Vol. 80 Friday, 

No. 84 May 1, 2015 

Part II 

Department of Health and Human Services 

Centers for Medicare & Medicaid Services 

42 CFR Parts 412 

Medicare Program; Inpatient Psychiatric Facilities Prospective Payment 

System—Update for Fiscal Year Beginning October 1, 2015 (FY 2016); 

Proposed Rule 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

25012 Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 412 

[CMS–1627–P] 

RIN 0938–AS47 

Medicare Program; Inpatient 

Psychiatric Facilities Prospective 

Payment System—Update for Fiscal 

Year Beginning October 1, 2015 (FY 

2016) 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule would 

update the prospective payment rates 

for Medicare inpatient hospital services 

provided by inpatient psychiatric 

facilities (IPFs) (which are freestanding 

IPFs and psychiatric units of an acute 

care hospital or critical access hospital). 

These changes would be applicable to 

IPF discharges occurring during the 

fiscal year (FY) beginning October 1, 

2015 through September 30, 2016 (FY 

2016). This proposed rule also proposes: 

A new IPF-specific market basket; to 

update the IPF labor-related share; a 

transition to new Core Based Statistical 

Area (CBSA) designations in the FY 

2016 IPF Prospective Payment System 

(PPS) wage index; to phase out the rural 

adjustment for IPF providers whose 

status changes from rural to urban as a 

result of the proposed wage index CBSA 

changes; and new quality measures and 

reporting requirements under the IPF 

quality reporting program. This 

proposed rule also reminds IPFs of the 

October 1, 2015 implementation of the 

International Classification of Diseases, 

10th Revision, Clinical Modification 

(ICD–10–CM), and updates providers on 

the status of IPF PPS refinements. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5 p.m. on June 23, 2015. 

ADDRESSES: In commenting, please refer 

to file code CMS–1627–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

to http://www.regulations.gov. Follow 

the ‘‘Submit a comment’’ instructions. 

2. By regular mail. You may mail 

written comments to the following 

address ONLY: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–1627–P, P.O. Box 8010, 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 to the 

following address ONLY: Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–1627–P, Mail 

Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

4. By hand or courier. Alternatively, 

you may deliver (by hand or courier) 

your written comments ONLY to the 

following addresses prior to the close of 

the comment period: 

a. For delivery in Washington, DC— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Room 445–G, Hubert 

H. Humphrey Building, 200 

Independence Avenue SW., 

Washington, DC 20201. 

(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 a proof of filing by 

stamping in and retaining an extra copy of 

the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

If you intend to deliver your 

comments to the Baltimore address, call 

telephone number (410) 786–4492 in 

advance to schedule your arrival with 

one of our staff members. 

Comments erroneously mailed to the 

addresses indicated as appropriate for 

hand or courier delivery may be delayed 

and received after the comment period. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT:

Katherine Lucas or Jana Lindquist, 

(410) 786–7723, for general information. 

Hudson Osgood, (410) 786–7897 or 

Bridget Dickensheets, (410) 786–8670, 

for information regarding the market 

basket and labor-related share. 

Theresa Bean, (410) 786–2287, for 

information regarding the regulatory 

impact analysis. 

Rebecca Kliman, (410) 786–9723, or 

Jeffrey Buck, (410) 786–0407, for 

information regarding the inpatient 

psychiatric facility quality reporting 

program. 

SUPPLEMENTARY INFORMATION: 

Availability of Certain Tables 

Exclusively Through the Internet on the 

CMS Web Site 

In the past, tables setting forth the 

Wage Index for Urban Areas Based on 

CBSA Labor Market Areas and the Wage 

Index Based on CBSA Labor Market 

Areas for Rural Areas were published in 

the Federal Register as an Addendum to 

the annual PPS rulemaking (that is, the 

PPS proposed and final rules or, when 

applicable, the current update notice). 

However, beginning in FY 2015, these 

wage index tables are no longer 

published in the Federal Register. 

Instead, these tables will be available 

exclusively through the Internet. The 

wage index tables for this proposed rule 

are available exclusively through the 

Internet on the CMS Web site at http:// 

www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/IPFPPS/Wage

Index.html. 

To assist readers in referencing 

sections contained in this document, we 

are providing the following table of 

contents. 

I. Executive Summary 

A. Purpose 

B. Summary of the Major Provisions 

C. Summary of Impacts 

II. Background 

A. Overview of the Legislative 

Requirements of the IPF PPS 

B. Overview of the IPF PPS 

C. Annual Requirements for Updating the 

IPF PPS 

III. Provisions of the Proposed Rule 

A. Proposed Market Basket for the IPF PPS 

1. Background 

2. Overview of the Proposed 2012-Based 

IPF Market Basket 

3. Creating an IPF-Specific Market Basket 

a. Development of Cost Categories and 

Weights 

i. Medicare Cost Reports 

ii. Final Major Cost Category Computation 

iii. Derivation of the Detailed Operating 

Cost Weights 

iv. Derivation of the Detailed Capital Cost 

Weights 

v. Proposed 2012-Based IPF Market Basket 

Cost Categories and Weights 

b. Selection of Price Proxies 

i. Price Proxies for the Operating Portion of 

the Proposed 2012-Based IPF Market 

Basket 

ii. Price Proxies for the Capital Portion of 

the Proposed 2012-Based IPF Market 

Basket 

iii. Summary of All Price Proxies of the 

Proposed 2012-Based IPF Market Basket 

4. Proposed FY 2016 Market Basket Update 

5. Proposed Productivity Adjustment 

6. Proposed Labor-Related Share 

B. Proposed Updates to the IPF PPS Rates 

for FY Beginning October 1, 2016 

1. Determining the Standardized BudgetNeutral Federal Per Diem Base Rate 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 25013 

2. Proposed Update of the Federal Per 

Diem Base Rate and Electroconvulsive 

Therapy Rate 

C. Proposed Updates to the IPF PPS 

Patient-Level Adjustment Factors 

1. Overview of the IPF PPS Adjustment 

Factors 

2. IPF–PPS Patient-Level Adjustments 

a. MS–DRG Assignment 

b. Payment for Comorbid Conditions 

3. Patient Age Adjustments 

4. Variable Per Diem Adjustments 

D. Proposed Updates to the IPF PPS 

Facility-Level Adjustments 

1. Proposed Wage Index Adjustment 

a. Background 

b. Proposed Wage Index for FY 2016 

c. OMB Bulletins and Proposed 

Transitional Wage Index 

d. Adjustment for Rural Location and 

Proposal To Phase Out the Rural 

Adjustment for IPFs Losing Their Rural 

Adjustment Due to CBSA Changes 

e. Budget Neutrality Adjustment 

2. Teaching Adjustment 

3. Cost of Living Adjustment for IPFs 

Located in Alaska and Hawaii 

4. Adjustment for IPFs With a Qualifying 

Emergency Department (ED) 

E. Other Payment Adjustments and 

Policies 

1. Outlier Payment Overview 

2. Proposed Update to the Outlier Fixed 

Dollar Loss Threshold Amount 

3. Proposed Update to IPF Cost-to-Charge 

Ratio Ceilings 

IV. Updates on Other Payment Policy Issues 

A. Implementation of ICD–10–CM and 

ICD–10–PCS 

B. Update on IPF PPS Refinements 

V. Inpatient Psychiatric Facilities Quality 

Reporting (IPFQR) Program 

A. Background 

1. Statutory Authority 

2. Covered Entities 

3. Considerations in Selecting Quality 

Measures 

B. Retention of IPFQR Program Measures 

Adopted in Previous Payment 

Determinations 

C. Proposed Removal of Quality Measure 

From the IPFQR Program Measure Set 

D. New Quality Measures Proposed for the 

FY 2018 Payment Determination and 

Subsequent Years 

1. TOB–3 Tobacco Use Treatment Provided 

or Offered at Discharge and the Subset 

Measure TOB–3a Tobacco Use Treatment 

at Discharge 

2. SUB–2 Alcohol Use Brief Intervention 

Provided or Offered and SUB–2a Alcohol 

Use Brief Intervention 

3. Transition Record With Specified 

Elements Received by Discharged 

Patients (Discharges From an Inpatient 

Facility to Home/Self Care or Any Other 

Site of Care) 

4. Timely Transmission of Transition 

Record (Discharges From an Inpatient 

Facility to Home/Self Care or Any Other 

Site of Care) 

5. Screening for Metabolic Disorders 

6. Summary of Measures Proposed for 

Adoption and Removal for FY 2018 and 

Subsequent Years 

E. Possible IPFQR Program Measures and 

Topics for Future Consideration 

F. Changes to Reporting Requirements 

1. Proposed Changes to Reporting by Age 

and Quarter 

2. Proposed Changes to Aggregate 

Population Count Reporting 

3. Proposed Changes to Sampling 

Requirements for FY 2018 Payment 

Determination and Subsequent Years 

G. Public Display and Review 

Requirements 

H. Form, Manner, and Timing of Quality 

Data Submission 

1. Procedural and Submission 

Requirements 

2. Proposed Change to the Reporting 

Periods and Submission Timeframes 

3. Population, Sampling, and Minimum 

Case Threshold 

4. Data Accuracy and Completeness 

Acknowledgement (DACA) 

Requirements 

I. Reconsideration and Appeals Procedures 

J. Exceptions to Quality Reporting 

Requirements 

VI. Collection of Information Requirements 

A. Wage Estimates 

B. ICRs Regarding the Inpatient Psychiatric 

Quality Reporting (IPFQR) Program 

1. Changes in Time Required to ChartAbstract Data Based on Proposed 

Reporting Requirements 

2. Estimated Burden of IPFQR Program 

Proposals 

C. Summary of Annual Burden Estimates 

for Proposed Requirements 

D. ICRs Regarding the Hospital and Health 

Care Complex Cost Report 

E. Submission of PRA-Related Comments 

VII. Regulatory Impact Analysis 

A. Statement of Need 

B. Overall Impact 

C. Anticipated Effects 

1. Budgetary Impact 

2. Impact on Providers 

3. Results 

4. Effects of Updates to the IPFQR Program 

5. Effect on Beneficiaries 

D. Alternatives Considered 

E. Accounting Statement 

Regulations Text 

Addendum—FY 2016 Proposed Rates and 

Adjustment Factors 

Acronyms 

Because of the many terms to which 

we refer by acronym in this proposed 

rule, we are listing the acronyms used 

and their corresponding meanings in 

alphabetical order below: 

ADC Average Daily Census 

AHA American Hospital Association 

AHE Average Hourly Earning 

BBRA Medicare, Medicaid and SCHIP 

[State Children’s Health Insurance 

Program] Balanced Budget Refinement Act 

of 1999 (Pub. L. 106–113) 

BEA Bureau of Economic Analysis 

BLS Bureau of Labor Statistics 

CAH Critical Access Hospital 

CBSA Core-Based Statistical Area 

CCR Cost-to-Charge Ratio 

CPI Consumer Price Index 

CPI–U Consumer Price Index for all Urban 

Consumers 

DRGs Diagnosis-Related Groups 

ECI Employment Cost Index 

ESRD End State Renal Disease 

FR Federal Register 

FTE Full-time equivalent 

FY Federal Fiscal Year (October 1 through 

September 30) 

GDP Gross Domestic Product 

GME Graduate Medical Education 

HHA Home Health Agency 

HBIPS Hospital Based Inpatient Psychiatric 

Services 

ICD–9–CM International Classification of 

Diseases, 9th Revision, Clinical 

Modification 

ICD–10–CM International Classification of 

Diseases, 10th Revision, Clinical 

Modification 

ICD–10–PCS International Classification of 

Diseases, 10th Revision, Procedure Coding 

System 

IGI IHS Global Insight, Inc. 

I–O Input—Output 

IPFs Inpatient Psychiatric Facilities 

IPFQR Inpatient Psychiatric Facilities 

Quality Reporting 

IRFs Inpatient Rehabilitation Facilities 

LOS Length of Stay 

LTCHs Long-Term Care Hospitals 

MAC Medicare Administrative Contractor 

MedPAR Medicare Provider Analysis and 

Review File 

MFP Multifactor Productivity 

MMA Medicare Prescription Drug, 

Improvement, and Modernization Act of 

2003 

MSA Metropolitan Statistical Area 

NAICS North American Industry 

Classification System 

NQF National Quality Forum 

OES Occupational Employment Statistics 

OMB Office of Management and Budget 

OPPS Outpatient Prospective Payment 

System 

PLI Professional Liability Insurance 

PPI Producer Price Index 

PPS Prospective Payment System 

RPL Rehabilitation, Psychiatric, and LongTerm Care 

RY Rate Year (July 1 through June 30) 

SCHIP State Children’s Health Insurance 

Program 

SNF Skilled Nursing Facility 

SOC Standard Occupational Classification 

TEFRA Tax Equity and Fiscal Responsibility 

Act of 1982 (Pub. L. 97–248) 

I. Executive Summary 

A. Purpose 

This proposed rule would update the 

prospective payment rates for Medicare 

inpatient hospital services provided by 

inpatient psychiatric facilities (IPFs) for 

discharges occurring during the fiscal 

year (FY) beginning October 1, 2015 

through September 30, 2016. For the 

Inpatient Psychiatric Facility Quality 

Reporting (IPFQR) Program, it also 

would change the measures collected 

under the program and modify reporting 

requirements for all program measures. 

B. Summary of the Major Provisions 

In this proposed rule, we would 

update the IPF Prospective Payment 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

25014 Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 

System (PPS), as specified in 42 CFR 

412.428. The updates include the 

following: 

• Effective for FY 2016 IPF PPS 

update, we are proposing to adopt a FY 

2012-based IPF-specific market basket. 

We propose to adjust the FY 2012-based 

IPF market basket update (currently 

estimated to be 2.7 percent) by a 

reduction for economy-wide 

productivity (currently estimated to be 

0.6 percentage point) as required by 

section 1886(s)(2)(A)(i) of the Social 

Security Act (the Act), and further 

reduced by 0.2 percentage point as 

required by section 1886(s)(2)(A)(ii) of 

the Act, resulting in an estimated 

market basket update of 1.9 percent. 

• We propose to update the IPF per 

diem rate from $728.31 to $745.19. 

Providers that failed to report quality 

data for FY 2016 payment would receive 

a proposed FY 2016 per diem rate of 

$730.56. 

• We propose to update the 

electroconvulsive therapy (ECT) 

payment from $313.55 to $320.82. 

Providers that failed to report quality 

data for FY 2016 payment would receive 

a proposed FY 2016 ECT rate of 

$314.52. 

• We propose to adopt new Office of 

Management and Budget (OMB) CoreBased Statistical Area (CBSA) 

delineations for the FY 2016 IPF PPS 

wage index and future IPF PPS wage 

indices. We propose to implement these 

CBSA changes using a 1-year transition 

with a blended wage index for all 

providers, consisting of a blend of fifty 

percent of the FY 2016 IPF wage index 

using the current OMB delineations and 

fifty percent of the FY 2016 IPF wage 

index using the revised OMB 

delineations. 

• We propose to phase out the rural 

adjustment for the 37 rural IPFs that 

would be re-designated as urban IPFs 

due to the OMB CBSA changes. 

Specifically, we propose to phase out 

the 17 percent rural adjustment for these 

37 providers over 3 years (2-thirds of the 

adjustment given in FY 2016, one-third 

of the adjustment given in FY 2017, and 

no rural adjustment thereafter). 

• We propose to use the updated 

Labor Related Share of 74.9 percent and 

CBSA rural and urban wage indices for 

FY 2016, and establish a wage index 

budget-neutrality adjustment of 1.0041. 

• We propose to update the fixed 

dollar loss threshold amount from 

$8,755 to $9,825 in order to maintain 

outlier payments that are 2 percent of 

total IPF PPS payments. 

• We propose that the national urban 

and rural cost-to-charge ratio (CCR) 

ceilings for FY 2016 would be 1.6881 

and 1.9041, respectively, and the 

national median CCR would be 0.4675 

for urban IPFs and 0.6210 for rural IPFs. 

The national median CCR is applied to 

new IPFs that have not yet submitted 

their first Medicare cost report, to IPFs 

for which the CCR calculation data are 

inaccurate or incomplete, or to IPFs 

whose overall CCR exceeds 3 standard 

deviations above the national geometric 

mean. These amounts are used in the 

outlier calculation to determine if an 

IPF’s CCR is statistically accurate and 

for new providers without an 

established CCR. 

• We note that IPF PPS patient-level 

and facility-level adjustments, other 

than those mentioned above, would 

remain the same as in FY 2015. 

In addition: 

• We remind providers that 

International Classification of Diseases, 

10th Revision, Clinical Modification/

Procedure Coding System (ICD–10–CM/ 

PCS) will be implemented on October 1, 

2015. 

• As we continue our analysis for 

future IPF PPS refinements, we find, 

from preliminary analysis of 2012 to 

2013 data, that over 20 percent of IPF 

stays reported no ancillary costs, such 

as laboratory and drug costs, in their 

cost reports, or laboratory or drug 

charges on their claims. Because we 

expect that most patients requiring 

hospitalization for active psychiatric 

treatment would need drugs and 

laboratory services, we remind 

providers that the IPF per diem payment 

rate includes the cost of all ancillary 

services, including drugs and laboratory 

services. CMS pays only the inpatient 

psychiatric facility for services 

furnished to a Medicare beneficiary who 

is an inpatient of that inpatient 

psychiatric facility, except for certain 

professional services, and payments are 

considered to be payments in full for all 

inpatient hospital services provided 

directly or under arrangement (see 42 

CFR 412.404(d)), as specified in 42 CFR 

409.10. 

For the Inpatient Psychiatric Facility 

Quality Reporting (IPFQR) Program, we 

are making several proposals related to 

measures and several proposals related 

to data submission for the IPFQR 

Program measures. We are proposing to 

adopt five new measures beginning with 

the fiscal year (FY) 2018 payment 

determination: 

• TOB–3—Tobacco Use Treatment 

Provided or Offered at Discharge and 

the subset measure TOB–3a Tobacco 

Use Treatment at Discharge (National 

Quality Forum (NQF) #1656); 

• SUB–2—Alcohol Use Brief 

Intervention Provided or Offered and 

the subset measure SUB–2a (NQF 

#1663); 

• Transition Record with Specified 

Elements Received by Discharged 

Patients (Discharges from an Inpatient 

Facility to Home/Self Care or Any Other 

Site of Care) (NQF) #0647); 

• Timely Transmission of Transition 

Record (Discharges from an Inpatient 

Facility to Home/Self Care or Any Other 

Site of Care) (NQF #0648); and 

• Screening for Metabolic Disorders. 

If Transition Record with Specified 

Elements Received by Discharged 

Patients (Discharges from an Inpatient 

Facility to Home/Self Care or Any Other 

Site of Care) is adopted, we are 

proposing to remove Hospital Based 

Inpatient Psychiatric Services (HBIPS)– 

6 Post-Discharge Continuing Care Plan 

(NQF #0557). Likewise, if Timely 

Transmission of Transition Record 

(Discharges from an Inpatient Facility to 

Home/Self Care or Any Other Site of 

Care) (NQF #0648) is adopted, we are 

proposing to remove HBIPS–7 PostDischarge Continuing Care Plan 

Transmitted to the Next Level of Care 

Provider Upon Discharge (NQF #0558). 

We are also proposing to remove one 

measure, HBIPS–4 Patients Discharged 

on Multiple Antipsychotic Medications, 

beginning with the FY 2017 payment 

determination. 

We are also making several proposals 

regarding how facilities should report 

data for IPFQR Program measures: 

• We are proposing to require that 

measures be reported as a single yearly 

count rather than by quarter and age 

beginning with the FY 2017 payment 

determination; 

• We are proposing to require that 

aggregate population counts be reported 

as a single yearly number rather than by 

quarter beginning with the FY 2017 

payment determination; and 

• We are proposing to allow uniform 

sampling for certain measures beginning 

with the FY 2018 payment 

determination. 

C. Summary of Impacts 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 25015 

Provision description Total transfers 

FY 2016 IPF PPS payment rate update .................................................. The overall economic impact of this proposed rule is an estimated $80 

million in increased payments to IPFs during FY 2016. 

Provision description Costs 

New quality reporting program requirements ........................................... The total costs beginning in FY 2016 for IPFs as a result of the proposed new quality reporting requirements are estimated to be $6.31 

million. 

II. Background 

A. Overview of the Legislative 

Requirements for the IPF PPS 

Section 124 of the Medicare, 

Medicaid, and SCHIP (State Children’s 

Health Insurance Program) Balanced 

Budget Refinement Act of 1999 (BBRA) 

(Pub. L. 106–113) required the 

establishment and implementation of an 

IPF PPS. Specifically, section 124 of the 

BBRA mandated that the Secretary of 

the Department Health and Human 

Services (the Secretary) develop a per 

diem PPS for inpatient hospital services 

furnished in psychiatric hospitals and 

psychiatric units including an adequate 

patient classification system that reflects 

the differences in patient resource use 

and costs among psychiatric hospitals 

and psychiatric units. 

Section 405(g)(2) of the Medicare 

Prescription Drug, Improvement, and 

Modernization Act of 2003 (MMA) (Pub. 

L. 108–173) extended the IPF PPS to 

distinct part psychiatric units of critical 

access hospitals (CAHs). 

Section 3401(f) of the Patient 

Protection and Affordable Care Act 

(Pub. L. 111–148) as amended by 

section 10319(e) of that Act and by 

section 1105(d) of the Health Care and 

Education Reconciliation Act of 2010 

(Pub. L. 111–152) (hereafter referred to 

as ‘‘the Affordable Care Act’’) added 

subsection (s) to section 1886 of the Act. 

Section 1886(s)(1) of the Act titled 

‘‘Reference to Establishment and 

Implementation of System’’ refers to 

section 124 of the BBRA, which relates 

to the establishment of the IPF PPS. 

Section 1886(s)(2)(A)(i) of the Act 

requires the application of the 

productivity adjustment described in 

section 1886(b)(3)(B)(xi)(II) of the Act to 

the IPF PPS for the Rate Year (RY) 

beginning in 2012 (that is, a RY that 

coincides with a FY) and each 

subsequent RY. For the RY beginning in 

2015 (that is, FY 2016), the current 

estimate of the productivity adjustment 

would be equal to 0.6 percentage point, 

which we are proposing in this FY 2016 

proposed rule. 

Section 1886(s)(2)(A)(ii) of the Act 

requires the application of an ‘‘other 

adjustment’’ that reduces any update to 

an IPF PPS base rate by percentages 

specified in section 1886(s)(3) of the Act 

for the RY beginning in 2010 through 

the RY beginning in 2019. For the RY 

beginning in 2015 (that is, FY 2016), 

section 1886(s)(3)(D) of the Act requires 

the reduction to be 0.2 percentage point. 

We are proposing that reduction in this 

FY 2016 IPF PPS proposed rule. 

Section 1886(s)(4) of the Act requires 

the establishment of a quality data 

reporting program for the IPF PPS 

beginning in RY 2014. 

To implement and periodically 

update these provisions, we have 

published various proposed and final 

rules in the Federal Register. For more 

information regarding these rules, see 

the CMS Web site at http://www.cms.

hhs.gov/InpatientPsychFacilPPS/. 

B. Overview of the IPF PPS 

The November 2004 IPF PPS final 

rule (69 FR 66922) established the IPF 

PPS, as required by section 124 of the 

BBRA and codified at subpart N of part 

412 of the Medicare regulations. The 

November 2004 IPF PPS final rule set 

forth the per diem Federal rates for the 

implementation year (the 18-month 

period from January 1, 2005 through 

June 30, 2006), and provided payment 

for the inpatient operating and capital 

costs to IPFs for covered psychiatric 

services they furnish (that is, routine, 

ancillary, and capital costs, but not costs 

of approved educational activities, bad 

debts, and other services or items that 

are outside the scope of the IPF PPS). 

Covered psychiatric services include 

services for which benefits are provided 

under the fee-for-service Part A 

(Hospital Insurance Program) of the 

Medicare program. 

The IPF PPS established the Federal 

per diem base rate for each patient day 

in an IPF derived from the national 

average daily routine operating, 

ancillary, and capital costs in IPFs in FY 

2002. The average per diem cost was 

updated to the midpoint of the first year 

under the IPF PPS, standardized to 

account for the overall positive effects of 

the IPF PPS payment adjustments, and 

adjusted for budget-neutrality. 

