1.3160
1.2083
36.0540
34.3752
37.0211
35.7758020008
1.2411
1.2083
35.9236
36.1250
39.3432
37.1503020012
1.3780
1.2083
31.8995
32.5975
33.9375
32.8391020014
1.1294
1.2083
32.0894
29.4472
30.9722
30.8221020017
1.9188
1.2083
33.5852
35.4119
35.8804
34.9149020018
0.9273
1.9278
*
*
*
*020019
0.8687
1.9278
*
*
*
*020024
1.1780
1.2083
33.0644
29.5195
38.6934
33.4500020026
1.4935
1.9278
*
*
*
*020027
0.9341
1.9278
*
*
*
*030001
1.5488
1.0110
29.9840
32.4791
33.4178
31.9042030002
2.0931
1.0110
29.0519
30.2200
31.0818
30.0874030006
1.6975
0.9416
25.8872
27.0599
27.7421
26.9373030007
1.4495
1.1187
29.6174
31.1928
33.7213
31.5818030009
***
*
22.3993
26.5408
*
23.8204030010
1.4087
0.9416
24.8275
28.5684
30.6261
28.0431030011
1.4962
0.9416
25.1361
28.1423
28.8203
27.4688030012
1.3876
0.9961
26.3859
27.3895
29.1042
27.6846030013
1.4744
1.0085
25.7050
27.0111
31.2815
28.0280030014
1.5918
1.0110
25.6259
29.6582
29.8296
28.4308030016
1.2374
1.0110
26.7003
29.1980
30.7896
28.9890030017
2.0652
1.0110
26.2452
30.6007
34.4852
30.7776030018
1.3205
1.0110
28.9476
29.4566
31.8056
30.0512030019
1.3316
1.0110
27.3156
29.5921
30.1934
29.0814030022
1.5703
1.0110
26.4404
30.5710
30.3746
29.2068030023
1.7873
1.1551
33.8333
34.2142
35.8287
34.6826030024
2.0639
1.0110
31.6658
31.9247
33.1797
32.2883030027
0.9709
*
20.4032
*
*
20.4032030030
1.5768
1.0110
30.2712
32.0994
34.4166
32.2546030033
1.2960
1.1187
26.6531
28.7508
29.9383
28.4685030036
1.4588
1.0110
30.3521
30.9834
33.0523
31.6117030037
2.1478
1.0110
28.6453
31.2877
34.1079
31.4098030038
1.6801
1.0110
29.5509
29.9314
31.7238
30.2225030040
0.9098
*
24.8145
27.5322
*
26.1823030043
1.2683
0.8854
24.7932
26.5834
27.3856
26.2806030055
1.4591
0.9576
24.5202
27.1473
27.1621
26.3554030060
1.0894
*
24.3523
24.8373
*
24.5964030061
1.6799
1.0110
25.5529
28.0696
28.1337
27.3140030062
1.2025
0.8854
23.8068
26.6880
28.9587
26.5838030064
1.9657
0.9416
25.4922
28.3853
29.8226
28.0126030065
1.5912
1.0110
27.1646
29.5883
31.0817
29.3880( print page 47438)030067
1.0582
0.9152
20.4376
20.7591
27.4497
22.9601030068
1.1135
0.8854
20.8846
23.1394
23.8792
22.6625030069
1.4256
0.9333
26.3518
30.2224
29.7802
28.7293030071
0.8920
1.4400
*
*
*
*030073
1.0393
1.4400
*
*
*
*030074
0.8727
1.4400
*
*
*
*030077
0.7686
1.4400
*
*
*
*030078
0.9911
1.4400
*
*
*
*030080
1.5497
0.9416
25.2077
27.1360
28.6568
27.0149030083
1.4230
1.0110
27.5353
27.4983
33.5302
29.3979030084
0.9008
1.4400
*
*
*
*030085
1.5896
0.9416
24.5792
26.8364
28.1388
26.6166030087
1.6937
1.0110
26.6594
29.5962
31.2331
29.4038030088
1.3707
1.0110
26.6796
27.8604
29.9758
28.2309030089
1.6397
1.0110
27.1835
28.9068
30.1591
28.8100030092
1.4993
1.0110
27.3203
31.7512
30.6343
30.0167030093
1.2962
1.0110
25.8955
26.4430
27.8821
26.8453030094
1.4039
1.0110
29.5948
31.5422
33.4050
31.6120030099
0.8736
0.8854
26.3236
27.1402
26.9227
26.8026030100
2.0564
0.9416
29.0691
31.5628
34.7532
31.7816030101
1.4424
1.1222
26.1927
27.8302
30.6764
28.3394030102
2.3653
1.0110
29.0942
31.6285
33.6247
31.5058030103
1.7635
1.0110
30.1994
31.7322
32.2833
31.3997030105
2.2401
1.0110
31.3094
31.2970
32.7449
31.8780030106
1.7527
1.0110
34.7221
32.9840
36.4667
34.9449030107
1.9168
1.0110
*
35.6197
35.5386
35.5721030108
2.0446
1.0110
*
*
29.9395
29.9395030109
***
*
*
16.5906
*
16.5906030110
1.6188
1.0110
*
31.4852
29.7949
30.5015030111
1.0309
0.9416
*
*
33.3711
33.3711030112
1.9762
1.0110
*
*
36.6601
36.6601030113
0.8959
1.4400
*
*
*
*030114
1.3883
0.9416
*
*
*
*030115
1.3514
1.0110
*
*
*
*030117
1.1079
0.9333
*
*
*
*030118
1.0969
0.9961
*
*
*
*030119
1.1665
1.0110
*
*
*
*040001
1.0776
0.8871
23.7718
22.9327
22.9948
23.2132040002
1.2042
0.7516
20.1384
21.2020
25.0000
22.0327040004
1.7265
0.8871
25.0286
27.1741
28.1117
26.7791040007
1.7562
0.8960
25.7142
40.1291
29.1941
31.6856040010
1.4682
0.8871
23.0274
24.2315
26.5287
24.6226040011
1.0455
0.7516
20.3970
21.0967
22.2431
21.2830040014
1.3571
0.8725
25.3451
26.4777
28.9855
26.8514040015
0.9961
0.7516
19.2831
20.4279
20.1061
19.9379040016
1.7616
0.8960
22.1228
25.8056
26.5911
24.8386040017
1.0969
0.8714
21.9875
21.9147
23.8768
22.5741040018
1.0812
0.8052
23.6044
24.0026
25.6751
24.3852040019
1.1088
0.8963
23.7328
23.8706
24.9113
24.1695040020
1.5861
0.8963
21.6603
22.6497
23.9470
22.7542040021
1.5370
0.8960
25.6917
25.4046
26.1853
25.7538040022
1.5695
0.8871
25.4052
29.5000
27.9902
27.5948040026
1.5090
0.9105
25.4072
27.7931
29.5299
27.6091040027
1.4827
0.8619
21.1412
21.4252
23.8220
22.1274040029
1.4947
0.8960
24.0704
24.8409
25.1479
24.6992040036
1.6105
0.8960
26.3226
27.6234
29.7150
27.9675040039
1.2755
0.8153
19.5998
21.2712
21.4819
20.7976040041
1.1732
0.8725
22.1531
23.7787
26.4964
24.1438040042
1.3805
0.9313
19.9627
21.1716
19.8709
20.3344040045
1.0416
*
17.2281
*
*
17.2281040047
1.1288
0.7633
21.9163
22.4249
23.0358
22.4531040050
1.2290
0.7516
16.3930
17.6906
18.5119
17.5660040051
0.9632
0.7516
19.1400
21.3342
22.0394
20.8386040053
***
*
20.7823
*
*
20.7823040054
***
*
18.2685
18.0509
19.5353
18.6008040055
1.5244
0.8052
23.3156
23.0448
24.9164
23.7097040062
1.6625
0.8052
23.3082
23.8994
25.2303
24.1355( print page 47439)040067
1.1373
0.7523
16.8800
19.0471
18.9872
18.2681040069
1.0183
0.8963
24.4662
24.8060
24.9996
24.7603040071
1.4578
0.8725
24.3824
25.4680
25.2840
25.0575040072
1.1153
0.7516
19.9009
22.4741
22.1058
21.4220040074
1.1975
0.8960
25.2423
25.2699
26.2661
25.5884040075
***
*
18.3253
*
*
18.3253040076
1.0000
0.8725
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*
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*
18.2182
*
*
18.2182040109
1.1066
*
22.8801
*
*
22.8801040114
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0.8960
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***
*
14.0700
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***
*
28.1393
*
22.0054
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***
*
*
37.1976
*
37.1976040144
***
*
*
21.4008
*
21.4008040145
1.7860
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*
*
24.4367
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***
*
*
*
33.7876
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*
*
*
*050002
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*
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***
*
32.2172
*
*
32.2172050063
1.3845
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34.0906
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34.5048( print page 47440)050065
***
*
34.0280
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***
*
25.7385
*
*
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***
*
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***
*
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*
*
*
*050148
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*
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***
*
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37.3823( print page 47441)050169
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***
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*
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***
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***
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***
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***
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***
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***
*
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***
*
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*
27.5819050253
***
*
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*
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***
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***
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***
*
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32.9747( print page 47442)050300
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***
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*
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*
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0.9463
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37.5531050379
***
*
32.9576
*
*
32.9576050380
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35.9492050390
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***
*
18.1005
17.2141
*
17.6460050393
1.4101
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***
*
21.3814
*
*
21.3814050411
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*
33.3124
*
*
33.3124050420
***
*
24.9401
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***
*
30.8030
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29.0773( print page 47443)050456
1.2382
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1.0345
*
28.9080
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*
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***
*
34.6995
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***
*
32.1379
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*
33.1420050492
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***
*
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***
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29.8242
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***
*
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***
*
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***
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***
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22.7121
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***
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***
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42.8108
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***
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35.6548
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***
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34.2580
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*
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*
34.8536
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*
*
*
*060116
1.4020
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*
*
*
*060117
1.5297
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*
*
*
*060118
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*
*
*070001
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35.6798( print page 47446)070002
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*
*
*
*080001
1.6247
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32.0105
33.5310
31.8696080002
***
*
27.7932
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*
16.5974
*
*
16.5974100006
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***
*
23.9414
27.1257
*
25.5458100022
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***
*
16.1223
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*
17.4007100028
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*
*
*
*100080
1.7114
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*
*
*
*
*100275
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30.5720
30.1327100277
1.4051
1.0008
16.5427
20.4791
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20.4492100279
1.3366
0.9485
26.8606
28.6383
29.2257
28.2861100281
1.3703
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28.6660
29.6698
30.9131
29.8017100284
1.0113
1.0008
23.8170
22.3134
25.2637
23.6827100285
1.2689
1.0247
*
*
41.9481
41.9481100286
1.6191
0.9618
29.4284
28.3645
25.8085
27.6610100287
1.3868
1.0247
28.3427
28.1051
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28.7018100288
1.5156
1.0247
33.8141
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31.0802100289
1.6865
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30.3063100290
1.1899
0.9315
23.5080
27.1011
28.7111
26.4179100291
1.2458
0.9380
*
28.4722
28.1515
28.2974100292
1.3544
0.8733
*
26.7063
27.7644
27.2418100293
***
*
*
32.7963
*
32.7963100294
***
*
*
30.7557
*
30.7557100295
***
*
*
26.1983
*
26.1983100296
1.3408
1.0008
*
*
29.3870
29.3870100297
***
*
*
*
32.1536
32.1536100298
0.8217
0.9027
*
*
19.0297
19.0297100299
1.2623
0.9770
*
*
34.3697
34.3697100300
1.5491
0.9770
*
*
*
*100301
2.4311
0.8733
*
*
*
*100302
1.1232
0.9284
*
*
*
*110001
1.3413
0.8582
25.3102
26.4338
26.5640
26.1063110002
1.3627
0.9812
25.3897
26.4715
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22.8999
28.1209
27.2826
26.2185110006
1.5283
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28.6090
28.3839
*
28.4953110007
1.5851
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26.6396
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27.1711
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1.0604
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24.4275
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25.7235110046
1.1564
0.9812
23.8292
26.7464
*
25.2689110050
1.0878
0.8582
26.1319
27.5985
27.0651
26.9506( print page 47450)110051
1.1325
0.7861
19.4276
20.1756
21.4898
20.4314110054
1.3879
0.9812
25.7085
28.9254
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2.0203
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29.5779
29.9625
30.5196
30.0318110079
1.4371
0.9812
23.1024
26.8412
27.3274
25.6718110080
***
*
22.3213
18.4714
*
20.3904110082
1.9484
0.9812
29.8366
30.8320
30.1072
30.2642110083
1.9004
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20.2502
21.2642
20.2556110135
1.2746
0.7861
20.4412
22.5346
24.0945
22.4857110136
***
*
15.8573
18.8212
*
17.2827110142
0.9496
0.8046
18.1980
21.3935
21.6286
20.4908110143
1.4032
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28.6583
29.9139
28.7963110146
1.0451
0.9089
23.9067
27.0987
29.0193
26.6351110149
***
*
27.1477
28.4040
*
27.8380110150
1.3058
0.9812
22.6624
25.3742
26.9884
24.9555110153
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28.8946
30.0145
28.6658110165
1.3804
0.9812
26.8378
27.0977
28.7902
27.5702110166
***
*
26.8070
*
*
26.8070110168
1.8202
0.9812
27.0022
28.5700
29.7774
28.4702110172
1.3257
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29.1703
31.1234
31.3999
30.6003110177
1.7868
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26.7504
28.8356
29.7079
28.4491110179
***
*
26.0759
*
*
26.0759110183
1.2715
0.9812
29.6132
28.6208
28.3505
28.8254110184
1.2398
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1.3990
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26.7852
28.8267
30.0843
28.6181110193
***
*
27.3341
27.9161
*
27.6234110194
0.9359
0.7861
18.4776
19.1920
21.0826
19.6210110198
1.3957
0.9812
31.7748
31.0557
32.8171
31.8629( print page 47451)110200
1.9226
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22.3249
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24.7904110201
1.4598
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28.2232
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1.2000
0.8204
40.5120
*
*
40.5120110214
***
*
*
37.1450
*
37.1450110215
1.2911
0.9812
25.7886
27.5566
29.5238
27.7250110219
1.4241
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27.0362
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32.2603
29.4317110220
***
*
*
37.5741
*
37.5741110221
***
*
*
28.0500
*
28.0500110222
***
*
*
35.6189
*
35.6189110223
***
*
*
*
25.3071
25.3071110224
***
*
*
*
33.6464
33.6464110225
1.1627
0.9812
*
*
29.5373
29.5373110226
1.1705
0.9812
*
*
*
*110228
0.6858
0.9812
*
*
*
*120001
1.7954
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34.1385
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39.1941
36.8951120014
1.2810
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28.6416
30.3463
30.9839
30.0257120016
***
*
19.6039
*
*
19.6039120019
1.1328
1.0740
30.3809
30.4257
33.0114
31.2831120022
1.9275
1.1305
26.6100
29.9527
32.5326
29.5914120025
***
*
30.2367
*
*
30.2367120026
1.4060
1.1305
30.3293
32.4566
34.2244
32.4725120027
1.3547
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29.0488120028
1.3018
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34.0451
32.3420120029
***
*
*
*
44.6382
44.6382130002
1.4431
0.8706
23.6078
24.7871
24.7266
24.4032130003
1.3970
0.9614
27.6345
28.6158
28.6136
28.2894130005
***
*
25.7523
*
*
25.7523130006
1.7752
0.9496
25.3221
27.2158
28.0048
26.8675130007
1.8212
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1.7059
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27.3783130021
***
*
16.1658
*
*
16.1658130024
1.1822
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23.6212
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1.2426
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27.4962130049
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27.8229130062
***
*
20.6642
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29.1925
24.9270130063
1.3933
0.9496
22.5904
26.0955
27.7607
25.3662130065
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0.9272
*
21.9792
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0.9674
*
*
28.9883
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0.5728
0.9272
*
*
21.3867
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0.9674
*
*
*
*140001
1.1034
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22.2003
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1.5341
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35.1024
31.8806
40.1360
35.1264140B10 3

1.0471
35.1024
31.8806
40.1360
35.1264140011
1.1265
0.8345
22.4091
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1.0141
*
18.1242
*
*
18.1242140018
1.4713
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30.7398
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0.9076
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18.9228
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22.3179
20.8686140024
***
*
17.5249
*
*
17.5249( print page 47452)140026
1.1369
0.8660
23.0470
25.9669
26.0493
25.0156140029
1.5629
1.0588
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1.2831
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28.0422140045
***
*
20.6548
*
*
20.6548140046
1.5047
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23.2127
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21.6230
22.2390140061
***
*
20.8063
*
*
20.8063140062
1.3499
1.0588
34.7704
34.1230
36.8271
35.2283140063
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30.5036
30.7251
30.1522140088
1.9227
1.0588
32.4978
30.5450
32.6866
31.9069140089
1.2571
0.8345
23.3401
24.1066
24.9120
24.1080140091
1.7600
0.9315
26.8518
27.8536
28.2095
27.6630140093
1.2233
0.9244
25.3127
28.3298
28.6709
27.3188140094
1.0741
1.0588
27.9273
27.3841
28.7647
28.0321140095
1.1840
1.0588
27.6799
28.7617
29.7385
28.6923140100
1.4114
1.0471
37.0820
41.3374
37.2961
38.7112140101
1.2087
1.0588
28.5365
29.4081
28.9723
28.9915140103
1.1471
1.0588
23.3258
23.6406
24.0926
23.6947140105
2.4503
1.0588
27.4531
29.5274
29.6590
28.8385140109
1.2813
*
19.5675
*
*
19.5675140110
1.1010
1.0471
27.9844
28.6364
30.3432
29.0082140113
1.6263
0.9315
26.7969
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30.2542
28.8718140114
1.4998
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1.1211
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25.1498
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1.2804
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31.9902
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33.6671140117
1.5489
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1.5337
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29.7570
32.5518
33.1987
31.8004140119
1.8437
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36.1419
34.2118
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34.0199140120
1.2654
0.9385
22.7375
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24.2583140122
1.4644
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29.7419140124
1.2540
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36.1327
35.7563
38.2191
36.7032140125
1.1728
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20.4014
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1.5916
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1.2387
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31.6158140133
1.2958
1.0588
28.0339
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29.7606140135
1.4316
0.8345
22.3264
23.3196
24.6645
23.4680140137
1.0331
0.8982
21.4699
23.4174
31.4349
24.5880140141
***
*
21.7872
*
*
21.7872140143
1.1598
1.0471
26.2954
27.4499
26.1126
26.6046140145
1.0894
0.8982
23.4608
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25.2040
24.9380140147
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19.8541
21.0686
21.1817
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1.7334
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1.7108
1.0588
35.2711
52.0970
35.5951
40.9580140151
0.8038
1.0588
23.4879
27.0312
26.0825
25.5372( print page 47453)140152
1.1775
1.0588
27.6086
30.2209
29.8647
29.2051140155
1.3616
1.0471
28.9724
29.5734
32.7960
30.4671140158
1.3843
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30.4445
28.3050140160
1.2234
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24.5373
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26.0399140161
1.0989
1.0471
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28.8266
25.7893140162
1.5902
0.9483
27.4471
29.4121
32.1810
29.6162140164
1.8223
0.8982
23.7457
24.6009
25.9726
24.8076140165
***
*
16.6304
*
*
16.6304140166
1.1619
0.8345
23.1005
26.4800
26.2875
25.2809140167
1.1608
0.8345
22.8911
22.8703
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23.5836140172
1.3652
1.0588
29.8568
32.1220
33.0926
31.7168140174
1.5704
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29.9167140176
1.2291
1.0588
31.3490
32.9794
32.6145
32.3408140177
0.9037
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22.5610
26.4340
25.5725
24.9321140179
1.2694
1.0588
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30.2944
29.1090140180
1.1722
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28.3629
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29.1352
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1.1314
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25.0101
25.0226
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25.9072140182
1.5031
1.0588
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1.2951
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21.1802
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1.4648
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23.8531
25.2423
26.5398
25.2116140186
1.5398
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30.6951
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30.4067140187
1.5456
0.8982
23.2892
24.8332
25.5873
24.5668140189
1.1669
0.8345
23.7198
22.5965
24.7013
23.6837140190
***
*
19.8296
*
*
19.8296140191
1.3318
1.0588
25.8678
28.5836
31.9943
28.7069140197
1.2406
1.0588
23.0684
24.0463
24.9103
23.9565140199
1.0545
*
22.0315
*
*
22.0315140200
1.4401
1.0588
26.3379
28.8435
30.6641
28.5880140202
1.5516
1.0471
29.7870
32.7915
32.9433
31.9581140206
1.2638
1.0588
30.6561
29.7953
29.6275
30.0202140207
1.2121
1.0588
24.1048
26.0535
28.2262
26.0084140208
1.6599
1.0588
29.4708
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31.4035
30.1416140209
1.5570
0.9385
24.5376
26.3230
29.7965
26.7808140210
1.0667
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19.2640
20.6954
19.2053
19.6895140211
1.3090
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29.7054
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31.4539
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31.6926
32.1031
31.3688140217
1.5498
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32.2271140223
1.4787
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31.9322140224
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29.6181
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29.6765140228
1.5681
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28.2855
27.2863140231
1.4308
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30.6410
30.0236
34.8291
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29.9830140234
1.0454
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1.5950
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31.0918
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1.4146
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32.7986
30.9712140242
1.5032
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32.0522
34.6120
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33.9225140250
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29.8441140251
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27.8740140252
1.4020
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33.3351
34.4268
35.8762
34.5480140258
1.5174
1.0588
30.2639
34.2333
33.0093
32.5353140275
1.3123
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26.1473
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27.4339140276
1.8647
1.0588
29.8325
31.6359
32.1048
31.2217140280
1.4651
0.8893
23.4447
24.9401
26.6536
24.9140140281
1.7584
1.0588
30.4838
33.3903
35.6589
33.1771140285
***
*
20.7576
*
*
20.7576140286
1.1539
1.0588
29.1543
30.3237
32.0048
30.4851140288
1.5228
1.0588
29.3988
31.5197
31.5944
30.8910140289
1.3067
0.8982
22.6211
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1.3576
1.0588
31.7341
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32.0531140291
1.6115
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29.8958
31.9052
33.8706
31.9796140292
1.1022
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27.6285
28.5094
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28.8381140294
1.1266
0.8345
23.4503
24.0750
26.1595
24.6196140300
1.1884
1.0588
34.8568
35.1494
42.5240
37.4107140301
1.1568
1.0588
31.7073
49.9507
39.4295
38.1755140303
2.2073
1.0588
*
29.6470
*
29.6470150001
1.1331
0.9717
29.6844
28.9075
31.8089
30.1191150002
1.4417
1.0471
25.0063
26.6222
27.6481
26.6696( print page 47454)150003
1.7490
0.8676
25.3458
26.7585
26.9771
26.3734150004
1.4753
1.0471
26.8458
28.7336
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1.2795
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1.3979
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1.3720
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1.3865
1.0471
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27.5703
27.0525
27.1187150009
1.4332
0.9029
22.2147
25.4496
25.7616
24.5212150010
1.4963
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27.2272
28.4118
27.4601150011
1.2451
0.9589
24.3490
25.3178
26.7686
25.4614150012
1.5620
0.9643
27.3029
30.0348
31.2282
29.5432150013
***
*
21.8465
*
*
21.8465150015
1.3250
0.8899
26.2434
28.0931
27.3811
27.2243150017
1.8561
0.9041
25.2342
26.3973
26.3379
26.0051150018
1.7221
0.9540
26.3289
27.3689
29.1137
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1.8096
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29.6967
28.9196
30.0030
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1.0788
0.8726
22.6773
23.1041
23.8971
23.1999150023
1.5637
0.9589
23.7159
26.9095
27.7520
25.8891150024
1.4818
0.9717
27.1589
28.1655
28.4170
27.8897150026
1.3161
0.9540
28.1127
28.6517
30.4967
29.1723150027
1.0482
*
17.4862
*
*
17.4862150029
1.4657
0.9643
26.9680
28.7187
29.9307
28.4271150030
1.1967
0.9589
26.9534
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29.3588
28.5143150033
1.5576
0.9717
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1.4561
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1.5977
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29.3156
33.0112
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1.3921
0.8823
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25.2137
25.2685
24.7693150045
1.0745
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25.2225
26.9818
27.5340
26.5867150046
1.4882
0.8823
21.9369
24.5593
26.5876
24.4158150047
1.7159
0.9041
25.8348
25.5194
25.8497
25.7351150048
1.3899
0.9661
27.1817
27.1233
28.1525
27.5023150049
1.3604
*
22.3370
*
*
22.3370150051
1.6346
0.9589
23.7061
26.5655
28.9157
26.4848150052
1.0751
*
20.6339
*
*
20.6339150056
1.9446
0.9717
28.2842
28.8727
29.3500
28.8453150057
2.0988
0.9717
24.8605
28.9529
30.3287
27.8807150058
1.5711
0.9643
27.5341
29.1444
29.1255
28.6425150059
1.5551
0.9717
28.5715
31.4987
31.3362
30.4971150060
***
*
24.8544
*
*
24.8544150061
1.1275
0.8568
22.2822
21.3711
22.6746
22.1018150062
1.1339
*
24.6088
*
*
24.6088150064
1.2000
0.8568
23.7707
25.4987
28.7978
26.0980150065
1.2625
0.9589
25.9461
27.9283
30.2053
27.9985150069
1.1757
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25.8564150072
1.1657
0.8673
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21.2120
21.7644
21.1633150074
1.4427
0.9717
25.2586
25.9321
28.5655
26.5901150075
1.0975
0.9041
24.0745
25.1568
25.7245
24.9787150076
1.2881
0.9503
28.1874
29.3249
30.1120
29.2167150079
1.1099
*
21.4067
*
*
21.4067150082
1.6825
0.8568
25.5860
28.3494
26.4544
26.8048150084
1.8395
0.9717
29.3905
31.1720
33.1784
31.1870150086
1.1722
0.9661
23.9404
25.1992
26.6745
25.3042150088
1.2748
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26.6306150089
1.6023
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30.4835
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29.1401150091
1.1638
0.9041
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32.1627
31.1005150097
1.1290
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25.0367
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1.0330
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25.8742
25.4603150104
1.0856
0.9717
25.5872
28.2552
28.7788
27.5177150106
1.0158
*
20.9387
*
*
20.9387150109
1.4641
0.8676
23.5865
25.3367
26.8464
25.2376150112
1.4978
0.9589
26.5643
28.0068
29.8540
28.1787150113
1.2888
0.9589
24.8760
24.7960
25.9814
25.2159( print page 47455)150115
1.4230
0.8568
19.3411
22.0747
22.5793
21.2670150122
1.3185
*
26.0173
*
*
26.0173150124
***
*
21.3933
*
*
21.3933150125
1.5103
1.0471
26.7666
27.6535
29.3596
27.9342150126
1.4164
1.0471
26.9887
28.9454
29.4300
28.4467150128
1.4409
0.9717
26.4976
28.7810
29.5008
28.2807150129
1.1548
0.9717
29.9099
29.7398
31.4317
30.3985150130
1.6136
*
21.7400
*
*
21.7400150132
***
*
25.6257
27.6560
*
26.6249150133
1.2457
0.9041
22.7292
25.1322
24.2538
24.0313150134
1.0198
0.9029
23.8525
26.3249
21.6740
23.7590150136
***
*
26.2704
*
*
26.2704150146
1.1370
0.9041
29.3383
29.5256
30.3343
29.7676150147
1.5120
1.0471
22.8456
27.2339
26.1646
25.6998150149
1.0014
0.8568
23.6360
23.7026
24.9629
24.1402150150
1.3167
0.9041
25.5331
27.0542
26.7700
26.4920150151
***
*
38.1445
*
*
38.1445150152
***
*
44.7145
*
*
44.7145150153
2.4172
0.9717
*
32.1022
35.0617
33.7428150154
2.5712
0.9717
*
29.8514
29.8894
29.8711150155
***
*
*
45.0121
*
45.0121150156
***
*
*
25.9681
*
25.9681150157
1.6761
0.9717
*
*
32.3106
32.3106150158
1.2402
0.9717
*
*
*
*150160
2.0073
0.9717
*
*
*
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1.4755
0.9717
*
*
*
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1.7836
0.9717
*
*
*
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1.1054
0.9029
*
*
*
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1.2039
0.9222
25.1220
24.5108
25.7255
25.1337160005
1.2097
0.8476
21.8949
23.1034
24.7755
23.2878160008
1.0516
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20.7200
22.1402
22.4758
21.7846160013
1.2974
0.8655
23.7163
24.0956
24.4099
24.0734160014
***
*
20.5882
*
*
20.5882160016
1.5636
0.9222
23.3619
24.5338
27.1460
24.9575160020
1.1531
*
19.5554
*
*
19.5554160024
1.5654
0.9157
26.2392
27.4158
29.3756
27.6168160026
***
*
24.7424
*
*
24.7424160028
1.3092
0.9473
26.2948
27.8535
30.0576
28.1943160029
1.6382
0.9423
27.9277
28.7324
30.6687
29.0931160030
1.3868
1.0016
26.7068
28.7786
30.9415
28.8521160031
0.7988
*
19.7368
*
*
19.7368160032
1.0669
0.8711
23.4727
25.4662
26.2935
25.1093160033
1.7485
0.8893
24.6768
26.5315
27.2060
26.1337160034
1.0217
*
19.3503
*
*
19.3503160039
0.9129
*
22.1180
*
*
22.1180160040
1.2906
0.8719
23.9053
25.9032
26.8110
25.5671160045
1.6881
0.8684
25.4153
26.6463
27.5289
26.5339160047
1.3936
0.9473
25.2072
26.0227
28.1280
26.4469160048
***
*
19.5831
*
*
19.5831160050
1.0566
*
24.5402
*
*
24.5402160057
1.2590
0.9137
23.0937
25.1272
25.6274
24.6663160058
1.9710
0.9423
27.1646
28.4167
28.9924
28.2025160064
1.6011
0.9113
28.6139
28.7668
28.4209
28.5968160066
0.9354
*
22.7709
*
*
22.7709160067
1.3637
0.8719
23.4060
24.8137
26.0243
24.7721160069
1.5286
0.8875
25.3402
27.4473
27.6157
26.8150160079
1.4774
0.8684
23.7234
24.7372
26.1618
24.8787160080
1.2832
0.8893
23.1837
25.8252
27.2370
25.4033160081
***
*
23.1930
*
*
23.1930160082
1.7698
0.9157
26.4398
27.4718
28.7831
27.5581160083
1.6593
0.9157
28.2193
27.3004
28.3921
27.9725160089
1.2887
0.9137
22.6551
23.2149
23.2888
23.0562160091
***
*
17.9862
*
*
17.9862160101
1.0750
0.9157
25.1000
25.0503
25.4740
25.2122160104
1.6546
0.8893
24.9134
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0.8719
24.9434
26.6633
28.8134
26.8749160112
1.2895
0.8476
23.0672
24.7957
25.2886
24.4326( print page 47456)160117
1.3823
0.8875
25.0278
25.4659
27.3927
25.9740160118
***
*
19.7764
*
*
19.7764160122
1.0947
0.8476
22.5872
23.9177
24.4996
23.6844160124
1.1525
0.8476
23.1690
22.5482
24.3063
23.3383160126
1.0265
*
19.8323
*
*
19.8323160146
1.3905
0.9083
22.9897
22.6949
24.8485
23.4694160147
1.2941
0.9222
26.6438
28.6303
29.8992
28.4676160153
1.7364
0.9083
28.9881
29.9378
30.6173
29.8520160154
1.1302
*
*
*
*
*160155
1.7147
0.8893
*
*
*
*170001
1.1457
0.7979
21.9131
23.1260
23.8863
22.9705170006
1.3231
0.8966
21.9019
24.2068
27.1033
24.4549170009
1.0518
0.9318
29.2588
30.9025
29.6386
29.9250170010
1.2444
0.7979
24.0008
23.9707
25.5573
24.5518170012
1.6127
0.8717
24.7392
26.1367
27.1195
25.9606170013
1.6234
0.8717
25.0419
25.2476
26.7124
25.6577170014
1.0200
0.9318
23.5960
23.8135
24.2322
23.8856170015
***
*
20.2368
*
*
20.2368170016
1.6402
0.8556
25.9482
25.8061
26.7536
26.1671170017
1.0743
0.8938
24.7771
26.9657
27.2925
26.3737170019
1.1990
*
22.0251
*
*
22.0251170020
1.5974
0.8717
23.1800
23.2757
24.1149
23.5243170022
1.1485
*
22.2878
*
*
22.2878170023
1.4198
0.8717
23.9808
24.0561
23.9812
24.0054170027
1.3961
0.7979
22.5103
23.1766
23.4037
23.0169170033
1.3489
0.8717
20.7864
21.9709
24.1882
22.2852170039
0.9451
0.8938
21.5203
26.9852
26.0952
24.6299170040
1.9800
0.9318
28.2856
28.4458
30.2468
29.0256170049
1.5227
0.9318
24.7895
25.2070
26.4086
25.4876170052
***
*
18.5291
*
*
18.5291170058
1.0973
0.9318
23.3398
22.9210
26.5949
24.2599170068
1.2243
0.9151
22.6087
23.0635
23.8812
23.1883170070
***
*
16.0162
*
*
16.0162170074
1.2229
0.7979
21.0565
23.7829
23.0567
22.6765170075
0.8299
0.7979
16.5444
19.7760
19.9351
18.7474170085
0.6104
*
*
*
*
*170086
1.5806
0.8556
24.0812
26.1362
26.3615
25.5525170093
***
*
16.5553
*
*
16.5553170094
0.9369
0.7979
21.3887
21.5295
16.5136
19.6903170098
***
*
20.1242
*
*
20.1242170103
1.2869
0.8938
22.8707
23.8042
24.2003
23.6452170104
1.4622
0.9318
26.9671
26.2990
27.6211
26.9584170105
1.0944
0.7979
21.4422
21.9606
22.7412
22.0343170109
1.0365
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23.2626
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23.8515
23.4041170110
0.8838
0.7979
22.9195
23.3260
23.9572
23.4236170114
0.9064
*
18.9158
*
*
18.9158170120
1.3860
0.8966
21.0499
22.0253
22.2805
21.7560170122
1.6825
0.8938
25.3982
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28.7175
26.8262170123
1.6951
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27.2239
27.6653
27.0843
27.3131170133
1.0455
0.9318
22.9309
23.1226
25.2301
23.8079170137
1.2778
0.7979
23.8862
24.7096
25.3395
24.6697170142
1.4000
0.8452
22.5778
23.9527
24.6019
23.7457170143
***
*
20.4459
*
*
20.4459170144
***
*
24.6259
*
*
24.6259170145
1.0844
0.7979
21.5756
23.2162
23.3967
22.7065170146
1.5046
0.9318
29.1358
29.8858
29.0720
29.3567170147
***
*
21.4753
22.4973
24.3268
22.5630170150
1.1567
0.8145
18.5744
20.9448
19.6160
19.7250170166
0.9972
0.7979
19.2842
21.0762
22.6968
21.0440170175
1.4183
0.8717
23.9304
25.6281
26.7229
25.4235170176
1.5941
0.9318
26.2366
27.2332
29.0735
27.5811170180
***
*
25.1368
32.5010
*
27.5335170182
1.4404
0.9318
25.7443
27.3503
28.9710
27.3812170183
1.9426
0.8938
24.5539
25.8340
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31.7896
32.8392
30.2613
31.6196170187
1.4872
0.7979
23.3702
22.8493
24.1461
23.4565( print page 47457)170188
1.9667
0.9318
29.9751
30.6844
32.2573
31.0137170190
1.0160
0.8452
22.8729
22.9540
26.2625
24.0473170191
1.7207
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22.1197
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22.6600170192
1.9119
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27.3099170193
1.4210
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23.2189170194
1.0835
0.9318
27.9903
29.9014
27.6989
28.5239170195
2.2763
0.9318
*
30.1001
29.5947
29.8108170196
2.3666
0.8938
*
*
32.1832
32.1832180001
1.2557
0.9661
25.4217
27.6917
29.7423
27.6443180002
1.0602
0.8073
22.9727
25.7862
26.5488
25.1142180004
1.0972
0.7810
19.5437
22.0797
20.8805
20.8284180005
1.1194
0.8724
24.5561
24.9779
25.6159
25.0807180006
***
*
14.8011
*
*
14.8011180007
1.5249
0.9002
22.7606
25.7042
27.1924
25.2359180009
1.7050
0.8878
25.3837
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26.4316180010
1.8883
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0.9698
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1.1161
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31.1159
26.3532
29.7120180025
1.1421
0.9029
19.1543
22.6897
28.5935
23.5037180026
1.0693
*
18.2120
*
*
18.2120180027
1.2468
0.8095
23.8763
20.8303
21.7639
22.0496180028
0.9153
*
24.7967
*
*
24.7967180029
1.3898
0.8797
23.0536
25.6479
26.1528
24.9999180035
1.6203
0.9661
29.8438
31.0794
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31.2815180036
1.2418
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25.3664180037
1.3241
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1.1554
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1.3291
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27.4732
29.4127
27.6339180046
0.9468
0.9002
27.2244
27.1034
27.0962
27.1405180047
***
*
21.8036
*
*
21.8036180048
1.2971
0.9029
21.6571
23.9230
24.3696
23.3120180049
1.4467
0.8797
23.3407
22.4769
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23.3961180050
1.1550
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24.3916
23.1293180053
0.9914
0.7810
19.1578
21.3044
22.1921
20.9808180055
1.1922
*
20.7237
*
*
20.7237180056
1.1773
0.8465
22.8910
24.3074
24.5326
23.9077180063
1.1034
*
17.9741
*
*
17.9741180064
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17.8239180066
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24.9441
25.6157
25.9689
25.5126180105
0.8863
0.7810
19.7615
21.6002
23.1917
21.5276( print page 47458)180106
0.8981
0.7810
17.8020
20.2884
20.7220
19.6713180115
0.9198
0.7810
20.9831
20.5539
20.3089
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1.2129
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1.3102
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1.3502
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29.1712
27.7427180132
1.4705
0.8797
23.7652
24.5105
25.3789
24.5776180134
0.9988
*
18.6779
*
*
18.6779180138
1.2338
0.9029
27.3400
28.1901
28.6871
28.0932180139
0.9711
0.7810
23.5363
23.3569
24.7575
23.8896180141
1.8039
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25.3042
25.3357
27.5912
26.1155180143
1.6427
0.9002
25.1613
28.1924
30.8734
28.2381180144
***
*
*
29.5052
*
29.5052180147
***
*
*
*
31.1615
31.1615180148
***
*
*
*
30.1250
30.1250180149
0.9785
0.7810
*
*
*
*190001
1.1366
0.7586
19.7516
22.1394
22.1569
21.3062190002
1.6414
0.8322
22.0056
23.3368
24.6984
23.3292190003
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25.8294
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24.0111
24.6074
26.3638
24.9678190009
1.2890
0.7977
19.8404
21.1005
24.0696
21.5285190010
***
*
21.6889
*
*
21.6889190011
0.9912
0.7869
19.7319
21.4052
21.6991
20.9430190013
1.4546
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28.6297
28.0169
27.7947190041
1.4801
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24.6734
28.5376
28.0050
27.0392190043
***
*
17.3477
*
*
17.3477190044
1.3206
0.7846
19.5567
20.9993
21.2604
20.6016190045
1.6104
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27.1996
26.1757190046
1.4983
0.8711
24.2128
23.8552
24.7370
24.2698190048
1.0173
*
19.6288
*
*
19.6288190050
1.0996
0.7630
19.1076
21.0259
20.9142
20.3649190053
1.1445
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23.7298
23.4086190065
1.6036
0.8009
23.7450
22.1880
23.1202
23.0047190077
0.9332
*
18.8409
*
*
18.8409190078
1.0556
0.7773
21.3786
22.2431
22.2346
21.9592190079
1.2228
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23.8562
23.1638
23.1096190090
1.0644
0.7586
20.2045
23.1241
24.3303
22.5642190095
***
*
18.0174
*
*
18.0174190098
1.7671
0.8551
24.6353
25.6854
25.7449
25.3598190099
1.0514
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27.3126
26.9700
26.4749190106
1.1179
0.7977
21.7228
23.5376
26.6227
23.8316( print page 47459)190109
1.2697
*
18.6524
*
*
18.6524190111
1.6595
0.8551
24.4998
25.5729
26.5722
25.5481190114
1.0528
0.7586
15.8031
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22.8809
21.2580
21.3081190122
1.3165
0.8009
23.7082
22.0072
22.2371
22.6302190124
***
*
24.6675
26.0032
27.9484
26.2122190125
1.5999
0.7869
23.9649
25.5463
24.8256
24.7616190128
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28.6616190131
1.2853
0.8009
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27.8465
28.6795
27.2765190133
0.8990
0.7687
13.6266
18.2045
22.4311
19.4522190135
***
*
26.8238
27.7540
30.5646
28.1639190140
0.9706
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17.6936
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23.0485
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1.5689
0.8711
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28.7200
27.4158190149
1.0427
*
18.8819
*
*
18.8819190151
0.9473
0.7586
18.6293
18.7467
18.8391
18.7428190152
1.5619
0.8711
27.6099
28.1334
30.8512
28.8848190158
***
*
26.3042
26.4787
30.6450
27.6757190160
1.6083
0.7869
21.6740
22.9325
24.7822
22.9872190161
1.2550
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19.1022
22.6187
22.9035
21.4144190162
***
*
25.0328
25.2953
*
25.1543190164
1.1717
0.8198
22.8599
25.2560
26.6207
24.9939190167
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26.2596
25.9476190177
1.7190
0.8711
27.4621
27.7792
28.2751
27.8348190182
***
*
28.4799
27.1682
29.8656
28.5188190183
1.1703
0.7975
19.8084
22.6928
22.0119
21.4403190184
1.0091
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23.9608
24.9476
24.1626
24.3753190185
***
*
24.7912
25.6394
28.9759
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0.9347
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16.1195
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26.7043
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25.5498190199
1.0219
0.8009
14.1409
27.3304
32.0194
23.0028190200
***
*
27.5681
28.8173
27.4781
27.9971190201
1.2441
0.7783
24.5877
25.1010
24.4563
24.7120190202
1.3990
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27.6084
29.6612
27.4877190203
***
*
26.8795
28.1832
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1.5165
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27.1786
25.5751
26.7642
26.5210190246
1.6612
0.7747
*
*
22.7833
22.7833190247
***
*
*
32.7499
*
32.7499190248
***
*
*
23.2220
*
23.2220190249
1.8972
0.8009
*
20.0468
25.2523
22.1292190250
2.1185
0.8711
*
31.5101
33.3302
32.3430190251
1.2888
0.8009
*
21.4464
23.8389
22.5823190252
***
*
*
23.6924
*
23.6924190253
***
*
*
22.8060
23.8037
23.3049190254
***
*
*
32.9290
*
32.9290190255
0.7428
0.8322
*
22.2412
16.1593
18.2998190256
0.8040
0.8711
*
*
25.9577
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1.6107
0.7647
*
*
26.5505
26.5505190258
1.0203
0.8551
*
31.3715
26.1141
28.3735190259
1.8072
0.8322
*
*
26.5084
26.5084190260
***
*
*
*
29.3947
29.3947190261
1.6813
0.7869
*
*
27.0441
27.0441( print page 47460)190262
***
*
*
*
30.3719
30.3719190263
2.4748
0.8322
*
*
26.4202
26.4202190264
***
*
*
*
26.5842
26.5842190265
0.7095
0.7869
*
*
22.6231
22.6231190266
1.9424
0.8009
*
*
*
*190267
1.2028
0.8711
*
*
*
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1.3593
0.8322
*
*
*
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1.7939
0.8711
*
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*
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1.5530
0.8322
*
*
*
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1.6476
0.8009
*
*
*
*200001
1.3864
0.9881
25.1144
25.2542
26.3045
25.5700200002
1.0776
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25.7478
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1.9781
0.9991
31.1056
30.7510
32.5812
31.4774200012
1.3475
*
25.7623
*
*
25.7623200013
***
*
24.4131
*
*
24.4131200018
1.2583
0.8408
23.6337
23.5632
22.5027
23.1555200019
1.2478
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28.5750
27.0015200027
***
*
26.3118
*
*
26.3118200028
***
*
24.3271
*
*
24.3271200031
1.2583
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21.9489
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28.0855210010
***
*
25.7775
*
*
25.7775210011
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30.5517( print page 47461)210039
1.1414
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*
22.0549
*
*
22.0549220006
***
*
30.8599
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26.1069220028
***
*
32.0980
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1.1319
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30.1564220B74 4

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30.1564220075
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30.9175
32.2957
30.7771220076
***
*
29.7507
27.5148
*
28.6235220077
1.6762
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32.0323220080
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***
*
31.1708
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1.1951
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30.3885( print page 47462)220100
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***
*
33.6003
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32.6345220135
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33.9866
36.0203
37.5189
35.8946220153
***
*
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27.3833230042
***
*
26.2037
*
*
26.2037230046
1.9067
1.0498
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31.6235
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27.0288
26.9333230065
***
*
28.4631
32.6255
*
29.9929230066
1.3080
0.9968
27.4928
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*
22.2165
*
*
22.2165230085
1.1931
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25.4289
23.9146230087
***
*
16.9168
*
*
16.9168230089
1.3368
1.0143
28.7015
31.0522
32.8450
30.6488( print page 47463)230092
1.3633
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1.2029
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24.3772
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28.4372
26.1557230103
***
*
21.6609
*
*
21.6609230104
1.5968
1.0143
30.5570
32.4634
32.4125
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1.1884
*
24.1485
*
*
24.1485230121
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29.7417
28.1870230143
***
*
21.4083
*
*
21.4083230144
2.3494
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*
*
*
*230146
1.3924
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26.3432
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29.8366
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***
*
22.8644
*
*
22.8644230156
1.6271
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31.1909
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29.4630230169
***
*
31.8442
*
*
31.8442230172
1.1867
*
25.7402
*
*
25.7402230174
1.2752
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***
*
23.6706
34.6295
*
25.2502230186
***
*
26.2282
*
*
26.2282230189
***
*
23.0100
*
*
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*
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*
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31.1383( print page 47464)230275
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26.6926230283
***
*
26.2622
33.5531
*
27.8105230289
***
*
29.7721
*
*
29.7721230291
***
*
30.9656
*
*
30.9656230292
***
*
31.8943
*
*
31.8943230294
***
*
*
31.6195
*
31.6195230295
***
*
*
27.1298
*
27.1298230296
***
*
*
*
34.2107
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1.6768
1.0095
*
*
*
*230299
0.7569
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*
*
*
*230300
2.9905
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*
*
*
*240001
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***
*
28.3860
*
*
28.3860240014
1.0234
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*
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*
*
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*
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*
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*
25.3568
*
*
25.3568240030
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***
*
26.7778
*
*
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*
26.6582
*
*
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***
*
22.7077
*
*
22.7077240104
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*
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*
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***
*
21.7500
*
*
21.7500240128
***
*
21.5791
23.3334
*
22.4504( print page 47465)240132
1.2808
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*
21.7416
*
*
21.7416240152
***
*
29.6196
*
*
29.6196240162
***
*
22.2722
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*
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***
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20.7220( print page 47466)250100
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25.6566250101
***
*
19.3543
*
*
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18.1195
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*
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17.8999
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*
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***
*
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*
*
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*
18.6486
*
*
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***
*
29.0461
*
*
29.0461250155
***
*
*
22.5728
*
22.5728250156
***
*
*
*
16.8659
16.8659250157
***
*
*
*
29.6398
29.6398250160
2.3735
0.8198
*
*
*
*250161
2.1565
0.7950
*
*
*
*260001
1.6505
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25.9250
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29.5271
27.7489260002
***
*
26.4879
*
*
26.4879260004
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***
*
18.9522
*
*
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***
*
20.3061
*
*
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***
*
20.5007
*
*
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***
*
17.8741
*
*
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***
*
22.1913
*
*
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*
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*
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*
*
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***
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21.6214
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*
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***
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20.8015
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*
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21.8533
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***
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***
*
*
*
34.8953
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*
*
*
*260215
0.8925
*
*
*
*
*260216
1.1892
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*
*
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1.9096
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*270002
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***
*
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*
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***
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*
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***
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*
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***
*
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*
*
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***
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***
*
*
*
22.4859
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***
*
*
37.1662
*
37.1662290045
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*( print page 47469)300001
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***
*
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*
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***
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32.8390
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33.1814310042
***
*
30.7357
34.4986
*
32.5359310044
1.3437
1.1616
31.3205
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34.8319310048
1.3604
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33.9506
32.4220310049
***
*
27.8565
*
*
27.8565310050
1.2632
1.3001
27.3033
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1.4210
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34.6577( print page 47470)310073
1.9384
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38.0643
37.5163
37.3327310077
***
*
32.6644
34.6085
*
33.6290310078
***
*
29.8014
30.5761
*
30.1919310081
1.2435
1.1616
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41.5702
40.9091310120
1.1067
1.1673
31.4111
29.2535
33.3861
31.2922310122
***
*
*
*
41.9029
41.9029310123
***
*
*
*
37.1022
37.1022310124
***
*
*
*
41.8827
41.8827310125
***
*
*
*
36.2186
36.2186310126
1.5770
1.1673
*
*
*
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2.1663
1.1616
*
*
*
*320001
1.6904
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32.7192
25.2889320046
***
*
24.3534
*
*
24.3534320057
0.8729
1.4400
*
*
*
*320058
0.7716
1.4400
*
*
*
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0.8739
1.4400
*
*
*
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0.9509
1.4400
*
*
*
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0.8807
1.4400
*
*
*
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0.8932
1.4400
*
*
*
*320063
1.3138
0.9522
24.4696
25.0031
26.0104
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1.1009
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*
*
*
*320074
1.1777
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27.6877
26.3861( print page 47471)320083
2.5829
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26.8654330001
***
*
33.4718
*
*
33.4718330002
1.4701
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42.1087330016
***
*
28.4391
22.0493
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1.2350
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2.5188
*
21.0464
*
*
21.0464330064
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***
*
31.9873
*
*
31.9873330096
1.2247
0.8416
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1.0476
*
20.3189
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*
20.3189330100
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22.8019( print page 47472)330104
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24.2010
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1.7292
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24.5219
26.4386
28.4446
26.4931330154
1.7046
*
*
*
*
*330157
1.3499
0.9602
25.2312
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27.1432
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1.5286
1.3229
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45.3774
46.4939
43.5632330171
***
*
30.0122
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***
*
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*
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***
*
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*
*
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***
*
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1.2696
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33.3050
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37.0111
35.2121330333
***
*
26.1917
*
*
26.1917330338
***
*
31.3761
37.7497
*
34.6182330339
0.7538
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*
*
*
*
*330357
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*
*
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*330405
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*
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*330406
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*
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*( print page 47474)340001
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*
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*
*
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***
*
23.7243
*
*
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***
*
23.1918
*
*
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1.8409
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***
*
21.0642
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*
*
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1.4288
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*
*
*
*340158
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*
*
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*
24.7471
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*
25.7127340178
***
*
28.7218
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***
*
*
34.1895
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34.1895340182
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*
*
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0.9505
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*
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*350002
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*
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*
*
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*350070
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***
*
23.5793
*
*
23.5793360025
1.4534
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26.7668( print page 47476)360026
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*
21.7248
*
*
21.7248360048
1.7561
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***
*
25.8367
26.2222
*
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24.2444
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*
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***
*
26.6348
*
*
26.6348360095
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***
*
24.1588
*
*
24.1588360107
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***
*
21.0067
*
*
21.0067( print page 47477)360130
1.4726
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22.1610
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*
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*
24.4712
*
*
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***
*
24.7001
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1.8984
*
*
*
*
*360245
0.5514
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*
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***
*
27.3903
*
*
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***
*
*
36.0754
*
36.0754360265
***
*
*
36.6265
*
36.6265360266
2.1283
1.0024
*
*
31.7565
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***
*
*
*
34.0936
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***
*
*
*
34.0526
34.0526360269
1.7379
0.9661
*
*
24.8552
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22.1050( print page 47478)370007
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14.2053
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*
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***
*
25.4733
*
*
25.4733370125
***
*
17.1361
*
*
17.1361370138
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*
*
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*
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1.4658
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1.4400
*
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*
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1.2163
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***
*
14.7193
*
*
14.7193370178
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*
23.5794
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*
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*
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***
*
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23.5190
22.8869
25.7770
24.0068370206
1.5795
0.8754
26.0912
26.0353
27.5752
26.5860370210
2.1527
0.8498
21.2682
23.3786
27.2111
23.9630370211
1.0812
0.8754
26.5345
27.8737
28.6537
27.7381370212
1.7251
0.8754
21.0758
19.1720
20.3495
20.1565370213
***
*
29.3777
*
*
29.3777370214
0.9301
0.7822
*
20.6217
21.0732
20.8619370215
2.4407
0.8754
32.3589
31.5652
32.4087
32.1115370216
2.0115
0.8498
*
27.2429
25.8260
26.4854370217
***
*
*
26.8677
*
26.8677370218
2.3278
0.8498
*
*
30.3445
30.3445370220
1.9660
0.8754
*
*
*
*370222
1.8271
0.8754
*
*
*
*370223
0.8903
0.8754
*
*
*
*370224
1.0183
0.8754
*
*
*
*370225
1.6928
0.8754
*
*
*
*380001
1.3077
1.1226
30.0103
29.5842
32.0770
30.5857380002
1.2470
0.9957
27.1861
30.3385
31.5246
29.7051380004
1.7238
1.1226
30.5172
32.6901
34.5432
32.6120380005
1.4137
1.0297
30.2210
30.9087
33.2849
31.5054380007
2.0505
1.1226
33.9969
33.9601
35.1697
34.3879380008
***
*
25.8356
*
*
25.8356380009
2.0476
1.1226
31.7042
32.4016
34.5635
32.8913380010
***
*
30.2957
34.4208
*
32.1520380014
1.9251
1.0701
29.9648
33.6078
33.1928
32.2201380017
1.8286
1.1226
32.2447
34.2605
35.3734
33.9502380018
1.9115
1.0297
28.0701
30.9923
31.8181
30.3581380020
1.4164
1.1002
28.3563
29.6053
34.6183
30.5329380021
1.4801
1.1226
29.3295
29.2164
32.6142
30.3295380022
1.3408
1.0315
29.2642
30.1742
29.6224
29.6961380023
1.1613
*
26.5439
*
*
26.5439380025
1.2143
1.1226
33.2105
35.5084
36.4910
35.1206380027
1.2897
1.0707
25.5161
26.4982
28.0247
26.6752380029
1.2690
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29.4461
28.4964380033
1.7458
1.1002
30.8767
33.4828
34.0094
32.8334380037
1.3197
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30.5818
32.4033
32.7922
31.9693380038
1.3171
1.1226
34.2303
34.5971
35.1105
34.6431380039
***
*
32.3959
38.0989
*
34.9720380040
1.4156
0.9957
32.0103
31.2286
32.9081
32.0782380047
1.8756
1.0586
29.8627
31.0584
32.8188
31.2891380050
1.4599
1.0146
25.6190
27.1814
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27.5476380051
1.6409
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1.2947
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24.9476
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26.2866380056
1.1310
1.0472
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1.4620
1.1226
30.7041
32.0101
33.8863
32.2260380061
1.6742
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29.8217
32.3699
34.5230
32.2744380071
1.3152
1.1226
30.2304
31.7761
31.0901
31.0382380075
1.3436
1.0297
29.0368
33.8962
31.6884
31.4882380081
0.6765
*
21.8850
26.8149
*
24.3121380082
1.2709
1.1226
32.3002
35.6708
35.7821
34.6175380089
1.3136
1.1226
33.4214
34.6015
35.4850
34.5152380090
1.3036
1.0707
34.4536
33.0990
35.5535
34.3715380091
1.3645
1.1226
33.8950
39.9703
40.5066
38.1384( print page 47480)380100
1.6492
1.1226
*
*
*
*390001
1.5887
0.8357
22.5309
23.6075
24.3251
23.4964390002
1.2797
0.8390
22.4388
24.7867
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1.1981
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23.3672
24.5099
23.1723390004
1.5748
0.9230
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25.1216
26.8581
28.6926
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1.1363
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22.2680
22.8042
22.6297
22.5689390009
1.8142
0.8503
25.5482
26.7462
26.7234
26.3594390010
1.1864
0.8390
23.5390
24.5785
24.8196
24.2873390011
***
*
21.9279
21.4856
20.2291
21.2244390012
1.2256
1.0892
28.5076
30.7542
32.4856
30.5696390013
1.3344
0.9115
24.0044
25.0037
26.2323
25.0976390016
1.2396
0.8697
21.9549
23.2095
24.3488
23.2187390019
1.1020
1.0003
23.4636
24.0538
25.7515
24.3571390022
***
*
29.0710
30.3565
29.6308
29.6956390023
1.2512
1.0892
31.7149
35.4452
34.7787
34.0489390024
1.0192
1.0892
35.3960
33.5186
38.8750
35.7342390025
0.4708
1.0892
17.2977
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20.3878
18.9809390026
1.2143
1.0892
29.5157
31.8512
31.8309
31.0660390027
1.7300
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35.8381
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39.2158
36.9328390028
1.6327
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25.7246
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27.1451
26.6794390030
1.1561
1.0003
22.1581
23.6063
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23.4873390031
1.2251
0.9413
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26.2654
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25.3410390032
1.2846
0.8390
22.7205
23.9466
24.5243
23.7229390035
1.1521
1.0892
26.2647
28.4564
29.5417
28.1290390036
1.4349
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24.6032
21.6358
24.4917
23.5130390037
1.4058
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24.7820
25.4290
25.2296
25.1464390039
1.1400
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20.3787
22.0208
23.2300
21.8622390041
1.2825
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21.5925
22.9814
24.2257
22.9573390042
1.3541
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25.6328
28.3633
28.0996
27.3605390043
1.2010
0.8357
22.2549
23.2378
24.2087
23.2256390044
1.6735
1.0765
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28.7758
29.4057
28.4751390045
1.5824
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23.0712
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24.6495
23.8980390046
1.6539
0.9650
27.2630
29.6574
30.5115
29.1858390048
1.0779
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24.9759
28.5342
28.3152
27.3378390049
1.5927
1.0003
27.1366
29.6121
30.7431
29.2428390050
2.0709
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26.6931
27.2599
27.3481
27.1028390052
1.1795
0.8401
23.3474
24.9510
25.1462
24.4784390054
***
*
22.8087
24.4435
27.4805
24.7389390055
***
*
25.6945
*
*
25.6945390056
1.0637
0.8357
19.5537
23.5077
23.5821
22.1218390057
1.3198
1.0892
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21.8367
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25.3029
26.2568
25.5026390073
1.7402
0.8357
26.3698
25.7822
26.4083
26.2016390074
***
*
22.8545
23.6500
25.4098
23.9494390075
***
*
24.6359
*
*
24.6359390076
1.3948
1.0892
27.9004
31.8500
32.7671
30.8676390079
1.8369
0.8775
23.3053
22.5607
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1.3297
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27.2616
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1.2608
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30.3840
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25.2014
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24.6290
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1.5985
1.0765
27.0763
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28.6055
28.1718( print page 47481)390097
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1.0892
25.6660
26.1741
27.9858
26.5902390100
1.7084
0.9650
27.7208
30.0132
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24.3172390108
1.2286
1.0892
27.2661
27.8171
28.5928
27.9029390109
1.1558
*
19.9156
*
*
19.9156390110
1.6017
0.8390
23.9808
27.7311
25.3407
25.6183390111
2.1688
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1.1678
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20.5614
21.8917
21.3378390119
1.3034
0.8357
22.2746
23.0928
24.3245
23.2322390121
***
*
23.1408
25.4826
*
24.2748390122
1.0755
0.8407
22.5786
23.1866
23.3220
23.0325390123
1.1927
1.0892
28.6269
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34.0062
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1.2633
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22.4033
22.8816
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29.6396
31.1168
29.5034390133
1.7272
1.0765
28.7162
31.1083
32.9812
31.0147390135
***
*
24.4738
*
*
24.4738390136
***
*
22.1415
23.9813
*
23.0891390137
1.4885
0.8357
23.4877
24.2878
26.1457
24.6489390138
1.1933
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1.3716
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1.7008
1.0892
32.6265
34.2069
34.8999
33.9342390176
1.0494
0.8390
*
23.9779
24.1247
24.0545390178
1.3615
0.8991
20.7270
22.6006
23.1452
22.1438390179
1.4427
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25.2267390189
1.1565
0.8357
22.3722
22.6796
23.6215
22.9388390191
1.1480
*
20.8761
*
*
20.8761390192
0.9882
0.8357
21.2619
20.5459
23.6171
21.8230390193
***
*
20.1024
*
*
20.1024390194
1.1194
1.0003
25.4235
27.5890
26.3152
26.4435390195
1.6293
1.0892
31.0019
34.2980
34.5594
33.3475( print page 47482)390196
1.6590
*
*
*
*
*390197
1.3808
1.0003
25.7739
26.8270
27.2455
26.6103390198
1.0933
0.8503
18.7222
20.5979
20.4350
19.9087390199
1.1701
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21.3157
22.3224
23.0046
22.2038390200
***
*
23.7471
*
*
23.7471390201
1.3003
0.8357
26.3658
27.0054
27.3542
26.9245390203
1.6204
1.0892
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29.5251
30.7346
29.6944390211
1.2565
0.8991
23.1450
25.1689
26.5052
24.9533390215
***
*
28.0403
*
*
28.0403390217
1.2433
0.8390
24.3610
23.5879
24.1886
24.0513390219
1.3175
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30.9464
31.7361
30.5072390223
2.0325
1.0892
27.6407
30.2523
34.3280
30.7325390224
***
*
18.7624
*
*
18.7624390225
1.2242
0.9650
24.9391
27.5803
27.2555
26.6147390226
1.7798
1.0892
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0.5343
1.0892
*
*
*
*390278
0.5326
1.0892
23.6843
26.6664
28.6323
26.3012390279
***
*
17.0012
*
*
17.0012390285
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***
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37.6569
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***
*
29.7287
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*
30.3388390289
***
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28.8826
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*
29.8023390290
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***
*
30.9836
*
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30.9836390302
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*
*
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***
*
*
27.5580
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30.4832
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***
*
*
*
29.3217
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***
*
*
*
40.3789
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*
*
24.5393
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***
*
*
*
36.1737
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***
*
*
*
37.8924
37.8924390310
***
*
*
*
44.3991
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*
*
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*
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***
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***
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***
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21.6231440111
1.2941
0.9618
28.5705
29.0975
28.8453
28.8380440114
***
*
24.0146
*
*
24.0146440115
1.0084
0.8255
21.7830
23.1409
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22.8901440120
1.5807
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23.6328
22.9331( print page 47486)440130
1.1080
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1.3047
0.9364
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23.9241
25.2293
24.2131440145
1.0761
*
20.7875
*
*
20.7875440147
***
*
31.4012
33.1756
34.8199
33.1562440148
1.1125
0.9364
24.6412
23.9810
22.6188
23.6904440149
***
*
20.4563
*
*
20.4563440150
1.3915
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26.8308
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1.1731
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28.6971
28.7074
29.9894
29.1537440162
***
*
21.1418
27.6837
24.8705
24.4635440166
***
*
31.0779
35.3064
*
32.7296440168
0.9656
0.9313
22.8768
28.1215
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20.9536440203
***
*
19.3864
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*
*
*
*440225
0.7954
0.8012
*
24.8328
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1.5468
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*
26.5831
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0.9618
*
*
30.7785
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*
*
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0.9712
*
18.3047
*
*
18.3047450021
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26.1022( print page 47487)450035
1.4958
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27.6978450037
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21.9037450050
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*
23.3044
*
*
23.3044450051
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0.9462
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*
21.9082
*
*
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0.8859
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21.7337
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1.6741
*
*
*
*
*450078
0.9153
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15.8968
21.4716
20.0758
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1.6341
0.9785
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24.2018
23.3904450083
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1.1900
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23.2071
24.9917
26.2781
24.8586450094
***
*
25.2434
*
*
25.2434450096
***
*
24.1618
26.5103
28.1902
26.1065450097
1.4813
0.9996
26.4965
29.0142
29.8734
28.4576450098
0.9764
*
22.6626
*
*
22.6626450099
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19.3245
20.1295450113
***
*
54.6663
*
*
54.6663450119
1.3059
0.9135
25.7008
27.8027
31.1026
28.0194450121
***
*
25.7051
29.1296
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1.2261
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***
*
23.7098
25.9494
*
24.6979450132
1.5736
0.9954
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1.2593
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***
*
22.2915
23.9558
26.2011
24.2451450152
1.2222
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23.1608( print page 47488)450178
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***
*
16.6319
*
*
16.6319450280
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*
37.1721
*
37.1721450324
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0.9681
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26.1099450353
***
*
24.4454
27.0248
27.9576
26.5065450358
1.9690
0.9996
30.4280
31.4926
32.5922
31.5508450362
***
*
25.4372
*
*
25.4372450369
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0.8198
18.4848
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0.9938
*
23.2283
*
*
23.2283450378
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30.7684
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32.2278
31.1287450379
1.3331
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0.9328
*
22.0482
*
*
22.0482450388
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21.9347
*
19.7864450395
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27.5189
26.7743
26.5003( print page 47489)450399
0.8946
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21.5746
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0.8612
*
20.0351
*
*
20.0351450418
***
*
26.8434
28.4362
*
27.5264450419
1.2724
0.9681
31.0405
31.9966
34.2427
32.4903450422
1.2225
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32.1021450424
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26.8380450488
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17.7822
18.6563
20.2475
18.8938450508
1.5958
0.8871
23.9572
28.4471
27.2850
26.5800450514
***
*
22.6552
26.3704
27.3043
25.5172450518
1.4357
0.8615
24.1194
28.1755
29.1322
27.1788450530
1.2777
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28.0481450539
1.1985
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22.7465450547
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34.3349
25.8923450558
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1.2013
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28.8323
27.8240450620
1.0024
0.8198
17.7138
18.6183
20.3723
18.9192450623
1.1755
*
28.3552
*
*
28.3552450626
***
*
26.8374
*
*
26.8374450630
1.5459
0.9996
29.6796
29.1462
29.8431
29.5562450634
1.7069
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30.1727
31.5024
34.2380
31.8910( print page 47490)450661
1.1887
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30.2610
30.0751
27.8684450662
1.5730
0.9192
28.0913
29.0535
29.0532
28.7293450665
***
*
18.6054
*
*
18.6054450668
1.5287
0.9140
26.2375
28.8635
30.6114
28.5378450669
1.2128
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28.5103
30.1704
28.9694450730
1.3698
0.9785
29.9430
31.3324
32.7293
31.3334450733
***
*
26.4977
*
*
26.4977450742
1.1911
0.9785
26.1189
27.2023
30.0583
27.8913450743
1.4606
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23.8314
25.8175
23.8627450749
0.9915
0.8198
17.8227
20.0487
22.1562
19.9062450751
***
*
19.3267
18.7456
21.4223
19.9014450754
0.9275
0.8198
20.8968
22.1819
24.7797
22.6402450755
0.9393
0.8474
18.0092
19.8988
22.2006
20.0136450758
***
*
25.6547
28.7342
28.2803
27.5631450760
1.0564
0.9140
24.6349
24.7489
25.1637
24.8390450761
0.8818
*
15.7483
*
*
15.7483450763
1.0706
*
22.4905
*
*
22.4905450766
1.9348
0.9785
30.0441
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25.2007
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24.1984
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1.3241
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24.1300450829
***
*
19.5014
20.6016
19.5842
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1.0196
0.9522
28.1617
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27.8005
28.1885( print page 47491)450831
1.4011
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1.1195
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22.1335
21.9266
31.9606
24.7549450851
2.5542
0.9785
30.1213
32.6950
35.1102
32.6767450852
***
*
30.0191
*
*
30.0191450853
1.9480
0.9785
*
36.1169
37.1043
36.6729450854
***
*
*
27.1868
*
27.1868450855
1.5587
0.9192
*
30.8855
32.6916
31.8350450856
1.9053
0.8895
*
39.0865
37.7362
38.3791450857
***
*
*
30.4632
*
30.4632450860
1.9631
0.9996
*
24.0171
29.1075
26.9551450861
***
*
*
34.9290
*
34.9290450862
1.4560
0.9996
*
31.2224
31.8095
31.4630450863
***
*
*
24.8825
*
24.8825450864
2.0615
0.9181
*
23.3765
24.5049
24.0210450865
1.0642
0.9501
*
29.1763
29.9559
29.5867450866
***
*
*
15.2959
*
15.2959450867
1.1905
0.9501
*
28.2289
29.5879
28.9055450868
1.8308
0.9954
*
27.9579
25.3486
26.8246450869
2.0516
0.9135
*
22.6253
26.1616
24.9911450870
***
*
*
37.4364
*
37.4364450871
1.8016
0.9501
*
*
28.9150
28.9150450872
1.3873
0.9681
*
*
27.2833
27.2833450873
***
*
*
*
14.8821
14.8821450874
1.5449
0.9785
*
*
34.6083
34.6083450875
1.6419
0.9151
*
*
23.2763
23.2763450876
2.0787
0.8641
*
*
28.4343
28.4343450877
1.5503
0.9140
*
*
26.1867
26.1867450878
2.5573
0.8895
*
*
31.6750
31.6750450879
1.2943
0.8501
*
*
35.5672
35.5672450880
1.6570
0.9681
*
*
35.9572
35.9572450881
***
*
*
*
24.5464
24.5464450882
***
*
*
*
26.6910
26.6910450883
2.5235
0.9785
*
*
35.2646
35.2646450884
0.9920
0.8920
*
*
27.8213
27.8213450885
1.4958
0.9785
*
*
34.1148
34.1148450886
1.9602
0.9660
*
*
*
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1.4699
0.9660
*
*
*
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1.5257
0.9785
*
*
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2.0976
0.9785
*
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1.3643
0.9785
*
*
*
*450893
1.2413
0.9785
*
*
*
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1.6453
0.9785
*
*
*
*450895
***
*
*
*
18.4142
18.4142460001
1.8844
0.9480
27.0757
28.7150
30.0040
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1.5188
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27.3614( print page 47492)460017
1.3017
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1.0138
*
19.5669
18.5159
*
19.0929460021
1.6953
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1.4454
*
27.2866
*
*
27.2866460037
0.8447
*
21.1035
*
*
21.1035460039
1.0867
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1.0387
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30.7872
33.1981
31.2960470006
1.2524
*
26.9651
*
*
26.9651470010
***
*
26.1273
*
*
26.1273470011
1.1763
1.0387
28.3911
28.1330
29.6269
28.7242470012
1.1997
1.0387
24.3425
26.0225
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25.8314470018
1.1137
*
28.3419
*
*
28.3419470024
1.2029
1.0387
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***
*
27.3456
*
*
27.3456490004
1.3086
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1.6441
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21.9123490031
***
*
22.0579
*
*
22.0579490032
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0.9232
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1.2301
*
22.5423
*
*
22.5423490048
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22.9792( print page 47493)490057
1.6174
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1.4004
1.0675
30.4285
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31.3631490104
0.7733
0.9232
17.3295
*
17.0548
17.1728490105
0.7209
0.8073
24.7922
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25.5156490106
0.9111
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21.6359490130
1.2701
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23.9982
25.3352
24.0816490133
***
*
26.5684
*
*
26.5684490134
0.7623
0.8073
*
*
33.2405
33.2405490135
0.7016
0.8888
*
*
25.9998
25.9998490136
1.4665
0.9232
*
*
*
*490137
1.2895
0.8777
*
*
*
*500001
1.6372
1.1362
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33.4028( print page 47494)500031
1.2765
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*
*
*
*500053
1.2886
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*
30.1396
*
*
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*
*
*
*
*500139
1.5206
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0.8772
*
24.5744
*
*
24.5744500148
1.1803
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22.2161
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37.7830
30.2231500150
1.2180
1.1226
*
*
*
*510001
1.9238
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***
*
21.7135
*
*
21.7135510029
1.3235
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*
23.1011
*
*
23.1011510070
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20.1997
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20.0241( print page 47495)510077
1.0539
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***
*
27.7061
*
*
27.7061510090
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0.8878
*
*
*
*520002
1.3394
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*
23.8817
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*
24.3767520062
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***
*
24.8184
*
*
24.8184520070
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1.2971
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25.8210520094
***
*
25.7567
*
*
25.7567520095
1.2937
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26.7863
30.4216
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28.4877520098
2.0355
1.1176
30.6150
32.5785
36.5776
33.3175520100
1.2798
0.9852
26.2161
29.3243
29.9458
28.5050520102
1.1728
1.0295
26.8234
29.1680
30.7990
28.9928520103
1.5495
1.0295
27.9147
30.3165
32.6269
30.3612520107
1.2792
0.9715
28.3431
28.9878
29.4178
28.9355520109
1.0392
0.9684
23.3271
24.7228
25.0697
24.3762520113
1.3272
0.9684
27.4135
31.4708
33.3475
30.7254520116
1.2669
1.0295
26.9902
27.9688
30.2156
28.3945520132
***
*
23.1941
25.0006
27.3431
25.0308520136
1.7249
1.0295
27.7703
30.6522
32.1479
30.1365520138
1.8879
1.0295
28.4394
30.8016
31.6581
30.2963520139
1.2893
1.0295
26.5110
28.8870
30.4903
28.6153520140
0.3793
*
28.4433
31.0043
31.1315
30.2285520152
1.0907
*
24.9392
29.7308
*
27.4042520160
1.8662
0.9684
25.7588
27.9548
29.5582
27.7551( print page 47496)520170
1.4782
1.0295
27.2221
30.4309
31.4710
29.7190520173
1.0829
0.9684
28.0995
29.2429
31.0599
29.4647520177
1.6194
1.0295
30.7317
31.4555
32.5714
31.6050520178
1.0240
*
20.2666
*
*
20.2666520189
1.2042
1.0471
28.4720
28.0014
29.0295
28.4999520193
1.7002
0.9684
26.0885
27.8113
29.2007
27.7865520194
1.7148
1.0295
24.9408
30.1668
31.4379
28.8968520195
0.3556
1.0295
36.6973
36.3116
36.2900
36.4369520196
1.6798
0.9684
35.1043
36.9266
31.1175
34.0254520197
***
*
*
*
30.1917
30.1917520198
1.4193
0.9684
*
*
28.5975
28.5975520199
2.2776
1.0295
*
*
36.5699
36.5699520200
0.9180
*
*
*
*
*520201
0.6866
*
*
*
*
*520202
1.4495
1.0004
*
*
*
*530002
1.1272
0.9163
26.8356
28.3063
29.2069
28.1167530006
1.1827
0.9163
24.9318
27.2421
29.2104
27.0638530007
***
*
20.4391
*
*
20.4391530008
1.1673
0.9163
23.8589
24.0090
26.5180
24.7926530009
0.9202
0.9163
26.8316
24.6719
26.0490
25.8222530010
1.3058
0.9163
25.8482
25.9852
27.4121
26.4402530011
1.1124
0.9163
24.8245
27.8772
27.8613
26.9109530012
1.7060
0.9270
25.2526
26.9582
28.7524
26.9862530014
1.5520
0.9204
24.5947
26.7156
28.5469
26.6902530015
1.1541
0.9272
27.6876
29.8310
29.8306
29.0860530017
1.1052
0.9163
25.3362
29.8503
31.1105
28.7232530023
***
*
21.3813
*
*
21.3813530025
1.2402
0.9163
28.6938
24.4392
29.4346
27.4317530032
1.0159
0.9163
25.7728
23.9004
24.6580
24.73341
                             Based on salaries adjusted for occupational mix, according to the calculation in section II.D.6 to this final rule.2
                             The case-mix index is based on the billed DRGs in the FY 2006 MedPAR file.  It is not transfer adjusted.*
                             Denotes wage data not available for the provider for that year.**
                             Based on the sum of the salaries and hours computed for Federal FYs 2006, 2007, and 2008.***
                            Denotes MedPAR data not available for the provider for FY 2006.3
                             This provider, 140B10, is part of a multi-campus provider, 140010, that is comprised of campuses that are located in two different CBSAs. For the FY 2008 wage index, a new provider record was created, designated with a “B” in the 4th position of the provider number, to distinguish between the portion of the wages and hours of the multi-campus facility that is being allocated between the two different CBSAs.  Please refer to the FY 2008 final rule, section III.H.I.7  “Geographic Reclassification for Multi-campus Hospitals,” for more details on this provision.4
                             This provider, 220B74, is part of a multi-campus provider, 220074, that is comprised of campuses that are located in two different CBSAs.  For the FY 2008 wage index, a new provider record was created, designated with a “B” in the 4th position of the provider number, to distinguish between the portion of the wages and hours of the multi-campus facility that is being allocated between the two different CBSAs.  Please refer to the FY 2008 final rule, section III.H.I.7 “Geographic Reclassification for Multi-campus Hospitals,” for more details on this provision.
 Table 3A.—Fy 2008 and 3-Year* Average Hourly Wage for Urban Areas by CBSA
[*Based on the salaries and hours computed for Federal FYs 2006, 2007, and 2008.]
CBSA code
Urban area
FY 2008 average hourly wage
3-Year average hourly wage10180
Abilene, TX
25.5587
24.134710380
Aguadilla-Isabela-San Sebastia
                                
                                n, PR
10.3758
11.493910420
Akron, OH
26.9806
25.860010500
Albany, GA
26.5094
25.866810580
Albany-Schenectady-Troy, NY
26.8819
25.766510740
Albuquerque, NM
30.1667
28.630310780
Alexandria, LA
24.6476
23.544610900
Allentown-Bethlehem-Easton, PA-NJ
31.0279
29.547311020
Altoona, PA
25.8973
25.401311100
Amarillo, TX
28.3855
27.150311180
Ames, IA
30.9415
28.852111260
Anchorage, AK
36.4638
35.034611300
Anderson, IN
27.8045
26.024611340
Anderson, SC
28.5621
26.737511460
Ann Arbor, MI
32.5609
31.591811500
Anniston-Oxford, AL
24.7360
23.290111540
Appleton, WI
29.2835
27.6497( print page 47497)11700
Asheville, NC
28.5382
27.372212020
Athens-Clarke County, GA
31.0062
28.597512060
Atlanta-Sandy Springs-Marietta, GA
30.4332
28.962812100
Atlantic City, NJ
37.4144
34.928612220
Auburn-Opelika, AL
25.0468
23.913312260
Augusta-Richmond County, GA-SC
29.7703
28.572012420
Austin-Round Rock, TX
29.4701
27.866812540
Bakersfield, CA
34.6222
32.185712580
Baltimore-Towson, MD
31.1116
29.429612620
Bangor, ME
30.6488
29.074012700
Barnstable Town, MA
39.1145
37.302712940
Baton Rouge, LA
24.8413
24.303412980
Battle Creek, MI
31.1795
28.748513020
Bay City, MI
27.9569
27.383313140
Beaumont-Port Arthur, TX
26.7226
25.352613380
Bellingham, WA
34.9174
33.402813460
Bend, OR
32.8326
31.406113644
Bethesda-Gaithersburg-Frederick, MD
32.4274
32.230813740
Billings, MT
27.5114
26.301713780
Binghamton, NY
28.1250
26.243713820
Birmingham-Hoover, AL
27.4679
26.310113900
Bismarck, ND
22.4781
21.838213980
Blacksburg-Christiansburg-Radford, VA
25.2131
23.998414020
Bloomington, IN
28.9157
26.484814060
Bloomington-Normal, IL
29.4154
27.285014260
Boise City-Nampa, ID
29.4544
27.581614484
Boston-Quincy, MA
36.7350
34.636614500
Boulder, CO
31.3555
29.577114540
Bowling Green, KY
25.0769
24.024114740
Bremerton-Silverdale, WA
33.5606
31.934814860
Bridgeport-Stamford-Norwalk, CT
39.6328
37.609815180
Brownsville-Harlingen, TX
28.5123
28.311315260
Brunswick, GA
30.2845
29.137815380
Buffalo-Niagara Falls, NY
29.7374
28.152115500
Burlington, NC
26.6546
25.645815540
Burlington-South Burlington, VT
29.7251
28.015815764
Cambridge-Newton-Framingham, MA
34.7914
32.902115804
Camden, NJ
32.6688
31.092215940
Canton-Massillon, OH
27.6581
26.507515980
Cape Coral-Fort Myers, FL
29.4194
27.920716180
Carson City, NV
29.0454
29.024016220
Casper, WY
28.7524
26.986216300
Cedar Rapids, IA
26.9348
25.816416580
Champaign-Urbana, IL
28.8930
28.072816620
Charleston, WV
26.0325
25.146316700
Charleston-North Charleston, SC
28.2298
27.103216740
Charlotte-Gastonia-Concord, NC-SC
29.4814
28.216016820
Charlottesville, VA
28.4122
28.881516860
Chattanooga, TN-GA
27.7980
26.606816940
Cheyenne, WY
28.5469
26.690216974
Chicago-Naperville-Joliet, IL
32.8395
31.571317020
Chico, CA
34.8369
32.353517140
Cincinnati-Middletown, OH-KY-IN
29.9631
28.381717300
Clarksville, TN-KY
25.4903
24.565417420
Cleveland, TN
25.3412
24.181917460
Cleveland-Elyria-Mentor, OH
28.9854
27.568917660
Coeur d'Alene, ID
29.0166
27.850017780
College Station-Bryan, TX
28.4470
26.569917820
Colorado Springs, CO
29.3604
27.953817860
Columbia, MO
26.4800
24.972217900
Columbia, SC
27.3857
26.465817980
Columbus, GA-AL
27.9721
25.775818020
Columbus, IN
29.8540
28.257018140
Columbus, OH
31.0923
29.580918580
Corpus Christi, TX
26.2254
25.063218700
Corvallis, OR
33.1928
32.220119060
Cumberland, MD-WV
24.6976
24.872519124
Dallas-Plano-Irving, TX
30.3505
29.523019140
Dalton, GA
26.6185
26.1940( print page 47498)19180
Danville, IL
28.6709
27.318819260
Danville, VA
25.7323
24.937319340
Davenport-Moline-Rock Island, IA-IL
27.2974
25.923119380
Dayton, OH
28.7765
27.144519460
Decatur, AL
24.0785
23.905719500
Decatur, IL
25.1658
24.054419660
Deltona-Daytona Beach-Ormond Beach, FL
27.7377
27.049519740
Denver-Aurora, CO
32.4261
31.409019780
Des Moines-West Des Moines, IA
28.4016
27.553519804
Detroit-Livonia-Dearborn, MI
31.1865
30.389520020
Dothan, AL
22.9406
22.321620100
Dover, DE
32.2443
30.006020220
Dubuque, IA
27.5285
26.486020260
Duluth, MN-WI
31.2690
30.035320500
Durham, NC
30.2065
29.186620740
Eau Claire, WI
29.1817
27.861520764
Edison, NJ
34.3515
32.965120940
El Centro, CA
28.4246
26.834321060
Elizabethtown, KY
26.7279
25.669021140
Elkhart-Goshen, IN
29.5912
28.160621300
Elmira, NY
25.8453
24.604921340
El Paso, TX
28.3494
26.999221500
Erie, PA
26.3723
25.687521660
Eugene-Springfield, OR
34.1240
32.305421780
Evansville, IN-KY
26.2546
25.672221820
Fairbanks, AK
33.9375
32.839121940
Fajardo, PR
13.5395
12.373622020
Fargo, ND-MN
24.6382
24.198422140
Farmington, NM
28.7893
25.710922180
Fayetteville, NC
30.7591
28.379022220
Fayetteville-Springdale-Rogers, AR-MO
27.5174
26.204222380
Flagstaff, AZ
35.8287
34.682622420
Flint, MI
34.1572
31.991122500
Florence, SC
26.5044
25.822022520
Florence-Muscle Shoals, AL
23.6943
23.405222540
Fond du Lac, WI
30.6657
29.565322660
Fort Collins-Loveland, CO
29.6511
28.424322744
Fort Lauderdale-Pompano Beach-Deerfield Beach, FL
31.2029
30.037722900
Fort Smith, AR-OK
24.9751
23.747923020
Fort Walton Beach-Crestview-Destin, FL
26.8731
25.732923060
Fort Wayne, IN
28.0404
27.665723104
Fort Worth-Arlington, TX
29.8878
28.305823420
Fresno, CA
34.2409
32.244723460
Gadsden, AL
25.2583
23.786123540
Gainesville, FL
28.8468
27.711923580
Gainesville, GA
29.2134
27.282323844
Gary, IN
28.6630
27.615124020
Glens Falls, NY
26.4328
25.376924140
Goldsboro, NC
28.7544
26.857124220
Grand Forks, ND-MN
24.9615
23.537924300
Grand Junction, CO
30.0988
28.499924340
Grand Rapids-Wyoming, MI
29.0742
27.944624500
Great Falls, MT
26.4422
25.638624540
Greeley, CO
31.0018
29.163424580
Green Bay, WI
29.4031
28.101924660
Greensboro-High Point, NC
28.2442
26.838024780
Greenville, NC
28.7434
27.612124860
Greenville-Mauldin-Easley, SC
29.8863
28.766625020
Guayama, PR
09.1328
09.203425060
Gulfport-Biloxi, MS
26.6981
25.827525180
Hagerstown-Martinsburg, MD-WV
28.7052
27.686125260
Hanford-Corcoran, CA
33.0818
30.961625420
Harrisburg-Carlisle, PA
28.6281
27.525325500
Harrisonburg, VA
27.5890
26.764025540
Hartford-West Hartford-East Hartford, CT
34.1958
32.538725620
Hattiesburg, MS
23.3688
22.393325860
Hickory-Lenoir-Morganton, NC
27.8279
26.509125980
1
                                 Hinesville-Fort Stewart, GA26100
Holland-Grand Haven, MI
28.1106
26.9710( print page 47499)26180
Honolulu, HI
35.0637
32.928226300
Hot Springs, AR
28.2416
26.559426380
Houma-Bayou Cane-Thibodaux, LA
24.7360
23.633926420
Houston-Sugar Land-Baytown, TX
31.0073
29.666526580
Huntington-Ashland, WV-KY-OH
27.5367
26.765526620
Huntsville, AL
27.9664
26.728126820
Idaho Falls, ID
28.6730
27.293126900
Indianapolis-Carmel, IN
30.1393
28.965926980
Iowa City, IA
29.2283
28.331027060
Ithaca, NY
29.5885
28.855827100
Jackson, MI
29.3442
28.056627140
Jackson, MS
24.6588
24.093927180
Jackson, TN
26.6460
25.944427260
Jacksonville, FL
28.1891
27.266827340
Jacksonville, NC
25.6349
24.558627500
Janesville, WI
30.5583
28.847927620
Jefferson City, MO
26.9896
25.337927740
Johnson City, TN
23.8863
23.398327780
Johnstown, PA
23.6956
24.122527860
Jonesboro, AR
24.5432
23.383427900
Joplin, MO
28.5715
26.141128020
Kalamazoo-Portage, MI
32.5665
31.211928100
Kankakee-Bradley, IL
31.4634
30.429028140
Kansas City, MO-KS
28.9006
27.710028420
Kennewick-Richland-Pasco, WA
30.5718
30.086728660
Killeen-Temple-Fort Hood, TX
25.7531
25.418628700
Kingsport-Bristol-Bristol, TN-VA
24.0579
23.561628740
Kingston, NY
29.7092
27.874528940
Knoxville, TN
24.8497
24.315129020
Kokomo, IN
29.3517
28.255129100
La Crosse, WI-MN
30.0819
28.407429140
Lafayette, IN
26.9111
25.788829180
Lafayette, LA
25.7422
24.741129340
Lake Charles, LA
24.1388
23.181129404
Lake County-Kenosha County, IL-WI
32.8246
31.342229420
2
                                 Lake Havasu City- Kingman, AZ
28.9483
27.619929460
Lakeland, FL
27.4022
26.465429540
Lancaster, PA
29.5629
28.735529620
Lansing-East Lansing, MI
31.1650
29.420329700
Laredo, TX
26.3647
24.414729740
Las Cruces, NM
26.4515
25.613229820
Las Vegas-Paradise, NV
35.5188
33.586529940
Lawrence, KS
25.3394
24.669730020
Lawton, OK
26.0678
24.473030140
Lebanon, PA
25.4407
25.212530300
Lewiston, ID-WA
28.6136
28.289430340
Lewiston-Auburn, ME
28.8124
27.489930460
Lexington-Fayette, KY
27.9203
26.648630620
Lima, OH
28.7203
26.971330700
Lincoln, NE
30.6210
29.588330780
Little Rock-North Little Rock-Conway, AR
27.7910
27.060730860
Logan, UT-ID
28.4789
27.028730980
Longview, TX
27.2767
26.002131020
Longview, WA
34.2017
30.299331084
Los Angeles-Long Beach-Glendale, CA
36.1216
34.633331140
Louisville-Jefferson County, KY-IN
28.0031
27.043431180
Lubbock, TX
26.8019
25.583631340
Lynchburg, VA
26.6920
25.528131420
Macon, GA
30.2376
28.672131460
Madera, CA
26.0908
25.291531540
Madison, WI
34.6626
32.271131700
Manchester-Nashua, NH
31.4185
30.133931900
Mansfield, OH
28.5643
27.893332420
Mayagez, PR
11.3432
11.295632580
McAllen-Edinburg-Mission, TX
28.3352
26.492132780
Medford, OR
31.9397
30.847132820
Memphis, TN-MS-AR
28.8850
27.629932900
Merced, CA
37.1577
33.931933124
Miami-Miami Beach-Kendall, FL
31.0417
29.1773( print page 47500)33140
Michigan City-La Porte, IN
27.2502
26.808733260
Midland, TX
30.1228
28.374033340
Milwaukee-Waukesha-West Allis, WI
31.9336
30.329433460
Minneapolis-St. Paul-Bloomington, MN-WI
33.7989
32.248033540
Missoula, MT
27.0081
26.379833660
Mobile, AL
24.6508
23.335033700
Modesto, CA
36.9816
35.081033740
Monroe, LA
24.4048
23.597333780
Monroe, MI
29.3721
28.318333860
Montgomery, AL
25.1560
24.304534060
Morgantown, WV
26.0767
25.061034100
Morristown, TN
22.9838
22.992134580
Mount Vernon-Anacortes, WA
31.5882
30.330534620
Muncie, IN
24.8045
24.859634740
Muskegon-Norton Shores, MI
30.9174
29.401334820
Myrtle Beach-Conway-North Myrtle Beach, SC
26.8308
26.053434900
Napa, CA
43.2961
38.973934940
Naples-Marco Island, FL
29.8301
29.400634980
Nashville-Davidson-Murfreesboro-Franklin, TN
29.8314
28.794435004
Nassau-Suffolk, NY
39.9385
38.050535084
Newark-Union, NJ-PA
36.2043
34.766035300
New Haven-Milford, CT
37.0135
35.405035380
New Orleans-Metairie-Kenner, LA
27.0196
25.946335644
New York-White Plains-Wayne, NY-NJ
41.0297
39.174135660
Niles-Benton Harbor, MI
28.3275
26.561435980
Norwich-New London, CT
35.5892
34.400436084
Oakland-Fremont-Hayward, CA
47.4312
45.460736100
Ocala, FL
26.6198
25.758036140
Ocean City, NJ
34.3497
32.165336220
Odessa, TX
30.8727
29.495136260
Ogden-Clearfield, UT
28.0771
26.756836420
Oklahoma City, OK
27.1496
26.203536500
Olympia, WA
35.4177
32.823636540
Omaha-Council Bluffs, NE-IA
29.3831
28.030336740
Orlando-Kissimmee, FL
28.7946
27.914936780
Oshkosh-Neenah, WI
29.0738
27.406536980
Owensboro, KY
26.9752
25.911337100
Oxnard-Thousand Oaks-Ventura, CA
35.3324
33.646037340
Palm Bay-Melbourne-Titusville, FL
29.0918
28.334637380
2
                                 Palm Coast, FL
27.0981
27.518837460
Panama City-Lynn Haven, FL
26.1809
24.313237620
Parkersburg-Marietta-Vienna, WV-OH
25.6137
24.319237700
Pascagoula, MS
26.4851
24.508437764
Peabody, MA (Formerly, Essex County, MA)
32.8768
31.194937860
Pensacola-Ferry Pass-Brent, FL
25.1928
23.736637900
Peoria, IL
29.1064
26.982237964
Philadelphia, PA
33.7819
32.443338060
Phoenix-Mesa-Scottsdale, AZ
31.3577
29.978638220
Pine Bluff, AR
25.2840
25.192038300
Pittsburgh, PA
26.0226
25.392738340
Pittsfield, MA
31.1782
30.059638540
Pocatello, ID
28.4934
27.313038660
Ponce, PR
13.2197
13.653938860
Portland-South Portland-Biddeford, ME
30.9888
29.778538900
Portland-Vancouver-Beaverton, OR-WA
34.8215
33.181738940
Port St. Lucie, FL
31.1259
29.606739100
Poughkeepsie-Newburgh-Middletown, NY
34.0640
32.412039140
Prescott, AZ
30.8935
29.213939300
Providence-New Bedford-Fall River, RI-MA
32.6657
31.818439340
Provo-Orem, UT
29.4032
28.028939380
Pueblo, CO
27.0893
25.637839460
Punta Gorda, FL
29.6456
28.143239540
Racine, WI
29.7224
27.618239580
Raleigh-Cary, NC
29.9696
28.662439660
Rapid City, SD
26.9365
25.983339740
Reading, PA
29.1988
28.394139820
Redding, CA
39.7306
36.780339900
Reno-Sparks, NV
34.3107
33.622340060
Richmond, VA
28.6339
27.1478( print page 47501)40140
Riverside-San Bernardino-Ontario, CA
33.8115
32.208940220
Roanoke, VA
27.5669
25.739640340
Rochester, MN
32.5362
32.332840380
Rochester, NY
27.6600
26.752140420
Rockford, IL
30.4079
29.376040484
Rockingham County-Strafford County, NH
31.1894
30.124640580
Rocky Mount, NC
27.9351
26.459340660
Rome, GA
29.6117
28.289540900
Sacramento—Arden-Arcade—Roseville, CA
40.5303
38.506140980
Saginaw-Saginaw Township North, MI
28.2960
27.056941060
St. Cloud, MN
34.2980
31.616941100
St. George, UT
29.5761
28.194341140
St. Joseph, MO-KS
27.3754
28.241341180
St. Louis, MO-IL
27.8586
26.541841420
Salem, OR
32.2491
30.693941500
Salinas, CA
45.2648
42.371741540
Salisbury, MD
27.6311
26.452341620
Salt Lake City, UT
29.3832
28.001741660
San Angelo, TX
26.8540
25.031041700
San Antonio, TX
27.5914
26.424041740
San Diego-Carlsbad-San Marcos, CA
34.7234
33.246741780
Sandusky, OH
27.1546
26.609041884
San Francisco-San Mateo-Redwood City, CA
45.9063
44.573941900
San Germa
                                
                                n-Cabo Rojo, PR
14.2744
13.860941940
San Jose-Sunnyvale-Santa Clara, CA
47.8883
45.279341980
San Juan-Caguas-Guaynabo, PR
14.0384
13.405742020
San Luis Obispo-Paso Robles, CA
37.0690
33.913742044
Santa Ana-Anaheim-Irvine, CA
35.9446
34.012742060
Santa Barbara-Santa Maria-Goleta, CA
35.5323
33.462642100
Santa Cruz-Watsonville, CA
48.5956
45.312942140
Santa Fe, NM
33.1342
31.953842220
Santa Rosa-Petaluma, CA
44.8763
41.697442260
Sarasota-Bradenton-Venice, FL
30.3046
28.738842340
Savannah, GA
27.5761
27.080042540
Scranton—Wilkes-Barre, PA
25.8832
24.750342644
Seattle-Bellevue-Everett, WA
35.2419
33.686442680
Sebastian-Vero Beach, FL
30.0959
28.611743100
Sheboygan, WI
28.0852
26.741443300
Sherman-Denison, TX
26.4590
26.241343340
Shreveport-Bossier City, LA
26.5251
25.764843580
Sioux City, IA-NE-SD
28.1724
27.070143620
Sioux Falls, SD
29.6291
28.107143780
South Bend-Mishawaka, IN-MI
29.9101
28.920543900
Spartanburg, SC
29.1389
27.225744060
Spokane, WA
32.2318
31.191844100
Springfield, IL
27.7357
26.261644140
Springfield, MA
32.4121
30.433244180
Springfield, MO
27.2665
25.288144220
Springfield, OH
26.4842
25.076944300
State College, PA
26.7342
25.207144700
Stockton, CA
36.6289
34.145944940
Sumter, SC
27.5988
25.344745060
Syracuse, NY
30.8602
28.926145104
Tacoma, WA
33.9112
31.962445220
Tallahassee, FL
27.9986
26.327345300
Tampa-St. Petersburg-Clearwater, FL
28.2697
27.208045460
Terre Haute, IN
27.3687
25.338545500
Texarkana, TX-Texarkana, AR
24.1336
23.794745780
Toledo, OH
28.7454
27.850645820
Topeka, KS
26.5404
25.836745940
Trenton-Ewing, NJ
33.2313
31.969046060
Tucson, AZ
29.2073
27.508446140
Tulsa, OK
26.3577
25.012746220
Tuscaloosa, AL
26.4577
25.548746340
Tyler, TX
28.4760
26.868546540
Utica-Rome, NY
27.2131
25.564946660
Valdosta, GA
25.4439
25.142946700
Vallejo-Fairfield, CA
44.7630
43.607047020
Victoria, TX
25.1713
24.3382( print page 47502)47220
Vineland-Millville-Bridgeton, NJ
33.0258
30.463447260
Virginia Beach-Norfolk-Newport News, VA-NC
27.2219
26.000947300
Visalia-Porterville, CA
31.6363
30.071447380
Waco, TX
26.6549
25.493147580
Warner Robins, GA
29.8158
26.811447644
Warren-Troy-Farmington Hills, MI
31.1197
29.588247894
Washington-Arlington-Alexandria, DC-VA-MD-WV
33.1099
32.093247940
Waterloo-Cedar Falls, IA
27.0432
25.530148140
Wausau, WI
30.5724
29.061348260
Weirton-Steubenville, WV-OH
24.4665
23.343448300
Wenatchee, WA
34.9713
31.344448424
West Palm Beach-Boca Raton-Boynton Beach, FL
29.7017
28.714348540
Wheeling, WV-OH
21.7324
20.933548620
Wichita, KS
27.7241
26.680848660
Wichita Falls, TX
25.4414
24.712948700
Williamsport, PA
24.6495
23.955948864
Wilmington, DE-MD-NJ
33.0826
31.316548900
Wilmington, NC
28.9236
28.235349020
Winchester, VA-WV
30.5349
29.641349180
Winston-Salem, NC
28.1570
26.927949340
Worcester, MA
35.2178
32.740149420
Yakima, WA
31.6531
29.714849500
Yauco, PR
09.9278
11.128049620
York-Hanover, PA
29.2356
27.896249660
Youngstown-Warren-Boardman, OH-PA
27.8874
25.993949700
Yuba City, CA
32.6363
31.571249740
Yuma, AZ
31.2815
28.02801
                             This area has no average hourly wage because there are no short-term, acute care hospitals in the area.2
                             This a new CBSA for fiscal year 2008. To calculate the 3-year average hourly wage for this new area, we included the hospitals data from their previous geographic location for fiscal year 2006 and fiscal year 2007.
 Table 3B.—FY 2008 and 3-Year* Average Hourly Wage for Rural Areas by CBSA
[*Based on the sum of the salaries and hours computed for federal fiscal years 2006, 2007, and 2008]
CBSA code
Nonurban area
FY 2008 average hourly wage
3-Year average hourly wage01
Alabama
23.4686
22.338602
Alaska
37.4766
33.922103
Arizona
27.4632
26.083204
Arkansas
23.2843
22.116905
California
36.3980
33.279306
Colorado
29.3035
27.501007
Connecticut
34.8710
34.545608
Delaware
30.5175
28.901610
Florida
26.6208
25.536011
Georgia
24.3828
23.035012
Hawaii
33.3125
31.513413
Idaho
24.2477
23.553514
Illinois
25.8829
24.597015
Indiana
26.5753
25.311716
Iowa
26.2900
25.130217
Kansas
24.6910
23.603018
Kentucky
24.2238
23.041319
Louisiana
23.5288
22.336020
Maine
26.0794
25.218721
Maryland
27.6405
26.736922
Massachusetts23
Michigan
27.6315
26.419024
Minnesota
28.2328
26.945525
Mississippi
23.9977
22.876426
Missouri
25.1550
23.780027
Montana
25.8521
25.352628
Nebraska
27.1868
25.637929
Nevada
30.0915
27.433230
New Hampshire
32.6655
31.876031
New Jersey 1( print page 47503)32
New Mexico
27.8053
25.644733
New York
25.9034
24.502134
North Carolina
26.6853
25.399435
North Dakota
22.6685
21.596736
Ohio
26.9711
25.802937
Oklahoma
23.8499
22.800538
Oregon
30.7608
28.951939
Pennsylvania
25.8624
24.573940
Puerto Rico 141
Rhode Island 142
South Carolina
27.0046
25.709143
South Dakota
25.8767
24.797444
Tennessee
24.3974
23.491145
Texas
25.4256
24.079746
Utah
25.4798
24.178947
Vermont
30.2117
28.635049
Virginia
24.9884
23.815750
Washington
31.5042
30.381951
West Virginia
23.4724
22.698352
Wisconsin
30.0360
28.353553
Wyoming
28.4210
27.02681
                             All counties within the State or territory are classified as urban.
 Table 4A.—Wage Index and Capital Geographic Adjustment Factor (GAF) for Urban Areas by CBSA—FY 2008
CBSA code
Urban area
                                 (constituent counties)
Wage index
GAF10180
Abilene, TX
0.8240
0.8758Callahan County, TXJones County, TXTaylor County, TX10380
Aguadilla-Isabela-San Sebastia
                                
                                n, PR
0.3345
0.4724Aguada Municipio, PRAguadilla Municipio, PRAn
                                
                                asco Municipio, PRIsabela Municipio, PRLares Municipio, PRMoca Municipio, PRRinco
                                
                                n Municipio, PRSan Sebastia
                                
                                n Municipio, PR10420
Akron, OH
0.8699
0.9090Portage County, OHSummit County, OH10500
Albany, GA
0.8666
0.9066Baker County, GADougherty County, GALee County, GATerrell County, GAWorth County, GA10580
Albany-Schenectady-Troy, NY
0.8667
0.9067Albany County, NYRensselaer County, NYSaratoga County, NYSchenectady County, NYSchoharie County, NY10740
Albuquerque, NM
0.9725
0.9811Bernalillo County, NMSandoval County, NMTorrance County, NMValencia County, NM10780
Alexandria, LA
0.7977
0.8566Grant Parish, LARapides Parish, LA10900
Allentown-Bethlehem-Easton, PA-NJ (PA Hospitals)
1.0003
1.0002Warren County, NJ( print page 47504)Carbon County, PALehigh County, PANorthampton County, PA10900
2
                                 Allentown-Bethlehem-Easton, PA-NJ (NJ Hospitals)
1.1616
1.1080Warren County, NJCarbon County, PALehigh County, PANorthampton County, PA11020
2
                                 Altoona, PA
0.8357
0.8843Blair County, PA11100
Amarillo, TX
0.9151
0.9411Armstrong County, TXCarson County, TXPotter County, TXRandall County, TX11180
Ames, IA
0.9976
0.9984Story County, IA11260
2
                                 Anchorage, AK
1.2083
1.1383Anchorage Municipality, AKMatanuska-Susitna Borough, AK11300
Anderson, IN
0.8964
0.9278Madison County, IN11340
Anderson, SC
0.9208
0.9451Anderson County, SC11460
Ann Arbor, MI
1.0498
1.0338Washtenaw County, MI11500
Anniston-Oxford, AL
0.7975
0.8565Calhoun County, AL11540
2
                                 Appleton, WI
0.9684
0.9783Calumet County, WIOutagamie County, WI11700
Asheville, NC
0.9201
0.9446Buncombe County, NCHaywood County, NCHenderson County, NCMadison County, NC12020
Athens-Clarke County, GA
0.9996
0.9997Clarke County, GAMadison County, GAOconee County, GAOglethorpe County, GA12060
1
                                 Atlanta-Sandy Springs-Marietta, GA
0.9812
0.9871Barrow County, GABartow County, GAButts County, GACarroll County, GACherokee County, GAClayton County, GACobb County, GACoweta County, GADawson County, GADeKalb County, GADouglas County, GAFayette County, GAForsyth County, GAFulton County, GAGwinnett County, GAHaralson County, GAHeard County, GAHenry County, GAJasper County, GALamar County, GAMeriwether County, GANewton County, GAPaulding County, GAPickens County, GAPike County, GARockdale County, GASpalding County, GAWalton County, GA( print page 47505)12100
Atlantic City, NJ
1.2063
1.1371Atlantic County, NJ12220
Auburn-Opelika, AL
0.8075
0.8638Lee County, AL12260
Augusta-Richmond County, GA-SC
0.9598
0.9723Burke County, GAColumbia County, GAMcDuffie County, GARichmond County, GAAiken County, SCEdgefield County, SC12420
1
                                 Austin-Round Rock, TX
0.9501
0.9656Bastrop County, TXCaldwell County, TXHays County, TXTravis County, TXWilliamson County, TX12540
2
                                 Bakersfield, CA
1.1735
1.1158Kern County, CA12580
1
                                 Baltimore-Towson, MD
1.0030
1.0021Anne Arundel County, MDBaltimore County, MDCarroll County, MDHarford County, MDHoward County, MDQueen Anne's County, MDBaltimore City, MD12620
Bangor, ME
0.9881
0.9918Penobscot County, ME12700
Barnstable Town, MA
1.2611
1.1722Barnstable County, MA12940
Baton Rouge, LA
0.8009
0.8590Ascension Parish, LAEast Baton Rouge Parish, LAEast Feliciana Parish, LAIberville Parish, LALivingston Parish, LAPointe Coupee Parish, LASt. Helena Parish, LAWest Baton Rouge Parish, LAWest Feliciana Parish, LA12980
Battle Creek, MI
1.0052
1.0036Calhoun County, MI13020
Bay City, MI
0.9394
0.9581Bay County, MI13140
Beaumont-Port Arthur, TX
0.8615
0.9029Hardin County, TXJefferson County, TXOrange County, TX13380
Bellingham, WA
1.1257
1.0845Whatcom County, WA13460
Bend, OR
1.0586
1.0398Deschutes County, OR13644
1
                                 Bethesda-Gaithersburg-Frederick, MD
1.1016
1.0685Frederick County, MDMontgomery County, MD13740
Billings, MT
0.8870
0.9212Carbon County, MTYellowstone County, MT13780
Binghamton, NY
0.9068
0.9352Broome County, NYTioga County, NY13820
1
                                 Birmingham-Hoover, AL
0.8855
0.9201Bibb County, ALBlount County, ALChilton County, ALJefferson County, ALSt. Clair County, ALShelby County, ALWalker County, AL( print page 47506)13900
Bismarck, ND
0.7311
0.8070Burleigh County, NDMorton County, ND13980
Blacksburg-Christiansburg-Radford, VA
0.8129
0.8677Giles County, VAMontgomery County, VAPulaski County, VARadford City, VA14020
Bloomington, INGreene County, INMonroe County, INOwen County, IN
0.9323
0.953114060
Bloomington-Normal, IL
0.9483
0.9643McLean County, IL14260
Boise City-Nampa, ID
0.9496
0.9652Ada County, IDBoise County, IDCanyon County, IDGem County, IDOwyhee County, ID14484
1
                                 Boston-Quincy, MA
1.1843
1.1228Norfolk County, MAPlymouth County, MASuffolk County, MA14500
Boulder, CO
1.0109
1.0075Boulder County, CO14540
Bowling Green, KY
0.8085
0.8645Edmonson County, KYWarren County, KY14740
Bremerton-Silverdale, WA
1.0820
1.0555Kitsap County, WA14860
Bridgeport-Stamford-Norwalk, CT
1.2778
1.1828Fairfield County, CT15180
Brownsville-Harlingen, TX
0.9192
0.9439Cameron County, TX15260
Brunswick, GA
0.9764
0.9838Brantley County, GAGlynn County, GAMcIntosh County, GA15380
1
                                 Buffalo-Niagara Falls, NY
0.9588
0.9716Erie County, NYNiagara County, NY15500
2
                                 Burlington, NC
0.8603
0.9021Alamance County, NC15540
2
                                 Burlington-South Burlington, VT
1.0387
1.0263Chittenden County, VTFranklin County, VTGrand Isle County, VT15764
1
                                 Cambridge-Newton-Framingham, MA
1.1216
1.0818Middlesex County, MA15804
1,2
                                 Camden, NJ
1.1616
1.1080Burlington County, NJCamden County, NJGloucester County, NJ15940
Canton-Massillon, OH
0.8917
0.9245Carroll County, OHStark County, OH15980
Cape Coral-Fort Myers, FL
0.9485
0.9644Lee County, FL16180
2
                                 Carson City, NV
0.9701
0.9794Carson City, NV16220
Casper, WY
0.9270
0.9494Natrona County, WY16300
Cedar Rapids, IA
0.8684
0.9079Benton County, IAJones County, IALinn County, IA16580
Champaign-Urbana, IL
0.9315
0.9526Champaign County, ILFord County, IL( print page 47507)Piatt County, IL16620
Charleston, WV
0.8393
0.8869Boone County, WVClay County, WVKanawha County, WVLincoln County, WVPutnam County, WV16700
Charleston-North Charleston, SC
0.9101
0.9375Berkeley County, SCCharleston County, SCDorchester County, SC16740
1
                                 Charlotte-Gastonia-Concord, NC-SC
0.9505
0.9658Anson County, NCCabarrus County, NCGaston County, NCMecklenburg County, NCUnion County, NCYork County, SC16820
Charlottesville, VA
0.9160
0.9417Albemarle County, VAFluvanna County, VAGreene County, VANelson County, VACharlottesville City, VA16860
Chattanooga, TN-GA
0.8962
0.9277Catoosa County, GADade County, GAWalker County, GAHamilton County, TNMarion County, TNSequatchie County, TN16940
Cheyenne, WY
0.9204
0.9448Laramie County, WY16974
1
                                 Chicago-Naperville-Joliet, IL
1.0588
1.0399Cook County, ILDeKalb County, ILDuPage County, ILGrundy County, ILKane County, ILKendall County, ILMcHenry County, ILWill County, IL17020
2
                                 Chico, CA
1.1735
1.1158Butte County, CA17140
1
                                 Cincinnati-Middletown, OH-KY-IN
0.9661
0.9767Dearborn County, INFranklin County, INOhio County, INBoone County, KYBracken County, KYCampbell County, KYGallatin County, KYGrant County, KYKenton County, KYPendleton County, KYBrown County, OHButler County, OHClermont County, OHHamilton County, OHWarren County, OH17300
Clarksville, TN-KY
0.8218
0.8742Christian County, KYTrigg County, KYMontgomery County, TNStewart County, TN17420
Cleveland, TN
0.8171
0.8708Bradley County, TNPolk County, TN17460
1
                                 Cleveland-Elyria-Mentor, OH
0.9345
0.9547Cuyahoga County, OH( print page 47508)Geauga County, OHLake County, OHLorain County, OH Medina County, OH17660
Coeur d'Alene, ID
0.9355
0.9554Kootenai County, ID17780
College Station-Bryan, TX
0.9171
0.9425Brazos County, TXBurleson County, TXRobertson County, TX17820
Colorado Springs, CO
0.9466
0.9631El Paso County, COTeller County, CO17860
Columbia, MO
0.8537
0.8973Boone County, MOHoward County, MO17900
Columbia, SC
0.8829
0.9182Calhoun County, SCFairfield County, SCKershaw County, SCLexington County, SCRichland County, SCSaluda County, SC17980
Columbus, GA-AL
0.9019
0.9317Russell County, ALChattahoochee County, GAHarris County, GAMarion County, GAMuscogee County, GA18020
Columbus, IN
0.9625
0.9742Bartholomew County, IN18140
1
                                 Columbus, OH
1.0024
1.0016Delaware County, OHFairfield County, OHFranklin County, OHLicking County, OHMadison County, OHMorrow County, OHPickaway County, OHUnion County, OH18580
Corpus Christi, TX
0.8456
0.8915Aransas County, TXNueces County, TXSan Patricio County, TX18700
Corvallis, OR
1.0701
1.0475Benton County, OR19060
2
                                 Cumberland, MD-WV (MD Hospitals)
0.8911
0.9241Allegany County, MDMineral County, WV19060
Cumberland, MD-WV (WV Hospitals)
0.7962
0.8555Allegany County, MDMineral County, WV19124
1
                                 Dallas-Plano-Irving, TX
0.9785
0.9852Collin County, TXDallas County, TXDelta County, TXDenton County, TXEllis County, TXHunt County, TXKaufman County, TXRockwall County, TX19140
Dalton, GA
0.8582
0.9006Murray County, GAWhitfield County, GA19180
Danville, IL
0.9244
0.9476Vermilion County, IL19260
Danville, VA
0.8296
0.8799Pittsylvania County, VADanville City, VA19340
Davenport-Moline-Rock Island, IA-IL
0.8893
0.9228Henry County, IL( print page 47509)Mercer County, ILRock Island County, ILScott County, IA19380
Dayton, OH
0.9278
0.9500Greene County, OHMiami County, OHMontgomery County, OHPreble County, OH19460
Decatur, AL
0.7832
0.8459Lawrence County, ALMorgan County, AL19500
2
                                 Decatur, ILMacon County, IL0.83450.883519660
Deltona-Daytona Beach-Ormond Beach, FL
0.8943
0.9264Volusia County, FL19740
1
                                 Denver-Aurora, CO
1.0454
1.0309Adams County, COArapahoe County, COBroomfield County, COClear Creek County, CODenver County, CODouglas County, COElbert County, COGilpin County, COJefferson County, COPark County, CO19780
Des Moines-West Des Moines, IA
0.9157
0.9415Dallas County, IAGuthrie County, IAMadison County, IAPolk County, IAWarren County, IA19804
1
                                 Detroit-Livonia-Dearborn, MI
1.0095
1.0065Wayne County, MI20020
2
                                 Dothan, AL
0.7567
0.8262Geneva County, ALHenry County, ALHouston County, AL20100
Dover, DE
1.0396
1.0270Kent County, DE20220
Dubuque, IA
0.8875
0.9215Dubuque County, IA20260
Duluth, MN-WI
1.0081
1.0055Carlton County, MNSt. Louis County, MNDouglas County, WI20500
Durham, NC
0.9738
0.9820Chatham County, NCDurham County, NCOrange County, NCPerson County, NC20740
2
                                 Eau Claire, WI
0.968
40.9783Chippewa County, WIEau Claire County, WI20764
1,2
                                 Edison, NJ
1.1616
1.1080Middlesex County, NJMonmouth County, NJOcean County, NJSomerset County, NJ20940
2
                                 El Centro, CA
1.1735
1.1158Imperial County, CA21060
Elizabethtown, KY
0.8617
0.9031Hardin County, KYLarue County, KY21140
Elkhart-Goshen, IN
0.9540
0.9683Elkhart County, IN21300
2
                                 Elmira, NY
0.8416
0.8886Chemung County, NY21340
El Paso, TX
0.9140
0.9403El Paso County, TX( print page 47510)21500
Erie, PA
0.8503
0.8949Erie County, PA21660
Eugene-Springfield, OR
1.1002
1.0676Lane County, OR21780
2
                                 Evansville, IN-KY (IN Hospitals)
0.8568
0.8996Gibson County, INPosey County, INVanderburgh County, INWarrick County, INHenderson County, KYWebster County, KY21780
Evansville, IN-KY (KY Hospitals)
0.8465
0.8922Gibson County, INPosey County, INVanderburgh County, INWarrick County, INHenderson County, KYWebster County, KY21820
2
                                 Fairbanks, AK
1.2083
1.1383Fairbanks North Star Borough, AK21940
Fajardo, PR
0.4365
0.5668Ceiba Municipio, PRFajardo Municipio, PRLuquillo Municipio, PR22020
2
                                 Fargo, ND-MN (MN Hospitals)
0.9113
0.9384Clay County, MNCass County, ND22020
Fargo, ND-MN (ND Hospitals)
0.7943
0.8541Clay County, MNCass County, ND22140
Farmington, NM
0.9282
0.9503San Juan County, NM22180
Fayetteville, NC
0.9917
0.9943Cumberland County, NCHoke County, NC22220
Fayetteville-Springdale-Rogers, AR-MO
0.8871
0.9212Benton County, ARMadison County, ARWashington County, ARMcDonald County, MO22380
Flagstaff, AZ
1.1551
1.1038Coconino County, AZ22420
Flint, MI
1.1012
1.0682Genesee County, MI22500
2
                                 Florence, SC
0.8707
0.9095Darlington County, SCFlorence County, SC22520
Florence-Muscle Shoals, AL
0.7692
0.8355Colbert County, ALLauderdale County, AL22540
Fond du Lac, WI
0.9887
0.9922Fond du Lac County, WI22660
Fort Collins-Loveland, CO
0.9579
0.9710Larimer County, CO22744
1
                                 Fort Lauderdale-Pompano Beach-Deerfield Beach, FL
1.0247
1.0168Broward County, FL22900
Fort Smith, AR-OK
0.8052
0.8621Crawford County, ARFranklin County, ARSebastian County, ARLe Flore County, OKSequoyah County, OK23020
2
                                 Fort Walton Beach-Crestview-Destin, FL
0.8733
0.9114Okaloosa County, FL23060
Fort Wayne, IN
0.9041
0.9333Allen County, INWells County, INWhitley County, IN23104
1
                                 Fort Worth-Arlington, TX
0.9636
0.9749Johnson County, TX( print page 47511)Parker County, TXTarrant County, TXWise County, TX23420
2
                                 Fresno, CA
1.1735
1.1158Fresno County, CA23460
Gadsden, AL
0.8144
0.8688Etowah County, AL23540
Gainesville, FL
0.9301
0.9516Alachua County, FLGilchrist County, FL23580
Gainesville, GA
0.9418
0.9598Hall County, GA23844
Gary, IN
0.9241
0.9474Jasper County, INLake County, INNewton County, INPorter County, IN24020
Glens Falls, NY
0.8522
0.8963Warren County, NYWashington County, NY24140
Goldsboro, NC
0.9271
0.9495Wayne County, NC24220
2
                                 Grand Forks, ND-MN (MN Hospitals)
0.9113
0.9384Polk County, MNGrand Forks County, ND24220
Grand Forks, ND-MN (ND Hospitals)
0.8048
0.8618Polk County, MNGrand Forks County, ND24300
Grand Junction, CO
1.0135
1.0092Mesa County, CO24340
Grand Rapids-Wyoming, MI
0.9374
0.9567Barry County, MIIonia County, MIKent County, MINewaygo County, MI24500
Great Falls, MT
0.8761
0.9134Cascade County, MT24540
Greeley, CO
0.9996
0.9997Weld County, CO24580
2
                                 Green Bay, WI
0.9684
0.9783Brown County, WIKewaunee County, WIOconto County, WI24660
Greensboro-High Point, NC
0.9106
0.9379Guilford County, NCRandolph County, NCRockingham County, NC24780
Greenville, NC
0.9267
0.9492Greene County, NCPitt County, NC24860
Greenville-Mauldin-Easley, SC
0.9636
0.9749Greenville County, SCLaurens County, SCPickens County, SC25020
Guayama, PR
0.2944
0.4328Arroyo Municipio, PRGuayama Municipio, PRPatillas Municipio, PR25060
Gulfport-Biloxi, MS
0.8607
0.9024Hancock County, MSHarrison County, MSStone County, MS25180
Hagerstown-Martinsburg, MD-WV
0.9255
0.9484Washington County, MDBerkeley County, WVMorgan County, WV25260
2
                                 Hanford-Corcoran, CA
1.1735
1.1158Kings County, CA25420
Harrisburg-Carlisle, PA
0.9230
0.9466Cumberland County, PA( print page 47512)Dauphin County, PAPerry County, PA25500
Harrisonburg, VA
0.8895
0.9229Rockingham County, VAHarrisonburg City, VA25540
1,2
                                 Hartford-West Hartford-East Hartford, CT
1.2432
1.1608Hartford County, CTMiddlesex County, CTTolland County, CT25620
2
                                 Hattiesburg, MS
0.7752
0.8400Forrest County, MSLamar County, MSPerry County, MS25860
Hickory-Lenoir-Morganton, NC
0.8972
0.9284Alexander County, NCBurke County, NCCaldwell County, NCCatawba County, NC25980
Hinesville-Fort Stewart, GA
0.7861
0.8481Liberty County, GA Long County, GA26100
Holland-Grand Haven, MI
0.9063
0.9348Ottawa County, MI26180
Honolulu, HI
1.1305
1.0876Honolulu County, HI26300
Hot Springs, AR
0.9105
0.9378Garland County, AR26380
Houma-Bayou Cane-Thibodaux, LA
0.7975
0.8565Lafourche Parish, LATerrebonne Parish, LA26420
1
                                 Houston-Sugar Land-Baytown, TX
0.9996
0.9997Austin County, TXBrazoria County, TXChambers County, TXFort Bend County, TXGalveston County, TXHarris County, TXLiberty County, TXMontgomery County, TXSan Jacinto County, TXWaller County, TX26580
Huntington-Ashland, WV-KY-OH
0.8878
0.9217Boyd County, KYGreenup County, KYLawrence County, OHCabell County, WVWayne County, WV26620
Huntsville, AL
0.9017
0.9316Limestone County, ALMadison County, AL26820
Idaho Falls, ID
0.9272
0.9496Bonneville County, IDJefferson County, ID26900
1
                                 Indianapolis-Carmel, IN
0.9717
0.9805Boone County, INBrown County, INHamilton County, INHancock County, INHendricks County, INJohnson County, INMarion County, INMorgan County, INPutnam County, INShelby County, IN26980
Iowa City, IA
0.9423
0.9601Johnson County, IAWashington County, IA27060
Ithaca, NY
0.9709
0.9800Tompkins County, NY27100
Jackson, MI
0.9460
0.9627Jackson County, MI( print page 47513)27140
Jackson, MS
0.7950
0.8546Copiah County, MSHinds County, MSMadison County, MSRankin County, MSSimpson County, MS27180
Jackson, TN
0.8591
0.9012Chester County, TNMadison County, TN27260
1
                                 Jacksonville, FL
0.9089
0.9367Baker County, FLClay County, FLDuval County, FLNassau County, FLSt. Johns County, FL27340
2
                                 Jacksonville, NC
0.8603
0.9021Onslow County, NC27500
Janesville, WI
0.9852
0.9898Rock County, WI27620
Jefferson City, MO
0.8702
0.9092Callaway County, MOCole County, MOMoniteau County, MOOsage County, MO27740
2
                                 Johnson City, TN
0.7917
0.8522Carter County, TNUnicoi County, TNWashington County, TN27780
2
                                 Johnstown, PA
0.8357
0.8843Cambria County, PA27860
Jonesboro, AR
0.8503
0.8949Craighead County, ARPoinsett County, AR27900
Joplin, MO
0.9211
0.9453Jasper County, MONewton County, MO28020
Kalamazoo-Portage, MI
1.0500
1.0340Kalamazoo County, MIVan Buren County, MI28100
Kankakee-Bradley, IL V
1.0144
1.0098Kankakee County, IL28140
1
                                 Kansas City, MO-KS
0.9318
0.9528Franklin County, KSJohnson County, KSLeavenworth County, KSLinn County, KSMiami County, KSWyandotte County, KSBates County, MOCaldwell County, MOCass County, MOClay County, MOClinton County, MOJackson County, MOLafayette County, MOPlatte County, MORay County, MO28420
2
                                 Kennewick-Richland-Pasco, WA
1.0558
1.0379Benton County, WAFranklin County, WA28660
Killeen-Temple-Fort Hood, TX
0.8303
0.8804Bell County, TXCoryell County, TXLampasas County, TX28700
2
                                 Kingsport-Bristol-Bristol, TN-VA (VA Hospitals)
0.8073
0.8636Hawkins County, TNSullivan County, TNBristol City, VAScott County, VAWashington County, VA( print page 47514)28700
2
                                 Kingsport-Bristol-Bristol, TN-VA (TN Hospitals)Hawkins County, TN
0.7917
0.8522Sullivan County, TNBristol City, VAScott County, VAWashington County, VA28740
Kingston, NY
0.9578
0.9709Ulster County, NY28940
Knoxville, TN
0.8012
0.8592Anderson County, TNBlount County, TNKnox County, TNLoudon County, TNUnion County, TN29020
Kokomo, IN
0.9463
0.9629Howard County, INTipton County, IN29100
La Crosse, WI-MN
0.9698
0.9792Houston County, MNLa Crosse County, WI29140
Lafayette, IN
0.8676
0.9073Benton County, INCarroll County, INTippecanoe County, IN29180
Lafayette, LA
0.8322
0.8818Lafayette Parish, LASt. Martin Parish, LA29340
Lake Charles, LA
0.7783
0.8423Calcasieu Parish, LACameron Parish, LA29404
Lake County-Kenosha County, IL-WI
1.0583
1.0396Lake County, ILKenosha County, WI29420
Lake Havasu City-Kingman, AZ
0.9333
0.9538Mohave County, AZ29460
Lakeland, FL
0.8834
0.9186Polk County, FL29540
Lancaster, PA
0.9650
0.9759Lancaster County, PA29620
Lansing-East Lansing, MI
1.0047
1.0032Clinton County, MIEaton County, MIIngham County, MI29700
Laredo, TX
0.8501
0.8947Webb County, TX29740
2
                                 Las Cruces, NM
0.8965
0.9279Dona Ana County, NM29820
1
                                 Las Vegas-Paradise, NV
1.1452
1.0973Clark County, NV29940
Lawrence, KS
0.8170
0.8707Douglas County, KS30020
Lawton, OK
0.8405
0.8878Comanche County, OK30140
2
                                 Lebanon, PA
0.8357
0.8843Lebanon County, PA30300
2
                                 Lewiston, ID-WA (WA Hospitals)
1.0558
1.0379Nez Perce County, IDAsotin County, WA30300
Lewiston, ID-WA (ID Hospitals)
0.9225
0.9463Nez Perce County, IDAsotin County, WA30340
Lewiston-Auburn, ME
0.9289
0.9507Androscoggin County, ME30460
Lexington-Fayette, KY
0.9002
0.9305Bourbon County, KYClark County, KYFayette County, KYJessamine County, KYScott County, KYWoodford County, KY( print page 47515)30620
Lima, OH
0.9307
0.9520Allen County, OH30700
Lincoln, NE
0.9872
0.9912Lancaster County, NESeward County, NE30780
Little Rock-North Little Rock-Conway, AR
0.8960
0.9276Faulkner County, ARGrant County, ARLonoke County, ARPerry County, ARPulaski County, ARSaline County, AR30860
Logan, UT-ID
0.9214
0.9455Franklin County, IDCache County, UT30980
Longview, TX
0.8871
0.9212Gregg County, TXRusk County, TXUpshur County, TX31020
Longview, WA
1.1027
1.0692Cowlitz County, WA31084
1,2
                                 Los Angeles-Long Beach-Glendale, CA
1.1735
1.1158Los Angeles County, CA31140
1
                                 Louisville-Jefferson County, KY-IN
0.9029
0.9324Clark County, INFloyd County, INHarrison County, INWashington County, INBullitt County, KYHenry County, KYJefferson County, KYMeade County, KYNelson County, KYOldham County, KYShelby County, KYSpencer County, KYTrimble County, KY31180
Lubbock, TX
0.8641
0.9048Crosby County, TXLubbock County, TX31340
Lynchburg, VA
0.8605
0.9022Amherst County, VAAppomattox County, VABedford County, VACampbell County, VABedford City, VALynchburg City, VA31420
Macon, GA
0.9748
0.9827Bibb County, GACrawford County, GAJones County, GAMonroe County, GATwiggs County, GA31460
2
                                 Madera, CA
1.1735
1.1158Madera County, CA31540
Madison, WIColumbia County, WI
1.1176
1.0791Dane County, WIIowa County, WI31700
2
                                 Manchester-Nashua, NH
1.1259
1.0846Hillsborough County, NH31900
Mansfield, OH
0.9209
0.9451Richland County, OH32420
Mayagnez, PR
0.3657
0.5021Hormigueros Municipio, PRMayagu
                                
                                ez Municipio, PR32580
McAllen-Edinburg-Mission, TX
0.9135
0.9399Hidalgo County, TX32780
Medford, OR
1.0297
1.0202Jackson County, OR( print page 47516)32820
1
                                 Memphis, TN-MS-AR
0.9313
0.9524Crittenden County, ARDeSoto County, MSMarshall County, MSTate County, MSTunica County, MSFayette County, TNShelby County, TNTipton County, TN32900
Merced, CA
1.1980
1.1317Merced County, CA33124
1
                                 Miami-Miami Beach-Kendall, FL
1.0008
1.0005Miami-Dade County, FL33140
Michigan City-La Porte, IN
0.8786
0.9152LaPorte County, IN33260
Midland, TX
0.9711
0.9801Midland County, TX33340
1
                                 Milwaukee-Waukesha-West Allis, WI
1.0295
1.0201Milwaukee County, WIOzaukee County, WIWashington County, WIWaukesha County, WI33460
1
                                 Minneapolis-St. Paul-Bloomington, MN-WI
1.0896
1.0605Anoka County, MNCarver County, MNChisago County, MNDakota County, MNHennepin County, MNIsanti County, MNRamsey County, MNScott County, MNSherburne County, MNWashington County, MNWright County, MNPierce County, WISt. Croix County, WI33540
Missoula, MT
0.8738
0.9118Missoula County, MT33660
Mobile, AL
0.7947
0.8544Mobile County, AL33700
Modesto, CA
1.2019
1.1342Stanislaus County, CA33740
Monroe, LA
0.7869
0.8486Ouachita Parish, LAUnion Parish, LA33780
Monroe, MI
0.9469
0.9633Monroe County, MI33860
Montgomery, AL
0.8111
0.8664Autauga County, ALElmore County, ALLowndes County, ALMontgomery County, AL34060
Morgantown, WV
0.8407
0.8880Monongalia County, WVPreston County, WV34100
2
                                 Morristown, TN
0.7917
0.8522Grainger County, TNHamblen County, TNJefferson County, TN34580
2
                                 Mount Vernon-Anacortes, WA
1.0558
1.0379Skagit County, WA34620
2
                                 Muncie, IN
0.858
0.8996Delaware County, IN34740
Muskegon-Norton Shores, MI
0.9968
0.9978Muskegon County, MI34820
2
                                 Myrtle Beach-Conway-North Myrtle Beach, SC
0.8707
0.9095Horry County, SC34900
Napa, CA
1.3959
1.2566Napa County, CA34940
Naples-Marco Island, FL
0.9618
0.9737( print page 47517)Collier County, FL34980
1
                                 Nashville-Davidson-Murfreesboro-Franklin, TN
0.9618
0.9737Cannon County, TNCheatham County, TNDavidson County, TNDickson County, TNHickman County, TNMacon County, TNRobertson County, TNRutherford County, TNSmith County, TNSumner County, TNTrousdale County, TNWilliamson County, TNWilson County, TN35004
1
                                 Nassau-Suffolk, NY
1.2877
1.1891Nassau County, NYSuffolk County, NY35084
1
                                 Newark-Union, NJ-PA
1.1673
1.1117Essex County, NJHunterdon County, NJMorris County, NJSussex County, NJUnion County, NJPike County, PA35300
2
                                 New Haven-Milford, CT
1.2432
1.1608New Haven County, CT35380
1
                                 New Orleans-Metairie-Kenner, LA
0.8711
0.9098Jefferson Parish, LAOrleans Parish, LAPlaquemines Parish, LASt. Bernard Parish, LASt. Charles Parish, LASt. John the Baptist Parish, LASt. Tammany Parish, LA35644
1
                                 New York-White Plains-Wayne, NY-NJ
1.3229
1.2112Bergen County, NJHudson County, NJPassaic County, NJBronx County, NYKings County, NYNew York County, NYPutnam County, NYQueens County, NYRichmond County, NYRockland County, NYWestchester County, NY35660
Niles-Benton Harbor, MI
0.9133
0.9398Berrien County, MI35980
2
                                 Norwich-New London, CT
1.2432
1.1608New London County, CT36084
1
                                 Oakland-Fremont-Hayward, CA
1.5343
1.3406Alameda County, CAContra Costa County, CA36100
2
                                 Ocala, FL
0.8733
0.9114Marion County, FL36140
2
                                 Ocean City, NJ
1.1616
1.1080Cape May County, NJ36220
Odessa, TX
0.9954
0.9968Ector County, TX36260
Ogden-Clearfield, UT
0.9053
0.9341Davis County, UTMorgan County, UTWeber County, UT36420
1
                                 Oklahoma City, OK
0.8754
0.9129Canadian County, OKCleveland County, OKGrady County, OKLincoln County, OKLogan County, OK( print page 47518)McClain County, OKOklahoma County, OK36500
Olympia, WA
1.1419
1.0951Thurston County, WA36540
Omaha-Council Bluffs, NE-IA
0.9473
0.9636Harrison County, IAMills County, IAPottawattamie County, IACass County, NEDouglas County, NESarpy County, NESaunders County, NEWashington County, NE36740
1
                                 Orlando-Kissimmee, FL
0.9284
0.9504Lake County, FLOrange County, FLOsceola County, FLSeminole County, FL36780
2
                                 Oshkosh-Neenah, WI
0.9684
0.9783Winnebago County, WI36980
Owensboro, KY
0.8697
0.9088Daviess County, KYHancock County, KYMcLean County, KY37100
2
                                 Oxnard-Thousand Oaks-Ventura, CA
1.1735
1.1158Ventura County, CA37340
Palm Bay-Melbourne-Titusville, FL
0.9380
0.9571Brevard County, FL37380
Palm Coast, FL
0.8737
0.9117Flager County, FL37460
2
                                 Panama City-Lynn Haven, FL
0.8733
0.9114Bay County, FL37620
2
                                 Parkersburg-Marietta-Vienna, WV-OH (OH Hospitals)Washington County, OH
0.8696
0.9088Pleasants County, WVWirt County, WVWood County, WV37620
Parkersburg-Marietta-Vienna, WV-OH (WV Hospitals)
0.8258
0.8772Washington County, OHPleasants County, WVWirt County, WVWood County, WV37700
Pascagoula, MS
0.8539
0.8975George County, MSJackson County, MS37764
Peabody, MA
1.0599
1.0406Essex County, MA37860
2
                                 Pensacola-Ferry Pass-Brent, FL
0.8733
0.9114Escambia County, FLSanta Rosa County, FL37900
Peoria, IL
0.9385
0.9575Marshall County, ILPeoria County, ILStark County, ILTazewell County, ILWoodford County, IL37964
1
                                 Philadelphia, PA
1.0892
1.0603Bucks County, PAChester County, PADelaware County, PAMontgomery County, PAPhiladelphia County, PA38060
1
                                 Phoenix-Mesa-Scottsdale, AZ
1.0110
1.0075Maricopa County, AZPinal County, AZ38220
Pine Bluff, AR
0.8152Cleveland County, ARJefferson County, ARLincoln County, AR 0.869438300
1
                                 Pittsburgh, PA
0.8390( print page 47519)Allegheny County, PAArmstrong County, PABeaver County, PAButler County, PAFayette County, PAWashington County, PAWestmoreland County, PA 0.886738340
Pittsfield, MA
1.0052
1.0036Berkshire County, MA38540
Pocatello, ID
0.9186
0.9435Bannock County, IDPower County, ID38660
Ponce, PR
0.4262
0.5576Juana Dfaz Municipio, PRPonce Municipio, PRVillalba Municipio, PR38860
Portland-South Portland-Biddeford, ME
0.9991
0.9994Cumberland County, MESagadahoc County, MEYork County, ME38900
1
                                 Portland-Vancouver-Beaverton, OR-WA
1.1226
1.0824Clackamas County, ORColumbia County, ORMultnomah County, ORWashington County, ORYamhill County, ORClark County, WASkamania County, WA38940
Port St. Lucie, FL
1.0035
1.0024Martin County, FLSt. Lucie County, FL39100
Poughkeepsie-Newburgh-Middletown, NY
1.0982
1.0662Dutchess County, NYOrange County, NY39140
Prescott, AZ
l0.9961
0.9973Yavapai County, AZ39300
1
                                 Providence-New Bedford-Fall River, RI-MA
1.0532
1.0361Bristol County, MABristol County, RIKent County, RINewport County, RIProvidence County, RIWashington County, RI39340
Provo-Orem, UT
0.9480
0.9641Juab County, UTUtah County, UT39380
2
                                 Pueblo, CO
0.9447
0.9618Pueblo County, CO39460
Punta Gorda, FL
0.9558
0.9695Charlotte County, FL39540
2
                                 Racine, WI
0.9684
0.9783Racine County, WI39580
Raleigh-Cary, NC
0.9663
0.9768Franklin County, NCJohnston County, NCWake County, NC39660
Rapid City, SD
0.8685
0.9080Meade County, SDPennington County, SD39740
Reading, PA
0.9413
0.9594Berks County, PA39820
Redding, CA
1.2809
1.1847Shasta County, CA39900
Reno-Sparks, NV
1.1062
1.0716Storey County, NVWashoe County, NV40060
1
                                 Richmond, VA
0.9232
0.9467Amelia County, VACaroline County, VACharles City County, VA( print page 47520)Chesterfield County, VACumberland County, VADinwiddie County, VAGoochland County, VAHanover County, VAHenrico County, VAKing and Queen County, VAKing William County, VALouisa County, VANew Kent County, VAPowhatan County, VAPrince George County, VASussex County, VAColonial Heights City, VAHopewell City, VAPetersburg City, VARichmond City, VA40140
1,2
                                 Riverside-San Bernardino-Ontario, CA
1.1735
1.1158Riverside County, CASan Bernardino County, CA40220
Roanoke, VA
0.8888
0.9224Botetourt County, VACraig County, VAFranklin County, VARoanoke County, VARoanoke City, VASalem City, VA40340
Rochester, MN
1.0490
1.0333Dodge County, MNOlmsted County, MNWabasha County, MN40380
1
                                 Rochester, NY
0.8918
0.9246Livingston County, NYMonroe County, NYOntario County, NYOrleans County, NYWayne County, NY40420
Rockford, IL
0.9804
0.9865Boone County, ILWinnebago County, IL40484
2
                                 Rockingham County-Strafford County, NH
1.1259
1.0846Rockingham County, NHStrafford County, NH40580
Rocky Mount, NC
0.9007
0.9309Edgecombe County, NCNash County, NC40660
Rome, GA
0.9547
0.9688Floyd County, GA40900
1
                                 Sacramento—Arden-Arcade—Roseville, CAEl Dorado County, CA
1.3067
1.2010Placer County, CASacramento County, CAYolo County, CA40980
Saginaw-Saginaw Township North, MI
0.9122
0.9390Saginaw County, MI41060
St. Cloud, MN
1.1058
1.0713Benton County, MNStearns County, MN41100
St. George, UT
0.9535
0.9679Washington County, UT41140
St. Joseph, MO-KS
0.8826
0.9180Doniphan County, KSAndrew County, MOBuchanan County, MODeKalb County, MO41180
1
                                 St. Louis, MO-IL
0.8982
0.9291Bond County, ILCalhoun County, ILClinton County, ILJersey County, IL( print page 47521)Macoupin County, ILMadison County, ILMonroe County, ILSt. Clair County, ILCrawford County, MOFranklin County, MOJefferson County, MOLincoln County, MOSt. Charles County, MOSt. Louis County, MOWarren County, MOWashington County, MOSt. Louis City, MO41420
Salem, OR
1.0397
1.0270Marion County, ORPolk County, OR41500
Salinas, CA
1.4593
1.2954Monterey County, CA41540
2
                                 Salisbury, MD
0.8911
0.9241Somerset County, MDWicomico County, MD41620
Salt Lake City, UT
0.9473
0.9636Salt Lake County, UTSummit County, UTTooele County, UT41660
San Angelo, TX
0.8658
0.9060Irion County, TXTom Green County, TX41700
1
                                 San Antonio, TX
0.8895
0.9229Atascosa County, TXBandera County, TXBexar County, TXComal County, TXGuadalupe County, TXKendall County, TXMedina County, TXWilson County, TX41740
1,2
                                 San Diego-Carlsbad-San Marcos, CA
1.1735
1.1158San Diego County, CA41780
Sandusky, OH
0.8755
0.9130Erie County, OH41884
1
                                 San Francisco-San Mateo-Redwood City, CA
1.4800
1.3080Marin County, CASan Francisco County, CASan Mateo County, CA41900
San Germa
                                