The Federal per diem payment under 

the IPF PPS is comprised of the Federal 

per diem base rate described above and 

certain patient- and facility-level 

payment adjustments that were found in 

the regression analysis to be associated 

with statistically significant per diem 

cost differences. 

The patient-level adjustments include 

age, Diagnosis-Related Group (DRG) 

assignment, comorbidities, and variable 

per diem adjustments to reflect higher 

per diem costs in the early days of an 

IPF stay. Facility-level adjustments 

include adjustments for the IPF’s wage 

index, rural location, teaching status, a 

cost-of-living adjustment for IPFs 

located in Alaska and Hawaii, and the 

presence of a qualifying emergency 

department (ED). 

The IPF PPS provides additional 

payment policies for: Outlier cases; 

interrupted stays; and a per treatment 

adjustment for patients who undergo 

electroconvulsive therapy (ECT). During 

the IPF PPS mandatory 3-year transition 

period, stop-loss payments were also 

provided; however, since the transition 

ended in 2008, these payments are no 

longer available. 

A complete discussion of the 

regression analysis that established the 

IPF PPS adjustment factors appears in 

the November 2004 IPF PPS final rule 

(69 FR 66933 through 66936). 

Section 124 of the BBRA did not 

specify an annual rate update strategy 

for the IPF PPS and was broadly written 

to give the Secretary discretion in 

establishing an update methodology. 

Therefore, in the November 2004 IPF 

PPS final rule, we implemented the IPF 

PPS using the following update strategy: 

• Calculate the final Federal per diem 

base rate to be budget-neutral for the 18- 

month period of January 1, 2005 

through June 30, 2006. 

• Use a July 1 through June 30 annual 

update cycle. 

• Allow the IPF PPS first update to be 

effective for discharges on or after July 

1, 2006 through June 30, 2007. 

In RY 2012, we proposed and 

finalized switching the IPF PPS 

payment rate update from a rate year 

that begins on July 1 and ends on June 

30 to one that coincides with the 

Federal fiscal year that begins October 1 

and ends on September 30. In order to 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

25016 Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 

transition from one timeframe to 

another, the RY 2012 IPF PPS covered 

a 15-month period from July 1, 2011 

through September 30, 2012. Therefore, 

the update cycle for FY 2016 will be 

October 1, 2015 through September 30, 

2016. For further discussion of the 15- 

month market basket update for RY 

2012 and changing the payment rate 

update period to coincide with a FY 

period, we refer readers to the RY 2012 

IPF PPS proposed rule (76 FR 4998) and 

the RY 2012 IPF PPS final rule (76 FR 

26432). 

C. Annual Requirements for Updating 

the IPF PPS 

In November 2004, we implemented 

the IPF PPS in a final rule that appeared 

in the November 15, 2004 Federal 

Register (69 FR 66922). In developing 

the IPF PPS, to ensure that the IPF PPS 

is able to account adequately for each 

IPF’s case-mix, we performed an 

extensive regression analysis of the 

relationship between the per diem costs 

and certain patient and facility 

characteristics to determine those 

characteristics associated with 

statistically significant cost differences 

on a per diem basis. For characteristics 

with statistically significant cost 

differences, we used the regression 

coefficients of those variables to 

determine the size of the corresponding 

payment adjustments. 

In that final rule, we explained that 

we believe it is important to delay 

updating the adjustment factors derived 

from the regression analysis until we 

have IPF PPS data that include as much 

information as possible regarding the 

patient-level characteristics of the 

population that each IPF serves. 

Therefore, we indicated that we did not 

intend to update the regression analysis 

and the patient- and facility-level 

adjustments until we complete that 

analysis. Until that analysis is complete, 

we stated our intention to publish a 

notice in the Federal Register each 

spring to update the IPF PPS (71 FR 

27041). We have begun the necessary 

analysis to make refinements to the IPF 

PPS using more current data to set the 

adjustment factors; however, we are not 

proposing any refinements in this 

proposed rule. Rather, as explained in 

section IV.B. of this proposed rule, we 

expect that in future rulemaking we will 

be ready to propose potential 

refinements. 

In the May 6, 2011 IPF PPS final rule 

(76 FR 26432), we changed the payment 

rate update period to a RY that 

coincides with a FY update. Therefore, 

update notices are now published in the 

Federal Register in the summer to be 

effective on October 1. When proposing 

changes in IPF payment policy, a 

proposed rule would be issued in the 

spring and the final rule in the summer 

in order to be effective on October 1. For 

further discussion on changing the IPF 

PPS payment rate update period to a RY 

that coincides with a FY, see the IPF 

PPS final rule published in the Federal 

Register on May 6, 2011 (76 FR 26434 

through 26435). For a detailed list of 

updates to the IPF PPS, see 42 CFR 

412.428. 

Our most recent IPF PPS annual 

update occurred in an August 6, 2014, 

Federal Register final rule (79 FR 

45938) (hereinafter referred to as the 

August 2014 IPF PPS final rule) that set 

forth updates to the IPF PPS payment 

rates for FY 2015. That rule updated the 

IPF PPS per diem payment rates that 

were published in the August 2013 IPF 

PPS notice (78 FR 46734) in accordance 

with our established policies. 

III. Provisions of the Proposed Rule 

A. Proposed Market Basket for the IPF 

PPS 

1. Background 

The input price index that was used 

to develop the IPF PPS was the 

Excluded Hospital with Capital market 

basket. This market basket was based on 

1997 Medicare cost reports for Medicare 

participating IRFs, IPFs, LTCHs, cancer 

hospitals, and children’s hospitals. 

Although ‘‘market basket’’ technically 

describes the mix of goods and services 

used in providing health care at a given 

point in time, this term is also 

commonly used to denote the input 

price index (that is, cost category 

weights and price proxies) derived from 

that market basket. Accordingly, the 

term ‘‘market basket,’’ as used in this 

document, refers to an input price 

index. 

Beginning with the May 2006 IPF PPS 

final rule (71 FR 27046 through 27054), 

IPF PPS payments were updated using 

a 2002-based RPL market basket 

reflecting the operating and capital cost 

structures for freestanding IRFs, 

freestanding IPFs, and LTCHs. Cancer 

and children’s hospitals were excluded 

from the RPL market basket because 

their payments are based entirely on 

reasonable costs subject to rate-ofincrease limits established under the 

authority of section 1886(b) of the Act 

and not through a PPS. Also, the 2002 

cost structures for cancer and children’s 

hospitals are noticeably different than 

the cost structures of freestanding IRFs, 

freestanding IPFs, and LTCHs. See the 

May 2006 IPF PPS final rule (71 FR 

27046 through 27054) for a complete 

discussion of the 2002-based RPL 

market basket. 

In the May 1, 2009 IPF PPS notice (74 

FR 20376), we expressed our interest in 

exploring the possibility of creating a 

stand-alone IPF market basket that 

reflects the cost structures of only IPF 

providers. One available option was to 

combine the Medicare cost report data 

from freestanding IPF providers with 

Medicare cost report data from hospitalbased IPF providers. We indicated that 

an examination of the Medicare cost 

report data comparing freestanding IPFs 

and hospital-based IPFs showed 

differences between cost levels and cost 

structures. At that time, we were unable 

to fully understand these differences 

even after reviewing explanatory 

variables such as geographic variation, 

case mix (including DRG, comorbidity, 

and age), urban or rural status, teaching 

status, and presence of a qualifying 

emergency department. As a result, we 

continued to research ways to reconcile 

the differences and solicited public 

comment for additional information that 

might help us to better understand the 

reasons for the variations in costs and 

cost structures, as indicated by the 

Medicare cost report data (74 FR 20376). 

We summarized the public comments 

we received and our responses in the 

April 2010 IPF PPS notice (75 FR 23111 

through 23113). Despite receiving 

comments from the public on this issue, 

we were still unable to sufficiently 

reconcile the observed differences in 

costs and cost structures between 

hospital-based and freestanding IPFs, 

and, therefore, we did not believe it to 

be appropriate at that time to 

incorporate data from hospital-based 

IPFs with those of freestanding IPFs to 

create a stand-alone IPF market basket. 

Beginning with the RY 2012 IPF PPS 

final rule (76 FR 26432), IPF PPS 

payments were updated using a 2008- 

based RPL market basket reflecting the 

operating and capital cost structures for 

freestanding IRFs, freestanding IPFs, 

and LTCHs. The major changes for RY 

2012 included: Updating the base year 

from FY 2002 to FY 2008; using a more 

specific composite chemical price 

proxy; breaking the professional fees 

cost category into 2 separate categories 

(Labor-related and Nonlabor-related); 

and adding 2 additional cost categories 

(Administrative and Facilities Support 

Services and Financial Services), which 

were previously included in the 

residual All Other Services cost 

categories. The RY 2012 IPF PPS 

proposed rule (76 FR 4998) and RY 2012 

final rule (76 FR 26432) contain a 

complete discussion of the development 

of the 2008-based RPL market basket. 

For FY 2016, we are proposing to 

create a 2012-based IPF market basket, 

using Medicare cost report data for both 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 25017 

freestanding and hospital-based IPFs. In 

the following discussion, we provide an 

overview of the proposed market basket 

and describe the methodologies used to 

determine the operating and capital 

portions of the proposed 2012-based IPF 

market basket. 

2. Overview of the Proposed 2012-Based 

IPF Market Basket 

The proposed 2012-based IPF market 

basket is a fixed-weight, Laspeyres-type 

price index. A Laspeyres price index 

measures the change in price, over time, 

of the same mix of goods and services 

purchased in the base period. Any 

changes in the quantity or mix of goods 

and services (that is, intensity) 

purchased over time relative to a base 

period are not measured. 

The index itself is constructed in 3 

steps. First, a base period is selected (in 

this proposed rule, the base period is FY 

2012) and total base period 

expenditures are estimated for a set of 

mutually exclusive and exhaustive 

spending categories with the proportion 

of total costs that each category 

represents being calculated. These 

proportions are called cost or 

expenditure weights. Second, each 

expenditure category is matched to an 

appropriate price or wage variable, 

referred to as a price proxy. In nearly 

every instance, these price proxies are 

derived from publicly available 

statistical series that are published on a 

consistent schedule (preferably at least 

on a quarterly basis). Finally, the 

expenditure weight for each cost 

category is multiplied by the level of its 

respective price proxy. The sum of these 

products (that is, the expenditure 

weights multiplied by their price levels) 

for all cost categories yields the 

composite index level of the market 

basket in a given period. Repeating this 

step for other periods produces a series 

of market basket levels over time. 

Dividing an index level for a given 

period by an index level for an earlier 

period produces a rate of growth in the 

input price index over that timeframe. 

As noted above, the market basket is 

described as a fixed-weight index 

because it represents the change in price 

over time of a constant mix (quantity 

and intensity) of goods and services 

needed to furnish IPF services. The 

effects on total expenditures resulting 

from changes in the mix of goods and 

services purchased subsequent to the 

base period are not measured. For 

example, an IPF hiring more nurses to 

accommodate the needs of patients 

would increase the volume of goods and 

services purchased by the IPF, but 

would not be factored into the price 

change measured by a fixed-weight IPF 

market basket. Only when the index is 

rebased would changes in the quantity 

and intensity be captured, with those 

changes being reflected in the cost 

weights. Therefore, we rebase the 

market basket periodically so that the 

cost weights reflect recent changes in 

the mix of goods and services that IPFs 

purchase (facility inputs) to furnish 

inpatient care between base periods. 

3. Creating an IPF-Specific Market 

Basket 

As discussed in section III.A.1, over 

the last several years we have been 

exploring the possibility of creating a 

stand-alone, or IPF-specific, market 

basket that reflects the cost structures of 

only IPF providers. The major cost 

weights for the 2008-based RPL market 

basket were calculated using Medicare 

cost report data for freestanding 

facilities only. We used freestanding 

facilities due to concerns regarding our 

ability to incorporate Medicare cost 

report data for hospital-based providers. 

In the FY 2015 IPF PPS final rule (79 FR 

45941), we presented several of these 

concerns (as stated below) but explained 

that we would continue to research the 

possibility of creating an IPF-specific 

market basket to update IPF PPS 

payments. 

Since the FY 2015 IPF PPS final rule, 

we have performed additional research 

on the Medicare cost report data 

available for hospital-based IPFs and 

evaluated these concerns. We 

subsequently concluded from this 

research that Medicare cost report data 

for both hospital-based IPFs and 

freestanding IPFs can be used to 

calculate the major market basket cost 

weights for a stand-alone IPF market 

basket. We have developed a detailed 

methodology to derive market basket 

cost weights that are representative of 

the universe of IPF providers. We 

believe the use of this proposed IPF 

market basket is a technical 

improvement over the RPL market 

basket that is currently used to update 

IPF PPS payments. As a result, in this 

FY 2016 IPF PPS proposed rule, we are 

proposing a 2012-based IPF market 

basket that reflects data for both 

freestanding and hospital-based IPFs. 

Below we discuss our prior concerns 

and provide reasons for why we now 

feel it is appropriate to create a standalone IPF market basket using Medicare 

cost report data for both hospital-based 

and freestanding IPFs. 

One concern we discussed in the FY 

2015 IPF PPS final rule (79 FR 45941) 

about using the hospital-based IPF 

Medicare cost report data was the cost 

level differences for hospital-based IPFs 

relative to freestanding IPFs were not 

readily explained by the specific 

characteristics of the individual 

providers and the patients that they 

serve (for example, characteristics 

related to case mix, urban/rural status, 

teaching status, or presence of a 

qualified emergency department). To 

address this concern, we used 

regression analysis to evaluate the effect 

of including hospital-based IPF 

Medicare cost report data in the 

calculation of cost distributions. A more 

detailed description of these regression 

models can be found in the FY 2015 IPF 

final rule (79 FR 45941). Based on this 

analysis, we concluded that the 

inclusion of those IPF providers with 

unexplained variability in costs did not 

significantly impact the cost weights 

and, therefore, should not be a major 

cause of concern. 

Another concern regarding the 

incorporation of hospital-based IPF data 

into the calculation of the market basket 

cost weights was the complexity of the 

Medicare cost report data for these 

providers. The freestanding IPFs 

independently submit a Medicare cost 

report for their facilities, making it 

relatively straightforward to obtain the 

cost categories necessary to determine 

the major market basket cost weights. 

However, Medicare cost report data 

submitted for a hospital-based IPF are 

embedded in the Medicare cost report 

submitted for the entire hospital facility 

in which the IPF is located. In order to 

use Medicare cost report data from these 

providers, we needed to determine the 

appropriate adjustments to apply to the 

data to ensure that the cost weights we 

obtained would represent only the 

hospital-based IPF (not the hospital as a 

whole). Over the past year, we worked 

to develop detailed methodologies to 

calculate the major cost weights for both 

freestanding and hospital-based IPFs. 

We believe that our proposed 

methodologies and the resulting cost 

weights, described in section III.A.3.a.i 

below, are reasonable and appropriate. 

We welcome public comments on these 

proposals. 

We also evaluated the differences in 

cost weights for hospital-based and 

freestanding IPFs and found the most 

significant differences occurred for 

salaries and pharmaceutical costs. 

Specifically, the hospital-based IPF 

salary cost weights tend to be lower 

than those of freestanding IPFs while 

hospital-based IPF pharmaceutical cost 

weights tend to be higher than those of 

freestanding IPFs. Our proposed 

methodology for deriving costs for each 

of these categories can be found in 

section III.A.3.a.i below. We will 

continue to research and monitor these 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

25018 Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 

cost shares to ensure that the differences 

are explainable. 

In summary, our research over the 

past year allowed us to evaluate the 

appropriateness of including hospitalbased IPF data in the calculation of the 

major cost weights for an IPF market 

basket. We believe that the proposed 

methodologies for deriving the cost 

weights give us the ability to create a 

stand-alone IPF market basket that 

reflects the cost structure of the universe 

of IPF providers. Therefore, we believe 

that the use of this proposed 2012-based 

IPF market basket to update IPF PPS 

payments is an improvement over the 

current 2008-based RPL market basket. 

a. Development of Cost Categories and 

Weights 

i. Medicare Cost Reports 

The proposed 2012-based IPF market 

basket consists of seven major cost 

categories derived from the FY 2012 

Medicare cost reports (CMS Form 2552– 

10) for freestanding and hospital-based 

IPFs, including Wages and Salaries, 

Employee Benefits, Contract Labor, 

Pharmaceuticals, Professional Liability 

Insurance (PLI), Capital, and a residual. 

The residual reflects all remaining costs 

that are not captured in the other six 

cost categories. The FY 2012 cost 

reports include providers whose cost 

report begin date is on or between 

October 1, 2011, and September 30, 

2012. We choose to use FY 2012 as the 

base year because we believe that the 

Medicare cost reports for this year 

represent the most recent, complete set 

of Medicare cost report data available 

for IPFs at the time of rulemaking. 

Prior Medicare cost report data used 

to develop the RPL market basket 

showed large differences between some 

providers’ Medicare length of stay (LOS) 

and total facility LOS. Since our goal is 

to measure cost weights that are 

reflective of case mix and practice 

patterns associated with providing 

services to Medicare beneficiaries, we 

limited our selection of Medicare cost 

reports used in the RPL market basket 

to those facilities that had a Medicare 

LOS that was within a comparable range 

of their total facility average LOS. For 

the 2008-based RPL market basket, we 

used those IPF Medicare cost reports 

whose average Medicare LOS was 

within 30 percent of the average facility 

LOS if the facility LOS was greater than 

or equal to 15 days. For those IPFs 

whose average facility LOS was less 

than 15 days, the Medicare LOS had to 

be within 50 percent of the average 

facility LOS. When applying the LOS 

trim to derive the 2008-based RPL 

market basket, we found that those 

providers that were excluded (of which 

seventy percent were IPFs) had an 

average facility LOS (40 days) that was 

2 times larger than the Medicare LOS 

(20 days). 

To create the proposed 2012-based 

IPF market basket, we reevaluated the 

LOS trim based on FY 2012 Medicare 

cost report data and the inclusion of 

hospital-based providers. Based on our 

analysis of the data, we are proposing to 

apply a less restrictive LOS trim to 

derive the 2012-based IPF market basket 

than was applied to derive the RPL 

market basket. For freestanding IPFs, we 

propose to define the Medicare and 

facility LOS as those reported on line 14 

of Worksheet S–3, Part I (consistent 

with the RPL market basket method). 

For hospital-based IPFs, we are 

proposing to use line 16 of Worksheet 

S–3, Part I to determine the Medicare 

and facility LOS. To derive the 

proposed 2012-based IPF market basket, 

for those IPFs with an average facility 

LOS of greater than or equal to 15 days, 

we are proposing to include IPFs where 

the Medicare LOS is within 50 percent 

(higher or lower) of the average facility 

LOS. For those IPFs whose average 

facility LOS is less than 15 days, we are 

proposing to include IPFs where the 

Medicare LOS is within 95 percent 

(higher or lower) of the facility LOS. 

This less restrictive trim increases the 

number of IPFs included in the 

derivation of the market basket, 

particularly for those providers where 

the Medicare LOS and facility LOS is 

within 5 days. Applying the proposed 

trim results in IPF Medicare cost reports 

with an average Medicare LOS of 12 

days, average facility LOS of 10 days, 

and Medicare utilization (as measured 

by Medicare inpatient IPF days as a 

percentage of total facility days) of 30 

percent. If we were to apply the same 

trim as was applied for the 2008-based 

RPL market basket, it would result in 

IPF Medicare cost reports with an 

average Medicare LOS of 12 days, 

average facility LOS of 9 days, and 

Medicare utilization of 31 percent. 

Those providers that were excluded 

from the proposed 2012-based IPF 

market basket have an average Medicare 

LOS of 22 days, average facility LOS of 

49 days, and a Medicare utilization of 5 

percent. Of those Medicare cost reports 

excluded from the proposed 2012-based 

IPF market basket, about 70 percent of 

these were freestanding providers 

whereas freestanding providers 

represent about 30 percent of all IPFs. 

We believe the proposed trim is a 

technical improvement as data from 

more IPFs is used while still being 

reflective of case mix and practice 

patterns associated with providing 

services to Medicare beneficiaries. 

We applied this LOS trim to first 

obtain a set of cost reports for facilities 

that have a Medicare LOS within a 

comparable range of their total facility 

LOS. Using the resulting set of FY 2012 

Medicare cost reports for freestanding 

IPFs and hospital-based IPFs, we are 

proposing to calculate costs for the six 

major cost categories (Wages and 

Salaries, Employee Benefits, Contract 

Labor, Professional Liability Insurance, 

Pharmaceuticals, and Capital). 

Similar to the 2008-based RPL market 

basket major cost weights, the proposed 

2012-based IPF market basket cost 

weights reflect Medicare allowable costs 

(routine, ancillary and capital costs) that 

are eligible for inclusion under the IPF 

PPS payments. We define Medicare 

allowable costs for freestanding 

facilities as cost centers (CMS Form 

2552–10): 30 through 35, 50 through 76 

(excluding 52 and 75), 90 through 91, 

and 93. We define Medicare allowable 

costs for hospital-based facilities as cost 

centers (CMS Form 2552–10): 40, 50 

through 76 (excluding 52 and 75), 90 

through 91, and 93. For freestanding 

IPFs, total Medicare allowable costs are 

equal to the total costs as reported on 

Worksheet B, part I, column 26. For 

hospital-based IPFs, total Medicare 

allowable costs are equal to total costs 

for the IPF inpatient unit after the 

allocation of overhead costs (Worksheet 

B, part I, column 26, line 40) and a 

portion of total ancillary costs. We 

calculate the portion of ancillary costs 

attributable to the hospital-based IPF for 

a given ancillary cost center by 

multiplying total facility ancillary costs 

for the specific cost center (as reported 

on Worksheet B, Part I, column 26) by 

the ratio of IPF Medicare ancillary costs 

for the cost center (as reported on 

Worksheet D–3, column 3 for IPF 

subproviders) to total Medicare 

ancillary costs for the cost center (equal 

to the sum of Worksheet D–3, column 3 

for all relevant PPS (that is, IPPS, IRF, 

IPF and Skilled Nursing Facility 

(SNF))). 

Below we provide a description of the 

proposed methodologies used to derive 

costs for the six major cost categories. 

Wages and Salaries Costs 

For freestanding IPFs, Wages and 

Salaries costs are derived as the sum of 

routine inpatient salaries, ancillary 

salaries, and a proportion of overhead 

(or general service cost center) salaries 

as reported on Worksheet A, column 1. 

Since overhead salary costs are 

attributable to the entire IPF, we only 

include the proportion attributable to 

the Medicare allowable cost centers. We 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 25019 

estimate the proportion of overhead 

salaries that are attributed to Medicare 

allowable costs centers by multiplying 

the ratio of Medicare allowable salaries 

to total salaries (Worksheet A, column 1, 

line 200) times total overhead salaries. 

A similar methodology was used to 

derive Wages and Salaries costs in the 

2008-based RPL market basket. 

For hospital-based IPFs, Wages and 

Salaries costs are derived as the sum of 

inpatient unit wages and salaries 

(Worksheet A, column 1, line 40) and a 

portion of salary costs attributable to 

total facility ancillary and overhead cost 

centers as these cost centers are shared 

with the entire facility. We calculate the 

portion of ancillary salaries attributable 

to the hospital-based IPF for a given 

ancillary cost center by multiplying 

total facility ancillary salary costs for 

the specific cost center (as reported on 

Worksheet A, column 1) by the ratio of 

IPF Medicare ancillary costs for the cost 

center (as reported on Worksheet D–3, 

column 3 for IPF subproviders) to total 

Medicare ancillary costs for the cost 

center (equal to the sum of Worksheet 

D–3, column 3 for all relevant PPS units 

(that is, IPPS, IRF, IPF and SNF)). For 

example, if hospital-based IPF Medicare 

laboratory costs represent 10 percent of 

the total Medicare laboratory costs for 

the entire facility, then 10 percent of 

total facility laboratory salaries (as 

reported in Worksheet A, column 1, line 

60) would be attributable to the 

hospital-based IPF. We believe it is 

appropriate to use only a portion of the 

ancillary costs in the market basket cost 

weight calculations since the hospitalbased IPF only utilizes a portion of the 

facility’s ancillary services. We believe 

the ratio of reported IPF Medicare costs 

to reported total Medicare costs 

provides a reasonable estimate of the 

ancillary services utilized, and costs 

incurred, by the hospital-based IPF. 