                                n-Cabo Rojo, PR
0.4603
0.5878Cabo Rojo Municipio, PRLajas Municipio, PR Sabana Grande Municipio, PRSan Germa
                                
                                n Municipio, PR41940
1
                                 San Jose-Sunnyvale-Santa Clara, CA
1.5439
1.3464San Benito County, CASanta Clara County, CA41980
1
                                 San Juan-Caguas-Guaynabo, PR
0.4526
0.5811Aguas Buenas Municipio, PRAibonito Municipio, PRArecibo Municipio, PRBarceloneta Municipio, PRBarranquitas Municipio, PRBayamo
                                
                                n Municipio, PRCaguas Municipio, PRCamuy Municipio, PRCano
                                
                                vanas Municipio, PRCarolina Municipio, PRCatan
                                
                                o Municipio, PRCayey Municipio, PRCiales Municipio, PRCidra Municipio, PRComerio Municipio, PRCorozal Municipio, PRDorado Municipio, PR( print page 47522)Florida Municipio, PRGuaynabo Municipio, PRGurabo Municipio, PRHatillo Municipio, PRHumacao Municipio, PRJuncos Municipio, PRLas Piedras Municipio, PRLofza Municipio, PRManati Municipio, PRMaunabo Municipio, PRMorovis Municipio, PRNaguabo Municipio, PRNaranjito Municipio, PROrocovis Municipio, PRQuebradillas Municipio, PRRio Grande Municipio, PRSan Juan Municipio, PRSan Lorenzo Municipio, PRToa Alta Municipio, PRToa Baja Municipio, PRTrujillo Alto Municipio, PRVega Alta Municipio, PRVega Baja Municipio, PR Yabucoa Municipio, PR42020
San Luis Obispo-Paso Robles, CA
1.1951
1.1298San Luis Obispo County, CA42044
1,2
                                 Santa Ana-Anaheim-Irvine, CA
1.1735
1.1158Orange County, CA42060
2
                                 Santa Barbara-Santa Maria-Goleta, CA
1.1735
1.1158Santa Barbara County, CA42100
Santa Cruz-Watsonville, CA
1.5667
1.3600Santa Cruz County, CA42140
Santa Fe, NM
1.0682
1.0462Santa Fe County, NM42220
Santa Rosa-Petaluma, CA
1.4469
1.2879Sonoma County, CA42260
Sarasota-Bradenton-Venice, FL
0.9770
0.9842Manatee County, FLSarasota County, FL42340
Savannah, GA
0.8890
0.9226Bryan County, GAChatham County, GAEffingham County, GA42540
2
                                 Scranton—Wilkes-Barre, PA
0.8357
0.8843Lackawanna County, PALuzerne County, PAWyoming County, PA42644
1
                                 Seattle-Bellevue-Everett, WA
1.1362
1.0914King County, WASnohomish County, WA42680
Sebastian-Vero Beach, FL
0.9703
0.9796Indian River County, FL43100
2
                                 Sheboygan, WI
0.9684
0.9783Sheboygan County, WI43300
Sherman-Denison, TX
0.8530
0.8968Grayson County, TX43340
Shreveport-Bossier City, LA
0.8551
0.8983Bossier Parish, LACaddo Parish, LADe Soto Parish, LA43580
Sioux City, IA-NE-SD
0.9083
0.9363Woodbury County, IADakota County, NEDixon County, NEUnion County, SD43620
Sioux Falls, SD
0.9553
0.9692Lincoln County, SDMcCook County, SDMinnehaha County, SDTurner County, SD43780
South Bend-Mishawaka, IN-MI
0.9643
0.9754( print page 47523)St. Joseph County, INCass County, MI43900
Spartanburg, SC
0.9395
0.9582Spartanburg County, SC44060
2
                                 Spokane, WA
1.0558
1.0379Spokane County, WA44100
Springfield, IL
0.8942
0.9263Menard County, ILSangamon County, IL44140
Springfield, MA
1.0450
1.0306Franklin County, MAHampden County, MAHampshire County, MA44180
Springfield, MO
0.8791
0.9155Christian County, MODallas County, MOGreene County, MOPolk County, MOWebster County, MO44220
2
                                 Springfield, OH
0.8696
0.9088Clark County, OH44300
State College, PA
0.8619
0.9032Centre County, PA44700
Stockton, CA
1.1809
1.1206San Joaquin County, CA44940
Sumter, SC
0.8898
0.9232Sumter County, SC45060
Syracuse, NY
0.9950
0.9966Madison County, NYOnondaga County, NYOswego County, NY45104
Tacoma, WA
1.0933
1.0630Pierce County, WA45220
Tallahassee, FL
0.9027
0.9323Gadsden County, FLJefferson County, FLLeon County, FLWakulla County, FL45300
1
                                 Tampa-St. Petersburg-Clearwater, FL
0.9170
0.9424Hernando County, FLHillsborough County, FLPasco County, FLPinellas County, FL45460
Terre Haute, IN
0.8823
0.9178Clay County, INSullivan County, INVermillion County, INVigo County, IN45500
2
                                 Texarkana, TX-Texarkana, AR (TX Hospitals)
0.8198
0.8728Miller County, ARBowie County, TX45500
Texarkana, TX-Texarkana, AR (AR Hospitals)
0.7781
0.8421Miller County, ARBowie County, TX45780
Toledo, OH
0.9268
0.9493Fulton County, OHLucas County, OHOttawa County, OHWood County, OH45820
Topeka, KS
0.8556
0.8987Jackson County, KSJefferson County, KSOsage County, KSShawnee County, KSWabaunsee County, KS45940
2
                                 Trenton-Ewing, NJ
1.1616
1.1080Mercer County, NJ46060
Tucson, AZ
0.9416
0.9596Pima County, AZ46140
Tulsa, OK
0.8498
0.8945( print page 47524)Creek County, OKOkmulgee County, OKOsage County, OKPawnee County, OKRogers County, OKTulsa County, OKWagoner County, OK46220
Tuscaloosa, AL
0.8530
0.8968Greene County, ALHale County, ALTuscaloosa County, AL46340
Tyler, TX
0.9181
0.9432Smith County, TX46540
Utica-Rome, NY
0.8774
0.9143Herkimer County, NYOneida County, NY46660
Valdosta, GABrooks County, GAEchols County, GALanier County, GALowndes County, GA
0.8204
0.873246700
Vallejo-Fairfield, CASolano County, CA
1.4432
1.285647020
2
                                 Victoria, TXCalhoun County, TXGoliad County, TXVictoria County, TX
0.8198
0.872847220
Vineland-Millville-Bridgeton, NJ
1.0647
1.0439Cumberland County, NJ47260
1
                                 Virginia Beach-Norfolk-Newport News, VA-NC
0.8777
0.9145Currituck County, NCGloucester County, VAIsle of Wight County, VAJames City County, VAMathews County, VASurry County, VAYork County, VAChesapeake City, VAHampton City, VANewport News City, VANorfolk City, VAPoquoson City, VAPortsmouth City, VASuffolk City, VAVirginia Beach City, VAWilliamsburg City, VA47300
2
                                 Visalia-Porterville, CA
1.1735
1.1158Tulare County, CA47380
Waco, TX
0.8593
0.9014McLennan County, TX47580
Warner Robins, GA
0.9613
0.9733Houston County, GA47644
1
                                 Warren-Troy-Farmington Hills, MI
1.0033
1.0023Lapeer County, MILivingston County, MIMacomb County, MIOakland County, MISt. Clair County, MI47894
1
                                 Washington-Arlington-Alexandria, DC-VA-MD-WV
1.0675
1.0457District of Columbia, DCCalvert County, MDCharles County, MDPrince George's County, MDArlington County, VAClarke County, VAFairfax County, VAFauquier County, VALoudoun County, VAPrince William County, VASpotsylvania County, VA( print page 47525)Stafford County, VAWarren County, VAAlexandria City, VAFairfax City, VAFalls Church City, VAFredericksburg City, VAManassas City, VAManassas Park City, VAJefferson County, WV47940
Waterloo-Cedar Falls, IA
0.8719
0.9104Black Hawk County, IABremer County, IAGrundy County, IA48140
Wausau, WI
1.0004
1.0003Marathon County, WI48260
2
                                 Weirton-Steubenville, WV-OH (OH Hospitals)
0.8696
0.9088Jefferson County, OHBrooke County, WVHancock County, WV48260
Weirton-Steubenville, WV-OH (WV Hospitals)
0.7889
0.8501Jefferson County, OHBrooke County, WVHancock County, WV48300
Wenatchee, WA
1.1275
1.0856Chelan County, WADouglas County, WA48424
1
                                 West Palm Beach-Boca Raton-Boynton Beach, FL
0.9576
0.9708Palm Beach County, FL48540
2
                                 Wheeling, WV-OH (OH Hospitals)
0.8696
0.9088Belmont County, OHMarshall County, WVOhio County, WV48540
2
                                 Wheeling, WV-OH (WV Hospitals)
0.7568
0.8263Belmont County, OHMarshall County, WVOhio County, WV48620
Wichita, KS
0.8938
0.9260Butler County, KSHarvey County, KSSedgwick County, KSSumner County, KS48660
Wichita Falls, TX
0.8203
0.8731Archer County, TXClay County, TXWichita County, TX48700
2
                                 Williamsport, PA
0.8357
0.8843Lycoming County, PA48864
Wilmington, DE-MD-NJ (DE, MD Hospitals)
1.0666
1.0451New Castle County, DECecil County, MDSalem County, NJ48864
2
                                 Wilmington, DE-MD-NJ (NJ Hospitals)
1.1616
1.1080New Castle County, DECecil County, MDSalem County, NJ48900
Wilmington, NC
0.9325
0.9533Brunswick County, NCNew Hanover County, NCPender County, NC49020
Winchester, VA-WV
0.9845
0.9894Frederick County, VAWinchester City, VAHampshire County, WV49180
Winston-Salem, NC
0.9078
0.9359Davie County, NCForsyth County, NCStokes County, NCYadkin County, NC49340
Worcester, MA
1.1354
1.0909Worcester County, MA( print page 47526)49420
2
                                 Yakima, WA
1.0558
1.0379Yakima County, WA49500
Yauco, PR
0.3200
0.4583Gua
                                
                                nica Municipio, PRGuayanilla Municipio, PRPen
                                
                                uelas Municipio, PRYauco Municipio, PR49620
York-Hanover, PA
0.9425
0.9603York County, PA49660
Youngstown-Warren-Boardman, OH-PA
0.8991
0.9298Mahoning County, OHTrumbull County, OHMercer County, PA49700
2
                                 Yuba City, CA
1.1735
1.1158Sutter County, CAYuba County, CA40740
Yuma, AZ
1.0085
1.0058Yuma County, AZ1
                             Large urban area.2
                             Hospitals geographically located in the area are assigned the statewide rural wage index for FY 2008. New Jersey floor is imputed as discussed in the FY 2005 IPPS final rule (69 FR 49109) and in section III.G.2 of the preamble in this final rule.
 Table 4B.—Wage Index and Capital Geographic Adjustment (GAF) for Rural Areas by CBSA—FY 2008
CBSA code
Nonurban area
Wage index
GAF01
Alabama
0.7567
0.826202
Alaska
1.2083
1.138303
Arizona
0.8854
0.920004
Arkansas
0.7516
0.822405
California
1.1735
1.115806
Colorado
0.9447
0.961807
Connecticut
1.2432
1.160808
Delaware
1.0104
1.007110
Florida
0.8733
0.911411
Georgia
0.7861
0.848112
Hawaii
1.0740
1.050113
Idaho
0.7818
0.844914
Illinois
0.8345
0.883515
Indiana
0.8568
0.899616
Iowa
0.8476
0.892917
Kansas
0.7979
0.856818
Kentucky
0.7810
0.844319
Louisiana
0.7586
0.827620
Maine
0.8408
0.888021
Maryland
0.8911
0.924122
Massachusetts
0.9705
0.979723
Michigan
0.8908
0.923924
Minnesota
0.9113
0.938425
Mississippi
0.7752
0.840026
Missouri
0.8153
0.869527
Montana
0.8335
0.882728
Nebraska
0.8846
0.919529
Nevada
0.9701
0.979430
New Hampshire
1.1259
1.084631
New Jersey1
1.1616
1.108032
New Mexico
0.8965
0.927933
New York
0.8416
0.888634
North Carolina
0.8603
0.902135
North Dakota
0.7309
0.806836
Ohio
0.8696
0.908837
Oklahoma
0.7701
0.836238
Oregon
0.9957
0.997139
Pennsylvania
0.8357
0.884340
Puerto Rico 141
Rhode Island 142
South Carolina
0.8707
0.909543
South Dakota
0.8343
0.883344
Tennessee
0.7917
0.8522( print page 47527)45
Texas
0.8198
0.872846
Utah
0.8214
0.874047
Vermont
1.0387
1.026349
Virginia
0.8073
0.863650
Washington
1.0558
1.037951
West Virginia
0.7568
0.826352
Wisconsin
0.9684
0.978353
Wyoming
0.9163
0.94191
                             All counties in the State or Territory are classified as urban.  New Jersey floor is imputed as discussed in the FY 2005 final rule (69 FR 49109) and in section III.G.2 of the preamble in this final rule.
 Table 4C.—Wage Index and Capital Geographic Adjustment Factor (GAF) for Hospitals That Are Reclassified bY CBSA—FY 2008
CBSA code
Area
Wage index
GAF10500
Albany, GA
0.8666
0.906610580
Albany-Schenectady-Troy, NY
0.8667
0.906710740
Albuquerque, NM
0.9725
0.981110780
Alexandria, LA
0.7977
0.856610900
Allentown-Bethlehem-Easton, PA-NJ
1.0003
1.000211100
Amarillo, TX
0.9151
0.941111180
Ames, IA
0.9222
0.946011260
Anchorage, AK
1.2083
1.138311460
Ann Arbor, MI
1.0143
1.009811500
Anniston-Oxford, AL
0.7975
0.856512060
Atlanta-Sandy Springs-Marietta, GA
0.9812
0.987112260
Augusta-Richmond County, GA-SC
0.9598
0.972312420
Austin-Round Rock, TX
0.9501
0.965612580
Baltimore-Towson, MD
1.0030
1.002112620
Bangor, ME
0.9881
0.991812940
Baton Rouge, LA
0.8009
0.859013020
Bay City, MI
0.9394
0.958113644
Bethesda-Gaithersburg-Frederick, MD
1.1016
1.068513780
Binghamton, NY
0.8775
0.914413820
Birmingham-Hoover, AL
0.8724
0.910813900
Bismarck, ND
0.7311
0.807013980
Blacksburg-Christiansburg-Radford, VA
0.7732
0.838514020
Bloomington, IN
0.8823
0.917814484
Boston-Quincy, MA
1.1303
1.087514740
Bremerton-Silverdale, WA
1.0820
1.055514860
Bridgeport-Stamford-Norwalk, CT
1.2341
1.154915380
Buffalo-Niagara Falls, NY
0.9588
0.971615540
Burlington-South Burlington, VT
0.9584
0.971315940
Canton-Massillon, OH
0.8806
0.916616180
Carson City, NV
0.9701
0.979416620
Charleston, WV
0.8393
0.886916700
Charleston-North Charleston, SC
0.9101
0.937516740
Charlotte-Gastonia-Concord, NC-SC
0.9342
0.954516820
Charlottesville, VA
0.9160
0.941716860
Chattanooga, TN-GA
0.8962
0.927716974
Chicago-Naperville-Joliet, IL
1.0471
1.032017140
Cincinnati-Middletown, OH-KY-IN
0.9661
0.976717300
Clarksville, TN-KY
0.8095
0.865317460
Cleveland-Elyria-Mentor, OH
0.9215
0.945617820
Colorado Springs, CO
0.9466
0.963117860
Columbia, MO
0.8537
0.897317980
Columbus, GA-AL
0.8587
0.900918140
Columbus, OH
0.9820
0.987618700
Corvallis, OR
1.0315
1.021519124
Dallas-Plano-Irving, TX
0.9681
0.978019340
Davenport-Moline-Rock Island, IA-IL
0.8893
0.922819380
Dayton, OH
0.9278
0.950019460
Decatur, AL
0.7832
0.845919740
Denver-Aurora, CO
1.0454
1.030919804
Detroit-Livonia-Dearborn, MI
1.0095
1.006520100
Dover, DE
1.0104
1.007120260
Duluth, MN-WI
0.9956
0.997020500
Durham, NC
0.9738
0.982020764
Edison, NJ
1.1616
1.1080( print page 47528)21060
Elizabethtown, KY
0.7978
0.856721500
Erie, PA
0.8416
0.888621660
Eugene-Springfield, OR
1.0707
1.047921780
Evansville, IN-KY (KY Hospitals)
0.8123
0.867321780
Evansville, IN-KY (IN Hospitals)
0.8568
0.899622020
Fargo, ND-MN
0.7943
0.854122180
Fayetteville, NC
0.9593
0.971922220
Fayetteville-Springdale-Rogers, AR-MO
0.8714
0.910022380
Flagstaff, AZ
1.1187
1.079822420
Flint, MI
1.0243
1.016622520
Florence-Muscle Shoals, AL
0.7752
0.840022540
Fond du Lac, WI
0.9715
0.980422660
Fort Collins-Loveland, CO
0.9579
0.971022744
Fort Lauderdale-Pompano Beach-Deerfield Beach, FL
1.0247
1.016823020
Fort Walton Beach-Crestview-Destin, FL
0.8733
0.911423060
Fort Wayne, IN
0.9041
0.933323104
Fort Worth-Arlington, TX
0.9636
0.974923540
Gainesville, FL
0.9301
0.951623844
Gary, IN
0.9241
0.947424300
Grand Junction, CO
1.0135
1.009224340
Grand Rapids-Wyoming, MI
0.9374
0.956724500
Great Falls, MT
0.8761
0.913424540
Greeley, CO
0.9744
0.982424580
Green Bay, WI (MI Hospitals)
0.9357
0.955524580
Green Bay, WI (WI Hospitals)
0.9684
0.978324660
Greensboro-High Point, NC
0.9106
0.937924780
Greenville, NC
0.9267
0.949224860
Greenville-Mauldin-Easley, SC
0.9403
0.958725060
Gulfport-Biloxi, MS
0.8216
0.874125420
Harrisburg-Carlisle, PA
0.9115
0.938525540
Hartford-West Hartford-East Hartford, CT (CT Hospitals)
1.2432
1.160825540
Hartford-West Hartford-East Hartford, CT (MA Hospitals)
1.1025
1.069125860
Hickory-Lenoir-Morganton, NC
0.8814
0.917226180
Honolulu, HI
1.1305
1.087626420
Houston-Sugar Land-Baytown, TX
0.9996
0.999726580
Huntington-Ashland, WV-KY-OH
0.8724
0.910826620
Huntsville, AL
0.8629
0.904026820
Idaho Falls, ID
0.9272
0.949626900
Indianapolis-Carmel, IN
0.9589
0.971726980
Iowa City, IA
0.9137
0.940127060
Ithaca, NY
0.9709
0.980027140
Jackson, MS
0.7950
0.854627180
Jackson, TN
0.8435
0.890027260
Jacksonville, FL
0.9089
0.936727620
Jefferson City, MO
0.8702
0.909227780
Johnstown, PA
0.8357
0.884327860
Jonesboro, AR
0.8503
0.894927900
Joplin, MO
0.8966
0.928028020
Kalamazoo-Portage, MI
1.0146
1.010028140
Kansas City, MO-KS
0.9318
0.952828420
Kennewick-Richland-Pasco, WA (ID Hospitals)
0.9614
0.973428420
Kennewick-Richland-Pasco, WA (WA Hospitals)
1.0558
1.037928700
Kingsport-Bristol-Bristol, TN-VA
0.7810
0.844328740
Kingston, NY
0.9270
0.949428940
Knoxville, TN
0.8012
0.859229180
Lafayette, LA
0.8322
0.881829404
Lake County-Kenosha County, IL-WI
1.0583
1.039629460
Lakeland, FL
0.8834
0.918629540
Lancaster, PA
0.9650
0.975929620
Lansing-East Lansing, MI
0.9906
0.993629740
Las Cruces, NM
0.8965
0.927929820
Las Vegas-Paradise, NV
1.1222
1.082230020
Lawton, OK
0.8070
0.863430460
Lexington-Fayette, KY
0.8797
0.916030620
Lima, OH
0.9307
0.952030700
Lincoln, NE
0.9626
0.974230780
Little Rock-North Little Rock-Conway, AR
0.8725
0.910830860
Logan, UT-ID
0.9214
0.945530980
Longview, TX
0.8871
0.921231084
Los Angeles-Long Beach-Santa Ana, CA
1.1735
1.115831140
Louisville-Jefferson County, KY-IN
0.9029
0.9324( print page 47529)31340
Lynchburg, VA
0.8605
0.902231420
Macon, GA
0.9567
0.970131540
Madison, WI
1.0996
1.067231700
Manchester-Nashua, NH
1.1259
1.084632780
Medford, OR
1.0146
1.010032820
Memphis, TN-MS-AR
0.8963
0.927833124
Miami-Miami Beach-Kendall, FL
1.0008
1.000533340
Milwaukee-Waukesha-West Allis, WI
1.0295
1.020133460
Minneapolis-St. Paul-Bloomington, MN-WI
1.0896
1.060533540
Missoula, MT
0.8738
0.911833700
Modesto, CA
1.2019
1.134233740
Monroe, LA
0.7764
0.840933860
Montgomery, AL
0.8111
0.866434060
Morgantown, WV
0.8255
0.876934740
Muskegon-Norton Shores, MI
0.9474
0.963734820
Myrtle Beach-Conway-North Myrtle Beach, SC
0.8707
0.909534980
Nashville-Davidson-Murfreesboro-Franklin, TN
0.9364
0.956035004
Nassau-Suffolk, NY
1.2625
1.173135084
Newark-Union, NJ-PA (NJ Hospitals)
1.1616
1.108035084
Newark-Union, NJ-PA (PA, NY Hospitals)
1.1570
1.105035300
New Haven-Milford, CT
1.2432
1.160835380
New Orleans-Metairie-Kenner, LA
0.8711
0.909835644
New York-White Plains-Wayne, NY-NJ
1.3001
1.196935980
Norwich-New London, CT
1.1732
1.115636084
Oakland-Fremont-Hayward, CA
1.5343
1.340636140
Ocean City, NJ
1.0498
1.033836220
Odessa, TX
0.9522
0.967036420
Oklahoma City, OK
0.8754
0.912936500
Olympia, WA
1.1287
1.086436740
Orlando-Kissimmee, FL
0.9170
0.942437700
Pascagoula, MS
0.8539
0.897537860
Pensacola-Ferry Pass-Brent, FL
0.8123
0.867337900
Peoria, IL
0.9225
0.946337964
Philadelphia, PA (DE, PA Hospitals)
1.0765
1.051837964
Philadelphia, PA (NJ Hospitals)
1.1616
1.108038220
Pine Bluff, AR
0.7955
0.855038300
Pittsburgh, PA (PA, WV Hospitals)
0.8390
0.886738300
Pittsburgh, PA (OH Hospitals)
0.8696
0.908838340
Pittsfield, MA
1.0387
1.026338860
Portland-South Portland-Biddeford, ME
0.9589
0.971738900
Portland-Vancouver-Beaverton, OR-WA
1.1226
1.082438940
Port St. Lucie, FL
0.9851
0.989839100
Poughkeepsie-Newburgh-Middletown, NY
1.0762
1.051639140
Prescott, AZ
0.9576
0.970839340
Provo-Orem, UT
0.9380
0.957139580
Raleigh-Cary, NC
0.9474
0.963739740
Reading, PA
0.9413
0.959439820
Redding, CA
1.2651
1.174739900
Reno-Sparks, NV
1.0851
1.057540060
Richmond, VA
0.9232
0.946740220
Roanoke, VA
0.8746
0.912340340
Rochester, MN
1.0490
1.033340380
Rochester, NY
0.8918
0.924640420
Rockford, IL
0.9703
0.979640484
Rockingham County, NH
1.0173
1.011840660
Rome, GA
0.9388
0.957740900
Sacramento—Arden-Arcade—Roseville, CA
1.2918
1.191640980
Saginaw-Saginaw Township North, MI
0.8974
0.928541060
St. Cloud, MN
1.0322
1.021941100
St. George, UT
0.9535
0.967941140
St. Joseph, MO-KS
0.8826
0.918041180
St. Louis, MO-IL
0.8982
0.929141620
Salt Lake City, UT
0.9473
0.963641700
San Antonio, TX
0.8895
0.922941884
San Francisco-San Mateo-Redwood City, CA
1.4800
1.308041980
San Juan-Caguas-Guaynabo, PR
0.4526
0.581142044
Santa Ana-Anaheim-Irvine, CA
1.1735
1.115842140
Santa Fe, NM
1.0379
1.025842220
Santa Rosa-Petaluma, CA
1.4146
1.268142260
Sarasota-Bradenton-Venice, FL
0.9770
0.984242340
Savannah, GA
0.8890
0.9226( print page 47530)42644
Seattle-Bellevue-Everett, WA
1.1208
1.081243300
Sherman-Denison, TX
0.8530
0.896843340
Shreveport-Bossier City, LA
0.8551
0.898343580
Sioux City, IA-NE-SD
0.8846
0.919543620
Sioux Falls, SD
0.9373
0.956643780
South Bend-Mishawaka, IN-MI
0.9503
0.965743900
Spartanburg, SC
0.9395
0.958244060
Spokane, WA
1.0226
1.015444180
Springfield, MO
0.8619
0.903244940
Sumter, SC
0.8707
0.909545060
Syracuse, NY
0.9602
0.972645220
Tallahassee, FL
0.8454
0.891445300
Tampa-St. Petersburg-Clearwater, FL
0.9170
0.942445500
Texarkana, TX-Texarkana, AR
0.7781
0.842145780
Toledo, OH
0.9268
0.949345820
Topeka, KS
0.8452
0.891246140
Tulsa, OK
0.8498
0.894546220
Tuscaloosa, AL
0.8162
0.870246340
Tyler, TX
0.9181
0.943246700
Vallejo-Fairfield, CA
1.4267
1.275547260
Virginia Beach-Norfolk-Newport News, VA
0.8777
0.914547894
Washington-Arlington-Alexandria, DC-VA
1.0675
1.045748140
Wausau, WI
1.0004
1.000348620
Wichita, KS
0.8717
0.910348700
Williamsport, PA
0.8357
0.884348864
Wilmington, DE-MD-NJ (NJ Hospitals)
1.1616
1.108048864
Wilmington, DE-MD-NJ (DE Hospitals)
1.0666
1.045148900
Wilmington, NC
0.9156
0.941449180
Winston-Salem, NC
0.9078
0.935949340
Worcester, MA
1.1259
1.084649660
Youngstown-Warren-Boardman, OH-PA
0.8697
0.908804
Rural Arkansas
0.7586
0.827605
Rural California
1.1735
1.115810
Rural Florida
0.8733
0.911414
Rural Illinois
0.8345
0.883516
Rural Iowa
0.8476
0.892917
Rural Kansas
0.7979
0.856822
Rural Massachusetts
0.9705
0.979723
Rural Michigan
0.8908
0.923924
Rural Minnesota
0.9113
0.938425
Rural Mississippi
0.7752
0.840026
Rural Missouri
0.8153
0.869529
Rural Nevada
0.8706
0.909530
Rural New Hampshire
1.0532
1.036133
Rural New York
0.8416
0.888634
Rural North Carolina
0.8603
0.902136
Rural Ohio
0.8696
0.908837
Rural Oklahoma
0.7701
0.836238
Rural Oregon
0.9957
0.997139
Rural Pennsylvania (PA Hospitals)
0.8357
0.884339
Rural Pennsylvania (NY Hospitals)
0.8416
0.888644
Rural Tennessee
0.7917
0.852245
Rural Texas
0.8198
0.872847
Rural Vermont
0.9427
0.960449
Rural Virginia
0.8073
0.863650
Rural Washington
1.0558
1.037953
Rural Wyoming
0.9009
0.9310
 Table 4F.—Puerto Rico Wage Index and Capital Geographic Adjustment Factor (GAF) by CBSA  FY 2008
CBSA code
Area
Wage index
GAF
Wage index—reclassified hospitals
GAF—reclassified hospitals10380
Aguadilla-Isabela-San Sebastián, PR
0.7754
0.840121940
Fajardo, PR
1.0049
1.003425020
Guayama, PR
0.6861
0.772632420
Mayagüez, PR
0.8478
0.893138660
Ponce, PR
0.9869
0.9910( print page 47531)41900
San Germán-Cabo Rojo, PR
1.0548
1.037241980
San Juan-Caguas-Guaynabo, PR
1.0401
1.0273
1.0401
1.027349500
Yauco, PR
0.7432
0.8161
 The following list represents all hospitals that are eligible to have their wage index increased by the out-migration adjustment listed in this table.  Hospitals cannot receive the out-migration adjustment if they are reclassified under section 1886(d)(10) of the Act or redesignated under section 1886(d)(8) of the Act.  Hospitals that have already been reclassified under section 1886(d)(10) of the Act or redesignated under section 1886(d)(8(B)) of the Act are designated with an asterisk. We automatically assume that hospitals that have already been reclassified under section 1886(d)(10) of the Act or redesignated under section 1886(d)(8) of the Act wish to retain their reclassification/redesignation status and waive the application of the out-migration adjustment.  Section 1886(d)(10) hospitals that wished to receive the out-migration adjustment, rather than their reclassification, had to follow the termination/withdrawal procedures specified in 42 CFR 412.273 and section III.I.3. of the preamble of the FY 2008 IPPS proposed rule.  Otherwise, they were deemed to have waived the out-migration adjustment.  Hospitals redesignated under section 1886(d)(8) of the Act were deemed to have waived the out-migration adjustment, unless they explicitly notified CMS that they elected to receive the out migration adjustment instead within 45 days from the publication of the proposed rule. Table 4J.—Out-Migration Adjustment—FY 2008
Provider No.
Reclassified for FY 2008
Out-migration adjustment
Qualifying county name
County code010005
*
0.0296
MARSHALL
01470010008

0.0174
CRENSHAW
01200010009
*
0.0092
MORGAN
01510010010
*
0.0296
MARSHALL
01470010012
*
0.0186
DE KALB
01240010015

0.0046
CLARKE
01120010022
*
0.1127
CHEROKEE
01090010025
*
0.0235
CHAMBERS
01080010029
*
0.0289
LEE
01400010032

0.0325
RANDOLPH
01550010035
*
0.0254
CULLMAN
01210010038

0.0047
CALHOUN
01070010045
*
0.0222
FAYETTE
01280010047

0.0127
BUTLER
01060010052

0.0103
TALLAPOOSA
01610010054
*
0.0092
MORGAN
01510010061

0.0541
JACKSON
01350010065
*
0.0103
TALLAPOOSA
01610010078

0.0047
CALHOUN
01070010083
*
0.0134
BALDWIN
01010010085
*
0.0092
MORGAN
01510010091

0.0046
CLARKE
01120010100
*
0.0134
BALDWIN
01010010101
*
0.0211
TALLADEGA
01600010109

0.0451
PICKENS
01530010110

0.0214
BULLOCK
01050010125

0.0476
WINSTON
01660010128

0.0046
CLARKE
01120010129

0.0134
BALDWIN
01010010138

0.0066
SUMTER
01590010143
*
0.0254
CULLMAN
01210010146

0.0047
CALHOUN
01070010150
*
0.0127
BUTLER
01060010158
*
0.0022
FRANKLIN
01290010164
*
0.0211
TALLADEGA
01600030067

0.0298
LAPAZ
03055040014
*
0.0198
WHITE
04720040019
*
0.0258
ST. FRANCIS
04610040039
*
0.0172
GREENE
04270040047

0.0117
RANDOLPH
04600040067

0.0007
COLUMBIA
04130040071
*
0.0148
JEFFERSON
04340( print page 47532)040076
*
0.1000
HOT SPRING
04290040081

0.0357
PIKE
04540040100
*
0.0198
WHITE
04720050002

0.0010
ALAMEDA
05000050007

0.0146
SAN MATEO
05510050008

0.0026
SAN FRANCISCO
05480050009
*
0.0180
NAPA
05380050013
*
0.0180
NAPA
05380050014
*
0.0139
AMADOR
05020050016

0.0103
SAN LUIS OBISPO
05500050042
*
0.0162
TEHAMA
05620050043

0.0010
ALAMEDA
05000050047

0.0026
SAN FRANCISCO
05480050055

0.0026
SAN FRANCISCO
05480050070

0.0146
SAN MATEO
05510050073
*
0.0171
SOLANO
05580050075

0.0010
ALAMEDA
05000050076
*
0.0026
SAN FRANCISCO
05480050084

0.0132
SAN JOAQUIN
05490050090
*
0.0058
SONOMA
05590050101
*
0.0171
SOLANO
05580050113

0.0146
SAN MATEO
05510050118
*
0.0132
SAN JOAQUIN
05490050122

0.0132
SAN JOAQUIN
05490050133
*
0.0178
YUBA
05680050136
*
0.0058
SONOMA
05590050150
*
0.0342
NEVADA
05390050152

0.0026
SAN FRANCISCO
05480050167

0.0132
SAN JOAQUIN
05490050174
*
0.0058
SONOMA
05590050194

0.0052
SANTA CRUZ
05540050195

0.0010
ALAMEDA
05000050197
*
0.0146
SAN MATEO
05510050211

0.0010
ALAMEDA
05000050228

0.0026
SAN FRANCISCO
05480050232

0.0103
SAN LUIS OBISPO
05500050242

0.0052
SANTA CRUZ
05540050264

0.0010
ALAMEDA
05000050283

0.0010
ALAMEDA
05000050289

0.0146
SAN MATEO
05510050291
*
0.0058
SONOMA
05590050305

0.0010
ALAMEDA
05000050313

0.0132
SAN JOAQUIN
05490050320

0.0010
ALAMEDA
05000050325

0.0033
TUOLUMNE
05650050335

0.0033
TUOLUMNE
05650050336

0.0132
SAN JOAQUIN
05490050366

0.0015
CALAVERAS
05040050367
*
0.0171
SOLANO
05580050385
*
0.0058
SONOMA
05590050407

0.0026
SAN FRANCISCO
05480050444

0.0233
MERCED
05340050454

0.0026
SAN FRANCISCO
05480050457

0.0026
SAN FRANCISCO
05480050476
*
0.0278
LAKE
05160050488

0.0010
ALAMEDA
05000050494
*
0.0342
NEVADA
05390050506

0.0103
SAN LUIS OBISPO
05500050512

0.0010
ALAMEDA
05000050528
*
0.0233
MERCED
05340050541
*
0.0146
SAN MATEO
05510050547
*
0.0058
SONOMA
05590050633

0.0103
SAN LUIS OBISPO
05500050667
*
0.0180
NAPA
05380050668

0.0026
SAN FRANCISCO
05480050680
*
0.0171
SOLANO
05580050690
*
0.0058
SONOMA
05590050707

0.0146
SAN MATEO
05510050714

0.0052
SANTA CRUZ
05540050748

0.0132
SAN JOAQUIN
05490050754

0.0146
SAN MATEO
05510( print page 47533)060001
*
0.0042
WELD
06610060003
*
0.0069
BOULDER
06060060010

0.0153
LARIMER
06340060027
*
0.0069
BOULDER
06060060030

0.0153
LARIMER
06340060103
*
0.0069
BOULDER
06060060116
*
0.0069
BOULDER
06060070006
*
0.0045
FAIRFIELD
07000070010
*
0.0045
FAIRFIELD
07000070018
*
0.0045
FAIRFIELD
07000070028
*
0.0045
FAIRFIELD
07000070033
*
0.0045
FAIRFIELD
07000070034
*
0.0045
FAIRFIELD
07000080001
*
0.0063
NEW CASTLE
08010080003
*
0.0063
NEW CASTLE
08010100014
*
0.0047
VOLUSIA
10630100017
*
0.0047
VOLUSIA
10630100045
*
0.0047
VOLUSIA
10630100047
*
0.0028
CHARLOTTE
10070100068
*
0.0047
VOLUSIA
10630100072
*
0.0047
VOLUSIA
10630100077
*
0.0028
CHARLOTTE
10070100102

0.0125
COLUMBIA
10110100118
*
0.0177
FLAGLER
10170100156
*
0.0125
COLUMBIA
10110100232
*
0.0054
PUTNAM
10530100236
*
0.0028
CHARLOTTE
10070100252
*
0.0151
OKEECHOBEE
10460100290

0.0582
SUMTER
10590110023
*
0.0416
GORDON
11500110029
*
0.0052
HALL
11550110040
*
0.1455
JACKSON
11610110041
*
0.0623
HABERSHAM
11540110100

0.0790
JEFFERSON
11620110101

0.0067
COOK
11311110142

0.0185
EVANS
11441110146
*
0.0805
CAMDEN
11170110150
*
0.0227
BALDWIN
11030110187
*
0.0643
LUMPKIN
11701110189
*
0.0066
FANNIN
11450110190

0.0241
MACON
11710110205

0.0507
GILMER
11471130003
*
0.0235
NEZ PERCE
13340130024

0.0675
BONNER
13080130049
*
0.0319
KOOTENAI
13270130066

0.0319
KOOTENAI
13270130067
*
0.0725
BINGHAM
13050130068

0.0319
KOOTENAI
13270140001

0.0369
FULTON
14370140026

0.0315
LA SALLE
14580140043
*
0.0056
WHITESIDE
14988140058
*
0.0126
MORGAN
14770140110
*
0.0315
LA SALLE
14580140160
*
0.0332
STEPHENSON
14970140161
*
0.0168
LIVINGSTON
14610140167
*
0.0632
IROQUOIS
14460140234

0.0315
LA SALLE
14580150006
*
0.0113
LA PORTE
15450150015

0.0113
LA PORTE
15450150022

0.0158
MONTGOMERY
15530150030
*
0.0192
HENRY
15320150072

0.0105
CASS
15080150076
*
0.0215
MARSHALL
15490150088
*
0.0111
MADISON
15470150091
*
0.0050
HUNTINGTON
15340150102
*
0.0108
STARKE
15740150113
*
0.0111
MADISON
15470150133
*
0.0193
KOSCIUSKO
15420150146
*
0.0319
NOBLE
15560160013

0.0179
MUSCATINE
16690160030

0.0040
STORY
16840( print page 47534)160032

0.0235
JASPER
16490160080
*
0.0066
CLINTON
16220170137
*
0.0336
DOUGLAS
17220170150

0.0166
COWLEY
17170180012
*
0.0080
HARDIN
18460180017
*
0.0035
BARREN
18040180049
*
0.0488
MADISON
18750180064

0.0314
MONTGOMERY
18860180066
*
0.0439
LOGAN
18700180070

0.0239
GRAYSON
18420180079

0.0259
HARRISON
18480190003
*
0.0085
IBERIA
19220190015
*
0.0243
TANGIPAHOA
19520190017

0.0187
ST. LANDRY
19480190034

0.0189
VERMILION
19560190044

0.0260
ACADIA
19000190050

0.0044
BEAUREGARD
19050190053

0.0100
JEFFRSON DAVIS
19260190054

0.0085
IBERIA
19220190078

0.0187
ST. LANDRY
19480190086
*
0.0061
LINCOLN
19300190088
*
0.0387
WEBSTER
19590190099
*
0.0189
AVOYELLES
19040190106
*
0.0101
ALLEN
19010190116

0.0085
MOREHOUSE
19330190133

0.0101
ALLEN
19010190140

0.0035
FRANKLIN
19200190144
*
0.0387
WEBSTER
19590190145

0.0090
LA SALLE
19290190184
*
0.0161
CALDWELL
19100190190

0.0161
CALDWELL
19100190191
*
0.0187
ST. LANDRY
19480190246

0.0161
CALDWELL
19100190257

0.0061
LINCOLN
19300200024
*
0.0094
ANDROSCOGGIN
20000200032

0.0466
OXFORD
20080200034
*
0.0094
ANDROSCOGGIN
20000200050
*
0.0227
HANCOCK
20040210001

0.0187
WASHINGTON
21210210023

0.0079
ANNE ARUNDEL
21010210028

0.0512
ST. MARYS
21180210043

0.0079
ANNE ARUNDEL
21010220002

0.0271
MIDDLESEX
22090220010
*
0.0355
ESSEX
22040220011

0.0271
MIDDLESEX
22090220029
*
0.0355
ESSEX
22040220033
*
0.0355
ESSEX
22040220035
*
0.0355
ESSEX
22040220049

0.0271
MIDDLESEX
22090220063

0.0271
MIDDLESEX
22090220070

0.0271
MIDDLESEX
22090220080
*
0.0355
ESSEX
22040220082

0.0271
MIDDLESEX
22090220084

0.0271
MIDDLESEX
22090220098

0.0271
MIDDLESEX
22090220101

0.0271
MIDDLESEX
22090220105

0.0271
MIDDLESEX
22090220171

0.0271
MIDDLESEX
22090220174
*
0.0355
ESSEX
22040230003
*
0.0220
OTTAWA
23690230005

0.0473
LENAWEE
23450230013
*
0.0025
OAKLAND
23620230015

0.0295
ST. JOSEPH
23740230019
*
0.0025
OAKLAND
23620230021
*
0.0102
BERRIEN
23100230022
*
0.0212
BRANCH
23110230029
*
0.0025
OAKLAND
23620230035
*
0.0095
MONTCALM
23580230037
*
0.0210
HILLSDALE
23290230047
*
0.0021
MACOMB
23490230069
*
0.0210
LIVINGSTON
23460( print page 47535)230071
*
0.0025
OAKLAND
23620230072
*
0.0220
OTTAWA
23690230075

0.0047
CALHOUN
23120230078
*
0.0102
BERRIEN
23100230092
*
0.0223
JACKSON
23370230093

0.0058
MECOSTA
23530230096
*
0.0295
ST. JOSEPH
23740230099
*
0.0231
MONROE
23570230121
*
0.0678
SHIAWASSEE
23770230130
*
0.0025
OAKLAND
23620230151
*
0.0025
OAKLAND
23620230174
*
0.0220
OTTAWA
23690230195
*
0.0021
MACOMB
23490230204
*
0.0021
MACOMB
23490230207
*
0.0025
OAKLAND
23620230208
*
0.0095
MONTCALM
23580230217

0.0047
CALHOUN
23120230222
*
0.0035
MIDLAND
23550230223
*
0.0025
OAKLAND
23620230227
*
0.0021
MACOMB
23490230254
*
0.0025
OAKLAND
23620230257
*
0.0021
MACOMB
23490230264
*
0.0021
MACOMB
23490230269
*
0.0025
OAKLAND
23620230277
*
0.0025
OAKLAND
23620230279
*
0.0210
LIVINGSTON
23460240018

0.0805
GOODHUE
24240240044

0.0625
WINONA
24840240064
*
0.0134
ITASCA
24300240069
*
0.0267
STEELE
24730240071
*
0.0385
RICE
24650240117

0.0527
MOWER
24490240211

0.0812
PINE
24570250023
*
0.0541
PEARL RIVER
25540250040
*
0.0021
JACKSON
25290250117
*
0.0541
PEARL RIVER
25540250128

0.0446
PANOLA
25530250160

0.0446
PANOLA
25530260059

0.0077
LACLEDE
26520260064
*
0.0089
AUDRAIN
26030260097

0.0300
JOHNSON
26500260116

0.0087
ST. FRANCOIS
26930260163

0.0087
ST. FRANCOIS
26930270081

0.0234
MUSSELSHELL
27320280077

0.0080
DODGE
28260280123

0.0123
GAGE
28330290002
*
0.0277
LYON
29090300011

0.0069
HILLSBOROUGH
30050300012

0.0069
HILLSBOROUGH
30050300020

0.0069
HILLSBOROUGH
30050300034

0.0069
HILLSBOROUGH
30050310002
*
0.0268
ESSEX
31200310009
*
0.0268
ESSEX
31200310010

0.0092
MERCER
31260310011

0.0115
CAPE MAY
31180310013
*
0.0268
ESSEX
31200310018
*
0.0268
ESSEX
31200310021
*
0.0092
MERCER
31260310038
*
0.0209
MIDDLESEX
31270310039
*
0.0209
MIDDLESEX
31270310044

0.0092
MERCER
31260310054
*
0.0268
ESSEX
31200310070
*
0.0209
MIDDLESEX
31270310076
*
0.0268
ESSEX
31200310083
*
0.0268
ESSEX
31200310092

0.0092
MERCER
31260310093
*
0.0268
ESSEX
31200310096
*
0.0268
ESSEX
31200310108
*
0.0209
MIDDLESEX
31270310110

0.0092
MERCER
31260310119
*
0.0268
ESSEX
31200( print page 47536)320003
*
0.0629
SAN MIGUEL
32230320011

0.0442
RIO ARRIBA
32190320018

0.0024
DONA ANA
32060320085

0.0024
DONA ANA
32060330004
*
0.0633
ULSTER
33740330008
*
0.0112
WYOMING
33900330010

0.0054
MONTGOMERY
33380330027
*
0.0123
NASSAU
33400330033

0.0214
CHENANGO
33080330047

0.0054
MONTGOMERY
33380330073
*
0.0134
GENESEE
33290330094
*
0.0478
COLUMBIA
33200330103
*
0.0124
CATTARAUGUS
33040330106
*
0.0123
NASSAU
33400330126
*
0.0642
ORANGE
33540330132

0.0124
CATTARAUGUS
33040330135

0.0642
ORANGE
33540330167
*
0.0123
NASSAU
33400330175

0.0249
CORTLAND
33210330181
*
0.0123
NASSAU
33400330182
*
0.0123
NASSAU
33400330191
*
0.0017
WARREN
33750330198
*
0.0123
NASSAU
33400330205

0.0642
ORANGE
33540330224
*
0.0633
ULSTER
33740330225
*
0.0123
NASSAU
33400330235
*
0.0293
CAYUGA
33050330259
*
0.0123
NASSAU
33400330264

0.0642
ORANGE
33540330276

0.0029
FULTON
33280330331
*
0.0123
NASSAU
33400330332
*
0.0123
NASSAU
33400330372
*
0.0123
NASSAU
33400330386
*
0.0727
SULLIVAN
33710340020

0.0156
LEE
34520340021
*
0.0162
CLEVELAND
34220340024

0.0177
SAMPSON
34810340027
*
0.0128
LENOIR
34530340037

0.0162
CLEVELAND
34220340038

0.0253
BEAUFORT
34060340039
*
0.0101
IREDELL
34480340068
*
0.0087
COLUMBUS
34230340069
*
0.0015
WAKE
34910340070
*
0.0395
ALAMANCE
34000340071
*
0.0226
HARNETT
34420340073
*
0.0015
WAKE
34910340085

0.0250
DAVIDSON
34280340096

0.0250
DAVIDSON
34280340104

0.0162
CLEVELAND
34220340114
*
0.0015
WAKE
34910340124
*
0.0226
HARNETT
34420340126
*
0.0100
WILSON
34970340129
*
0.0101
IREDELL
34480340133

0.0308
MARTIN
34580340138
*
0.0015
WAKE
34910340144
*
0.0101
IREDELL
34480340145
*
0.0336
LINCOLN
34540340151

0.0052
HALIFAX
34410340173
*
0.0015
WAKE
34910360002

0.0142
ASHLAND
36020360010
*
0.0074
TUSCARAWAS
36800360013
*
0.0135
SHELBY
36760360025
*
0.0077
ERIE
36220360036
*
0.0126
WAYNE
36860360040

0.0387
KNOX
36430360044

0.0127
DARKE
36190360065
*
0.0075
HURON
36400360071

0.0035
VAN WERT
36820360086
*
0.0186
CLARK
36110360096
*
0.0071
COLUMBIANA
36140360107
*
0.0119
SANDUSKY
36730( print page 47537)360125
*
0.0134
ASHTABULA
36030360156

0.0119
SANDUSKY
36730360175
*
0.0183
CLINTON
36130360185
*
0.0071
COLUMBIANA
36140360187
*
0.0186
CLARK
36110360245
*
0.0134
ASHTABULA
36030370014
*
0.0361
BRYAN
37060370015
*
0.0367
MAYES
37480370023

0.0090
STEPHENS
37680370065

0.0096
CRAIG
37170370072

0.0258
LATIMER
37380370083

0.0051
PUSHMATAHA
37630370100

0.0100
CHOCTAW
37110370149
*
0.0302
POTTAWATOMIE
37620370156

0.0121
GARVIN
37240370169

0.0163
MCINTOSH
37450370172

0.0258
LATIMER
37380370214

0.0121
GARVIN
37240380022
*
0.0067
LINN
38210380029

0.0075
MARION
38230380051

0.0075
MARION
38230380056

0.0075
MARION
38230390008

0.0056
LAWRENCE
39450390016
*
0.0056
LAWRENCE
39450390030
*
0.0284
SCHUYLKILL
39650390031
*
0.0284
SCHUYLKILL
39650390044
*
0.0191
BERKS
39110390052

0.0044
CLEARFIELD
39230390065
*
0.0523
ADAMS
39000390066
*
0.0364
LEBANON
39460390079
*
0.0007
BRADFORD
39130390086
*
0.0044
CLEARFIELD
39230390096
*
0.0191
BERKS
39110390113
*
0.0050
CRAWFORD
39260390122

0.0050
CRAWFORD
39260390138
*
0.0214
FRANKLIN
39350390146

0.0020
WARREN
39740390150

0.0022
GREENE
39370390151
*
0.0214
FRANKLIN
39350390162
*
0.0200
NORTHAMPTON
39590390181

0.0284
SCHUYLKILL
39650390183
*
0.0284
SCHUYLKILL
39650390201
*
0.1163
MONROE
39550390236

0.0007
BRADFORD
39130390313
*
0.0284
SCHUYLKILL
39650420007
*
0.0027
SPARTANBURG
42410420009
*
0.0113
OCONEE
42360420019

0.0158
CHESTER
42110420027
*
0.0108
ANDERSON
42030420030
*
0.0069
COLLETON
42140420036
*
0.0064
LANCASTER
42280420039
*
0.0153
UNION
42430420043

0.0157
CHEROKEE
42100420053

0.0035
NEWBERRY
42350420062
*
0.0109
CHESTERFIELD
42120420068
*
0.0027
ORANGEBURG
42370420069
*
0.0052
CLARENDON
42130420083
*
0.0027
SPARTANBURG
42410430008

0.0535
BROOKINGS
43050430048

0.0129
LAWRENCE
43400430094

0.0129
LAWRENCE
43400440007

0.0219
COFFEE
44150440008
*
0.0449
HENDERSON
44380440016

0.0144
CARROLL
44080440024
*
0.0230
BRADLEY
44050440030

0.0056
HAMBLEN
44310440031

0.0019
ROANE
44720440033

0.0027
CAMPBELL
44060440035
*
0.0301
MONTGOMERY
44620440047

0.0338
GIBSON
44260440051

0.0082
MC NAIRY
44540( print page 47538)440057

0.0021
CLAIBORNE
44120440060
*
0.0338
GIBSON
44260440067

0.0056
HAMBLEN
44310440070

0.0109
DECATUR
44190440081

0.0052
SEVIER
44770440084

0.0025
MONROE
44610440109

0.0070
HARDIN
44350440115

0.0338
GIBSON
44260440137

0.0738
BEDFORD
44010440144
*
0.0219
COFFEE
44150440148
*
0.0296
DE KALB
44200440153

0.0007
COCKE
44140440174

0.0312
HAYWOOD
44370440180

0.0027
CAMPBELL
44060440181

0.0365
HARDEMAN
44340440182

0.0144
CARROLL
44080440185
*
0.0230
BRADLEY
44050450032
*
0.0254
HARRISON
45620450039
*
0.0024
TARRANT
45910450052
*
0.0276
BOSQUE
45160450059
*
0.0075
COMAL
45320450064
*
0.0024
TARRANT
45910450087
*
0.0024
TARRANT
45910450090

0.0649
COOKE
45340450099
*
0.0145
GRAY
45563450135
*
0.0024
TARRANT
45910450137
*
0.0024
TARRANT
45910450144

0.0559
ANDREWS
45010450163

0.0054
KLEBERG
45743450192

0.0271
HILL
45651450194

0.0213
CHEROKEE
45281450210

0.0150
PANOLA
45842450224
*
0.0195
WOOD
45974450236

0.0388
HOPKINS
45654450270

0.0271
HILL
45651450283
*
0.0653
VAN ZANDT
45947450324
*
0.0132
GRAYSON
45564450347
*
0.0370
WALKER
45949450348
*
0.0059
FALLS
45500450370

0.0235
COLORADO
45312450389
*
0.0618
HENDERSON
45640450393
*
0.0132
GRAYSON
45564450395
*
0.0440
POLK
45850450419
*
0.0024
TARRANT
45910450438
*
0.0235
COLORADO
45312450451

0.0535
SOMERVELL
45893450460

0.0053
TYLER
45942450469
*
0.0132
GRAYSON
45564450497

0.0375
MONTAGUE
45800450539

0.0067
HALE
45582450547

0.0195
WOOD
45974450563
*
0.0024
TARRANT
45910450565

0.0486
PALO PINTO
45841450573

0.0125
JASPER
45690450596
*
0.0742
HOOD
45653450639
*
0.0024
TARRANT
45910450641

0.0375
MONTAGUE
45800450672
*
0.0024
TARRANT
45910450675
*
0.0024
TARRANT
45910450677
*
0.0024
TARRANT
45910450698

0.0127
LAMB
45751450747
*
0.0126
ANDERSON
45000450755

0.0276
HOCKLEY
45652450770
*
0.0181
MILAM
45795450779
*
0.0024
TARRANT
45910450813
*
0.0126
ANDERSON
45000450838

0.0125
JASPER
45690450872
*
0.0024
TARRANT
45910450880
*
0.0024
TARRANT
45910450884

0.0049
UPSHUR
45943450886

0.0024
TARRANT
45910( print page 47539)450888

0.0024
TARRANT
45910460017

0.0384
BOX ELDER
46010460039
*
0.0384
BOX ELDER
46010490019
*
0.1088
CULPEPER
49230490084

0.0187
ESSEX
49280490110

0.0184
MONTGOMERY
49600500003
*
0.0166
SKAGIT
50280500007
*
0.0166
SKAGIT
50280500019

0.0131
LEWIS
50200500039
*
0.0094
KITSAP
50170500041
*
0.0020
COWLITZ
50070510012

0.0124
MASON
51260510018
*
0.0187
JACKSON
51170510047
*
0.0269
MARION
51240510077
*
0.0021
MINGO
51290520028
*
0.0286
GREEN
52220520035

0.0076
SHEBOYGAN
52580520044

0.0076
SHEBOYGAN
52580520057

0.0193
SAUK
52550520059
*
0.0195
RACINE
52500520071
*
0.0161
JEFFERSON
52270520076
*
0.0146
DODGE
52130520095
*
0.0193
SAUK
52550520096

0.0195
RACINE
52500520102
*
0.0242
WALWORTH
52630520116
*
0.0161
JEFFERSON
52270
 Table 5.—List of Medicare Severity-Diagnosis Related Groups (MS–DRGs), Relative Weighting Factors, and Geometric and Arithmetic Mean Length of Stay
MS–DRG
FY 2008 final rule post-acute DRG
FY 2008 final rule special pay DRG
MDC
TYPE
MS–DRG title
Weights
Geometric mean LOS
Arithmetic mean LOS001
No
No
PRE
SURG
Heart transplant or implant of heart assist system w MCC
23.1117
30.8
45.6002
No
No
PRE
SURG
Heart transplant or implant of heart assist system w/o MCC
16.2735
16.1
22.8003
Yes
No
PRE
SURG
ECMO or trach w MV 96+ hrs or PDX exc face, mouth  neck w maj O.R.
18.7707
33.4
40.6004
Yes
No
PRE
SURG
Trach w MV 96+ hrs or PDX exc face, mouth  neck w/o maj O.R.
11.4219
23.8
29.3005
No
No
PRE
SURG
Liver transplant w MCC or intestinal transplant
10.6120
17.6
23.5006
No
No
PRE
SURG
Liver transplant w/o MCC
7.2562
9.1
10.5007
No
No
PRE
SURG
Lung transplant
8.4002
14.6
17.3008
No
No
PRE
SURG
Simultaneous pancreas/kidney transplant
5.1726
10.1
11.8009
No
No
PRE
SURG
Bone marrow transplant
6.4842
18.1
21.7010
No
No
PRE
SURG
Pancreas transplant
3.8902
9.2
10.5011
No
No
PRE
SURG
Tracheostomy for face,mouth  neck diagnoses w MCC
4.1482
12.8
16.2012
No
No
PRE
SURG
Tracheostomy for face,mouth  neck diagnoses w CC
3.2472
8.9
10.9013
No
No
PRE
SURG
Tracheostomy for face,mouth  neck diagnoses w/o CC/MCC
2.6760
6.1
7.2020
No
No
01
SURG
Intracranial vascular procedures w PDX hemorrhage w MCC
7.7073
15.2
19.1021
No
No
01
SURG
Intracranial vascular procedures w PDX hemorrhage w CC
6.7021
13.4
15.5022
No
No
01
SURG
Intracranial vascular procedures w PDX hemorrhage w/o CC/MCC
5.6085
7.8
9.6023
No
No
01
SURG
Cranio w major dev impl/acute complex CNS PDX w MCC or chemo implant
4.7036
9.0
12.8024
No
No
01
SURG
Cranio w major dev impl/acute complex CNS PDX w/o MCC
3.8978
6.1
8.9025
Yes
No
01
SURG
Craniotomy  endovascular intracranial procedures w MCC
4.2362
10.3
13.3( print page 47540)026
Yes
No
01
SURG
Craniotomy  endovascular intracranial procedures w CC
3.1582
6.5
8.2027
Yes
No
01
SURG
Craniotomy  endovascular intracranial procedures w/o CC/MCC
2.3259
3.5
4.6028
Yes
Yes
01
SURG
Spinal procedures w MCC
4.2339
10.8
14.7029
Yes
Yes
01
SURG
Spinal procedures w CC or spinal neurostimulators
2.8356
5.3
7.3030
Yes
Yes
01
SURG
Spinal procedures w/o CC/MCC
1.7617
2.8
3.7031
Yes
No
01
SURG
Ventricular shunt procedures w MCC
3.2226
9.2
13.2032
Yes
No
01
SURG
Ventricular shunt procedures w CC
1.9342
3.8
5.8033
Yes
No
01
SURG
Ventricular shunt procedures w/o CC/MCC
1.4281
2.3
3.1034
No
No
01
SURG
Carotid artery stent procedure w MCC
2.5438
4.8
7.3035
No
No
01
SURG
Carotid artery stent procedure w CC
1.8996
2.0
2.9036
No
No
01
SURG
Carotid artery stent procedure w/o CC/MCC
1.6977
1.3
1.6037
No
No
01
SURG
Extracranial procedures w MCC
2.2630
6.0
8.7038
No
No
01
SURG
Extracranial procedures w CC
1.4686
2.5
3.7039
No
No
01
SURG
Extracranial procedures w/o CC/MCC
1.0909
1.5
1.8040
Yes
Yes
01
SURG
Periph/cranial nerve  other nerv syst proc w MCC
3.2550
10.0
13.6041
Yes
Yes
01
SURG
Periph/cranial nerve  other nerv syst proc w CC or periph neurostim
2.3595
5.4
7.3042
Yes
Yes
01
SURG
Periph/cranial nerve  other nerv syst proc w/o CC/MCC
1.8710
2.5
3.6052
No
No
01
MED
Spinal disorders  injuries w CC/MCC
1.4329
4.7
7.0053
No
No
01
MED
Spinal disorders  injuries w/o CC/MCC
1.1172
3.1
4.0054
Yes
No
01
MED
Nervous system neoplasms w MCC
1.4228
5.3
7.2055
Yes
No
01
MED
Nervous system neoplasms w/o MCC
1.1213
3.8
5.0056
Yes
No
01
MED
Degenerative nervous system disorders w MCC
1.2820
5.8
7.8057
Yes
No
01
MED
Degenerative nervous system disorders w/o MCC
0.8951
3.9
4.9058
No
No
01
MED
Multiple sclerosis  cerebellar ataxia w MCC
1.2669
5.8
8.0059
No
No
01
MED
Multiple sclerosis  cerebellar ataxia w CC
0.9226
4.3
5.2060
No
No
01
MED
Multiple sclerosis  cerebellar ataxia w/o CC/MCC
0.8160
3.4
4.1061
No
No
01
MED
Acute ischemic stroke w use of thrombolytic agent w MCC
2.5541
7.3
9.6062
No
No
01
MED
Acute ischemic stroke w use of thrombolytic agent w CC
2.0886
5.3
6.3063
No
No
01
MED
Acute ischemic stroke w use of thrombolytic agent w/o CC/MCC
1.8642
3.9
4.5064
Yes
No
01
MED
Intracranial hemorrhage or cerebral infarction w MCC
1.5470
5.6
7.6065
Yes
No
01
MED
Intracranial hemorrhage or cerebral infarction w CC
1.1901
4.3
5.3066
Yes
No
01
MED
Intracranial hemorrhage or cerebral infarction w/o CC/MCC
1.0303
3.1
3.8067
No
No
01
MED
Nonspecific cva  precerebral occlusion w/o infarct w MCC
1.2194
4.7
6.2068
No
No
01
MED
Nonspecific cva  precerebral occlusion w/o infarct w/o MCC
0.9131
2.8
3.6069
No
No
01
MED
Transient ischemia
0.7339
2.5
3.1070
Yes
No
01
MED
Nonspecific cerebrovascular disorders w MCC
1.6212
6.0
7.9071
Yes
No
01
MED
Nonspecific cerebrovascular disorders w CC
1.2522
4.5
5.6072
Yes
No
01
MED
Nonspecific cerebrovascular disorders w/o CC/MCC
0.9586
2.9
3.7073
No
No
01
MED
Cranial  peripheral nerve disorders w MCC
1.1717
4.8
6.4074
No
No
01
MED
Cranial  peripheral nerve disorders w/o MCC
0.8954
3.4
4.4( print page 47541)075
No
No
01
MED
Viral meningitis w CC/MCC
1.5369
6.0
7.6076
No
No
01
MED
Viral meningitis w/o CC/MCC
1.1439
3.4
4.2077
No
No
01
MED
Hypertensive encephalopathy w MCC
1.4611
5.6
7.2078
No
No
01
MED
Hypertensive encephalopathy w CC
1.0996
3.7
4.6079
No
No
01
MED
Hypertensive encephalopathy w/o CC/MCC
0.9839
2.8
3.4080
No
No
01
MED
Nontraumatic stupor  coma w MCC
0.9014
3.6
4.9081
No
No
01
MED
Nontraumatic stupor  coma w/o MCC
0.7161
2.7
3.4082
No
No
01
MED
Traumatic stupor  coma, coma ≥1 hr w MCC
1.6724
3.9
6.4083
No
No
01
MED
Traumatic stupor  coma, coma ≥1 hr w CC
1.3328
3.7
5.2084
No
No
01
MED
Traumatic stupor  coma, coma ≥1 hr w/o CC/MCC
1.1106
2.3
3.1085
Yes
No
01
MED
Traumatic stupor  coma, coma 1 hr w MCC
1.6946
5.7
7.9086
Yes
No
01
MED
Traumatic stupor  coma, coma 1 hr w CC
1.2337
4.0
5.1087
Yes
No
01
MED
Traumatic stupor  coma, coma 1 hr w/o CC/MCC
0.9235
2.6
3.4088
No
No
01
MED
Concussion w MCC
1.2968
4.3
6.1089
No
No
01
MED
Concussion w CC
0.9479
3.0
3.8090
No
No
01
MED
Concussion w/o CC/MCC
0.7405
2.0
2.5091
Yes
No
01
MED
Other disorders of nervous system w MCC
1.3242
4.7
6.6092
Yes
No
01
MED
Other disorders of nervous system w CC
0.9529
3.5
4.4093
Yes
No
01
MED
Other disorders of nervous system w/o CC/MCC
0.7710
2.6
3.2094
No
No
01
MED
Bacterial  tuberculous infections of nervous system w MCC
3.1499
9.7
12.5095
No
No
01
MED
Bacterial  tuberculous infections of nervous system w CC
2.5679
7.2
9.1096
No
No
01
MED
Bacterial  tuberculous infections of nervous system w/o CC/MCC
2.3482
4.9
6.2097
No
No
01
MED
Non-bacterial infect of nervous sys exc viral meningitis w MCC
2.6665
9.3
11.8098
No
No
01
MED
Non-bacterial infect of nervous sys exc viral meningitis w CC
2.0568
6.8
8.5099
No
No
01
MED
Non-bacterial infect of nervous sys exc viral meningitis w/o CC/MCC
1.8177
5.1
6.3100
Yes
No
01
MED
Seizures w MCC
1.2500
4.7
6.3101
Yes
No
01
MED
Seizures w/o MCC
0.8258
2.9
3.7102
No
No
01
MED
Headaches w MCC
0.8710
3.6
5.1103
No
No
01
MED
Headaches w/o MCC
0.6677
2.5
3.2113
No
No
02
SURG
Orbital procedures w CC/MCC
1.4141
3.8
5.5114
No
No
02
SURG
Orbital procedures w/o CC/MCC
1.0292
2.0
2.7115
No
No
02
SURG
Extraocular procedures except orbit
1.1185
3.3
4.5116
No
No
02
SURG
Intraocular procedures w CC/MCC
0.8891
2.2
3.4117
No
No
02
SURG
Intraocular procedures w/o CC/MCC
0.7094
1.5
1.9121
No
No
02
MED
Acute major eye infections w CC/MCC
0.8800
4.6
5.8122
No
No
02
MED
Acute major eye infections w/o CC/MCC
0.6608
3.3
4.1123
No
No
02
MED
Neurological eye disorders
0.7224
2.4
2.9124
No
No
02
MED
Other disorders of the eye w MCC
0.9308
3.9
5.3125
No
No
02
MED
Other disorders of the eye w/o MCC
0.6792
2.7
3.5129
No
No
03
SURG
Major head  neck procedures w CC/MCC or major device
1.7992
3.7
5.1130
No
No
03
SURG
Major head  neck procedures w/o CC/MCC
1.3987
2.4
3.2131
No
No
03
SURG
Cranial/facial procedures w CC/MCC
1.6300
4.0
5.8132
No
No
03
SURG
Cranial/facial procedures w/o CC/MCC
1.2054
2.1
2.6133
No
No
03
SURG
Other ear, nose, mouth  throat O.R. procedures w CC/MCC
1.4331
3.7
5.8134
No
No
03
SURG
Other ear, nose, mouth  throat O.R. procedures w/o CC/MCC
0.9474
1.7
2.1( print page 47542)135
No
No
03
SURG
Sinus  mastoid procedures w CC/MCC
1.5318
4.3
6.4136
No
No
03
SURG
Sinus  mastoid procedures w/o CC/MCC
1.1094
1.8
2.6137
No
No
03
SURG
Mouth procedures w CC/MCC
1.2677
3.7
5.4138
No
No
03
SURG
Mouth procedures w/o CC/MCC
0.8474
1.9
2.4139
No
No
03
SURG
Salivary gland procedures
0.8470
1.4
1.8146
No
No
03
MED
Ear, nose, mouth  throat malignancy w MCC
1.7734
7.1
10.3147
No
No
03
MED
Ear, nose, mouth  throat malignancy w CC
1.2182
4.2
5.8148
No
No
03
MED
Ear, nose, mouth  throat malignancy w/o CC/MCC
1.0070
2.5
3.5149
No
No
03
MED
Dysequilibrium
0.6154
2.2
2.7150
No
No
03
MED
Epistaxis w MCC
0.9916
4.0
5.5151
No
No
03
MED
Epistaxis w/o MCC
0.6227
2.3
2.9152
No
No
03
MED
Otitis media  URI w MCC
0.8160
3.7
4.7153
No
No
03
MED
Otitis media  URI w/o MCC
0.6207
2.8
3.4154
No
No
03
MED
Nasal trauma  deformity w MCC
1.1294
4.8
6.5155
No
No
03
MED
Nasal trauma  deformity w CC
0.8630
3.5
4.5156
No
No
03
MED
Nasal trauma  deformity w/o CC/MCC
0.7412
2.5
3.2157
No
No
03
MED
Dental  Oral Diseases w MCC
1.1909
5.0
6.9158
No
No
03
MED
Dental  Oral Diseases w CC
0.8653
3.4
4.4159
No
No
03
MED
Dental  Oral Diseases w/o CC/MCC
0.7361
2.4
3.1163
Yes
No
04
SURG
Major chest procedures w MCC
4.0452
12.2
15.0164
Yes
No
04
SURG
Major chest procedures w CC
2.8081
6.9
8.3165
Yes
No
04
SURG
Major chest procedures w/o CC/MCC
2.4106
4.5
5.4166
Yes
No
04
SURG
Other resp system O.R. procedures w MCC
3.2677
10.1
13.0167
Yes
No
04
SURG
Other resp system O.R. procedures w CC
2.4151
6.5
8.1168
Yes
No
04
SURG
Other resp system O.R. procedures w/o CC/MCC
1.8181
4.0
5.4175
Yes
No
04
MED
Pulmonary embolism w MCC
1.4152
6.1
7.4176
Yes
No
04
MED
Pulmonary embolism w/o MCC
1.1580
4.7
5.5177
Yes
No
04
MED
Respiratory infections  inflammations w MCC
1.8444
7.2
9.2178
Yes
No
04
MED
Respiratory infections  inflammations w CC
1.5636
6.0
7.4179
Yes
No
04
MED
Respiratory infections  inflammations w/o CC/MCC
1.2754
4.6
5.6180
No
No
04
MED
Respiratory neoplasms w MCC
1.5550
6.1
8.0181
No
No
04
MED
Respiratory neoplasms w CC
1.3126
4.5
6.0182
No
No
04
MED
Respiratory neoplasms w/o CC/MCC
1.1455
3.3
4.3183
No
No
04
MED
Major chest trauma w MCC
1.2664
5.7
7.2184
No
No
04
MED
Major chest trauma w CC
0.9611
3.8
4.6185
No
No
04
MED
Major chest trauma w/o CC/MCC
0.7298
2.7
3.3186
Yes
No
04
MED
Pleural effusion w MCC
1.4542
5.8
7.5187
Yes
No
04
MED
Pleural effusion w CC
1.1947
4.2
5.5188
Yes
No
04
MED
Pleural effusion w/o CC/MCC
0.9745
3.2
4.1189
No
No
04
MED
Pulmonary edema  respiratory failure
1.3660
4.8
6.2190
Yes
No
04
MED
Chronic obstructive pulmonary disease w MCC
1.1138
5.1
6.5191
Yes
No
04
MED
Chronic obstructive pulmonary disease w CC
0.9405
4.2
5.1192
Yes
No
04
MED
Chronic obstructive pulmonary disease w/o CC/MCC
0.8145
3.4
4.0193
Yes
No
04
MED
Simple pneumonia  pleurisy w MCC
1.2505
5.5
6.9194
Yes
No
04
MED
Simple pneumonia  pleurisy w CC
1.0235
4.5
5.3195
Yes
No
04
MED
Simple pneumonia  pleurisy w/o CC/MCC
0.8398
3.5
4.1196
Yes
No
04
MED
Interstitial lung disease w MCC
1.3781
5.8
7.3197
Yes
No
04
MED
Interstitial lung disease w CC
1.1458
4.4
5.4198
Yes
No
04
MED
Interstitial lung disease w/o CC/MCC
0.9654
3.5
4.3199
No
No
04
MED
Pneumothorax w MCC
1.4699
6.6
8.5200
No
No
04
MED
Pneumothorax w CC
1.0753
3.9
5.1201
No
No
04
MED
Pneumothorax w/o CC/MCC
0.8588
3.2
4.1( print page 47543)202
No
No
04
MED
Bronchitis  asthma w CC/MCC
0.7841
3.6
4.5203
No
No
04
MED
Bronchitis  asthma w/o CC/MCC
0.6252
2.9
3.5204
No
No
04
MED
Respiratory signs  symptoms
0.6658
2.2
2.9205
Yes
No
04
MED
Other respiratory system diagnoses w MCC
1.0636
4.2
5.6206
Yes
No
04
MED
Other respiratory system diagnoses w/o MCC
0.7848
2.7
3.5207
Yes
No
04
MED
Respiratory system diagnosis w ventilator support 96+ hours
5.1231
12.6
15.0208
No
No
04
MED
Respiratory system diagnosis w ventilator support 96 hours
2.2463
5.2
7.3215
No
No
05
SURG
Other heart assist system implant
12.0016
6.3
12.0216
Yes
No
05
SURG
Cardiac valve  oth maj cardiothoracic proc w card cath w MCC
9.3040
15.9
18.7217
Yes
No
05
SURG
Cardiac valve  oth maj cardiothoracic proc w card cath w CC
7.5813
10.9
12.2218
Yes
No
05
SURG
Cardiac valve  oth maj cardiothoracic proc w card cath w/o CC/MCC
6.8595
8.3
9.1219
Yes
Yes
05
SURG
Cardiac valve  oth maj cardiothoracic proc w/o card cath w MCC
7.2072
11.7
14.5220
Yes
Yes
05
SURG
Cardiac valve  oth maj cardiothoracic proc w/o card cath w CC
5.7278
7.6
8.6221
Yes
Yes
05
SURG
Cardiac valve  oth maj cardiothoracic proc w/o card cath w/o CC/MCC
5.2463
6.0
6.4222
No
No
05
SURG
Cardiac defib implant w cardiac cath w AMI/HF/shock w MCC
8.0234
10.8
13.3223
No
No
05
SURG
Cardiac defib implant w cardiac cath w AMI/HF/shock w/o MCC
6.8809
5.0
6.6224
No
No
05
SURG
Cardiac defib implant w cardiac cath w/o AMI/HF/shock w MCC
7.3178
9.2
11.5225
No
No
05
SURG
Cardiac defib implant w cardiac cath w/o AMI/HF/shock w/o MCC
6.2956
4.5
5.7226
No
No
05
SURG
Cardiac defibrillator implant w/o cardiac cath w MCC
5.9123
6.2
9.4227
No
No
05
SURG
Cardiac defibrillator implant w/o cardiac cath w/o MCC
5.0411
1.8
2.8228
Yes
No
05
SURG
Other cardiothoracic procedures w MCC
6.7400
12.0
14.6229
Yes
No
05
SURG
Other cardiothoracic procedures w CC
5.3191
7.9
9.0230
Yes
No
05
SURG
Other cardiothoracic procedures w/o CC/MCC
4.7847
5.6
6.6231
No
No
05
SURG
Coronary bypass w PTCA w MCC
7.2993
10.8
13.2232
No
No
05
SURG
Coronary bypass w PTCA w/o MCC
6.1947
8.0
9.0233
Yes
No
05
SURG
Coronary bypass w cardiac cath w MCC
6.4496
12.4
14.3234
Yes
No
05
SURG
Coronary bypass w cardiac cath w/o MCC
4.9216
8.2
8.9235
Yes
No
05
SURG
Coronary bypass w/o cardiac cath w MCC
5.1381
9.7
11.5236
Yes
No
05
SURG
Coronary bypass w/o cardiac cath w/o MCC
3.7307
6.1
6.6237
No
No
05
SURG
Major cardiovasc procedures w MCC or thoracic aortic anuerysm repair
4.4954
7.8
11.2238
No
No
05
SURG
Major cardiovasc procedures w/o MCC
3.1891
3.4
4.9239
Yes
No
05
SURG
Amputation for circ sys disorders exc upper limb  toe w MCC
3.9454
12.1
15.6240
Yes
No
05
SURG
Amputation for circ sys disorders exc upper limb  toe w CC
2.9983
8.4
10.5241
Yes
No
05
SURG
Amputation for circ sys disorders exc upper limb  toe w/o CC/MCC
2.4709
5.7
6.9( print page 47544)242
Yes
No
05
SURG
Permanent cardiac pacemaker implant w MCC
3.2586
6.9
8.9243
Yes
No
05
SURG
Permanent cardiac pacemaker implant w CC
2.5483
3.8
5.1244
Yes
No
05
SURG
Permanent cardiac pacemaker implant w/o CC/MCC
2.1367
2.2
2.9245
No
No
05
SURG
AICD lead  generator procedures
3.1073
2.1
3.3246
No
No
05
SURG
Perc cardiovasc proc w drug-eluting stent w MCC or 4+ vessels/stents
2.9046
3.7
5.5247
No
No
05
SURG
Perc cardiovasc proc w drug-eluting stent w/o MCC
2.1255
1.7
2.2248
No
No
05
SURG
Perc cardiovasc proc w non-drug-eluting stent w MCC or 4+ ves/stents
2.5180
4.3
6.2249
No
No
05
SURG
Perc cardiovasc proc w non-drug-eluting stent w/o MCC
1.8124
1.9
2.5250
No
No
05
SURG
Perc cardiovasc proc w/o coronary artery stent or AMI w MCC
2.4870
5.3
7.5251
No
No
05
SURG
Perc cardiovasc proc w/o coronary artery stent or AMI w/o MCC
1.7480
2.1
3.0252
No
No
05
SURG
Other vascular procedures w MCC
2.7564
5.6
8.8253
No
No
05
SURG
Other vascular procedures w CC
2.2536
4.1
6.0254
No
No
05
SURG
Other vascular procedures w/o CC/MCC
1.6786
2.0
2.8255
Yes
No
05
SURG
Upper limb  toe amputation for circ system disorders w MCC
2.1486
7.3
9.9256
Yes
No
05
SURG
Upper limb  toe amputation for circ system disorders w CC
1.6847
5.8
7.5257
Yes
No
05
SURG
Upper limb  toe amputation for circ system disorders w/o CC/MCC
1.3990
3.7
4.9258
No
No
05
SURG
Cardiac pacemaker device replacement w MCC
2.2926
5.5
7.6259
No
No
05
SURG
Cardiac pacemaker device replacement w/o MCC
1.6553
1.9
2.6260
No
No
05
SURG
Cardiac pacemaker revision except device replacement w MCC
2.1625
7.2
10.2261
No
No
05
SURG
Cardiac pacemaker revision except device replacement w CC
1.3212
2.8
3.9262
No
No
05
SURG
Cardiac pacemaker revision except device replacement w/o CC/MCC
1.1245
1.9
2.5263
No
No
05
SURG
Vein ligation  stripping
1.4977
3.5
5.5264
Yes
No
05
SURG
Other circulatory system O.R. procedures
2.4840
5.9
9.0280
Yes
No
05
MED
Acute myocardial infarction, discharged alive w MCC
1.7391
5.9
7.5281
Yes
No
05
MED
Acute myocardial infarction, discharged alive w CC
1.3126
4.0
4.9282
Yes
No
05
MED
Acute myocardia infarction, discharged alive w/o CC/MCC
1.0617
2.6
3.2283
No
No
05
MED
Acute myocardial infarction, expired w MCC
1.5787
3.4
5.5284
No
No
05
MED
Acute myocardial infarction, expired w CC
1.2074
2.3
3.5285
No
No
05
MED
Acute myocardial infarction, expired w/o CC/MCC
1.0421
1.6
2.2286
No
No
05
MED
Circulatory disorders except AMI, w card cath w MCC
1.6667
5.2
7.1287
No
No
05
MED
Circulatory disorders except AMI, w card cath w/o MCC
1.1412
2.5
3.2288
Yes
No
05
MED
Acute  subacute endocarditis w MCC
2.9143
9.6
12.2289
Yes
No
05
MED
Acute  subacute endocarditis w CC
2.3075
7.1
8.7290
Yes
No
05
MED
Acute  subacute endocarditis w/o CC/MCC
1.9733
5.2
6.6291
Yes
No
05
MED
Heart failure  shock w MCC
1.2585
5.1
6.6292
Yes
No
05
MED
Heart failure  shock w CC
1.0134
4.1
5.0293
Yes
No
05
MED
Heart failure  shock w/o CC/MCC
0.8765
3.1
3.7( print page 47545)294
No
No
05
MED
Deep vein thrombophlebitis w CC/MCC
0.8665
4.6
5.5295
No
No
05
MED
Deep vein thrombophlebitis w/o CC/MCC
0.6950
3.8
4.4296
No
No
05
MED
Cardiac arrest, unexplained w MCC
1.1144
2.0
3.3297
No
No
05
MED
Cardiac arrest, unexplained w CC
0.8490
1.5
1.9298
No
No
05
MED
Cardiac arrest, unexplained w/o CC/MCC
0.7207
1.2
1.4299
Yes
No
05
MED
Peripheral vascular disorders w MCC
1.2220
5.2
6.9300
Yes
No
05
MED
Peripheral vascular disorders w CC
0.9451
4.1
5.1301
Yes
No
05
MED
Peripheral vascular disorders w/o CC/MCC
0.7183
3.1
3.8302
No
No
05
MED
Atherosclerosis w MCC
0.8236
3.3
4.4303
No
No
05
MED
Atherosclerosis w/o MCC
0.6055
2.1
2.6304
No
No
05
MED
Hypertension w MCC
0.8312
3.9
5.2305
No
No
05
MED
Hypertension w/o MCC
0.5942
2.3
2.9306
No
No
05
MED
Cardiac congenital  valvular disorders w MCC
1.2007
4.5
6.5307
No
No
05
MED
Cardiac congenital  valvular disorders w/o MCC
0.8224
2.7
3.5308
No
No
05
MED
Cardiac arrhythmia  conduction disorders w MCC
1.0841
4.3
5.8309
No
No
05
MED
Cardiac arrhythmia  conduction disorders w CC
0.8233
3.1
3.9310
No
No
05
MED
Cardiac arrhythmia  conduction disorders w/o CC/MCC
0.6439
2.3
2.8311
No
No
05
MED
Angina pectoris
0.5118
1.9
2.3312
No
No
05
MED
Syncope  collapse
0.7197
2.5
3.2313
No
No
05
MED
Chest pain
0.5489
1.7
2.1314
Yes
No
05
MED
Other circulatory system diagnoses w MCC
1.5606
5.1
7.1315
Yes
No
05
MED
Other circulatory system diagnoses w CC
1.1720
3.5
4.6316
Yes
No
05
MED
Other circulatory system diagnoses w/o CC/MCC
0.9075
2.4
3.0326
Yes
No
06
SURG
Stomach, esophageal  duodenal proc w MCC
5.1660
13.4
17.2327
Yes
No
06
SURG
Stomach, esophageal  duodenal proc w CC
3.2941
8.1
10.3328
Yes
No
06
SURG
Stomach, esophageal  duodenal proc w/o CC/MCC
1.8017
3.3
4.4329
Yes
No
06
SURG
Major small  large bowel procedures w MCC
4.5059
12.8
15.9330
Yes
No
06
SURG
Major small  large bowel procedures w CC
2.8935
8.4
9.8331
Yes
No
06
SURG
Major small  large bowel procedures w/o CC/MCC
1.8415
5.4
6.0332
Yes
No
06
SURG
Rectal resection w MCC
3.7139
12.2
14.7333
Yes
No
06
SURG
Rectal resection w CC
2.5787
7.8
8.9334
Yes
No
06
SURG
Rectal resection w/o CC/MCC
1.7856
4.9
5.6335
Yes
No
06
SURG
Peritoneal adhesiolysis w MCC
3.4785
11.8
14.4336
Yes
No
06
SURG
Peritoneal adhesiolysis w CC
2.4776
7.7
9.3337
Yes
No
06
SURG
Peritoneal adhesiolysis w/o CC/MCC
1.6984
4.4
5.7338
No
No
06
SURG
Appendectomy w complicated principal diag w MCC
2.7254
9.1
10.9339
No
No
06
SURG
Appendectomy w complicated principal diag w CC
1.9805
6.1
7.1340
No
No
06
SURG
Appendectomy w complicated principal diag w/o CC/MCC
1.3849
3.6
4.3341
No
No
06
SURG
Appendectomy w/o complicated principal diag w MCC
1.8824
5.3
7.3342
No
No
06
SURG
Appendectomy w/o complicated principal diag w CC
1.3562
3.4
4.3343
No
No
06
SURG
Appendectomy w/o complicated principal diag w/o CC/MCC
0.9887
1.9
2.3344
No
No
06
SURG
Minor small  large bowel procedures w MCC
2.5156
9.4
12.0( print page 47546)345
No
No
06
SURG
Minor small  large bowel procedures w CC
1.7028
6.2
7.2346
No
No
06
SURG
Minor small  large bowel procedures w/o CC/MCC
1.2617
4.4
5.0347
No
No
06
SURG
Anal  stomal procedures w MCC
1.7658
6.2
8.4348
No
No
06
SURG
Anal  stomal procedures w CC
1.2781
4.1
5.5349
No
No
06
SURG
Anal  stomal procedures w/o CC/MCC
0.8629
2.4
3.0350
No
No
06
SURG
Inguinal  femoral hernia procedures w MCC
1.8330
5.9
8.1351
No
No
06
SURG
Inguinal  femoral hernia procedures w CC
1.2449
3.4
4.5352
No
No
06
SURG
Inguinal  femoral hernia procedures w/o CC/MCC
0.8967
1.9
2.4353
No
No
06
SURG
Hernia procedures except inguinal  femoral w MCC
2.0241
6.6
8.8354
No
No
06
SURG
Hernia procedures except inguinal  femoral w CC
1.4092
4.0
5.1355
No
No
06
SURG
Hernia procedures except inguinal  femoral w/o CC/MCC
1.0147
2.3
2.9356
Yes
No
06
SURG
Other digestive system O.R. procedures w MCC
3.3790
9.6
13.3357
Yes
No
06
SURG
Other digestive system O.R. procedures w CC
2.4946
6.1
8.0358
Yes
No
06
SURG
Other digestive system O.R. procedures w/o CC/MCC
1.7333
3.4
4.6368
No
No
06
MED
Major esophageal disorders w MCC
1.3788
5.1
6.6369
No
No
06
MED
Major esophageal disorders w CC
1.0839
3.7
4.6370
No
No
06
MED
Major esophageal disorders w/o CC/MCC
0.9558
2.8
3.4371
Yes
No
06
MED
Major gastrointestinal disorders  peritoneal infections w MCC
1.6263
6.6
8.8372
Yes
No
06
MED
Major gastrointestinal disorders  peritoneal infections w CC
1.3059
5.5
6.8373
Yes
No
06
MED
Major gastrointestinal disorders  peritoneal infections w/o CC/MCC
1.1109
4.2
5.0374
Yes
No
06
MED
Digestive malignancy w MCC
1.7229
6.5
8.8375
Yes
No
06
MED
Digestive malignancy w CC
1.3337
4.6
6.0376
Yes
No
06
MED
Digestive malignancy w/o CC/MCC
1.0268
3.1
4.1377
Yes
No
06
MED
G.I. hemorrhage w MCC
1.3367
5.0
6.5378
Yes
No
06
MED
G.I. hemorrhage w CC
1.0195
3.7
4.5379
Yes
No
06
MED
G.I. hemorrhage w/o CC/MCC
0.8476
2.9
3.4380
Yes
No
06
MED
Complicated peptic ulcer w MCC
1.4334
5.5
7.2381
Yes
No
06
MED
Complicated peptic ulcer w CC
1.1302
4.2
5.1382
Yes
No
06
MED
Complicated peptic ulcer w/o CC/MCC
0.9662
3.0
3.6383
No
No
06
MED
Uncomplicated peptic ulcer w MCC
1.1024
4.6
5.9384
No
No
06
MED
Uncomplicated peptic ulcer w/o MCC
0.8399
3.2
3.8385
No
No
06
MED
Inflammatory bowel disease w MCC
1.4936
6.7
9.0386
No
No
06
MED
Inflammatory bowel disease w CC
1.0766
4.6
5.7387
No
No
06
MED
Inflammatory bowel disease w/o CC/MCC
0.9488
3.6
4.4388
Yes
No
06
MED
G.I. obstruction w MCC
1.2860
5.5
7.4389
Yes
No
06
MED
G.I. obstruction w CC
0.9533
4.0
5.0390
Yes
No
06
MED
G.I. obstruction w/o CC/MCC
0.7260
3.0
3.6391
No
No
06
MED
Esophagitis, gastroent  misc digest disorders w MCC
0.9565
4.1
5.5392
No
No
06
MED
Esophagitis, gastroent  misc digest disorders w/o MCC
0.7121
2.8
3.5393
No
No
06
MED
Other digestive system diagnoses w MCC
1.3237
5.0
7.0394
No
No
06
MED
Other digestive system diagnoses w CC
1.0257
3.8
4.9395
No
No
06
MED
Other digestive system diagnoses w/o CC/MCC
0.7874
2.7
3.4405
Yes
No
07
SURG
Pancreas, liver  shunt procedures w MCC
4.8273
12.8
17.3406
Yes
No
07
SURG
Pancreas, liver  shunt procedures w CC
3.3149
7.1
9.5( print page 47547)407
Yes
No
07
SURG
Pancreas, liver  shunt procedures w/o CC/MCC
2.2443
4.2
5.5408
No
No
07
SURG
Biliary tract proc except only cholecyst w or w/o c.d.e. w MCC
3.8540
12.2
15.1409
No
No
07
SURG
Biliary tract proc except only cholecyst w or w/o c.d.e. w CC
2.9126
8.2
9.9410
No
No
07
SURG
Biliary tract proc except only cholecyst w or w/o c.d.e. w/o CC/MCC
2.0794
5.7
6.8411
No
No
07
SURG
Cholecystectomy w c.d.e. w MCC
3.4128
10.9
13.1412
No
No
07
SURG
Cholecystectomy w c.d.e. w CC
2.6382
7.6
8.8413
No
No
07
SURG
Cholecystectomy w c.d.e. w/o CC/MCC
1.9412
5.2
6.0414
Yes
No
07
SURG
Cholecystectomy except by laparoscope w/o c.d.e. w MCC
3.0942
9.7
11.9415
Yes
No
07
SURG
Cholecystectomy except by laparoscope w/o c.d.e. w CC
2.2749
6.6
7.7416
Yes
No
07
SURG
Cholecystectomy except by laparoscope w/o c.d.e. w/o CC/MCC
1.5398
4.1
4.9417
No
No
07
SURG
Laparoscopic cholecystectomy w/o c.d.e. w MCC
2.1361
6.6
8.4418
No
No
07
SURG
Laparoscopic cholecystectomy w/o c.d.e. w CC
1.7104
4.5
5.6419
No
No
07
SURG
Laparoscopic cholecystectomy w/o c.d.e. w/o CC/MCC
1.2400
2.5
3.2420
No
No
07
SURG
Hepatobiliary diagnostic procedures w MCC
3.4851
10.1
14.2421
No
No
07
SURG
Hepatobiliary diagnostic procedures w CC
2.2557
5.6
7.8422
No
No
07
SURG
Hepatobiliary diagnostic procedures w/o CC/MCC
1.9432
3.4
4.5423
No
No
07
SURG
Other hepatobiliary or pancreas O.R. procedures w MCC
3.9593
11.4
15.5424
No
No
07
SURG
Other hepatobiliary or pancreas O.R. procedures w CC
3.0104
7.8
10.2425
No
No
07
SURG
Other hepatobiliary or pancreas O.R. procedures w/o CC/MCC
2.5812
4.5
5.6432
No
No
07
MED
Cirrhosis  alcoholic hepatitis w MCC
1.5033
5.1
6.9433
No
No
07
MED
Cirrhosis  alcoholic hepatitis w CC
1.1431
3.8
4.9434
No
No
07
MED
Cirrhosis  alcoholic hepatitis w/o CC/MCC
1.0125
2.8
3.6435
No
No
07
MED
Malignancy of hepatobiliary system or pancreas w MCC
1.5661
5.8
7.7436
No
No
07
MED
Malignancy of hepatobiliary system or pancreas w CC
1.2906
4.5
5.9437
No
No
07
MED
Malignancy of hepatobiliary system or pancreas w/o CC/MCC
1.1709
3.3
4.4438
No
No
07
MED
Disorders of pancreas except malignancy w MCC
1.4201
5.6
7.7439
No
No
07
MED
Disorders of pancreas except malignancy w CC
1.0609
4.3
5.4440
No
No
07
MED
Disorders of pancreas except malignancy w/o CC/MCC
0.8912
3.2
3.9441
Yes
No
07
MED
Disorders of liver except malig,cirr,alc hepa w MCC
1.3973
5.1
7.0442
Yes
No
07
MED
Disorders of liver except malig,cirr,alc hepa w CC
1.0935
4.0
5.1443
Yes
No
07
MED
Disorders of liver except malig,cirr,alc hepa w/o CC/MCC
0.9079
3.1
3.8444
No
No
07
MED
Disorders of the biliary tract w MCC
1.3744
5.0
6.6445
No
No
07
MED
Disorders of the biliary tract w CC
1.1030
3.8
4.8446
No
No
07
MED
Disorders of the biliary tract w/o CC/MCC
0.8521
2.6
3.3453
No
No
08
SURG
Combined anterior/posterior spinal fusion w MCC
8.4313
12.7
15.9454
No
No
08
SURG
Combined anterior/posterior spinal fusion w CC
6.5810
6.8
8.4( print page 47548)455
No
No
08
SURG
Combined anterior/posterior spinal fusion w/o CC/MCC
5.7023
4.1
4.7456
No
No
08
SURG
Spinal fus exc cerv w spinal curv/malig/infec or 9+ fus w MCC
6.7669
12.1
15.9457
No
No
08
SURG
Spinal fus exc cerv w spinal curv/malig/infec or 9+ fus w CC
5.4650
6.4
7.8458
No
No
08
SURG
Spinal fus exc cerv w spinal curv/malig/infec or 9+ fus w/o CC/MCC
4.9437
4.1
4.6459
Yes
No
08
SURG
Spinal fusion except cervical w MCC
4.8679
7.8
9.6460
Yes
No
08
SURG
Spinal fusion except cervical w/o MCC
3.4870
3.8
4.3461
No
No
08
SURG
Bilateral or multiple major joint procs of lower extremity w MCC
3.8345
6.9
8.5462
No
No
08
SURG
Bilateral or multiple major joint procs of lower extremity w/o MCC
3.0993
3.9
4.3463
Yes
No
08
SURG
Wnd debrid  skn grft exc hand, for musculo-conn tiss dis w MCC
3.9615
12.3
16.9464
Yes
No
08
SURG
Wnd debrid  skn grft exc hand, for musculo-conn tiss dis w CC
2.8821
7.8
10.4465
Yes
No
08
SURG
Wnd debrid  skn grft exc hand, for musculo-conn tiss dis w/o CC/MCC
2.3417
4.6
6.2466
Yes
No
08
SURG
Revision of hip or knee replacement w MCC
3.5408
7.6
9.5467
Yes
No
08
SURG
Revision of hip or knee replacement w CC
2.7523
4.8
5.6468
Yes
No
08
SURG
Revision of hip or knee replacement w/o CC/MCC
2.4545
3.7
4.0469
Yes
No
08
SURG
Major joint replacement or reattachment of lower extremity w MCC
2.6664
7.1
8.4470
Yes
No
08
SURG
Major joint replacement or reattachment of lower extremity w/o MCC
1.9871
3.7
4.0471
No
No
08
SURG
Cervical spinal fusion w MCC
3.4723
7.0
10.1472
No
No
08
SURG
Cervical spinal fusion w CC
2.4819
2.9
4.3473
No
No
08
SURG
Cervical spinal fusion w/o CC/MCC
1.9446
1.6
2.0474
Yes
No
08
SURG
Amputation for musculoskeletal sys  conn tissue dis w MCC
2.8432
9.5
12.5475
Yes
No
08
SURG
Amputation for musculoskeletal sys  conn tissue dis w CC
2.1308
6.6
8.6476
Yes
No
08
SURG
Amputation for musculoskeletal sys  conn tissue dis w/o CC/MCC
1.6799
3.8
5.0477
Yes
Yes
08
SURG
Biopsies of musculoskeletal system  connective tissue w MCC
2.6555
9.6
12.5478
Yes
Yes
08
SURG
Biopsies of musculoskeletal system  connective tissue w CC
1.9836
4.8
6.8479
Yes
Yes
08
SURG
Biopsies of musculoskeletal system  connective tissue w/o CC/MCC
1.6784
1.9
2.8480
Yes
Yes
08
SURG
Hip  femur procedures except major joint w MCC
2.4027
8.0
9.5481
Yes
Yes
08
SURG
Hip  femur procedures except major joint w CC
1.8485
5.4
6.0482
Yes
Yes
08
SURG
Hip  femur procedures except major joint w/o CC/MCC
1.5644
4.5
4.9483
Yes
No
08
SURG
Major joint  limb reattachment proc of upper extremity w CC/MCC
1.9905
3.5
4.4484
Yes
No
08
SURG
Major joint  limb reattachment proc of upper extremity w/o CC/MCC
1.7376
2.2
2.5485
No
No
08
SURG
Knee procedures w pdx of infection w MCC
2.9362
10.2
12.4486
No
No
08
SURG
Knee procedures w pdx of infection w CC
2.3382
6.8
8.1487
No
No
08
SURG
Knee procedures w pdx of infection w/o CC/MCC
1.7771
5.0
5.8488
Yes
No
08
SURG
Knee procedures w/o pdx of infection w CC/MCC
1.6584
4.1
5.1489
Yes
No
08
SURG
Knee procedures w/o pdx of infection w/o CC/MCC
1.4512
2.7
3.1490
No
No
08
SURG
Back  neck proc exc spinal fusion w CC/MCC or disc device/neurostim
1.4912
3.3
4.7( print page 47549)491
No
No
08
SURG
Back  neck proc exc spinal fusion w/o CC/MCC
1.0066
1.8
2.3492
Yes
Yes
08
SURG
Lower extrem  humer proc except hip,foot,femur w MCC
2.2413
6.9
8.7493
Yes
Yes
08
SURG
Lower extrem  humer proc except hip,foot,femur w CC
1.7186
4.4
5.3494
Yes
Yes
08
SURG
Lower extrem  humer proc except hip,foot,femur w/o CC/MCC
1.2752
2.8
3.4495
Yes
No
08
SURG
Local excision  removal int fix devices exc hip  femur w MCC
2.5765
8.3
11.1496
Yes
No
08
SURG
Local excision  removal int fix devices exc hip  femur w CC
1.7792
4.6
6.0497
Yes
No
08
SURG
Local excision  removal int fix devices exc hip  femur w/o CC/MCC
1.2301
2.3
3.1498
No
No
08
SURG
Local excision  removal int fix devices of hip  femur w CC/MCC
1.7563
5.8
8.2499
No
No
08
SURG
Local excision  removal int fix devices of hip  femur w/o CC/MCC
1.1887
2.3
3.1500
Yes
Yes
08
SURG
Soft tissue procedures w MCC
2.4096
8.1
11.3501
Yes
Yes
08
SURG
Soft tissue procedures w CC
1.5598
4.4
5.9502
Yes
Yes
08
SURG
Soft tissue procedures w/o CC/MCC
1.0342
2.3
2.9503
No
No
08
SURG
Foot procedures w MCC
1.7538
6.9
8.9504
No
No
08
SURG
Foot procedures w CC
1.4058
5.0
6.4505
No
No
08
SURG
Foot procedures w/o CC/MCC
1.1584
2.6
3.4506
No
No
08
SURG
Major thumb or joint procedures
1.0877
2.3
3.2507
No
No
08
SURG
Major shoulder or elbow joint procedures w CC/MCC
1.4296
3.6
5.2508
No
No
08
SURG
Major shoulder or elbow joint procedures w/o CC/MCC
1.1330
1.7
2.0509
No
No
08
SURG
Arthroscopy
1.0769
1.9
2.8510
Yes
No
08
SURG
Shoulder,elbow or forearm proc,exc major joint proc w MCC
1.6616
5.0
6.6511
Yes
No
08
SURG
Shoulder,elbow or forearm proc,exc major joint proc w CC
1.2512
3.1
3.9512
Yes
No
08
SURG
Shoulder,elbow or forearm proc,exc major joint proc w/o CC/MCC
0.9602
1.7
2.1513
No
No
08
SURG
Hand or wrist proc, except major thumb or joint proc w CC/MCC
1.1748
3.7
5.1514
No
No
08
SURG
Hand or wrist proc, except major thumb or joint proc w/o CC/MCC
0.8313
2.0
2.6515
Yes
Yes
08
SURG
Other musculoskelet sys  conn tiss O.R. proc w MCC
2.4858
8.1
10.9516
Yes
Yes
08
SURG
Other musculoskelet sys  conn tiss O.R. proc w CC
1.8307
4.4
6.0517
Yes
Yes
08
SURG
Other musculoskelet sys  conn tiss O.R. proc w/o CC/MCC
1.4192
2.0
2.9533
Yes
No
08
MED
Fractures of femur w MCC
1.1294
5.1
6.9534
Yes
No
08
MED
Fractures of femur w/o MCC
0.7560
3.2
4.0535
Yes
No
08
MED
Fractures of hip  pelvis w MCC
1.0836
4.8
6.4536
Yes
No
08
MED
Fractures of hip  pelvis w/o MCC
0.7340
3.4
4.0537
No
No
08
MED
Sprains, strains,  dislocations of hip, pelvis  thigh w CC/MCC
0.7528
3.8
4.7538
No
No
08
MED
Sprains, strains,  dislocations of hip, pelvis  thigh w/o CC/MCC
0.5986
2.6
3.1539
Yes
No
08
MED
Osteomyelitis w MCC
1.7648
7.7
10.2540
Yes
No
08
MED
Osteomyelitis w CC
1.4026
5.8
7.2541
Yes
No
08
MED
Osteomyelitis w/o CC/MCC
1.2101
4.4
5.7542
Yes
No
08
MED
Pathological fractures  musculoskelet  conn tiss malig w MCC
1.4877
6.8
8.7543
Yes
No
08
MED
Pathological fractures  musculoskelet  conn tiss malig w CC
1.1151
4.8
6.0544
Yes
No
08
MED
Pathological fractures  musculoskelet  conn tiss malig w/o CC/MCC
0.9395
3.7
4.5545
Yes
No
08
MED
Connective tissue disorders w MCC
1.8330
6.5
9.0546
Yes
No
08
MED
Connective tissue disorders w CC
1.2092
4.3
5.5( print page 47550)547
Yes
No
08
MED
Connective tissue disorders w/o CC/MCC
0.9054
3.2
3.9548
No
No
08
MED
Septic arthritis w MCC
1.5372
7.0
9.3549
No
No
08
MED
Septic arthritis w CC
1.1522
5.0
6.2550
No
No
08
MED
Septic arthritis w/o CC/MCC
0.9567
3.6
4.5551
Yes
No
08
MED
Medical back problems w MCC
1.1632
5.5
7.2552
Yes
No
08
MED
Medical back problems w/o MCC
0.7839
3.4
4.2553
No
No
08
MED
Bone diseases  arthropathies w MCC
0.9199
4.8
6.1554
No
No
08
MED
Bone diseases  arthropathies w/o MCC
0.6475
3.0
3.7555
No
No
08
MED
Signs  symptoms of musculoskeletal system  conn tissue w MCC
0.7886
3.6
4.9556
No
No
08
MED
Signs  symptoms of musculoskeletal system  conn tissue w/o MCC
0.5958
2.5
3.2557
Yes
No
08
MED
Tendonitis, myositis  bursitis w MCC
1.2171
5.4
6.9558
Yes
No
08
MED
Tendonitis, myositis  bursitis w/o MCC
0.8480
3.5
4.3559
Yes
No
08
MED
Aftercare, musculoskeletal system  connective tissue w MCC
1.2104
5.1
7.3560
Yes
No
08
MED
Aftercare, musculoskeletal system  connective tissue w CC
0.8521
3.6
4.7561
Yes
No
08
MED
Aftercare, musculoskeletal system  connective tissue w/o CC/MCC
0.6753
2.1
2.7562
Yes
No
08
MED
Fx, sprn, strn  disl except femur, hip, pelvis  thigh w MCC
1.1163
5.0
6.5563
Yes
No
08
MED
Fx, sprn, strn  disl except femur, hip, pelvis  thigh w/o MCC
0.6981
3.1
3.7564
No
No
08
MED
Other musculoskeletal sys  connective tissue diagnoses w MCC
1.1606
5.3
7.1565
No
No
08
MED
Other musculoskeletal sys  connective tissue diagnoses w CC
0.9003
4.0
5.1566
No
No
08
MED
Other musculoskeletal sys  connective tissue diagnoses w/o CC/MCC
0.7790
2.9
3.7573
Yes
No
09
SURG
Skin graft /or debrid for skn ulcer or cellulitis w MCC
2.7483
10.1
13.8574
Yes
No
09
SURG
Skin graft /or debrid for skn ulcer or cellulitis w CC
2.0177
7.2
9.5575
Yes
No
09
SURG
Skin graft /or debrid for skn ulcer or cellulitis w/o CC/MCC
1.4216
4.7
5.9576
No
No
09
SURG
Skin graft /or debrid exc for skin ulcer or cellulitis w MCC
2.4766
7.8
12.1577
No
No
09
SURG
Skin graft /or debrid exc for skin ulcer or cellulitis w CC
1.6262
4.1
6.0578
No
No
09
SURG
Skin graft /or debrid exc for skin ulcer or cellulitis w/o CC/MCC
1.0742
2.5
3.4579
Yes
No
09
SURG
Other skin, subcut tiss  breast proc w MCC
2.3093
8.1
11.1580
Yes
No
09
SURG
Other skin, subcut tiss  breast proc w CC
1.4256
3.6
5.5581
Yes
No
09
SURG
Other skin, subcut tiss  breast proc w/o CC/MCC
0.9124
1.9
2.6582
No
No
09
SURG
Mastectomy for malignancy w CC/MCC
0.9432
2.1
2.9583
No
No
09
SURG
Mastectomy for malignancy w/o CC/MCC
0.7523
1.6
1.8584
No
No
09
SURG
Breast biopsy, local excision  other breast procedures w CC/MCC
1.2484
3.7
5.7585
No
No
09
SURG
Breast biopsy, local excision  other breast procedures w/o CC/MCC
0.9066
1.7
2.2592
Yes
No
09
MED
Skin ulcers w MCC
1.4555
6.6
8.9593
Yes
No
09
MED
Skin ulcers w CC
1.1060
5.2
6.5594
Yes
No
09
MED
Skin ulcers w/o CC/MCC
0.9335
3.9
4.9595
No
No
09
MED
Major skin disorders w MCC
1.3997
6.0
8.2596
No
No
09
MED
Major skin disorders w/o MCC
0.8766
3.8
4.8597
No
No
09
MED
Malignant breast disorders w MCC
1.4034
5.9
8.2598
No
No
09
MED
Malignant breast disorders w CC
1.0695
4.2
5.6( print page 47551)599
No
No
09
MED
Malignant breast disorders w/o CC/MCC
0.7232
2.6
3.6600
No
No
09
MED
Non-malignant breast disorders w CC/MCC
0.8471
4.1
5.4601
No
No
09
MED
Non-malignant breast disorders w/o CC/MCC
0.6715
3.1
3.8602
Yes
No
09
MED
Cellulitis w MCC
1.1522
5.5
7.0603
Yes
No
09
MED
Cellulitis w/o MCC
0.8087
3.9
4.7604
No
No
09
MED
Trauma to the skin, subcut tiss  breast w MCC
0.9681
4.1
5.4605
No
No
09
MED
Trauma to the skin, subcut tiss  breast w/o MCC
0.6863
2.8
3.5606
No
No
09
MED
Minor skin disorders w MCC
0.9223
4.2
5.9607
No
No
09
MED
Minor skin disorders w/o MCC
0.6505
2.9
3.8614
No
No
10
SURG
Adrenal  pituitary procedures w CC/MCC
2.1978
5.2
7.3615
No
No
10
SURG
Adrenal  pituitary procedures w/o CC/MCC
1.6502
2.8
3.4616
Yes
No
10
SURG
Amputat of lower limb for endocrine,nutrit, metabol dis w MCC
3.1449
12.6
15.6617
Yes
No
10
SURG
Amputat of lower limb for endocrine,nutrit, metabol dis w CC
2.2071
7.2
9.0618
Yes
No
10
SURG
Amputat of lower limb for endocrine,nutrit, metabol dis w/o CC/MCC
1.7554
4.9
6.1619
No
No
10
SURG
O.R. procedures for obesity w MCC
2.7625
6.4
9.3620
No
No
10
SURG
O.R. procedures for obesity w CC
1.9294
3.4
4.2621
No
No
10
SURG
O.R. procedures for obesity w/o CC/MCC
1.6876
2.1
2.4622
Yes
No
10
SURG
Skin grafts  wound debrid for endoc, nutrit  metab dis w MCC
2.7257
9.7
13.2623
Yes
No
10
SURG
Skin grafts  wound debrid for endoc, nutrit  metab dis w CC
2.0065
6.8
8.7624
Yes
No
10
SURG
Skin grafts  wound debrid for endoc, nutrit  metab dis w/o CC/MCC
1.6056
4.6
5.9625
No
No
10
SURG
Thyroid, parathyroid  thyroglossal procedures w MCC
1.5928
5.0
7.5626
No
No
10
SURG
Thyroid, parathyroid  thyroglossal procedures w CC
1.0183
2.2
3.3627
No
No
10
SURG
Thyroid, parathyroid  thyroglossal procedures w/o CC/MCC
0.8169
1.3
1.5628
Yes
No
10
SURG
Other endocrine, nutrit  metab O.R. proc w MCC
3.0602
7.8
11.8629
Yes
No
10
SURG
Other endocrine, nutrit  metab O.R. proc w CC
2.4730
7.0
8.8630
Yes
No
10
SURG
Other endocrine, nutrit  metab O.R. proc w/o CC/MCC
1.7767
3.7
5.1637
Yes
No
10
MED
Diabetes w MCC
1.0891
4.6
6.2638
Yes
No
10
MED
Diabetes w CC
0.8021
3.4
4.3639
Yes
No
10
MED
Diabetes w/o CC/MCC
0.6742
2.5
3.1640
Yes
No
10
MED
Nutritional  misc metabolic disorders w MCC
0.9793
4.1
5.6641
Yes
No
10
MED
Nutritional  misc metabolic disorders w/o MCC
0.7248
3.1
3.9642
No
No
10
MED
Inborn errors of metabolism
1.0616
3.8
5.3643
Yes
No
10
MED
Endocrine disorders w MCC
1.3926
6.0
7.8644
Yes
No
10
MED
Endocrine disorders w CC
1.0638
4.3
5.4645
Yes
No
10
MED
Endocrine disorders w/o CC/MCC
0.8310
3.2
3.9652
No
No
11
SURG
Kidney transplant
3.0654
6.6
7.9653
Yes
No
11
SURG
Major bladder procedures w MCC
4.5710
13.3
16.8654
Yes
No
11
SURG
Major bladder procedures w CC
3.1860
8.8
10.1655
Yes
No
11
SURG
Major bladder procedures w/o CC/MCC
2.7075
5.8
6.6656
No
No
11
SURG
Kidney  ureter procedures for neoplasm w MCC
2.6603
8.4
10.8657
No
No
11
SURG
Kidney  ureter procedures for neoplasm w CC
1.8997
5.1
6.1( print page 47552)658
No
No
11
SURG
Kidney  ureter procedures for neoplasm w/o CC/MCC
1.6556
3.3
3.8659
Yes
No
11
SURG
Kidney  ureter procedures for non-neoplasm w MCC
2.8119
8.2
11.3660
Yes
No
11
SURG
Kidney  ureter procedures for non-neoplasm w CC
2.0605
4.8
6.5661
Yes
No
11
SURG
Kidney  ureter procedures for non-neoplasm w/o CC/MCC
1.4004
2.6
3.3662
No
No
11
SURG
Minor bladder procedures w MCC
2.0375
7.3
10.5663
No
No
11
SURG
Minor bladder procedures w CC
1.4254
3.6
5.3664
No
No
11
SURG
Minor bladder procedures w/o CC/MCC
1.0388
1.6
2.1665
No
No
11
SURG
Prostatectomy w MCC
2.1393
9.3
12.2666
No
No
11
SURG
Prostatectomy w CC
1.4691
4.3
6.3667
No
No
11
SURG
Prostatectomy w/o CC/MCC
0.9335
2.0
2.7668
No
No
11
SURG
Transurethral procedures w MCC
1.7208
6.3
8.6669
No
No
11
SURG
Transurethral procedures w CC
1.2079
3.1
4.4670
No
No
11
SURG
Transurethral procedures w/o CC/MCC
0.8838
1.9
2.5671
No
No
11
SURG
Urethral procedures w CC/MCC
1.2808
3.9
5.8672
No
No
11
SURG
Urethral procedures w/o CC/MCC
0.8422
1.9
2.5673
No
No
11
SURG
Other kidney  urinary tract procedures w MCC
2.5235
6.0
10.2674
No
No
11
SURG
Other kidney  urinary tract procedures w CC
2.1024
4.0
6.6675
No
No
11
SURG
Other kidney  urinary tract procedures w/o CC/MCC
1.7196
1.4
1.9682
Yes
No
11
MED
Renal failure w MCC
1.4664
5.3
7.3683
Yes
No
11
MED
Renal failure w CC
1.1942
4.5
5.7684
Yes
No
11
MED
Renal failure w/o CC/MCC
0.9835
3.1
3.8685
No
No
11
MED
Admit for renal dialysis
0.8599
2.4
3.5686
No
No
11
MED
Kidney  urinary tract neoplasms w MCC
1.4513
6.0
8.1687
No
No
11
MED
Kidney  urinary tract neoplasms w CC
1.1147
4.0
5.3688
No
No
11
MED
Kidney  urinary tract neoplasms w/o CC/MCC
0.8577
2.5
3.2689
Yes
No
11
MED
Kidney  urinary tract infections w MCC
1.0587
5.0
6.4690
Yes
No
11
MED
Kidney  urinary tract infections w/o MCC
0.8000
3.6
4.3691
No
No
11
MED
Urinary stones w esw lithotripsy w CC/MCC
1.1508
3.0
4.2692
No
No
11
MED
Urinary stones w esw lithotripsy w/o CC/MCC
0.9457
1.8
2.3693
No
No
11
MED
Urinary stones w/o esw lithotripsy w MCC
1.0459
3.9
5.2694
No
No
11
MED
Urinary stones w/o esw lithotripsy w/o MCC
0.7110
2.0
2.6695
No
No
11
MED
Kidney  urinary tract signs  symptoms w MCC
0.9422
4.3
5.7696
No
No
11
MED
Kidney  urinary tract signs  symptoms w/o MCC
0.6276
2.6
3.2697
No
No
11
MED
Urethral stricture
0.7223
2.4
3.3698
Yes
No
11
MED
Other kidney  urinary tract diagnoses w MCC
1.3017
5.1
6.8699
Yes
No
11
MED
Other kidney  urinary tract diagnoses w CC
1.0352
3.8
4.9700
Yes
No
11
MED
Other kidney  urinary tract diagnoses w/o CC/MCC
0.8232
2.7
3.5707
No
No
12
SURG
Major male pelvic procedures w CC/MCC
1.5521
3.5
4.5708
No
No
12
SURG
Major male pelvic procedures w/o CC/MCC
1.1858
2.0
2.4709
No
No
12
SURG
Penis procedures w CC/MCC
1.6134
3.6
6.5710
No
No
12
SURG
Penis procedures w/o CC/MCC
1.2986
1.5
1.9711
No
No
12
SURG
Testes procedures w CC/MCC
1.6051
5.3
7.8712
No
No
12
SURG
Testes procedures w/o CC/MCC
1.0842
2.1
3.0( print page 47553)713
No
No
12
SURG
Transurethral prostatectomy w CC/MCC
0.9850
2.9
4.2714
No
No
12
SURG
Transurethral prostatectomy w/o CC/MCC
0.6710
1.7
2.0715
No
No
12
SURG
Other male reproductive system O.R. proc for malignancy w CC/MCC
1.5300
3.8
6.1716
No
No
12
SURG
Other male reproductive system O.R. proc for malignancy w/o CC/MCC
1.1310
1.3
1.5717
No
No
12
SURG
Other male reproductive system O.R. proc exc malignancy w CC/MCC
1.5653
5.0
7.5718
No
No
12
SURG
Other male reproductive system O.R. proc exc malignancy w/o CC/MCC
1.0329
2.1
2.7722
No
No
12
MED
Malignancy, male reproductive system w MCC
1.2827
5.6
7.4723
No
No
12
MED
Malignancy, male reproductive system w CC
1.0603
4.2
5.4724
No
No
12
MED
Malignancy, male reproductive system w/o CC/MCC
0.7677
2.5
3.3725
No
No
12
MED
Benign prostatic hypertrophy w MCC
0.9071
4.4
5.7726
No
No
12
MED
Benign prostatic hypertrophy w/o MCC
0.6886
2.8
3.5727
No
No
12
MED
Inflammation of the male reproductive system w MCC
1.0083
5.1
6.5728
No
No
12
MED
Inflammation of the male reproductive system w/o MCC
0.7241
3.3
4.0729
No
No
12
MED
Other male reproductive system diagnoses w CC/MCC
0.9542
3.7
5.1730
No
No
12
MED
Other male reproductive system diagnoses w/o CC/MCC
0.7058
2.4
3.2734
No
No
13
SURG
Pelvic evisceration, rad hysterectomy  rad vulvectomy w CC/MCC
2.0185
5.8
7.6735
No
No
13
SURG
Pelvic evisceration, rad hysterectomy  rad vulvectomy w/o CC/MCC
1.3798
3.0
3.5736
No
No
13
SURG
Uterine  adnexa proc for ovarian or adnexal malignancy w MCC
3.2108
11.5
13.9737
No
No
13
SURG
Uterine  adnexa proc for ovarian or adnexal malignancy w CC
2.1022
6.2
7.4738
No
No
13
SURG
Uterine  adnexa proc for ovarian or adnexal malignancy w/o CC/MCC
1.6754
3.5
3.9739
No
No
13
SURG
Uterine,adnexa proc for non-ovarian/adnexal malig w MCC
2.2081
7.9
10.2740
No
No
13
SURG
Uterine,adnexa proc for non-ovarian/adnexal malig w CC
1.4577
4.4
5.2741
No
No
13
SURG
Uterine,adnexa proc for non-ovarian/adnexal malig w/o CC/MCC
1.0308
2.8
3.1742
No
No
13
SURG
Uterine  adnexa proc for non-malignancy w CC/MCC
1.2422
3.5
4.6743
No
No
13
SURG
Uterine  adnexa proc for non-malignancy w/o CC/MCC
0.8672
2.1
2.3744
No
No
13
SURG
DC, conization, laparascopy  tubal interruption w CC/MCC
1.1896
4.0
5.8745
No
No
13
SURG
DC, conization, laparascopy  tubal interruption w/o CC/MCC
0.8660
2.1
2.5746
No
No
13
SURG
Vagina, cervix  vulva procedures w CC/MCC
1.0488
3.0
4.1747
No
No
13
SURG
Vagina, cervix  vulva procedures w/o CC/MCC
0.8499
1.7
1.9748
No
No
13
SURG
Female reproductive system reconstructive procedures
0.7916
1.5
1.8749
No
No
13
SURG
Other female reproductive system O.R. procedures w CC/MCC
2.2813
7.1
9.8750
No
No
13
SURG
Other female reproductive system O.R. procedures w/o CC/MCC
1.4993
2.6
3.3754
No
No
13
MED
Malignancy, female reproductive system w MCC
1.5596
6.4
8.9755
No
No
13
MED
Malignancy, female reproductive system w CC
1.1608
4.2
5.6( print page 47554)756
No
No
13
MED
Malignancy, female reproductive system w/o CC/MCC
0.7702
2.5
3.3757
No
No
13
MED
Infections, female reproductive system w MCC
1.4328
6.8
8.9758
No
No
13
MED
Infections, female reproductive system w CC
1.1147
4.9
6.1759
No
No
13
MED
Infections, female reproductive system w/o CC/MCC
0.9609
3.7
4.6760
No
No
13
MED
Menstrual  other female reproductive system disorders w CC/MCC
0.6910
2.9
3.8761
No
No
13
MED
Menstrual  other female reproductive system disorders w/o CC/MCC
0.5569
2.0
2.5765
No
No
14
SURG
Cesarean section w CC/MCC
0.9943
4.1
5.3766
No
No
14
SURG
Cesarean section w/o CC/MCC
0.7664
3.0
3.2767
No
No
14
SURG
Vaginal delivery w sterilization /or DC
0.7246
2.5
2.9768
No
No
14
SURG
Vaginal delivery w O.R. proc except steril /or DC
1.7348
4.7
5.8769
No
No
14
SURG
Postpartum  post abortion diagnoses w O.R. procedure
1.9114
3.2
5.7770
No
No
14
SURG
Abortion w DC, aspiration curettage or hysterotomy
0.7336
1.6
2.6774
No
No
14
MED
Vaginal delivery w complicating diagnoses
0.5914
2.6
3.2775
No
No
14
MED
Vaginal delivery w/o complicating diagnoses
0.4461
2.1
2.3776
No
No
14
MED
Postpartum  post abortion diagnoses w/o O.R. procedure
0.6460
2.6
3.5777
No
No
14
MED
Ectopic pregnancy
0.7087
1.8
2.1778
No
No
14
MED
Threatened abortion
0.3744
2.0
2.8779
No
No
14
MED
Abortion w/o DC
0.6013
1.7
2.6780
No
No
14
MED
False labor
0.2845
1.3
2.7781
No
No
14
MED
Other antepartum diagnoses w medical complications
0.5689
2.7
3.9782
No
No
14
MED
Other antepartum diagnoses w/o medical complications
0.4297
1.7
2.8789
No
No
15
MED
Neonates, died or transferred to another acute care facility
1.4250
*
*790
No
No
15
MED
Extreme immaturity or respiratory distress syndrome, neonate
4.6990
*
*791
No
No
15
MED
Prematurity w major problems
3.2093
*
*792
No
No
15
MED
Prematurity w/o major problems
1.9364
*
*793
No
No
15
MED
Full term neonate w major problems
3.2966
*
*794
No
No
15
MED
Neonate w other significant problems
1.1668
*
*795
No
No
15
MED
Normal newborn
0.1580
*
*799
No
No
16
SURG
Splenectomy w MCC
3.9513
10.7
14.3800
No
No
16
SURG
Splenectomy w CC
2.7617
6.4
8.2801
No
No
16
SURG
Splenectomy w/o CC/MCC
2.3252
3.7
4.8802
No
No
16
SURG
Other O.R. proc of the blood  blood forming organs w MCC
2.7940
9.1
12.8803
No
No
16
SURG
Other O.R. proc of the blood  blood forming organs w CC
1.8259
4.7
6.5804
No
No
16
SURG
Other O.R. proc of the blood  blood forming organs w/o CC/MCC
1.4754
2.4
3.2808
No
No
16
MED
Major hematol/immun diag exc sickle cell crisis  coagul w MCC
1.6171
6.0
8.0809
No
No
16
MED
Major hematol/immun diag exc sickle cell crisis  coagul w CC
1.2031
3.9
5.0810
No
No
16
MED
Major hematol/immun diag exc sickle cell crisis  coagul w/o CC/MCC
1.0741
3.1
3.9811
No
No
16
MED
Red blood cell disorders w MCC
1.0006
4.0
5.5812
No
No
16
MED
Red blood cell disorders w/o MCC
0.7780
2.8
3.7813
No
No
16
MED
Coagulation disorders
1.3426
3.8
5.2814
No
No
16
MED
Reticuloendothelial  immunity disorders w MCC
1.3226
5.3
7.2815
No
No
16
MED
Reticuloendothelial  immunity disorders w CC
1.0233
3.9
4.9( print page 47555)816
No
No
16
MED
Reticuloendothelial  immunity disorders w/o CC/MCC
0.7990
2.7
3.4820
No
No
17
SURG
Lymphoma  leukemia w major O.R. procedure w MCC
4.4970
13.8
18.4821
No
No
17
SURG
Lymphoma  leukemia w major O.R. procedure w CC
2.6847
5.4
7.8822
No
No
17
SURG
Lymphoma  leukemia w major O.R. procedure w/o CC/MCC
1.5989
2.7
3.7823
No
No
17
SURG
Lymphoma  non-acute leukemia w other O.R. proc w MCC
3.5188
12.0
15.4824
No
No
17
SURG
Lymphoma  non-acute leukemia w other O.R. proc w CC
2.5164
6.6
8.8825
No
No
17
SURG
Lymphoma  non-acute leukemia w other O.R. proc w/o CC/MCC
1.6201
3.3
4.7826
No
No
17
SURG
Myeloprolif disord or poorly diff neopl w maj O.R. proc w MCC
3.9780
13.0
17.4827
No
No
17
SURG
Myeloprolif disord or poorly diff neopl w maj O.R. proc w CC
2.4230
5.7
7.5828
No
No
17
SURG
Myeloprolif disord or poorly diff neopl w maj O.R. proc w/o CC/MCC
1.5109
2.9
3.7829
No
No
17
SURG
Myeloprolif disord or poorly diff neopl w other O.R. proc w CC/MCC
2.4894
6.9
10.5830
No
No
17
SURG
Myeloprolif disord or poorly diff neopl w other O.R. proc w/o CC/MCC
1.6396
2.5
3.5834
No
No
17
MED
Acute leukemia w/o major O.R. procedure w MCC
3.6361
8.9
14.7835
No
No
17
MED
Acute leukemia w/o major O.R. procedure w CC
2.5626
5.3
8.2836
No
No
17
MED
Acute leukemia w/o major O.R. procedure w/o CC/MCC
2.1785
3.4
5.1837
No
No
17
MED
Chemo w acute leukemia as sdx or w high dose chemo agent w MCC
4.7788
17.2
22.7838
No
No
17
MED
Chemo w acute leukemia as sdx w CC or high dose chemo agent
2.9919
6.2
9.0839
No
No
17
MED
Chemo w acute leukemia as sdx w/o CC/MCC
2.3980
4.9
6.1840
Yes
No
17
MED
Lymphoma  non-acute leukemia w MCC
2.1454
6.8
9.6841
Yes
No
17
MED
Lymphoma  non-acute leukemia w CC
1.6444
5.0
6.6842
Yes
No
17
MED
Lymphoma  non-acute leukemia w/o CC/MCC
1.2188
3.2
4.3843
No
No
17
MED
Other myeloprolif dis or poorly diff neopl diag w MCC
1.6341
6.3
8.7844
No
No
17
MED
Other myeloprolif dis or poorly diff neopl diag w CC
1.2403
4.5
6.0845
No
No
17
MED
Other myeloprolif dis or poorly diff neopl diag w/o CC/MCC
0.9664
3.3
4.3846
No
No
17
MED
Chemotherapy w/o acute leukemia as secondary diagnosis w MCC
1.6523
5.8
8.5847
No
No
17
MED
Chemotherapy w/o acute leukemia as secondary diagnosis w CC
1.0296
2.7
3.3848
No
No
17
MED
Chemotherapy w/o acute leukemia as secondary diagnosis w/o CC/MCC
0.9116
2.3
2.9849
No
No
17
MED
Radiotherapy
1.2663
4.3
6.0853
Yes
No
18
SURG
Infectious  parasitic diseases w O.R. procedure w MCC
5.1840
12.8
16.8854
Yes
No
18
SURG
Infectious  parasitic diseases w O.R. procedure w CC
3.9291
9.1
11.2855
Yes
No
18
SURG
Infectious  parasitic diseases w O.R. procedure w/o CC/MCC
3.3662
5.6
7.3856
Yes
No
18
SURG
Postoperative or post-traumatic infections w O.R. proc w MCC
3.9257
12.1
16.2857
Yes
No
18
SURG
Postoperative or post-traumatic infections w O.R. proc w CC
2.4919
6.8
8.9858
Yes
No
18
SURG
Postoperative or post-traumatic infections w O.R. proc w/o CC/MCC
2.0996
4.7
6.0( print page 47556)862
Yes
No
18
MED
Postoperative  post-traumatic infections w MCC
1.5454
6.2
8.3863
Yes
No
18
MED
Postoperative  post-traumatic infections w/o MCC
1.0560
4.2
5.2864
No
No
18
MED
Fever of unknown origin
0.8240
3.2
4.1865
No
No
18
MED
Viral illness w MCC
1.2074
4.9
6.8866
No
No
18
MED
Viral illness w/o MCC
0.7527
2.8
3.5867
Yes
No
18
MED
Other infectious  parasitic diseases diagnoses w MCC
2.1971
7.2
9.9868
Yes
No
18
MED
Other infectious  parasitic diseases diagnoses w CC
1.5258
4.6
5.9869
Yes
No
18
MED
Other infectious  parasitic diseases diagnoses w/o CC/MCC
1.3611
3.5
4.4870
Yes
No
18
MED
Septicemia w MV 96+ hours
5.7579
12.6
15.3871
Yes
No
18
MED
Septicemia w/o MV 96+ hours w MCC
1.7484
5.6
7.7872
Yes
No
18
MED
Septicemia w/o MV 96+ hours w/o MCC
1.3783
4.7
5.8876
No
No
19
SURG
O.R. procedure w principal diagnoses of mental illness
2.4632
6.9
11.4880
No
No
19
MED
Acute adjustment reaction  psychosocial dysfunction
0.6085
2.4
3.2881
No
No
19
MED
Depressive neuroses
0.5198
3.1
4.2882
No
No
19
MED
Neuroses except depressive
0.5685
3.1
4.4883
No
No
19
MED
Disorders of personality  impulse control
0.8999
4.6
7.4884
Yes
No
19
MED
Organic disturbances  mental retardation
0.8431
4.0
5.4885
No
No
19
MED
Psychoses
0.7783
5.5
7.6886
No
No
19
MED
Behavioral  developmental disorders
0.6983
4.0
5.9887
No
No
19
MED
Other mental disorder diagnoses
0.8341
3.1
4.6894
No
No
20
MED
Alcohol/drug abuse or dependence, left ama
0.3571
2.1
3.0895
No
No
20
MED
Alcohol/drug abuse or dependence w rehabilitation therapy
0.7557
8.2
10.5896
Yes
No
20
MED
Alcohol/drug abuse or dependence w/o rehabilitation therapy w MCC
1.0419
4.8
6.6897
Yes
No
20
MED
Alcohol/drug abuse or dependence w/o rehabilitation therapy w/o MCC
0.6145
3.3
4.1901
No
No
21
SURG
Wound debridements for injuries w MCC
2.8534
9.3
14.4902
No
No
21
SURG
Wound debridements for injuries w CC
1.8611
5.7
7.9903
No
No
21
SURG
Wound debridements for injuries w/o CC/MCC
1.4966
3.5
4.9904
No
No
21
SURG
Skin grafts for injuries w CC/MCC
2.5246
7.2
12.2905
No
No
21
SURG
Skin grafts for injuries w/o CC/MCC
1.5926
3.5
4.7906
No
No
21
SURG
Hand procedures for injuries
0.9803
2.2
3.3907
Yes
No
21
SURG
Other O.R. procedures for injuries w MCC
3.1030
8.1
11.7908
Yes
No
21
SURG
Other O.R. procedures for injuries w CC
2.1865
5.0
6.9909
Yes
No
21
SURG
Other O.R. procedures for injuries w/o CC/MCC
1.4112
2.7
3.6913
No
No
21
MED
Traumatic injury w MCC
1.0631
4.6
6.2914
No
No
21
MED
Traumatic injury w/o MCC
0.6890
2.7
3.4915
No
No
21
MED
Allergic reactions w MCC
0.8660
3.3
4.7916
No
No
21
MED
Allergic reactions w/o MCC
0.4986
1.7
2.1917
Yes
No
21
MED
Poisoning  toxic effects of drugs w MCC
1.1717
3.7
5.2918
Yes
No
21
MED
Poisoning  toxic effects of drugs w/o MCC
0.6886
2.1
2.7919
No
No
21
MED
Complications of treatment w MCC
1.2830
4.4
6.2920
No
No
21
MED
Complications of treatment w CC
0.9797
3.2
4.3921
No
No
21
MED
Complications of treatment w/o CC/MCC
0.7101
2.3
2.9922
No
No
21
MED
Other injury, poisoning  toxic effect diag w MCC
1.1338
4.1
6.0( print page 47557)923
No
No
21
MED
Other injury, poisoning  toxic effect diag w/o MCC
0.7071
2.4
3.3927
No
No
22
SURG
Extensive burns or full thickness burns w MV 96+ hrs w skin graft
12.3042
23.0
28.8928
No
No
22
SURG
Full thickness burn w skin graft or inhal inj w CC/MCC
4.3956
12.1
16.2929
No
No
22
SURG
Full thickness burn w skin graft or inhal inj w/o CC/MCC
2.3533
5.6
7.7933
No
No
22
MED
Extensive burns or full thickness burns w MV 96+ hrs w/o skin graft
2.6626
2.7
5.9934
No
No
22
MED
Full thickness burn w/o skin grft or inhal inj
1.3745
4.7
6.8935
No
No
22
MED
Non-extensive burns
1.1605
3.7
5.5939
No
No
23
SURG
O.R. proc w diagnoses of other contact w health services w MCC
2.1672
7.5
10.9940
No
No
23
SURG
O.R. proc w diagnoses of other contact w health services w CC
1.6823
4.4
6.4941
No
No
23
SURG
O.R. proc w diagnoses of other contact w health services w/o CC/MCC
1.3531
2.3
3.0945
Yes
No
23
MED
Rehabilitation w CC/MCC
1.1005
8.4
10.3946
Yes
No
23
MED
Rehabilitation w/o CC/MCC
1.0143
7.0
7.9947
Yes
No
23
MED
Signs  symptoms w MCC
0.8767
3.8
5.0948
Yes
No
23
MED
Signs  symptoms w/o MCC
0.6542
2.7
3.4949
No
No
23
MED
Aftercare w CC/MCC
0.7323
2.5
4.1950
No
No
23
MED
Aftercare w/o CC/MCC
0.5948
2.4
3.4951
No
No
23
MED
Other factors influencing health status
0.6109
2.1
3.8955
No
No
24
SURG
Craniotomy for multiple significant trauma
5.1028
8.5
12.2956
Yes
Yes
24
SURG
Limb reattachment, hip  femur proc for multiple significant trauma
3.4854
7.6
9.5957
No
No
24
SURG
Other O.R. procedures for multiple significant trauma w MCC
5.7960
10.5
16.0958
No
No
24
SURG
Other O.R. procedures for multiple significant trauma w CC
4.4786
7.9
10.5959
No
No
24
SURG
Other O.R. procedures for multiple significant trauma w/o CC/MCC
3.6988
4.9
6.1963
No
No
24
MED
Other multiple significant trauma w MCC
2.2985
6.3
9.3964
No
No
24
MED
Other multiple significant trauma w CC
1.7015
5.0
6.3965
No
No
24
MED
Other multiple significant trauma w/o CC/MCC
1.4108
3.3
4.1969
No
No
25
SURG
HIV w extensive O.R. procedure w MCC
5.1395
13.5
18.7970
No
No
25
SURG
HIV w extensive O.R. procedure w/o MCC
3.6849
6.6
9.5974
No
No
25
MED
HIV w major related condition w MCC
2.1382
7.4
10.4975
No
No
25
MED
HIV w major related condition w CC
1.5918
5.3
7.3976
No
No
25
MED
HIV w major related condition w/o CC/MCC
1.3357
3.8
4.9977
No
No
25
MED
HIV w or w/o other related condition
1.0387
3.8
5.3981
Yes
No

SURG
Extensive O.R. procedure unrelated to principal diagnosis w MCC
4.5168
11.9
15.3982
Yes
No

SURG
Extensive O.R. procedure unrelated to principal diagnosis w CC
3.5417
7.8
10.0983
Yes
No

SURG
Extensive O.R. procedure unrelated to principal diagnosis w/o CC/MCC
2.9737
3.9
5.4984
No
No

SURG
Prostatic O.R. procedure unrelated to principal diagnosis w MCC
2.7217
11.7
14.6985
No
No

SURG
Prostatic O.R. procedure unrelated to principal diagnosis w CC
2.0865
7.4
9.7986
No
No

SURG
Prostatic O.R. procedure unrelated to principal diagnosis w/o CC/MCC
1.6706
3.5
5.1987
Yes
No

SURG
Non-extensive O.R. proc unrelated to principal diagnosis w MCC
2.8500
9.9
13.2988
Yes
No

SURG
Non-extensive O.R. proc unrelated to principal diagnosis w CC
2.0134
5.9
8.0( print page 47558)989
Yes
No

SURG
Non-extensive O.R. proc unrelated to principal diagnosis w/o CC/MCC
1.6310
2.9
4.1998
No
No