We calculate the portion of overhead 

salary costs attributable to hospitalbased IPFs by multiplying the total 

overhead costs attributable to the 

hospital-based IPF (sum of columns 4 

through18 on Worksheet B, part I, line 

40) by the ratio of total facility overhead 

salaries (as reported on Worksheet A, 

column 1, lines 4 through18) to total 

facility overhead costs (as reported on 

Worksheet A, column 7, lines 4 

through18). This methodology assumes 

the proportion of total costs related to 

salaries for the overhead cost centers is 

similar for all inpatient units (that is, 

acute inpatient or inpatient psychiatric). 

Since the 2008-based RPL market basket 

did not include hospital-based 

providers, this proposed methodology 

cannot be compared to the derivation of 

Wages and Salaries costs in the 2008- 

based RPL market basket. 

Employee Benefits Costs 

Effective with our implementation of 

CMS Form 2552–10, CMS began 

collecting Employee Benefits and 

Contract Labor data on Worksheet S–3, 

Part V. Previously, with CMS Form 

2540–96, Employee Benefits and 

Contract Labor data were reported on 

Worksheet S–3, part II, which was 

applicable to only IPPS providers and, 

therefore, these data were not available 

for the derivation of the RPL market 

basket. Due to the lack of such data, the 

Employee Benefits cost weight for the 

2008-based RPL market basket was 

derived by multiplying the 2008-based 

RPL market basket Wages and Salaries 

cost weight by the ratio of the IPPS 

hospital market basket Employee 

Benefits cost weight to the IPPS hospital 

market basket Wages and Salaries cost 

weight. Similarly, the Contract Labor 

cost weight for the 2008-based RPL 

market basket was derived by 

multiplying the 2008-based RPL market 

basket Wages and Salaries cost weight 

by the ratio of the IPPS hospital market 

basket Contract Labor cost weight to the 

IPPS hospital market basket Wages and 

Salaries cost weight. 

For FY 2012 Medicare cost report 

data, while there were providers that 

did report data on Worksheet S–3, part 

V, many providers did not complete this 

worksheet. However, we believe we had 

a large enough sample to enable us to 

produce reasonable Employee Benefits 

cost weights. We continue to encourage 

all providers to report these data on the 

Medicare cost report. 

For freestanding IPFs, Employee 

Benefits costs are equal to the data 

reported on Worksheet S–3, Part V, line 

2, column 2. 

For hospital-based IPFs, we calculate 

total benefits as the sum of benefit costs 

reported on Worksheet S–3 Part V, line 

3, column 2, and a portion of ancillary 

benefits and overhead benefits for the 

total facility. Ancillary benefits 

attributable to the hospital-based IPF are 

calculated by multiplying ancillary 

salaries for the hospital-based IPF as 

determined in the derivation of Wages 

and Salaries for the hospital-based IPF 

by the ratio of total facility benefits to 

total facility salaries. Similarly, 

overhead benefits attributable to the 

hospital-based IPF are calculated by 

multiplying overhead salaries for the 

hospital-based IPF as determined in the 

derivation of Wages and Salaries for the 

hospital-based IPF by the ratio of total 

facility benefits to total facility salaries. 

Contract Labor Costs 

Similar to the RPL and IPPS market 

baskets, Contract Labor costs are 

primarily associated with direct patient 

care services. Contract labor costs for 

other services such as accounting, 

billing, and legal are calculated 

separately using other government data 

sources as described in section 

III.A.3.a.ii. As discussed above in the 

Employee Benefits section, we now 

have data reported on Worksheet S–3, 

Part V that we can use to derive the 

Contract Labor cost weight for the 2012- 

based IPF market basket. For 

freestanding IPFs, Contract Labor costs 

are based on data reported on 

Worksheet S–3, part V, column 1, line 

2 and for hospital-based IPFs Contract 

Labor costs are based on line 3 of this 

same worksheet. As previously noted, 

for FY 2012 Medicare cost report data, 

while there were providers that did 

report data on Worksheet S–3, part V, 

many providers did not complete this 

worksheet. However, we believe we had 

a large enough sample to enable us to 

produce a reasonable Contract Labor 

cost weight. We continue to encourage 

all providers to report these data on the 

Medicare cost report. 

Pharmaceuticals Costs 

For freestanding IPFs, 

pharmaceuticals costs are based on nonsalary costs reported on Worksheet A, 

column 7 less Worksheet A, column 1 

for the pharmacy cost center (line 15) 

and drugs charged to patients cost 

center (line 73). 

For hospital-based IPFs, 

pharmaceuticals costs are based on a 

portion of the non-salary pharmacy 

costs and a portion of the non-salary 

drugs charged to patient costs reported 

for the total facility. Non-salary 

pharmacy costs attributable to the 

hospital-based IPF are calculated by 

multiplying total pharmacy costs 

attributable to the hospital-based IPF (as 

reported on Worksheet B, column 15, 

line 40) by the ratio of total non-salary 

pharmacy costs (Worksheet A, column 

2, line 15) to total pharmacy costs (sum 

of Worksheet A, column 1 and 2 for line 

15) for the total facility. Non-salary 

drugs charged to patient costs 

attributable to the hospital-based IPF are 

calculated by multiplying total nonsalary drugs charged to patient costs 

(Worksheet B, part I, column 0, line 73 

plus Worksheet B, part I, column 15, 

line 73 less Worksheet A, column 1, line 

73) for the total facility by the ratio of 

Medicare drugs charged to patient 

ancillary costs for the IPF unit (as 

reported on Worksheet D–3 for IPF 

subproviders, line 73, column 3) to total 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

25020 Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 

Medicare drugs charged to patients 

ancillary costs for the total facility 

(equal to the sum of Worksheet D–3, 

line 73, column 3, for all relevant PPS 

(i.e. IPPS, IRF, IPF and SNF)). 

Professional Liability Insurance (PLI) 

Costs 

For freestanding IPFs, PLI costs (often 

referred to as malpractice costs) are 

equal to premiums, paid losses and selfinsurance costs reported on Worksheet 

S–2, line 118, columns 1 through 3. 

For hospital-based IPFs, we assume 

that the PLI weight for the total facility 

is similar to the hospital-based IPF unit 

since the only data reported on this 

worksheet is for the entire facility. 

Therefore, hospital-based IPF PLI costs 

are equal to total facility PLI (as 

reported on Worksheet S–2, line 118, 

columns 1 through 3) divided by total 

facility costs (as reported on Worksheet 

A, line 200) times hospital-based IPF 

Medicare allowable total costs. 

Capital Costs 

For freestanding IPFs, capital costs are 

equal to Medicare allowable capital 

costs as reported on Worksheet B, Part 

II, column 26. 

For hospital-based IPFs, capital costs 

are equal to IPF inpatient capital costs 

(as reported on Worksheet B, part II, 

column 26, line 40) and a portion of IPF 

ancillary capital costs. We calculate the 

portion of ancillary capital costs 

attributable to the hospital-based IPF for 

a given cost center by multiplying total 

facility ancillary capital costs for the 

specific ancillary cost center (as 

reported on Worksheet B, Part II, 

column 26) by the ratio of IPF Medicare 

ancillary costs for the cost center (as 

reported on Worksheet D–3, column 3 

for IPF subproviders) to total Medicare 

ancillary costs for the cost center (equal 

to the sum of Worksheet D–3, column 3 

for all relevant PPS (that is, IPPS, IRF, 

IPF and SNF)). 

i. Final Major Cost Category 

Computation 

After we derive costs for the six major 

cost categories for each provider using 

the Medicare cost report data as 

described above, we trim the data for 

outliers based on the following steps. 

First, we divide the costs for each of the 

six categories by total Medicare 

allowable costs calculated for the 

provider to obtain cost weights for the 

universe of IPF providers. Next, we 

apply a mutually exclusive top and 

bottom 5 percent trim for each cost 

weight to remove outliers. After the 

outliers have been removed, we sum the 

costs for each category across all 

remaining providers. We then divide 

this by the sum of total Medicare 

allowable costs across all remaining 

providers to obtain a cost weight for the 

proposed 2012-based IPF market basket 

for the given category. Finally, we 

calculate the residual ‘‘All Other’’ cost 

weight that reflects all remaining costs 

that are not captured in the six cost 

categories listed above. See Table 1 

below for the resulting cost weights for 

these major cost categories that we 

obtain from the Medicare cost reports. 

TABLE 1—MAJOR COST CATEGORIES AS DERIVED FROM MEDICARE COST REPORTS

Major cost categories 

2012-Based 

IPF 

(percent) 

2008-Based 

RPL 

(percent) 

Wages and Salaries ................................................................................................................................................ 50.8 47.4 

Employee Benefits 1 ................................................................................................................................................. 13.0 12.3 

Contract Labor 1 ....................................................................................................................................................... 1.4 2.6 

Professional Liability Insurance (Malpractice) ......................................................................................................... 1.1 0.8 

Pharmaceuticals ...................................................................................................................................................... 4.8 6.5 

Capital ...................................................................................................................................................................... 7.0 8.4 

All Other ................................................................................................................................................................... 22.0 22.0 

* Total may not sum to 100 due to rounding. 

1 Due to the lack of Medicare cost report data, the Employee Benefits and Contract Labor cost weights in the 2008-based RPL market basket 

were based on the IPPS market basket. 

The Wages and Salaries cost weight 

obtained directly from the Medicare cost 

reports for the proposed 2012-based IPF 

market basket is approximately 3 

percentage points higher than the Wages 

and Salaries cost weight for the 2008- 

based RPL market basket. This is the 

result of freestanding IPFs having a 

larger percentage of costs attributable to 

labor than freestanding Inpatient 

Rehabilitation Facilities (IRF) and Longterm care hospitals. These latter 

facilities were included in the 2008- 

based RPL market basket. 

As we did for the 2008-based RPL 

market basket, we propose to allocate 

the Contract Labor cost weight to the 

Wages and Salaries and Employee 

Benefits cost weights based on their 

relative proportions under the 

assumption that contract labor costs are 

comprised of both wages and salaries 

and employee benefits. The Contract 

Labor allocation proportion for Wages 

and Salaries is equal to the Wages and 

Salaries cost weight as a percent of the 

sum of the Wages and Salaries cost 

weight and the Employee Benefits cost 

weight. This rounded percentage is 80 

percent; therefore, we propose to 

allocate 80 percent of the Contract Labor 

cost weight to the Wages and Salaries 

cost weight and 20 percent to the 

Employee Benefits cost weight. Table 2 

shows the Wages and Salaries and 

Employee Benefit cost weights after 

Contract Labor cost weight allocation for 

both the proposed 2012-based IPF 

market basket and 2008-based RPL 

market basket. 

TABLE 2—WAGES AND SALARIES AND EMPLOYEE BENEFITS COST WEIGHTS AFTER CONTRACT LABOR ALLOCATION

Major cost categories 2012-Based 

IPF 

2008-Based 

RPL 

Wages and Salaries ................................................................................................................................................ 51.9 49.4 

Employee Benefits ................................................................................................................................................... 13.3 12.8 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 25021 

1http://www.bea.gov/papers/pdf/IOmanual_

092906.pdf. 

i. Derivation of the Detailed Operating 

Cost Weights 

To further divide the ‘‘All Other’’ 

residual cost weight estimated from the 

FY 2012 Medicare Cost Report data into 

more detailed cost categories, we 

propose to use the 2007 Benchmark 

Input-Output (I–O) ‘‘Use Tables/Before 

Redefinitions/Purchaser Value’’ for 

North American Industry Classification 

System (NAICS) 622000 Hospitals, 

published by the Bureau of Economic 

Analysis (BEA). These data are publicly 

available at the following Web site: 

http://www.bea.gov/industry/io_

annual.htm. 

The BEA Benchmark I–O data are 

scheduled for publication every five 

years with the most recent data 

available for 2007. The 2007 Benchmark 

I–O data are derived from the 2007 

Economic Census and are the building 

blocks for BEA’s economic accounts. 

Thus, they represent the most 

comprehensive and complete set of data 

on the economic processes or 

mechanisms by which output is 

produced and distributed.1 BEA also 

produces Annual I–O estimates; 

however, while based on a similar 

methodology, these estimates reflect less 

comprehensive and less detailed data 

sources and are subject to revision when 

benchmark data becomes available. 

Instead of using the less detailed 

Annual I–O data, we inflate the 2007 

Benchmark I–O data forward to 2012 by 

applying the annual price changes from 

the respective price proxies to the 

appropriate market basket cost 

categories that are obtained from the 

2007 Benchmark I–O data. We repeat 

this practice for each year. We then 

calculate the cost shares that each cost 

category represents of the inflated 2012 

data. These resulting 2012 cost shares 

are applied to the All Other residual 

cost weight to obtain the detailed cost 

weights for the proposed 2012-based IPF 

market basket. For example, the cost for 

Food: Direct Purchases represents 6.5 

percent of the sum of the ‘‘All Other’’ 

2007 Benchmark I–O Hospital 

Expenditures inflated to 2012; therefore, 

the Food: Direct Purchases cost weight 

represents 6.5 percent of the 2012-based 

IPF market basket’s ‘‘All Other’’ cost 

category (22.0 percent), yielding a 

‘‘final’’ Food: Direct Purchases cost 

weight of 1.4 percent in the proposed 

2012-based IPF market basket (0.065 * 

22.0 percent = 1.4 percent). 

Using this methodology, we derive 

eighteen detailed IPF market basket cost 

category weights from the proposed 

2012-based IPF market basket residual 

cost weight (22.0 percent). These 

categories are: (1) Electricity, (2) Fuel, 

Oil, and Gasoline (3) Water & Sewerage 

(4) Food: Direct Purchases, (5) Food: 

Contract Services, (6) Chemicals, (7) 

Medical Instruments, (8) Rubber & 

Plastics, (9) Paper and Printing 

Products, (10) Miscellaneous Products, 

(11) Professional Fees: Labor-related, 

(12) Administrative and Facilities 

Support Services, (13) Installation, 

Maintenance, and Repair, (14) All Other 

Labor-related Services, (15) Professional 

Fees: Nonlabor-related, (16) Financial 

Services, (17) Telephone Services, and 

(18) All Other Nonlabor-related 

Services. 

iii. Derivation of the Detailed Capital 

Cost Weights 

As described in section III.A.3.a.i of 

this preamble, we are proposing a 

Capital-Related cost weight of 7.0 

percent as obtained from the FY 2012 

Medicare cost reports for freestanding 

and hospital-based IPF providers. We 

are proposing to then separate this total 

Capital-Related cost weight into more 

detailed cost categories. 

Using FY 2012 Medicare cost reports, 

we are able to group Capital-Related 

costs into the following categories: 

Depreciation, Interest, Lease, and Other 

Capital-Related costs. For each of these 

categories, we are proposing to 

determine separately for hospital-based 

IPFs and freestanding IPFs what 

proportion of total capital-related costs 

the category represent. 

For freestanding IPFs, we are 

proposing to derive the proportions for 

Depreciation, Interest, Lease, and Other 

Capital-related costs using the data 

reported by the IPF on Worksheet A–7, 

which is similar to the methodology 

used for the 2008-based RPL market 

basket. 

For hospital-based IPFs, data for these 

four categories are not reported 

separately for the subprovider; 

therefore, we are proposing to derive 

these proportions using data reported on 

Worksheet A–7 for the total facility. We 

are assuming the cost shares for the 

overall hospital are representative for 

the hospital-based subprovider IPF unit. 

For example, if depreciation costs make 

up 60 percent of total capital costs for 

the entire facility, we believe it is 

reasonable to assume that the hospitalbased IPF would also have a 60 percent 

proportion because it is a subprovider 

unit contained within the total facility. 

In order to combine each detailed 

capital cost weight for freestanding and 

hospital-based IPFs into a single capital 

cost weight for the proposed 2012-based 

IPF market basket, we are proposing to 

weight together the shares for each of 

the categories (Depreciation, Interest, 

Lease, and Other Capital-related costs) 

based on the share of total capital costs 

each provider type represents of the 

total capital costs for all IPFs for 2012. 

Applying this methodology results in 

proportions of total capital-related costs 

for Depreciation, Interest, Lease and 

Other Capital-related costs that are 

representative of the universe of IPF 

providers. 

We next are proposing to allocate 

lease costs across each of the remaining 

detailed capital-related cost categories 

as was done in the 2008-based RPL 

market basket. This would result in 3 

primary capital-related cost categories 

in the proposed 2012-based IPF market 

basket: Depreciation, Interest, and Other 

Capital-Related costs. Lease costs are 

unique in that they are not broken out 

as a separate cost category in the 

proposed 2012-based IPF market basket, 

but rather we are proposing to 

proportionally distribute these costs 

among the cost categories of 

Depreciation, Interest, and Other 

Capital-Related, reflecting the 

assumption that the underlying cost 

structure of leases is similar to that of 

capital-related costs in general. As was 

done under the 2008-based RPL market 

basket, we are proposing to assume that 

10 percent of the lease costs as a 

proportion of total capital-related costs 

represents overhead and assign those 

costs to the Other Capital-Related cost 

category accordingly. We propose to 

distribute the remaining lease costs 

proportionally across the 3 cost 

categories (Depreciation, Interest, and 

Other Capital-Related) based on the 

proportion that these categories 

comprise of the sum of the Depreciation, 

Interest, and Other Capital-related cost 

categories (excluding lease expenses). 

This is the same methodology used for 

the 2008-based RPL market basket. The 

allocation of these lease expenses are 

shown in Table 3 below. 

Finally, we are proposing to further 

divide the Depreciation and Interest cost 

categories. We are proposing to separate 

Depreciation into the following 2 

categories: (1) Building and Fixed 

Equipment; and (2) Movable Equipment; 

and proposing to separate Interest into 

the following 2 categories: (1) 

Government/Nonprofit; and (2) Forprofit. 

To disaggregate the Depreciation cost 

weight, we need to determine the 

percent of total Depreciation costs for 

IPFs that is attributable to Building and 

Fixed Equipment, which we hereafter 

refer to as the ‘‘fixed percentage.’’ For 

the proposed 2012-based IPF market 

basket, we are proposing to use slightly 

different methods to obtain the fixed 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

25022 Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 

percentages for hospital-based IPFs 

compared to freestanding IPFs. 

For freestanding IPFs, we are 

proposing to use depreciation data from 

Worksheet A–7 of the FY 2012 Medicare 

cost reports, similar to the methodology 

used for the 2008-based RPL market 

basket. However, for hospital-based 

IPFs, we determined that the fixed 

percentage for the entire facility may not 

be representative of the IPF subprovider 

unit due to the entire facility likely 

employing more sophisticated movable 

assets that are not utilized by the 

hospital-based IPF. Therefore, for 

hospital-based IPFs, we are proposing to 

calculate a fixed percentage using: (1) 

Building and fixture capital costs 

allocated to the subprovider unit as 

reported on Worksheet B, part I line 40; 

and (2) building and fixture capital costs 

for the top five ancillary cost centers 

utilized by hospital-based IPFs. We 

propose to weight these 2 fixed 

percentages (inpatient and ancillary) 

using the proportion that each capital 

cost type represents of total capital costs 

in the proposed 2012-based IPF market 

basket. We are proposing to then weight 

the fixed percentages for hospital-based 

and freestanding IPFs together using the 

proportion of total capital costs each 

provider type represents. 

To disaggregate the Interest cost 

weight, we need to determine the 

percent of total interest costs for IPFs 

that are attributable to government and 

nonprofit facilities, which we hereafter 

refer to as the ‘‘nonprofit percentage.’’ 

For the IPF market basket, we are 

proposing to use interest costs data from 

Worksheet A–7 of the FY 2012 Medicare 

cost reports for both freestanding and 

hospital-based IPFs, similar to the 

methodology used for the 2008-based 

RPL market basket. We are proposing to 

determine the percent of total interest 

costs that are attributed to government 

and nonprofit IPFs separately for 

hospital-based and freestanding IPFs. 

We then are proposing to weight the 

nonprofit percentages for hospital-based 

and freestanding IPFs together using the 

proportion of total capital costs each 

provider type represents. 

Table 3 below provides the detailed 

capital cost shares obtained from the 

Medicare cost reports. Ultimately, these 

detailed capital cost shares are applied 

to the total Capital-Related cost weight 

determined in section III.A.3.a.i to split 

out the total weight of 7.0 percent into 

more detailed cost categories and 

weights. 

TABLE 3—DETAILED CAPITAL COST WEIGHTS FOR THE PROPOSED 2012-BASED IPF MARKET BASKET

Cost shares 

obtained from 

medicare cost 

reports 

percent 

Proposed detailed capital 

cost shares 

after allocation 

of lease expenses 

percent 

Depreciation ............................................................................................................................................................. 64 75 

Building and Fixed Equipment ................................................................................................................................. 46 53 

Movable Equipment ................................................................................................................................................. 19 22 

Interest ..................................................................................................................................................................... 15 17 

Government/Nonprofit .............................................................................................................................................. 12 14 

For Profit .................................................................................................................................................................. 2 3 

Lease ....................................................................................................................................................................... 15 n/a 

Other ........................................................................................................................................................................ 6 8 

v. Proposed 2012-Based IPF Market 

Basket Cost Categories and Weights 

Table 4 below shows the cost 

categories and weights for the proposed 

2012-based IPF market basket compared 

to the 2008-based RPL market basket. 

TABLE 4—PROPOSED 2012-BASED IPF COST WEIGHTS COMPARED TO 2008-BASED RPL COST WEIGHTS

Cost category 

Proposed 

2012-Based 

IPF cost 

weight 

2008-Based 

RPL cost 

weight 

Total ......................................................................................................................................................................... 100.0 100.0 

Compensation ................................................................................................................................................... 65.2 62.3 

Wages and Salaries ........................................................................................................................... 51.9 49.4 

Employee Benefits ............................................................................................................................. 13.3 12.8 

Utilities .............................................................................................................................................................. 1.8 1.6 

Electricity ............................................................................................................................................ 0.8 1.1 

Fuel, Oil, and Gasoline ...................................................................................................................... 0.9 0.4 

Water & Sewerage ............................................................................................................................. 0.1 0.1 

Professional Liability Insurance ........................................................................................................................ 1.1 0.8 

Malpractice ......................................................................................................................................... 1.1 0.8 

All Other Products and Services ...................................................................................................................... 25.0 27.0 

All Other Products ..................................................................................................................................... 11.7 15.6 

Pharmaceuticals ................................................................................................................................. 4.8 6.5 

Food: Direct Purchases ..................................................................................................................... 1.4 3.0 

Food: Contract Services .................................................................................................................... 0.9 0.4 

Chemicals ........................................................................................................................................... 0.6 1.1 

Medical Instruments ........................................................................................................................... 1.9 1.8 

Rubber & Plastics .............................................................................................................................. 0.5 1.1 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 25023 

TABLE 4—PROPOSED 2012-BASED IPF COST WEIGHTS COMPARED TO 2008-BASED RPL COST WEIGHTS—Continued 

Cost category 

Proposed 

2012-Based 

IPF cost 

weight 

2008-Based 

RPL cost 

weight 

Paper and Printing Products .............................................................................................................. 1.0 1.0 

Apparel ............................................................................................................................................... ........................ 0.2 

Machinery and Equipment ................................................................................................................. ........................ 0.1 

Miscellaneous Products ..................................................................................................................... 0.7 0.3 

All Other Services ............................................................................................................................................. 13.3 11.4 

Labor-Related Services ............................................................................................................................. 6.7 4.7 

Professional Fees: Labor-related ....................................................................................................... 2.9 2.1 

Administrative and Facilities Support Services .................................................................................. 0.7 0.4 

Installation, Maintenance, and Repair ............................................................................................... 1.6 ........................