**
Principal diagnosis invalid as discharge diagnosis
N/A
*
*999
No
No

**
Ungroupable
N/A
*
*MS–DRGs 998 and 999 contain cases that could not be assigned to valid DRGs.**Note:**
                             If there is no value or asterisk in either the geometric mean length of stay or the arithmetic mean length of stay columns, the volume of cases is insufficient to obtain a meaningful computation of these statistics.
 Table 6A.—New Diagnosis Codes
Diagnosis code
Description
CC
MDC
MS–DRG040.41
Infant botulism
Y
15
791 1
                                , 793 1CC
18
867, 868, 869040.42
Wound botulism
Y
                                 CC
18
867, 868, 869058.10
Roseola infantum, unspecified
N
15
791 1
                                , 793 118
865, 866058.11
Roseola infantum due to human herpesvirus 6
N
15
791 1
                                , 793 118
865, 866058.12
Roseola infantum due to human herpesvirus 7
N
15
791 1
                                , 793 118
865, 866058.21
Human herpesvirus 6 encephalitis
Y
                                 MCC
1
23,24,97, 98, 9915
791 1
                                , 793 125
974, 975, 976058.29
Other human herpesvirus encephalitis
Y
                                 MCC
1
23, 24, 97, 98, 9915
791 1
                                , 793 125
974, 975, 976058.81
Human herpesvirus 6 infection
N
9
606, 607058.82
Human herpesvirus 7 infection
N
9
606, 607058.89
Other human herpesvirus infection
N
9
606, 607079.83
Parvovirus B19
Y
                                 CC
18
865, 866200.30
Marginal zone lymphoma, unspecified site, extranodal and solid organ sites
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.31
Marginal zone lymphoma, lymph nodes of head, face, and neck
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.32
Marginal zone lymphoma, intrathoracic lymph nodes
Y
                                 CC
17
820, 821, 822, 823, 824, 825,840, 841, 84225
974, 975, 976200.33
Marginal zone lymphoma, intraabdominal lymph nodes
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.34
Marginal zone lymphoma, lymph nodes of axilla and upper limb
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.35
Marginal zone lymphoma, lymph nodes of inguinal region and lower limb
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.36
Marginal zone lymphoma, intrapelvic lymph nodes
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976( print page 47559)200.37
Marginal zone lymphoma, spleen
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.38
Marginal zone lymphoma, lymph nodes of multiple sites
Y
                                 CC
17
820, 821, 822, 823, 824, 825,840, 841, 84225
974, 975, 976200.40
Mantle cell lymphoma, unspecified site, extranodal and solid organ sites
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.41
Mantle cell lymphoma, lymph nodes of head, face, and neck
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.42
Mantle cell lymphoma, intrathoracic lymph nodes
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.43
Mantle cell lymphoma, intra-abdominal lymph nodes
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.44
Mantle cell lymphoma, lymph nodes of axilla and upper limb
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.45
Mantle cell lymphoma, lymph nodes of inguinal region and lower limb
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.46
Mantle cell lymphoma, intrapelvic lymph nodes
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841,84225
974, 975, 976200.47
Mantle cell lymphoma, spleen
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.48
Mantle cell lymphoma, lymph nodes of multiple sites
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.50
Primary central nervous system lymphoma, unspecified site, extranodal and solid organ sites
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.51
Primary central nervous system lymphoma, lymph nodes of head, face, and neck
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.52
Primary central nervous system lymphoma, intrathoracic lymph nodes
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.53
Primary central nervous system lymphoma, intra-abdominal lymph nodes
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.54
Primary central nervous system lymphoma, lymph nodes of axilla and upper limb
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.55
Primary central nervous system lymphoma, lymph nodes of inguinal region and lower limb
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976( print page 47560)200.56
Primary central nervous system lymphoma, intrapelvic lymph nodes
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.57
Primary central nervous system lymphoma, spleen
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.58
Primary central nervous system lymphoma, lymph nodes of multiple sites
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.60
Anaplastic large cell lymphoma, unspecified site, extranodal and solid organ sites
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.61
Anaplastic large cell lymphoma, lymph nodes of head, face, and neck
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.62
Anaplastic large cell lymphoma, intrathoracic lymph nodes
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.63
Anaplastic large cell lymphoma, intra-abdominal lymph nodes
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.64
Anaplastic large cell lymphoma, lymph nodes of axilla and upper limb
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.65
Anaplastic large cell lymphoma, lymph nodes of inguinal region and lower limb
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.66
Anaplastic large cell lymphoma, intrapelvic lymph nodes
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.67
Anaplastic large cell lymphoma, spleen
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.68
Anaplastic large cell lymphoma, lymph nodes of multiple sites
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.70
Large cell lymphoma, unspecified site, extranodal and solid organ sites
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.71
Large cell lymphoma, lymph nodes of head, face, and neck
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841,84225
974, 975, 976200.72
Large cell lymphoma, intrathoracic lymph nodes
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.73
Large cell lymphoma, intra-abdominal lymph nodes
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841,84225
974, 975, 976200.74
Large cell lymphoma, lymph nodes of axilla and upper limb
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841,84225
974, 975, 976200.75
Large cell lymphoma, lymph nodes of inguinal region and lower limb
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 842( print page 47561)25
974, 975, 976200.76
Large cell lymphoma, intrapelvic lymph nodes
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.77
Large cell lymphoma, spleen
Y
                                 CC
17
820,821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976200.78
Large cell lymphoma, lymph nodes of multiple sites
Y
                                 CC
17
820,821, 822, 823, 824, 825, 840, 841, 84225
974, 975,  976202.70
Peripheral T cell lymphoma, unspecified site, extranodal and solid organ sites
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976202.71
Peripheral T cell lymphoma, lymph nodes of head, face, and neck
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976202.72
Peripheral T cell lymphoma, intrathoracic lymph nodes
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976202.73
Peripheral T cell lymphoma, intra-abdominal lymph nodes
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976202.74
Peripheral T cell lymphoma, lymph nodes of axilla and upper limb
Y
                                 CC
17
820, 821, 822,  823, 824, 825, 840, 841, 84225
974, 975, 976202.75
Peripheral T cell lymphoma, lymph nodes of inguinal region and lower limb
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976202.76
Peripheral T cell lymphoma, intrapelvic lymph nodes
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976202.77
Peripheral T cell lymphoma, spleen
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976202.78
Peripheral T cell lymphoma, lymph nodes of multiple sites
Y
                                 CC
17
820, 821, 822, 823, 824, 825, 840, 841, 84225
974, 975, 976233.30
Carcinoma in situ, unspecified female genital organ
N
13
739, 740, 741, 744, 745, 754, 755, 756233.31
Carcinoma in situ, vagina
N
13
739, 740, 741, 744, 745, 754, 755, 756233.32
Carcinoma in situ, vulva
N
13
739, 740, 741, 744, 745, 754, 755, 756233.39
Carcinoma in situ, other female genital organ
N
13
739, 740, 741, 744, 745, 754, 755, 756255.41
Glucocorticoid deficiency
Y
                                 CC
10
643, 644, 645255.42
Mineralocorticoid deficiency
Y
                                 CC
10
643, 644, 645258.01
Multiple endocrine neoplasia [MEN] type I
N
10
643, 644, 645258.02
Multiple endocrine neoplasia [MEN] type IIA
N
10
643, 644, 645258.03
Multiple endocrine neoplasia [MEN] type IIB
N
10
643, 644, 645284.81
Red cell aplasia (acquired) (adult) (with thymoma)
Y
16
808, 809, 810MCC
25
977284.89
Other specified aplastic anemias
Y
16
808, 809, 810( print page 47562)MCC
25
977288.66
Bandemia
N
16
814, 815, 816315.34
Speech and language developmental delay due to hearing loss
N
19
886331.5
Idiopathic normal pressure hydrocephalus (INPH)
Y
                                 CC
1
56, 57359.21
Myotonic muscular dystrophy
N
1
91, 92, 93359.22
Myotonia congenita
N
1
91, 92, 93359.23
Myotonic chondrodystrophy
N
1
91, 92, 93359.24
Drug induced myotonia
N
1
91, 92, 93359.29
Other specified myotonic disorder
N
1
91, 92, 93364.81
Floppy iris syndrome
N
2
124, 125364.89
Other disorders of iris and ciliary body
N
2
124, 125388.45
Acquired auditory processing disorder
N
19
886389.05
Conductive hearing loss, unilateral
N
3
154, 155, 156389.06
Conductive hearing loss, bilateral
N
3
154, 155, 156389.13
Neural hearing loss, unilateral
N
3
154, 155, 156389.17
Sensory hearing loss, unilateral
N
3
154, 155, 156389.20
Mixed hearing loss, unspecified
N
3
154, 155, 156389.21
Mixed hearing loss, unilateral
N
3
154, 155, 156389.22
Mixed hearing loss, bilateral
N
3
154, 155, 156414.2
Chronic total occlusion of coronary artery
N
5
302, 303415.12
Septic pulmonary embolism
Y
4
175,176MCC
15
791 1
                                , 793 1423.3
Cardiac tamponade
Y
                                 CC
5
314, 315, 316440.4
Chronic total occlusion of artery of the extremities
N
5
299, 300, 301449
Septic arterial embolism
Y
5
299, 300, 301CC
15
791 1
                                , 793 1488
Influenza due to identified avian influenza virus
N
3
152, 153525.71
Osseointegration failure of dental implant
N
PRE
11, 12, 133
157, 158, 159525.72
Post-osseointegration biological failure of dental implant
N
PRE
11, 12, 133
157, 158, 159525.73
Post-osseointegration mechanical failure of dental implant
N
PRE
11, 12, 133
157, 158, 159525.79
Other endosseous dental implant failure
N
PRE
11, 12, 133
157, 158, 159569.43
Anal sphincter tear (healed) (old)
N
6
393, 394, 395624.01
Vulvar intraepithelial neoplasia I [VIN I]
N
13
742, 743, 760, 761624.02
Vulvar intraepithelial neoplasia  II [VIN II]
N
13
742, 743, 760, 761624.09
Other dystrophy of vulva
N
13
742, 743, 760, 761664.60
Anal sphincter tear complicating delivery, not associated with third-degree perineal laceration, unspecified as to episode of care or not applicable
N
14
765, 766, 767, 768, 774, 775664.61
Anal sphincter tear complicating delivery, not associated with third-degree perineal laceration, delivered, with or without mention of antepartum condition
Y
                                 CC
14
765, 766, 767, 768, 774,775664.64
Anal sphincter tear complicating delivery, not associated with third-degree perineal laceration, postpartum condition or complication
Y
                                 CC
14
769, 776733.45
Aseptic necrosis of bone, jaw
Y
                                 CC
8
553, 554787.20
Dysphagia, unspecified
N
6
391, 392787.21
Dysphagia, oral phase
N
6
391, 392787.22
Dysphagia, oropharyngeal phase
N
6
391, 392787.23
Dysphagia, pharyngeal phase
N
6
391, 392787.24
Dysphagia, pharyngoesophageal phase
N
6
391, 392787.29
Other dysphagia
N
6
391, 392789.51
Malignant ascites
Y
                                 CC
23
947, 948789.59
Other ascites
Y
                                 CC
23
947, 948999.31 *
Infection due to central venous catheter
Y
                                 CC
5
314, 315, 316999.39 *
Infection following other infusion, injection, transfusion, or vaccination
Y
15
791 1
                                , 793 1CC
18
856, 857, 858, 867, 868, 869V12.53
Personal history of sudden cardiac arrest
N
23
951V12.54
Personal history of transient ischemic attack (TIA), and cerebral infarction without residual deficits
N
23
951V13.22
Personal history of cervical dysplasia
N
17
843, 844, 845( print page 47563)V16.52
Family history of malignant neoplasm,bladder
N
23
951V17.41
Family history of sudden cardiac death (SCD)
N
23
951V17.49
Family history of other cardiovascular diseases
N
23
951V18.11
Family history of multiple endocrine neoplasia [MEN] syndrome
N
23
951V18.19
Family history of other endocrine and metabolic diseases
N
23
951V25.04
Counseling and instruction in natural family planning to avoid pregnancy
N
23
951V26.41
Procreative counseling and advice using natural family planning
N
23
951V26.49
Other procreative management,  counseling and advice
N
23
951V26.81
Encounter for assisted reproductive fertility procedure cycle
N
23
951V26.89
Other specified procreative management
N
23
951V49.85
Dual sensory impairment
N
23
951V68.01
Disability examination
N
23
951V68.09
Other issue of medical certificates
N
23
951V72.12
Encounter for hearing conservation and treatment
N
15
795  223
951V73.81
Special screening examination, Human papillomavirus (HPV)
N
23
951V84.81
Genetic susceptibility to multiple endocrine neoplasia [MEN]
N
23
951V84.89
Genetic susceptibility to other disease
N
23
951MCC—Major Complication or Comorbidity in MS–DRGs.New codes 629.82, 629.83, 629.84 and V17.40 that were listed in the proposed rule have been deleted. They will not be implemented on October 1, 2007.1
                             Secondary diagnosis of major problem.2
                             On “Only secondary diagnosis” list.* These diagnosis codes were discussed at the March 22–23, 2007 ICD–9–CM Coordination and Maintenance Committee meeting and were not finalized in time to include in the proposed rule.  They will be implemented on October 1, 2007.
 Table 6B.—New Procedure Codes
Procedure code
Description
O.R.
MDC
MS–DRG00.19
Disruption of blood brain barrier via infusion [BBBD]
N00.94 *
Intra-operative neurophysiologic monitoring
N01.10
Intracranial pressure monitoring
N01.16
Intracranial oxygen monitoring
N01.17
Brain temperature monitoring
N07.83 *
Thoracoscopic partial excision of thymus
Y
1
40, 41, 424
163, 164, 16510
628, 629, 63016
802, 803, 80417
820, 821, 822, 826, 827, 82821
907, 908, 90924
957, 958, 95907.84 *
Thoracoscopic total excision of thymus
Y
1
40, 41, 424
163, 164, 16510
628, 629, 63016
802, 803, 80417
820, 821, 822, 826, 827, 82821
907, 908, 90924
957, 958, 95907.95 *
Thoracoscopic incision of thymus
Y
1
40, 41, 424
163, 164, 16510
628, 629, 63016
802, 803, 80417
820, 821, 822, 826, 827, 82821
907, 908, 90924
957, 958, 95907.98 *
Other and unspecified thoracoscopic operations on thymus
Y
1
40, 41, 424
163, 164, 16510
628, 629, 63016
802, 803, 80417
820, 821, 822, 826, 827, 82821
907, 908, 90924
957, 958, 95932.20 *
Thoracoscopic excision of lesion or tissue of lung
Y
4
163, 164, 16517
820, 821, 822, 826, 827, 828( print page 47564)21
907, 908, 90924
957, 958, 95932.30 *
Thoracoscopic segmental resection of lung
Y
4
163, 164, 16517
820, 821, 822, 826, 827, 82821
907, 908, 90924
957, 958, 95932.39 *
Other and unspecified segmental resection of lung
Y
4
163, 164, 16517
820, 821, 822, 826, 827, 82821
907, 908, 90924
957, 958, 95932.41
Thoracoscopic lobectomy of lung
Y
4
163, 164, 16521
907, 908, 90924
957, 958, 95932.49
Other lobectomy of lung
Y
4
163, 164, 16521
907, 908, 90924
957, 958, 95932.50 *
Thoracoscopic pneumonectomy
Y
4
163, 164, 16521
907, 908, 90924
957, 958, 95932.59 *
Other and unspecified pneumonectomy
Y
4
163, 164, 16521
907, 908, 90924
957, 958, 95933.20
Thoracoscopic lung biopsy
Y
4
166, 167, 1685
2648
515, 516, 51711
673, 674, 67517
823, 824, 825, 829, 83034.06
Thoracoscopic drainage of pleural cavity
Y
4
166, 167, 16834.20
Thoracoscopic pleural biopsy
Y
4
166, 167, 16834.52
Thoracoscopic decortication of lung
Y
4
163, 164, 16517
820, 821, 822, 826, 827, 82821
907, 908, 90924
957, 958, 95950.13 *
Transjugular liver biopsy
N50.14 *
Laparoscopic liver biopsy
Y
6
356, 357, 3587
420, 421, 4229
579, 580, 58111
673, 674, 67516
802, 803, 80417
820, 821, 822, 826, 827, 82821
907, 908, 90924
957, 958, 95970.53
Repair of cystocele and rectocele with graft or prosthesis
Y
6
329, 330, 33111
653, 654, 65513
74870.54
Repair of cystocele with graft or prosthesis
Y
11
662, 663, 66413
74870.55
Repair of rectocele with graft or prosthesis
Y
6
329, 330, 33113
74870.63
Vaginal construction with graft or prosthesis
Y
13
74870.64
Vaginal reconstruction with graft or prosthesis
Y
13
74821
907, 908, 90924
957, 958, 95970.78
Vaginal suspension and fixation with graft or prosthesis
Y
11
662, 663,  66413
74870.93
Other operations on cul-de-sac with graft or prosthesis
Y
13
746, 74770.94
Insertion of biological graft
N70.95
Insertion of synthetic graft or prosthesis
N84.80 *
Insertion or replacement of interspinous process device(s)
Y
1
28, 29, 308
49021
907, 908, 90924
957, 958, 95984.81 *
Revision of interspinous process device(s)
Y
8
515, 516, 51721
907, 908, 90924
957, 958, 95984.82 *
Insertion or replacement of pedicle-based dynamic stabilization device(s)
Y
1
28, 29, 30( print page 47565)8
49021
907, 908, 90924
957, 958, 95984.83 *
Revision of pedicle-based dynamic stabilization device(s)
Y
8
515, 516, 51721
907, 908, 90924
957, 958, 95984.84 *
Insertion or replacement of facet replacement device(s)
Y
1
28, 29, 308
49021
907, 908, 90924
957, 958, 95984.85 *
Revision of facet replacement device(s)
Y
8
515, 516, 51721
907, 908, 90924
957, 958, 95988.59
Intra-operative fluorescence vascular angiography
N92.41 *
Intra-operative electron radiation therapy
N* These procedure codes were discussed at the March 22–23, 2007 ICD–9–CM Coordination and Maintenance Committee meeting and were not finalized in time to include in the proposed rule.  They will be implemented on October 1, 2007.
 Table 6C.—Invalid Diagnosis Codes
Diagnosis code
Description
CC
MDC
CMS DRG233.3
Carcinoma in situ, other and unspecified female genital organs
N
13
354, 355, 363, 366, 367255.4
Corticoadrenal insufficiency
Y
10
300, 301258.0
Polyglandular activity in multiple endocrine adenomatosis
N
10
300, 301284.8
Other specified aplastic anemias
Y
16
57425
490359.2
Myotonic disorders
N
1
34, 35364.8
Other disorders of iris and ciliary body
N
2
46, 47, 48389.2
Mixed conductive and sensorineural hearing loss
N
3
73, 74624.0
Dystrophy of vulva
N
13
358, 359, 369787.2
Dysphagia
N
6
182, 183, 184789.5
Ascites
Y
23
463, 464999.3 *
Complications of medical care, not elsewhere classified, Other infection
Y
15
387 1
                                , 389 118
423, 579V17.4
Family history of other cardiovascular diseases
N
23
467V18.1
Family history of other endocrine and metabolic diseases
N
23
467V26.4
Procreative management,general counseling and advice
N
23
467V26.8
Other specified procreative management
N
23
467V68.0
Issue of medical certificates
N
23
467V84.8
Genetic susceptibility to other disease
N
23
467The DRG assignments listed are based on the current code assignment in the CMS DRGs.1
                             Secondary diagnosis of major problem.* This diagnosis code was discussed at the March 22–23, 2007 ICD–9–CM Coordination and Maintenance Committee meeting and was not finalized in time to include in the proposed rule.  It will be deleted on October 1, 2007.
 Table 6D.—Invalid Procedure Codes
Procedure code
Description
O.R.
MDC
CMS–DRG32.3 *
Segmental resection of lung
Y
4
7521
442, 44324
48632.4
Lobectomy of lung
Y
4
7521
442, 44324
48632.5 *
Complete pneumonectomy
Y
4
7521
442, 44324
48684.58 *
Implantation of interspinous process decompression device
Y
1
531, 5328
499, 50021
442, 44324
486The DRG assignments listed are based on the current code assignment in the CMS DRGs.* These procedure codes were discussed at the March 22–23, 2007 ICD–9–CM Coordination and Maintenance Committee meeting and were not finalized in time to include in the proposed rule.  They will be deleted on October 1, 2007.
 
 
 Table 6E.—Revised Diagnosis Code Titles
Diagnosis code
Description
CC
MDC
MS–DRG005.1
Botulism food poisoning
Y
18
867, 868, 869359.3
Periodic paralysis
N
1
91, 92, 93389.14
Central hearing loss
N
3
154, 155, 156389.18
Sensorineural hearing loss, bilateral
N
3
154, 155, 156389.7
Deaf, nonspeaking, not elsewhere classifiable
N
3
154, 155, 156
 Table 6F.—Revised Procedure Code Titles
Procedure code
Description
O.R.
MDC
MS–DRG00.18 *
Infusion of immunosuppressive antibody therapy
N00.74
Hip bearing surface, metal-on-polyethylene
N00.75
Hip bearing surface, metal-on-metal
N00.76
Hip bearing surface, ceramic-on-ceramic
N00.77
Hip bearing surface, ceramic-on-polyethylene
N07.81 *
Other partial excision of thymus
Y
1
40, 41, 424
163, 64, 16510
628, 629, 63016
802, 803, 80417
820, 821, 822, 826, 827, 82821
907, 908, 90924
957, 958, 95907.82 *
Other total excision of thymus
Y
1
40, 41, 424
163, 164, 16510
628, 629, 63016
802, 803, 80417
820, 821, 822, 826, 827, 82821
907, 908, 90924
957, 958, 95907.92 *
Other incision of thymus
Y
4
163, 164, 16510
628, 629, 63016
802, 803, 80417
820, 821, 822, 826, 827, 82821
907, 908, 90924
957, 958, 95907.99 *
Other and unspecified operations on thymus
Y
4
163, 164,16510
628, 629, 63016
802, 803, 80417
820, 821, 822, 826, 827, 82834.24
Other pleural biopsy
N39.8
Operations on carotid body, carotid sinus and other vascular bodies
Y
1
37, 38, 394
166, 167, 1685
252, 253, 25453.41
Repair of umbilical hernia with graft or prosthesis
Y
6
353, 354, 355 987, 988, 98953.61
Incisional hernia repair with graft or prosthesis
Y
6
353, 354, 35521
907, 908, 90924
957, 958, 959987, 988, 98953.69
Repair of other hernia of anterior abdominal wall with graft or prosthesis
Y
06
353, 354, 355 987, 988, 98999.14
Injection or infusion of gamma globulin
N* These procedure codes were discussed at the March 22–23, 2007 ICD–9–CM Coordination and Maintenance Committee meeting and were not finalized in time to include in the proposed rule. They will be implemented on October 1, 2007.
 
 
 
 
      
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
      
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
      
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
      
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
      
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
      
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
      
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 Table 7A.—Medicare Prospective Payment System Selected Percentile Lengths of Stay FY 2006 MedPar Update March 2007 Grouper V24.0 CMS DRGs
DRG
Number of discharges
Arithmetic mean LOS
10th 
                                 percentile
25th 
                                 percentile
50th 
                                 percentile
75th 
                                 percentile
90th 
                                 percentile1
25,131
9.4313
2
4
7
12
192
9,628
4.2481
1
2
3
6
83
3
31.6667
2
2
42
51
516
256
2.9608
1
1
2
4
67
14,480
9.0468
2
4
7
11
188
3,103
2.7051
1
1
2
3
69
1,792
6.0107
1
2
4
7
1110
18,959
5.7670
2
3
4
7
1111
2,790
3.6250
1
1
3
5
712
59,298
5.3199
2
3
4
6
913
7,739
4.8765
2
3
4
6
814
264,219
5.2662
2
3
4
6
1015
13,996
3.8492
1
2
3
5
716
20,216
6.2530
2
3
5
8
1217
3,152
3.2056
1
1
2
4
618
34,068
5.1279
2
3
4
6
1019
7,541
3.3149
1
2
3
4
621
2,094
6.1833
2
3
5
8
1222
3,399
5.1278
2
2
4
6
1023
10,464
3.7091
1
2
3
5
726
33
2.8750
1
1
2
3
527
6,296
4.6766
1
1
3
6
1028
21,433
5.4849
1
2
4
7
1129
6,780
3.0806
1
1
2
4
631
5,116
3.7875
1
2
3
5
732
1,745
2.2458
1
1
2
3
434
29,554
4.6998
1
2
4
6
935
7,840
2.9365
1
1
2
4
536
302
1.9455
1
1
1
1
237
1,199
4.0918
1
1
3
5
938
56
2.3846
1
1
2
3
439
306
2.2586
1
1
1
2
440
1,124
4.4811
1
2
4
5
842
1,642
2.5714
1
1
1
2
443
130
3.0156
1
1
2
4
544
1,283
4.8950
2
3
4
6
945
2,879
2.9292
1
2
2
4
546
4,048
3.9677
1
2
3
5
847
1,288
2.9741
1
1
2
4
649
2,479
4.2539
1
2
3
5
850
2,000
1.7953
1
1
1
2
351
178
2.7910
1
1
1
3
652
185
1.5301
1
1
1
2
253
1,919
3.8786
1
1
2
5
955
1,254
2.7630
1
1
1
3
656
375
2.5627
1
1
2
3
557
740
3.4384
1
1
2
4
758
1
1.0000
1
1
1
1
159
113
2.5221
1
1
1
3
560
5
3.4000
1
1
1
6
861
213
5.8774
1
1
4
7
1362
1
4.0000
4
4
4
4
463
2,607
4.5492
1
2
3
6
964
3,108
6.1176
1
2
4
7
1265
39,649
2.7318
1
1
2
3
566
7,805
3.2004
1
1
2
4
667
349
3.5948
1
2
3
4
768
14,613
3.7088
1
2
3
5
769
3,579
2.7922
1
2
2
3
570
22
2.4545
1
1
2
3
471
65
3.8125
1
2
3
5
772
1,398
3.3912
1
2
3
4
673
9,912
4.3625
1
2
3
6
875
46,315
9.3605
3
4
7
12
1976
45,317
10.1339
3
5
8
13
1977
1,784
4.4012
1
2
4
6
978
52,438
5.9444
2
4
5
7
1079
151,130
7.8794
3
4
6
10
1480
5,970
5.2160
2
3
4
6
981
8
3.1250
1
2
3
3
4( print page 48109)82
61,331
6.5291
2
3
5
8
1383
7,240
5.0375
2
3
4
6
984
1,346
3.0015
1
2
3
4
585
22,437
6.0961
2
3
5
8
1286
1,440
3.3698
1
2
3
4
687
105,232
6.2370
2
3
5
8
1188
378,958
4.7587
2
3
4
6
989
472,756
5.3886
2
3
4
7
1090
34,464
3.5882
1
2
3
4
691
43
5.0930
1
2
3
6
892
16,046
5.8190
2
3
5
7
1193
1,120
3.5820
1
2
3
5
694
13,688
5.8577
2
3
5
7
1195
1,410
3.4328
1
2
3
4
796
52,901
4.1779
1
2
3
5
797
21,402
3.2642
1
2
3
4
698
11
4.6364
1
2
4
6
799
20,929
3.0894
1
1
2
4
6100
5,463
2.0814
1
1
2
3
4101
24,319
4.1850
1
2
3
5
8102
4,235
2.4307
1
1
2
3
5103
988
37.8279
9
13
25
47
83104
19,397
14.5499
6
8
12
18
25105
32,104
9.9315
4
6
8
11
18106
3,285
10.8958
5
7
9
13
19108
9,268
10.4271
4
6
8
13
19110
56,637
7.8089
1
3
6
10
16111
10,448
2.7745
1
1
2
4
6113
30,753
12.4596
4
6
10
15
24114
7,290
8.1490
2
4
7
10
15117
7,097
4.0233
1
1
2
5
9118
7,994
3.0067
1
1
2
4
7119
793
5.4823
1
1
4
8
12120
30,375
9.0225
1
3
6
12
19121
132,870
5.9605
2
3
5
8
11122
47,937
3.2303
1
1
3
4
6123
24,196
4.6425
1
1
3
6
11124
111,282
4.4078
1
2
3
6
9125
85,682
2.6793
1
1
2
3
5126
5,197
10.7631
3
6
8
13
20127
632,794
5.0454
2
3
4
6
9128
3,390
4.9852
2
3
4
6
8129
3,268
2.6096
1
1
1
3
6130
84,710
5.2355
1
3
4
7
10131
20,557
3.6402
1
2
3
5
6132
85,172
2.7460
1
1
2
3
5133
5,023
2.0883
1
1
2
3
4134
38,372
3.0023
1
1
2
4
6135
7,010
4.2221
1
2
3
5
8136
900
2.4872
1
1
2
3
5138
207,864
3.8413
1
2
3
5
7139
68,246
2.3922
1
1
2
3
4140
25,370
2.3401
1
1
2
3
4141
126,247
3.3956
1
2
3
4
6142
44,621
2.4528
1
1
2
3
4143
223,237
2.1145
1
1
2
3
4144
107,318
5.8453
1
2
4
7
12145
5,085
2.5058
1
1
2
3
5146
9,743
9.6593
4
6
8
11
17147
2,423
5.3166
2
4
5
7
8149
18,595
5.4424
3
4
5
7
8150
23,520
10.4472
3
6
9
13
19151
5,168
4.9323
1
2
4
7
9152
4,910
7.7955
3
4
6
9
13153
1,853
4.7348
2
3
4
6
7155
5,811
3.7807
1
2
3
5
8156
3
19.0000
2
2
16
39
39157
8,167
5.5270
1
2
4
7
11158
3,274
2.6225
1
1
2
3
5159
19,093
5.0841
1
2
4
6
10( print page 48110)160
10,896
2.5844
1
1
2
3
5161
9,755
4.5095
1
2
3
6
9162
4,431
2.0711
1
1
1
3
4163
7
4.7143
2
3
4
5
7164
6,034
7.6391
3
4
6
9
14165
2,336
3.8898
1
2
4
5
7166
5,502
4.2153
1
2
3
5
8167
4,870
2.0816
1
1
2
3
4168
1,653
4.5972
1
2
3
6
9169
862
2.1583
1
1
2
3
4170
17,875
10.3572
2
4
8
13
21171
1,388
3.8916
1
2
3
5
8172
32,418
6.7337
2
3
5
8
13173
1,955
3.4441
1
1
3
4
6174
240,894
4.6420
2
2
4
6
8175
25,028
2.8115
1
2
2
3
5176
13,344
5.0520
2
3
4
6
9177
7,771
4.4075
2
2
4
5
8178
2,294
3.1007
1
2
3
4
5179
14,696
5.7497
2
3
4
7
11180
90,205
5.2286
2
3
4
6
10181
23,385
3.2729
1
2
3
4
6182
284,288
4.0583
1
2
3
5
8183
73,204
2.8163
1
1
2
4
5184
81
3.5556
1
2
2
4
7185
6,071
4.4178
1
2
3
5
9186
4
4.7500
3
3
3
6
7187
655
3.9908
1
2
3
5
8188
85,371
5.3017
1
2
4
6
10189
11,855
2.9775
1
1
2
4
6190
9
5.1111
1
2
4
5
9191
10,286
12.1607
3
6
9
15
25192
1,303
5.2928
1
3
5
7
9193
3,726
12.0478
4
6
10
15
22194
431
6.6136
3
4
6
8
11195
2,436
10.2609
4
6
9
13
18196
505
5.5549
2
3
5
7
9197
15,282
8.9193
3
5
7
11
16198
3,595
4.2656
2
3
4
5
7199
1,330
8.7641
2
3
6
11
19200
891
10.4065
2
4
7
13
21201
2,625
13.0693
3
6
10
16
26202
26,642
6.0702
2
3
5
7
12203
30,604
6.3715
2
3
5
8
12204
67,196
5.3052
2
3
4
6
10205
32,076
5.7548
2
3
4
7
11206
1,771
3.8392
1
2
3
5
7207
37,953
5.1883
1
2
4
6
10208
8,748
2.8981
1
1
2
4
5210
127,328
6.5376
3
4
5
7
11211
23,386
4.5191
3
3
4
5
7212
6
4.6667
1
1
2
8
8213
8,148
9.2665
2
4
7
12
18216
19,791
5.4380
1
1
3
8
12217
14,674
11.9337
3
5
8
15
24218
31,163
5.4241
2
3
4
7
10219
20,018
3.1029
1
2
3
4
5220
5
6.5000
1
1
2
4
4223
11,983
3.3894
1
1
2
4
7224
8,755
1.9509
1
1
1
2
3225
6,196
5.1605
1
2
4
7
10226
7,243
6.3625
1
3
4
8
13227
4,761
2.5699
1
1
2
3
5228
2,624
4.2102
1
1
3
5
9229
979
2.3154
1
1
2
3
4230
2,438
5.7623
1
2
4
7
12232
480
2.9430
1
1
1
3
7233
22,424
5.9435
1
2
5
8
12234
10,689
2.4816
1
1
1
3
6235
4,507
4.5416
1
2
4
6
8( print page 48111)236
41,531
4.3734
2
3
4
5
7237
1,836
3.7021
1
2
3
5
7238
9,574
8.0098
2
4
6
9
15239
37,495
5.9298
2
3
5
7
11240
12,594
6.4175
2
3
5
8
12241
2,415
3.5871
1
2
3
4
6242
2,616
6.3669
2
3
5
8
12243
98,427
4.4708
1
2
4
6
8244
16,911
4.3383
1
2
3
5
8245
5,216
3.0312
1
1
3
4
5246
1,297
3.5771
1
2
3
4
6247
21,405
3.3455
1
2
3
4
6248
17,580
4.7555
2
3
4
6
8249
13,366
3.9374
1
1
3
5
8250
4,475
3.8692
1
2
3
5
7251
1,923
2.7432
1
1
3
3
5253
25,870
4.5355
2
3
4
5
8254
9,313
3.0799
1
2
3
4
5255
1
3.0000
3
3
3
3
3256
7,739
5.0466
1
2
4
6
9257
12,277
2.5477
1
1
2
3
5258
10,259
1.6863
1
1
1
2
3259
2,463
2.9923
1
1
1
3
7260
2,003
1.3551
1
1
1
1
2261
1,523
2.1103
1
1
1
2
4262
569
4.8768
1
2
4
6
10263
20,967
10.2150
3
5
7
12
20264
3,496
5.9813
2
3
5
7
11265
3,986
6.3149
1
2
4
8
14266
2,126
3.0918
1
1
2
4
6267
215
4.9346
1
2
3
5
9268
1,018
3.3734
1
1
2
4
7269
11,532
8.0441
2
4
6
10
16270
2,567
3.7101
1
1
3
5
7271
20,085
6.7420
2
3
5
8
12272
5,806
5.6625
2
3
4
7
10273
1,106
3.7945
1
2
3
5
7274
2,256
6.1463
2
3
5
8
11275
191
2.9050
1
1
2
3
5276
1,455
4.4663
1
2
4
6
8277
122,645
5.3563
2
3
4
7
9278
31,770
3.8934
2
2
3
5
7279
9
2.5556
1
1
3
4
4280
19,679
3.9461
1
2
3
5
7281
6,054
2.8113
1
1
2
3
5283
6,894
4.3785
1
2
3
5
8284
1,776
2.9858
1
1
2
4
5285
8,387
9.8055
3
5
8
13
18286
3,030
5.2288
1
2
4
6
10287
5,038
9.5913
3
5
7
11
18288
9,255
3.3157
1
2
2
4
6289
5,844
2.5231
1
1
1
2
5290
12,189
2.0053
1
1
1
2
3291
51
1.5200
1
1
1
2
2292
7,680
10.0354
2
4
8
12
19293
325
4.6852
1
2
3
6
9294
95,358
4.1796
1
2
3
5
8295
4,608
3.6299
1
2
3
4
7296
209,892
4.4834
1
2
3
5
8297
36,469
2.9933
1
2
3
4
5298
82
3.3537
1
2
2
4
7299
1,589
5.2780
1
2
4
6
10300
21,925
5.7484
2
3
5
7
11301
3,625
3.3959
1
2
3
4
6302
10,721
7.8878
4
5
6
9
13303
19,684
6.0530
2
3
5
7
11304
13,865
7.8471
2
3
6
10
16305
2,903
2.9119
1
2
2
4
5306
5,219
5.8804
1
2
3
8
14307
1,657
1.9212
1
1
2
2
3( print page 48112)308
5,083
5.4260
1
2
3
7
12309
2,789
1.6113
1
1
1
2
3310
24,767
4.5591
1
2
3
6
10311
5,064
1.8171
1
1
1
2
3312
1,378
4.8198
1
1
3
6
10313
483
2.1206
1
1
2
3
4315
35,069
6.7590
1
1
4
9
16316
233,845
5.9901
2
3
5
7
11317
2,526
3.4968
1
1
2
4
7318
5,851
5.7865
1
3
4
7
11319
337
2.8234
1
1
2
4
5320
228,348
4.9126
2
3
4
6
9321
29,956
3.4930
1
2
3
4
6322
80
3.2875
1
2
3
4
6323
19,348
3.0716
1
1
2
4
6324
3,880
1.9113
1
1
1
2
3325
9,350
3.6738
1
2
3
5
7326
2,325
2.4998
1
1
2
3
4327
5
2.6000
1
1
2
2
6328
531
3.4356
1
1
2
4
6329
49
1.6531
1
1
1
2
2330
1
1.0000
1
1
1
1
1331
56,142
5.4154
1
2
4
7
10332
3,224
3.0420
1
1
2
4
6333
306
5.5065
1
2
3
7
13334
9,289
3.9511
1
2
3
5
7335
12,822
2.2583
1
1
2
3
4336
25,296
3.1764
1
1
2
3
6337
19,205
1.7798
1
1
2
2
3338
615
5.5668
1
2
4
8
12339
1,138
5.6484
1
1
3
7
12340
1
1.0000
1
1
1
1
1341
2,815
3.1900
1
1
1
3
7342
455
3.3890
1
1
2
4
7344
2,043
2.9843
1
1
1
3
7345
1,260
5.1809
1
2
3
6
11346
3,420
5.6788
2
3
4
7
11347
217
2.9299
1
1
1
4
6348
4,289
4.0382
1
2
3
5
7349
504
2.5668
1
1
2
3
5350
7,262
4.4271
2
2
4
5
8352
1,138
4.2251
1
2
3
5
9353
2,814
5.7246
2
3
4
6
11354
7,329
5.4921
2
3
4
6
10355
4,668
2.9265
2
2
3
3
4356
21,423
1.8025
1
1
1
2
3357
5,260
7.8391
3
4
6
9
15358
19,769
3.8000
1
2
3
4
7359
26,817
2.2435
1
2
2
3
3360
13,806
2.3374
1
1
2
3
4361
268
3.0784
1
1
2
3
6362
2
1.5000
1
1
2
2
2363
1,809
4.1390
1
2
3
4
9364
1,660
3.9054
1
1
3
5
8365
1,529
7.8041
2
3
5
10
18366
4,716
6.2386
1
3
4
8
12367
440
3.0308
1
1
2
3
5368
4,146
6.5766
2
3
5
8
12369
3,707
3.1123
1
1
2
4
6370
2,429
5.2575
2
3
4
5
8371
2,869
3.3973
2
3
3
4
4372
1,493
3.2390
2
2
2
3
4373
5,378
2.3207
1
2
2
3
3374
123
2.8537
1
2
2
3
5375
10
5.8000
2
3
4
8
9376
499
3.5524
1
2
2
4
7377
88
5.6782
1
2
3
6
11378
181
2.0608
1
1
2
3
3379
497
2.7591
1
1
2
3
5380
107
2.6449
1
1
1
2
4( print page 48113)381
188
2.6330
1
1
1
2
6382
50
2.6600
1
1
1
1
3383
3,082
3.8501
1
1
3
4
7384
129
2.7752
1
1
1
2
5386
1
65.0000
65
65
65
65
65389
1
7.0000
7
7
7
7
7392
1,943
9.1889
2
4
6
11
20394
2,707
6.9819
1
2
5
9
15395
102,692
4.0561
1
2
3
5
8396
15
3.0667
1
2
2
3
6397
15,199
5.1973
1
2
4
6
10398
6,435
5.2248
1
2
4
7
10399
1,003
3.1210
1
1
2
4
6401
6,358
10.9924
2
5
9
14
22402
1,191
3.9840
1
1
3
5
8403
30,729
7.8057
2
3
6
10
16404
3,414
3.9800
1
2
3
5
8406
2,211
9.6383
2
4
7
12
20407
558
3.3986
1
2
3
4
6408
1,918
8.5727
1
2
5
10
19409
1,515
5.9874
1
3
4
6
12410
28,076
3.7196
1
2
3
4
6411
3
5.0000
1
1
2
12
12412
8
3.0000
1
1
2
5
5413
4,931
6.7113
2
3
5
8
13414
456
3.6674
1
2
3
4
7417
35
6.2000
1
2
4
7
14418
29,523
6.0100
2
3
5
7
11419
17,335
4.2610
1
2
3
5
8420
2,722
3.0898
1
2
3
4
5421
11,518
4.1047
1
2
3
5
8422
55
3.4815
1
2
3
4
6423
9,086
8.0894
2
3
6
10
16424
985
11.3610
1
4
8
14
23425
10,770
3.2202
1
1
2
4
6426
5,083
4.1506
1
2
3
5
7427
1,825
4.4489
1
2
3
5
7428
841
7.4118
1
2
4
8
13429
23,577
5.4058
2
3
4
6
9430
83,653
7.6171
2
3
6
9
13431
414
5.9390
1
2
4
6
9432
446
4.5925
1
2
3
5
8433
5,079
2.9767
1
1
2
3
4439
1,771
8.8932
1
3
5
9
17440
4,836
8.1083
2
3
5
9
17441
754
3.2943
1
1
2
4
6442
18,906
8.6115
2
3
6
10
17443
3,296
3.3745
1
1
3
4
7444
5,837
4.0427
1
2
3
5
8445
2,126
2.6778
1
1
2
3
5446
1
1.0000
1
1
1
1
1447
6,374
2.5062
1
1
2
3
5449
42,610
3.6921
1
1
3
4
7450
7,159
1.9949
1
1
1
2
4451
2
4.0000
2
2
6
6
6452
29,623
4.8122
1
2
3
6
9453
5,106
2.8213
1
1
2
3
5454
4,544
4.0475
1
2
3
5
8455
803
2.4770
1
1
2
3
4461
2,236
5.6670
1
2
4
7
12462
10,305
9.4779
4
5
7
9
11463
33,817
3.8352
1
2
3
5
7464
7,616
2.9074
1
1
2
4
5465
193
3.1746
1
1
2
3
6466
1,183
3.9942
1
1
2
4
6467
1,019
3.7708
1
1
2
3
6468
52,003
12.1213
3
6
9
15
23470
19
3.3684
2
2
3
4
6471
15,412
4.5818
3
3
4
5
7473
8,326
11.7260
2
3
6
15
31( print page 48114)476
2,617
9.4923
2
4
8
13
19477
26,701
8.6649
1
3
7
11
17479
28,698
2.2900
1
1
1
3
5480
930
19.3817
6
9
13
23
42481
1,389
21.8301
10
15
20
24
33482
4,742
11.2108
4
6
8
13
21484
457
12.2105
2
6
10
16
23485
3,773
9.4954
4
5
7
11
18486
2,851
12.6014
2
6
10
16
25487
5,168
6.6943
1
3
5
8
13488
839
16.9509
4
7
13
21
34489
13,781
8.2563
2
3
6
10
16490
5,119
5.2595
1
2
4
6
10491
23,975
2.9996
1
2
2
3
5492
3,954
13.6789
3
5
6
23
32493
60,423
5.9498
2
3
5
8
11494
22,581
2.7089
1
1
2
4
5495
378
17.2566
8
10
14
20
29496
4,285
8.4126
3
4
6
10
17497
32,795
5.5022
3
3
4
6
9498
22,332
3.5496
2
2
3
4
5499
34,590
4.0072
1
2
3
5
8500
44,952
2.0954
1
1
2
3
4501
3,051
9.3862
4
5
7
11
17502
694
5.4046
2
3
5
7
9503
5,501
3.8369
1
2
3
5
7504
188
28.7861
9
15
25
38
52505
160
5.9114
1
1
2
6
12506
1,000
14.8004
3
7
12
19
29507
280
7.3718
2
3
6
11
15508
563
7.3826
2
3
5
9
14509
146
4.6763
1
2
3
5
8510
1,721
6.0481
1
2
4
7
12511
510
3.8270
1
1
3
5
8512
583
11.8045
6
7
9
13
20513
182
10.4890
6
7
9
12
16515
57,972
3.5777
1
1
1
4
9518
25,043
2.4104
1
1
1
3
5519
14,023
4.5367
1
1
2
6
11520
17,615
1.8731
1
1
1
2
3521
33,931
5.3752
1
2
4
6
8522
5,512
10.5479
3
4
5
7
9523
15,764
3.7672
1
2
3
4
5524
104,648
3.0672
1
2
3
4
6525
154
12.0260
1
2
7
16
34528
1,731
16.5380
5
9
15
21
29529
5,136
6.8812
1
2
4
8
16530
3,247
2.8688
1
1
2
3
5531
5,321
9.2281
2
3
7
12
19532
3,018
3.6205
1
1
3
5
7533
40,612
3.5337
1
1
2
4
8534
34,525
1.6712
1
1
1
2
3535
8,653
8.7874
2
4
7
11
17536
7,826
7.1736
2
3
6
9
14537
9,526
6.5102
1
3
5
8
13538
5,106
2.8812
1
1
2
4
6539
4,776
10.5928
2
3
7
14
23540
1,424
3.4040
1
1
2
4
7541
24,418
40.6333
16
23
34
49
71542
22,162
29.3309
11
17
24
35
50543
5,726
11.3068
2
4
9
15
23544
444,140
4.3213
3
3
4
5
7545
44,068
5.0758
3
3
4
6
8546
3,637
7.8084
3
4
6
9
14547
29,849
12.1407
6
8
10
14
20548
26,598
8.6902
5
6
8
10
13549
12,969
10.1156
5
6
8
12
18550
29,780
6.6674
4
5
6
8
10551
51,330
6.0799
1
2
5
8
12552
78,735
3.3420
1
1
2
4
7( print page 48115)553
44,667
8.8671
1
3
7
12
18554
78,338
5.1191
1
2
3
7
11555
37,904
4.6521
1
2
3
6
9556
17,924
1.9017
1
1
1
2
4557
129,504
3.9574
1
2
3
5
8558
185,260
1.7497
1
1
1
2
3559
4,850
6.8469
2
4
5
8
13560
3,401
10.0047
3
5
8
13
19561
2,983
9.4530
3
5
8
12
18562
53,381
4.7061
1
2
4
6
9563
20,263
3.1483
1
2
3
4
6564
16,650
3.3843
1
2
3
4
6565
46,695
14.9666
6
9
13
18
25566
80,036
7.2764
1
3
6
10
14567
10,028
15.6091
6
8
12
19
29568
16,182
11.0602
2
5
8
14
22569
59,084
14.2085
5
8
12
18
26570
69,076
9.8967
4
6
8
12
18571
11,056
4.8116
2
2
4
6
9572
55,040
6.9411
2
3
5
8
13573
6,500
10.8933
4
6
8
12
19574
27,832
5.7540
2
3
4
7
11575
13,964
15.2777
6
8
13
19
26576
297,949
7.1004
2
3
6
9
14577
11,261
2.3454
1
1
1
2
5578
39,116
15.6778
5
8
12
19
29579
19,915
10.6805
3
5
8
13
2111,792,587
 Table 7B.—Medicare Prospective Payment System Selected Pecentile Lengths of Stay FY 2006 MedPar Update March 2007 Grouper V25.0 MS–DRGs
DRG
Number of discharges
Arithmetic mean LOS
10th 
                                 percentile
25th 
                                 percentile
50th 
                                 percentile
75th 
                                 percentile
90th 
                                 percentile1
652
45.5567
10
18
32
57
962
336
22.8304
8
10
15
27
463
24,550
40.6297
16
23
34
49
714
22,030
29.2666
11
17
24
35
505
634
23.5221
7
10
17
29
516
296
10.5135
6
7
9
12
177
378
17.2566
8
10
14
20
298
583
11.8045
6
7
9
13
209
1,389
21.8301
10
15
20
24
3310
182
10.4890
6
7
9
12
1611
1,301
16.1742
6
8
13
20
2812
1,961
10.9218
4
6
9
13
1913
1,480
7.2324
3
4
7
9
1220
910
19.0868
6
11
18
25
3421
571
15.4823
7
10
14
20
2522
250
9.6225
3
5
9
13
1623
3,571
12.7811
3
5
10
17
2624
2,177
8.8745
1
3
7
12
1825
8,513
13.3366
4
7
11
17
2526
12,081
8.1992
3
4
7
10
1527
14,221
4.6096
1
2
4
6
928
1,633
14.6554
4
7
11
18
2729
3,097
7.3448
2
3
6
10
1430
3,609
3.7074
1
1
3
5
731
1,062
13.1723
3
5
10
18
2632
3,069
5.7546
1
2
4
7
1333
4,254
3.0634
1
1
2
4
634
825
7.2676
1
2
6
10
1435
2,918
2.9170
1
1
2
3
736
7,515
1.5828
1
1
1
1
337
4,807
8.6796
2
3
7
11
1838
16,551
3.6657
1
1
2
5
839
53,705
1.8335
1
1
1
2
340
4,593
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11
17844
2,900
6.0297
2
3
5
8
12845
997
4.2753
1
2
3
5
8846
2,504
8.4896
2
3
5
10
19847
23,868
3.2756
1
2
3
4
6848
1,704
2.9316
1
1
2
4
5849
1,515
5.9874
1
3
4
6
12853
31,699
16.7841
5
8
13
21
31854
6,958
11.1833
4
6
9
14
20855
429
7.3077
2
4
6
10
14856
6,230
16.1966
5
7
12
20
32857
10,308
8.8878
3
4
7
11
17858
3,375
5.9762
2
3
5
7
11862
7,498
8.3120
2
4
6
10
16863
22,027
5.2255
2
3
4
7
9864
20,089
4.1010
1
2
3
5
7865
2,035
6.8455
2
3
5
8
14866
9,506
3.5183
1
2
3
4
6867
5,408
9.8846
3
4
7
13
19868
2,523
5.9071
2
3
5
7
10869
1,155
4.3735
2
2
3
5
8870
13,968
15.2784
6
8
13
19
26( print page 48125)871
205,298
7.6922
2
4
6
10
15872
92,712
5.7913
2
3
5
7
10876
981
11.3738
1
4
8
14
23880
10,771
3.2201
1
1
2
4
6881
5,083
4.1506
1
2
3
5
7882
1,825
4.4489
1
2
3
5
7883
841
7.4118
1
2
4
8
13884
23,580
5.4065
2
3
4
6
9885
83,653
7.6171
2
3
6
9
13886
414
5.9390
1
2
4
6
9887
446
4.5925
1
2
3
5
8894
5,079
2.9767
1
1
2
3
4895
10,306
10.5223
3
4
6
8
9896
5,570
6.6093
2
3
5
8
12897
39,332
4.1198
1
2
3
5
6901
925
14.4242
3
5
9
17
30902
2,220
7.9436
2
3
6
9
16903
1,691
4.8673
1
2
4
6
10904
984
12.2029
2
4
7
13
22905
787
4.7253
1
2
4
6
8906
754
3.2943
1
1
2
4
6907
8,177
11.6843
3
5
8
14
24908
8,576
6.8610
2
3
5
8
13909
5,449
3.5868
1
1
3
5
7913
836
6.1739
2
3
5
8
12914
7,129
3.3884
1
2
3
4
6915
932
4.6541
1
2
3
6
10916
5,442
2.1384
1
1
2
3
4917
14,534
5.1977
1
2
4
6
11918
35,238
2.7248
1
1
2
3
5919
10,709
6.2394
1
3
4
8
13920
14,309
4.3065
1
2
3
5
8921
9,716
2.9383
1
1
2
4
5922
1,034
6.0448
1
2
4
8
13923
4,313
3.2778
1
1
2
4
6927
188
28.7861
9
15
25
38
52928
826
16.1693
4
8
13
20
31929
454
7.6987
2
3
6
11
15933
160
5.9114
1
1
2
6
12934
709
6.8459
1
3
5
8
13935
2,231
5.5423
1
2
4
7
11939
435
10.9206
2
4
8
14
22940
735
6.4044
1
3
5
8
14941
1,065
3.0321
1
1
2
4
6945
6,307
10.2789
4
6
8
11
14946
3,998
7.8844
3
5
6
7
8947
6,629
4.9880
1
2
4
6
10948
34,805
3.4130
1
2
3
4
6949
857
4.1317
1
1
2
4
7950
519
3.4320
1
1
2
4
5951
1,019
3.7708
1
1
2
3
6955
457
12.2105
2
6
10
16
23956
3,773
9.4954
4
5
7
11
18957
1,326
16.0023
2
7
13
20
30958
1,227
10.4857
3
6
9
13
19959
298
6.0949
2
3
5
8
10963
1,516
9.2677
1
4
7
13
19964
2,543
6.2813
2
3
5
8
11965
1,109
4.1285
1
2
3
5
8969
679
18.7115
5
8
14
23
37970
160
9.4654
2
4
7
12
20974
6,395
10.4471
2
4
7
13
21975
4,561
7.2542
2
3
5
9
14976
2,825
4.8614
1
2
4
6
8977
5,119
5.2595
1
2
4
6
10981
26,495
15.2659
5
8
12
19
28982
19,350
9.9611
3
5
8
13
19983
6,154
5.3856
1
2
4
7
11984
671
14.5768
5
8
13
18
27985
1,110
9.7085
2
5
9
13
18( print page 48126)986
836
5.1092
1
2
3
7
11987
8,060
13.1893
4
6
11
17
25988
12,328
7.9772
2
4
7
10
15989
6,176
4.1332
1
1
3
6
9999
17
2.7333
1
2
8
18
2411,795,587
 Table 8A.—Statewide Average Operating Cost-to-Charge Ratios—July 2007
State
Urban
RuralAlabama
0.257
0.337Alaska
0.421
0.751Arizona
0.282
0.404Arkansas
0.333
0.356California
0.227
0.328Colorado
0.289
0.443Connecticut
0.411
0.526Delaware
0.494
0.514District of Columbia *
0.352Florida
0.244
0.287Georgia
0.337
0.391Hawaii
0.376
0.45Idaho
0.473
0.541Illinois
0.312
0.4Indiana
0.401
0.455Iowa
0.369
0.448Kansas
0.292
0.438Kentucky
0.376
0.375Louisiana
0.301
0.355Maine
0.492
0.466Maryland
0.732
0.794Massachusetts *
0.475Michigan
0.369
0.457Minnesota
0.384
0.524Mississippi
0.308
0.37Missouri
0.328
0.37Montana
0.423
0.49Nebraska
0.342
0.455Nevada
0.221
0.475New Hampshire
0.453
0.465New Jersey *
0.183New Mexico
0.383
0.376New York
0.356
0.523North Carolina
0.43
0.414North Dakota
0.43
0.473Ohio
0.354
0.531Oklahoma
0.304
0.391Oregon
0.462
0.418Pennsylvania
0.271
0.428Puerto Rico *
0.455Rhode Island *
0.391South Carolina
0.283
0.314South Dakota
0.346
0.441Tennessee
0.306
0.379Texas
0.26
0.344Utah
0.42
0.566Vermont
0.54
0.637Virginia
0.361
0.364Washington
0.397
0.448West Virginia
0.476
0.471Wisconsin
0.425
0.475Wyoming
0.431
0.571* All counties in the State or Territory are classified as urban, with the exception of Massachusetts, which has areas designated as rural.  However, no short-term acute care IPPS hospitals are located in those areas as of July 2007.
 Table 8B.—Statewide Average Capital Cost-to-Charge Ratios—July 2007
State
RatioAlabama
0.024Alaska
0.037Arizona
0.024Arkansas
0.026California
0.015Colorado
0.029Connecticut
0.029Delaware
0.035District of Columbia
0.023Florida
0.023Georgia
0.029Hawaii
0.03Idaho
0.039Illinois
0.025Indiana
0.037Iowa
0.029Kansas
0.03Kentucky
0.029Louisiana
0.027Maine
0.033Maryland
0.055Massachusetts
0.032Michigan
0.029Minnesota
0.029Mississippi
0.027Missouri
0.027Montana
0.036Nebraska
0.039Nevada
0.022New Hampshire
0.035New Jersey
0.013New Mexico
0.032New York
0.028North Carolina
0.036North Dakota
0.039Ohio
0.029Oklahoma
0.029Oregon
0.033Pennsylvania
0.022Puerto Rico
0.034Rhode Island
0.02South Carolina
0.025South Dakota
0.032Tennessee
0.03Texas
0.026Utah
0.035Vermont
0.042Virginia
0.036Washington
0.031West Virginia
0.033Wisconsin
0.037Wyoming
0.045
 Table 8C.—Statewide Average Total Cost-to-Charge Ratios for LTCHS—July 2007
State
Urban
RuralAlabama
0.279
0.368Alaska
0.454
0.811Arizona
0.306
0.435Arkansas
0.356
0.388California
0.241
0.349Colorado
0.316
0.49Connecticut
0.439
0.574Delaware
0.528
0.553District of Columbia *
0.374Florida
0.266
0.318Georgia
0.364
0.426Hawaii
0.404
0.487Idaho
0.512
0.585Illinois
0.337
0.432Indiana
0.438
0.499Iowa
0.393
0.488Kansas
0.318
0.479Kentucky
0.405
0.405Louisiana
0.328
0.383Maine
0.526
0.495Maryland **
0.444
0.347Massachusetts *
0.506Michigan
0.398
0.491Minnesota
0.411
0.564Mississippi
0.334
0.399Missouri
0.353
0.403Montana
0.454
0.533Nebraska
0.378
0.502Nevada
0.242
0.535New Hampshire
0.487
0.502New Jersey *
0.197New Mexico
0.415
0.41New York
0.383
0.559North Carolina
0.466
0.45North Dakota
0.465
0.52Ohio
0.381
0.572( print page 48127)Oklahoma
0.332
0.424Oregon
0.496
0.448Pennsylvania
0.292
0.46Puerto Rico *
0.489Rhode Island *
0.411South Carolina
0.307
0.341South Dakota
0.375
0.479Tennessee
0.336
0.412Texas
0.285
0.375Utah
0.453
0.62Vermont
0.584
0.676Virginia
0.4
0.401Washington
0.428
0.48West Virginia
0.509
0.504Wisconsin
0.462
0.516Wyoming
0.467
0.626* All counties in the State or Territory are classified as urban, with the exception of Massachusetts, which has areas designated as rural.  However, no short-term acute care IPPS hospitals or LTCHs are located in those areas as of July 2007.** National average IPPS total cost-to-charge ratios, as discussed in section VI.E. of this final rule.
 Table 9A.—Hospital Reclassifications and Redesignations—FY 2008
Provider No.
Geographic CBSA
Reclassified CBSA
LUGAR010005
01
26620010009
19460
26620010010
01
13820010012
01
40660010022
01
12060
LUGAR010025
01
17980010029
12220
17980010035
01
13820010044
01
13820010045
01
13820010054
19460
26620010059
19460
26620010065
01
13820010083
01
33660010085
19460
26620010090
33660
37700010100
01
37860010101
01
13820
LUGAR010118
01
46220010126
01
33860010143
01
13820010150
01
33860010158
01
19460010164
01
11500
LUGAR020008
02
11260030007
39140
22380
LUGAR030033
03
22380030055
29420
39140030101
29420
29820040014
04
30780040017
04
22220040019
04
32820040020
27860
32820040027
04
44180040039
04
26040041
04
30780040069
04
32820040071
38220
30780040076
04
30780
LUGAR040080
04
27860040085
04
32820040088
04
33740040091
04
45500040100
04
30780040119
04
30780050006
05
39820050009
34900
46700050013
34900
46700050014
05
40900050022
40140
42044050042
05
39820050046
37100
31084050054
40140
42044( print page 48128)050069
42044
31084050071
41940
36084050073
46700
36084050076
41884
36084050082
37100
31084050089
40140
31084050090
42220
41884050099
40140
31084050101
46700
36084050102
40140
42044050118
44700
33700050129
40140
31084050133
49700
40900050136
42220
41884050140
40140
31084050150
05
40900050159
37100
31084050168
42044
31084050173
42044
31084050174
42220
41884050193
42044
31084050197
41884
36084050224
42044
31084050226
42044
31084050230
42044
31084050236
37100
31084050243
40140
42044050245
40140
31084050272
40140
31084050279
40140
31084050291
42220
41884050292
40140
42044050298
40140
31084050300
40140
31084050301
05
42220050327
40140
31084050329
40140
42044050348
42044
31084050367
46700
36084050385
42220
41884050390
40140
42044050394
37100
31084050423
40140
42044050426
42044
31084050476
05
42220050494
05
40900050510
41884
36084050517
40140
31084050526
42044
31084050534
40140
42044050541
41884
36084050543
42044
31084050547
42220
41884050548
42044
31084050549
37100
31084050551
42044
31084050567
42044
31084050570
42044
31084050573
40140
42044050580
42044
31084050584
40140
31084050586
40140
31084050589
42044
31084050603
42044
31084050609
42044
31084050616
37100
31084050667
34900
46700050678
42044
31084050680
46700
36084050684
40140
42044050686
40140
42044( print page 48129)050690
42220
41884050693
42044
31084050694
40140
42044050701
40140
42044050709
40140
31084050720
42044
31084050749
37100
31084060001
24540
19740060003
14500
19740060012
39380
17820060023
24300
19740060027
14500
19740060049
06
22660060075
06
24300060096
06
19740060103
14500
19740060116
14500
19740070001
35300
35004070003
07
25540
LUGAR070004
07
25540070005
35300
35004070006
14860
35644070010
14860
35644070011
07
25540070015
25540
35644070016
35300
35004070017
35300
35004070018
14860
35644070019
35300
35004070022
35300
35004070028
14860
35644070031
35300
35004070033
14860
35644070034
14860
35644070036
25540
35300070038
35300
35004070039
35300
35004080001
48864
37964080003
48864
37964080004
20100
48864080006
08
20100080007
08
36140090011
47894
13644100002
48424
22744100014
19660
36740100017
19660
36740100022
33124
22744100023
10
36740100024
10
33124100045
19660
36740100047
39460
42260100049
10
29460100068
19660
36740100072
19660
36740100077
39460
42260100080
48424
22744100081
10
23020
LUGAR100105
42680
38940100109
10
36740100118
37380
27260100130
48424
22744100139
10
23540
LUGAR100150
10
33124100156
10
23540100157
29460
45300100168
48424
22744100176
48424
22744100217
42680
38940100232
10
23540100234
48424
22744100236
39460
42260( print page 48130)100239
45300
42260100249
10
45300100252
10
42680100253
48424
22744100258
48424
22744100268
48424
22744100269
48424
22744100275
48424
22744100287
48424
22744100288
48424
22744100292
10
23020
LUGAR110002
11
12060110016
11
17980110023
11
12060110029
23580
12060110038
11
45220110040
11
12060
LUGAR110041
11
12060110054
40660
12060110069
47580
31420110075
11
42340110095
11
10500110121
11
45220110122
46660
45220110125
11
31420110128
11
42340110146
11
27260110150
11
12060110153
47580
31420110168
40660
12060110187
11
12060
LUGAR110189
11
12060120028
12
26180130002
13
29130003
30300
28420130049
17660
44060130067
13
26820
LUGAR140B10
29404
16974140012
14
16974140015
14
41180140032
14
41180140033
29404
16974140034
14
41180140040
14
37900140043
14
19340140046
14
41180140058
14
41180140064
14
37900140084
29404
16974140100
29404
16974140110
14
16974140130
29404
16974140143
14
16974140155
28100
16974140160
14
40420140161
14
16974140164
14
41180140186
28100
16974140202
29404
16974140233
40420
16974140291
29404
16974150002
23844
16974150004
23844
16974150006
33140
43780150008
23844
16974150011
15
26900150023
45460
26900150030
15
26900
LUGAR150034
23844
16974150042
15
14020150045
15
23060( print page 48131)150048
15
17140150051
14020
26900150065
15
26900150069
15
17140150076
15
43780150088
11300
26900150090
23844
16974150091
15
23060150102
15
23844
LUGAR150112
18020
26900150113
11300
26900150115
15
21780150125
23844
16974150126
23844
16974150133
15
23060150146
15
23060150147
23844
16974160001
16
11180160016
16
11180160057
16
26980160064
16
47940160080
16
19340160089
16
26980160147
16
11180170006
17
27900170012
17
48620170013
17
48620170020
17
48620170023
17
48620170033
17
48620170058
17
28140170068
17
11100170120
17
27900170142
17
45820170175
17
48620170190
17
45820170193
17
48620180002
18
49180005
18
26580180011
18
30460180012
21060
31140180013
14540
34980180017
18
21060180019
18
17140180024
18
31140180027
18
17300180029
18
30460180044
18
26580180048
18
31140180049
18
30460180050
18
28700180066
18
34980180069
18
26580180078
18
26580180080
18
28940180093
18
21780180102
18
17300180104
18
17300180116
18
17300180124
14540
34980180127
18
31140180132
18
30460190003
19
29180190015
19
35380190086
19
33740190088
19
43340190099
19
12940190106
19
10780190144
19
43340190164
19
45190167
19
29180( print page 48132)190184
19
33740190191
19
29180190208
19
04190218
19
43340200020
38860
40484200024
30340
38860200034
30340
38860200039
20
38860200050
20
12620200063
20
38860220008
39300
14484220010
37764
14484220020
39300
14484220029
37764
14484220033
37764
14484220035
37764
14484220073
39300
14484220074
39300
14484220077
44140
25540220080
37764
14484220174
37764
14484230002
19804
11460230003
26100
34740230013
47644
22420230019
47644
22420230020
19804
11460230021
35660
28020230022
23
29620230024
19804
11460230029
47644
22420230030
23
40980230035
23
24340
LUGAR230036
23
13020230037
23
11460230038
24340
34740230047
47644
19804230053
19804
11460230054
23
24580230059
24340
34740230069
47644
11460230071
47644
22420230072
26100
34740230077
40980
22420230080
23
13020230089
19804
11460230092
27100
11460230096
23
28020230097
23
24340230099
33780
11460230104
19804
11460230105
23
13020230106
24340
34740230119
19804
11460230121
23
29620
LUGAR230130
47644
22420230135
19804
11460230142
19804
11460230146
19804
11460230151
47644
22420230165
19804
11460230174
26100
34740230176
19804
11460230195
47644
19804230204
47644
19804230207
47644
22420230208
23
24340
LUGAR230222
23
13020230223
47644
22420230227
47644
19804230236
24340
34740230244
19804
11460( print page 48133)230254
47644
22420230257
47644
19804230264
47644
19804230269
47644
22420230270
19804
11460230273
19804
11460230277
47644
22420230279
47644
11460240030
24
41060240064
24
20260240069
24
40340240071
24
40340240075
24
41060240088
24
41060240093
24
33460240187
24
33460250002
25
22520250004
25
32820250006
25
32820250009
25
27180250023
25
25060
LUGAR250031
25
27140250034
25
32820250040
37700
25060250042
25
32820250044
25
22520250069
25
46220250078
25620
25060250079
25
27140250081
25
46220250082
25
38220250094
25620
25060250097
25
12940250099
25
27140250100
25
46220250104
25
46220250117
25
25060
LUGAR260009
26
28140260015
26
27860260017
26
27620260022
26
16260025
26
41180260050
26
41140260064
26
17860260074
26
17860260094
26
44180260110
26
41180260113
26
14260119
26
27860260175
26
28140260183
26
41180260186
26
27620270003
27
24500270017
27
33540280009
28
30700280023
28
30700280032
28
30700280061
28
53280065
28
24540280125
28
43580290002
29
16180
LUGAR290006
29
39900290019
16180
39900300001
30
31700300014
40484
31700300018
40484
31700300019
30
15764310002
35084
35644310009
35084
35644310013
35084
35644310014
15804
37964( print page 48134)310015
35084
35644310017
35084
35644310018
35084
35644310021
45940
35084310031
15804
20764310032
47220
48864310038
20764
35644310039
20764
35644310048
20764
35084310050
35084
35644310054
35084
35644310070
20764
35644310076
35084
35644310081
15804
37964310083
35084
35644310093
35084
35644310096
35084
35644310108
20764
35644310119
35084
35644320003
32
42140320005
22140
10740320006
32
10740320013
32
42140320014
32
29740320033
32
42140
LUGAR320063
32
36220320065
32
36220330004
28740
39100330008
33
15380
LUGAR330023
39100
14860330027
35004
35644330049
39100
14860330067
39100
14860330073
33
40380
LUGAR330079
33
47330085
33
45060330094
33
28740330103
33
39330106
35004
35644330126
39100
35644330136
33
45060330157
33
45060330167
35004
35644330181
35004
35644330182
35004
35644330191
24020
10580330198
35004
35644330224
28740
39100330225
35004
35644330229
33
21500330235
33
45060
LUGAR330239
33
21500330250
33
15540330259
35004
35644330277
33
27060330331
35004
35644330332
35004
35644330372
35004
35644330386
33
35084340004
24660
49180340008
34
16740340010
24140
39580340013
34
16740340015
34
16740340021
34
16740340023
11700
24860340027
34
24780340039
34
16740340050
34
22180340051
34
25860340068
34
48900( print page 48135)340069
39580
20500340070
15500
24660340071
34
39580
LUGAR340073
39580
20500340091
24660
49180340109
34
47260340114
39580
20500340115
34
20500340124
34
39580
LUGAR340126
34
39580340127
34
20500
LUGAR340129
34
16740340131
34
24780340138
39580
20500340144
34
16740340145
34
16740
LUGAR340147
40580
39580340173
39580
20500350003
35
13900350006
35
13900350009
35
22020360008
36
26580360010
36
15940360011
36
18140360013
36
30620360014
36
18140360019
10420
17460360020
10420
17460360025
41780
45780360027
10420
17460360036
36
17460360039
36
18140360054
36
26580360065
36
45780360078
10420
17460360079
19380
17140360086
44220
19380360095
36
45780360096
36
49660
LUGAR360107
36
45780360121
36
45780360150
10420
17460360159
36
18140360175
36
18140360185
36
49660
LUGAR360187
44220
19380360197
36
18140360211
48260
38300360245
36
17460
LUGAR360253
19380
17140370004
37
27900370006
37
46140370014
37
43300370015
37
46140370016
37
36420370018
37
46140370022
37
30020370025
37
46140370026
37
36420370047
37
36420370049
37
36420370113
37
22220370149
37
36420380001
38
38900380022
38
18700
LUGAR380027
38
21660380050
38
32780380090
38
21660390006
39
25420390013
39
25420390016
39
36( print page 48136)390030
39
10900390031
39
39740
LUGAR390044
39740
37964390046
49620
29540390048
39
25420390065
39
12580390066
30140
25420390071
39
48700
LUGAR390079
39
13780390086
39
27780390091
39
49660390093
39
38300390096
39740
37964390110
27780
38300390113
39
49660390133
10900
37964390138
39
25420390151
39
13644390162
10900
35084390246
39
48700390313
39
39740
LUGAR400048
25020
41980410001
39300
14484410004
39300
14484410005
39300
14484410007
39300
14484410010
39300
14484410011
39300
14484410012
39300
14484410013
39300
35980420007
43900
24860420009
42
24860
LUGAR420020
42
16770420027
11340
24860420030
42
16700420036
42
16740420039
42
43900
LUGAR420062
42
16740420067
42
42340420068
42
16700420069
42
44940
LUGAR420071
42
24860420080
42
42340420083
43900
24860420085
34820
48900420098
42
34820430012
43
43620430013
43
43620440002
27180
32820440008
44
27180440020
44
26620440024
17420
16860440025
44
34440035
17300
34980440056
34100
28940440060
44
27180440068
44
16860440072
44
32820440073
44
34980440144
44
34980440148
44
34980440151
44
34980440175
44
34980440185
17420
16860440192
44
34980450007
45
41700450032
45
43340450039
23104
19124450059
41700
12420450064
23104
19124450080
45
30980( print page 48137)450087
23104
19124450099
45
11100450135
23104
19124450137
23104
19124450148
23104
19124450178
45
36220450187
45
26420450196
45
19124450211
45
30980450214
45
26420450224
45
46340450283
45
19124
LUGAR450324
43300
19124450347
45
26420450351
45
23104450389
45
19124
LUGAR450393
43300
19124450395
45
26420450419
23104
19124450438
45
26420450447
45
19124450465
45
26420450469
43300
19124450484
45
30980450508
45
30980450563
23104
19124450596
45
23104450639
23104
19124450656
45
30980450672
23104
19124450675
23104
19124450677
23104
19124450747
45
46340450770
45
12420
LUGAR450779
23104
19124450813
45
41700450830
45
36220450839
45
43340450872
23104
19124450880
23104
19124460004
36260
41620460005
36260
41620460007
46
41100460011
46
39340460021
41100
29820460026
46
39340460039
46
30860460041
36260
41620460042
36260
41620470001
47
30470012
47
38340490004
25500
16820490005
49020
47894490013
49
31340490018
49
16820490019
49
47894490042
13980
40220490079
49
49180490092
49
40060490097
49
40060490106
49
16820490109
47260
40060500002
50
28420500003
34580
42644500007
34580
42644500016
48300
42644500021
45104
42644500031
50
36500500039
14740
42644500041
31020
38900500072
50
14740( print page 48138)500079
45104
42644500108
45104
42644500129
45104
42644510001
34060
38300510002
51
40220510006
51
34060510018
51
16620
LUGAR510030
51
34060510046
51
13980510047
51
38300510062
51
16620510070
51
16620510071
51
13980510077
51
26580520002
52
48140520021
29404
16974520028
52
31540
LUGAR520037
52
48140520059
39540
29404520071
52
33340
LUGAR520076
52
31540520095
52
31540520102
52
33340
LUGAR520107
52
22540520113
52
24580520116
52
33340
LUGAR520189
29404
16974530015
53
26820
 Table 9C.—Hospitals Redesignated as Rural Under Section 1886(d)(8)(E) of the Act—FY 2008
Provider No.
Geographic CBSA
Redesignated rural area050192
23420
05050528
32900
05050618
40140
05100048
37860
10100134
27260
10140167
14
14170137
29940
17220051
38340
22230078
35660
23250017
25
25250126
32820
25260006
41140
26260195
44180
26330044
46540
33330268
10580
33360125
36
36370054
36420
37380040
13460
38390130
27780
39390183
39
39390185
42540
39390201
39
39440135
34980
44450052
45
45450078
10180
45450243
10180
45450348
45
45500148
48300
50
 