All Other: Labor-related Services ....................................................................................................... 1.5 2.1 

Nonlabor-Related Services ....................................................................................................................... 6.6 6.7 

Professional Fees: Nonlabor-related ................................................................................................. 2.6 4.2 

Financial services ............................................................................................................................... 2.3 0.9 

Telephone Services ........................................................................................................................... 0.6 0.4 

Postage .............................................................................................................................................. ........................ 0.6 

All Other: Nonlabor-related Services ................................................................................................. 1.1 0.6 

Capital-Related Costs ....................................................................................................................................... 7.0 8.4 

Depreciation .............................................................................................................................................. 5.2 5.5 

Fixed Assets ....................................................................................................................................... 3.7 3.3 

Movable Equipment ........................................................................................................................... 1.5 2.2 

Interest Costs ............................................................................................................................................ 1.2 2.0 

Government/Nonprofit ........................................................................................................................ 1.0 0.7 

For Profit ............................................................................................................................................ 0.2 1.3 

Other Capital-Related Costs ..................................................................................................................... 0.6 0.9 

Other Capital-Related Costs .............................................................................................................. 0.6 0.9 

The proposed 2012-based IPF market 

basket does not include separate cost 

categories for Apparel, Machinery & 

Equipment, and Postage. Due to the 

small weights associated with these 

detailed categories and relatively stable 

price growth in the applicable price 

proxy, we are proposing to include 

Apparel and Machinery & Equipment in 

the Miscellaneous Products cost 

category and Postage in the All-Other 

Nonlabor-related Services. We note that 

these Machinery & Equipment expenses 

are for equipment that is paid for in a 

given year and not depreciated over the 

assets’ useful life. Depreciation 

expenses for movable equipment are 

reflected in the Capital-related costs of 

the proposed 2012-based IPF market 

basket. For the proposed 2012-based IPF 

market basket, we are also proposing to 

include a separate cost category for 

Installation, Maintenance, and Repair. 

b. Selection of Price Proxies 

After developing the cost weights for 

the proposed 2012-based IPF market 

basket, we selected the most appropriate 

wage and price proxies currently 

available to represent the rate of price 

change for each expenditure category. 

For the majority of the cost weights, we 

base the price proxies on Bureau of 

Labor Statistics (BLS) data and group 

them into one of the following BLS 

categories: 

• Employment Cost Indexes. 

Employment Cost Indexes (ECIs) 

measure the rate of change in 

employment wage rates and employer 

costs for employee benefits per hour 

worked. These indexes are fixed-weight 

indexes and strictly measure the change 

in wage rates and employee benefits per 

hour. ECIs are superior to Average 

Hourly Earnings (AHE) as price proxies 

for input price indexes because they are 

not affected by shifts in occupation or 

industry mix, and because they measure 

pure price change and are available by 

both occupational group and by 

industry. The industry ECIs are based 

on the North American Classification 

System (NAICS) and the occupational 

ECIs are based on the Standard 

Occupational Classification System 

(SOC). 

• Producer Price Indexes. Producer 

Price Indexes (PPIs) measure price 

changes for goods sold in other than 

retail markets. PPIs are used when the 

purchases of goods or services are made 

at the wholesale level. 

• Consumer Price Indexes. Consumer 

Price Indexes (CPIs) measure change in 

the prices of final goods and services 

bought by consumers. CPIs are only 

used when the purchases are similar to 

those of retail consumers rather than 

purchases at the wholesale level, or if 

no appropriate PPIs are available. 

We evaluated the price proxies using 

the criteria of reliability, timeliness, 

availability, and relevance: 

• Reliability. Reliability indicates that 

the index is based on valid statistical 

methods and has low sampling 

variability. Widely accepted statistical 

methods ensure that the data were 

collected and aggregated in a way that 

can be replicated. Low sampling 

variability is desirable because it 

indicates that the sample reflects the 

typical members of the population. 

(Sampling variability is variation that 

occurs by chance because only a sample 

was surveyed rather than the entire 

population.) 

• Timeliness. Timeliness implies that 

the proxy is published regularly, 

preferably at least once a quarter. The 

market baskets are updated quarterly 

and, therefore, it is important for the 

underlying price proxies to be up-todate, reflecting the most recent data 

available. We believe that using proxies 

that are published regularly (at least 

quarterly, whenever possible) helps to 

ensure that we are using the most recent 

data available to update the market 

basket. We strive to use publications 

that are disseminated frequently, 

because we believe that this is an 

optimal way to stay abreast of the most 

current data available. 

• Availability. Availability means that 

the proxy is publicly available. We 

prefer that our proxies are publicly 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

25024 Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 

available because this will help ensure 

that our market basket updates are as 

transparent to the public as possible. In 

addition, this enables the public to be 

able to obtain the price proxy data on 

a regular basis. 

• Relevance. Relevance means that 

the proxy is applicable and 

representative of the cost category 

weight to which it is applied. The CPIs, 

PPIs, and ECIs that we have selected to 

propose in this regulation meet these 

criteria. Therefore, we believe that they 

continue to be the best measure of price 

changes for the cost categories to which 

they would be applied. 

Table 6 lists all price proxies for the 

proposed 2012-based IPF market basket. 

Below is a detailed explanation of the 

price proxies we are proposing for each 

cost category weight. 

i. Price Proxies for the Operating Portion 

of the Proposed 2012-Based IPF Market 

Basket 

Wages and Salaries 

To measure wage price growth in the 

proposed 2012-based IPF market basket, 

we are proposing to apply a proxy blend 

based on six occupational subcategories 

within the Wages and Salaries category, 

which would reflect the IPF 

occupational mix. There is not a 

published wage proxy for IPF workers. 

The 2008-based RPL market basket uses 

the ECI for Wages and Salaries for All 

Civilian workers in Hospitals (BLS 

series code #CIU1026220000000I) to 

proxy these expenses. 

We propose to use the National 

Industry-Specific Occupational 

Employment and Wage estimates for 

North American Industrial 

Classification System (NAICS) 622200, 

Psychiatric & Substance Abuse 

Hospitals, published by the BLS Office 

of Occupational Employment Statistics 

(OES), as the data source for the wage 

cost shares in the wage proxy blend. We 

propose to use OES’ May 2012 data. 

Detailed information on the 

methodology for the national industryspecific occupational employment and 

wage estimates survey can be found at 

http://www.bls.gov/oes/current/oes_

tec.htm. 

Based on the OES data, there are six 

wage subcategories: Management; 

NonHealth Professional and Technical; 

Health Professional and Technical; 

Health Service; NonHealth Service; and 

Clerical. Table 5 lists the proposed 2012 

occupational assignments for the six 

wage subcategories. 

TABLE 5—PROPOSED 2012 OCCUPATIONAL ASSIGNMENTS FOR IPF WAGE BLEND

2012 PROPOSED OCCUPATIONAL GROUPINGS

Group 1 Management 

11–0000 .................................................................................................... Management Occupations. 

Group 2 NonHealth Professional & Technical 

13–0000 .................................................................................................... Business and Financial Operations Occupations. 

15–0000 .................................................................................................... Computer and Mathematical Science Occupations. 

17–0000 .................................................................................................... Architecture and Engineering Occupations. 

19–0000 .................................................................................................... Life, Physical, and Social Science Occupations. 

23–0000 .................................................................................................... Legal Occupations. 

25–0000 .................................................................................................... Education, Training, and Library Occupations. 

27–0000 .................................................................................................... Arts, Design, Entertainment, Sports, and Media Occupations. 

Group 3 Health Professional & Technical 

29–1021 .................................................................................................... Dentists, General. 

29–1031 .................................................................................................... Dietitians and Nutritionists. 

29–1051 .................................................................................................... Pharmacists. 

29–1062 .................................................................................................... Family and General Practitioners. 

29–1063 .................................................................................................... Internists, General.

29–1069 .................................................................................................... Physicians and Surgeons, All Other. 

29–1071 .................................................................................................... Physician Assistants. 

29–1111 .................................................................................................... Registered Nurses. 

29–1122 .................................................................................................... Occupational Therapists. 

29–1123 .................................................................................................... Physical Therapists.

29–1125 .................................................................................................... Recreational Therapists. 

29–1126 .................................................................................................... Respiratory Therapists. 

29–1127 .................................................................................................... Speech-Language Pathologists. 

29–1129 .................................................................................................... Therapists, All Other. 

29–1199 .................................................................................................... Health Diagnosing and Treating Practitioners, All Other. 

Group 4 Health Service 

21–0000 .................................................................................................... Community and Social Services Occupations. 

29–2011 .................................................................................................... Medical and Clinical Laboratory Technologists. 

29–2012 .................................................................................................... Medical and Clinical Laboratory Technicians. 

29–2021 .................................................................................................... Dental Hygienists. 

29–2032 .................................................................................................... Diagnostic Medical Sonographers. 

29–2034 .................................................................................................... Radiologic Technologists and Technicians. 

29–2041 .................................................................................................... Emergency Medical Technicians and Paramedics. 

29–2051 .................................................................................................... Dietetic Technicians. 

29–2052 .................................................................................................... Pharmacy Technicians. 

29–2054 .................................................................................................... Respiratory Therapy Technicians. 

29–2061 .................................................................................................... Licensed Practical and Licensed Vocational Nurses. 

29–2071 .................................................................................................... Medical Records and Health Information Technicians. 

29–2099 .................................................................................................... Health Technologists and Technicians, All Other. 

29–9012 .................................................................................................... Occupational Health and Safety Technicians. 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 25025 

TABLE 5—PROPOSED 2012 OCCUPATIONAL ASSIGNMENTS FOR IPF WAGE BLEND—Continued 

2012 PROPOSED OCCUPATIONAL GROUPINGS

29–9099 .................................................................................................... Healthcare Practitioner and Technical Workers, All Other. 

31–0000 .................................................................................................... Healthcare Support Occupations. 

Group 5 NonHealth Service 

33–0000 .................................................................................................... Protective Service Occupations. 

35–0000 .................................................................................................... Food Preparation and Serving Related Occupations. 

37–0000 .................................................................................................... Building and Grounds Cleaning and Maintenance Occupations. 

39–0000 .................................................................................................... Personal Care and Service Occupations. 

41–0000 .................................................................................................... Sales and Related Occupations. 

47–0000 .................................................................................................... Construction and Extraction Occupations. 

49–0000 .................................................................................................... Installation, Maintenance, and Repair Occupations. 

51–0000 .................................................................................................... Production Occupations. 

53–0000 .................................................................................................... Transportation and Material Moving Occupations. 

Group 6 Clerical 

43–0000 .................................................................................................... Office and Administrative Support Occupations. 

Total expenditures by occupation 

(i.e., occupational assignment) were 

calculated by taking the OES number of 

employees multiplied by the OES 

annual average salary. These 

expenditures were aggregated based on 

the six groups in Table 6. We next 

calculated the proportion of each 

group’s expenditures relative to the total 

expenditures of all six groups. These 

proportions, listed in Table 5, represent 

the weights used in the wage proxy 

blend. We propose using the published 

wage proxies in Table 6 for each of the 

six groups (that is, wage subcategories) 

as we believe these six price proxies are 

the most technically appropriate indices 

available to measure the price growth of 

the Wages and Salaries cost category in 

the proposed 2012-based IPF market 

basket. 

TABLE 6—PROPOSED 2012-BASED IPF MARKET BASKET WAGE PROXY BLEND

Wage subcategory Wage blend 

weight Price proxy BLS Series ID 

Health Service .............................. 36.2 ECI for Wages and Salaries for All Civilian workers in Healthcare 

and Social Assistance.

CIU1026200000000I 

Health Professional and Technical 33.5 ECI for Wages and Salaries for All Civilian workers in Hospitals ..... CIU1026220000000I 

NonHealth Service ........................ 9.2 ECI for Wages and Salaries for Private Industry workers in Service 

Occupations.

CIU2020000300000I 

NonHealth Professional and Technical.7.3 ECI for Wages and Salaries for Private Industry workers in Professional, Scientific, and Technical Services.CIU2025400000000I 

Management ................................. 7.1 ECI for Wages and Salaries for Private Industry workers in Management, Business, and Financial.CIU2020000110000I 

Clerical .......................................... 6.7 ECI for Wages and Salaries for Private Industry workers in Office 

and Administrative Support.

CIU2020000220000I 

Total ....................................... 100.0 

A comparison of the yearly changes 

from FY 2012 to FY 2015 for the 

proposed 2012-based IPF wage blend 

and the 2008-based RPL wage proxy is 

shown in Table 7. The average annual 

increase in the 2 price proxies is similar, 

and in no year is the difference greater 

than 0.2 percentage point. 

TABLE 7—FISCAL YEAR GROWTH IN THE PROPOSED 2012-BASED IPF WAGE PROXY BLEND AND 2008-BASED RPL 

WAGE PROXY

2012 2013 2014 2015 Average 

2012–2015 

2012-based IPF Proposed Wage Proxy Blend ................... 1.6 1.6 1.6 2.2 1.8 

2008-based RPL Wage Proxy ............................................. 1.5 1.5 1.5 2.0 1.6 

** Source: IHS Global Insight, Inc., 1st Quarter 2015 forecast with historical data through 4th Quarter 2014. 

Benefits 

For measuring benefits price growth 

in the proposed 2012-based IPF market 

basket, we are proposing to apply a 

benefits proxy blend based on the same 

six subcategories and the same six blend 

weights proposed for the wage proxy 

blend. These subcategories and blend 

weights are listed in Table 8. 

Applicable benefit ECIs, that are 

identical in industry definition to the 

wage blend ECIs, were selected for each 

of the six subcategories. These proposed 

benefit ECIs, listed in Table 8, are not 

publically available. Therefore, we 

calculated ‘‘ECIs for Total Benefits’’ 

using publically available ‘‘ECIs for 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

25026 Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 

Total Compensation’’ for each 

subcategory and the relative importance 

of wages within that subcategory’s total 

compensation. This is the same benefits 

ECI methodology we implemented in 

our IPPS, SNF, HHA, RPL, LTCH, and 

ESRD market baskets. We believe the six 

price proxies listed in Table 8 are the 

most technically appropriate indices to 

measure the price growth of the Benefits 

cost category in the proposed 2012- 

based IPF market basket. 

The current 2008-based RPL market 

basket uses the ECI for Benefits for All 

Civilian Workers in Hospitals to proxy 

Benefit expenses. 

TABLE 8—PROPOSED 2012-BASED IPF MARKET BASKET BENEFITS PROXY BLEND

Wage subcategory Wage blend 

weight Price proxy 

Health Service .......................................... 36.2 ECI for Total Benefits for All Civilian workers in Healthcare and Social Assistance. 

Health Professional and Technical ........... 33.5 ECI for Total Benefits for All Civilian workers in Hospitals. 

NonHealth Service .................................... 9.2 ECI for Total Benefits for Private Industry workers in Service Occupations. 

NonHealth Professional and Technical .... 7.3 ECI for Total Benefits for Private Industry workers in Professional, Scientific, and 

Technical Services. 

Management ............................................. 7.1 ECI for Total Benefits for Private Industry workers in Management, Business, and 

Financial. 

Clerical ...................................................... 6.7 ECI for Total Benefits for Private Industry workers in Office and Administrative Support. 

Total ................................................... 100.0 

A comparison of the yearly changes 

from FY 2012 to FY 2015 for the 

proposed 2012-based IPF benefit proxy 

blend and the 2008-based RPL benefit 

proxy is shown in Table 9. The average 

annual increase in the 2 price proxies is 

similar, and in no year is the difference 

greater than 0.4 percentage point. 

TABLE 9—FISCAL YEAR GROWTH IN THE PROPOSED 2012-BASED IPF BENEFIT PROXY BLEND AND 2008-BASED RPL 

BENEFIT PROXY

2012 2013 2014 2015 Average 

2012–2015 

2012-based IPF Proposed Benefit Proxy Blend .................. 2.5 1.9 2.0 2.2 2.2 

2008-based RPL Benefit Proxy ........................................... 2.1 1.8 2.1 2.1 2.0 

Source: IHS Global Insight, Inc., 1st Quarter 2015 forecast with historical data through 4th Quarter 2014. 

Electricity 

We are proposing to continue to use 

the PPI for Commercial Electric Power 

(BLS series code #WPU0542) to measure 

the price growth of this cost category. 

This is the same price proxy used in the 

2008-based RPL market basket. 

Fuel, Oil, and Gasoline 

We are proposing to change the proxy 

used for the Fuel, Oil, and Gasoline cost 

category. The 2008-based RPL market 

basket uses the PPI for Petroleum 

Refineries (BLS series code #PCU32411– 

32411) to proxy these expenses. 

For the proposed 2012-based IPF 

market basket, we are proposing to use 

a blend of the PPI for Petroleum 

Refineries and the PPI Commodity for 

Natural Gas (BLS series code 

#WPU0531). Our analysis of the Bureau 

of Economic Analysis’ 2007 Benchmark 

Input-Output data (use table before 

redefinitions, purchaser’s value for 

NAICS 622000 [Hospitals]), shows that 

Petroleum Refineries expenses accounts 

for approximately 70 percent and 

Natural Gas accounts for approximately 

30 percent of the Fuel, Oil, and Gasoline 

expenses. Therefore, we propose a blend 

using 70 percent of the PPI for 

Petroleum Refineries (BLS series code 

#PCU32411–32411) and 30 percent of 

the PPI Commodity for Natural Gas (BLS 

series code #WPU0531). We believe that 

these 2 price proxies are the most 

technically appropriate indices 

available to measure the price growth of 

the Fuel, Oil, and Gasoline cost category 

in the proposed 2012-based IPF market 

basket. 

Water and Sewerage 

We are proposing to continue to use 

the CPI for Water and Sewerage 

Maintenance (BLS series code 

#CUUR0000SEHG01) to measure the 

price growth of this cost category. This 

is the same proxy used in the 2008- 

based RPL market basket. 

Professional Liability Insurance 

We are proposing to continue to use 

the CMS Hospital Professional Liability 

Index to measure changes in 

professional liability insurance (PLI) 

premiums. To generate this index, we 

collect commercial insurance premiums 

for a fixed level of coverage while 

holding non-price factors constant (such 

as a change in the level of coverage). 

This is the same proxy used in the 2008- 

based RPL market basket. 

Pharmaceuticals 

We are proposing to continue to use 

the PPI for Pharmaceuticals for Human 

Use, Prescription (BLS series code 

#WPUSI07003) to measure the price 

growth of this cost category. This is the 

same proxy used in the 2008-based RPL 

market basket. 

Food: Direct Purchases 

We are proposing to continue to use 

the PPI for Processed Foods and Feeds 

(BLS series code #WPU02) to measure 

the price growth of this cost category. 

This is the same proxy used in the 2008- 

based RPL market basket. 

Food: Contract Purchases 

We are proposing to continue to use 

the CPI for Food Away From Home (BLS 

series code #CUUR0000SEFV) to 

measure the price growth of this cost 

category. This is the same proxy used in 

the 2008-based RPL market basket. 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 25027 

Chemicals 

We are proposing to continue to use 

a four part blended PPI composed of the 

PPI for Industrial Gas Manufacturing 

(BLS series code PCU325120325120P), 

the PPI for Other Basic Inorganic 

Chemical Manufacturing (BLS series 

code #PCU32518–32518), the PPI for 

Other Basic Organic Chemical 

Manufacturing (BLS series code 

#PCU32519–32519), and the PPI for 

Soap and Cleaning Compound 

Manufacturing (BLS series code 

#PCU32561–32561). We propose 

updating the blend weights using 2007 

Benchmark I–O data which, compared 

to 2002 Benchmark I–O data, is 

weighted more toward organic chemical 

products and weighted less toward 

inorganic chemical products. 

Table 10 below shows the proposed 

weights for each of the four PPIs used 

to create the blended PPI. These are the 

same four proxies used in the 2008- 

based RPL market basket; however, the 

blended PPI weights in the 2008-based 

RPL market baskets were based on 2002 

Benchmark I–O data. 

TABLE 10—BLENDED CHEMICAL PPI WEIGHTS

Name 

Proposed 

2012-Based 

IPF weights 

(percent) 

2008-Based 

RPL weights 

(percent) 

NAICS 

PPI for Industrial Gas Manufacturing .......................................................................................... 32 35 325120 

PPI for Other Basic Inorganic Chemical Manufacturing ............................................................. 17 25 325180 

PPI for Other Basic Organic Chemical Manufacturing ................................................................ 45 30 325190 

PPI for Soap and Cleaning Compound Manufacturing ............................................................... 6 10 325610 

Medical Instruments 

We are proposing to use a blend for 

the Medical Instruments cost category. 

The 2007 Benchmark Input-Output data 

shows an approximate 50/50 split 

between Surgical and Medical 

Instruments and Medical and Surgical 

Appliances and Supplies for this cost 

category. Therefore, we propose a blend 

composed of 50 percent of the 

commodity-based PPI for Surgical and 

Medical Instruments (BLS code 

#WPU1562) and 50 percent of the 

commodity-based PPI for Medical and 

Surgical Appliances and Supplies (BLS 

code #WPU1563). The 2008-based RPL 

market basket uses the single, higher 

level PPI for Medical, Surgical, and 

Personal Aid Devices (BLS series code 

#WPU156). 

Rubber and Plastics 

We are proposing to continue to use 

the PPI for Rubber and Plastic Products 

(BLS series code #WPU07) to measure 

price growth of this cost category. This 

is the same proxy used in the 2008- 

based RPL market basket. 

Paper and Printing Products 

We are proposing to continue to use 

the PPI for Converted Paper and 

Paperboard Products (BLS series code 

#WPU0915) to measure the price growth 

of this cost category. This is the same 

proxy used in the 2008-based RPL 

market basket. 

Miscellaneous Products 

We are proposing to continue to use 

the PPI for Finished Goods Less Food 

and Energy (BLS series code 

#WPUSOP3500) to measure the price 

growth of this cost category. This is the 

same proxy used in the 2008-based RPL 

market basket. 

Professional Fees: Labor-Related 

We are proposing to continue to use 

the ECI for Total Compensation for 

Private Industry workers in Professional 

and Related (BLS series code 

#CIU2010000120000I) to measure the 

price growth of this category. This is the 

same proxy used in the 2008-based RPL 

market basket. 

Administrative and Facilities Support 

Services 

We are proposing to continue to use 

the ECI for Total Compensation for 

Private Industry workers in Office and 

Administrative Support (BLS series 

code #CIU2010000220000I) to measure 

the price growth of this category. This 

is the same proxy used in the 2008- 

based RPL market basket. 

Installation, Maintenance, and Repair 

We are proposing to use the ECI for 

Total Compensation for Civilian 

workers in Installation, Maintenance, 

and Repair (BLS series code 

#CIU1010000430000I) to measure the 

price growth of this new cost category. 

Previously these costs were included in 

the All Other: Labor-related Services 

category and were proxied by the ECI 

for Total Compensation for Private 

Industry workers in Service 

Occupations (BLS series code 

#CIU2010000300000I). We believe that 

this index better reflects the price 

changes of labor associated with 

maintenance-related services and its 

incorporation represents a technical 

improvement to the market basket. 

All Other: Labor-Related Services 

We are proposing to continue to use 

the ECI for Total Compensation for 

Private Industry workers in Service 

Occupations (BLS series code 

#CIU2010000300000I) to measure the 

price growth of this cost category. This 

is the same proxy used in the 2008- 

based RPL market basket. 

Professional Fees: Nonlabor-Related 

We are proposing to continue to use 

the ECI for Total Compensation for 

Private Industry workers in Professional 

and Related (BLS series code 

#CIU2010000120000I) to measure the 

price growth of this category. This is the 

same proxy used in the 2008-based RPL 

market basket. 

Financial Services 

We are proposing to continue to use 

the ECI for Total Compensation for 

Private Industry workers in Financial 

Activities (BLS series code 

#CIU201520A000000I) to measure the 

price growth of this cost category. This 

is the same proxy used in the 2008- 

based RPL market basket. 

Telephone Services 

We are proposing to continue to use 

the CPI for Telephone Services (BLS 

series code #CUUR0000SEED) to 

measure the price growth of this cost 

category. This is the same proxy used in 

the 2008-based RPL market basket. 

All Other: Nonlabor-Related Services 

We are proposing to continue to use 

the CPI for All Items Less Food and 

Energy (BLS series code 

#CUUR0000SA0L1E) to measure the 

price growth of this cost category. This 

is the same proxy used in the 2008- 

based RPL market basket. 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

25028 Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 

ii. Price Proxies for the Capital Portion 

of the Proposed 2012-Based IPF Market 

Basket 

Capital Price Proxies Prior to Vintage 

Weighting 

We are proposing to apply the same 

price proxies to the detailed capitalrelated cost categories as were applied 

in the 2008-based RPL market basket, 

which are provided in Table 12 and 

described below. We are also proposing 

to continue to vintage weight the capital 

price proxies for Depreciation and 

Interest in order to capture the longterm consumption of capital. This 

vintage weighting method is similar to 

the method used for the 2008-based RPL 

market basket and is described below. 

We are proposing to proxy the 

Depreciation: Building and Fixed 

Equipment cost category by BEA’s 

Chained Price Index for Nonresidential 

Construction for Hospitals and Special 

Care Facilities (BEA Table 5.4.4. Price 

Indexes for Private Fixed Investment in 

Structures by Type). We are proposing 

to proxy the Depreciation: Movable 

Equipment cost category by the PPI for 

Machinery and Equipment (BLS series 

code #WPU11). We are proposing to 

proxy the Nonprofit Interest cost 

category by the average yield on 

domestic municipal bonds (Bond Buyer 

20-bond index). We are proposing to 

proxy the For-profit Interest cost 

category by the average yield on 

Moody’s Aaa bonds (Federal Reserve). 

We are proposing to proxy the Other 

Capital-Related cost category by the 

CPI–U for Rent of Primary Residence 

(BLS series code #CUUS0000SEHA). We 

believe these are the most appropriate 

proxies for IPF capital-related costs that 

meet our selection criteria of relevance, 

timeliness, availability, and reliability. 

Vintage Weights for Price Proxies 

Because capital is acquired and paid 

for over time, capital-related expenses 

in any given year are determined by 

both past and present purchases of 

physical and financial capital. The 

vintage-weighted capital-related portion 

of the proposed 2012-based IPF market 

basket is intended to capture the longterm consumption of capital, using 

vintage weights for depreciation 

(physical capital) and interest (financial 

capital). These vintage weights reflect 

the proportion of capital-related 

purchases attributable to each year of 

the expected life of building and fixed 

equipment, movable equipment, and 

interest. We are proposing to use vintage 

weights to compute vintage-weighted 

price changes associated with 

depreciation and interest expenses. 

Capital-related costs are inherently 

complicated and are determined by 

complex capital-related purchasing 

decisions, over time, based on such 

factors as interest rates and debt 

financing. In addition, capital is 

depreciated over time instead of being 

consumed in the same period it is 

purchased. By accounting for the 

vintage nature of capital, we are able to 

provide an accurate and stable annual 

measure of price changes. Annual nonvintage price changes for capital are 

unstable due to the volatility of interest 

rate changes and, therefore, do not 

reflect the actual annual price changes 

for IPF capital-related costs. The capitalrelated component of the proposed 

2012-based IPF market basket reflects 

the underlying stability of the capitalrelated acquisition process. 

To calculate the vintage weights for 

depreciation and interest expenses, we 

first need a time series of capital-related 

purchases for building and fixed 

equipment and movable equipment. We 

found no single source that provides an 

appropriate time series of capital-related 

purchases by hospitals for all of the 

above components of capital purchases. 

The early Medicare cost reports did not 

have sufficient capital-related data to 

meet this need. Data we obtained from 

the American Hospital Association 

(AHA) do not include annual capitalrelated purchases. However, the AHA 

does provide a consistent database of 

total expenses back to 1963. 

Consequently, we are proposing to use 

data from the AHA Panel Survey and 

the AHA Annual Survey to obtain a 

time series of total expenses for 

hospitals. We are then proposing to use 

data from the AHA Panel Survey 

supplemented with the ratio of 

depreciation to total hospital expenses 

obtained from the Medicare cost reports 

to derive a trend of annual depreciation 

expenses for 1963 through 2012. We 

propose to separate these depreciation 

expenses into annual amounts of 

building and fixed equipment 

depreciation and movable equipment 

depreciation as determined above. From 

these annual depreciation amounts we 

derive annual end-of-year book values 

for building and fixed equipment and 

movable equipment using the expected 

life for each type of asset category. 

While data are not available that are 

specific to IPFs, we believe this 

information for all hospitals serves as a 

reasonable alternative for the pattern of 

depreciation for IPFs. 

To continue to calculate the vintage 

weights for depreciation and interest 

expenses, we also need the expected 

lives for Building and Fixed Equipment, 

Movable Equipment, and Interest for the 

proposed 2012-based IPF market basket. 

We are proposing to calculate the 

expected lives using Medicare cost 

report data from freestanding and 

hospital-based IPFs. The expected life of 

any asset can be determined by dividing 

the value of the asset (excluding fully 

depreciated assets) by its current year 

depreciation amount. This calculation 

yields the estimated expected life of an 

asset if the rates of depreciation were to 

continue at current year levels, 

assuming straight-line depreciation. We 

are proposing to determine the expected 

life of building and fixed equipment 

separately for hospital-based IPFs and 

freestanding IPFs and weight these 

expected lives using the percent of total 

capital costs each provider type 

represents. We are proposing to apply a 

similar method for movable equipment. 

Using these proposed methods, we 

determined the average expected life of 

building and fixed equipment to be 

equal to 23 years, and the average 

expected life of movable equipment to 

be equal to 11 years. For the expected 

life of interest, we believe vintage 

weights for interest should represent the 

average expected life of building and 

fixed equipment because, based on 

previous research described in the FY 

1997 IPPS final rule (61 FR 46198), the 

expected life of hospital debt 

instruments and the expected life of 

buildings and fixed equipment are 

similar. We note that for the 2008-based 

RPL market basket, we used FY 2008 

Medicare cost reports for IPPS hospitals 

to determine the expected life of 

building and fixed equipment and 

movable equipment (76 FR 51763). The 

2008-based RPL market basket was 

based on an expected average life of 

building and fixed equipment of 26 

years and an expected average life of 

movable equipment of 11 years, which 

were both calculated using data for IPPS 

hospitals. 

Multiplying these expected lives by 

the annual depreciation amounts results 

in annual year-end asset costs for 

building and fixed equipment and 

movable equipment. We then calculate 

a time series, beginning in 1964, of 

annual capital purchases by subtracting 

the previous year’s asset costs from the 

current year’s asset costs. 

For the building and fixed equipment 

and movable equipment vintage 

weights, we are proposing to use the 

real annual capital-related purchase 

amounts for each asset type to capture 

the actual amount of the physical 

acquisition, net of the effect of price 

inflation. These real annual capitalrelated purchase amounts are produced 

by deflating the nominal annual 

purchase amount by the associated price 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 25029 

proxy as provided above. For the 

interest vintage weights, we are 

proposing to use the total nominal 

annual capital-related purchase 

amounts to capture the value of the debt 

instrument (including, but not limited 

to, mortgages and bonds). Using these 

capital-related purchase time series 

specific to each asset type, we are 

proposing to calculate the vintage 

weights for building and fixed 

equipment, for movable equipment, and 

for interest. 

The vintage weights for each asset 

type are deemed to represent the 

average purchase pattern of the asset 

over its expected life (in the case of 

building and fixed equipment and 

interest, 23 years, and in the case of 

movable equipment, 11 years). For each 

asset type, we used the time series of 

annual capital-related purchase 

amounts available from 2012 back to 

1964. These data allow us to derive 

twenty-seven 23-year periods of capitalrelated purchases for building and fixed 

equipment and interest, and thirty-nine 

11-year periods of capital-related 

purchases for movable equipment. For 

each 23-year period for building and 

fixed equipment and interest, or 11-year 

period for movable equipment, we 

calculate annual vintage weights by 

dividing the capital-related purchase 

amount in any given year by the total 

amount of purchases over the entire 23- 

year or 11-year period. This calculation 

is done for each year in the 23-year or 

11-year period and for each of the 

periods for which we have data. We 

then calculate the average vintage 

weight for a given year of the expected 

life by taking the average of these 

vintage weights across the multiple 

periods of data. The vintage weights for 

the capital-related portion of the 2008- 

based RPL market basket and the 

proposed 2012-based IPF market basket 

are presented in Table 11 below. 

TABLE 11—2008-BASED RPL MARKET BASKET AND PROPOSED 2012-BASED IPF MARKET BASKET VINTAGE WEIGHTS

FOR CAPITAL-RELATED PRICE PROXIES

Year 

Building and fixed equipment Movable equipment Interest 

2012-based 

23 years 

2008-based 

26 years 

2012-based 

11 years 

2008-based 

11 years 

2012-based 

23 years 

2008-based 

26 years 

1 ........................... 0.029 0.021 0.069 0.071 0.017 0.010 

2 ........................... 0.031 0.023 0.073 0.075 0.019 0.012 

3 ........................... 0.034 0.025 0.077 0.080 0.022 0.014 

4 ........................... 0.036 0.027 0.083 0.083 0.024 0.016 

5 ........................... 0.037 0.028 0.087 0.085 0.026 0.018 

6 ........................... 0.039 0.030 0.091 0.089 0.028 0.020 

7 ........................... 0.040 0.031 0.096 0.092 0.030 0.021 

8 ........................... 0.041 0.033 0.100 0.098 0.032 0.024 

9 ........................... 0.042 0.035 0.103 0.103 0.035 0.026 

10 ......................... 0.044 0.037 0.107 0.109 0.038 0.029 

11 ......................... 0.045 0.039 0.114 0.116 0.040 0.033 

12 ......................... 0.045 0.041 .............................. .............................. 0.042 0.035 

13 ......................... 0.045 0.042 .............................. .............................. 0.044 0.038 

14 ......................... 0.046 0.043 .............................. .............................. 0.046 0.041 

15 ......................... 0.046 0.044 .............................. .............................. 0.048 0.043 

16 ......................... 0.048 0.045 .............................. .............................. 0.053 0.046 

17 ......................... 0.049 0.046 .............................. .............................. 0.057 0.049 

18 ......................... 0.050 0.047 .............................. .............................. 0.060 0.052 

19 ......................... 0.051 0.047 .............................. .............................. 0.063 0.053 

20 ......................... 0.051 0.045 .............................. .............................. 0.066 0.053 

21 ......................... 0.051 0.045 .............................. .............................. 0.067 0.055 

22 ......................... 0.050 0.045 .............................. .............................. 0.069 0.056 

23 ......................... 0.052 0.046 .............................. .............................. 0.073 0.060 

24 ......................... .............................. 0.046 .............................. .............................. .............................. 0.063 

25 ......................... .............................. 0.045 .............................. .............................. .............................. 0.064 

26 ......................... .............................. 0.046 .............................. .............................. .............................. 0.068 

Total .............. 1.000 1.000 1.000 1.000 1.000 1.000 

Note: Numbers may not add to total due to rounding. 

The process of creating vintageweighted price proxies requires 

applying the vintage weights to the 

price proxy index where the last applied 

vintage weight in Table 11 is applied to 

the most recent data point. We have 

provided on the CMS Web site an 

example of how the vintage weighting 

price proxies are calculated, using 

example vintage weights and example 

price indices. The example can be found 

at the following link: http://www.cms.

gov/Research-Statistics-Data-andSystems/Statistics-Trends-and-Reports/

MedicareProgramRatesStats/Market

BasketResearch.html in the zip file 

titled ‘‘Weight Calculations as described 

in the IPPS FY 2010 Proposed Rule.’’ 

iii. Summary of Price Proxies of the 

Proposed 2012-Based IPF Market Basket 

Table 12 shows both the operating 

and capital price proxies for the 

proposed 2012-based IPF Market Basket. 

TABLE 12—PRICE PROXIES FOR THE PROPOSED 2012-BASED IPF MARKET BASKET

Cost description Price proxies Weight 

(percent) 

Total .......................................................... ....................................................................................................................................... 100.0 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

25030 Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 

TABLE 12—PRICE PROXIES FOR THE PROPOSED 2012-BASED IPF MARKET BASKET—Continued 

Cost description Price proxies Weight 

(percent) 

Compensation .................................... ....................................................................................................................................... 65.2 

Wages and Salaries ................... Blended Wages and Salaries Price Proxy ................................................................... 51.9 

Employee Benefits ..................... Blended Benefits Price Proxy ...................................................................................... 13.3 

Utilities ............................................... ....................................................................................................................................... 1.8 

Electricity .................................... PPI for Commercial Electric Power ............................................................................. 0.8 

Fuel, Oil, and Gasoline ............... Blend of the PPI for Petroleum Refineries and PPI for Natural Gas .......................... 0.9 

Water & Sewerage ..................... CPI–U for Water and Sewerage Maintenance ............................................................ 0.1 

Professional Liability Insurance ......... ....................................................................................................................................... 1.1 

Malpractice ................................. CMS Hospital Professional Liability Insurance Premium Index .................................. 1.1 

All Other Products and Services ....... ....................................................................................................................................... 25.0 

All Other Products ............................. ....................................................................................................................................... 11.7 

Pharmaceuticals ......................... PPI for Pharmaceuticals for human use, prescription ................................................. 4.8 

Food: Direct Purchases .............. PPI for Processed Foods and Feeds .......................................................................... 1.4 

Food: Contract Services ............. CPI–U for Food Away From Home .............................................................................. 0.9 

Chemicals ................................... Blend of Chemical PPIs ............................................................................................... 0.6 

Medical Instruments ................... Blend of the PPI for Surgical and medical instruments and PPI for Medical and surgical appliances and supplies.1.9 

Rubber & Plastics ....................... PPI for Rubber and Plastic Products ........................................................................... 0.5 

Paper and Printing Products ...... PPI for Converted Paper and Paperboard Products ................................................... 1.0 

Miscellaneous Products .............. PPI for Finished Goods Less Food and Energy .......................................................... 0.7 

All Other Services .............................. ....................................................................................................................................... 13.3 

Labor-Related Services ..................... ....................................................................................................................................... 6.7 

Professional Fees: Labor-related ECI for Total compensation for Private industry workers in Professional and related 2.9 

Administrative and Facilities 

Support Services.

ECI for Total compensation for Private industry workers in Office and administrative 

support.

0.7 

Installation, Maintenance, and 

Repair.

ECI for Total compensation for Civilian workers in Installation, maintenance, and repair.1.6 

All Other: Labor-related Services ECI for Total compensation for Private industry workers in Service occupations ...... 1.5 

Nonlabor-Related Services ................ ....................................................................................................................................... 6.6 

Professional Fees: Nonlabor-related.ECI for Total compensation for Private industry workers in Professional and related 2.6 

Financial services ....................... ECI for Total compensation for Private industry workers in Financial activities ......... 2.3 

Telephone Services .................... CPI–U for Telephone Services .................................................................................... 0.6 

All Other: Nonlabor-related Services.CPI–U for All Items Less Food and Energy ................................................................ 1.1 

Capital-Related Costs ........................ ....................................................................................................................................... 7.0 

Depreciation ....................................... ....................................................................................................................................... 5.2 

Fixed Assets ............................... BEA chained price index for nonresidential construction for hospitals and special 

care facilities—vintage weighted (23 years).

3.7 

Movable Equipment .................... PPI for machinery and equipment—vintage weighted (11 years) ............................... 1.5 

Interest Costs .................................... ....................................................................................................................................... 1.2 

Government/Nonprofit ................ Average yield on domestic municipal bonds (Bond Buyer 20 bonds)—vintage 

weighted (23 years).

1.0 

For Profit ..................................... Average yield on Moody’s Aaa bonds—vintage weighted (23 years) ......................... 0.2 

Other Capital-Related Costs .............. CPI–U for Rent of primary residence .......................................................................... 0.6 

Note: Totals may not sum to 100.0 percent due to rounding. 

4. Proposed FY 2016 Market Basket 

Update 

For FY 2016 (that is, beginning 

October 1, 2015 and ending September 

30, 2016), we are proposing to use an 

estimate of the proposed 2012-based IPF 

market basket increase factor to update 

the IPF PPS base payment rate. 

Consistent with historical practice, we 

estimate the market basket update for 

the IPF PPS based on IHS Global 

Insight’s forecast using the most recent 

available data. IHS Global Insight (IGI), 

Inc. is a nationally recognized economic 

and financial forecasting firm that 

contracts with CMS to forecast the 

components of the market baskets and 

multifactor productivity (MFP). 

Based on IGI’s first quarter 2015 

forecast with historical data through the 

fourth quarter of 2014, the projected 

proposed 2012-based IPF market basket 

increase factor for FY 2016 is 2.7 

percent. Therefore, consistent with our 

historical practice of estimating market 

basket increases based on the best 

available data, we are proposing a 

market basket increase factor of 2.7 

percent for FY 2016. We are also 

proposing that if more recent data are 

subsequently available (for example, a 

more recent estimate of the market 

basket) we would use such data, to 

determine the FY 2016 update in the 

final rule. 

For comparison, the current 2008- 

based RPL market basket is projected to 

increase by 2.8 percent in FY 2016 

based on IGI’s first quarter 2015 

forecast. Table 13 compares the 

proposed 2012-based IPF market basket 

and the 2008-based RPL market basket 

percent changes. 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 25031 

TABLE 13—PROPOSED 2012-BASED IPF MARKET BASKET AND 2008-BASED RPL MARKET BASKET PERCENT CHANGES, 

FY 2010 THROUGH FY 2018 

Fiscal Year (FY) 

Proposed 

2012-Based 

IPF market 

basket index 

percent 

change 

2008-Based 

RPL market 

basket index 

percent 

change 

Historical data: 

FY 2010 ............................................................................................................................................................ 2.0 2.2 

FY 2011 ............................................................................................................................................................ 2.2 2.5 

FY 2012 ............................................................................................................................................................ 1.9 2.2 

FY 2013 ............................................................................................................................................................ 2.0 2.1 

FY 2014 ............................................................................................................................................................ 1.9 1.8 

Average 2010–2014 ......................................................................................................................................... 2.0 2.2 

Forecast: 

FY 2015 ............................................................................................................................................................ 2.0 2.2 

FY 2016 ............................................................................................................................................................ 2.7 2.8 

FY 2017 ............................................................................................................................................................ 3.0 3.0 

FY 2018 ............................................................................................................................................................ 3.0 3.1 

Average 2015–2018 ......................................................................................................................................... 2.7 2.8 

Note: These market basket percent changes do not include any further adjustments as may be statutorily required. Source: IHS Global Insight, 

Inc. 1st quarter 2015 forecast. 

For FY 2016, the proposed 2012-based 

IPF market basket update (2.7 percent) 

is one tenth of a percentage point lower 

than the 2008-based RPL market basket 

(2.8 percent). The 0.1 percentage point 

difference stems from the lower 

Pharmaceuticals cost weight in the 

proposed 2012-based IPF market basket 

(4.8 percent) compared to the 2008- 

based RPL market basket (6.5 percent) as 

well as from the use of the blended 

price proxies for the Wages and Salaries 

and Employee Benefits cost categories. 

5. Proposed Productivity Adjustment 

Section 1886(s)(2)(A)(i) of the Act 

requires the application of the 

productivity adjustment described in 

section 1886(b)(3)(B)(xi)(II) of the Act to 

the IPF PPS for the RY beginning in 

2012 (that is, a RY that coincides with 

a FY) and each subsequent RY. The 

statute defines the productivity 

adjustment to be equal to the 10-year 

moving average of changes in annual 

economy-wide private nonfarm business 

multifactor productivity (MFP) (as 

projected by the Secretary for the 10- 

year period ending with the applicable 

FY, year, cost reporting period, or other 

annual period) (the ‘‘MFP adjustment’’). 

The Bureau of Labor Statistics (BLS) 

publishes the official measure of private 

non-farm business MFP. We refer 

readers to the BLS Web site at http://

www.bls.gov/mfp for the BLS historical 

published MFP data. 

MFP is derived by subtracting the 

contribution of labor and capital inputs 

growth from output growth. The 

projections of the components of MFP 

are currently produced by IGI, a 

nationally recognized economic 

forecasting firm with which CMS 

contracts to forecast the components of 

the market baskets and MFP. As 

described in the FY 2012 IPPS/LTCH 

final rule (76 FR 51690 through 51692), 

in order to generate a forecast of MFP, 

IGI replicated the MFP measure 

calculated by the BLS using a series of 

proxy variables derived from IGI’s U.S. 

macroeconomic models. In the FY 2012 

rule, we identified each of the major 

MFP component series employed by the 

BLS to measure MFP as well as 

provided the corresponding concepts 

determined to be the best available 

proxies for the BLS series. 

Beginning with the FY 2016 

rulemaking cycle, the MFP adjustment 

is calculated using a revised series 

developed by IGI to proxy the aggregate 

capital inputs. Specifically, IGI has 

replaced the Real Effective Capital Stock 

used for Full Employment GDP with a 

forecast of BLS aggregate capital inputs 

recently developed by IGI using a 

regression model. This series provides a 

better fit to the BLS capital inputs, as 

measured by the differences between 

the actual BLS capital input growth 

rates and the estimated model growth 

rates over the historical time period. 

Therefore, we are using IGI’s most 

recent forecast of the BLS capital inputs 

series in the MFP calculations beginning 

with the FY 2016 rulemaking cycle. A 

complete description of the MFP 

projection methodology is available on 

our Web site at http://www.cms.gov/

Research-Statistics-Data-and-Systems/

Statistics-Trends-and-Reports/Medicare

ProgramRatesStats/MarketBasket

Research.html. Although we discuss the 

IGI changes to the MFP proxy series in 

this proposed rule, in the future, when 

IGI makes changes to the MFP 

methodology, we will announce them 

on our Web site rather than in the 

annual rulemaking. 

Using IGI’s first quarter 2015 forecast, 

the MFP adjustment for FY 2016 (the 

10-year moving average of MFP for the 

period ending FY 2016) is projected to 

be 0.6 percent. Thus, in accordance with 

section 1886(s)(2)(A)(i) of the Act, we 

propose to base the FY 2016 market 

basket update, which is used to 

determine the applicable percentage 

increase for the IPF payments, on the 

most recent estimate of the proposed 

2012-based IPF market basket (currently 

estimated to be 2.7 percent based on 

IGI’s first quarter 2015 forecast). We 

propose to then reduce this percentage 

increase by the current estimate of the 

MFP adjustment for FY 2016 of 0.6 

percentage point (the 10-year moving 

average of MFP for the period ending FY 

2016 based on IGI’s first quarter 2015 

forecast). Furthermore, we also propose 

that if more recent data are subsequently 

available (for example, a more recent 

estimate of the market basket and MFP 

adjustment), we would use such data to 

determine the FY 2016 market basket 

update and MFP adjustment in the final 

rule. 

Section 1886(s)(2)(A)(ii) of the Act 

requires the application of an ‘‘other 

adjustment’’ that reduces any update to 

an IPF PPS base rate by percentages 

specified in section 1886(s)(3) of the Act 

for the RY beginning in 2010 through 

the RY beginning in 2019. For the RY 

beginning in 2015 (that is, FY 2016), 

section 1886(s)(3)(D) of the Act requires 

the reduction to be 0.2 percentage point. 

We are proposing to implement the 

productivity adjustment and ‘other 

adjustment’ in this FY 2016 IPF PPS 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

25032 Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 

proposed rule. We invite public 

comment on these proposals. 

6. Proposed Labor-Related Share 

Due to variations in geographic wage 

levels and other labor-related costs, we 

believe that payment rates under the IPF 

PPS should continue to be adjusted by 

a geographic wage index, which would 

apply to the labor-related portion of the 

Federal per diem base rate (hereafter 

referred to as the labor-related share). 

The labor-related share is determined by 

identifying the national average 

proportion of total costs that are related 

to, influenced by, or vary with the local 

labor market. We continue to classify a 

cost category as labor-related if the costs 

are labor-intensive and vary with the 

local labor market. As stated in the FY 

2015 IPF PPS final rule (79 FR 45943), 

the labor-related share was defined as 

the sum of the relative importance of 

Wages and Salaries, Employee Benefits, 

Professional Fees: Labor- Related 

Services, Administrative and Facilities 

Support Services, All Other: Laborrelated Services, and a portion of the 

Capital Costs from the 2008-based RPL 

market basket. 