 
 Table 10.—Geometric Mean Plus the Lesser of .75 of the National Adjusted Operating Standardized Payment Amount (Increased to Reflect the Difference Between Costs and Charges) or .75 of One Standard Deviation of Mean Charges by Medicare Severity—Diagnosis-Related Group (MS–DRG) July 2007 1
MS–DRG
Number of cases
Threshold1
652
$344,9722
335
$178,0843
24,400
$248,2594
21,825
$149,2295
634
$167,7046
296
$92,3077
378
$134,5478
583
$92,2989
1,388
$97,03910
182
$73,44511
1,297
$71,63512
1,956
$51,55413
1,476
$36,94120
910
$138,40221
566
$108,06622
249
$74,80523
3,564
$81,02424
2,168
$57,35625
8,493
$77,71526
12,059
$52,35127
14,191
$41,28528
1,623
$74,16929
3,089
$45,89930
3,592
$30,00031
1,061
$60,32632
3,064
$35,47933
4,237
$28,78834
821
$58,37235
2,911
$41,56636
7,454
$36,54337
4,803
$51,76638
16,531
$32,78939
53,619
$23,94040
4,585
$57,54141
8,005
$39,48242
5,216
$34,23252
1,188
$29,32053
590
$21,94154
4,750
$30,21455
16,945
$24,92056
7,800
$28,29957
48,665
$18,15458
796
$28,69159
2,676
$21,47560
4,240
$16,41561
1,368
$53,02862
2,320
$42,00063
1,150
$36,28564
56,448
$33,84565
115,423
$26,27466
91,644
$19,97567
1,403
$30,79168
12,512
$21,80169
104,325
$17,61370
7,165
$33,37071
10,283
$26,04372
5,811
$19,09773
8,728
$27,01374
32,760
$19,85775
1,229
$33,94676
861
$22,53077
1,112
$33,09678
1,386
$23,66079
896
$18,68880
2,095
$24,17881
8,250
$15,97982
1,664
$34,22983
2,070
$28,41784
2,527
$21,04285
5,383
$34,77786
10,921
$26,13887
11,827
$18,48388
730
$30,53189
2,836
$22,35090
3,285
$16,40291
6,763
$29,35492
15,467
$20,63693
15,043
$15,98894
1,533
$55,25595
1,101
$41,89196
749
$35,51597
1,266
$50,37398
1,065
$35,77799
637
$30,000100
16,012
$28,458101
57,312
$17,754102
1,373
$24,469103
15,199
$15,977113
592
$31,359114
593
$19,667115
1,110
$25,665116
715
$23,533117
1,406
$15,540121
609
$21,777122
666
$12,422123
2,865
$17,881124
684
$24,203125
4,742
$15,308129
1,401
$38,054130
1,063
$27,826131
895
$36,608132
910
$26,200133
2,057
$31,616134
3,781
$19,478135
430
$34,413136
503
$21,916137
847
$26,995138
926
$17,071139
1,710
$19,625146
696
$35,195147
1,457
$25,206148
924
$17,390149
39,487
$14,828150
945
$25,227151
6,840
$12,717152
2,363
$22,142153
16,167
$14,126154
1,857
$28,012155
4,431
$20,298156
4,969
$14,819157
1,164
$28,373158
3,158
$19,955159
2,365
$14,144163
13,502
$78,302164
18,484
$47,957165
14,267
$37,903166
20,398
$57,270167
21,074
$39,819168
5,555
$30,197175
12,032
$33,122176
40,330
$25,127177
57,526
$35,859178
72,497
$29,849179
26,495
$23,293180
22,628
$33,012181
32,425
$26,937182
6,085
$21,762183
1,679
$29,889184
4,279
$21,041185
2,607
$14,730186
8,586
$31,513187
10,362
$25,629188
4,840
$19,425189
105,009
$28,877190
57,361
$27,675191
126,608
$22,656192
193,798
$17,011193
88,637
$29,447194
274,002
$23,196195
142,476
$16,909196
5,173
$30,810197
7,087
$25,433198
4,822
$19,617199
3,279
$33,342200
8,321
$23,384201
3,470
$16,338202
32,849
$19,060203
40,990
$13,891204
26,244
$16,200205
5,816
$26,189206
22,615
$17,512207
46,394
$81,122208
79,797
$41,204215
154
$151,766216
8,437
$161,671217
7,940
$116,693218
2,963
$97,867219
10,112
$131,302220
14,302
$93,773221
7,644
$81,213222
2,862
$150,236223
5,774
$116,596224
1,930
$138,303225
5,882
$109,289226
7,078
$112,853227
50,687
$88,692( print page 48140)228
3,099
$124,484229
4,351
$88,309230
1,797
$72,663231
1,484
$138,738232
1,799
$107,841233
16,996
$118,266234
39,349
$86,707235
9,680
$95,709236
33,005
$68,284237
22,981
$84,128238
43,967
$53,458239
13,900
$59,235240
13,862
$40,599241
2,927
$30,264242
17,243
$63,738243
40,609
$50,008244
65,831
$42,222245
6,081
$54,185246
41,300
$65,056247
272,543
$46,585248
5,558
$58,102249
29,332
$41,932250
5,768
$53,604251
39,992
$38,463252
44,846
$48,386253
52,457
$42,805254
53,894
$34,650255
2,624
$38,481256
3,944
$29,789257
694
$21,430258
599
$49,941259
7,342
$35,275260
872
$47,350261
2,921
$28,440262
3,284
$21,635263
792
$29,057264
30,336
$39,273280
61,020
$35,562281
62,050
$27,923282
57,249
$21,202283
16,022
$31,166284
5,089
$23,429285
3,008
$16,066286
23,379
$40,316287
173,151
$27,701288
3,262
$48,403289
1,471
$35,164290
447
$27,561291
184,689
$28,984292
245,075
$22,187293
200,858
$16,283294
1,756
$20,506295
1,631
$12,987296
1,844
$26,653297
893
$18,216298
518
$11,608299
17,570
$27,658300
49,533
$20,057301
37,733
$14,452302
7,919
$23,176303
81,896
$14,065304
2,116
$24,255305
36,019
$13,919306
1,385
$27,627307
6,479
$17,568308
33,741
$27,332309
85,320
$19,164310
156,223
$13,820311
25,143
$12,408312
170,267
$16,986313
222,163
$13,782314
60,587
$30,470315
33,354
$22,371316
18,077
$15,239326
11,616
$86,242327
11,348
$49,564328
8,994
$31,783329
48,381
$78,387330
68,497
$46,866331
29,611
$34,881332
1,897
$72,507333
6,490
$45,775334
3,751
$33,992335
7,194
$67,336336
12,815
$43,034337
8,636
$32,651338
1,513
$58,118339
3,289
$39,790340
3,551
$29,763341
878
$43,015342
2,662
$32,037343
6,796
$22,560344
897
$51,699345
3,090
$33,750346
2,758
$25,650347
1,577
$36,665348
4,295
$27,844349
5,539
$17,498350
1,802
$41,248351
4,663
$28,402352
8,835
$18,578353
3,076
$44,781354
9,041
$30,877355
16,621
$21,562356
8,411
$57,529357
8,336
$39,734358
2,477
$30,907368
3,069
$31,649369
4,850
$24,300370
3,104
$18,383371
16,940
$31,947372
23,722
$26,571373
14,227
$19,299374
9,505
$34,336375
20,165
$26,493376
4,486
$20,960377
50,797
$30,746378
118,928
$22,456379
95,521
$17,322380
2,934
$32,401381
5,702
$25,732382
4,681
$18,936383
1,307
$28,326384
8,723
$19,941385
2,119
$33,554386
7,449
$24,853387
5,105
$19,162388
18,375
$29,409389
47,827
$21,609390
47,010
$15,176391
47,836
$24,951392
308,502
$16,603393
24,053
$29,057394
48,058
$22,377395
24,695
$16,159405
3,949
$82,207406
5,420
$49,157407
2,195
$36,266408
1,682
$68,553409
1,771
$46,888410
693
$35,868411
985
$65,611412
1,098
$47,835413
850
$37,471414
5,643
$59,255415
7,154
$40,657416
6,018
$30,408417
16,735
$46,510418
28,654
$36,535419
37,427
$27,109420
738
$62,577421
1,118
$37,072422
359
$28,797423
1,528
$64,735424
934
$44,742425
148
$35,273432
16,397
$30,669433
9,146
$21,794434
931
$15,756435
12,004
$32,775436
14,157
$26,550437
4,304
$23,750438
14,497
$31,776439
25,932
$25,153440
26,506
$17,450441
14,036
$29,001442
13,192
$22,508443
6,445
$16,775444
12,529
$31,104445
17,390
$25,361446
16,434
$18,758453
852
$162,887454
1,700
$108,936455
1,715
$83,977456
770
$132,661457
2,084
$93,332458
1,282
$76,740( print page 48141)459
3,212
$91,544460
51,227
$61,564461
1,071
$78,546462
14,292
$59,077463
5,317
$58,659464
6,589
$40,817465
2,748
$30,426466
3,914
$70,273467
14,340
$53,217468
21,479
$45,760469
29,879
$56,067470
412,628
$41,647471
2,241
$71,684472
6,629
$48,438473
22,659
$39,710474
2,857
$47,799475
3,709
$34,430476
1,560
$23,529477
2,262
$56,473478
7,379
$41,535479
10,118
$33,437480
25,993
$50,045481
74,669
$37,407482
49,780
$31,682483
6,572
$44,230484
17,287
$37,116485
1,152
$55,605486
2,066
$41,452487
1,345
$33,445488
2,541
$33,298489
6,198
$25,879490
21,668
$34,194491
57,424
$22,157492
4,761
$47,695493
16,833
$36,100494
29,419
$27,047495
1,888
$49,247496
5,499
$34,237497
7,196
$26,140498
1,258
$36,490499
1,173
$20,709500
1,359
$47,252501
3,956
$30,666502
6,635
$21,338503
743
$38,514504
2,274
$30,843505
3,142
$22,627506
921
$23,455507
840
$33,141508
2,717
$24,377509
674
$24,413510
994
$38,909511
4,183
$30,425512
12,088
$21,576513
1,104
$28,452514
1,175
$18,054515
3,601
$50,791516
11,512
$37,225517
17,926
$30,519533
835
$26,648534
3,647
$14,482535
6,888
$26,452536
34,492
$14,330537
694
$19,017538
1,139
$12,077539
3,397
$33,217540
4,317
$26,851541
1,787
$20,216542
6,196
$32,544543
18,834
$24,660544
12,389
$16,758545
4,061
$33,836546
6,159
$23,684547
4,717
$16,961548
592
$32,771549
1,139
$25,057550
855
$16,440551
9,580
$29,107552
88,568
$17,262553
2,820
$24,400554
20,429
$13,865555
2,006
$21,701556
19,316
$13,456557
3,196
$28,869558
14,252
$17,984559
1,646
$27,886560
4,208
$19,203561
7,439
$12,631562
5,051
$26,441563
36,361
$14,373564
1,622
$27,213565
3,385
$19,726566
2,673
$14,394573
5,721
$44,181574
12,468
$32,298575
6,221
$24,293576
563
$44,962577
2,305
$31,201578
3,228
$21,726579
3,359
$42,784580
11,019
$28,964581
12,249
$19,890582
5,787
$22,538583
9,356
$17,024584
801
$29,768585
1,687
$19,824592
4,026
$29,343593
13,080
$21,992594
2,828
$15,050595
1,092
$29,676596
5,792
$18,108597
555
$29,885598
1,502
$23,607599
342
$14,643600
611
$21,165601
841
$13,706602
21,456
$26,696603
132,037
$16,799604
2,652
$25,279605
22,943
$15,043606
1,371
$23,075607
7,242
$13,623614
1,429
$44,375615
1,594
$32,682616
1,145
$57,766617
6,944
$36,252618
268
$26,622619
675
$60,360620
2,007
$41,188621
6,560
$35,408622
1,241
$43,105623
3,392
$32,380624
392
$23,639625
1,107
$40,323626
2,751
$27,124627
14,146
$17,672628
3,297
$50,940629
4,125
$39,861630
551
$30,359637
16,431
$26,711638
46,657
$17,852639
36,178
$12,405640
56,149
$23,948641
189,293
$15,306642
1,570
$23,220643
5,072
$30,688644
12,220
$23,221645
8,140
$17,134652
10,695
$57,598653
1,591
$83,573654
3,387
$53,557655
1,514
$40,260656
3,739
$56,731657
7,946
$38,721658
7,957
$31,512659
4,484
$50,345660
7,985
$36,157661
4,264
$28,963662
998
$41,819663
2,288
$29,509664
4,543
$21,878665
693
$47,203666
2,405
$30,729667
3,765
$17,825668
3,768
$39,717669
13,307
$27,864670
12,685
$17,652671
917
$28,730672
940
$17,260673
12,678
$43,306674
13,848
$38,503675
8,371
$31,046682
76,428
$30,010683
128,229
$25,096684
28,358
$16,191685
2,520
$18,480686
1,596
$31,207( print page 48142)687
3,467
$24,323688
1,098
$16,621689
55,794
$25,635690
201,347
$16,948691
908
$32,082692
653
$23,510693
2,256
$27,732694
19,345
$16,454695
982
$24,045696
10,646
$13,740697
585
$16,016698
21,255
$27,675699
27,064
$21,858700
11,141
$15,265707
6,053
$34,725708
15,996
$27,483709
796
$33,770710
2,015
$28,020711
953
$34,001712
793
$18,806713
12,009
$24,773714
32,647
$14,452715
662
$34,063716
1,367
$26,199717
666
$31,483718
601
$17,543722
881
$29,143723
2,078
$23,828724
648
$14,696725
808
$23,676726
3,956
$15,110727
1,106
$26,379728
6,224
$15,600729
603
$22,516730
533
$13,176734
1,528
$39,515735
1,278
$24,152736
842
$68,890737
3,487
$39,497738
912
$26,791739
980
$48,238740
4,638
$31,707741
6,330
$22,182742
11,685
$29,883743
34,686
$19,452744
1,634
$28,628745
2,080
$18,005746
2,664
$27,839747
11,073
$19,176748
21,289
$18,499749
1,048
$42,919750
477
$22,403754
1,097
$31,826755
3,219
$24,291756
783
$15,311757
1,326
$31,148758
1,659
$24,086759
1,141
$17,474760
1,815
$17,766761
1,844
$12,285765
2,606
$19,738766
2,664
$13,500767
123
$14,158768
10
$28,485769
87
$30,005770
188
$15,884774
1,476
$11,268775
5,343
$8,224776
495
$14,028777
180
$17,674778
494
$7,925779
107
$12,859780
50
$5,097781
3,062
$11,922782
129
$7,495790
1
$10,833793
1
$7,090799
631
$76,349800
730
$45,475801
581
$35,346802
693
$51,863803
1,030
$33,789804
978
$23,443808
8,276
$33,959809
15,783
$24,984810
3,694
$19,852811
18,481
$24,763812
83,743
$16,735813
15,112
$25,353814
1,649
$29,809815
3,483
$23,384816
2,274
$16,506820
1,490
$83,865821
2,593
$40,857822
2,108
$28,934823
2,452
$64,905824
3,130
$40,661825
1,940
$29,667826
566
$77,477827
1,354
$40,261828
851
$29,066829
1,386
$44,427830
520
$24,753834
5,293
$50,478835
1,458
$30,789836
1,554
$23,578837
1,638
$85,982838
942
$41,591839
1,368
$27,115840
15,248
$37,650841
11,355
$28,759842
7,431
$22,903843
1,498
$32,667844
2,893
$25,181845
988
$19,989846
2,498
$37,579847
23,816
$25,378848
1,695
$18,894849
1,507
$26,993853
31,591
$74,761854
6,945
$48,947855
429
$35,398856
6,215
$64,096857
10,284
$35,984858
3,362
$28,311862
7,481
$32,142863
21,957
$20,215864
19,959
$19,205865
2,032
$28,094866
9,474
$15,750867
5,387
$37,568868
2,507
$24,368869
1,129
$18,549870
13,815
$88,048871
204,810
$33,442872
92,533
$25,285876
971
$40,650880
10,578
$14,303881
4,636
$10,640882
1,673
$11,353883
799
$16,323884
21,747
$17,521885
78,937
$14,233886
377
$13,044887
427
$17,908894
4,627
$7,335895
6,777
$14,018896
5,447
$25,167897
36,860
$12,339901
924
$48,924902
2,217
$31,735903
1,687
$22,773904
980
$39,732905
779
$24,032906
751
$22,406907
8,164
$52,970908
8,553
$34,755909
5,427
$25,547913
828
$26,522914
7,082
$15,123915
928
$24,230916
5,418
$9,886917
14,498
$28,130918
35,052
$13,329919
10,672
$27,995920
14,259
$20,512921
9,672
$13,742922
1,027
$26,635923
4,264
$14,600927
187
$176,300928
819
$59,748929
448
$32,846933
158
$31,761934
701
$23,844935
2,209
$21,589939
428
$42,833940
732
$32,886( print page 48143)941
1,058
$25,659945
5,485
$19,140946
2,759
$16,452947
6,597
$22,649948
34,624
$14,331949
767
$17,139950
463
$11,233951
1,008
$13,228955
456
$82,510956
3,769
$54,265957
1,324
$98,340958
1,221
$65,671959
295
$44,675963
1,509
$46,368964
2,538
$32,378965
1,105
$23,186969
676
$74,013970
159
$41,737974
6,358
$38,805975
4,516
$27,839976
2,770
$20,952977
5,016
$23,318981
26,444
$75,138982
19,320
$52,350983
6,143
$37,859984
671
$56,002985
1,108
$38,757986
833
$27,923987
8,040
$53,132988
12,302
$35,639989
6,162
$25,762999
30
$11,2701
                             Cases taken from the FY 2006 MedPAR file; MS–DRGs are from GROUPER Version 25.0.
 Table 11.—FY 2008 MS–LTC–DRGs, Relative Weights, Geometric Average Length of Stay, Short-Stay Outlier Threshold, and IPPS Comparable Threshold
MS–LTC–DRG
MS–DRG title
FY 2006 LTCH cases
Relative weight 1
Geometric average length of stay
Short stay outlier Threshold 2
IPPS Comparable Threshold 3001
Heart transplant or implant of heart assist system w MCC
0
0.0000
0.0
0.0
0.0002
Heart transplant or implant of heart assist system w/o MCC
0
0.0000
0.0
0.0
0.0003
ECMO or trach w MV 96+ hrs or PDX exc face, mouth  neck w maj O.R
280
4.2380
64.3
53.6
53.6004
Trach w MV 96+ hrs or PDX exc face, mouth  neck w/o maj O.R
1,067
3.0249
46.7
38.9
38.9005
Liver transplant w MCC or intestinal transplant
0
0.0000
0.0
0.0
0.0006
Liver transplant w/o MCC
0
0.0000
0.0
0.0
0.0007
Lung transplant
0
0.0000
0.0
0.0
0.0008
Simultaneous pancreas/kidney transplant
0
0.0000
0.0
0.0
0.0009
Bone marrow transplant
0
1.1417
29.0
24.2
24.2010
Pancreas transplant
0
1.1417
29.0
24.2
0.0011
Tracheostomy for face, mouth  neck diagnoses w MCC
0
1.5545
35.2
29.3
25.2012
Tracheostomy for face, mouth  neck diagnoses w CC
1
1.5545
35.2
29.3
16.7013
Tracheostomy for face, mouth  neck diagnoses w/o CC/MCC
0
1.5545
35.2
29.3
11.2020
Intracranial vascular procedures w PDX hemorrhage w MCC
0
1.5545
35.2
29.3
29.3021
Intracranial vascular procedures w PDX hemorrhage w CC
0
0.5472
20.3
16.9
16.9022
Intracranial vascular procedures w PDX hemorrhage w/o CC/MCC
0
0.5472
20.3
16.9
16.1023
Cranio w major dev impl/acute complex CNS PDX w MCC or chemo implant
0
1.5545
35.2
29.3
22.2024
Cranio w major dev impl/acute complex CNS PDX w/o MCC
0
0.5472
20.3
16.9
15.8025
Craniotomy  endovascular intracranial procedures w MCC
0
1.5545
35.2
29.3
22.1026
Craniotomy  endovascular intracranial procedures w CC
2
1.5545
35.2
29.3
13.2027
Craniotomy  endovascular intracranial procedures w/o CC/MCC
0
1.5545
35.2
29.3
7.5028
Spinal procedures w MCC
6
1.1417
29.0
24.2
24.2029
Spinal procedures w CC or spinal neurostimulators
4
1.1417
29.0
24.2
12.4030
Spinal procedures w/o CC/MCC
2
0.5472
20.3
16.9
5.9031
Ventricular shunt procedures w MCC
2
1.5545
35.2
29.3
22.9032
Ventricular shunt procedures w CC
1
0.5472
20.3
16.9
9.4033
Ventricular shunt procedures w/o CC/MCC
1
0.5472
20.3
16.9
4.7( print page 48144)034
Carotid artery stent procedure w MCC
0
1.5545
35.2
29.3
12.5035
Carotid artery stent procedure w CC
0
1.1417
29.0
24.2
4.4036
Carotid artery stent procedure w/o CC/MCC
0
1.1417
29.0
24.2
2.2037
Extracranial procedures w MCC
12
1.5545
35.2
29.3
14.9038
Extracranial procedures w CC
8
1.1417
29.0
24.2
5.8039
Extracranial procedures w/o CC/MCC
0
1.1417
29.0
24.2
2.6040
Periph/cranial nerve  other nerv syst proc w MCC
153
1.2704
36.2
30.2
22.7041
Periph/cranial nerve  other nerv syst proc w CC or periph neurostim
100
1.0810
34.3
28.6
12.3042
Periph/cranial nerve  other nerv syst proc w/o CC/MCC
9
0.7305
22.9
19.1
5.7052
Spinal disorders  injuries w CC/MCC
78
1.0629
32.3
26.9
10.7053
Spinal disorders  injuries w/o CC/MCC
18
1.0629
32.3
26.9
6.4054
Nervous system neoplasms w MCC
50
0.7205
23.6
19.7
11.7055
Nervous system neoplasms w/o MCC
67
0.6779
22.0
18.3
8.1056
Degenerative nervous system disorders w MCC
1,335
0.7407
26.4
22.0
12.3057
Degenerative nervous system disorders w/o MCC
2,607
0.6309
24.4
20.3
7.6058
Multiple sclerosis  cerebellar ataxia w MCC
23
0.7305
22.9
19.1
12.5059
Multiple sclerosis  cerebellar ataxia w CC
44
0.5595
22.6
18.8
8.0060
Multiple sclerosis  cerebellar ataxia w/o CC/MCC
22
0.5472
20.3
16.9
6.2061
Acute ischemic stroke w use of thrombolytic agent w MCC
0
0.7897
24.2
20.2
16.0062
Acute ischemic stroke w use of thrombolytic agent w CC
0
0.6563
22.7
18.9
9.6063
Acute ischemic stroke w use of thrombolytic agent w/o CC/MCC
0
0.5472
20.3
16.9
6.8064
Intracranial hemorrhage or cerebral infarction w MCC
126
0.7746
25.1
20.9
12.7065
Intracranial hemorrhage or cerebral infarction w CC
119
0.6691
23.3
19.4
8.2066
Intracranial hemorrhage or cerebral infarction w/o CC/MCC
22
0.5472
20.3
16.9
5.8067
Nonspecific cva  precerebral occlusion w/o infarct w MCC
5
0.5472
20.3
16.9
10.1068
Nonspecific cva  precerebral occlusion w/o infarct w/o MCC
8
0.5472
20.3
16.9
5.6069
Transient ischemia
17
0.5472
20.3
16.9
4.7070
Nonspecific cerebrovascular disorders w MCC
104
0.7897
24.2
20.2
12.7071
Nonspecific cerebrovascular disorders w CC
86
0.6563
22.7
18.9
8.8072
Nonspecific cerebrovascular disorders w/o CC/MCC
9
0.5472
20.3
16.9
5.8073
Cranial  peripheral nerve disorders w MCC
86
0.7849
25.6
21.3
10.2074
Cranial  peripheral nerve disorders w/o MCC
175
0.6260
23.4
19.5
6.9075
Viral meningitis w CC/MCC
21
0.7305
22.9
19.1
12.1076
Viral meningitis w/o CC/MCC
1
0.5472
20.3
16.9
6.5077
Hypertensive encephalopathy w MCC
4
0.7305
22.9
19.1
11.4078
Hypertensive encephalopathy w CC
9
0.7305
22.9
19.1
7.2079
Hypertensive encephalopathy w/o CC/MCC
1
0.5472
20.3
16.9
5.3080
Nontraumatic stupor  coma w MCC
40
0.6312
24.6
20.5
7.8081
Nontraumatic stupor  coma w/o MCC
71
0.5618
23.1
19.3
5.3082
Traumatic stupor  coma, coma 1 hr w MCC
27
0.8864
29.5
24.6
10.9083
Traumatic stupor  coma, coma 1 hr w CC
12
0.7305
22.9
19.1
8.6084
Traumatic stupor  coma, coma 1 hr w/o CC/MCC
4
0.7305
22.9
19.1
4.9085
Traumatic stupor  coma, coma 1 hr w MCC
105
0.9044
28.3
23.6
13.2086
Traumatic stupor  coma, coma 1 hr w CC
89
0.7437
25.1
20.9
8.2087
Traumatic stupor  coma, coma 1 hr w/o CC/MCC
28
0.6361
20.4
17.0
5.3088
Concussion w MCC
1
1.1417
29.0
24.2
9.9089
Concussion w CC
2
1.1417
29.0
24.2
6.0090
Concussion w/o CC/MCC
0
1.1417
29.0
24.2
3.7091
Other disorders of nervous system w MCC
242
0.8019
25.6
21.3
10.7092
Other disorders of nervous system w CC
191
0.6704
22.0
18.3
6.9093
Other disorders of nervous system w/o CC/MCC
53
0.5811
20.1
16.8
4.9094
Bacterial  tuberculous infections of nervous system w MCC
210
1.0328
27.9
23.3
20.8095
Bacterial  tuberculous infections of nervous system w CC
110
0.9306
27.0
22.5
14.9096
Bacterial  tuberculous infections of nervous system w/o CC/MCC
26
0.9306
27.0
22.5
10.1097
Non-bacterial infect of nervous sys exc viral meningitis w MCC
58
0.9289
26.8
22.3
19.6098
Non-bacterial infect of nervous sys exc viral meningitis w CC
33
0.8629
22.7
18.9
13.7( print page 48145)099
Non-bacterial infect of nervous sys exc viral meningitis w/o CC/MCC
10
0.7305
22.9
19.1
10.1100
Seizures w MCC
39
0.7904
26.5
22.1
10.1101
Seizures w/o MCC
35
0.6177
21.4
17.8
5.8102
Headaches w MCC
6
0.8249
25.0
20.8
8.1103
Headaches w/o MCC
12
0.8249
25.0
20.8
5.0113
Orbital procedures w CC/MCC
1
0.7305
22.9
19.1
9.2114
Orbital procedures w/o CC/MCC
0
0.7305
22.9
19.1
4.1115
Extraocular procedures except orbit
0
0.8249
25.0
20.8
7.2116
Intraocular procedures w CC/MCC
0
0.8249
25.0
20.8
5.2117
Intraocular procedures w/o CC/MCC
0
0.8249
25.0
20.8
2.8121
Acute major eye infections w CC/MCC
8
0.7305
22.9
19.1
9.1122
Acute major eye infections w/o CC/MCC
2
0.5472
20.3
16.9
6.3123
Neurological eye disorders
3
0.5472
20.3
16.9
4.5124
Other disorders of the eye w MCC
2
1.1417
29.0
24.2
8.4125
Other disorders of the eye w/o MCC
9
0.8249
25.0
20.8
5.5129
Major head  neck procedures w CC/MCC or major device
0
1.1977
26.4
22.0
8.1130
Major head  neck procedures w/o CC/MCC
0
0.7305
22.9
19.1
4.8131
Cranial/facial procedures w CC/MCC
2
1.5545
35.2
29.3
9.5132
Cranial/facial procedures w/o CC/MCC
0
1.5545
35.2
29.3
4.0133
Other ear, nose, mouth  throat O.R. procedures w CC/MCC
3
0.7305
22.9
19.1
9.4134
Other ear, nose, mouth  throat O.R. procedures w/o CC/MCC
1
0.7305
22.9
19.1
3.2135
Sinus  mastoid procedures w CC/MCC
0
0.7305
22.9
19.1
10.8136
Sinus  mastoid procedures w/o CC/MCC
0
0.7305
22.9
19.1
3.9137
Mouth procedures w CC/MCC
1
1.5545
35.2
29.3
8.7138
Mouth procedures w/o CC/MCC
0
1.5545
35.2
29.3
3.7139
Salivary gland procedures
1
1.5545
35.2
29.3
2.5146
Ear, nose, mouth  throat malignancy w MCC
43
1.1977
26.4
22.0
16.9147
Ear, nose, mouth  throat malignancy w CC
36
1.0416
24.9
20.8
9.3148
Ear, nose, mouth  throat malignancy w/o CC/MCC
4
0.7305
22.9
19.1
5.6149
Dysequilibrium
9
0.5472
20.3
16.9
4.2150
Epistaxis w MCC
0
0.7305
22.9
19.1
8.8151
Epistaxis w/o MCC
0
0.7305
22.9
19.1
4.5152
Otitis media  URI w MCC
10
0.7305
22.9
19.1
7.4153
Otitis media  URI w/o MCC
23
0.7305
22.9
19.1
5.2154
Nasal trauma  deformity w MCC
55
0.7703
21.0
17.5
10.5155
Nasal trauma  deformity w CC
45
0.7703
21.0
17.5
7.2156
Nasal trauma  deformity w/o CC/MCC
10
0.7305
22.9
19.1
4.9157
Dental  Oral Diseases w MCC
9
0.8249
25.0
20.8
11.3158
Dental  Oral Diseases w CC
19
0.8249
25.0
20.8
7.1159
Dental  Oral Diseases w/o CC/MCC
1
0.5472
20.3
16.9
4.8163
Major chest procedures w MCC
27
2.2157
39.7
33.1
23.6164
Major chest procedures w CC
10
1.5545
35.2
29.3
13.0165
Major chest procedures w/o CC/MCC
0
1.5545
35.2
29.3
8.3166
Other resp system O.R. procedures w MCC
1,572
2.4392
42.3
35.3
20.6167
Other resp system O.R. procedures w CC
233
2.1594
38.0
31.7
13.1168
Other resp system O.R. procedures w/o CC/MCC
11
1.1417
29.0
24.2
8.9175
Pulmonary embolism w MCC
103
0.7160
22.0
18.3
11.6176
Pulmonary embolism w/o MCC
139
0.5989
20.1
16.8
8.4177
Respiratory infections  inflammations w MCC
2,953
0.8393
23.5
19.6
14.9178
Respiratory infections  inflammations w CC
2,265
0.7671
22.2
18.5
11.7179
Respiratory infections  inflammations w/o CC/MCC
370
0.6885
19.0
15.8
8.9180
Respiratory neoplasms w MCC
162
0.8140
20.2
16.8
13.1181
Respiratory neoplasms w CC
109
0.7103
19.3
16.1
9.7182
Respiratory neoplasms w/o CC/MCC
19
0.5472
20.3
16.9
6.9183
Major chest trauma w MCC
1
0.5472
20.3
16.9
11.5184
Major chest trauma w CC
1
0.5472
20.3
16.9
7.3185
Major chest trauma w/o CC/MCC
0
0.5472
20.3
16.9
5.0186
Pleural effusion w MCC
137
0.8259
23.6
19.7
12.2187
Pleural effusion w CC
63
0.7042
21.1
17.6
8.8188
Pleural effusion w/o CC/MCC
14
0.7042
21.1
17.6
6.5189
Pulmonary edema  respiratory failure
5,707
0.9743
24.0
20.0
10.1190
Chronic obstructive pulmonary disease w MCC
1,657
0.6858
20.9
17.4
10.2191
Chronic obstructive pulmonary disease w CC
1,558
0.6256
19.5
16.3
7.9192
Chronic obstructive pulmonary disease w/o CC/MCC
871
0.5832
17.2
14.3
6.2( print page 48146)193
Simple pneumonia  pleurisy w MCC
1,689
0.7088
21.6
18.0
10.9194
Simple pneumonia  pleurisy w CC
2,110
0.6429
19.8
16.5
8.2195
Simple pneumonia  pleurisy w/o CC/MCC
455
0.5962
18.2
15.2
6.3196
Interstitial lung disease w MCC
114
0.6529
20.0
16.7
11.6197
Interstitial lung disease w CC
95
0.6133
19.6
16.3
8.5198
Interstitial lung disease w/o CC/MCC
44
0.5956
19.7
16.4
6.7199
Pneumothorax w MCC
24
0.8249
25.0
20.8
13.8200
Pneumothorax w CC
17
0.7305
22.9
19.1
8.3201
Pneumothorax w/o CC/MCC
10
0.5472
20.3
16.9
6.5202
Bronchitis  asthma w CC/MCC
96
0.6903
21.1
17.6
6.9203
Bronchitis  asthma w/o CC/MCC
34
0.5650
17.1
14.3
5.3204
Respiratory signs  symptoms
309
0.8187
22.0
18.3
4.4205
Other respiratory system diagnoses w MCC
261
0.8207
22.4
18.7
9.0206
Other respiratory system diagnoses w/o MCC
167
0.7667
21.5
17.9
5.5207
Respiratory system diagnosis w ventilator support 96+ hours
12,448
2.0266
34.3
28.6
22.6208
Respiratory system diagnosis w ventilator support 96 hours
1,890
1.5514
27.8
23.2
12.5215
Other heart assist system implant
0
0.8249
25.0
20.8
20.5216
Cardiac valve  oth maj cardiothoracic proc w card cath w MCC
0
1.5545
35.2
29.3
28.7217
Cardiac valve  oth maj cardiothoracic proc w card cath w CC
0
0.8249
25.0
20.8
17.7218
Cardiac valve  oth maj cardiothoracic proc w card cath w/o CC/MCC
0
0.8249
25.0
20.8
12.7219
Cardiac valve  oth maj cardiothoracic proc w/o card cath w MCC
0
1.5545
35.2
29.3
22.6220
Cardiac valve  oth maj cardiothoracic proc w/o card cath w CC
0
0.8249
25.0
20.8
12.5221
Cardiac valve  oth maj cardiothoracic proc w/o card cath w/o CC/MCC
0
0.8249
25.0
20.8
8.7222
Cardiac defib implant w cardiac cath w AMI/HF/shock w MCC
0
1.5545
35.2
29.3
20.9223
Cardiac defib implant w cardiac cath w AMI/HF/shock w/o MCC
0
1.5545
35.2
29.3
11.0224
Cardiac defib implant w cardiac cath w/o AMI/HF/shock w MCC
0
1.5545
35.2
29.3
18.2225
Cardiac defib implant w cardiac cath w/o AMI/HF/shock w/o MCC
0
1.5545
35.2
29.3
9.2226
Cardiac defibrillator implant w/o cardiac cath w MCC
11
1.5545
35.2
29.3
16.8227
Cardiac defibrillator implant w/o cardiac cath w/o MCC
4
1.5545
35.2
29.3
4.1228
Other cardiothoracic procedures w MCC
0
1.5410
35.0
29.2
23.2229
Other cardiothoracic procedures w CC
0
1.2681
30.8
25.7
13.5230
Other cardiothoracic procedures w/o CC/MCC
0
0.8249
25.0
20.8
10.2231
Coronary bypass w PTCA w MCC
0
1.5545
35.2
29.3
20.9232
Coronary bypass w PTCA w/o MCC
0
0.8249
25.0
20.8
13.1233
Coronary bypass w cardiac cath w MCC
0
1.5545
35.2
29.3
21.0234
Coronary bypass w cardiac cath w/o MCC
0
0.8249
25.0
20.8
12.2235
Coronary bypass w/o cardiac cath w MCC
0
1.5545
35.2
29.3
17.0236
Coronary bypass w/o cardiac cath w/o MCC
0
0.8249
25.0
20.8
9.0237
Major cardiovasc procedures w MCC or thoracic aortic anuerysm repair
3
1.5545
35.2
29.3
19.6238
Major cardiovasc procedures w/o MCC
3
0.8249
25.0
20.8
8.1239
Amputation for circ sys disorders exc upper limb  toe w MCC
171
1.3794
37.4
31.2
24.7240
Amputation for circ sys disorders exc upper limb  toe w CC
94
1.2872
36.1
30.1
16.6241
Amputation for circ sys disorders exc upper limb  toe w/o CC/MCC
5
1.1417
29.0
24.2
10.7242
Permanent cardiac pacemaker implant w MCC
14
1.5545
35.2
29.3
14.5243
Permanent cardiac pacemaker implant w CC
9
1.5545
35.2
29.3
8.5244
Permanent cardiac pacemaker implant w/o CC/MCC
3
1.1417
29.0
24.2
4.6245
AICD lead  generator procedures
2
0.7305
22.9
19.1
4.9246
Perc cardiovasc proc w drug-eluting stent w MCC or 4+ vessels/stents
1
0.8249
25.0
20.8
9.1247
Perc cardiovasc proc w drug-eluting stent w/o MCC
0
0.8249
25.0
20.8
3.3248
Perc cardiovasc proc w non-drug-eluting stent w MCC or 4+ ves/stents
1
1.5545
35.2
29.3
10.3( print page 48147)249
Perc cardiovasc proc w non-drug-eluting stent w/o MCC
0
1.5545
35.2
29.3
3.9250
Perc cardiovasc proc w/o coronary artery stent or AMI w MCC
1
0.8249
25.0
20.8
12.7251
Perc cardiovasc proc w/o coronary artery stent or AMI w/o MCC
0
0.8249
25.0
20.8
4.6252
Other vascular procedures w MCC
108
1.5410
35.0
29.2
15.1253
Other vascular procedures w CC
56
1.2681
30.8
25.7
10.2254
Other vascular procedures w/o CC/MCC
5
0.8249
25.0
20.8
4.3255
Upper limb  toe amputation for circ system disorders w MCC
45
1.1713
33.7
28.1
16.7256
Upper limb  toe amputation for circ system disorders w CC
37
0.9516
29.4
24.5
12.3257
Upper limb  toe amputation for circ system disorders w/o CC/MCC
1
0.9516
29.4
24.5
8.2258
Cardiac pacemaker device replacement w MCC
1
1.5545
35.2
29.3
12.6259
Cardiac pacemaker device replacement w/o MCC
0
1.5545
35.2
29.3
4.0260
Cardiac pacemaker revision except device replacement w MCC
1
1.5545
35.2
29.3
17.4261
Cardiac pacemaker revision except device replacement w CC
2
0.5472
20.3
16.9
6.4262
Cardiac pacemaker revision except device replacement w/o CC/MCC
0
0.5472
20.3
16.9
3.7263
Vein ligation  stripping
1
0.8249
25.0
20.8
9.2264
Other circulatory system O.R. procedures
595
1.0667
31.6
26.3
15.4280
Acute myocardial infarction, discharged alive w MCC
107
0.7263
21.4
17.8
12.0281
Acute myocardial infarction, discharged alive w CC
60
0.6931
22.8
19.0
7.8282
Acute myocardia infarction, discharged alive w/o CC/MCC
7
0.6931
22.8
19.0
5.1283
Acute myocardial infarction, expired w MCC
26
0.6609
17.0
14.2
9.0284
Acute myocardial infarction, expired w CC
5
0.6609
17.0
14.2
5.4285
Acute myocardial infarction, expired w/o CC/MCC
1
0.6609
17.0
14.2
3.3286
Circulatory disorders except AMI, w card cath w MCC
15
1.1417
29.0
24.2
11.6287
Circulatory disorders except AMI, w card cath w/o MCC
7
0.8249
25.0
20.8
5.0288
Acute  subacute endocarditis w MCC
453
0.9082
26.4
22.0
19.7289
Acute  subacute endocarditis w CC
225
0.8580
26.4
22.0
13.7290
Acute  subacute endocarditis w/o CC/MCC
53
0.7664
25.5
21.3
10.6291
Heart failure  shock w MCC
1,601
0.6968
21.4
17.8
10.7292
Heart failure  shock w CC
1,183
0.6252
20.4
17.0
7.7293
Heart failure  shock w/o CC/MCC
387
0.5775
18.5
15.4
5.6294
Deep vein thrombophlebitis w CC/MCC
7
0.8249
25.0
20.8
8.6295
Deep vein thrombophlebitis w/o CC/MCC
0
0.8249
25.0
20.8
6.7296
Cardiac arrest, unexplained w MCC
0
0.6609
17.0
14.2
4.8297
Cardiac arrest, unexplained w CC
0
0.6609
17.0
14.2
2.7298
Cardiac arrest, unexplained w/o CC/MCC
0
0.6609
17.0
14.2
1.9299
Peripheral vascular disorders w MCC
551
0.7152
24.8
20.7
11.2300
Peripheral vascular disorders w CC
800
0.6150
22.2
18.5
8.2301
Peripheral vascular disorders w/o CC/MCC
93
0.5557
19.4
16.2
6.0302
Atherosclerosis w MCC
69
0.6170
21.9
18.3
6.9303
Atherosclerosis w/o MCC
93
0.5673
20.5
17.1
3.9304
Hypertension w MCC
12
0.8249
25.0
20.8
8.3305
Hypertension w/o MCC
39
0.5856
22.6
18.8
4.4306
Cardiac congenital  valvular disorders w MCC
54
0.8786
24.2
20.2
10.2307
Cardiac congenital  valvular disorders w/o MCC
39
0.7767
23.1
19.3
5.5308
Cardiac arrhythmia  conduction disorders w MCC
88
0.7431
24.7
20.6
9.3309
Cardiac arrhythmia  conduction disorders w CC
76
0.5940
20.4
17.0
6.2310
Cardiac arrhythmia  conduction disorders w/o CC/MCC
39
0.5184
17.0
14.2
4.2311
Angina pectoris
4
0.7305
22.9
19.1
3.5312
Syncope  collapse
44
0.5336
19.7
16.4
4.9313
Chest pain
5
0.5472
20.3
16.9
3.1314
Other circulatory system diagnoses w MCC
1,399
0.8123
23.1
19.3
11.8315
Other circulatory system diagnoses w CC
451
0.7114
21.6
18.0
7.3316
Other circulatory system diagnoses w/o CC/MCC
98
0.6243
18.9
15.8
4.7326
Stomach, esophageal  duodenal proc w MCC
34
1.8646
36.2
30.2
28.1327
Stomach, esophageal  duodenal proc w CC
9
1.5545
35.2
29.3
16.8328
Stomach, esophageal  duodenal proc w/o CC/MCC
1
0.5472
20.3
16.9
7.2329
Major small  large bowel procedures w MCC
24
1.5545
35.2
29.3
25.3330
Major small  large bowel procedures w CC
20
1.5545
35.2
29.3
14.6331
Major small  large bowel procedures w/o CC/MCC
1
0.5472
20.3
16.9
8.7( print page 48148)332
Rectal resection w MCC
0
1.5057
36.1
30.1
22.6333
Rectal resection w CC
0
1.3309
30.7
25.6
13.0334
Rectal resection w/o CC/MCC
0
0.8249
25.0
20.8
8.6335
Peritoneal adhesiolysis w MCC
4
1.5545
35.2
29.3
22.9336
Peritoneal adhesiolysis w CC
2
0.7305
22.9
19.1
14.6337
Peritoneal adhesiolysis w/o CC/MCC
0
0.7305
22.9
19.1
9.3338
Appendectomy w complicated principal diag w MCC
0
0.8884
24.1
20.1
16.7339
Appendectomy w complicated principal diag w CC
0
0.7667
22.2
18.5
10.8340
Appendectomy w complicated principal diag w/o CC/MCC
0
0.6856
19.9
16.6
6.6341
Appendectomy w/o complicated principal diag w MCC
0
0.8884
24.1
20.1
12.0342
Appendectomy w/o complicated principal diag w CC
0
0.7667
22.2
18.5
6.8343
Appendectomy w/o complicated principal diag w/o CC/MCC
0
0.6856
19.9
16.6
3.4344
Minor small  large bowel procedures w MCC
0
0.8884
24.1
20.1
19.1345
Minor small  large bowel procedures w CC
0
0.7667
22.2
18.5
10.9346
Minor small  large bowel procedures w/o CC/MCC
0
0.6856
19.9
16.6
7.4347
Anal  stomal procedures w MCC
5
1.1417
29.0
24.2
13.8348
Anal  stomal procedures w CC
3
0.8249
25.0
20.8
8.9349
Anal  stomal procedures w/o CC/MCC
1
0.5472
20.3
16.9
4.7350
Inguinal  femoral hernia procedures w MCC
1
1.5545
35.2
29.3
13.6351
Inguinal  femoral hernia procedures w CC
1
1.1417
29.0
24.2
7.4352
Inguinal  femoral hernia procedures w/o CC/MCC
1
0.8249
25.0
20.8
3.7353
Hernia procedures except inguinal  femoral w MCC
0
0.8249
25.0
20.8
14.5354
Hernia procedures except inguinal  femoral w CC
1
0.8249
25.0
20.8
8.2355
Hernia procedures except inguinal  femoral w/o CC/MCC
0
0.8249
25.0
20.8
4.4356
Other digestive system O.R. procedures w MCC
109
1.5057
36.1
30.1
22.5357
Other digestive system O.R. procedures w CC
46
1.3309
30.7
25.6
13.3358
Other digestive system O.R. procedures w/o CC/MCC
3
0.8249
25.0
20.8
7.6368
Major esophageal disorders w MCC
22
1.1417
29.0
24.2
10.5369
Major esophageal disorders w CC
8
1.1417
29.0
24.2
7.1370
Major esophageal disorders w/o CC/MCC
1
1.1417
29.0
24.2
5.2371
Major gastrointestinal disorders  peritoneal infections w MCC
666
0.8884
24.1
20.1
14.1372
Major gastrointestinal disorders  peritoneal infections w CC
426
0.7667
22.2
18.5
10.6373
Major gastrointestinal disorders  peritoneal infections w/o CC/MCC
52
0.6856
19.9
16.6
7.7374
Digestive malignancy w MCC
122
0.8340
22.9
19.1
14.4375
Digestive malignancy w CC
81
0.7563
19.7
16.4
9.7376
Digestive malignancy w/o CC/MCC
9
0.5472
20.3
16.9
6.5377
G.I. hemorrhage w MCC
94
0.7032
22.5
18.8
10.3378
G.I. hemorrhage w CC
60
0.6334
21.5
17.9
6.8379
G.I. hemorrhage w/o CC/MCC
20
0.5472
20.3
16.9
5.2380
Complicated peptic ulcer w MCC
14
0.8249
25.0
20.8
11.4381
Complicated peptic ulcer w CC
16
0.8249
25.0
20.8
7.9382
Complicated peptic ulcer w/o CC/MCC
6
0.7305
22.9
19.1
5.5383
Uncomplicated peptic ulcer w MCC
6
0.8249
25.0
20.8
9.1384
Uncomplicated peptic ulcer w/o MCC
6
0.7305
22.9
19.1
5.9385
Inflammatory bowel disease w MCC
32
0.8874
24.6
20.5
14.4386
Inflammatory bowel disease w CC
26
0.7655
22.9
19.1
9.0387
Inflammatory bowel disease w/o CC/MCC
5
0.7655
22.9
19.1
6.9388
G.I. obstruction w MCC
191
0.8967
22.8
19.0
12.0389
G.I. obstruction w CC
91
0.7893
21.9
18.3
8.0390
G.I. obstruction w/o CC/MCC
12
0.7893
21.9
18.3
5.5391
Esophagitis, gastroent  misc digest disorders w MCC
246
0.8509
24.4
20.3
8.7392
Esophagitis, gastroent  misc digest disorders w/o MCC
266
0.6943
20.4
17.0
5.5393
Other digestive system diagnoses w MCC
678
0.9915
25.5
21.3
11.4394
Other digestive system diagnoses w CC
388
0.8523
22.0
18.3
7.7395
Other digestive system diagnoses w/o CC/MCC
31
0.7214
20.9
17.4
5.3405
Pancreas, liver  shunt procedures w MCC
9
1.5545
35.2
29.3
29.0406
Pancreas, liver  shunt procedures w CC
2
1.5545
35.2
29.3
16.0407
Pancreas, liver  shunt procedures w/o CC/MCC
1
1.1417
29.0
24.2
9.2408
Biliary tract proc except only cholecyst w or w/o c.d.e. w MCC
1
1.5545
35.2
29.3
23.7409
Biliary tract proc except only cholecyst w or w/o c.d.e. w CC
1
1.5545
35.2
29.3
15.4( print page 48149)410
Biliary tract proc except only cholecyst w or w/o c.d.e. w/o CC/MCC
0
1.5545
35.2
29.3
10.6411
Cholecystectomy w c.d.e. w MCC
0
1.1417
29.0
24.2
20.3412
Cholecystectomy w c.d.e. w CC
1
1.1417
29.0
24.2
13.5413
Cholecystectomy w c.d.e. w/o CC/MCC
0
1.1417
29.0
24.2
9.3414
Cholecystectomy except by laparoscope w/o c.d.e. w MCC
2
1.1417
29.0
24.2
18.4415
Cholecystectomy except by laparoscope w/o c.d.e. w CC
3
1.1417
29.0
24.2
11.6416
Cholecystectomy except by laparoscope w/o c.d.e. w/o CC/MCC
0
1.1417
29.0
24.2
7.5417
Laparoscopic cholecystectomy w/o c.d.e. w MCC
7
1.5545
35.2
29.3
13.5418
Laparoscopic cholecystectomy w/o c.d.e. w CC
5
1.1417
29.0
24.2
9.0419
Laparoscopic cholecystectomy w/o c.d.e. w/o CC/MCC
0
1.1417
29.0
24.2
5.0420
Hepatobiliary diagnostic procedures w MCC
2
1.1417
29.0
24.2
24.2421
Hepatobiliary diagnostic procedures w CC
1
0.8249
25.0
20.8
12.9422
Hepatobiliary diagnostic procedures w/o CC/MCC
0
0.8249
25.0
20.8
7.3423
Other hepatobiliary or pancreas O.R. procedures w MCC
23
1.1417
29.0
24.2
24.2424
Other hepatobiliary or pancreas O.R. procedures w CC
5
0.8249
25.0
20.8
17.1425
Other hepatobiliary or pancreas O.R. procedures w/o CC/MCC
0
0.8249
25.0
20.8
9.2432
Cirrhosis  alcoholic hepatitis w MCC
98
0.6223
19.0
15.8
11.1433
Cirrhosis  alcoholic hepatitis w CC
21
0.6223
19.0
15.8
7.7434
Cirrhosis  alcoholic hepatitis w/o CC/MCC
1
0.5472
20.3
16.9
5.7435
Malignancy of hepatobiliary system or pancreas w MCC
47
0.7422
20.2
16.8
12.6436
Malignancy of hepatobiliary system or pancreas w CC
34
0.7086
19.6
16.3
9.5437
Malignancy of hepatobiliary system or pancreas w/o CC/MCC
4
0.7086
19.6
16.3
7.1438
Disorders of pancreas except malignancy w MCC
251
1.0057
24.3
20.3
12.5439
Disorders of pancreas except malignancy w CC
166
0.8437
21.9
18.3
8.5440
Disorders of pancreas except malignancy w/o CC/MCC
28
0.7204
18.8
15.7
5.9441
Disorders of liver except malig, cirr, alc hepa w MCC
116
0.7588
21.8
18.2
11.3442
Disorders of liver except malig, cirr, alc hepa w CC
67
0.6925
21.2
17.7
8.1443
Disorders of liver except malig, cirr, alc hepa w/o CC/MCC
12
0.6925
21.2
17.7
6.0444
Disorders of the biliary tract w MCC
71
0.8181
24.0
20.0
10.7445
Disorders of the biliary tract w CC
41
0.6977
21.7
18.1
7.6446
Disorders of the biliary tract w/o CC/MCC
7
0.5472
20.3
16.9
5.2453
Combined anterior/posterior spinal fusion w MCC
0
1.5545
35.2
29.3
24.9454
Combined anterior/posterior spinal fusion w CC
1
1.5545
35.2
29.3
12.7455
Combined anterior/posterior spinal fusion w/o CC/MCC
0
1.5545
35.2
29.3
7.1456
Spinal fus exc cerv w spinal curv/malig/infec or 9+ fus w MCC
1
1.5545
35.2
29.3
24.9457
Spinal fus exc cerv w spinal curv/malig/infec or 9+ fus w CC
0
1.5545
35.2
29.3
11.6458
Spinal fus exc cerv w spinal curv/malig/infec or 9+ fus w/o CC/MCC
0
1.5545
35.2
29.3
6.8459
Spinal fusion except cervical w MCC
2
1.5545
35.2
29.3
14.7460
Spinal fusion except cervical w/o MCC
3
1.5545
35.2
29.3
6.4461
Bilateral or multiple major joint procs of lower extremity w MCC
0
1.5545
35.2
29.3
12.6462
Bilateral or multiple major joint procs of lower extremity w/o MCC
0
1.1417
29.0
24.2
5.8463
Wnd debrid  skn grft exc hand, for musculo-conn tiss dis w MCC
507
1.3514
38.8
32.3
27.4464
Wnd debrid  skn grft exc hand, for musculo-conn tiss dis w CC
311
1.1906
36.3
30.3
16.8465
Wnd debrid  skn grft exc hand, for musculo-conn tiss dis w/o CC/MCC
60
1.0747
29.6
24.7
10.0466
Revision of hip or knee replacement w MCC
3
1.5545
35.2
29.3
14.5467
Revision of hip or knee replacement w CC
4
1.5545
35.2
29.3
8.0468
Revision of hip or knee replacement w/o CC/MCC
0
1.5545
35.2
29.3
5.5469
Major joint replacement or reattachment of lower extremity w MCC
2
1.5545
35.2
29.3
12.6470
Major joint replacement or reattachment of lower extremity w/o MCC
2
1.5545
35.2
29.3
5.4471
Cervical spinal fusion w MCC
5
1.5545
35.2
29.3
17.3472
Cervical spinal fusion w CC
2
1.5545
35.2
29.3
7.0473
Cervical spinal fusion w/o CC/MCC
0
1.5545
35.2
29.3
2.9( print page 48150)474
Amputation for musculoskeletal sys  conn tissue dis w MCC
91
1.3338
36.6
30.5
20.4475
Amputation for musculoskeletal sys  conn tissue dis w CC
53
1.1390
32.7
27.3
13.9476
Amputation for musculoskeletal sys  conn tissue dis w/o CC/MCC
8
1.1390
32.7
27.3
8.0477
Biopsies of musculoskeletal system  connective tissue w MCC
13
1.5545
35.2
29.3
20.7478
Biopsies of musculoskeletal system  connective tissue w CC
14
1.1417
29.0
24.2
11.9479
Biopsies of musculoskeletal system  connective tissue w/o CC/MCC
5
1.1417
29.0
24.2
4.3480
Hip  femur procedures except major joint w MCC
11
1.5545
35.2
29.3
14.1481
Hip  femur procedures except major joint w CC
19
1.5545
35.2
29.3
8.4482
Hip  femur procedures except major joint w/o CC/MCC
1
1.1417
29.0
24.2
6.8483
Major joint  limb reattachment proc of upper extremity w CC/MCC
0
1.5545
35.2
29.3
6.6484
Major joint  limb reattachment proc of upper extremity w/o CC/MCC
0
1.1417
29.0
24.2
3.6485
Knee procedures w pdx of infection w MCC
10
1.5545
35.2
29.3
18.9486
Knee procedures w pdx of infection w CC
9
1.1417
29.0
24.2
12.3487
Knee procedures w pdx of infection w/o CC/MCC
1
1.1417
29.0
24.2
8.5488
Knee procedures w/o pdx of infection w CC/MCC
2
1.5545
35.2
29.3
7.8489
Knee procedures w/o pdx of infection w/o CC/MCC
0
1.5545
35.2
29.3
4.7490
Back  neck proc exc spinal fusion w CC/MCC or disc device/neurostim
7
1.1417
29.0
24.2
7.6491
Back  neck proc exc spinal fusion w/o CC/MCC
0
1.1417
29.0
24.2
3.4492
Lower extrem  humer proc except hip, foot, femur w MCC
5
1.5545
35.2
29.3
13.6493
Lower extrem  humer proc except hip, foot, femur w CC
19
1.1417
29.0
24.2
8.2494
Lower extrem  humer proc except hip, foot, femur w/o CC/MCC
1
0.8249
25.0
20.8
5.1495
Local excision  removal int fix devices exc hip  femur w MCC
32
1.3650
38.1
31.8
18.2496
Local excision  removal int fix devices exc hip  femur w CC
25
1.1981
36.8
30.7
9.8497
Local excision  removal int fix devices exc hip  femur w/o CC/MCC
3
1.1417
29.0
24.2
4.9498
Local excision  removal int fix devices of hip  femur w CC/MCC
8
1.5545
35.2
29.3
13.4499
Local excision  removal int fix devices of hip  femur w/o CC/MCC
2
0.7305
22.9
19.1
4.9500
Soft tissue procedures w MCC
46
1.3212
35.2
29.3
18.8501
Soft tissue procedures w CC
28
1.2903
30.7
25.6
9.6502
Soft tissue procedures w/o CC/MCC
3
0.8249
25.0
20.8
4.5503
Foot procedures w MCC
18
1.1417
29.0
24.2
14.6504
Foot procedures w CC
13
0.8249
25.0
20.8
10.5505
Foot procedures w/o CC/MCC
1
0.5472
20.3
16.9
5.3506
Major thumb or joint procedures
0
0.7305
22.9
19.1
5.0507
Major shoulder or elbow joint procedures w CC/MCC
3
0.8249
25.0
20.8
8.4508
Major shoulder or elbow joint procedures w/o CC/MCC
0
0.8249
25.0
20.8
3.0509
Arthroscopy
0
0.5472
20.3
16.9
4.2510
Shoulder, elbow or forearm proc, exc major joint proc w MCC
0
1.1417
29.0
24.2
10.7511
Shoulder, elbow or forearm proc, exc major joint proc w CC
4
1.1417
29.0
24.2
6.2512
Shoulder, elbow or forearm proc, exc major joint proc w/o CC/MCC
1
0.5472
20.3
16.9
3.1513
Hand or wrist proc, except major thumb or joint proc w CC/MCC
4
1.5545
35.2
29.3
8.4514
Hand or wrist proc, except major thumb or joint proc w/o CC/MCC
4
0.7305
22.9
19.1
4.0515
Other musculoskelet sys  conn tiss O.R. proc w MCC
49
1.3230
34.8
29.0
18.1516
Other musculoskelet sys  conn tiss O.R. proc w CC
21
1.1417
29.0
24.2
10.1517
Other musculoskelet sys  conn tiss O.R. proc w/o CC/MCC
6
0.8249
25.0
20.8
4.5533
Fractures of femur w MCC
3
0.8249
25.0
20.8
11.2534
Fractures of femur w/o MCC
7
0.7305
22.9
19.1
6.3( print page 48151)535
Fractures of hip  pelvis w MCC
19
0.7305
22.9
19.1
10.1536
Fractures of hip  pelvis w/o MCC
33
0.5998
23.7
19.8
6.0537
Sprains, strains,  dislocations of hip, pelvis  thigh w CC/MCC
0
0.5472
20.3
16.9
7.3538
Sprains, strains,  dislocations of hip, pelvis  thigh w/o CC/MCC
0
0.5472
20.3
16.9
4.8539
Osteomyelitis w MCC
936
0.9013
29.7
24.8
16.2540
Osteomyelitis w CC
767
0.8107
28.7
23.9
11.3541
Osteomyelitis w/o CC/MCC
252
0.7787
26.9
22.4
8.9542
Pathological fractures  musculoskelet  conn tiss malig w MCC
56
0.7359
21.7
18.1
14.0543
Pathological fractures  musculoskelet  conn tiss malig w CC
61
0.6347
21.3
17.8
9.4544
Pathological fractures  musculoskelet  conn tiss malig w/o CC/MCC
17
0.5472
20.3
16.9
6.8545
Connective tissue disorders w MCC
57
0.8501
23.9
19.9
14.7546
Connective tissue disorders w CC
38
0.6492
20.7
17.3
8.7547
Connective tissue disorders w/o CC/MCC
14
0.5472
20.3
16.9
6.1548
Septic arthritis w MCC
167
0.8584
28.2
23.5
15.0549
Septic arthritis w CC
199
0.7347
26.4
22.0
9.8550
Septic arthritis w/o CC/MCC
66
0.6704
23.5
19.6
7.2551
Medical back problems w MCC
107
0.7305
26.6
22.2
11.6552
Medical back problems w/o MCC
241
0.6022
22.8
19.0
6.5553
Bone diseases  arthropathies w MCC
24
0.8249
25.0
20.8
9.6554
Bone diseases  arthropathies w/o MCC
66
0.4822
20.5
17.1
5.8555
Signs  symptoms of musculoskeletal system  conn tissue w MCC
13
0.7305
22.9
19.1
7.8556
Signs  symptoms of musculoskeletal system  conn tissue w/o MCC
16
0.7305
22.9
19.1
5.0557
Tendonitis, myositis  bursitis w MCC
86
0.8177
25.9
21.6
11.0558
Tendonitis, myositis  bursitis w/o MCC
113
0.6919
21.4
17.8
6.6559
Aftercare, musculoskeletal system  connective tissue w MCC
1,370
0.7157
26.2
21.8
11.9560
Aftercare, musculoskeletal system  connective tissue w CC
2,078
0.6393
24.6
20.5
7.5561
Aftercare, musculoskeletal system  connective tissue w/o CC/MCC
970
0.5889
21.7
18.1
4.2562
Fx, sprn, strn  disl except femur, hip, pelvis  thigh w MCC
6
1.1417
29.0
24.2
10.4563
Fx, sprn, strn  disl except femur, hip, pelvis  thigh w/o MCC
22
0.5472
20.3
16.9
5.7564
Other musculoskeletal sys  connective tissue diagnoses w MCC
241
0.8134
24.9
20.8
11.6565
Other musculoskeletal sys  connective tissue diagnoses w CC
239
0.7382
24.8
20.7
8.1566
Other musculoskeletal sys  connective tissue diagnoses w/o CC/MCC
62
0.6862
22.1
18.4
5.9573
Skin graft /or debrid for skn ulcer or cellulitis w MCC
1,864
1.3068
38.0
31.7
22.2574
Skin graft /or debrid for skn ulcer or cellulitis w CC
1,911
1.1567
37.1
30.9
14.9575
Skin graft /or debrid for skn ulcer or cellulitis w/o CC/MCC
193
0.9938
31.7
26.4
9.4576
Skin graft /or debrid exc for skin ulcer or cellulitis w MCC
22
1.5545
35.2
29.3
20.3577
Skin graft /or debrid exc for skin ulcer or cellulitis w CC
24
1.1417
29.0
24.2
9.9578
Skin graft /or debrid exc for skin ulcer or cellulitis w/o CC/MCC
5
0.7305
22.9
19.1
5.4579
Other skin, subcut tiss  breast proc w MCC
493
1.2793
36.8
30.7
18.5580
Other skin, subcut tiss  breast proc w CC
418
1.1001
34.8
29.0
9.0581
Other skin, subcut tiss  breast proc w/o CC/MCC
29
0.9100
29.9
24.9
3.9582
Mastectomy for malignancy w CC/MCC
2
1.5545
35.2
29.3
4.3583
Mastectomy for malignancy w/o CC/MCC
0
1.5545
35.2
29.3
2.6584
Breast biopsy, local excision  other breast procedures w CC/MCC
2
1.1417
29.0
24.2
9.5585
Breast biopsy, local excision  other breast procedures w/o CC/MCC
0
1.1417
29.0
24.2
3.2592
Skin ulcers w MCC
2,994
0.8875
27.1
22.6
14.2593
Skin ulcers w CC
3,139
0.7877
26.8
22.3
10.0594
Skin ulcers w/o CC/MCC
405
0.7342
24.3
20.3
7.7( print page 48152)595
Major skin disorders w MCC
30
0.7525
24.5
20.4
13.2596
Major skin disorders w/o MCC
53
0.6155
23.8
19.8
7.6597
Malignant breast disorders w MCC
13
0.8249
25.0
20.8
13.7598
Malignant breast disorders w CC
17
0.7305
22.9
19.1
9.0599
Malignant breast disorders w/o CC/MCC
4
0.7305
22.9
19.1
5.7600
Non-malignant breast disorders w CC/MCC
12
0.7305
22.9
19.1
8.5601
Non-malignant breast disorders w/o CC/MCC
9
0.7305
22.9
19.1
6.0602
Cellulitis w MCC
758
0.6643
22.5
18.8
11.1603
Cellulitis w/o MCC
1,487
0.5528
19.4
16.2
7.3604
Trauma to the skin, subcut tiss  breast w MCC
23
0.8249
25.0
20.8
8.8605
Trauma to the skin, subcut tiss  breast w/o MCC
59
0.5685
21.2
17.7
5.4606
Minor skin disorders w MCC
60
0.8324
23.2
19.3
9.5607
Minor skin disorders w/o MCC
84
0.6776
22.6
18.8
5.9614
Adrenal  pituitary procedures w CC/MCC
0
1.2008
33.1
27.6
11.6615
Adrenal  pituitary procedures w/o CC/MCC
0
0.7305
22.9
19.1
5.1616
Amputat of lower limb for endocrine, nutrit,  metabol dis w MCC
62
1.4505
41.0
34.2
24.2617
Amputat of lower limb for endocrine, nutrit,  metabol dis w CC
117
1.2414
33.3
27.8
14.5618
Amputat of lower limb for endocrine, nutrit,  metabol dis w/o CC/MCC
2
0.8249
25.0
20.8
9.9619
O.R. procedures for obesity w MCC
2
0.8249
25.0
20.8
14.6620
O.R. procedures for obesity w CC
3
0.8249
25.0
20.8
6.3621
O.R. procedures for obesity w/o CC/MCC
0
0.8249
25.0
20.8
3.6622
Skin grafts  wound debrid for endoc, nutrit  metab dis w MCC
165
1.1462
35.6
29.7
21.1623
Skin grafts  wound debrid for endoc, nutrit  metab dis w CC
341
1.0197
32.2
26.8
13.5624
Skin grafts  wound debrid for endoc, nutrit  metab dis w/o CC/MCC
13
0.8249
25.0
20.8
9.4625
Thyroid, parathyroid  thyroglossal procedures w MCC
0
1.3385
36.6
30.5
12.4626
Thyroid, parathyroid  thyroglossal procedures w CC
0
1.2008
33.1
27.6
5.0627
Thyroid, parathyroid  thyroglossal procedures w/o CC/MCC
0
0.7305
22.9
19.1
2.1628
Other endocrine, nutrit  metab O.R. proc w MCC
54
1.3385
36.6
30.5
20.1629
Other endocrine, nutrit  metab O.R. proc w CC
90
1.2008
33.1
27.6
14.3630
Other endocrine, nutrit  metab O.R. proc w/o CC/MCC
4
0.7305
22.9
19.1
8.4637
Diabetes w MCC
363
0.7726
25.8
21.5
9.8638
Diabetes w CC
1,062
0.6757
24.0
20.0
6.7639
Diabetes w/o CC/MCC
92
0.6064
20.6
17.2
4.7640
Nutritional  misc metabolic disorders w MCC
607
0.7879
23.2
19.3
9.1641
Nutritional  misc metabolic disorders w/o MCC
615
0.6889
22.0
18.3
6.0642
Inborn errors of metabolism
4
0.7305
22.9
19.1
8.3643
Endocrine disorders w MCC
29
0.7358
24.9
20.8
12.4644
Endocrine disorders w CC
18
0.7358
24.9
20.8
8.6645
Endocrine disorders w/o CC/MCC
6
0.5472
20.3
16.9
6.1652
Kidney transplant
0
0.0000
0.0
0.0
0.0653
Major bladder procedures w MCC
0
1.1417
29.0
24.2
24.2654
Major bladder procedures w CC
0
0.7305
22.9
19.1
14.7655
Major bladder procedures w/o CC/MCC
0
0.5472
20.3
16.9
10.0656
Kidney  ureter procedures for neoplasm w MCC
0
0.8249
25.0
20.8
16.8657
Kidney  ureter procedures forneoplasm w CC
1
0.8249
25.0
20.8
9.2658
Kidney  ureter procedures for neoplasm w/o CC/MCC
0
0.8249
25.0
20.8
5.7659
Kidney  ureter procedures for non-neoplasm w MCC
9
1.1417
29.0
24.2
18.5660
Kidney  ureter procedures for non-neoplasm w CC
4
0.7305
22.9
19.1
10.6661
Kidney  ureter procedures for non-neoplasm w/o CC/MCC
1
0.5472
20.3
16.9
5.1662
Minor bladder procedures w MCC
2
0.8249
25.0
20.8
17.7663
Minor bladder procedures w CC
0
0.8249
25.0
20.8
8.5664
Minor bladder procedures w/o CC/MCC
1
1.5545
35.2
29.3
3.0665
Prostatectomy w MCC
2
0.8249
25.0
20.8
20.2666
Prostatectomy w CC
0
0.8249
25.0
20.8
10.7667
Prostatectomy w/o CC/MCC
1
1.1417
29.0
24.2
4.0668
Transurethral procedures w MCC
8
1.5545
35.2
29.3
14.4669
Transurethral procedures w CC
5
1.5545
35.2
29.3
7.0670
Transurethral procedures w/o CC/MCC
0
0.8249
25.0
20.8
3.7671
Urethral procedures w CC/MCC
0
0.7305
22.9
19.1
9.6672
Urethral procedures w/o CC/MCC
0
0.5472
20.3
16.9
3.8( print page 48153)673
Other kidney  urinary tract procedures w MCC
226
1.3255
33.6
28.0
17.6674
Other kidney  urinary tract procedures w CC
95
1.2557
30.6
25.5
11.1675
Other kidney  urinary tract procedures w/o CC/MCC
6
1.1417
29.0
24.2
2.7682
Renal failure w MCC
1,328
0.8553
23.6
19.7
12.1683
Renal failure w CC
785
0.7752
21.8
18.2
9.0684
Renal failure w/o CC/MCC
124
0.7121
20.5
17.1
5.9685
Admit for renal dialysis
51
0.7726
26.0
21.7
5.4686
Kidney  urinary tract neoplasms w MCC
31
0.8933
23.6
19.7
13.2687
Kidney  urinary tract neoplasms w CC
17
0.7305
22.9
19.1
8.5688
Kidney  urinary tract neoplasms w/o CC/MCC
3
0.5472
20.3
16.9
5.1689
Kidney  urinary tract infections w MCC
763
0.6624
22.9
19.1
9.9690
Kidney  urinary tract infections w/o MCC
724
0.5655
20.2
16.8
6.6691
Urinary stones w esw lithotripsy w CC/MCC
4
1.5545
35.2
29.3
6.6692
Urinary stones w esw lithotripsy w/o CC/MCC
0
1.5545
35.2
29.3
3.4693
Urinary stones w/o esw lithotripsy w MCC
16
0.7305
22.9
19.1
8.4694
Urinary stones w/o esw lithotripsy w/o MCC
12
0.7305
22.9
19.1
3.9695
Kidney  urinary tract signs  symptoms w MCC
4
0.8249
25.0
20.8
9.1696
Kidney  urinary tract signs  symptoms w/o MCC
1
0.5472
20.3
16.9
5.0697
Urethral stricture
0
0.5472
20.3
16.9
5.1698
Other kidney  urinary tract diagnoses w MCC
269
0.7919
22.6
18.8
10.9699
Other kidney  urinary tract diagnoses w CC
179
0.7293
22.1
18.4
7.7700
Other kidney  urinary tract diagnoses w/o CC/MCC
27
0.6052
19.6
16.3
5.4707
Major male pelvic procedures w CC/MCC
0
0.7305
22.9
19.1
6.9708
Major male pelvic procedures w/o CC/MCC
0
0.5472
20.3
16.9
3.5709
Penis procedures w CC/MCC
6
1.1417
29.0
24.2
10.3710
Penis procedures w/o CC/MCC
0
1.1417
29.0
24.2
2.7711
Testes procedures w CC/MCC
8
1.1417
29.0
24.2
13.2712
Testes procedures w/o CC/MCC
0
1.1417
29.0
24.2
4.6713
Transurethral prostatectomy w CC/MCC
1
1.5545
35.2
29.3
6.5714
Transurethral prostatectomy w/o CC/MCC
1
0.5472
20.3
16.9
2.9715
Other male reproductive system O.R. proc for malignancy w CC/MCC
1
1.5545
35.2
29.3
10.1716
Other male reproductive system O.R. proc for malignancy w/o CC/MCC
0
1.5545
35.2
29.3
2.0717
Other male reproductive system O.R. proc exc malignancy w CC/MCC
17
1.1417
29.0
24.2
12.4718
Other male reproductive system O.R. proc exc malignancy w/o CC/MCC
2
0.5472
20.3
16.9
4.1722
Malignancy, male reproductive system w MCC
12
0.8249
25.0
20.8
12.1723
Malignancy, male reproductive system w CC
9
0.7305
22.9
19.1
8.6724
Malignancy, male reproductive system w/o CC/MCC
1
0.5472
20.3
16.9
5.3725
Benign prostatic hypertrophy w MCC
2
1.1417
29.0
24.2
9.0726
Benign prostatic hypertrophy w/o MCC
3
0.5472
20.3
16.9
5.5727
Inflammation of the male reproductive system w MCC
37
0.7754
25.9
21.6
10.4728
Inflammation of the male reproductive system w/o MCC
56
0.6172
20.8
17.3
6.2729
Other male reproductive system diagnoses w CC/MCC
34
1.0319
26.6
22.2
8.4730
Other male reproductive system diagnoses w/o CC/MCC
2
0.7305
22.9
19.1
4.9734
Pelvic evisceration, rad hysterectomy  rad vulvectomy w CC/MCC
0
1.1417
29.0
24.2
11.8735
Pelvic evisceration, rad hysterectomy  rad vulvectomy w/o CC/MCC
0
0.5472
20.3
16.9
5.3736
Uterine  adnexa proc for ovarian or adnexal malignancy w MCC
0
1.1417
29.0
24.2
21.5737
Uterine  adnexa proc for ovarian or adnexal malignancy w CC
0
0.8249
25.0
20.8
11.0738
Uterine  adnexa proc for ovarian or adnexal malignancy w/o CC/MCC
0
0.5472
20.3
16.9
5.6739
Uterine, adnexa proc for non-ovarian/adnexal malig w MCC
0
1.1417
29.0
24.2
15.9740
Uterine, adnexa proc for non-ovarian/adnexal malig w CC
0
0.8249
25.0
20.8
7.7741
Uterine, adnexa proc for non-ovarian/adnexal malig w/o CC/MCC
0
0.5472
20.3
16.9
4.5742
Uterine  adnexa proc for non-malignancy w CC/MCC
0
0.8249
25.0
20.8
6.9743
Uterine  adnexa proc for non-malignancy w/o CC/MCC
0
0.5472
20.3
16.9
3.3744
DC, conization, laparascopy  tubal interruption w CC/MCC
1
0.8249
25.0
20.8
9.3( print page 48154)745
DC, conization, laparascopy  tubal interruption w/o CC/MCC
0
0.8249
25.0
20.8
3.8746
Vagina, cervix  vulva procedures w CC/MCC
3
0.8249
25.0
20.8
6.4747
Vagina, cervix  vulva procedures w/o CC/MCC
0
0.8249
25.0
20.8
2.8748
Female reproductive system reconstructive procedures
0
0.8249
25.0
20.8
2.6749
Other female reproductive system O.R. procedures w CC/MCC
3
0.8249
25.0
20.8
16.3750
Other female reproductive system O.R. procedures w/o CC/MCC
0
0.8249
25.0
20.8
5.1754
Malignancy, female reproductive system w MCC
14
1.1417
29.0
24.2
14.7755
Malignancy, female reproductive system w CC
15
0.8249
25.0
20.8
9.1756
Malignancy, female reproductive system w/o CC/MCC
1
0.5472
20.3
16.9
5.1757
Infections, female reproductive system w MCC
29
0.8375
22.6
18.8
13.9758
Infections, female reproductive system w CC
25
0.8317
27.2
22.7
9.5759
Infections, female reproductive system w/o CC/MCC
4
0.5472
20.3
16.9
7.2760
Menstrual  other female reproductive system disorders w CC/MCC
3
1.1417
29.0
24.2
6.0761
Menstrual  other female reproductive system disorders w/o CC/MCC
1
0.5472
20.3
16.9
3.8765
Cesarean section w CC/MCC
0
0.8249
25.0
20.8
7.4766
Cesarean section w/o CC/MCC
0
0.7305
22.9
19.1
4.3767
Vaginal delivery w sterilization /or DC
0
0.7305
22.9
19.1
4.1768
Vaginal delivery w O.R. proc except steril /or DC
0
0.7305
22.9
19.1
8.9769
Postpartum  post abortion diagnoses w O.R. procedure
1
0.7305
22.9
19.1
8.6770
Abortion w DC, aspiration curettage or hysterotomy
0
0.7305
22.9
19.1
3.5774
Vaginal delivery w complicating diagnoses
0
0.7305
22.9
19.1
4.5775
Vaginal delivery w/o complicating diagnoses
0
0.7305
22.9
19.1
3.1776
Postpartum  post abortion diagnoses w/o O.R. procedure
3
1.1417
29.0
24.2
5.4777
Ectopic pregnancy
0
0.7305
22.9
19.1
3.0778
Threatened abortion
0
0.5472
20.3
16.9
4.2779
Abortion w/o DC
0
0.5472
20.3
16.9
3.6780
False labor
0
0.5472
20.3
16.9
2.7781
Other antepartum diagnoses w medical complications
1
1.1417
29.0
24.2
5.9782
Other antepartum diagnoses w/o medical complications
0
0.5472
20.3
16.9
3.6789
Neonates, died or transferred to another acute care facility
0
0.5472
20.3
16.9
1.5790
Extreme immaturity or respiratory distress syndrome, neonate
0
0.5472
20.3
16.9
16.9791
Prematurity w major problems
0
1.1417
29.0
24.2
13.3792
Prematurity w/o major problems
0
0.5472
20.3
16.9
8.6793
Full term neonate w major problems
0
1.1417
29.0
24.2
17.6794
Neonate w other significant problems
0
1.1417
29.0
24.2
1.7795
Normal newborn
0
0.5472
20.3
16.9
3.1799
Splenectomy w MCC
0
1.1417
29.0
24.2
23.5800
Splenectomy w CC
0
0.8249
25.0
20.8
13.0801
Splenectomy w/o CC/MCC
0
0.8249
25.0
20.8
7.5802
Other O.R. proc of the blood  blood forming organs w MCC
7
1.5545
35.2
29.3
21.4803
Other O.R. proc of the blood  blood forming organs w CC
3
0.7305
22.9
19.1
10.8804
Other O.R. proc of the blood  blood forming organs w/o CC/MCC
0
0.7305
22.9
19.1
5.2808
Major hematol/immun diag exc sickle cell crisis  coagul w MCC
26
0.8009
20.7
17.3
12.8809
Major hematol/immun diag exc sickle cell crisis  coagul w CC
23
0.8009
20.7
17.3
7.9810
Major hematol/immun diag exc sickle cell crisis  coagul w/o CC/MCC
3
0.8009
20.7
17.3
6.2811
Red blood cell disorders w MCC
36
0.6655
23.2
19.3
9.0812
Red blood cell disorders w/o MCC
45
0.5699
19.5
16.3
5.9813
Coagulation disorders
48
0.8015
21.5
17.9
8.3814
Reticuloendothelial  immunity disorders w MCC
40
0.7474
22.6
18.8
11.7815
Reticuloendothelial  immunity disorders w CC
18
0.7305
22.9
19.1
7.8816
Reticuloendothelial  immunity disorders w/o CC/MCC
5
0.7305
22.9
19.1
5.3820
Lymphoma  leukemia w major O.R. procedure w MCC
0
0.8249
25.0
20.8
20.8821
Lymphoma  leukemia w major O.R. procedure w CC
2
0.8249
25.0
20.8
13.3( print page 48155)822
Lymphoma  leukemia w major O.R. procedure w/o CC/MCC
0
0.8249
25.0
20.8
5.9823
Lymphoma  non-acute leukemia w other O.R. proc w MCC
12
1.1417
29.0
24.2
24.2824
Lymphoma  non-acute leukemia w other O.R. proc w CC
3
1.1417
29.0
24.2
14.8825
Lymphoma  non-acute leukemia w other O.R. proc w/o CC/MCC
1
0.5472
20.3
16.9
7.8826
Myeloprolif disord or poorly diff neopl w maj O.R. proc w MCC
1
0.8249
25.0
20.8
20.8827
Myeloprolif disord or poorly diff neopl w maj O.R. proc w CC
0
0.8249
25.0
20.8
12.4828
Myeloprolif disord or poorly diff neopl w maj O.R. proc w/o CC/MCC
0
0.8249
25.0
20.8
5.9829
Myeloprolif disord or poorly diff neopl w other O.R. proc w CC/MCC
9
1.5545
35.2
29.3
17.8830
Myeloprolif disord or poorly diff neopl w other O.R. proc w/o CC/MCC
0
1.5545
35.2
29.3
5.5834
Acute leukemia w/o major O.R. procedure w MCC
20
1.1417
29.0
24.2
24.2835
Acute leukemia w/o major O.R. procedure w CC
3
0.8249
25.0
20.8
13.5836
Acute leukemia w/o major O.R. procedure w/o CC/MCC
1
0.5472
20.3
16.9
8.0837
Chemo w acute leukemia as sdx or w high dose chemo agent w MCC
1
1.5545
35.2
29.3
29.3838
Chemo w acute leukemia as sdx w CC or high dose chemo agent
2
0.8249
25.0
20.8
13.7839
Chemo w acute leukemia as sdx w/o CC/MCC
0
1.5545
35.2
29.3
9.1840
Lymphoma  non-acute leukemia w MCC
175
0.8718
20.8
17.3
16.1841
Lymphoma  non-acute leukemia w CC
64
0.8026
20.1
16.8
10.7842
Lymphoma  non-acute leukemia w/o CC/MCC
10
0.7305
22.9
19.1
6.9843
Other myeloprolif dis or poorly diff neopl diag w MCC
19
1.1417
29.0
24.2
14.5844
Other myeloprolif dis or poorly diff neopl diag w CC
13
1.1417
29.0
24.2
9.7845
Other myeloprolif dis or poorly diff neopl diag w/o CC/MCC
3
1.1417
29.0
24.2
6.8846
Chemotherapy w/o acute leukemia as secondary diagnosis w MCC
32
1.6788
37.4
31.2
13.8847
Chemotherapy w/o acute leukemia as secondary diagnosis w CC
61
1.4350
27.6
23.0
5.0848
Chemotherapy w/o acute leukemia as secondary diagnosis w/o CC/MCC
1
0.7305
22.9
19.1
4.6849
Radiotherapy
141
0.8994
23.5
19.6
9.5853
Infectious  parasitic diseases w O.R. procedure w MCC
703
1.7687
38.1
31.8
27.6854
Infectious  parasitic diseases w O.R. procedure w CC
95
1.4381
30.8
25.7
17.4855
Infectious  parasitic diseases w O.R. procedure w/o CC/MCC
1
0.7305
22.9
19.1
12.2856
Postoperative or post-traumatic infections w O.R. proc w MCC
335
1.4470
36.1
30.1
26.5857
Postoperative or post-traumatic infections w O.R. proc w CC
232
1.1886
31.5
26.3
14.1858
Postoperative or post-traumatic infections w O.R. proc w/o CC/MCC
28
1.1109
28.4
23.7
9.5862
Postoperative  post-traumatic infections w MCC
1,178
0.8670
25.2
21.0
13.4863
Postoperative  post-traumatic infections w/o MCC
1,304
0.7478
23.4
19.5
8.2864
Fever of unknown origin
16
0.7305
22.9
19.1
6.4865
Viral illness w MCC
56
0.7823
21.8
18.2
11.0866
Viral illness w/o MCC
33
0.6431
21.2
17.7
5.4867
Other infectious  parasitic diseases diagnoses w MCC
292
1.0954
23.6
19.7
16.2868
Other infectious  parasitic diseases diagnoses w CC
79
0.8869
22.0
18.3
9.3869
Other infectious  parasitic diseases diagnoses w/o CC/MCC
11
0.5472
20.3
16.9
6.8870
Septicemia w MV 96+ hours
588
1.9505
30.5
25.4
23.6871
Septicemia w/o MV 96+ hours w MCC
3,883
0.8299
23.5
19.6
13.0872
Septicemia w/o MV 96+ hours w/o MCC
1,543
0.7340
21.9
18.3
9.1876
O.R. procedure w principal diagnoses of mental illness
5
0.7305
22.9
19.1
19.1880
Acute adjustment reaction  psychosocial dysfunction
19
0.5472
20.3
16.9
5.0881
Depressive neuroses
15
0.5472
20.3
16.9
6.6882
Neuroses except depressive
16
0.5472
20.3
16.9
6.9883
Disorders of personality  impulse control
15
0.5472
20.3
16.9
11.8884
Organic disturbances  mental retardation
200
0.4883
23.3
19.4
8.3( print page 48156)885
Psychoses
1,390
0.4140
23.8
19.8
12.3886
Behavioral  developmental disorders
18
0.5472
20.3
16.9
9.4887
Other mental disorder diagnoses
0
0.5472
20.3
16.9
7.1894
Alcohol/drug abuse or dependence, left ama
1
0.5472
20.3
16.9
4.5895
Alcohol/drug abuse or dependence w rehabilitation therapy
1
0.5472
20.3
16.9
16.8896
Alcohol/drug abuse or dependence w/o rehabilitation therapy w MCC
10
0.8249
25.0
20.8
10.6897
Alcohol/drug abuse or dependence w/o rehabilitation therapy w/o MCC
23
0.5472
20.3
16.9
6.4901
Wound debridements for injuries w MCC
222
1.3395
35.2
29.3
23.7902
Wound debridements for injuries w CC
160
1.1605
33.5
27.9
12.9903
Wound debridements for injuries w/o CC/MCC
23
0.7305
22.9
19.1
7.9904
Skin grafts for injuries w CC/MCC
90
1.3351
40.8
34.0
18.8905
Skin grafts for injuries w/o CC/MCC
6
0.7305
22.9
19.1
7.7906
Hand procedures for injuries
1
0.5472
20.3
16.9
4.9907
Other O.R. procedures for injuries w MCC
85
1.6622
36.8
30.7
19.4908
Other O.R. procedures for injuries w CC
45
1.3966
34.1
28.4
11.3909
Other O.R. procedures for injuries w/o CC/MCC
5
0.8249
25.0
20.8
5.7913
Traumatic injury w MCC
51
0.8462
26.9
22.4
10.0914
Traumatic injury w/o MCC
72
0.6448
21.9
18.3
5.3915
Allergic reactions w MCC
0
0.5472
20.3
16.9
7.5916
Allergic reactions w/o MCC
1
0.5472
20.3
16.9
3.2917
Poisoning  toxic effects of drugs w MCC
7
0.7305
22.9
19.1
8.3918
Poisoning  toxic effects of drugs w/o MCC
6
0.7305
22.9
19.1
4.2919
Complications of treatment w MCC
1,072
0.9858
26.3
21.9
10.1920
Complications of treatment w CC
826
0.8518
24.6
20.5
6.8921
Complications of treatment w/o CC/MCC
95
0.7511
23.0
19.2
4.5922
Other injury, poisoning  toxic effect diag w MCC
5
0.5472
20.3
16.9
10.0923
Other injury, poisoning  toxic effect diag w/o MCC
9
0.5472
20.3
16.9
5.0927
Extensive burns or full thickness burns w MV 96+ hrs w skin graft
0
1.5545
35.2
29.3
29.3928
Full thickness burn w skin graft or inhal inj w CC/MCC
10
1.1417
29.0
24.2
24.2929
Full thickness burn w skin graft or inhal inj w/o CC/MCC
1
0.7305
22.9
19.1
13.1933
Extensive burns or full thickness burns w MV 96+ hrs w/o skin graft
7
1.5545
35.2
29.3
8.5934
Full thickness burn w/o skin grft or inhal inj
48
0.6998
24.2
20.2
11.1935
Non-extensive burns
40
0.7525
24.9
20.8
8.8939
O.R. proc w diagnoses of other contact w health services w MCC
381
1.2500
33.8
28.2
18.9940
O.R. proc w diagnoses of other contact w health services w CC
212
1.1066
33.8
28.2
10.5941
O.R. proc w diagnoses of other contact w health services w/o CC/MCC
36
0.9719
28.8
24.0
4.8945
Rehabilitation w CC/MCC
2,241
0.5867
22.2
18.5
16.3946
Rehabilitation w/o CC/MCC
472
0.4935
18.9
15.8
11.7947
Signs  symptoms w MCC
80
0.6340
22.7
18.9
7.9948
Signs  symptoms w/o MCC
137
0.5642
23.4
19.5
5.3949
Aftercare w CC/MCC
4,564
0.6693
22.1
18.4
6.1950
Aftercare w/o CC/MCC
759
0.5735
18.5
15.4
5.1951
Other factors influencing health status
38
1.5837
26.2
21.8
5.0955
Craniotomy for multiple significant trauma
0
1.5545
35.2
29.3
21.9956
Limb reattachment, hip  femur proc for multiple significant trauma
1
0.7305
22.9
19.1
14.4957
Other O.R. procedures for multiple significant trauma w MCC
3
1.5545
35.2
29.3
29.1958
Other O.R. procedures for multiple significant trauma w CC
1
1.1417
29.0
24.2
17.9959
Other O.R. procedures for multiple significant trauma w/o CC/MCC
0
1.1417
29.0
24.2
9.9963
Other multiple significant trauma w MCC
14
1.5545
35.2
29.3
16.5964
Other multiple significant trauma w CC
10
0.7305
22.9
19.1
10.2965
Other multiple significant trauma w/o CC/MCC
1
0.5472
20.3
16.9
6.5969
HIV w extensive O.R. procedure w MCC
10
1.5545
35.2
29.3
29.3970
HIV w extensive O.R. procedure w/o MCC
0
1.5545
35.2
29.3
15.8974
HIV w major related condition w MCC
162
0.8908
21.9
18.3
17.5975
HIV w major related condition w CC
74
0.7492
21.3
17.8
11.5976
HIV w major related condition w/o CC/MCC
35
0.7382
18.0
15.0
7.7( print page 48157)977
HIV w or w/o other related condition
22
0.7305
22.9
19.1
8.3981
Extensive O.R. procedure unrelated to principal diagnosis w MCC
1,073
2.2339
42.0
35.0
24.6982
Extensive O.R. procedure unrelated to principal diagnosis w CC
282
1.8277
37.6
31.3
16.3983
Extensive O.R. procedure unrelated to principal diagnosis w/o CC/MCC
19
1.1417
29.0
24.2
9.0984
Prostatic O.R. procedure unrelated to principal diagnosis w MCC
14
1.5545
35.2
29.3
23.7985
Prostatic O.R. procedure unrelated to principal diagnosis w CC
13
1.1417
29.0
24.2
16.6986
Prostatic O.R. procedure unrelated to principal diagnosis w/o CC/MCC
1
1.1417
29.0
24.2
8.5987
Non-extensive O.R. proc unrelated to principal diagnosis w MCC
389
1.6972
37.9
31.6
21.9988
Non-extensive O.R. proc unrelated to principal diagnosis w CC
184
1.3386
33.2
27.7
13.2989
Non-extensive O.R. proc unrelated to principal diagnosis w/o CC/MCC
19
0.8249
25.0
20.8
6.7998
Principal diagnosis invalid as discharge diagnosis
0
0.0000
0.0
0.0
0.0999
Ungroupable
0
0.0000
0.0
0.0
0.01
                             Transition blended relative weights for FY 2008 determined as described in Step 7 in section II.I.4. of the preamble of this final rule.2
                             The “short-stay outlier threshold” is calculated as 
                            5/6
                            ths of the geometric average length of stay of the LTC–DRG (as specified at § 412.529(a), in conjunction with new § 412.503).3
                             The “IPPS-comparable threshold” is calculated as one standard deviation from the geometric average length of stay of the same DRG under the IPPS as specified at § 412.529(c)(3)(i).  Note, as discussed in the RY 2008 LTCH PPS final rule (72 FR 26907), for some MS–LTC–DRGs, it was sometimes necessary to supplement IPPS hospital statistical data due to a low volume of IPPS cases, and for some MS–LTC–DRGs although IPPS hospital data may be available, a value of zero was assigned. In addition, we note that the “IPPS comparable threshold” is only applicable in the context of the payment adjustment for short-stay outliers (SSOs) at § 412.529.  A LTCH case that has a covered length of stay that exceeds the “SSO threshold” (and therefore is not an SSO case) but is within the value of the “IPPS comparable threshold” computed from IPPS statistical data would not be subject to the SSO adjustments at § 412.529.  So that it is clear that the “IPPS comparable threshold” only applies to LTCH cases that are SSOs, in instances where the value of the “IPPS comparable threshold” computed from IPPS statistical data for an MS–LTC–DRG is greater than the “SSO threshold” for the same MS–LTC–DRG, in this table we have substituted the computed value of the “IPPS comparable threshold” for the MS–LTC–DRG with the value of the “SSO threshold” (in column 6) for the same MS–LTC–DRG.
 Appendix A—Regulatory Impact Analysis I. Overall Impact We have examined the impacts of this final rule with comment period as required by Executive Order 12866 (September 1993, Regulatory Planning and Review) and the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96–354), section 1102(b) of the Social Security Act, the Unfunded Mandates Reform Act of 1995 (Pub. L. 104–4), and Executive Order 13132. Executive Order 12866 (as amended by Executive Order 13258, which merely reassigns responsibility of duties, and Executive Order 13422) directs agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity).  A regulatory impact analysis (RIA) must be prepared for major rules with economically significant effects ($100 million or more in any 1 year). We have determined that this rule is a major rule as defined in 5 U.S.C. 804(2).  We estimate that the changes for FY 2008 operating and capital payments will redistribute in excess of $100 million among different types of inpatient cases.  The market basket update to the IPPS rates required by the statute, in conjunction with other payment changes in this final rule with comment period, will result in an approximate $3.8 billion increase in FY 2008 operating and capital payments.  This amount does not reflect changes in hospital admissions or case-mix intensity in operating PPS payments, which will also affect overall payment changes.  It does assume that the −1.2 percent adjustment to the IPPS standardized amounts for adoption of the MS–DRGs will be completely offset by increases in case-mix that are the result of documentation and coding changes and not real increases in patient severity of illness. The RFA requires agencies to analyze options for regulatory relief of small businesses.  For purposes of the RFA, small entities include small businesses, nonprofit organizations, and government agencies.  Most hospitals and most other providers and suppliers are considered to be small entities, either by nonprofit status or by having revenues of $31.5 million or less in any 1 year.  (For details on the latest standards for heath care providers, we refer readers to page 33 of the Table of Small Business Size Standards at the Small Business Administration Web site at: 
                            *http://www.sba.gov/​services/​contractingopportunities/​sizestandardstopics/​tableofsize/​index.html.*)  For purposes of the RFA, all hospitals and other providers and suppliers are considered to be small entities.  Individuals and States are not included in the definition of a small entity.  We believe that this final rule with comment period will have a significant impact on small entities as explained in this Appendix.  Because we acknowledge that many of the affected entities are small entities, the analysis discussed throughout the preamble of this final rule with comment period constitutes our final regulatory flexibility analysis.  In the proposed rule, we solicited comments on our estimates and analysis of the impact of the proposed rule on those small entities.  We address any public comments that we received on the impact of the changes we are finalizing in the applicable sections of this appendix. In addition, section 1102(b) of the Act requires us to prepare a regulatory impact analysis for any proposed or final rule that may have a significant impact on the operations of a substantial number of small rural hospitals.  This analysis must conform to the provisions of section 604 of the RFA.  With the exception of hospitals located in certain New England counties, for purposes of section 1102(b) of the Act, we now define a small rural hospital as a hospital that is located outside of an urban area and has fewer than 100 beds.  Section 601(g) of the 
                            ( print page 48158)
                            Social Security Amendments of 1983 (Pub. L. 98–21) designated hospitals in certain New England counties as belonging to the adjacent urban area.  Thus, for purposes of the IPPS, we continue to classify these hospitals as urban hospitals. Section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104–4) also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation.  That threshold level is currently approximately $120 million.  This final rule with comment period will not mandate any requirements for State, local, or tribal governments, nor will it affect private sector costs. Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a proposed rule (and subsequent final rule) that imposes substantial direct requirement costs on State and local governments, preempts State law, or otherwise has Federalism implications.  As stated above, this final rule with comment period would not have a substantial effect on State and local governments. The following analysis, in conjunction with the remainder of this document, demonstrates that this rule is consistent with the regulatory philosophy and principles identified in Executive Order 12866, the RFA, and section 1102(b) of the Act.  The rule will affect payments to a substantial number of small rural hospitals, as well as other classes of hospitals, and the effects on some hospitals may be significant. II. Objectives The primary objective of the IPPS is to create incentives for hospitals to operate efficiently and minimize unnecessary costs while at the same time ensuring that payments are sufficient to adequately compensate hospitals for their legitimate costs.  In addition, we share national goals of preserving the Medicare Hospital Insurance Trust Fund. We believe the changes in this final rule with comment period will further each of these goals while maintaining the financial viability of the hospital industry and ensuring access to high quality health care for Medicare beneficiaries.  We expect that these changes will ensure that the outcomes of this payment system are reasonable and equitable while avoiding or minimizing unintended adverse consequences. III. Limitations of Our Analysis The following quantitative analysis presents the projected effects of our policy changes, as well as statutory changes effective for FY 2008, on various hospital groups.  We estimate the effects of individual policy changes by estimating payments per case while holding all other payment policies constant.  We use the best data available, but, generally, we do not attempt to make adjustments for future changes in such variables as admissions, lengths of stay, or case-mix.  However, we believe that adoption of the MS–DRGs in this final rule with comment period will create a risk of increased aggregate levels of payment as a result of more comprehensive documentation and coding.  As explained earlier in this final rule with comment period, the Secretary has broad discretion under section 1886(d)(3)(A)(vi) of the Act to adjust the standardized amount so as to eliminate the effect of changes in coding or classification of discharges that do not reflect real changes in case-mix.  Using this authority, the Medicare Actuary estimates that a negative adjustment of 4.8 percent will be necessary to maintain budget neutrality for the transition to the MS–DRGs.  However, with the 2-year implementation of the MS–DRG system, the 4.8 percent adjustment will be made over 3 years.  Therefore, we are reducing the IPPS standardized amount by 1.2 percent for FY 2008.  We will revisit the adjustment in 2 years if projected and actual data are different.  The payment impacts shown below illustrate the impact of changes in hospital payment, including the −1.2 percent adjustment to the IPPS standardized amounts both prior to and following the estimated growth in case-mix.  As we had done in the previous rules, we solicited comments and information about the anticipated effects of the proposed changes on hospitals and our methodology for estimating them. IV. Hospitals Included In and Excluded From the IPPS The prospective payment systems for hospital inpatient operating and capital related costs encompass most general short-term, acute care hospitals that participate in the Medicare program.  There were 35 Indian Health Service hospitals in our database, which we excluded from the analysis due to the special characteristics of the prospective payment methodology for these hospitals.  Among other short term, acute care hospitals, only the 46 such hospitals in Maryland remain excluded from the IPPS under the waiver at section 1814(b)(3) of the Act. As of July 2007, there are 3,534 IPPS hospitals to be included in our analysis.  This represents about 59 percent of all Medicare-participating hospitals.  The majority of this impact analysis focuses on this set of hospitals.  There are also approximately 1,286 CAHs.  These small, limited service hospitals are paid on the basis of reasonable costs rather than under the IPPS.  There are also 1,198 specialty hospitals and 2,262 specialty units that are excluded from the IPPS.  These specialty hospitals include IPFs, IRFs, LTCHs, RNHCIs, children's hospitals, and cancer hospitals.  Changes in payments for IPFs and IRFs are made through other separate rulemaking.  Payment impacts for these specialty hospitals and units, other than the reasonable cost-based updates for IPFs paid under a blend, are not included in this final rule with comment period.  There is also a separate rule to update and make changes to the LTCH PPS for its July 1 to June 30 rate year.  However, we have traditionally used the IPPS rule to update the LTCH relative weights because the LTCH PPS uses the same DRGs as the IPPS, resulting in the LTCH relative weights being recalibrated according to the same schedule as the IPPS (that is, for each Federal fiscal year).  The impacts of our policy changes on LTCHs, where applicable, are discussed below. V. Effects on Excluded Hospitals and Hospital Units As of July 2007, there were 1,198 hospitals excluded from the IPPS.  Of these 1,187 hospitals, 485 IPFs, 4 LTCHs, 82 children's hospitals, 11 cancer hospitals, and 15 RNHCIs are either being paid, on a reasonable cost basis or have a portion of the PPS payment based on reasonable cost principles subject to the rate-of-increase ceiling under § 413.40.  The remaining providers, 215 IRFs and 386 LTCHs, are paid 100 percent of the Federal prospective rate under the IRF PPS and the LTCH PPS, respectively.  As stated above, IRFs and IPFs that are not under a transition period are not affected by this final rule with comment period.  (IPFs under a transition period do have a portion of their PPS payment based on reasonable cost principles and thus are affected by this final rule with comment period.)  The impacts of the changes to LTCHs are discussed separately below.  In addition, there are 1,276 IPFs co-located in hospitals otherwise subject to the IPPS, paid on a blend of the IPF PPS per diem payment and the reasonable cost-based payment and 986 IRFs (paid under the IRF PPS) co-located in hospitals otherwise subject to the IPPS.  Under § 413.40(a)(2)(i)(A), the rate-of-increase ceiling is not applicable to the 93 IPPS excluded hospitals and units in Maryland that are paid in accordance with the waiver at section 1814(b)(3) of the Act. In the past, hospitals and units excluded from the IPPS have been paid based on their reasonable costs subject to limits as established by the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA).  Hospitals that continue to be paid fully on a reasonable cost basis are subject to TEFRA limits for FY 2008.  For these hospitals (cancer and children's hospitals), consistent with section 1886(b)(3)(B)(ii) of the Act, the update is the percentage increase in the FY 2008 IPPS operating market basket, which is 3.3 percent, based on Global Insights, Inc.'s 2007 second quarter forecast of the IPPS operating market basket increase.  In addition, in accordance with § 403.752(a) of the regulations, RNHCIs are paid under § 413.40, which also uses section 1886(b)(3)(B)(ii) of the Act to update target amounts by the rate-of-increase percentage.  For RNHCIs, the update is the percentage increase in the FY 2008 IPPS operating market basket increase, which is 3.3 percent, based on Global Insight, Inc.'s 2007 second quarter forecast of the IPPS operating market basket increase. Effective for cost reporting periods beginning on or after October 1, 2002, LTCHs that elected to be paid based on 100 percent of the LTCH PPS are paid, based on a Federal prospective payment amount that is updated annually.  Existing LTCHs received a PPS blended payment that consisted of the Federal prospective payment rate and a reasonable cost-based payment rate over a 5-year transition period, unless the LTCH elected to be paid at 100 percent of the Federal prospective rate at the beginning of any of its cost reporting periods during the 5-year transition period.  In accordance with § 412.533, for cost reporting periods beginning on or after October 1, 2006, the LTCH PPS transition blend percentages are 
                            ( print page 48159)
                            100 percent of the Federal prospective payment amount and zero percent of the PPS amount calculated under reasonable cost principles.  FY 2007 was the fifth year of the 5-year transition period established under § 412.533.  Because the reasonable cost-based amount is zero percent for cost reporting periods beginning during FY 2008, no LTCH will have a portion of its PPS payment that is based in part on reasonable cost subject to the rate-of-increase ceiling during FY 2008 or thereafter.  Thus, there is no longer a need for an update factor for LTCHs' TEFRA target amount for FY 2008. The final rule implementing the IPF PPS (69 FR 66922) established a 3-year transition to the IPF PPS during which some providers will received a blend of the IPF PPS per diem payment and the TEFRA reasonable cost-based payment.  Under this final rule with comment period, the FY 2008 rate-of-increase percentage that is applied to FY 2007 target amounts in order to calculate FY 2008 target amounts is 3.3 percent, based on Global Insight, Inc.'s 2007 second quarter forecast of the excluded hospital market basket increase. The impact on excluded hospitals and hospital units of the update in the rate-of-increase limit depends on the cumulative cost increases experienced by each excluded hospital or unit since its applicable base period.  For excluded hospitals and units that have maintained their cost increases at a level below the rate-of-increase limits since their base period, the major effect is on the level of incentive payments these hospitals and hospital units receive.  Conversely, for excluded hospitals and hospital units with per case cost increases above the cumulative update in their rate-of-increase limits, the major effect is the amount of excess costs that will not be reimbursed. We note that, under § 413.40(d)(3), an excluded hospital or unit whose costs exceed 110 percent of its rate-of-increase limit receives its rate-of-increase limit plus 50 percent of the difference between its reasonable costs and 110 percent of the limit, not to exceed 110 percent of its limit.  In addition, under the various provisions set forth in § 413.40, certain excluded hospitals and hospital units can obtain payment adjustments for justifiable increases in operating costs that exceed the limit. VI. Quantitative Effects of the Policy Changes Under the IPPS for Operating Costs A. Basis and Methodology of Estimates In this final rule with comment period, we are announcing policy changes and payment rate updates for the IPPS for operating costs.  Changes to the capital payments are discussed in section VIII. of this Appendix. Based on the overall percentage change in payments per case estimated using our payment simulation model, we estimate that total FY 2008 operating payments will increase 3.5 percent compared to FY 2007, largely due to the statutorily mandated update to the IPPS rates.  This amount reflects an adjustment of −1.2 percent to the IPPS standardized amounts to offset an anticipated increase in payments resulting from improved documentation and coding that does not represent real increases in underlying resource demands and patient acuity due to the adoption of MS–DRGs.  The impacts do not illustrate changes in hospital admissions or real case-mix intensity, which will also affect overall payment changes. We have prepared separate impact analyses of the changes to each system.  This section deals with changes to the operating prospective payment system.  Our payment simulation model relies on the most recent available data to enable us to estimate the impacts on payments per case of certain changes in this final rule with comment period.  However, there are other changes for which we do not have data available that would allow us to estimate the payment impacts using this model.  For those changes, we have attempted to predict the payment impacts based upon our experience and other more limited data. The data used in developing the quantitative analyses of changes in payments per case presented below are taken from the FY 2006 MedPAR file and the most current Provider-Specific File that is used for payment purposes.  Although the analyses of the changes to the operating PPS do not incorporate cost data, data from the most recently available hospital cost report were used to categorize hospitals.  Our analysis has several qualifications.  First, in this analysis, we do not make adjustments for future changes in such variables as admissions, lengths of stay, or underlying growth in real case-mix.  Second, due to the interdependent nature of the IPPS payment components, it is very difficult to precisely quantify the impact associated with each change.  Third, we use various sources for the data used to categorize hospitals in the tables.  In some cases, particularly the number of beds, there is a fair degree of variation in the data from different sources.  We have attempted to construct these variables with the best available source overall.  However, for individual hospitals, some miscategorizations are possible. Using cases from the FY 2006 MedPAR file, we simulated payments under the operating IPPS given various combinations of payment parameters.  Any short-term, acute care hospitals not paid under the IPPS (Indian Health Service hospitals and hospitals in Maryland) were excluded from the simulations.  The impact of payments under the capital IPPS, or the impact of payments for costs other than inpatient operating costs, are not analyzed in this section.  Estimated payment impacts of FY 2008 changes to the capital IPPS are discussed in section VIII. of this Appendix. The changes discussed separately below are the following: The effects of the annual reclassification of diagnoses and procedures, transition to the MS–DRG system, the recalibration of the DRG relative weights (including the expansion to 15 charge to cost ratios) as required by section 1886(d)(4)(C) of the Act.
                        The effects of the changes in hospitals' wage index values reflecting wage data from hospitals' cost reporting periods beginning during FY 2004, compared to the FY 2003 wage data.
                        The effects of the wage and recalibration budget neutrality factors.
                        The effects of the expiration of the labor market area transition for those hospitals that were urban under the old labor market area designations and are now considered rural hospitals.
                        The effects of geographic reclassifications by the MGCRB that will be effective in FY 2008.
                        The effects of the adjustment to the application of the rural floor budget neutrality provision on the wage index instead of on the standardized amount.
                        The effects of application of an imputed rural floor to States that have no rural areas and to States that have rural areas but no IPPS hospitals are located in those areas (69 FR 49109).
                        The effects of the September 30, 2007 expiration of section 508 of Pub. L. 108–173, which allowed qualifying hospitals to appeal the wage index classification otherwise applicable to the hospital and apply for reclassification to another area of the State in which the hospital is located (or, at the discretion of the Secretary, to an area within a contiguous State).
                        The effects of section 505 of Pub. L. 108–173, which provides for an increase in a hospital's wage index if the hospital qualifies by meeting a threshold percentage of residents of the county where the hospital is located who commute to work at hospitals in counties with higher wage indexes.
                        The effect of the budget neutrality adjustment being made for the adoption of the MS–DRGs under section 1886(d)(3)(A)(iv) of the Act for the change in aggregate payments that is a result of changes in the coding or classification of discharges that do not reflect real changes in case-mix.
                        The total estimated change in payments based on FY 2008 policies relative to payments based on FY 2007 policies. To illustrate the impacts of the FY 2008 changes, our analysis begins with a FY 2007 baseline simulation model using: the FY 2008 update of 3.3 percent; the FY 2007 DRG GROUPER (Version 24.0); the most current CBSA designations for hospitals based on OMB's MSA definitions; the FY 2007 wage index; and no MGCRB reclassifications.  Outlier payments are set at 5.1 percent of total operating DRG and outlier payments. Section 1886(b)(3)(B)(viii) of the Act, as added by section 5001(a) of Pub. L. 109–171, provides that for FY 2007 and subsequent years, the update factor will be reduced by 2.0 percentage points for any hospital that does not submit quality data in a form and manner and at a time specified by the Secretary.  At the time this impact was prepared, 146 providers did not receive the full market basket rate-of-increase for FY 2007 because they failed the quality data submission process.  For purposes of the simulations shown below, we modeled the payment changes for FY 2008 using a reduced update for these 146 hospitals.  However, we do not have enough information to determine which hospitals will not receive the full market basket rate-of-increase for FY 2008 at this time. Each policy change, statutorily or otherwise, is then added incrementally to this baseline, finally arriving at an FY 2008 model incorporating all of the changes.  This simulation allows us to isolate the effects of each change.
                            ( print page 48160) Our final comparison illustrates the percent change in payments per case from FY 2007 to FY 2008.  Three factors not discussed separately have significant impacts here.  The first is the update to the standardized amount.  In accordance with section 1886(b)(3)(B)(i) of the Act, we are updating the standardized amounts for FY 2008 using the most recently forecasted hospital market basket increase for FY 2008 of 3.3 percent.  (Hospitals that fail to comply with the quality data submission requirements to receive the full update will receive an update reduced by 2.0 percentage points to 1.3 percent.)  Under section 1886(b)(3)(B)(iv) of the Act, the updates to the hospital-specific amounts for SCHs and for MDHs are also equal to the market basket increase, or 3.3 percent. A second significant factor that affects the changes in hospitals' payments per case from FY 2007 to FY 2008 is the change in a hospital's geographic reclassification status from one year to the next.  That is, payments may be reduced for hospitals reclassified in FY 2007 that are no longer reclassified in FY 2008.  Conversely, payments may increase for hospitals not reclassified in FY 2007 that are reclassified in FY 2008.  Particularly with the expiration of section 508 of Pub. L. 108–173,  the reclassification provision, these impacts can be quite substantial, so if a relatively small number of hospitals in a particular category lose their reclassification status, the percentage change in payments for the category may be below the national mean. A third significant factor is that we currently estimate that actual outlier payments during FY 2007 will be 4.6 percent of total DRG payments.  When the FY 2007 final rule was published, we projected FY 2007 outlier payments would be 5.1 percent of total DRG plus outlier payments; the average standardized amounts were offset correspondingly.  The effects of the lower than expected outlier payments during FY 2008 (as discussed in the Addendum to this final rule with comment period) are reflected in the analyses below comparing our current estimates of FY 2007 payments per case to estimated FY 2008 payments per case (with outlier payments projected to equal 5.1 percent of total DRG payments). B. Analysis of Table I Table I displays the results of our analysis of the changes for FY 2008.  The table categorizes hospitals by various geographic and special payment consideration groups to illustrate the varying impacts on different types of hospitals.  The top row of the table shows the overall impact on the 3,534 hospitals included in the analysis. The next four rows of Table I contain hospitals categorized according to their geographic location: All urban, which is further divided into large urban and other urban; and rural.  There are 2,539 hospitals located in urban areas included in our analysis.  Among these, there are 1,406 hospitals located in large urban areas (populations over 1 million), and 1,133 hospitals in other urban areas (populations of 1 million or fewer).  In addition, there are 995 hospitals in rural areas.  The next two groupings are by bed-size categories, shown separately for urban and rural hospitals.  The final groupings by geographic location are by census divisions, also shown separately for urban and rural hospitals. The second part of Table I shows hospital groups based on hospitals' FY 2008 payment classifications, including any reclassifications under section 1886(d)(10) of the Act.  For example, the rows labeled urban, large urban, other urban, and rural show that the number of hospitals paid based on these categorizations after consideration of geographic reclassifications (including reclassifications under section 1886(d)(8)(B) and section 1886(d)(8)(E) of the Act that have implications for capital payments) are 2,578, 1,425, 1,153 and 956, respectively. The next three groupings examine the impacts of the changes on hospitals grouped by whether or not they have GME residency programs (teaching hospitals that receive an IME adjustment) or receive DSH payments, or some combination of these two adjustments.  There are 2,480 nonteaching hospitals in our analysis, 815 teaching hospitals with fewer than 100 residents, and 239 teaching hospitals with 100 or more residents. In the DSH categories, hospitals are grouped according to their DSH payment status, and whether they are considered urban or rural for DSH purposes.  The next category groups together hospitals considered urban after geographic reclassification, in terms of whether they receive the IME adjustment, the DSH adjustment, both, or neither. The next five rows examine the impacts of the changes on rural hospitals by special payment groups (SCHs, RRCs, and MDHs), as well as rural hospitals not receiving a special payment designation.  There were 194 RRCs, 367 SCHs, 150 MDHs, 99 hospitals that are both SCHs and RRCs, and 8 hospitals that are both an MDH and an RRC. The next series of groupings concern the geographic reclassification status of hospitals.  The first grouping displays all urban hospitals that were reclassified by the MGCRB for FY 2008.  The second grouping shows the MGCRB rural reclassifications. The final two groupings are based on the type of ownership and the hospital's Medicare utilization expressed as a percent of total patient days.  These data were taken from the FY 2004 Medicare cost reports. 
                            ( print page 48161) Table I.—Impact Analysis of Changes for FY 2008
Number of Hospitals 1
FY 2008 Transitional 
                                    2/3
                                     Cost 
                                    1/3
                                     Charge Weights  DRG Changes 2
FY 2008 Wage Data 3
FY 2008 DRG, Rel. Wts. and Wage Index Changes 4
FY 2008 Wage Index Expiration for the Transition for Hospitals Moving from Urban to Rural 5
FY 2008 MGCRB Reclass-ifications 6
Application of the Rural Floor 7
Application of Imputed Rural Floor 8
Expiration of Section 508 Provider Reclassification 9
FY 2008 Out-Migration Adjustment 10
All FY 2008 Changes w/CMI Adjustment Prior to Estimated Growth 11
All FY 2008 Changes w/CMI Adjustment and Estimated Growth 12(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)All Hospitals
3534
0.4
−0.1
0
0
0
0
0
−0.1
0
2.3
3.5By Geographic Location:Urban hospitals
2539
0.5
−0.1
0.1
0
−0.2
0
0
−0.1
0
2.6
3.9Large urban areas
1406
0.9
−0.1
0.4
0
−0.3
0
0
−0.1
0
3.1
4.3Other urban areas
1133
0.1
0
−0.2
0
−0.1
0.1
0
−0.2
0
2
3.2Rural hospitals
995
−0.9
−0.1
−1.2
−0.2
1.8
−0.1
0
0
0.1
0
1.2Bed Size (Urban):0–99 beds
630
−0.4
0
−0.6
−0.1
−0.4
0.1
0
−0.2
0
0.8
2.1100–199 beds
851
0.6
0
0.3
0
−0.2
0.1
0
−0.2
0
2.3
3.6200–299 beds
480
0.5
0
0.1
0
−0.2
0
0
−0.1
0
2.4
3.7300–499 beds
411
0.6
0
0.2
0
−0.2
0
0
−0.1
0
3
4.2500 or more beds
167
0.7
−0.3
0.1
0
−0.3
−0.1
−0.1
−0.1
0
2.9
4.1Bed Size (Rural):0–49 beds
337
−1.8
−0.1
−1.9
−0.1
0.5
−0.1
0
−0.1
0.2
−1.6
−0.450–99 beds
372
−1.2
−0.1
−1.4
−0.1
1
−0.1
0
0
0.1
−0.3
0.9100–149 beds
173
−0.8
0
−1.1
−0.4
2.3
−0.1
0
0
0.1
0.4
1.6150–199 beds
68
−0.5
0
−0.8
0
2.5
−0.1
0
0
0
0.3
1.5200 or more beds
45
−0.5
−0.1
−0.8
0
2.7
−0.1
0
0
0
0.9
2.1Urban by Region:New England
122
0.1
0.5
0.3
0
0.5
0.9
−0.1
−0.2
0.1
2.4
3.6Middle Atlantic
350
0.6
−0.3
−0.1
0
0.2
−0.2
0.3
−0.5
0
2.3
3.5South Atlantic
390
0.6
−0.1
0.1
0
−0.4
−0.1
−0.1
0
0
2.7
4East North Central
395
0.6
−0.2
0.1
0
−0.3
−0.1
−0.1
−0.1
0
2.4
3.7East South Central
166
0.1
−0.4
−0.6
0
−0.3
−0.1
−0.1
0
0
2.1
3.3West North Central
157
0
0.1
−0.2
0
−0.7
−0.2
−0.1
0
0
2.2
3.5West South Central
355
0.7
−0.3
0.1
0
−0.6
−0.1
−0.1
0
0
2.6
3.8Mountain
153
0.6
0
0.3
−0.1
−0.2
−0.1
−0.1
0
0
2.3
3.6Pacific
398
0.9
0.5
1.1
0
−0.3
0.6
−0.1
−0.1
0
3.9
5.2Puerto Rico
53
1.1
−0.3
0.4
0
−0.6
−0.1
0
0
0
2.9
4.2Rural by Region:New England
23
−0.8
−1.2
−2.2
0
2.6
−0.1
0
0
0
0
1.2Middle Atlantic
72
−1
0.2
−1
0.2
1.9
−0.1
0
−0.1
0
−0.2
1South Atlantic
173
−0.4
−0.1
−0.8
−0.2
2.1
−0.1
0
0
0.1
0.8
2East North Central
122
−1
0.1
−1.1
−0.1
1.3
−0.1
0
0
0.1
−0.1
1.1East South Central
177
−0.9
−0.3
−1.4
−0.2
2.3
−0.2
−0.1
0
0.1
0.5
1.7West North Central
115
−1.1
0
−1.2
0
1.2
−0.1
0
0
0
−0.2
1West South Central
199
−1.4
−0.2
−1.8
−0.5
2.2
−0.1
0
0
0.1
−1.3
−0.1Mountain
77
−0.8
0.2
−0.6
0
0.5
−0.1
0
0
0
−0.3
0.9Pacific
37
−0.7
0.8
−0.1
0
1.7
−0.1
0
−0.2
0
1.3
2.5By Payment Classification:Urban hospitals
2578
0.5
−0.1
0.1
0
−0.2
0
0
−0.1
0
2.6
3.8Large urban areas
1425
0.8
−0.1
0.4
0
−0.3
0
0
−0.1
0
3.1
4.3Other urban areas
1153
0.1
0
−0.2
0
0
0.1
0
−0.2
0
2
3.2Rural areas
956
−0.9
−0.1
−1.2
−0.2
1.7
−0.1
0
−0.1
0.1
0
1.2Teaching Status:Nonteaching
2480
0.1
0
−0.2
0
0.2
0.1
0
−0.1
0
1.8
3Fewer than 100 residents
815
0.4
−0.1
0
0
−0.1
0
0
−0.1
0
2.4
3.7100 or more residents
239
0.9
−0.2
0.3
0
−0.2
−0.1
0
−0.2
0
3.2
4.4Urban DSH:Non-DSH
859
0
−0.2
−0.5
0
−0.1
0
0.1
−0.2
0
1.6
2.8( print page 48162)100 or more beds
1512
0.7
0
0.3
0
−0.2
0
0
−0.1
0
2.9
4.1Less than 100 beds
355
−0.2
0.2
−0.3
−0.1
−0.1
0.1
−0.1
−0.1
0
1.7
3Rural DSH:SCH
384
−1.4
0
−1.5
0
0.2
0
0
0
0.1
−0.8
0.4RRC
203
−0.5
0
−0.8
−0.2
2.9
−0.1
0
−0.1
0
0.6
1.8100 or more beds
46
−0.3
−0.1
−0.8
−0.8
1.5
−0.2
−0.1
−0.1
0.3
1.3
2.5Less than 100 beds
175
−1.1
−0.1
−1.4
−0.4
1.2
−0.2
−0.1
−0.1
0.3
0.2
1.5Urban teaching and DSH:Both teaching and DSH
807
0.7
−0.1
0.3
0
−0.3
0
0
−0.1
0
3
4.2Teaching and no DSH
186
0.1
−0.3
−0.5
0
0
−0.1
0.1
−0.4
0.1
1.9
3.1No teaching and DSH
1060
0.5
0.1
0.3
0
−0
0.1
0
0
0
2.5
3.8No teaching and no DSH
525
0.1
−0.1
−0.3
0
−0.3
0
0
−0.1
0
1.6
2.9Special Hospital Types:RRC
194
−0.3
−0.1
−0.7
−0.2
3.2
−0.1
−0.1
0
0
1.5
2.7SCH
367
−1.4
0
−1.4
−0.1
0.1
0
0
0
0
−1
0.2MDH
150
−1.6
−0.1
−1.8
0
0.3
−0.1
0
0
0.1
−0.6
0.6SCH and RRC
99
−0.8
0
−0.9
0
0.7
−0.1
0
0
0
−0.4
0.8MDH and RRC
8
−1.5
0
−1.5
0
0.8
−0
0
0
0
−1.1
0.1Type of Ownership:Voluntary
2064
0.4
−0.1
−0.1
0
0
0
0
−0.1
0
2.2
3.5Proprietary
823
0.5
0.1
0.3
0
0
0
0
−0.1
0
2.6
3.9Government
597
0.4
0.1
0.2
0
−0
0.1
−0.1
0
0
2.4
3.6Medicare Utilization as a Percent of Inpatient Days:0–25
230
1.5
0
1.2
0
−0.3
−0.1
−0.1
0
0
4.2
5.525–50
1289
0.7
0
0.3
0
−0.3
0
0
−0.1
0
3
4.350–65
1451
0
−0.1
−0.4
0
0.4
0
0
−0.1
0
1.6
2.9Over 65
440
−0.7
−0.2
−1.2
0
0.4
−0.1
0
−0.3
0
0.5
1.8FY 2008 Reclassifications by the Medicare Geographic Classification Review Board:All Reclassified Hospitals
757
0.1
0
−0.2
−0.1
2.2
−0.1
0
−0.2
0
1.8
3.1Non-Reclassified Hospitals
2777
0.5
−0.1
0.1
0
−0.6
0
0
−0.1
0
2.5
3.7Urban Hospitals Reclassified
393
0.5
0
0.1
0
2
−0.1
0
−0.3
0
2.4
3.6Urban Nonreclassified, FY 2008:
2145
0.6
−0.1
0.1
0
−0.7
0
0
−0.1
0
2.7
3.9All Rural Hospitals Reclassified Full Year FY 2008:
364
−0.7
0
−1
−0.2
2.9
−0.1
0
0
0
0.6
1.8( print page 48163)Rural Nonreclassified Hospitals Full Year FY 2008:
569
−1.2
−0.2
−1.5
−0.1
−0.2
−0.1
0
−0.1
0.2
−1
0.2All Section 401 Reclassified Hospitals:
29
−0.8
0.1
−0.8
0
−0.8
−0
0
−0.6
0
−0.9
0.3Other Reclassified Hospitals (Section 1886(d)(8)(B))
63
−0.7
−0.3
−1.3
0
3.3
−0.1
0
0
0
0.7
1.9Former 508 Hospitals
107
0.5
−0.5
−0.3
0
0.4
−0.1
0
−2.5
0.1
−0.7
0.5Specialty HospitalsCardiac specialty Hospitals
22
−2.5
−0.3
−2.9
0
−0.7
0.1
−0.1
0
0
−0.3
0.91
                                 Because data necessary to classify some hospitals by category were missing, the total number of hospitals in each category may not equal the national total.  Discharge data are from FY 2006, and hospital cost report data are from reporting periods beginning in FY 2005 and FY 2004.2
                                 This column displays the payment impact of the changes to the V25 GROUPER and the recalibration of the DRG weights based on FY 2006 MedPAR data in accordance with section 1886(d)(4)(C)(iii) of the Act.3
                                 This column displays the payment impact of updating the wage index data to the FY 2004 cost report data.4
                                 This column displays the payment impact of the budget neutrality factor for DRG and wage index changes in accordance with section 1886(d)(4)(C)(iii) of the Act and section 1886(d)(3)(E) of the Act.5
                                 Shown here are the effects of the end of the three-year provision where rural hospitals that were formerly located in urban areas will now receive the wage index of the MSA that they are currently located in for FY 2008.6
                                 Shown here are the effects of geographic reclassifications by the Medicare Geographic Classification Review Board (MGCRB).  The effects demonstrate the FY 2008 payment impact of going from no reclassifications to the reclassifications scheduled to be in effect for FY 2008.  Reclassification for prior years has no bearing on the payment impacts shown here.  This column reflects the geographic budget neutrality factor of 0.991695.7
                                 This column displays the effects of the changes in the rural floor budget neutrality adjustment applied on the wage index instead of on the standardized amount. The column reflects a rural floor budget neutrality factor of 0.996660.8
                                 This column displays the payment impact of the application of the imputed rural floor applied to the wage index for providers located in states without rural areas.9
                                 This column displays the payment impact of the expiration of section 508 of Pub. L. 108–17, which had allowed qualifying hospitals to reclassify to receive the wage index of another area in their state.10
                                 This column displays the impact of section 505 of Pub. L. 108–173, which provides for an increase in a hospitals wage index if the hospital qualifies by meeting a threshold percentage of residents of the county where the hospital is located who commute to work at hospitals in counties with higher wage indexes.11
                                 This column shows changes in payments from FY 2007 to FY 2008 including a 0.988 case mix index adjustment for coding and documentation improvements that are anticipated with the adoption of the MS-DRGs prior to the estimated growth occurring.  It incorporates all of the changes displayed in Columns 4,5 ,6 ,7 ,8, 9,10 and  (the changes displayed in Columns 2 and 3 are included in Column 4).12
                                 This column shows changes in payments from FY 2007 to FY 2008 with a case-mix index adjustment and the estimated growth for improvements in documentation and coding.  It incorporates all of the changes displayed in Columns 4,5 ,6 ,7 ,8, 9,10 and  (the changes displayed in Columns 2 and 3 are included in Column 4).  It also reflects the impact of the FY 2008 update, and changes in hospitals' reclassification status in FY 2008 compared to FY 2007.  The sum of these impacts may be different from the percentage changes shown here due to rounding and interactive effects.
 