Based on our definition of the laborrelated share and the cost categories in 

the proposed 2012-based IPF market 

basket, we are proposing to include in 

the labor-related share the sum of the 

relative importance of Wages and 

Salaries, Employee Benefits, 

Professional Fees: Labor- Related, 

Administrative and Facilities Support 

Services, Installation, Maintenance, and 

Repair, All Other: Labor-related 

Services, and a portion of the CapitalRelated cost weight from the proposed 

2012-based IPF market basket. As noted 

in Section III.A.3.b.i of this proposed 

rule, for the proposed 2012-based IPF 

market basket, we have created a 

separate cost category for Installation, 

Maintenance and Repair services. These 

expenses were previously included in 

the ‘‘All Other’’ Labor-related Services 

cost category in the 2008-based RPL 

market basket, along with other services, 

including but not limited to janitorial, 

waste management, security, and dry 

cleaning/laundry services. Because 

these services tend to be labor-intensive 

and are mostly performed at the facility 

(and, therefore, unlikely to be purchased 

in the national market), we continue to 

believe that they meet our definition of 

labor-related services. 

Similar to the 2008-based RPL market 

basket, the proposed 2012-based IPF 

market basket includes 2 cost categories 

for nonmedical Professional fees 

(including but not limited to, expenses 

for legal, accounting, and engineering 

services). These are Professional Fees: 

Labor-related and Professional Fees: 

Nonlabor-related. For the proposed 

2012-based IPF market basket, we 

propose to estimate the labor-related 

percentage of non-medical professional 

fees (and assign these expenses to the 

Professional Fees: Labor-related services 

cost category) based on the same 

method that was used to determine the 

labor-related percentage of professional 

fees in the 2008-based RPL market 

basket. 

To summarize, the professional 

services survey found that hospitals 

purchase the following proportion of 

these four services outside of their local 

labor market: 

• 34 percent of accounting and 

auditing services. 

• 30 percent of engineering services. 

• 33 percent of legal services. 

• 42 percent of management 

consulting services. 

We applied each of these percentages 

to the respective Benchmark I–O cost 

category underlying the professional 

fees cost category to determine the 

Professional Fees: Nonlabor-related 

costs. The Professional Fees: Laborrelated costs were determined to be the 

difference between the total costs for 

each Benchmark I–O category and the 

Professional Fees: Nonlabor-related 

costs. This is the same methodology that 

we used to separate the 2008-based RPL 

market basket professional fees category 

into Professional Fees: Labor-related 

and Professional Fees: Nonlabor-related 

cost categories. For more detail 

regarding this methodology see the FY 

2012 IPF final rule (76 FR 26445). 

In addition to the professional 

services listed above, we also classified 

expenses under NAICS 55, Management 

of Companies and Enterprises, into the 

Professional Fees cost category as was 

done in the 2008-based RPL market 

basket. The NAICS 55 data are mostly 

comprised of corporate, subsidiary, and 

regional managing offices, or otherwise 

referred to as home offices. Since many 

facilities are not located in the same 

geographic area as their home office, we 

analyzed data from a variety of sources 

in order to determine what proportion 

of these costs should be appropriately 

included in the labor-related share. For 

the 2012-based IPF market basket, we 

are proposing to derive the home office 

percentages using data for both 

freestanding IPF providers and hospitalbased IPF providers. In the 2008-based 

RPL market basket, we used the home 

office percentages based on the data 

reported by freestanding IRFs, IPFs, and 

LTCHs. Using data primarily from the 

Medicare cost reports and the Home 

Office Medicare Records (HOMER) 

database that provides the address 

(including city and state) for home 

offices, we were able to determine that 

36 percent of the total number of 

freestanding and hospital-based IPFs 

that had home offices had those home 

offices located in their respective local 

labor markets—defined as being in the 

same Metropolitan Statistical Area 

(MSA). 

The Medicare cost report requires 

hospitals to report their home office 

provider numbers. Using the HOMER 

database to determine the home office 

location for each home office provider 

number, we compared the location of 

the provider with the location of the 

hospital’s home office. We then placed 

providers into one of the following 2 

groups: 

• Group 1—Provider and home office 

are located in different MSAs. 

• Group 2—Provider and home office 

are located in the same MSA. 

We found that 64 percent of the 

providers with home offices were 

classified into Group 1 (that is, different 

MSA) and, thus, these providers were 

determined to not be located in the 

same local labor market as their home 

office. We found that 36 percent of all 

providers with home offices were 

classified into Group 2 (that is, the same 

MSA). Given these results, we are 

proposing to classify 36 percent of the 

Professional Fees costs into the 

Professional Fees: Labor-related cost 

category and the remaining 64 percent 

into the Professional Fees: Nonlaborrelated Services cost category. This 

methodology for apportioning the 

Professional Fee expenses between 

labor-related and nonlabor-related 

categories is similar to the method used 

in the 2008-based RPL market basket 

(see 76 FR 26445). 

Using this proposed method and the 

IHS Global Insight, Inc. 4th quarter 2014 

forecast for the proposed 2012-based IPF 

market basket, the proposed IPF laborrelated share for FY 2016 is the sum of 

the FY 2016 relative importance of each 

labor-related cost category. The relative 

importance reflects the different rates of 

price change for these cost categories 

between the base year (FY 2012) and FY 

2016. Table 14 shows the proposed FY 

2016 labor-related share using the 

proposed 2012-based IPF market basket 

relative importance and the FY 2015 

labor-related share using the 2008-based 

RPL market basket. 

The sum of the relative importance for 

FY 2016 operating costs (Wages and 

Salaries, Employee Benefits, 

Professional Fees: Labor-related, 

Administrative and Facilities Support 

Services, Installation Maintenance & 

Repair Services, and All Other: Laborrelated Services) is 71.8 percent, as 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 25033 

shown in Table 14. We are proposing to 

specify the labor-related share to one 

decimal place, which is consistent with 

the IPPS labor-related share (currently 

the Labor-related share from the RPL 

market basket is specified to 3 decimal 

places). 

We are proposing that the portion of 

Capital that is influenced by the local 

labor market is estimated to be 46 

percent, which is the same percentage 

applied to the 2008-based RPL market 

basket. Since the relative importance for 

Capital-Related Costs is 6.8 percent of 

the proposed 2012-based IPF market 

basket in FY 2016, we are proposing to 

take 46 percent of 6.8 percent to 

determine the proposed labor-related 

share of Capital for 2016. The result 

would be 3.1 percent, which we propose 

to add to 71.8 percent for the operating 

cost amount to determine the total 

proposed labor-related share for FY 

2016. 

The FY 2016 labor-related share using 

the proposed 2012-based IPF market 

basket is about five percentage points 

higher than the FY 2015 labor-related 

share using the 2008-based RPL market 

basket. Of the five percentage point 

difference, 3 percentage points is 

attributable to the higher Wages and 

Salaries and Employee Benefits cost 

weights in the 2012-based IPF market 

basket compared to the 2008-based RPL 

market basket, while 2 percentage 

points is attributable to the higher 

weight associated with the labor-related 

services cost categories. We would note 

that the higher Wages and Salaries cost 

weight in the 2012-based IPF market 

basket relative to the 2008-based RPL 

market basket is the result of 

freestanding IPFs having a larger 

percentage of costs attributable to labor 

than freestanding IRFs and Long-term 

care hospitals. These latter facilities 

were included in the 2008-based RPL 

market basket. 

TABLE 14—PROPOSED 2016 IPF LABOR-RELATED SHARE

FY 2016 laborrelated share 

based on 

proposed 2012- 

based IPF 

market basket 1

FY 2015 

final laborrelated share 2

Wages and Salaries .................................................................................................................................... 51.7 48.271 

Employee Benefits ....................................................................................................................................... 13.4 12.936 

Professional Fees: Labor-related ................................................................................................................ 2.9 2.058 

Administrative and Facilities Support Services ........................................................................................... 0.7 0.415 

Installation, Maintenance and Repair .......................................................................................................... 1.6 ..............................

All Other: Labor-related Services ................................................................................................................ 1.5 2.061 

Subtotal ................................................................................................................................................. 71.8 65.741 

Labor-related portion of capital (46%) ......................................................................................................... 3.1 3.553 

Total LRS ...................................................................................................................................... 74.9 69.294 

1 IHS Global Insight, Inc. 4th quarter 2014 forecast. 

2Federal Register 79–FR–45943. 

In weighing the effects of the change 

in the LRS, we considered whether to 

recommend a 2-year transitional 

implementation of the increase in the 

LRS. We recognize that IPFs with wage 

index values of less than one would be 

adversely affected by an increased LRS, 

as a larger share of the base rate would 

be adjusted by the wage index value. 

About 69 percent of IPFs would have 

wage index values of less than one using 

FY2015 CBSA data, and 30 percent of 

these providers are rural. While the LRS 

would be updated in a budget neutral 

fashion so that the overall impact on 

payments is zero, there would still be 

distributional effects on specific 

categories of IPFs. We considered the 

distributional effects of the multiple 

proposals made in this proposed rule, 

including the proposal to update the full 

LRS in FY 2016, and we found that the 

negative impact of updating the LRS in 

a single year, without a transition, was 

relatively small, as shown in Table 26 

in section VII. of this proposed rule. 

Additionally, we are proposing 2 other 

adjustments to benefit providers: A 

transitional wage index and a phase-out 

of the 17 percent rural adjustment for 

the 37 IPFs that would change from 

rural to urban status due to the new 

CBSA delineations. As presented in 

section III.A.6. of this proposed rule, we 

are proposing to use the 2012-based IPF 

market basket relative importance’s to 

determine the FY 2016 IPF LRS. We 

believe this is technically appropriate as 

it is based on more recent, providerspecific data for IPFs. For all of these 

reasons, we propose to implement the 

full LRS in FY 2016, but solicit 

comments on this issue. 

B. Proposed Updates to the IPF PPS for 

FY 2016 (Beginning October 1, 2015) 

The IPF PPS is based on a 

standardized Federal per diem base rate 

calculated from the IPF average per 

diem costs and adjusted for budgetneutrality in the implementation year. 

The Federal per diem base rate is used 

as the standard payment per day under 

the IPF PPS and is adjusted by the 

patient-level and facility-level 

adjustments that are applicable to the 

IPF stay. A detailed explanation of how 

we calculated the average per diem cost 

appears in the November 2004 IPF PPS 

final rule (69 FR 66926). 

1. Determining the Standardized 

Budget-Neutral Federal Per Diem Base 

Rate 

Section 124(a)(1) of the BBRA 

required that we implement the IPF PPS 

in a budget-neutral manner. In other 

words, the amount of total payments 

under the IPF PPS, including any 

payment adjustments, must be projected 

to be equal to the amount of total 

payments that would have been made if 

the IPF PPS were not implemented. 

Therefore, we calculated the budgetneutrality factor by setting the total 

estimated IPF PPS payments to be equal 

to the total estimated payments that 

would have been made under the Tax 

Equity and Fiscal Responsibility Act of 

1982 (TEFRA) (Pub. L. 97–248) 

methodology had the IPF PPS not been 

implemented. A step-by-step 

description of the methodology used to 

estimate payments under the TEFRA 

payment system appears in the 

November 2004 IPF PPS final rule (69 

FR 66926). 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

25034 Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 

Under the IPF PPS methodology, we 

calculated the final Federal per diem 

base rate to be budget-neutral during the 

IPF PPS implementation period (that is, 

the 18-month period from January 1, 

2005 through June 30, 2006) using a July 

1 update cycle. We updated the average 

cost per day to the midpoint of the IPF 

PPS implementation period (that is, 

October 1, 2005), and this amount was 

used in the payment model to establish 

the budget-neutrality adjustment. 

Next, we standardized the IPF PPS 

Federal per diem base rate to account 

for the overall positive effects of the IPF 

PPS payment adjustment factors by 

dividing total estimated payments under 

the TEFRA payment system by 

estimated payments under the IPF PPS. 

Additional information concerning this 

standardization can be found in the 

November 2004 IPF PPS final rule (69 

FR 66932) and the RY 2006 IPF PPS 

final rule (71 FR 27045). We then 

reduced the standardized Federal per 

diem base rate to account for the outlier 

policy, the stop loss provision, and 

anticipated behavioral changes. A 

complete discussion of how we 

calculated each component of the 

budget-neutrality adjustment appears in 

the November 2004 IPF PPS final rule 

(69 FR 66932 through 66933) and in the 

May 2006 IPF PPS final rule (71 FR 

27044 through 27046). The final 

standardized budget-neutral Federal per 

diem base rate established for cost 

reporting periods beginning on or after 

January 1, 2005 was calculated to be 

$575.95. 

The Federal per diem base rate has 

been updated in accordance with 

applicable statutory requirements and 

§ 412.428 through publication of annual 

notices or proposed and final rules. A 

detailed discussion on the standardized 

budget-neutral Federal per diem base 

rate and the electroconvulsive therapy 

(ECT) rate appears in the August 2013 

IPF PPS update notice (78 FR 46738 

through 46739). These documents are 

available on the CMS Web site at http:// 

www.cms.hhs.gov/InpatientPsych

FacilPPS/. 

2. Proposed FY 2016 Update of the 

Federal Per Diem Base Rate and 

Electroconvulsive Therapy (ECT) Rate 

The current (that is, FY 2015) Federal 

per diem base rate is $728.31 and the 

ECT rate is $313.55. For FY 2016, we are 

proposing to apply an update of 1.9 

percent (that is, the proposed FY 2012- 

based IPF-specific market basket 

increase for FY 2016 of 2.7 percent less 

the proposed productivity adjustment of 

0.6 percentage point, and further 

reduced by the 0.2 percentage point 

required under section1886(s)(3)(D) of 

the Act), and the wage index budgetneutrality factor of 1.0041 (as discussed 

in section III.D.1.e. of this proposed 

rule) to the FY 2015 Federal per diem 

base rate of $728.31, yielding a 

proposed Federal per diem base rate of 

$745.19 for FY 2016. Similarly, we are 

proposing to apply the 1.9 percent 

payment update and the 1.0041 wage 

index budget-neutrality factor to the FY 

2015 ECT rate, yielding a proposed ECT 

rate of $320.82 for FY 2016. 

As noted above, section 1886(s)(4) of 

the Act requires the establishment of a 

quality data reporting program for the 

IPF PPS beginning in RY 2015. We refer 

readers to section V. of this proposed 

rule for a discussion of the IPF Quality 

Reporting Program. Section 

1886(s)(4)(A)(i) of the Act requires that, 

for RY 2014 and each subsequent rate 

year, the Secretary shall reduce any 

annual update to a standard Federal rate 

for discharges occurring during the rate 

year by 2.0 percentage points for any 

IPF that does not comply with the 

quality data submission requirements 

with respect to an applicable year. 

Therefore, we are proposing to apply a 

2.0 percentage point reduction to the 

Federal per diem base rate and the ECT 

rate as follows: 

For IPFs that failed to submit quality 

reporting data under the IPFQR 

program, we would apply a ¥0.1 

percent annual update (that is, 1.9 

percent reduced by 2 percentage points, 

in accordance with section 

1886(s)(4)(A)(ii) of the Act) and the 

wage index budget-neutrality factor of 

1.0041 to the FY 2015 Federal per diem 

base rate of $728.31, yielding a Federal 

per diem base rate of $730.56 for FY 

2016. 

Similarly, we would apply the ¥0.1 

percent annual update and the 1.0041 

wage index budget-neutrality factor to 

the FY 2015 ECT rate of $313.55, 

yielding an ECT rate of $314.52 for FY 

2016. 

C. Proposed Updates to the IPF PPS 

Patient-Level Adjustment Factors 

1. Overview of the IPF PPS Adjustment 

Factors 

The IPF PPS payment adjustments 

were derived from a regression analysis 

of 100 percent of the FY 2002 MedPAR 

data file, which contained 483,038 

cases. For a more detailed description of 

the data file used for the regression 

analysis, see the November 2004 IPF 

PPS final rule (69 FR 66935 through 

66936). While we have since used more 

recent claims data to simulate payments 

to set the fixed dollar loss threshold 

amount for the outlier policy and to 

assess the impact of the IPF PPS 

updates, we continue to use the 

regression-derived adjustment factors 

established in 2005 for FY 2016. 

2. IPF PPS Patient-Level Adjustments 

The IPF PPS includes payment 

adjustments for the following patientlevel characteristics: Medicare Severity 

Diagnosis Related Groups (MS–DRGs) 

assignment of the patient’s principal 

diagnosis, selected comorbidities, 

patient age, and the variable per diem 

adjustments. 

a. MS–DRG Assignment 

We believe it is important to maintain 

the same diagnostic coding and DRG 

classification for IPFs that are used 

under the IPPS for providing psychiatric 

care. For this reason, when the IPF PPS 

was implemented for cost reporting 

periods beginning on or after January 1, 

2005, we adopted the same diagnostic 

code set (ICD–9–CM) and DRG patient 

classification system (that is, the CMS 

DRGs) that were utilized at the time 

under the IPPS. In the May 2008 IPF 

PPS notice (73 FR 25709), we discussed 

CMS’s effort to better recognize resource 

use and the severity of illness among 

patients. CMS adopted the new MS– 

DRGs for the IPPS in the FY 2008 IPPS 

final rule with comment period (72 FR 

47130). In the 2008 IPF PPS notice (73 

FR 25716), we provided a crosswalk to 

reflect changes that were made under 

the IPF PPS to adopt the new MS–DRGs. 

For a detailed description of the 

mapping changes from the original DRG 

adjustment categories to the current 

MS–DRG adjustment categories, we 

refer readers to the May 2008 IPF PPS 

notice (73 FR 25714). 

The IPF PPS includes payment 

adjustments for designated psychiatric 

DRGs assigned to the claim based on the 

patient’s principal diagnosis. The DRG 

adjustment factors were expressed 

relative to the most frequently reported 

psychiatric DRG in FY 2002, that is, 

DRG 430 (psychoses). The coefficient 

values and adjustment factors were 

derived from the regression analysis. 

Mapping the DRGs to the MS–DRGs 

resulted in the current 17 IPF–MS– 

DRGs, instead of the original 15 DRGs, 

for which the IPF PPS provides an 

adjustment. 

For the FY 2016 update, we are not 

proposing any changes to the IPF MS– 

DRG adjustment factors. In FY 2015 

rulemaking (79 FR 45945 through 

45947), we proposed and finalized 

conversions of the ICD–9–CM-based 

MS–DRGs to ICD–10–CM/PCS-based 

MS–DRGs, which will be implemented 

on October 1, 2015. Further information 

for the ICD–10–CM/PCS MS–DRG 

conversion project can be found on the 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 25035 

CMS ICD–10–CM Web site at http://

www.cms.hhs.gov/Medicare/Coding/

ICD10/ICD-10-MS-DRG-ConversionProject.html. 

For FY 2016, we propose to continue 

to make a payment adjustment for 

psychiatric diagnoses that group to one 

of the existing 17 MS–IPF–DRGs listed 

in the Addendum. Psychiatric principal 

diagnoses that do not group to one of 

the 17 designated DRGs would still 

receive the Federal per diem base rate 

and all other applicable adjustments, 

but the payment would not include a 

DRG adjustment. 

As noted above, the diagnoses for 

each IPF MS–DRG will be updated on 

October 1, 2015, using the ICD–10–CM/ 

PCS code sets. 

b. Payment for Comorbid Conditions 

The intent of the comorbidity 

adjustments is to recognize the 

increased costs associated with 

comorbid conditions by providing 

additional payments for certain 

concurrent medical or psychiatric 

conditions that are expensive to treat. In 

the May 2011 IPF PPS final rule (76 FR 

26451 through 26452), we explained 

that the IPF PPS includes 17 

comorbidity categories and identified 

the new, revised, and deleted ICD–9– 

CM diagnosis codes that generate a 

comorbid condition payment 

adjustment under the IPF PPS for RY 

2012 (76 FR 26451). 

Comorbidities are specific patient 

conditions that are secondary to the 

patient’s principal diagnosis and that 

require treatment during the stay. 

Diagnoses that relate to an earlier 

episode of care and have no bearing on 

the current hospital stay are excluded 

and must not be reported on IPF claims. 

Comorbid conditions must exist at the 

time of admission or develop 

subsequently, and affect the treatment 

received, length of stay (LOS), or both 

treatment and LOS. 

For each claim, an IPF may receive 

only one comorbidity adjustment within 

a comorbidity category, but it may 

receive an adjustment for more than one 

comorbidity category. Current billing 

instructions for claims for discharges on 

or after October 1, 2015 require IPFs to 

enter the complete ICD–10–CM codes 

for up to 24 additional diagnoses if they 

co-exist at the time of admission, or 

develop subsequently and impact the 

treatment provided. 

The comorbidity adjustments were 

determined based on the regression 

analysis using the diagnoses reported by 

IPFs in FY 2002. The principal 

diagnoses were used to establish the 

DRG adjustments and were not 

accounted for in establishing the 

comorbidity category adjustments, 

except where ICD–9–CM ‘‘code first’’ 

instructions apply. As we explained in 

the May 2011 IPF PPS final rule (76 FR 

265451), the ‘‘code first’’ rule applies 

when a condition has both an 

underlying etiology and a manifestation 

due to the underlying etiology. For these 

conditions, ICD–9–CM has a coding 

convention that requires the underlying 

conditions to be sequenced first 

followed by the manifestation. 

Whenever a combination exists, there is 

a ‘‘use additional code’’ note at the 

etiology code and a ‘‘code first’’ note at 

the manifestation code. 

The same principle holds for ICD–10– 

CM as for ICD–9–CM. Whenever a 

combination exists, there is a ‘‘use 

additional code’’ note in the ICD–10– 

CM codebook pertaining to the etiology 

code, and a ‘‘code first’’ code pertaining 

to the manifestation code. In the FY 

2015 IPF PPS final rule, we provided a 

‘‘code first’’ table for reference that 

highlights the same or similar 

manifestation codes where the ‘‘code 

first’’ instructions apply in ICD–10–CM 

that were present in ICD–9–CM (79 FR 

46009). 

As noted previously, it is our policy 

to maintain the same diagnostic coding 

set for IPFs that is used under the IPPS 

for providing the same psychiatric care. 

The 17 comorbidity categories formerly 

defined using ICD–9–CM codes were 

converted to ICD–10–CM/PCS in the FY 

2015 IPF PPS final rule (79 FR 45947 to 

45955). The goal for converting the 

comorbidity categories is referred to as 

replication, meaning that the payment 

adjustment for a given patient encounter 

is the same after ICD–10–CM 

implementation as it would be if the 

same record had been coded in ICD–9– 

CM and submitted prior to ICD–10–CM/ 

PCS implementation on October 1, 

2015. All conversion efforts were made 

with the intent of achieving this goal. 

We are not proposing any refinements 

to the comorbidity adjustments at this 

time, and propose to continue to use the 

existing adjustments in effect in FY 

2015. The FY 2016 comorbidity 

adjustments are found in the Addendum 

to this proposed rule. 

3. Patient Age Adjustments 

As explained in the November 2004 

IPF PPS final rule (69 FR 66922), we 

analyzed the impact of age on per diem 

cost by examining the age variable (that 

is, the range of ages) for payment 

adjustments. In general, we found that 

the cost per day increases with age. The 

older age groups are more costly than 

the under 45 age group, the differences 

in per diem cost increase for each 

successive age group, and the 

differences are statistically significant. 

For FY 2016, we are proposing to 

continue to use the patient age 

adjustments currently in effect in FY 

2015, as shown in the Addendum to this 

proposed rule. 

4. Variable Per Diem Adjustments 

We explained in the November 2004 

IPF PPS final rule (69 FR 66946) that the 

regression analysis indicated that per 

diem cost declines as the LOS increases. 

The variable per diem adjustments to 

the Federal per diem base rate account 

for ancillary and administrative costs 

that occur disproportionately in the first 

days after admission to an IPF. 

We used a regression analysis to 

estimate the average differences in per 

diem cost among stays of different 

lengths. As a result of this analysis, we 

established variable per diem 

adjustments that begin on day 1 and 

decline gradually until day 21 of a 

patient’s stay. For day 22 and thereafter, 

the variable per diem adjustment 

remains the same each day for the 

remainder of the stay. However, the 

adjustment applied to day 1 depends 

upon whether the IPF has a qualifying 

emergency department (ED). If an IPF 

has a qualifying ED, it receives a 1.31 

adjustment factor for day 1 of each stay. 

If an IPF does not have a qualifying ED, 

it receives a 1.19 adjustment factor for 

day 1 of the stay. The ED adjustment is 

explained in more detail in section 

III.D.4. of this proposed rule. 

For FY 2016, we propose to continue 

to use the variable per diem adjustment 

factors currently in effect as shown in 

the Addendum to this proposed rule. A 

complete discussion of the variable per 

diem adjustments appears in the 

November 2004 IPF PPS final rule (69 

FR 66946). 

D. Proposed Updates to the IPF PPS 

Facility-Level Adjustments 

The IPF PPS includes facility-level 

adjustments for the wage index, IPFs 

located in rural areas, teaching IPFs, 

cost of living adjustments for IPFs 

located in Alaska and Hawaii, and IPFs 

with a qualifying ED. 

1. Proposed Wage Index Adjustment 

a. Background 

As discussed in the May 2006 IPF PPS 

final rule (71 FR 27061) and in the May 

2008 (73 FR 25719) and May 2009 IPF 

PPS notices (74 FR 20373), in order to 

provide an adjustment for geographic 

wage levels, the labor-related portion of 

an IPF’s payment is adjusted using an 

appropriate wage index. Currently, an 

IPF’s geographic wage index value is 

determined based on the actual location 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

25036 Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 

of the IPF in an urban or rural area as 

defined in § 412.64(b)(1)(ii)(A) and (C). 

b. Proposed Wage Index for FY 2016 

Since the inception of the IPF PPS, we 

have used the pre-floor, pre-reclassified 

acute care hospital wage index in 

developing a wage index to be applied 

to IPFs because there is not an IPFspecific wage index available. We 

believe that IPFs generally compete in 

the same labor markets as acute care 

hospitals, so the pre-floor, prereclassified hospital wage index should 

reflect IPF labor costs. As discussed in 

the May 2006 IPF PPS final rule for FY 

2007 (71 FR 27061 through 27067), 

under the IPF PPS, the wage index is 

calculated using the IPPS wage index 

for the labor market area in which the 

IPF is located, without taking into 

account geographic reclassifications, 

floors, and other adjustments made to 

the wage index under the IPPS. For a 

complete description of these IPPS wage 

index adjustments, please see the CY 

2013 IPPS/LTCH PPS final rule (77 FR 

53365 through 53374). For FY 2016, we 

are proposing to continue to apply the 

most recent hospital wage index (that is, 

the FY 2015 pre-floor, pre-reclassified 

hospital wage index, which is the most 

appropriate index as it best reflects the 

variation in local labor costs of IPFs in 

the various geographic areas) using the 

most recent hospital wage data (that is, 

data from hospital cost reports for the 

cost reporting period beginning during 

FY 2011) without any geographic 

reclassifications, floors, or other 

adjustments. We propose to apply the 

FY 2016 IPF PPS wage index to 

payments beginning October 1, 2015. 

We apply the wage index adjustment 

to the labor-related portion of the 

Federal rate, which we are proposing to 

change from 69.294 percent to 74.9 

percent in FY 2016. This percentage 

reflects the labor-related relative 

importance of the FY 2012-based 

proposed IPF-specific market basket for 

FY 2016 (see section III.A.6. of this 

proposed rule). 

c. OMB Bulletins and Proposed 

Transitional Wage Index 

OMB publishes bulletins regarding 

CBSA changes, including changes to 

CBSA numbers and titles. In the May 

2006 IPF PPS final rule for RY 2007 (71 

FR 27061 through 27067), we adopted 

the changes discussed in the Office of 

Management and Budget (OMB) 

Bulletin No. 03–04 (June 6, 2003), 

which announced revised definitions 

for Metropolitan Statistical Areas 

(MSAs), and the creation of 

Micropolitan Statistical Areas and 

Combined Statistical Areas. In adopting 

the OMB CBSA geographic designations 

in RY 2007, we did not provide a 

separate transition for the CBSA-based 

wage index since the IPF PPS was 

already in a transition period from 

TEFRA payments to PPS payments. 

In the May 2008 IPF PPS notice, we 

incorporated the CBSA nomenclature 

changes published in the most recent 

OMB bulletin that applies to the 

hospital wage index used to determine 

the current IPF PPS wage index and 

stated that we expect to continue to do 

the same for all the OMB CBSA 

nomenclature changes in future IPF PPS 

rules and notices, as necessary (73 FR 

25721). The OMB bulletins may be 

accessed online at http://www.white

house.gov/omb/bulletins_default/. 

In accordance with our established 

methodology, we have historically 

adopted any CBSA changes that are 

published in the OMB bulletin that 

corresponds with the hospital wage 

index used to determine the IPF PPS 

wage index. For the FY 2015 IPF wage 

index, we used the FY 2014 pre-floor, 

pre-reclassified hospital wage index to 

adjust the IPF PPS payments. On 

February 28, 2013, OMB issued OMB 

Bulletin No. 13–01, which established 

revised delineations for Metropolitan 

Statistical Areas, Micropolitan 

Statistical Areas, and Combined 

Statistical Areas, and provided guidance 

on the use of the delineations of these 

statistical areas. A copy of this bulletin 

may be obtained at http://www.

whitehouse.gov/omb/bulletins_default/. 

Because the FY 2014 pre-floor, prereclassified hospital wage index was 

finalized prior to the issuance of this 

Bulletin, the FY 2015 IPF PPS wage 

index, which was based on the FY 2014 

pre-floor, pre-reclassified hospital wage 

index, did not reflect OMB’s new area 

delineations based on the 2010 Census. 

According to OMB, ‘‘[t]his bulletin 

provides the delineations of all 

Metropolitan Statistical Areas, 

Metropolitan Divisions, Micropolitan 

Statistical Areas, Combined Statistical 

Areas, and New England City and Town 

Areas in the United States and Puerto 

Rico based on the standards published 

on June 28, 2010, in the Federal 

Register (75 FR 37246 through 37252) 

and Census Bureau data.’’ These OMB 

Bulletin changes are reflected in the FY 

2015 pre-floor, pre-reclassified hospital 

wage index, upon which the FY 2016 

IPPS PPS wage index is based. We 

propose to adopt these new OMB CBSA 

delineations in the FY 2016 proposed 

IPF PPS wage index. 

We believe that the most current 

CBSA delineations accurately reflect the 

local economies and wage levels of the 

areas where IPFs are located, and we 

believe that it is important for the IPF 

PPS to use the latest CBSA delineations 

available in order to maintain an up-todate payment system that accurately 

reflects the reality of population shifts 

and labor market conditions. 

In proposing adoption of these 

changes for the IPF PPS, it is necessary 

to identify the new labor market area 

delineation for each county and facility 

in the country. For example, there 

would be new CBSAs, urban counties 

that would become rural, rural counties 

that would become urban, and existing 

CBSAs that would be split apart. 

Because the wage index of urban areas 

is typically higher than that of rural 

areas, IPF facilities currently located in 

rural counties that would become urban, 

beginning October 1, 2015, would 

generally experience an increase in their 

wage index values. We identified 105 

counties and 37 IPFs that would move 

from rural to urban status due to the 

new CBSA delineations beginning in FY 

2016, shown in Table 15. 

TABLE 15—FY 2016 RURAL TO URBAN CBSA CROSSWALK

County name 

FY 2014 CBSA Delineations/FY 2015 

data 

FY 2015 CBSA Delineations/FY 2015 

data Change in 

value 

(percent) CBSA Urban/

Rural Wage index CBSA Urban/Rural Wage index 

Baldwin County, Alabama ..................................... 1 RURAL 0.6963 19300 URBAN 0.7248 4.09 

Pickens County, Alabama ..................................... 1 RURAL 0.6963 46220 URBAN 0.8337 19.73 

Cochise County, Arizona ....................................... 3 RURAL 0.9125 43420 URBAN 0.8937 ¥2.06 

Little River County, Arkansas ................................ 4 RURAL 0.7311 45500 URBAN 0.7362 0.70 

Windham County, Connecticut .............................. 7 RURAL 1.1251 49340 URBAN 1.1493 2.15 

Sussex County, Delaware ..................................... 8 RURAL 1.0261 41540 URBAN 0.9289 ¥9.47 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 25037 

TABLE 15—FY 2016 RURAL TO URBAN CBSA CROSSWALK—Continued 

County name 

FY 2014 CBSA Delineations/FY 2015 

data 

FY 2015 CBSA Delineations/FY 2015 

data Change in 

value 

(percent) CBSA Urban/

Rural Wage index CBSA Urban/Rural Wage index 

Citrus County, Florida ........................................... 10 RURAL 0.8006 26140 URBAN 0.7625 ¥4.76 

Gulf County, Florida .............................................. 10 RURAL 0.8006 37460 URBAN 0.7906 ¥1.25 

Highlands County, Florida ..................................... 10 RURAL 0.8006 42700 URBAN 0.7982 ¥0.30 

Sumter County, Florida ......................................... 10 RURAL 0.8006 45540 URBAN 0.8095 1.11 

Walton County, Florida .......................................... 10 RURAL 0.8006 18880 URBAN 0.8156 1.87 

Lincoln County, Georgia ........................................ 11 RURAL 0.7425 12260 URBAN 0.9225 24.24 

Morgan County, Georgia ....................................... 11 RURAL 0.7425 12060 URBAN 0.9369 26.18 

Peach County, Georgia ......................................... 11 RURAL 0.7425 47580 URBAN 0.7542 1.58 

Pulaski County, Georgia ....................................... 11 RURAL 0.7425 47580 URBAN 0.7542 1.58 

Kalawao County, Hawaii ....................................... 12 RURAL 1.0741 27980 URBAN 1.0561 ¥1.68 

Maui County, Hawaii ............................................. 12 RURAL 1.0741 27980 URBAN 1.0561 ¥1.68 

Butte County, Idaho .............................................. 13 RURAL 0.7398 26820 URBAN 0.8933 20.75 

De Witt County, Illinois .......................................... 14 RURAL 0.8362 14010 URBAN 0.9165 9.60 

Jackson County, Illinois ......................................... 14 RURAL 0.8362 16060 URBAN 0.8324 ¥0.45 

Williamson County, Illinois .................................... 14 RURAL 0.8362 16060 URBAN 0.8324 ¥0.45 

Scott County, Indiana ............................................ 15 RURAL 0.8416 31140 URBAN 0.8605 2.25 

Union County, Indiana ........................................... 15 RURAL 0.8416 17140 URBAN 0.9473 12.56 

Plymouth County, Iowa ......................................... 16 RURAL 0.8451 43580 URBAN 0.8915 5.49 

Kingman County, Kansas ...................................... 17 RURAL 0.7806 48620 URBAN 0.8472 8.53 

Allen County, Kentucky ......................................... 18 RURAL 0.7744 14540 URBAN 0.8410 8.60 

Butler County, Kentucky ........................................ 18 RURAL 0.7744 14540 URBAN 0.8410 8.60 

Acadia Parish, Louisiana ....................................... 19 RURAL 0.7580 29180 URBAN 0.7869 3.81 

Iberia Parish, Louisiana ......................................... 19 RURAL 0.7580 29180 URBAN 0.7869 3.81 

St. James Parish, Louisiana ................................. 19 RURAL 0.7580 35380 URBAN 0.8821 16.37 

Tangipahoa Parish, Louisiana ............................... 19 RURAL 0.7580 25220 URBAN 0.9452 24.70 

Vermilion Parish, Louisiana ................................... 19 RURAL 0.7580 29180 URBAN 0.7869 3.81 

Webster Parish, Louisiana .................................... 19 RURAL 0.7580 43340 URBAN 0.8325 9.83 

St. Marys County, Maryland .................................. 21 RURAL 0.8554 15680 URBAN 0.8593 0.46 

Worcester County, Maryland ................................. 21 RURAL 0.8554 41540 URBAN 0.9289 8.59 

Midland County, Michigan ..................................... 23 RURAL 0.8207 33220 URBAN 0.7935 ¥3.31 

Montcalm County, Michigan .................................. 23 RURAL 0.8207 24340 URBAN 0.8799 7.21 

Fillmore County, Minnesota .................................. 24 RURAL 0.9124 40340 URBAN 1.1398 24.92 

Le Sueur County, Minnesota ................................ 24 RURAL 0.9124 33460 URBAN 1.1196 22.71 

Mille Lacs County, Minnesota ............................... 24 RURAL 0.9124 33460 URBAN 1.1196 22.71 

Sibley County, Minnesota ..................................... 24 RURAL 0.9124 33460 URBAN 1.1196 22.71 

Benton County, Mississippi ................................... 25 RURAL 0.7589 32820 URBAN 0.8991 18.47 

Yazoo County, Mississippi .................................... 25 RURAL 0.7589 27140 URBAN 0.7891 3.98 

Golden Valley County, Montana ........................... 27 RURAL 0.9024 13740 URBAN 0.8686 ¥3.75 

Hall County, Nebraska .......................................... 28 RURAL 0.8924 24260 URBAN 0.9219 3.31 

Hamilton County, Nebraska .................................. 28 RURAL 0.8924 24260 URBAN 0.9219 3.31 

Howard County, Nebraska .................................... 28 RURAL 0.8924 24260 URBAN 0.9219 3.31 

Merrick County, Nebraska ..................................... 28 RURAL 0.8924 24260 URBAN 0.9219 3.31 

Jefferson County, New York ................................. 33 RURAL 0.8208 48060 URBAN 0.8386 2.17 

Yates County, New York ....................................... 33 RURAL 0.8208 40380 URBAN 0.8750 6.60 

Craven County, North Carolina ............................. 34 RURAL 0.7995 35100 URBAN 0.8994 12.50 

Davidson County, North Carolina ......................... 34 RURAL 0.7995 49180 URBAN 0.8679 8.56 

Gates County, North Carolina ............................... 34 RURAL 0.7995 47260 URBAN 0.9223 15.36 

Iredell County, North Carolina ............................... 34 RURAL 0.7995 16740 URBAN 0.9073 13.48 

Jones County, North Carolina ............................... 34 RURAL 0.7995 35100 URBAN 0.8994 12.50 

Lincoln County, North Carolina ............................. 34 RURAL 0.7995 16740 URBAN 0.9073 13.48 

Pamlico County, North Carolina ............................ 34 RURAL 0.7995 35100 URBAN 0.8994 12.50 

Rowan County, North Carolina ............................. 34 RURAL 0.7995 16740 URBAN 0.9073 13.48 

Oliver County, North Dakota ................................. 35 RURAL 0.7099 13900 URBAN 0.7216 1.65 

Sioux County, North Dakota ................................. 35 RURAL 0.7099 13900 URBAN 0.7216 1.65 

Hocking County, Ohio ........................................... 36 RURAL 0.8329 18140 URBAN 0.9539 14.53 

Perry County, Ohio ................................................ 36 RURAL 0.8329 18140 URBAN 0.9539 14.53 

Cotton County, Oklahoma ..................................... 37 RURAL 0.7799 30020 URBAN 0.7918 1.53 

Josephine County, Oregon ................................... 38 RURAL 1.0083 24420 URBAN 1.0086 0.03 

Linn County, Oregon ............................................. 38 RURAL 1.0083 10540 URBAN 1.0879 7.89 

Adams County, Pennsylvania ............................... 39 RURAL 0.8719 23900 URBAN 1.0104 15.88 

Columbia County, Pennsylvania ........................... 39 RURAL 0.8719 14100 URBAN 0.9347 7.20 

Franklin County, Pennsylvania .............................. 39 RURAL 0.8719 16540 URBAN 1.0957 25.67 

Monroe County, Pennsylvania .............................. 39 RURAL 0.8719 20700 URBAN 0.9372 7.49 

Montour County, Pennsylvania ............................. 39 RURAL 0.8719 14100 URBAN 0.9347 7.20 

Utuado Municipio, Puerto Rico ............................. 40 RURAL 0.4047 10380 URBAN 0.3586 ¥11.39 

Beaufort County, South Carolina .......................... 42 RURAL 0.8374 25940 URBAN 0.8708 3.99 

Chester County, South Carolina ........................... 42 RURAL 0.8374 16740 URBAN 0.9073 8.35 

Jasper County, South Carolina ............................. 42 RURAL 0.8374 25940 URBAN 0.8708 3.99 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

25038 Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 

TABLE 15—FY 2016 RURAL TO URBAN CBSA CROSSWALK—Continued 

County name 

FY 2014 CBSA Delineations/FY 2015 

data 

FY 2015 CBSA Delineations/FY 2015 

data Change in 

value 

(percent) CBSA Urban/

Rural Wage index CBSA Urban/Rural Wage index 

Lancaster County, South Carolina ........................ 42 RURAL 0.8374 16740 URBAN 0.9073 8.35 

Union County, South Carolina .............................. 42 RURAL 0.8374 43900 URBAN 0.8277 ¥1.16 

Custer County, South Dakota ............................... 43 RURAL 0.8312 39660 URBAN 0.8989 8.14 

Campbell County, Tennessee ............................... 44 RURAL 0.7365 28940 URBAN 0.7015 ¥4.75 

Crockett County, Tennessee ................................. 44 RURAL 0.7365 27180 URBAN 0.7747 5.19 

Maury County, Tennessee .................................... 44 RURAL 0.7365 34980 URBAN 0.8969 21.78 

Morgan County, Tennessee .................................. 44 RURAL 0.7365 28940 URBAN 0.7015 ¥4.75 

Roane County, Tennessee ................................... 44 RURAL 0.7365 28940 URBAN 0.7015 ¥4.75 

Falls County, Texas .............................................. 45 RURAL 0.7855 47380 URBAN 0.8137 3.59 

Hood County, Texas ............................................. 45 RURAL 0.7855 23104 URBAN 0.9386 19.49 

Hudspeth County, Texas ....................................... 45 RURAL 0.7855 21340 URBAN 0.8139 3.62 

Lynn County, Texas .............................................. 45 RURAL 0.7855 31180 URBAN 0.8830 12.41 

Martin County, Texas ............................................ 45 RURAL 0.7855 33260 URBAN 0.8940 13.81 

Newton County, Texas .......................................... 45 RURAL 0.7855 13140 URBAN 0.8508 8.31 

Oldham County, Texas ......................................... 45 RURAL 0.7855 11100 URBAN 0.8277 5.37 

Somervell County, Texas ...................................... 45 RURAL 0.7855 23104 URBAN 0.9386 19.49 

Box Elder County, Utah ........................................ 46 RURAL 0.8891 36260 URBAN 0.9225 3.76 

Augusta County, Virginia ....................................... 49 RURAL 0.7674 44420 URBAN 0.8326 8.50 

Buckingham County, Virginia ................................ 49 RURAL 0.7674 16820 URBAN 0.9053 17.97 

Culpeper County, Virginia ..................................... 49 RURAL 0.7674 47894 URBAN 1.0403 35.56 

Floyd County, Virginia ........................................... 49 RURAL 0.7674 13980 URBAN 0.8473 10.41 

Rappahannock County, Virginia ............................ 49 RURAL 0.7674 47894 URBAN 1.0403 35.56 

Staunton City County, Virginia .............................. 49 RURAL 0.7674 44420 URBAN 0.8326 8.50 

Waynesboro City County, Virginia ........................ 49 RURAL 0.7674 44420 URBAN 0.8326 8.50 

Columbia County, Washington .............................. 50 RURAL 1.0892 47460 URBAN 1.0934 0.39 

Pend Oreille County, Washington ......................... 50 RURAL 1.0892 44060 URBAN 1.1425 4.89 

Stevens County, Washington ................................ 50 RURAL 1.0892 44060 URBAN 1.1425 4.89 

Walla Walla County, Washington .......................... 50 RURAL 1.0892 47460 URBAN 1.0934 0.39 

Fayette County, West Virginia .............................. 51 RURAL 0.7410 13220 URBAN 0.8024 8.29 

Raleigh County, West Virginia .............................. 51 RURAL 0.7410 13220 URBAN 0.8024 8.29 

Green County, Wisconsin ..................................... 52 RURAL 0.9041 31540 URBAN 1.1130 23.11 

The wage index values of rural areas 

are typically lower than that of urban 

areas. Therefore, IPFs located in a 

county that is currently designated as 

urban under the IPF PPS wage index 

that would become rural when we 

would adopt the new CBSA 

delineations may experience a decrease 

in their wage index values. We 

identified 37 counties and 3 IPFs that 

would move from urban to rural status 

due to the new CBSA delineations 

beginning in FY 2016. Table 16 shows 

the CBSA delineations and the urban 

wage index values for FY 2015 based on 

existing CBSA delineations, compared 

with the proposed CBSA delineations 

and wage index values for FY 2016 

based on the new OMB CBSA 

delineations. Table 16 also shows the 

percentage change in these values for 

those counties that would change from 

urban to rural, beginning in FY 2016, 

when we would adopt the new CBSA 

delineations. 

TABLE 16—FY 2016 URBAN TO RURAL CBSA CROSSWALK

County name 

FY 2014 CBSA Delineations/FY 2015 

data 

FY 2015 CBSA Delineations/FY 2015 

data Change in 

value 

(percent) CBSA Urban/

Rural Wage index CBSA Urban/Rural Wage index 

Greene County, Alabama ...................................... 46220 URBAN 0.8387 1 RURAL 0.6914 ¥17.56 

Franklin County, Arkansas .................................... 22900 URBAN 0.7593 4 RURAL 0.7311 ¥3.71 

Power County, Idaho ............................................. 38540 URBAN 0.9672 13 RURAL 0.7398 ¥23.51 

Franklin County, Indiana ....................................... 17140 URBAN 0.9473 15 RURAL 0.8416 ¥11.16 

Gibson County, Indiana ......................................... 21780 URBAN 0.8537 15 RURAL 0.8416 ¥1.42 

Greene County, Indiana ........................................ 14020 URBAN 0.9062 15 RURAL 0.8416 ¥7.13 

Tipton County, Indiana .......................................... 29020 URBAN 0.8990 15 RURAL 0.8416 ¥6.38 

Franklin County, Kansas ....................................... 28140 URBAN 0.9419 17 RURAL 0.7779 ¥17.41 

Geary County, Kansas .......................................... 31740 URBAN 0.8406 17 RURAL 0.7779 ¥7.46 

Nelson County, Kentucky ...................................... 31140 URBAN 0.8593 18 RURAL 0.7748 ¥9.83 

Webster County, Kentucky .................................... 21780 URBAN 0.8537 18 RURAL 0.7748 ¥9.24 

Franklin County, Massachusetts ........................... 44140 URBAN 1.0271 22 RURAL 1.1553 12.48 

Ionia County, Michigan .......................................... 24340 URBAN 0.8965 23 RURAL 0.8288 ¥7.55 

Newaygo County, Michigan .................................. 24340 URBAN 0.8965 23 RURAL 0.8288 ¥7.55 

George County, Mississippi .................................. 37700 URBAN 0.7396 25 RURAL 0.7570 2.35 

Stone County, Mississippi ..................................... 25060 URBAN 0.8179 25 RURAL 0.7570 ¥7.45 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 25039 

TABLE 16—FY 2016 URBAN TO RURAL CBSA CROSSWALK—Continued 

County name 

FY 2014 CBSA Delineations/FY 2015 

data 

FY 2015 CBSA Delineations/FY 2015 

data Change in 

value 

(percent) CBSA Urban/

Rural Wage index CBSA Urban/Rural Wage index 

Crawford County, Missouri .................................... 41180 URBAN 0.9366 26 RURAL 0.7725 ¥17.52 

Howard County, Missouri ...................................... 17860 URBAN 0.8319 26 RURAL 0.7725 ¥7.14 

Washington County, Missouri ............................... 41180 URBAN 0.9366 26 RURAL 0.7725 ¥17.52 

Anson County, North Carolina .............................. 16740 URBAN 0.9230 34 RURAL 0.7899 ¥14.42 

Greene County, North Carolina ............................ 24780 URBAN 0.9371 34 RURAL 0.7899 ¥15.71 

Erie County, Ohio .................................................. 41780 URBAN 0.7784 36 RURAL 0.8348 7.25 

Ottawa County, Ohio ............................................. 45780 URBAN 0.9129 36 RURAL 0.8348 ¥8.56 

Preble County, Ohio .............................................. 19380 URBAN 0.8938 36 RURAL 0.8348 ¥6.60 

Washington County, Ohio ..................................... 37620 URBAN 0.8186 36 RURAL 0.8348 1.98 

Stewart County, Tennessee .................................. 17300 URBAN 0.7526 44 RURAL 0.7277 ¥3.31 

Calhoun County, Texas ......................................... 47020 URBAN 0.8473 45 RURAL 0.7847 ¥7.39 

Delta County, Texas .............................................. 19124 URBAN 0.9703 45 RURAL 0.7847 ¥19.13 

San Jacinto County, Texas ................................... 26420 URBAN 0.9734 45 RURAL 0.7847 ¥19.39 

Summit County, Utah ............................................ 41620 URBAN 0.9512 46 RURAL 0.9005 ¥5.33 

Cumberland County, Virginia ................................ 40060 URBAN 0.9625 49 RURAL 0.7554 ¥21.52 

Danville City County, Virginia ................................ 19260 URBAN 0.7963 49 RURAL 0.7554 ¥5.14 

King And Queen County, Virginia ......................... 40060 URBAN 0.9625 49 RURAL 0.7554 ¥21.52 

Louisa County, Virginia ......................................... 40060 URBAN 0.9625 49 RURAL 0.7554 ¥21.52 

Pittsylvania County, Virginia .................................. 19260 URBAN 0.7963 49 RURAL 0.7554 ¥5.14 

Surry County, Virginia ........................................... 47260 URBAN 0.9223 49 RURAL 0.7554 ¥18.10 

Morgan County, West Virginia .............................. 25180 URBAN 0.9080 51 RURAL 0.7274 ¥19.89 

Pleasants County, West Virginia ........................... 37620 URBAN 0.8186 51 RURAL 0.7274 ¥11.14 

We note that IPFs in some urban 

CBSAs would experience a change in 

their wage index values even though 

they remain urban because an urban 

CBSA’s boundaries and/or the counties 

included in that CBSA could change. 