 
 C. Effects of the Changes to the DRG Reclassifications and Relative Cost-Based Weights (Column 2) In Column 2 of Table I, we present the combined effects of the DRG reclassifications and recalibration, as discussed in section II. of the preamble to this final rule with comment period.  Section 1886(d)(4)(C)(i) of the Act requires us annually to make appropriate classification changes in order to reflect changes in treatment patterns, technology, and any other factors that may change the relative use of hospital resources. As discussed in the preamble of this final rule with comment period, we are continuing the 3-year transition from charge-based to cost-based relative weights. In addition, we are implementing the MS–DRGs in a two year transition that will increase the number of DRGs from 538 to 745. For FY 2008, the first year of the transition, 50 percent of the relative weight for a DRG is based on the two-thirds cost weight/one-third charge weight calculated using FY 2006 MedPAR data grouped to the Version 24.0 (FY 2007) DRGs.  The remaining 50 percent of the FY 2008 relative weight for a DRG is based on the two-thirds cost weight/one-third charge weight calculated using FY 2006 MedPAR grouped to the Version 25.0 MS–DRGs.  Furthermore, the relative weights have been calculated using 15 cost centers as described in Section H of the preamble whereas the relative weights in FY 2007 were calculated using 13 cost centers.  In column 2, we compare aggregate payments using the blended FY 2008 relative weights (
                            2/3
                             cost, 
                            1/3
                             charge, 50 percent MS–DRGs and 50 percent CMS DRGs) for the MS–DRGs to the FY 2007 blended relative weights (
                            1/3
                             cost, 
                            2/3
                             charge) for the CMS DRGs.  The methods of calculating the relative weights and the reclassification changes to the GROUPER are described in more detail in section II.H. of the preamble to this final rule with comment period.  We note that, consistent with section 1886(d)(4)(C)(iii) of the Act, we are applying a budget neutrality factor to ensure that the overall payment impact of the DRG changes (combined with the wage index changes) is budget neutral.  This budget neutrality factor of 0.996563 is applied to payments in Column 4 and not Column 2 because it is a combined DRG reclassification and recalibration and wage index budget neutrality factor. The changes to the relative weights and DRGs shown in column 2 are prior to any offset for budget neutrality.  The “All Hospitals” line indicates that changes in this column will increase payments by 0.4 percent.  However, as stated earlier, the changes shown in this column are combined with revisions to the wage index and a single budget neutrality adjustment is made for these changes and shown in column 4.  Thus, the impact after accounting only for budget neutrality for changes to the DRG relative weights and classification is somewhat lower than the figures shown in this column (approximately 0.4 percent).  We estimate that changes to the relative weights and DRGs will increase payments to hospitals located in large urban areas (populations over 1 million) by approximately 0.9 percent before applying an adjustment for budget neutrality.  These changes generally increase payments to hospitals in all urban areas (0.5 percent) and large teaching hospitals (0.9 percent) before applying an adjustment for budget neutrality.  Rural hospitals will generally experience a decrease in payments from these changes (−0.9 percent) before applying an adjustment for budget neutrality.  Cardiac specialty hospitals would experience the greatest decline in payments (−2.5 percent) before applying an adjustment for budget neutrality from the changes to blended MS–DRGs and the blended relative cost weights. D. Effects of Wage Index Changes (Column 3) Section 1886(d)(3)(E) of the Act requires that, beginning October 1, 1993, we annually update the wage data used to calculate the wage index.  In accordance with this requirement, the wage index for FY 2008 is based on data submitted for hospital cost reporting periods beginning on or after October 1, 2003 and before October 1, 2004. The estimated impact of the wage data on hospital payments is isolated in Column 3 by holding the other payment parameters constant in this simulation.  That is, Column 3 shows the percentage changes in payments when going from a model using the FY 2007 wage index, based on FY 2003 wage data and having a 100-percent occupational mix adjustment applied, to a model using the FY 2008 pre-reclassification wage index, also having a 100-percent occupational mix adjustment applied, based on FY 2004 wage data.  The wage data collected on the FY 2004 cost report include overhead costs for contract labor that were not collected on FY 2003 and earlier cost reports.  The impacts below incorporate the effects of the FY 2004 wage data collected on hospital cost reports, including additional overhead costs for contract labor compared to the wage data from FY 2003 cost reports that were used to calculate the FY 2007 wage index. Column 3 shows the impacts of updating the wage data using FY 2004 cost reports.  Overall, the new wage data will lead to a −0.1 percent change for all hospitals before application of the wage and DRG recalibration budget neutrality adjustment shown in column 4.  Thus, the figures in this column are approximately 0.1 below what they otherwise would be if they also illustrated a budget neutrality adjustment solely for changes to the wage index.  Among the regions, the largest increase is in the rural Pacific region, which experiences a 0.8 percent increase before applying an adjustment for budget neutrality. The largest decline from updating the wage data is seen in rural New England region (a 1.2 percent decrease) before applying an adjustment for budget neutrality.  The decrease in the pre-reclassified wage index for rural New England is due to a change in our policy regarding how the wage data for New England deemed county hospitals are treated in the wage index calculation, as discussed in section III.I.10. of the preamble of this final rule with comment period.  Also discussed in that section, the policy change does not affect the post-reclassified wage data that are used in setting the IPPS rates and reflected in Tables 4A, 4B, and 4C of the Addendum to this final rule with comment period.  Thus, even though the pre-reclassified wage index will decline because of the change we made to our policy with respect to New England deemed counties, it will have no effect under the IPPS because we use the post-reclassified wage indices for payment.  However, non-PPS payment systems (SNF, IRF, and HHA, among others) that use the pre-reclassified wage index may be affected by this policy change.  However, we are limiting this policy change for New England deemed counties only to IPPS hospitals because it was only addressed in the FY 2008 IPPS proposed rule.  Any change to non-PPS provider wage indices will be addressed in the respective payment rules for these payment systems. In looking at the wage data itself, the national average hourly wage increased 4.3 percent compared to FY 2007.  Therefore, the only manner in which to maintain or exceed the previous year's wage index was to match or exceed the national 4.3 percent increase in average hourly wage.  Of the 3,475 hospitals with wage data for both FYs 2007 and 2008, 1,712, or 49.3 percent, experienced an average hourly wage increase of 4.3 percent or more. The following chart compares the shifts in wage index values for hospitals for FY 2008 relative to FY 2007.  Among urban hospitals, 40 will experience an increase of more than 5 percent and less than 10 percent and 4 will experience an increase of more than 10 percent.  Among rural hospitals, 37 will experience an increase of more than 5 percent and less than 10 percent, and 3 will experience an increase of more than 10 percent.  However, 940 rural hospitals will experience increases or decreases of less than 5 percent, while 2,384 urban hospitals will experience increases or decreases of less than 5 percent.  Fifty urban hospitals will experience decreases in their wage index values of more than 5 percent and less than 10 percent.  Fifteen urban hospitals will experience decreases in their wage index values of greater than 10 percent.  Two rural hospitals will experience decreases of more than 5 percent, but less than 10 percent.  No rural hospitals will experience decreases of more than 10 percent.  These figures are changes in the wage index only which adjusts only 69.7 or 62 percent of a hospital's total payment depending upon whether the wage index is greater or less than 1.0.  Therefore, these figures are illustrating a somewhat larger change in the wage index than would occur to the hospital's total payment. The following chart shows the projected impact for urban and rural hospitals.
                            ( print page 48165) Percentage change in area wage index values
Number of hospitalsUrban
RuralIncrease more than 10 percent
4
3Increase more than 5 percent and less than 10 percent
40
37Increase or decrease less than 5 percent
2,384
940Decrease more than 5 percent and less than 10 percent
50
2Decrease more than 10 percent
15
0
 E. Combined Effects of  DRG and Wage Index Changes (Column 4) Section 1886(d)(4)(C)(iii) of the Act requires that changes to DRG reclassifications and the relative weights cannot increase or decrease aggregate payments.  In addition, section 1886(d)(3)(E) of the Act specifies that any updates or adjustments to the wage index are to be budget neutral.  As noted in the Addendum to this final rule with comment period, in determining the budget neutrality factor, we equated simulated aggregate payments for FY 2007 and FY 2008 using the FY 2006 Medicare utilization data after applying the changes to the DRG relative weights and the wage index. We computed a wage and DRG recalibration budget neutrality factor of 0.996563.  The 0.0 percent impact for all hospitals demonstrates that these changes, in combination with the budget neutrality factor, are budget neutral.  In Table I, the combined overall impacts of the effects of both the DRG reclassifications and the updated wage index are shown in Column 4.  The estimated changes shown in this column reflect the combined effects of the changes in Columns 2 and 3 and the budget neutrality factor for the revised FY 2008 wage index.  Due to the changes to the application of the rural floor budget neutrality, this column does not include the wage index floor for urban areas as required by section 4410 of Pub. L. 105–33.  The effects of that provision are included in Column 7.  There also may be some variation of plus or minus 0.1 percentage point due to rounding. F. Effects of the Expiration of the 3-Year Provision Allowing Urban Hospitals That Were Converted to Rural as a Result of the FY 2005 Labor Market Area Changes to Maintain the Wage Index of the Urban Labor Market Area in Which They Were Formerly Located (Column 5) The policy adopted in FY 2005 for urban hospitals that became rural under the new labor market area definitions is to expire in FY 2008.  In FY 2005, we adopted a policy that allowed urban hospitals that became rural under the new labor market area regions to maintain the wage index assignment of the MSA where they were located for the 3-year period FY 2005, FY 2006, and FY 2007.  Beginning in FY 2008, these hospitals will receive their statewide rural wage index or their FY 2008 MGCRB reclassified wage index.  Column 5 shows the impact of the expiration of the labor market area transition for those hospitals that were urban under the old labor market area designations and are now considered rural hospitals.  The rural hospital row shows a 0.2 percent decrease from the end of the provision as these hold harmless hospitals are now considered geographically rural and are now receiving the wage index of the MSA where they are currently located. G. Effects of MGCRB Reclassifications (Column 6) Our impact analysis to this point has assumed hospitals are paid on the basis of their actual geographic location (with the exception of ongoing policies that provide that certain hospitals receive payments on other bases than where they are geographically located). The changes in Column 6 reflect the per case payment impact of moving from this baseline to a simulation incorporating the MGCRB decisions for FY 2008 which affect hospitals' wage index area assignments. By February 28 of each year, the MGCRB makes reclassification determinations that will be effective for the next fiscal year, which begins on October 1.  The MGCRB may approve a hospital's reclassification request for the purpose of using another area's wage index value.  Hospitals may appeal denials of MGCRB decisions to the CMS Administrator.  Further, hospitals have 45 days from publication of the IPPS rule in the 
                            **Federal Register**
                             to decide whether to withdraw or terminate an approved geographic reclassification for the following year.  This column reflects all MGCRB decisions, Administrator appeals and decisions of hospitals for FY 2008 geographic reclassifications. The overall effect of geographic reclassification is required by section 1886(d)(8)(D) of the Act to be budget neutral.  Therefore, we are applying an adjustment of 0.991695 to ensure that the effects of the section 1886(d)(10) reclassifications are budget neutral.  (See section II.A. of the Addendum to this final rule with comment period.)  Geographic reclassification generally benefits hospitals in rural areas.  We estimate that geographic reclassification will increase payments to rural hospitals by an average of 1.8 percent. H. Effects of the Adjustment to the Application of the Rural Floor (Column 7) As discussed in section III.G. of the preamble of this final rule with comment period, section 4410 of Pub. L. 105–33 established the rural floor by requiring that the wage index for a hospital in any urban area cannot be less than the area wage index determined for the state's rural area.  Since FY 1998, we have implemented this provision by adjusting the standardized amounts.  In this final rule with comment period, we are changing how we apply budget neutrality to the rural floor beginning in FY 2008.  Rather than applying a budget neutrality adjustment to the standardized amount, a uniform budget neutrality adjustment is applied to the wage index.  Therefore, we are applying an adjustment to the wage index of 0.996660 (−0.33 percent) to ensure that the rural floor adjustments are budget neutral as indicated by the zero effect on payments to hospitals overall. Column 7 shows the projected impact of change in the application of the rural floor.  The column compares the post-reclassification FY 2008 wage index of providers before the rural floor adjustment and the post-reclassification FY 2008 wage index of providers with the rural floor adjustment.  Only urban hospitals can benefit from the rural floor provision.  Because the provision is budget neutral, all other hospitals (that is, all rural hospitals and those urban hospitals to which the adjustment is not made) will experience a decrease in payments due to the budget neutrality adjustment.  We project rural hospitals will experience a 0.1 percent decrease in payments.  We project hospitals located in other urban areas (populations of 1 million or fewer) will experience a 0.1 percent increase in payments.  The rural floor will benefit 69 percent of the hospitals in New Hampshire (9) and 39 percent of the hospitals in Connecticut (13), explaining the average increase of 0.9 percent shown in the table for hospitals located in New England.  The average increase among hospitals in the Pacific region is estimated at 0.6 percent and is explained by application of the rural floor to 62 percent of the hospitals in California (207) and 18 percent of the hospitals in Washington (9). I. Effects of Application of the Imputed Rural Floor (Column 8) The FY 2005 IPPS final rule (69 FR 49109) established a temporary imputed rural floor for all urban States from FY 2005 to FY 2007.  The rural floor requires that an urban wage index cannot be lower than the wage index for any rural hospital in that State.  Therefore, an imputed rural floor was established for States that do not have rural areas or rural IPPS hospitals.  In this final rule, we are extending the imputed rural floor for one additional year through FY 2008. Column 8 shows the effects of application the imputed rural floor.  Only hospitals located in New Jersey had been affected by the provision. Therefore only urban providers in the Mid-Atlantic region (NJ) will experience an increase by 0.3 percent, from the imputed rural floor being applied in that State.
                            ( print page 48166) J. Effects of the Expiration of Section 508 of Pub. L. 108–173 (Column 9) Section 508 of Pub. L. 108–173 will expire on September 30, 2007.  As stated in the FY 2007 IPPS final rule (71 FR 48333), we established procedural rules under section 1886(d)(10)(D)(v) of the Act to address specific circumstances where individual and group reclassifications involve a section 508 hospital. In the final rule, the rules were designed to recognize the special circumstances of section 508 hospital reclassifications ending mid-year during FY 2007 and were intended to allow previously approved reclassifications to continue through March 31, 2007, and new section 1886(d)(10) reclassifications to begin April 1, 2007, upon the conclusion of the section 508 reclassifications.  Under these procedural rules, some section 1886(d)(10) hospital reclassifications are only in effect for the second half of the fiscal year.  However, Division B, Title I, section 106(a) of the MIEA–TRHCA (Pub. L. 109–432) extended any geographic reclassifications of hospitals that would expire on March 31, 2007, by 6 months until September 30, 2007.  For FY 2008, the providers that had been reclassified under section 508 in FY 2007 will receive payment using the wage index for the area where they are currently located.  The impact of the expiration of the policy is modeled in Column 8 of Table I.  Section 508 of Pub. L. 108–173 was not a budget neutral provision of the statute.  Its enactment increased total payments for Medicare inpatient hospital services.  Therefore, relative to FY 2007, the expiration of section 508 of Pub. L. 108–173 will reduce Medicare inpatient hospital payments by an estimated 0.1 percent. K.  Effects of the Wage Index Adjustment for Out-Migration (Column 10) Section 1886(d)(13) of the Act, as added by section 505 of Pub. L. 108–173, provides for an increase in the wage index for hospitals located in certain counties that have a relatively high percentage of hospital employees who reside in the county, but work in a different area with a higher wage index.  Hospitals located in counties that qualify for the payment adjustment are to receive an increase in the wage index that is equal to a weighted average of the difference between the wage index of the resident county, post-reclassification and the higher wage index work area(s), weighted by the overall percentage of workers who are employed in an area with a higher wage index.  With the out-migration adjustment, rural providers will experience a 0.1 percent increase in payments in FY 2008 relative to no adjustment at all.  We included these additional payments to providers in the impact table shown above, and we estimate the impact of these providers receiving the out-migration increase to be approximately $26 million. L. Effects of All Changes With CMI Adjustment Prior to Estimated Growth (Column 11) Column 11 compares our estimate of payments per case between FY 2007 and FY 2008 with all changes reflected in this final rule with comment period for FY 2008, including a 0.988 adjustment to the payment rates to account for anticipated improvements in documentation and coding that is expected to increase case-mix.  We generally apply an adjustment to the DRGs to ensure budget neutrality assuming constant utilization.  However, with the 2-year transition to the MS–DRGs, the number of DRGs expands from 538 to 745.  Therefore, the Office of the Actuary estimates an increase in the CMI due to improved coding and we have applied an additional adjustment to achieve budget neutrality.  However, because we modeled the impact, including the adjustment for anticipated case-mix increase but not the actual case-mix increase itself in column 11, this column illustrates a total payment change that is less than what is anticipated to occur. M. Effects of All Changes With CMI Adjustment and Estimated Growth (Column 12) Column 12 compares our estimate of payments per case between FY 2007 and FY 2008, incorporating all changes reflected in this final rule with comment period for FY 2008 (including statutory changes).  This column includes all of the policy changes and assumes the 1.2 percent increase in case-mix from improved documentation and coding will occur equally across all hospitals. Column 12 reflects the impact of all FY 2008 changes relative to FY 2007, including those shown in Columns 2 through 10.  The average increase for all hospitals is approximately 3.5 percent.  This increase includes the effects of the 3.3 percent market basket update.  It also reflects the 0.5 percentage point difference between the projected outlier payments in FY 2008 (5.1 percent of total DRG payments) and the current estimate of the percentage of actual outlier payments in FY 2007 (4.6 percent), as described in the introduction to this Appendix and the Addendum to this final rule with comment period.  As a result, payments are projected to be 0.5 percentage points lower in FY 2007 than originally estimated, resulting in a 0.5 percentage point greater increase for FY 2008 than would otherwise occur.  In addition, the impact of expiration of section 508 of Pub. L. 108–173 reclassification accounts for a 0.1 percent decrease in estimated payments.  As stated earlier, section 1886(d)(13) of the Act provides for an increase in the wage index for hospitals located in certain counties that have a relatively high percentage of hospital employees who reside in the county, but work in a different area with a higher wage index.  This provision of the statute is not budget neutral.  Although the out-migration adjustment will increase payments to some hospitals in FY 2008 relative to not having an adjustment at all, the total number of hospitals receiving the adjustment will be less in FY 2008 than FY 2007, resulting in a 0.1 percent reduction in total IPPS payments.  There might also be interactive effects among the various factors comprising the payment system that we are not able to isolate.  For these reasons, the values in Column 12 may not equal the product of the percentage changes described above. The overall change in payments per case for hospitals in FY 2008 is estimated to increase by 3.5 percent.  Hospitals in urban areas will experience an estimated 3.8 percent increase in payments per case compared to FY 2007.  Hospitals in large urban areas will experience an estimated 4.3 percent increase and hospitals in other urban areas will experience an estimated 3.2 percent increase in payments per case in FY 2008.  Hospital payments per case in rural areas are estimated to increase 1.2 percent. The increases that are larger than the national average for larger urban areas and smaller than the national average for other urban and rural areas are largely attributed to the differential impact of adopting MS–DRGs. Among urban census divisions, the largest estimated payment increases will be 5.2 percent in the Pacific region (generally attributed to MS–DRGs, wage data and application of the rural floor) and 4.2 percent in Puerto Rico (mostly due to MS–DRGs).  The smallest urban increase is estimated at 3.3 percent in the East South Central region (because of MS–DRGs, new wage data, MGCRB reclassification and application of the rural floor). Among rural regions in Column 12, the providers in the West South Central region experience an estimated decrease in payments by 0.1 percent (mostly due to MS–DRGs).  The Pacific and South Atlantic regions will have the highest increases among rural regions with 2.5 and 2.0 percent estimated increases, respectively.  Again, increases in rural areas are generally less than the national average due to the adoption of MS–DRGs. Among special categories of rural hospitals in Column 12, the SCH providers will receive an estimated increase in payments of 0.2 percent, and the RRCs will experience an estimated increase in payments by 2.7 percent. Urban hospitals reclassified for FY 2008 are anticipated to receive an increase of 3.6 percent, while urban hospitals that are not reclassified for FY 2008 are expected to receive an increase of 3.9 percent.  Rural hospitals reclassifying for FY 2008 are anticipated to receive a 1.8 percent payment increase. N. Effects of Policy on Payment Adjustments for Low-Volume Hospitals For FY 2008, we are continuing to apply the volume adjustment criteria we specified in the FY 2005 IPPS final rule (69 FR 49099).  We expect that two providers will receive the low-volume adjustment for FY 2008.  We estimate the impact of these providers receiving the additional 25-percent payment increase to be approximately $36,000. O. Impact Analysis of Table II Table II presents the projected impact of the changes for FY 2008 for urban and rural hospitals and for the different categories of hospitals shown in Table I.  It compares the estimated payments per case for FY 2007 with the average estimated payments per case for FY 2008, as calculated under our models.  Thus, this table presents, in terms of the average dollar amounts paid per discharge, the combined effects of the changes presented in Table I.  The percentage changes shown in the last column of Table II equal 
                            ( print page 48167)
                            the percentage changes in average payments from Column 12 of Table I. Table II.—Impact Analysis of Changes for FY 2008 Operating Prospective Payment System
[Payments per case]
Number of Hospitals
Average FY 200 Payment Per Case 1
Average FY 2008 Payment Per Case 1
All FY 2008 Changes(1)
(2)
(3)
(4)All hospitals
3534
$8,960
$9,278
3.5By Geographic Location:Urban hospitals
2539
$9,304
$9,663
3.9Large urban areas (populations over 1 million)
1406
$9,702
$10,122
4.3Other urban areas (populations of 1 million or fewer)
1133
$8,826
$9,110
3.2Rural hospitals
995
$6,993
$7,081
1.2Bed Size (Urban):0–99 beds
630
$7,148
$7,297
2.1100–199 beds
851
$7,882
$8,162
3.6200–299 beds
480
$8,777
$9,100
3.7300–499 beds
411
$9,722
$10,132
4.2500 or more beds
167
$11,695
$12,179
4.1Bed Size (Rural):0–49 beds
337
$6,049
$6,026
−0.450–99 beds
372
$6,480
$6,539
0.9100–149 beds
173
$6,816
$6,925
1.6150–199 beds
68
$7,598
$7,715
1.5200 or more beds
45
$8,686
$8,869
2.1Urban by Region:New England
122
$9,748
$10,098
3.6Middle Atlantic
350
$10,177
$10,533
3.5South Atlantic
390
$8,796
$9,144
4East North Central
395
$8,868
$9,193
3.7East South Central
166
$8,428
$8,706
3.3West North Central
157
$9,016
$9,329
3.5West South Central
355
$8,791
$9,128
3.8Mountain
153
$9,393
$9,728
3.6Pacific
398
$11,082
$11,657
5.2Puerto Rico
53
$4,364
$4,546
4.2Rural by Region:New England
23
$9,613
$9,727
1.2Middle Atlantic
72
$7,367
$7,437
1South Atlantic
173
$6,557
$6,688
2East North Central
122
$7,418
$7,499
1.1East South Central
177
$6,355
$6,463
1.7West North Central
115
$7,578
$7,652
1West South Central
199
$6,318
$6,313
−0.1Mountain
77
$7,536
$7,605
0.9Pacific
37
$8,552
$8,764
2.5By Payment Classification:Urban hospitals
2578
$9,284
$9,641
3.8Large urban areas (populations over 1 million)
1425
$9,688
$10,107
4.3Other urban areas (populations of 1 million or fewer)
1153
$8,798
$9,081
3.2Rural areas
956
$7,053
$7,141
1.2Teaching Status:Non-teaching
2480
$7,607
$7,835
3Fewer than 100 Residents
815
$9,036
$9,369
3.7100 or more Residents
239
$12,934
$13,499
4.4Urban DSH:Non-DSH
859
$8,109
$8,335
2.8100 or more beds
1512
$9,778
$10,179
4.1Less than 100 beds
355
$6,616
$6,813
3Rural DSH:SCH
384
$6,906
$6,932
0.4RRC
203
$7,574
$7,712
1.8100 or more beds
46
$6,013
$6,164
2.5Less than 100 beds
175
$5,344
$5,423
1.5Urban teaching and DSH:Both teaching and DSH
807
$10,700
$11,150
4.2Teaching and no DSH
186
$8,821
$9,097
3.1No teaching and DSH
1060
$8,006
$8,309
3.8No teaching and no DSH
525
$7,646
$7,867
2.9Rural Hospital Types:( print page 48168)RRC
194
$7,606
$7,813
2.7SCH
367
$7,437
$7,455
0.2MDH
150
$6,489
$6,529
0.6SCH and RRC
99
$8,713
$8,780
0.8MDH and RRC
8
$8,373
$8,383
0.1Type of Ownership:Voluntary
2064
$9,094
$9,409
3.5Proprietary
823
$8,144
$8,458
3.9Government
597
$9,211
$9,542
3.6Medicare Utilization as a Percent of Inpatient Days:0–25
230
$12,615
$13,304
5.525–50
1289
$10,114
$10,545
4.350–65
1451
$7,880
$8,105
2.9Over 65
440
$7,186
$7,312
1.8Hospitals Reclassified by the Medicare Geographic Classification Reviewboard:FY 2008 Reclassifications:All Reclassified Hospitals FY 2008
757
$8,650
$8,915
3.1All Non-Reclassified Hospitals FY 2008
2777
$9,055
$9,389
3.7Urban Reclassified Hospitals FY 2008:
393
$9,286
$9,623
3.6Urban Non-reclassified Hospitals FY 2008:
2145
$9,308
$9,671
3.9Rural Reclassified Hospitals FY 2008:
364
$7,491
$7,624
1.8Rural Nonreclassified Hospitals FY 2008:
569
$6,327
$6,340
0.2All Section 401 Reclassified Hospitals:
29
$8,245
$8,270
0.3Other Reclassified Hospitals (Section 1886(d)(8)(B))
63
$6,683
$6,809
1.9Former Section 508 Hospitals
107
$9,745
$9,795
0.5Specialty Hospitals:Cardiac Specialty Hospitals
22
$10,707
$10,799
0.91
                                 These payment amounts per case do not reflect any estimates of annual case-mix increase.
 VII.  Effects of Other Policy Changes In addition to those policy changes discussed above that we are able to model using our IPPS payment simulation model, we are making various other changes in this final rule with comment period.  Generally, we have limited or no specific data available with which to estimate the impacts of these changes.  Our estimates of the likely impacts associated with these other changes are discussed below. A.  Effects of Policy on Hospital-Acquired Conditions, Including Infections In section II.F. of the preamble of this final rule with comment period, we discuss our implementation of  section 5001(c) of Pub. L. 109–171, which requires the Secretary to identify, by October 1, 2007, at least two conditions that are (a) high cost or high volume or both, (2) result in the assignment of a case to a DRG that has a higher payment when present as a secondary diagnosis, and (c) could reasonably have been prevented through application of evidence-based guidelines.  For discharges occurring on or after October 1, 2008, hospitals will not receive additional payment for cases in which one of the selected conditions was not present on admission.  That is, the case will be paid as though the secondary diagnosis was not present.  However, the statute also requires the Secretary to continue counting the condition as a secondary diagnosis that results in a higher IPPS payment when doing the budget neutrality calculations for DRG reclassifications and recalibration.  Therefore, we do our budget neutrality calculations as though the payment provision did not apply but Medicare will make a lower payment to the hospital for the specific case that includes the secondary diagnosis.  Thus, the provision will result in cost savings to the Medicare program. We note that the provision will only apply when the selected conditions are the only secondary diagnosis present on the claim that will lead to higher payment.  Therefore, if a nonselected secondary diagnosis that leads to the same higher payment is on the claim, the case will continue to be assigned to the higher paying DRG and there will be no savings to Medicare from the case.  Patients will generally have multiple secondary diagnoses during a hospital stay.  Patients having one MCC or CC will frequently have additional conditions that also lead to higher payment. Therefore, in only a small percentage of the cases will the patient have only one secondary diagnosis that would lead to higher payment. The statute does not allow the payment provision to go into effect until October 1, 2008. For this reason, there will be no saving for FY 2008. Any savings associated with this provision will not be realized until FY 2009. We estimate this provision will save $20 million per year beginning October 1, 2008. Our savings estimates for the next 5 fiscal years are shown below: Year
SavingsFY 2008
$0FY 2009
20FY 2010
20FY 2011
20FY 2012
20
 B.  Effects of MS–LTC–DRG Reclassifications and Relative Weights for LTCHs In section II.I. of the preamble to this final rule with comment period, we discuss the adoption of the MS–LTC—DRGs (Version 25. of the CMS GROUPER).  We also discuss that we are implementing a 2-year transition to MS–LTC–DRGs, in which we determined transition blended MS–LTC–DRG relative weights for FY 2008.  We established in the RY 2008 LTCH PPS final rule (72 FR 26880 through 26884), beginning with the update for FY 2008, that the annual update to the classification and relative weights under the LTCH PPS will be done in a budget neutral manner, such that estimated aggregate LTCH PPS payments will be unaffected; that is, they will be neither greater than nor less than the estimated aggregate LTCH PPS payments that would have been made without the MS–LTC–DRG classification and relative weight changes.  However, if the budget neutrality policy had not been adopted, we would not have multiplied each MS–LTC–DRG transition blended relative weight by 1.020905 in the first step of the budget 
                            ( print page 48169)
                            neutrality process (normalization), and we would not have applied a budget neutrality factor of 0.996467 to the transition blended relative weights after normalization based on the most recent available claims data (FY 2006 MedPAR files) for the 376 LTCHs in our database.  With the adoption of this budget neutrality policy, we estimate that with the changes to the MS–LTC–DRG classifications and relative weights for FY 2008, there will be no change in aggregate LTCH PPS payments.  In applying the budget neutrality adjustment described above, we assumed constant utilization. C.  Effects of New Technology Add-On Payments In section II.J. of the preamble to this final  rule, we discuss add-on payments for new medical services and technologies.  As explained in that section, add-on payments for new technology under section 1886(d)(5)(K) of the Act are not required to be budget neutral.  As discussed earlier in this final rule with comment period, we are not approving Wingspan® for new technology add-on payments for FY 2008.  Thus, we will not make any IPPS add-on payments for this technology in FY 2008.  In addition, for FY 2008, we have discontinued new technology add-on payments for GORE TAG, Restore®, and X STOP.  In the FY 2007 IPPS final rule (71 FR 48344), we estimated that FY 2007 IPPS new technology add-on payments would be $16.61 million, $6.01 million, and $9.35 million, respectively, for these technologies.  We have no additional information to further refine these estimates.  Therefore, we estimate that Medicare's new technology add-on payments will decline by approximately $32 million (the sum of our estimates for FY 2007) in FY 2008 compared to FY 2007. D.  Effects of Requirements for Hospital Reporting of Quality Data for Annual Hospital Payment Update In section IV.A. of the preamble of this final rule with comment period, we discuss the requirements for hospitals to report quality data in order for hospitals to receive the full annual hospital payment update for FY 2008 and FY 2009.  We also note that, for the FY 2008 payment update, hospitals must pass our validation requirement of a minimum of 80 percent reliability, based upon our chart-audit validation process, for the first three quarters of data from CY 2006.  These data were due to the QIO Clinical Warehouse by August 15, 2006 (first quarter CY 2006 discharges), November 15, 2006 (second quarter CY 2006 discharges), and February 15, 2007 (third quarter CY 2006 discharges).  We have continued our efforts to ensure that QIOs provide assistance to all hospitals that wish to submit data.  In the preamble of this final rule with comment period, we are finalizing additional validation criteria to ensure that the quality data being sent to CMS are accurate.  The requirement of 5 charts per hospital will result in approximately 21,500 charts per quarter total submitted to the agency.  We reimburse hospitals for the cost of sending charts to the Clinical Data Abstraction Center (CDAC) at the rate of 12 cents per page for copying and approximately $4.00 per chart for postage.  Our experience shows that the average chart received at the CDAC is approximately 150 pages.  Thus, the agency will have expenditures of approximately $473,200 per quarter to collect the charts.  Given that we reimburse for the data collection effort, we believe that a requirement for five charts per hospital per quarter represents a minimal burden to the participating hospital. E.  Effects of Policy on Cancellation of Classification of Acquired Rural Status and Rural Referral Centers In section IV.C.2. of the preamble of this final rule with comment period, we are revising our regulations to change the effective date of cancellation of acquired rural status for hospitals classified as rural referral centers based on acquired rural status.  The current effective date is the hospital's next full cost reporting period following the date of its request for cancellation.  The new effective date will be the beginning of the Federal fiscal year following both the date of the hospital's request for cancellation and at least one 12-month cost reporting period in which it has been in acquired rural status.  Currently, there are about 100 IPPS hospitals that have acquired rural status and about 7 hospitals that became rural referral centers based on acquired rural status.  During this fiscal year (FY 2007), we have only received requests for cancellations from about five hospitals, all of which became rural referral centers after acquiring rural status.  However, this number may increase if the current policy is not changed.  We anticipate that the policy change will not have a significant impact on IPPS hospitals. F.  Effects of Policy on Payment for IME and Direct GME In section IV.D.3. of the preamble of this final rule with comment period, we discuss our policy related to whether vacation and sick leave as well as orientation should be included in the FTE count for IME and direct GME payment purposes.  We had proposed that, for cost reporting periods beginning on or after October, 1, 2007, for direct GME and IME, time spent by residents on vacation or sick leave be removed from the total time considered to constitute an FTE resident.  In addition, we proposed to continue our existing policy to count time spent by residents in orientation activities for both IME and direct GME payment purposes and proposed to change our policy to begin counting time spent by residents in orientation activities in nonhospital settings for purposes of both IME and direct GME payments (where the hospital otherwise met the regulatory requirements to count time spent by residents in the nonhospital setting).  However, as explained in section IV.D.3. of the preamble of this final rule with comment period, because of concerns related to implementation issues raised by the commenters, at this time we are not finalizing our proposal to remove vacation and sick leave from the total time considered to constitute an FTE resident.  Therefore, there is no impact for this provision.  In addition, there is no impact from the clarification of the policy for orientation time because it is not a change in policy.  We anticipate the additional time counted by hospitals for orientation activities in nonhospital settings under the revised policy will be negligible and will have minimal impact. G.  Effects of Policy Changes Relating to Emergency Services Under EMTALA During an Emergency Period In section IV.F. of the preamble of this final rule with comment period, we are amending the EMTALA regulations regarding EMTALA implementation in emergency areas during an emergency period.  Section 1135 of the Act authorizes the Secretary to temporarily waive or modify the application of several requirements and their implementing regulations as they relate to actions taken in an emergency area during an emergency period.  The EMTALA regulations (§ 489.24(a)(2)) now specify that sanctions for inappropriate transfer during a national emergency do not apply to a hospital with a dedicated emergency department located in an emergency area. To make our regulations better reflect the scope of the authority under section 1135 of the Act, we are revising them to clarify that such waivers also may apply to sanctions for the redirection or relocation of an individual to an alternate location to receive a medical screening examination where that direction or relocation occurs pursuant to a State emergency preparedness plan.  We also are revising the regulations to incorporate changes made by the Pandemic and All-Hazards Preparedness Act.  That legislation amended section 1135 of the Act to state that, in the case of a public health emergency that involves a pandemic infectious disease, sanctions for the direction or relocation of an individual to an alternative location for screening may be waived based on either a State emergency preparedness plan or a State pandemic preparedness plan, whichever applies in the State.  In addition, section 1135 of the Act was amended to create an exception to the otherwise applicable 72-hour limitation on the duration of waivers or modifications of sanctions for EMTALA violations in cases where a public health emergency involves a pandemic infectious disease (such as pandemic influenza). As described more fully earlier in this preamble, these changes are not discretionary and do not impose any substantive new requirements. On the contrary, they merely update our regulations to make them consistent with current statutory requirements.  Because of this, we are estimating no impact on Medicare expenditures and no significant impact on hospitals with emergency departments. H.  Effects of Policy on Disclosure of Physician Ownership in Hospitals and Patient Safety Measures In section IV.G. of the preamble of this final rule with comment period, we discuss our adoption of a requirement relating to disclosure of physician ownership in hospitals and to increase patient safety measures.  In the strategic and implementing 
                            ( print page 48170)
                            plan included in our “Final Report to the Congress and Strategic and Implementing Plan” required under section 5006 of the Deficit Reduction Act of 2005, we stated that we would adopt a disclosure requirement that would require hospitals to disclose to patients whether they are physician-owned and, if so, the names of the physician-owners.  In addition, we recognize that patients should be made aware of whether or not a physician is present in the hospital at all times, and the hospital's plans to address patients' emergency medical conditions when a physician is not present. In section IX.B. of the preamble of this final rule with comment period, we have revised our proposed estimate of the cost to affected hospitals of these disclosures to more accurately reflect the volume of disclosures anticipated.  Despite these changes, we continue to believe this final rule with comment period change will impose only minimal additional costs on hospitals.  We believe the cost of implementing these provisions borne by hospitals will be limited to the ongoing cost of providing written notices to patients.  In addition, the changes concerning disclosure of physician ownership in hospitals are consistent with current practices of members of the physician-owned specialty hospital associations.  Therefore, we do not believe that these changes will have any significant economic impact on hospitals. I.  Effects of Implementation of Rural Community Hospital Demonstration Program In section IV.H. of the preamble to this final rule with comment period, we discuss our implementation of section 410A of Pub. L. 108–173 that required the Secretary to establish a demonstration that will modify reimbursement for inpatient services for up to 15 small rural hospitals.  Section 410A(c)(2) requires that “in conducting the demonstration program under this section, the Secretary shall ensure that the aggregate payments made by the Secretary do not exceed the amount which the Secretary would have paid if the demonstration program under this section was not implemented.”  As discussed in section IV.H. of the preamble to this final rule with comment period, we are satisfying this requirement by adjusting national IPPS rates by a factor that is sufficient to account for the added costs of this demonstration.  We estimate that the average additional annual payment for FY 2008 that will be made to each participating hospital under the demonstration will be approximately $1,075,765.  We based this estimate on the recent historical experience of the difference between inpatient cost and payment for hospitals that are participating in the demonstration.  For the 9 participating hospitals, the total annual impact of the demonstration program is estimated to be $9,681,893.  The adjustment factor to the Federal rate used in calculating Medicare inpatient prospective payments as a result of the demonstration is 0.999903. J.  Effects of Policy on Services Furnished to Beneficiaries in Custody of Penal Authorities In section VII. of the preamble of this final rule with comment period, we discuss our revision of our regulations relating to the special conditions under which Medicare payment may be made for services furnished to individuals in custody of penal authorities.  We are indicating that, for purposes of Medicare payment, individuals who are in custody include, but are not limited to, individuals who are under arrest, incarcerated, imprisoned, escaped from confinement, under supervised release, on medical furlough, required to reside in mental health facilities, required to reside in halfway houses, required to live under home detention, or confined completely or partially in any way under a penal statute or rule.  This definition is in accordance with how custody has been defined by Federal courts for purposes of the habeas corpus protections of the Constitution and is consistent with current CMS policy.  We anticipate that this change will have no measurable impact on Medicare expenditures. VIII.  Impact of Changes in the Capital IPPS A.  General Considerations Fiscal year (FY) 2001 was the last year of the 10-year transition period established to phase in the PPS for hospital capital-related costs.  During the transition period, hospitals were paid under one of two payment methodologies: fully prospective or hold harmless.  Under the fully prospective methodology, hospitals were paid a blend of the capital Federal rate and their hospital-specific rate (see § 412.340).  Under the hold-harmless methodology, unless a hospital elected payment based on 100 percent of the capital Federal rate, hospitals were paid 85 percent of reasonable costs for old capital costs (100 percent for SCHs) plus an amount for new capital costs based on a proportion of the capital Federal rate (see § 412.344).  As we state in section V. of the preamble of this final rule with comment period, with the 10-year transition period ending with hospital cost reporting periods beginning on or after October 1, 2001 (FY 2002), beginning in FY 2002 capital prospective payment system payments for most hospitals are based solely on the capital Federal rate.  Therefore, we no longer include information on obligated capital costs or projections of old capital costs and new capital costs, which were factors needed to calculate payments during the transition period, for our impact analysis. In accordance with § 412.312, the basic methodology for determining a capital PPS payment includes a large urban add-on adjustment.  However, as discussed above and in section V. of the preamble of this final rule with comment period, we are eliminating the large urban add-on adjustment to capital IPPS payments in FY 2008.  The basic methodology for calculating capital IPPS payments in FY 2008 is as follows: (Standard Federal Rate) × (DRG weight) × (GAF) × (COLA for hospitals located in Alaska and Hawaii) × (1 + Disproportionate Share Adjustment Factor + IME Adjustment Factor, if applicable). In addition, hospitals may also receive outlier payments for those cases that qualify under the threshold established for each fiscal year. The data used in developing the impact analysis presented below are taken from the March 2007 update of the FY 2006 MedPAR file and the March 2007 update of the Provider-Specific File that is used for payment purposes.  Although the analyses of the changes to the capital prospective payment system do not incorporate cost data, we used the March 2007 update of the most recently available hospital cost report data (FYs 2004 and 2005) to categorize hospitals.  Our analysis has several qualifications.  We use the best data available and make assumptions about case-mix and beneficiary enrollment as described below.  In addition, as discussed in section III. of the Addendum to this final rule with comment period, we are adjusting the capital rates to account for improvements in documentation and coding under the MS–DRGs in FY 2008.  Furthermore, due to the interdependent nature of the IPPS, it is very difficult to precisely quantify the impact associated with each change.  In addition, we draw upon various sources for the data used to categorize hospitals in the tables.  In some cases (for instance, the number of beds), there is a fair degree of variation in the data from different sources.  We have attempted to construct these variables with the best available sources overall.  However, for individual hospitals, some miscategorizations are possible. Using cases from the March 2007 update of the FY 2006 MedPAR file, we simulated payments under the capital PPS for FY 2007 and FY 2008 for a comparison of total payments per case.  Any short-term, acute care hospitals not paid under the general IPPS (Indian Health Service hospitals and hospitals in Maryland) are excluded from the simulations. As we explain in section III.A. of the Addendum to this final rule with comment period, payments are no longer made under the regular exceptions provision under §§ 412.348(b) through (e).  Therefore, we no longer use the actuarial capital cost model (described in Appendix B of the August 1, 2001 proposed rule (66 FR 40099)).  We modeled payments for each hospital by multiplying the capital Federal rate by the GAF and the hospital's case mix.  We then added estimated payments for indirect medical education, disproportionate share, large urban add-on, and outliers, if applicable.  (We note that, consistent with the elimination of the large urban add-on beginning in FY 2008, discussed in section V.B. of the preamble of this final rule with comment period, such estimated payments under this policy are only reflected in the payments we modeled for FY 2007 and were not included in the payments we modeled for FY 2008.)  For purposes of this impact analysis, the model includes the following assumptions: We estimate that the Medicare case mix index will increase by 1.0 percent in both FYs 2007 and 2008. (We note that this does not reflect the adjustment to the capital rates to account for assumed growth in case mix due to improvement in documentation and coding under the MS–DRGs, as discussed in section III. of the Addendum of this final rule with comment period.)
                        We estimate that the Medicare discharges will be 13.1 million in FY 2007( print page 48171)
                            and 13.4 million in FY 2008 for an estimated 2.3 percent increase from FY 2007 to FY 2008.
                        The capital Federal rate was updated beginning in FY 1996 by an analytical framework that considers changes in the prices associated with capital-related costs and adjustments to account for forecast error, changes in the case-mix index, allowable changes in intensity, and other factors. As discussed in section V. of the preamble and section III.A. of the Addendum to this final rule with comment period, the FY 2008 update for all hospitals is 0.9 percent.
                        In addition to the FY 2008 update factors, the FY 2008 capital Federal rate for both urban and rural hospitals was calculated based on a GAF/DRG budget neutrality factor of 0.9997, an outlier adjustment factor of 0.9517, and an exceptions adjustment factor of 0.9997.
                        For FY 2008, as discussed in section V. of the preamble and section III.A. of the Addendum to this final rule with comment period, the FY 2008 capital rates for all hospitals was further adjusted by a factor of 0.988 (or 1.2 percent) to maintain budget neutrality for the implementation of the MS–DRGs by eliminating the effect of changes in coding or classification of discharges that do not reflect real case-mix changes. B.  Results We used the actuarial model described above to estimate the potential impact of our changes for FY 2008 on total capital payments per case, using a universe of 3,534 hospitals.  As described above, the individual hospital payment parameters are taken from the best available data, including the March 2007 update of the FY 2006 MedPAR file, the March 2007 update to the PSF, and the most recent cost report data from the March 2007 update of HCRIS.  In Table III, we present a comparison of total payments per case for FY 2007 compared to FY 2008 based on the FY 2008 payment policies.  Column 2 shows estimates of payments per case under our model for FY 2007.  Column 3 shows estimates of payments per case under our model for FY 2008.  Column 4 shows the total percentage change in payments from FY 2007 to FY 2008.  The change represented in Column 4 includes the 0.9 percent update to the capital Federal rate for all hospitals, a 1.0 percent increase in case mix, changes in the adjustments to the capital Federal rate (for example, the effect of the hospital wage index on the GAF), reclassifications by the MGCRB, and the additional 1.2 percent reduction to all of the rates to account for improvements in documentation and coding or other changes in coding that do not reflect real changes in case mix for implementation of the MS–DRGs. The comparisons are provided by:  (1) Geographic location; (2) region; and (3) payment classification. The simulation results show that, on average, capital payments per case can be expected to increase 0.6 percent in FY 2008.  In addition to the 0.9 percent update to the capital Federal rate, this projected increase in capital payments per case can be attributed to the implementation of the MS–DRGs, including the transition relative weights, as discussed in sections II.B. through E. of the preamble of this final rule with comment period. The results of our comparisons by geographic location and by region are consistent with the results we expected after eliminating the large urban add-on adjustment.  The geographic comparison shows that all urban hospitals are expected to experience a 0.6 percent increase in capital IPPS payments per case, while large urban areas are expected to experience no change in capital IPPS payments per case.  Capital IPPS payments per case for rural hospitals are expected to increase 0.3 percent.  The difference is mostly due to the MS–DRGs.  Specifically, based on existing hospital claims data, under the MS–DRGs, the better recognition of severity of illness is expected to increase payments to urban hospitals that treat a more acutely ill mix of patients.  Similarly, however, the improved recognition of severity of illness will decrease payments to rural hospitals because they are treating less severely ill patients.  Therefore, we project a lower increase in estimated payments for rural hospitals due to the DRG changes as compared to urban hospitals.  In addition to the effect of the DRG changes, the capital impact is also somewhat affected by the wage-index changes because the GAF values are derived from the wage index.  Furthermore, the outlier threshold also affects payments.  Because the FY 2008 outlier threshold is lower than the FY 2007 outlier threshold, payments will increase, further explaining why, after eliminating the large urban add-on adjustment of 3.0 percent, we estimate no change in payments from FY 2007 to FY 2008 for large urban hospitals.  For rural hospitals, another factor contributing to the smaller increase in payments for rural hospitals is the expiration of the 3-year hold harmless provision for urban hospitals that were converted to rural under the CBSAs in FY 2005.  The policy allowed urban hospitals under the old labor market area designations that became rural under the CBSAs to receive payment using the wage index of the MSA where they were previously classified as urban for 3 years:  FY 2005 through FY 2007.  Beginning in FY 2008, these rural hospitals will receive the wage index for the area that they are currently located in.  As a result, rural hospitals will experience a smaller increase in payments than urban hospitals because of the addition of these formerly urban hospitals. More than half of all regions are estimated to experience an increase in total capital payments per case from FY 2007 to FY 2008.  These increases vary by region and range from a 2.4 percent increase in the Pacific rural region to a 0.3 percent increase in the East North Central urban region, the Middle Atlantic rural region, and Puerto Rico.  Two urban regions are projected to experience a decrease in capital payments with the difference mostly due to changes in the GAF and the elimination of the large urban add on adjustment:  −0.6 percent in the Middle Atlantic urban region and −0.2 percent in the New England urban region.  In the rural regions experiencing a decrease in total capital payments per case, the range is from a 0.8 percent decrease in the West South Central rural region to a 0.1 percent decrease in the East North Central rural region.  For most of the rural regions projected to experience a decrease in capital payments, it is mostly due to changes in the GAF, as well as changes due to the adoption of the MS–DRGs.  The change in payments per case for all hospitals is 0.6 percent. By type of ownership, voluntary hospitals are estimated to experience an increase of 0.3 percent in capital payments per case, while both proprietary and government hospitals are estimated to experience a 1.2 percent increases in payments.  Voluntary hospitals are projected to have a slightly smaller increase in capital payments than government and proprietary hospitals, mostly due to the elimination of the large urban add-on adjustment and changes in the GAF. Section 1886(d)(10) of the Act established the MGCRB.  Before FY 2005, hospitals could apply to the MGCRB for reclassification for purposes of the standardized amount, wage index, or both.  Section 401(c) of Pub. L. 108–173 equalized the standardized amounts under the operating IPPS.  Therefore, beginning in FY 2005, there is no longer reclassification for the purposes of the standardized amounts; however, hospitals still may apply for reclassification for purposes of the wage index for FY 2008.  Reclassification for wage index purposes also affects the GAF because that factor is constructed from the hospital wage index. To present the effects of the hospitals being reclassified for FY 2008, we show the average payments per case for reclassified hospitals for FY 2007.  Rural nonreclassified hospitals are expected to have the largest decrease in payments of 0.4 percent, as compared to the 0.1 percent decrease for the other reclassified hospitals for FY 2008.  This difference is mostly due to changes in the GAF.  All urban nonreclassified hospitals and all rural reclassified hospitals are expected to experience an increase in payments of 0.7 percent, while all urban reclassified hospitals are expected to experience a 0.5 percent increase in capital payments per case. This difference is mostly due to the elimination of the large urban add-on as well as changes in the GAF. 
                            ( print page 48172) Table III.—Comparison of Total Payments per Case
[FY 2007 Payments Compared To FY 2008 Payments]
Number of hospitals
Average FY 2007 payments/case
Average FY 2008 payments/case
ChangeBy Geographic Location:All hospitals
3,534
748
752
0.6Large urban areas (populations over 1 million)
1,406
830
829
0.0Other urban areas (populations of 1 million of fewer)
1,133
737
748
1.5Rural areas
995
520
521
0.3Urban hospitals
2,539
788
793
0.60–99 beds
630
619
621
0.4100–199 beds
851
674
678
0.6200–299 beds
480
744
748
0.5300–499 beds
411
818
824
0.8500 or more beds
167
983
990
0.6Rural hospitals
995
520
521
0.30–49 beds
337
425
423
−0.550–99 beds
372
477
478
0.1100–149 beds
173
517
519
0.5150–199 beds
68
575
575
0.1200 or more beds
45
649
654
0.7By Region:Urban by Region
2,539
788
793
0.6New England
122
838
837
−0.2Middle Atlantic
350
862
857
−0.6South Atlantic
390
747
755
1.1East North Central
395
773
775
0.3East South Central
166
711
714
0.4West North Central
157
771
774
0.5West South Central
355
737
744
1.0Mountain
153
788
800
1.5Pacific
398
899
916
1.9Puerto Rico
53
345
346
0.3Rural by Region
995
520
521
0.3New England
23
711
709
−0.3Middle Atlantic
72
529
531
0.3South Atlantic
173
502
507
0.9East North Central
122
550
549
−0.1East South Central
177
481
480
−0.2West North Central
115
549
552
0.5West South Central
199
473
469
−0.8Mountain
77
520
528
1.6Pacific
37
627
642
2.4By Payment Classification:All hospitals
3,534
748
752
0.6Large urban areas (populations over 1 million)
1,425
828
828
0.0Other urban areas (populations of 1 million of fewer)
1,153
736
747
1.5Rural areas
956
520
522
0.2Teaching Status:Non-teaching
2,480
632
636
0.7Fewer than 100 Residents
815
761
764
0.4100 or more Residents
239
1,076
1,083
0.6Urban DSH:100 or more beds
1,512
812
820
0.9Less than 100 beds
355
552
554
0.4Rural DSH:Sole Community (SCH/EACH)
384
465
467
0.3Referral Center (RRC/EACH)
203
573
576
0.5Other Rural:100 or more beds
46
485
487
0.4Less than 100 beds
175
431
430
−0.4Urban teaching and DSH:Both teaching and DSH
807
888
895
0.7Teaching and no DSH
186
798
792
−0.7No teaching and DSH
1,060
667
675
1.1No teaching and no DSH
525
697
699
0.3Rural Hospital Types:Non special status hospitals
2,452
791
796
0.6RRC/EACH
53
698
707
1.3SCH/EACH
42
641
643
0.3Medicare-dependent hospitals (MDH)
16
446
440
−1.3SCH, RRC and EACH
15
746
764
2.3Hospitals Reclassified by the Medicare Geographic Classification Review Board:( print page 48173)FY 2008 Reclassifications:All Urban Reclassified
393
786
790
0.5All Urban Non-Reclassified
2,145
788
793
0.7All Rural Reclassified
364
564
568
0.7All Rural Non-Reclassified
569
455
453
−0.4Other Reclassified Hospitals (Section 1886(d)(8)(B))
63
516
515
−0.1Type of Ownership:Voluntary
2,064
765
768
0.3Proprietary
823
681
689
1.2Government
597
732
741
1.2Medicare Utilization as a Percent of Inpatient Days:0–25
230
979
991
1.325–50
1,289
845
851
0.850–65
1,451
664
667
0.4Over 65
440
597
595
−0.3
 IX.  Alternatives Considered This final rule with comment period contains a range of policies.  The preamble of this final rule with comment period provides descriptions of the statutory provisions that are addressed, identifies those policies when discretion has been exercised, presents rationale for our decisions and, where relevant, alternatives that were considered. X.  Overall Conclusion The changes we are making in this final rule with comment period will affect all classes of hospitals.  Some hospitals are expected to experience significant gains and others less significant gains, but overall hospitals are projected to experience positive updates in IPPS payments in FY 2008.  Table I of section VI. of this Appendix demonstrates the estimated distributional impact of the IPPS budget neutrality requirements for DRG and wage index changes, and for the wage index reclassifications under the MGCRB.  Table I also shows an overall increase of 3.5 percent in operating payments, an estimated increase of $3.56 billion, which includes hospital reporting of quality data program costs ($1.89 million) and all operating payment policies as described in section VI. of this Appendix.  Capital payments are estimated to increase by 0.6 percent per case, as shown in Table III of section VIII. of this Appendix.  Therefore, we project that capital payments will increase by $282 million in FY 2008 compared to FY 2007.  The operating and capital payments should result in a net increase of $3.837 billion to IPPS providers.  The discussions presented in the previous pages, in combination with the rest of this final rule with comment period, constitute a regulatory impact analysis. XI.  Accounting Statement As required by OMB Circular A–4 (available at 
                            *http://www.whitehousegov/​omb/​circulars/​a004/​a-4.pdf)*, in Table IV below, we have prepared an accounting statement showing the classification of the expenditures associated with the provisions of this final rule with comment period.  This table provides our best estimate of the increase in Medicare payments to providers as a result of the changes to the IPPS presented in this final rule with comment period.  All expenditures are classified as transfers to Medicare providers. Table IV.—Accounting Statement: Classification of Estimated Expenditures from FY 2007 to FY 2008
Category
TransfersAnnualized Monetized Transfers
$3.837 Billion.From Whom to Whom
Federal Government to IPPS Medicare Providers.Total
$3.837 Billion.
 XII. Executive Order 12866 In accordance with the provisions of Executive Order 12866, the Office of Management and Budget reviewed this final rule with comment period. Appendix B: Recommendation of Update Factors for Operating Cost Rates of Payment for Inpatient Hospital Services I.  Background Section 1886(e)(4)(A) of the Act requires that the Secretary, taking into consideration the recommendations of the MedPAC, recommend update factors for inpatient hospital services for each fiscal year that take into account the amounts necessary for the efficient and effective delivery of medically appropriate and necessary care of high quality.  Under section 1886(e)(5)(B) of the Act, we are required to publish update factors recommended by the Secretary in the proposed and final IPPS rules, respectively.  Accordingly, we are publishing our final recommendations for the update factors for the IPPS standardized amount, the hospital-specific rates for SCHs and MDHs, and the rate-of-increase limits for hospitals and hospital units excluded from the IPPS, as well as LTCHS, IPFs, and IRFs.  We also discuss our response to MedPAC's recommended update factors for inpatient hospital services. II.  Inpatient Hospital Update for FY 2008 Section 1886(b)(3)(B)(i)(XX) of the Act, as amended by section 5001(a) of Pub. L. 109–171, sets the FY 2008 percentage increase in the operating cost standardized amount equal to the rate-of-increase in the hospital market basket for IPPS hospitals in all areas, subject to the hospital submitting quality information under rules established by the Secretary in accordance with 1886(b)(3)(B)(viii) of the Act. For hospitals that do not provide these data, the update is equal to the market basket percentage increase less 2.0 percentage points. Consistent with current law, based on Global Insight, Inc.'s second quarter 2007 forecast of the FY 2008 market basket increase, the FY 2008 update to the standardized amount will be 3.3 percent (that is, the current estimate of the market basket rate-of-increase) for hospitals in all areas, provided the hospital submits quality data in accordance with our rules.  For hospitals that do not submit quality data, the update to the standardized amount will be 1.3 percent (that is, the current estimate of the market basket rate-of-increase minus 2.0 percentage points). Section 1886(b)(3)(B)(iv) of the Act sets the FY 2008 percentage increase in the hospital-specific rates applicable to SCHs and MDHs equal to the rate set forth in section 1886(b)(3)(B)(i) of the Act (that is, the same update factor as for all other hospitals subject to the IPPS).  Therefore, the update to the hospital-specific rates applicable to SCHs and MDHs will be 3.3  or 1.3 percent depending upon whether the hospital submits quality data. Section 1886(b)(3)(B)(ii) of the Act is used for purposes of determining the percentage increase in the rate-of-increase limits for children's and cancer hospitals.  Section 1886(b)(3)(B)(ii) of the Act sets the percentage increase in the rate-of-increase limits equal to the market basket percentage 
                            ( print page 48174)
                            increase.  In accordance with § 403.752(a) of the regulations, RNHCIs are paid under § 413.40, which also uses section 1886(b)(3)(B)(ii) of the Act to update the percentage increase in the rate-of-increase limits.  Section 1886(j)(3)(C) of the Act addresses the increase factor for the Federal prospective payment rate of IRFs.  Section 123 of Pub. L. 106–113, as amended by section 307(b) of Pub. L. 106–554, provides the statutory authority for updating payment rates under the LTCH PPS.  As discussed below, for cost reporting periods beginning on or after October 1, 2006, LTCHs that are not defined as new under § 412.23(e)(4), and that had not elected to be paid under 100 percent of the Federal rate are paid 100 percent of the adjusted Federal PPS rate.  Therefore, because no portion of LTCHs' prospective payments will be based on reasonable cost concepts for cost reporting periods beginning on or after October 1, 2006, we are not establishing a rate-of-increase percentage for FY 2008 for LTCHs to be used under § 413.40.  In addition, section 124 of Pub. L. 106–113 provides the statutory authority for updating all aspects of the payment rates for IPFs.  Under this broad authority, IPFs that are not defined as new under § 412.426(c) will be paid under a blend methodology for cost reporting periods beginning on or after January 1, 2005, and before January 1, 2008.  The methodology blends the estimated Federal per diem payment amount and a facility-specific payment amount.  The portion of the IPF PPS payment that is based on reasonable cost principles is updated in accordance with 42 CFR Part 413, which uses section 1886(b)(3)(B)(ii) of the Act to determine the percentage increase in the rate-of-increase limits.  For the reasonable cost-based portion of an IPF's PPS blended payments, we are providing our current estimate of the excluded hospital market basket increase (3.3 percent) to update the target amounts.  New IPFs are paid based on 100 percent of the Federal per diem payment amount. Currently, children's hospitals, cancer hospitals, and RNHCIs are the remaining three types of hospitals still reimbursed under the reasonable cost methodology.  We are providing our current estimate of the FY 2008 IPPS operating market basket percentage increase (3.3 percent) to update the target limits for children's hospitals, cancer hospitals, and RNHCIs. Effective for cost reporting periods beginning on or after October 1, 2002, LTCHs have been paid under the LTCH PPS, which was implemented with a 5-year transition period for LTCHs not defined as new under § 412.23(e)(4) (hereafter referred to as “existing”).  (See 67 FR 55954.)  An existing LTCH could have elected to be paid at 100 percent of the adjusted Federal prospective rate at the start of any of its cost reporting periods during the transition period.  During this transition period, if an existing LTCH did not elect to be paid at 100 percent of the adjusted Federal prospective payment rate, it received a PPS payment that consisted of a blend of its reasonable cost-based payment and the Federal prospective payment rate.  For cost reporting periods beginning on or after October 1, 2006, no portion of a LTCH's PPS payments can be based on reasonable cost concepts.  Consequently, there is no need to update the target limit under § 413.40 effective October 1, 2007, for LTCHs. In the RY 2008 LTCH PPS final rule (72 FR 26887 through 26890), we finalized an update of 0.71 percent (that is, the latest estimate of the market basket rate-of-increase of 3.2 percent minus an adjustment factor of 2.49 percentage points for case-mix growth due to improved coding) to the LTCH PPS Federal rate for RY 2008. Effective for cost reporting periods beginning on or after January 1, 2005, IPFs are paid under the IPF PPS.  IPF PPS payments are based on a Federal per diem rate that is derived from the sum of the average routine operating, ancillary, and capital costs for each patient day of psychiatric care in an IPF, adjusted for budget neutrality.  For cost reporting periods beginning on or after January 1, 2005, and before January 1, 2008, existing IPFs (those not defined as “new” under § 412.426(c)) are paid based on a blend of the reasonable cost based PPS payments and the Federal per diem base rate.  For cost reporting periods beginning on or after January 1, 2008, existing IPFs will be paid based on 100 percent of the Federal per diem rate.  For purposes of the update factor for FY 2008, the portion of the IPF PPS transitional blend payment based on reasonable costs will be determined by updating the IPF's TEFRA limit by the current estimate of the excluded hospital market basket, which is estimated to be 3.3 percent.  The update factor of 3.2 percent to the Federal per diem rate for July 1, 2007 through June 30, 2008, based on Global Insight, Inc.'s first quarter 2007 forecast of the RPL market basket increase, was provided in the rate year (RY) 2008 IPF PPS update notice (72 FR 25608). IRFs are paid under the IRF PPS for cost reporting periods beginning on or after January 1, 2002.  For cost reporting periods beginning on or after October 1, 2002 (FY 2003), and thereafter, the Federal prospective payments to IRFs are based on 100 percent of the adjusted Federal IRF prospective payment amount, updated annually  (69 FR 45721).  Under section 1886(j)(3)(C) of the Act, the FY 2008 IRF PPS update will equal 3.2 percent based on Global Insight, Inc.'s second quarter 2007 forecast of the RPL market basket increase with historical data through the first quarter of 2007. III.  Secretary's Final Recommendation MedPAC is recommending an inpatient hospital update equal to the market basket rate of increase for FY 2008.  MedPAC's rationale for this update recommendation is described in more detail below.  Using the 2007 second quarter forecast from Global Insight, Inc. of the FY 2008 market basket increase and an adjustment factor based on the FY 2008 President's Budget, we are recommending an update to the standardized amount of 2.65 percent (that is, the market basket rate-of-increase of 3.3 percent minus an adjustment factor of 0.65 percentage points). We are recommending that this same update factor apply to SCHs and MDHs.Our rationale for this recommended update is described below. In addition to making a recommendation for IPPS hospitals, in accordance with section 1886(e)(4)(A) of the Act, we are also recommending update factors for all other types of hospitals.  Consistent with the President's Budget, we are recommending an update based on the IPPS market basket increase for children's hospitals, cancer hospitals, and RNHCIs of 3.3 percent, based on Global Insight, Inc.'s 2007 second quarter forecast of the IPPS operating market basket increase.  For IPFs that are currently paid on a PPS blended payment basis, a portion of which is based on reasonable cost-principles and Federal prospective payment amounts, we are recommending an update factor of 3.3 percent for the portion of the payment that is based on reasonable costs.  Consistent with the President's Budget, based on Global Insight, Inc.'s first quarter 2007 forecast of the RPL market basket increase, we are recommending an update equal to the market basket increase of 3.2 percent for the Federal per diem payment amount. In the RY 2008 LTCH PPS final rule (72 FR 26887 through 26890), we implemented, and in this final rule with comment period recommend, an update of 0.71 percent (that is, the most recent estimate of the market basket rate-of-increase of 3.2 percent minus an adjustment factor of 2.49 percentage points for case-mix growth due to improved coding) to the Federal rate for RY 2008.  Finally, consistent with the President's FY 2008 Budget, we are recommending that the Federal rate to the IRF PPS remain unchanged for FY 2008. For fiscal years prior to FY 2008, section 1886(e)(3) of the Act directed the Secretary to report to the Congress an initial estimate of his recommendation of an appropriate payment inflation update for inpatient hospital services for the upcoming fiscal year not later than March 1.  Section 1886(d)(4)(C) of the Act further required the Secretary to include recommendations with respect to adjustments to the DRG weighting factors in the March 1 Report to Congress.  In addition, sections 1886(e)(4)(A) and (e)(5)(B) of the Act require that the Secretary recommend update factors in each of the IPPS proposed and final rules, taking into account MedPAC's recommendation.  Thus, the statute required the Secretary to make update recommendations in both a March 1 Report to Congress, and later in the IPPS proposed and final rules.  Historically, the only difference between the recommendation we provided in the March 1 Report to Congress and the IPPS proposed rule was the use of a later estimate of the market basket increase for the proposed rule.  Section 106(c) of MIEA–TRHCA eliminated the requirement to make the Report to Congress recommending an update and adjustments to DRG weighting factors by March 1. In accordance with section 106(c) of MIEA–TRHCA, we are making the Secretary's only recommendation for an update factor in the IPPS rules. IV.  MedPAC Recommendation for Assessing Payment Adequacy and Updating Payments in Traditional Medicare In its March 2007 Report to Congress, MedPAC assessed the adequacy of current payments and costs, and the relationship 
                            ( print page 48175)
                            between payments and an appropriate cost base, utilizing an established methodology used by MedPAC in the past several years. MedPAC recommended an update to the hospital inpatient rates equal to the increase in the hospital market basket in FY 2008, concurrent with implementation of a quality incentive payment program. MedPAC also recommended that CMS put pressure on hospitals to control their costs rather than accommodate the current rate of cost growth. MedPAC noted that, notwithstanding negative overall Medicare margins, most of the indicators of Medicare payment adequacy to hospitals are positive, including beneficiaries' access to care, increased access to capital, and service volume increases. MedPAC also noted that this recommendation “should have no impact on beneficiary access to care and is not expected to affect providers' willingness and ability to provide care to Medicare beneficiaries.” *Response:*
                             We agree with MedPAC that hospitals should control costs rather than accommodate the current rate of growth.  An update equal to less than the market basket will pressure hospitals to control their costs, consistent with MedPAC's recommendation. As MedPAC noted, rising hospital costs are resulting in margins for some hospitals that are below zero.  As discussed in section II. of the preamble of this final rule with comment period, CMS is refining the DRGs to better account for severity illness and is basing the DRG weights on cost rather than charges.  We believe that these refinements will better match Medicare payments to the cost of care and provide incentives for hospitals to be more efficient in controlling costs. For these reasons, we are recommending an inpatient hospital update equal to the market basket increase minus an adjustment factor of 0.65 percentage points for hospitals paid under the IPPS for FY 2008. We note that, because the operating and capital prospective payment systems remain separate, we are continuing to use separate updates for operating and capital payments. The update to the capital payment rate is discussed in section III. of the Addendum to this final rule with comment period.


# Footnotes

1.
    
                             Medicare Payment Advisory Commission: 
                            *Report to the Congress, Physician-Owned Specialty Hospitals*, March 2005, page viii. Back to Citation
 2.
    
                             Carter, Grace M. and Ginsburg, Paul: The Medicare Case Mix Index Increase, Medical Practice Changes, Aging and DRG Creep, Rand, 1985. Back to Citation
 3.
    
                             Review of Assumptions and Methods of The Medicare Trustees' Financial Projections; Technical Review Panel on the Medicare Trustees Reports, December 2000. Back to Citation
 4.
    
                             “Has DRG Creep Crept Up? Decomposing the Case Mix Index Change Between 1987 and 1988”; Carter, Newhouse, Relles; R–4098–HCFA/ProPAC (1991). Back to Citation
 5.
    
                             Medicare Payment Advisory Commission: Report to the Congress, March 2006 (p. 52). Back to Citation
 6.
    
                             Medicare Payment Advisory Commission: Report to Congress on Physician-Owned Specialty Hospitals, March 2005, p. 42. Back to Citation
 7.
    
                             Carter, Paddock: Preliminary Analyses of Changes in Coding and Case Mix Under the Inpatient Rehabilitation Facility Prospective Payment System, RAND, 2004. Back to Citation
 8.
    
                             Maryland uses a July 1 to June 30 State fiscal year. Prior to FY 2003, Maryland had a 6-month lag in the data used to calculate the hospital base case-mix index and case-mix change. Maryland used 12 months data ending December even though the hospitals' rate year was July 1 to June 30. In FY 2003, Maryland moved to what it calls “Real Time Case-Mix” and started using 12 months data ending June 30 to calculate case-mix index and case-mix change for a rate year beginning July 1. Back to Citation
 9.
    
                             The HSCRC informed us that it began using APR DRGs for this hospital to calculate the CMI and case-mix change to set the hospital's charge per case target (CPC) that is used in Maryland's all-payer ratesetting system for payment. However the HSCRC also compared the reasonableness of hospital rates and costs for this hospital relative to peer institutions using modified CMS DRGs to calculate CMI and case-mix change. This use of dual systems to calculate CMI and case-mix change made it difficult for the hospital to code aggressively in the first few years of using APR DRGs. Back to Citation
 10.
    
                             Medicare Payment Advisory Commission: Letter to Acting Administrator Leslie Norwalk, June 11, 2007, page 12. Back to Citation
 11.
    
                             Medicare Payment Advisory Commission: Letter to Acting Administrator Leslie Norwalk, June 11, 2007, page 12. Back to Citation
 12.
    
                             Carter, Grace M. and Ginsburg, Paul: The Medicare Case Mix Index Increase, Medical Practice Changes, Aging and DRG Creep, Rand, 1985. Back to Citation
 13.
    
                             Medicare Payment Advisory Comission: Letter to Acting Administrator Leslie Norwalk, June 11, 2007, page 12 citing Steinwald, B. and L. Dummit. 1989. “Hospital Case-mix change: Sicker patient or DRG Creep?” Health Affairs. Summer, 1989. Back to Citation
 14.
    
                             Medicare Payment Advisory Commission: Letter to Acting Administrator Leslie Norwalk, June 11, 2007, page 11. Back to Citation
 15.
    
                             Medicare Payment Advisory Commission: Letter to Acting Administrator Leslie Norwalk, June 11, 2007, page 12. Back to Citation
 16.
    
                             Medicare Payment Advisory Commission: Letter to Acting Administrator Leslie Norwalk, June 11, 2007, page 11. Back to Citation
 17.
    
                             Dimick, Chris “Clinical Documentation Specialists,” Journal of AHIMA, July–August 2007, pages 44–50. Back to Citation
 18.
    
                             Wynn, Barbara O., Beckett, Megan, et al., “Evaluation of Severity Adjusted DRG System: Draft Interim Report,” RAND HEALTH, August, 2007, Addendum, page 27. Back to Citation
 19.
    
                             Medicare Payment Advisory Commission: Letter to Acting Administrator Leslie Norwalk, June 11, 2007, page 13. Back to Citation
 20.
    
                             Medicare Payment Advisory Commission: Letter to Acting Administrator Leslie Norwalk, June 11, 2007, page 10. Back to Citation
 21.
    
                             Medicare Payment Advisory Commission:
                            *Report to the Congress: Physician-Owned Specialty Hospitals,*
                             March 2005, p. 26. Back to Citation
 22.
    
                             Foxman, B.: “Epidemiology of urinary tract infections: incidence, morbidity, and economic costs,” 
                            *The American Journal of Medicine,*
                             113 Suppl 1A, pp. 5s–13s, 2002. Back to Citation
 23.
    
                             Safdar N.: Clinical and Economic Consequences of Ventilator-Associated Pneumonia: a Systematic Review, 
                            *Critical Care Medicine,*
                             2005, 33(10), pp. 2184–2193. Back to Citation
 24.
    
                             Effective October 1, 2007, procedure code 84.58 (Implantation of interspinous process decompression device) has been deleted and replaced by new procedure code 84.80 (Insertion or replacement of interspinous process device(s)). Back to Citation
 25.
    
                             See the FY 1989 final rule (53 FR 38485, September 30, 1988), for the revision made for the discharges occurring in FY 1989; the FY 1990 final rule (54 FR 36552, September 1, 1989), for the FY 1990 revision; the FY 1991 final rule (55 FR 36126, September 4, 1990), for the FY 1991 revision; the FY 1992 final rule (56 FR 43209, August 30, 1991) for the FY 1992 revision; the FY 1993 final rule (57 FR 39753, September 1, 1992), for the FY 1993 revision; the FY 1994 final rule (58 FR 46278, September 1, 1993), for the FY 1994 revisions; the FY 1995 final rule (59 FR 45334, September 1, 1994), for the FY 1995 revisions; the FY 1996 final rule (60 FR 45782, September 1, 1995), for the FY 1996 revisions; the FY 1997 final rule (61 FR 46171, August 30, 1996), for the FY 1997 revisions; the FY 1998 final rule (62 FR 45966, August 29, 1997) for the FY 1998 revisions; the FY 1999 final rule (63 FR 40954, July 31, 1998), for the FY 1999 revisions; the FY 2001 final rule (65 FR 47064, August 1, 2000), for the FY 2001 revisions; the FY 2002 final rule (66 FR 39851, August 1, 2001), for the FY 2002 revisions; the FY 2003 final rule (67 FR 49998, August 1, 2002), for the FY 2003 revisions; the FY 2004 final rule (68 FR 45364, August 1, 2003), for the FY 2004 revisions; the FY 2005 final rule (69 FR 49848, August 11, 2004), for the FY 2005 revisions; the FY 2006 final rule (70 FR 47640, August 12, 2005), for the FY 2006 revisions; and the FY 2007 final rule (71 FR 47870) for the FY 2007 revisions. In the FY 2000 final rule (64 FR 41490, July 30, 1999, we did not modify the CC Exclusions List because we did not make any changes to the ICD–9–CM codes for FY 2000. Back to Citation
 26.
    
                             The original list of the ICD–9–CM procedure codes for the procedures we consider nonextensive procedures, if performed with an unrelated principal diagnosis, was published in Table 6C in section IV. of the Addendum to the FY 1989 final rule (53 FR 38591). As part of the FY 1991 final rule (55 FR 36135), the FY 1992 final rule (56 FR 43212), the FY 1993 final rule (57 FR 23625), the FY 1994 final rule (58 FR 46279), the FY 1995 final rule (59 FR 45336), the FY 1996 final rule (60 FR 45783), the FY 1997 final rule (61 FR 46173), and the FY 1998 final rule (62 FR 45981), we moved several other procedures from DRG 468 to DRG 477, and some procedures from DRG 477 to DRG 468. No procedures were moved in FY 1999, as noted in the final rule (63 FR 40962); in FY 2000 (64 FR 41496); in FY 2001 (65 FR 47064); or in FY 2002 (66 FR 39852). In the FY 2003 final rule (67 FR 49999) we did not move any procedures from DRG 477. However, we did move procedure codes from DRG 468 and placed them in more clinically coherent DRGs. In the FY 2004 final rule (68 FR 45365), we moved several procedures from DRG 468 to DRGs 476 and 477 because the procedures are nonextensive. In the FY 2005 final rule (69 FR 48950), we moved one procedure from DRG 468 to 477. In addition, we added several existing procedures to DRGs 476 and 477. In the FY 2006 (70 FR 47317), we moved one procedure from DRG 468 and assigned it to DRG 477. In FY 2007, we moved one procedure from DRG 468 and assigned it to DRGs 479, 553, and 554. Back to Citation
 27.
    
                             The BBA was enacted on August 5, 1997, and required application of the rural floor beginning with the FY 1998 IPPS. See the following for a description and calculation of the IPPS standardized amounts since that time: 62 FR 46038–46043, August 29, 1997; 63 FR 41006–41010, July 31, 1998; 64 FR 41544–41549, July 30, 1999; 65 FR 47111–47116, August 1, 2000; 66 FR 39939–39946, August 1, 2001; 67 FR 50120–50126, August 1, 2002; 68 FR 45474–45480, August 1, 2003; 69–FR–49273–49282, August 11, 2004; 70 FR 47491–47498, August 12, 2005; 71 FR 59889–58980, October 11, 2006. Back to Citation
 28.
    
                             Institute of Medicine, “Performance Measurement: Accelerating Improvement,” December 1, 2005, available at 
                            *http://www.iom.edu/​CMS/​3809/​19805/​31310.aspx.* Back to Citation
 29.
    
                             These figures represent 3.0 standard deviations from the mean of the log distribution of CCRs for all hospitals. Back to Citation


BILLING CODE 4120–01–P BILLING CODE 4120–01–C [FR Doc. 07–3820 Filed 8–1–07; 4:00 pm]