Table 17 shows those counties that 

would experience a change in their 

wage index value in FY 2016 due to the 

new OMB CBSAs. Table 17 shows the 

urban CBSA delineations and wage 

index values for FY 2015 based on 

existing CBSA delineations, compared 

with the urban CBSA delineations and 

wage index values for FY 2016 based on 

the new OMB delineations, and the 

percentage change in these values, for 

counties that would remain urban even 

though the CBSA boundaries and/or 

counties included in that CBSA would 

change. 

TABLE 17—FY 2015 URBAN TO A DIFFERENT FY 2016 URBAN CBSA CROSSWALK

County name 

FY 2014 CBSA Delineations/FY 2015 

data 

FY 2015 CBSA Delineations/FY 2015 

data Change in 

value 

(percent) CBSA Urban/

Rural Wage index CBSA Urban/Rural Wage index 

Flagler County, Florida .......................................... 37380 URBAN 0.8462 19660 URBAN 0.8376 ¥1.02 

De Kalb County, Illinois ......................................... 16974 URBAN 1.0412 20994 URBAN 1.0299 ¥1.09 

Kane County, Illinois ............................................. 16974 URBAN 1.0412 20994 URBAN 1.0299 ¥1.09 

Madison County, Indiana ...................................... 11300 URBAN 1.0078 26900 URBAN 1.0133 0.55 

Meade County, Kentucky ...................................... 31140 URBAN 0.8593 21060 URBAN 0.7701 ¥10.38 

Essex County, Massachusetts .............................. 37764 URBAN 1.0769 15764 URBAN 1.1159 3.62 

Ottawa County, Michigan ...................................... 26100 URBAN 0.8136 24340 URBAN 0.8799 8.15 

Jackson County, Mississippi ................................. 37700 URBAN 0.7396 25060 URBAN 0.7896 6.76 

Bergen County, New Jersey ................................. 35644 URBAN 1.3110 35614 URBAN 1.2837 ¥2.08 

Hudson County, New Jersey ................................ 35644 URBAN 1.3110 35614 URBAN 1.2837 ¥2.08 

Middlesex County, New Jersey ............................. 20764 URBAN 1.0989 35614 URBAN 1.2837 16.82 

Monmouth County, New Jersey ............................ 20764 URBAN 1.0989 35614 URBAN 1.2837 16.82 

Ocean County, New Jersey .................................. 20764 URBAN 1.0989 35614 URBAN 1.2837 16.82 

Passaic County, New Jersey ................................ 35644 URBAN 1.3110 35614 URBAN 1.2837 ¥2.08 

Somerset County, New Jersey ............................. 20764 URBAN 1.0989 35084 URBAN 1.1233 2.22 

Bronx County, New York ....................................... 35644 URBAN 1.3110 35614 URBAN 1.2837 ¥2.08 

Dutchess County, New York ................................. 39100 URBAN 1.1533 20524 URBAN 1.1345 ¥1.63 

Kings County, New York ....................................... 35644 URBAN 1.3110 35614 URBAN 1.2837 ¥2.08 

New York County, New York ................................ 35644 URBAN 1.3110 35614 URBAN 1.2837 ¥2.08 

Orange County, New York .................................... 39100 URBAN 1.1533 35614 URBAN 1.2837 11.31 

Putnam County, New York .................................... 35644 URBAN 1.3110 20524 URBAN 1.1345 ¥13.46 

Queens County, New York ................................... 35644 URBAN 1.3110 35614 URBAN 1.2837 ¥2.08 

Richmond County, New York ................................ 35644 URBAN 1.3110 35614 URBAN 1.2837 ¥2.08 

Rockland County, New York ................................. 35644 URBAN 1.3110 35614 URBAN 1.2837 ¥2.08 

Westchester County, New York ............................ 35644 URBAN 1.3110 35614 URBAN 1.2837 ¥2.08 

Brunswick County, North Carolina ........................ 48900 URBAN 0.8867 34820 URBAN 0.8620 ¥2.79 

Bucks County, Pennsylvania ................................. 37964 URBAN 1.0837 33874 URBAN 1.0157 ¥6.27 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

25040 Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 

TABLE 17—FY 2015 URBAN TO A DIFFERENT FY 2016 URBAN CBSA CROSSWALK—Continued 

County name 

FY 2014 CBSA Delineations/FY 2015 

data 

FY 2015 CBSA Delineations/FY 2015 

data Change in 

value 

(percent) CBSA Urban/

Rural Wage index CBSA Urban/Rural Wage index 

Chester County, Pennsylvania .............................. 37964 URBAN 1.0837 33874 URBAN 1.0157 ¥6.27 

Montgomery County, Pennsylvania ...................... 37964 URBAN 1.0837 33874 URBAN 1.0157 ¥6.27 

Arecibo Municipio, Puerto Rico ............................. 41980 URBAN 0.4449 11640 URBAN 0.4213 ¥5.30 

Camuy Municipio, Puerto Rico .............................. 41980 URBAN 0.4449 11640 URBAN 0.4213 ¥5.30 

Ceiba Municipio, Puerto Rico ................................ 21940 URBAN 0.3669 41980 URBAN 0.4438 20.96 

Fajardo Municipio, Puerto Rico ............................. 21940 URBAN 0.3669 41980 URBAN 0.4438 20.96 

Guanica Municipio, Puerto Rico ............................ 49500 URBAN 0.3375 38660 URBAN 0.4154 23.08 

Guayanilla Municipio, Puerto Rico ........................ 49500 URBAN 0.3375 38660 URBAN 0.4154 23.08 

Hatillo Municipio, Puerto Rico ............................... 41980 URBAN 0.4449 11640 URBAN 0.4213 ¥5.30 

Luquillo Municipio, Puerto Rico ............................. 21940 URBAN 0.3669 41980 URBAN 0.4438 20.96 

Penuelas Municipio, Puerto Rico .......................... 49500 URBAN 0.3375 38660 URBAN 0.4154 23.08 

Quebradillas Municipio, Puerto Rico ..................... 41980 URBAN 0.4449 11640 URBAN 0.4213 ¥5.30 

Yauco Municipio, Puerto Rico ............................... 49500 URBAN 0.3375 38660 URBAN 0.4154 23.08 

Anderson County, South Carolina ........................ 11340 URBAN 0.8744 24860 URBAN 0.9161 4.77 

Grainger County, Tennessee ................................ 34100 URBAN 0.6983 28940 URBAN 0.7015 0.46 

Lincoln County, West Virginia ............................... 16620 URBAN 0.7988 26580 URBAN 0.8846 10.74 

Putnam County, West Virginia .............................. 16620 URBAN 0.7988 26580 URBAN 0.8846 10.74 

Likewise, IPFs currently located in a 

rural area may remain rural under the 

new CBSA delineations but experience 

a change in their rural wage index value 

due to implementation of the new CBSA 

delineations. Table 18 shows the FY 

2015 CBSA delineations and rural 

statewide wage index values, compared 

with the FY 2016 CBSA delineations 

and rural statewide wage index values, 

and the percentage change in these 

values, for those rural areas that would 

change. 

TABLE 18—FY 2016 CHANGES TO THE STATEWIDE RURAL WAGE INDEX CROSSWALK

County name 

FY 2014 CBSA Delineations/ 

FY 2015 data 

FY 2015 CBSA Delineations/ 

FY 2015 data Change in 

value 

(percent) CBSA Urban/

Rural Wage index CBSA Urban/Rural Wage index 

ALABAMA .............................................................. 1 RURAL 0.6963 1 RURAL 0.6914 ¥0.70 

ARIZONA ............................................................... 3 RURAL 0.9125 3 RURAL 0.9219 1.03 

CONNECTICUT .................................................... 7 RURAL 1.1251 7 RURAL 1.1295 0.39 

FLORIDA ............................................................... 10 RURAL 0.8006 10 RURAL 0.8371 4.56 

GEORGIA .............................................................. 11 RURAL 0.7425 11 RURAL 0.7439 0.19 

HAWAII .................................................................. 12 RURAL 1.0741 12 RURAL 1.0872 1.22 

ILLINOIS ................................................................ 14 RURAL 0.8362 14 RURAL 0.8369 0.08 

KANSAS ................................................................ 17 RURAL 0.7806 17 RURAL 0.7779 ¥0.35 

KENTUCKY ........................................................... 18 RURAL 0.7744 18 RURAL 0.7748 0.05 

LOUISIANA ........................................................... 19 RURAL 0.7580 19 RURAL 0.7108 ¥6.23 

MARYLAND ........................................................... 21 RURAL 0.8554 21 RURAL 0.8746 2.24 

MASSACHUSETTS ............................................... 22 RURAL 1.3920 22 RURAL 1.1553 ¥17.00 

MICHIGAN ............................................................. 23 RURAL 0.8207 23 RURAL 0.8288 0.99 

MISSISSIPPI ......................................................... 25 RURAL 0.7589 25 RURAL 0.7570 ¥0.25 

NEBRASKA ........................................................... 28 RURAL 0.8924 28 RURAL 0.8877 ¥0.53 

NEW YORK ........................................................... 33 RURAL 0.8208 33 RURAL 0.8192 ¥0.19 

NORTH CAROLINA .............................................. 34 RURAL 0.7995 34 RURAL 0.7899 ¥1.20 

OHIO ..................................................................... 36 RURAL 0.8329 36 RURAL 0.8348 0.23 

OREGON ............................................................... 38 RURAL 1.0083 38 RURAL 0.9949 ¥1.33 

PENNSYLVANIA ................................................... 39 RURAL 0.8719 39 RURAL 0.8083 ¥7.29 

SOUTH CAROLINA .............................................. 42 RURAL 0.8374 42 RURAL 0.8370 ¥0.05 

TENNESSEE ......................................................... 44 RURAL 0.7365 44 RURAL 0.7277 ¥1.19 

TEXAS ................................................................... 45 RURAL 0.7855 45 RURAL 0.7847 ¥0.10 

UTAH ..................................................................... 46 RURAL 0.8891 46 RURAL 0.9005 1.28 

VIRGINIA ............................................................... 49 RURAL 0.7674 49 RURAL 0.7554 ¥1.56 

WASHINGTON ...................................................... 50 RURAL 1.0892 50 RURAL 1.0877 ¥0.14 

WEST VIRGINIA ................................................... 51 RURAL 0.7410 51 RURAL 0.7274 ¥1.84 

WISCONSIN .......................................................... 52 RURAL 0.9041 52 RURAL 0.9087 0.51 

While we believe that the new CBSA 

delineations would result in wage index 

values that are more representative of 

the actual costs of labor in a given area, 

we also recognize that use of the new 

CBSA delineations would result in 

reduced payments to some IPFs and 

increased payments to other IPFs, due to 

changes in wage index values. 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 25041 

Approximately 23.4 percent of IPFs 

would experience a decrease in wage 

index values due to CBSA changes, 

while 12.4 percent of IPFs would 

experience an increase in wage index 

values due to CBSA changes. The 

remaining 64.1 percent of IPFs would 

experience no change in their wage 

index values (these percentages do not 

sum to 100.0 percent due to rounding). 

While the wage index CBSA changes 

would be implemented in a budgetneutral fashion, the distributional 

effects of these CBSA changes appear to 

affect rural IPFs in particular; column 5 

in Table 26 in section VII. of this 

proposed rule shows that rural 

providers overall are anticipated to 

experience payment reductions of 0.2 

percent, with for-profit rural psychiatric 

hospitals anticipated to experience the 

greatest reduction of 0.6 percent. We 

believe that it would be appropriate to 

provide for a transition period to 

mitigate any negative impacts on 

facilities that experience reduced 

payments as a result of our adopting the 

new OMB CBSA delineations. 

Therefore, we propose to implement 

these CBSA changes using a 1-year 

transition with a blended wage index for 

all providers. For FY 2016, the wage 

index for each provider would consist of 

a blend of 50 percent of the FY 2016 IPF 

wage index using the current OMB 

delineations and 50 percent of the FY 

2016 IPF wage index using the new 

OMB delineations. This results in an 

average of the 2 values. We propose that 

the FY 2017 IPF PPS wage index and 

subsequent IPF PPS wage indices would 

be based solely on the new OMB CBSA 

delineations. We believe a 1-year 

transition strikes an appropriate balance 

between ensuring that IPF PPS 

payments are as accurate and stable as 

possible while giving IPFs time to adjust 

to the new CBSA delineations. The 

proposed FY 2016 IPF PPS Transitional 

wage index is located on the CMS Web 

site at http://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

IPFPPS/WageIndex.html. 

d. Adjustment for Rural Location and 

Proposal to Phase Out the Rural 

Adjustment for IPFs Losing Their Rural 

Adjustment Due to CBSA Changes 

In the November 2004 IPF PPS final 

rule, we provided a 17 percent payment 

adjustment for IPFs located in a rural 

area. This adjustment was based on the 

regression analysis, which indicated 

that the per diem cost of rural facilities 

was 17 percent higher than that of urban 

facilities after accounting for the 

influence of the other variables included 

in the regression. For FY 2016, we 

propose to continue to apply a 17 

percent payment adjustment for IPFs 

located in a rural area as defined at 

§ 412.64(b)(1)(ii)(C). A complete 

discussion of the adjustment for rural 

locations appears in the November 2004 

IPF PPS final rule (69 FR 66954). 

As noted in section III.D.1.c. of this 

proposed rule, we are proposing to 

adopt OMB updates to CBSA 

delineations. Adoption of the updated 

CBSAs would change the status of 37 

IPF providers currently designated as 

‘‘rural’’ to ‘‘urban’’ for FY 2016 and 

subsequent fiscal years. As such, these 

37 newly-urban providers would no 

longer receive the 17 percent rural 

adjustment. 

While 34 of these 37 rural IPFs that 

would be designated as urban under the 

new CBSA delineations would 

experience an increase in their wage 

index value, all 37 of these IPFs would 

lose the 17 percent rural adjustment. 

Consistent with the transition policy 

adopted for Inpatient Rehabilitation 

Facilities (IRFs) in FY 2006 (70 FR 

47923 through 47927), we considered 

the appropriateness of applying a 3-year 

phase-out of the rural adjustment for 

IPFs located in rural counties that 

would become urban under the new 

OMB delineations, given the potentially 

significant payment impacts for these 

IPFs. We believe that a phase-out of the 

rural adjustment transition period for 

these 37 IPFs specifically is appropriate 

because we expect these IPFs would 

experience a steeper and more abrupt 

reduction in their payments compared 

to other IPFs. 

Therefore, in addition to the 2-year 

wage index transition policy noted 

above, we are proposing a budgetneutral 3-year phase-out of the rural 

adjustment for existing FY 2015 rural 

IPFs that would become urban in FY 

2016 and that experience a loss in 

payments due to changes from the new 

CBSA delineations. Accordingly, the 

incremental steps needed to reduce the 

impact of the loss of the FY 2015 rural 

adjustment of 17 percent would be 

taken over FYs 2016, 2017 and 2018. 

This policy would allow rural IPFs that 

would be classified as urban in FY 2016 

to receive two-thirds of the 2015 rural 

adjustment for FY 2016, as well as the 

blended wage index. For FY 2017, these 

IPFs would receive the full FY 2017 

wage index and one-third of the FY 

2015 rural adjustment. For FY 2018, 

these IPFs would receive the full FY 

2018 wage index without a rural 

adjustment. We believe a 3-year budgetneutral phase-out of the rural 

adjustment for IPFs that transition from 

rural to urban status under the new 

CBSA delineations would best 

accomplish the goals of mitigating the 

loss of the rural adjustment for existing 

FY 2015 rural IPFs. The purpose of the 

gradual phase-out of the rural 

adjustment for these providers is to 

alleviate the significant payment 

implications for existing rural IPFs that 

may need time to adjust to the loss of 

their FY 2015 rural payment adjustment 

or that experience a reduction in 

payments solely because of this redesignation. As stated, this policy is 

specifically for rural IPFs that become 

urban in FY 2016. We are not 

implementing a transition policy for 

urban IPFs that become rural in FY 2016 

because these IPFs will receive the full 

rural adjustment of 17 percent 

beginning October 1, 2015. 

For the reasons discussed, we are 

proposing to implement a 3-year budgetneutral phase-out of the rural 

adjustment for the IPFs that during FY 

2015 were designated as rural and for 

FY 2016 are designated as urban under 

the new CBSA system. This is in 

addition to our proposed 

implementation of a 2-year blended 

wage index for all IPFs. We believe that 

the incremental reduction of the FY 

2015 rural adjustment would be 

appropriate to mitigate a significant 

reduction in payment. We considered 

alternative timeframes for phasing out 

the rural adjustment for IPFs which 

would transition from rural to urban 

status in FY 2016, but believe that a 3- 

year budget-neutral phase-out of the 

rural adjustment would appropriately 

mitigate the adverse payment impacts 

for existing FY 2015 rural IPFs that will 

be designated as urban IPFs in FY 2016, 

while also ensuring that payment rates 

for these providers are set accurately 

and appropriately. We invite public 

comment on this proposed policy. 

e. Budget Neutrality Adjustment 

Changes to the wage index are made 

in a budget-neutral manner so that 

updates do not increase expenditures. 

Therefore, for FY 2016, we propose to 

continue to apply a budget-neutrality 

adjustment in accordance with our 

existing budget-neutrality policy. This 

policy requires us to estimate the total 

amount of IPF PPS payments for FY 

2016 using the labor-related share and 

the wage indices from FY 2015 divided 

by the total estimated IPF PPS payments 

for FY 2016 using the labor-related 

share and wage indices from FY 2016. 

The estimated payments are based on 

FY 2014 IPF claims, inflated to the 

appropriate FY. This quotient is the 

wage index budget-neutrality factor, and 

it is applied in the update of the Federal 

per diem base rate for FY 2016 in 

addition to the market basket described 

in section III.A. of this proposed rule. 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

25042 Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 

The proposed wage index budgetneutrality factor for FY 2016 is 1.0041. 

2. Teaching Adjustment 

In the November 2004 IPF PPS final 

rule, we implemented regulations at 

§ 412.424(d)(1)(iii) to establish a facilitylevel adjustment for IPFs that are, or are 

part of, teaching hospitals. The teaching 

adjustment accounts for the higher 

indirect operating costs experienced by 

hospitals that participate in graduate 

medical education (GME) programs. The 

payment adjustments are made based on 

the ratio of the number of full-time 

equivalent (FTE) interns and residents 

training in the IPF and the IPF’s average 

daily census (ADC). 

Medicare makes direct GME payments 

(for direct costs such as resident and 

teaching physician salaries, and other 

direct teaching costs) to all teaching 

hospitals including those paid under a 

PPS, and those paid under the TEFRA 

rate-of-increase limits. These direct 

GME payments are made separately 

from payments for hospital operating 

costs and are not part of the IPF PPS. 

The direct GME payments do not 

address the estimated higher indirect 

operating costs teaching hospitals may 

face. 

The results of the regression analysis 

of FY 2002 IPF data established the 

basis for the payment adjustments 

included in the November 2004 IPF PPS 

final rule. The results showed that the 

indirect teaching cost variable is 

significant in explaining the higher 

costs of IPFs that have teaching 

programs. We calculated the teaching 

adjustment based on the IPF’s ‘‘teaching 

variable,’’ which is one plus the ratio of 

the number of FTE residents training in 

the IPF (subject to limitations described 

below) to the IPF’s ADC. 

We established the teaching 

adjustment in a manner that limited the 

incentives for IPFs to add FTE residents 

for the purpose of increasing their 

teaching adjustment. We imposed a cap 

on the number of FTE residents that 

may be counted for purposes of 

calculating the teaching adjustment. The 

cap limits the number of FTE residents 

that teaching IPFs may count for the 

purpose of calculating the IPF PPS 

teaching adjustment, not the number of 

residents teaching institutions can hire 

or train. We calculated the number of 

FTE residents that trained in the IPF 

during a ‘‘base year’’ and used that FTE 

resident number as the cap. An IPF’s 

FTE resident cap is ultimately 

determined based on the final 

settlement of the IPF’s most recent cost 

report filed before November 15, 2004 

(that is, the publication date of the IPF 

PPS final rule). A complete discussion 

on the temporary adjustment to the FTE 

cap to reflect residents added due to 

hospital closure and by residency 

program appears in the January 27, 2011 

IPF PPS proposed rule (76 FR 5018 

through 5020) and the May 6, 2011 IPF 

PPS final rule (76 R 26453 through 

26456). 

In the regression analysis, the 

logarithm of the teaching variable had a 

coefficient value of 0.5150. We 

converted this cost effect to a teaching 

payment adjustment by treating the 

regression coefficient as an exponent 

and raising the teaching variable to a 

power equal to the coefficient value. We 

note that the coefficient value of 0.5150 

was based on the regression analysis 

holding all other components of the 

payment system constant. A complete 

discussion of how the teaching 

adjustment was calculated appears in 

the November 2004 IPF PPS final rule 

(69 FR 66954 through 66957) and the 

May 2008 IPF PPS notice (73 FR 25721). 

As with other adjustment factors 

derived through the regression analysis, 

we do not plan to rerun the teaching 

adjustment factors in the regression 

analysis until we more fully analyze IPF 

PPS data. Therefore, in this proposed 

rule, for FY 2016, we propose to 

continue to retain the coefficient value 

of 0.5150 for the teaching adjustment to 

the Federal per diem base rate. 

3. Cost of Living Adjustment for IPFs 

Located in Alaska and Hawaii 

The IPF PPS includes a payment 

adjustment for IPFs located in Alaska 

and Hawaii based upon the county in 

which the IPF is located. As we 

explained in the November 2004 IPF 

PPS final rule, the FY 2002 data 

demonstrated that IPFs in Alaska and 

Hawaii had per diem costs that were 

disproportionately higher than other 

IPFs. Other Medicare PPSs (for example, 

the IPPS and LTCH PPS) adopted a cost 

of living adjustment (COLA) to account 

for the cost differential of care furnished 

in Alaska and Hawaii. 

We analyzed the effect of applying a 

COLA to payments for IPFs located in 

Alaska and Hawaii. The results of our 

analysis demonstrated that a COLA for 

IPFs located in Alaska and Hawaii 

would improve payment equity for 

these facilities. As a result of this 

analysis, we provided a COLA in the 

November 2004 IPF PPS final rule. 

A COLA for IPFs located in Alaska 

and Hawaii is made by multiplying the 

nonlabor-related portion of the Federal 

per diem base rate by the applicable 

COLA factor based on the COLA area in 

which the IPF is located. 

The COLA factors are published on 

the Office of Personnel Management 

(OPM) Web site (http://www.opm.gov/

oca/cola/rates.asp). 

We note that the COLA areas for 

Alaska are not defined by county as are 

the COLA areas for Hawaii. In 5 CFR 

591.207, the OPM established the 

following COLA areas: 

• City of Anchorage, and 80-kilometer 

(50-mile) radius by road, as measured 

from the Federal courthouse; 

• City of Fairbanks, and 80-kilometer 

(50-mile) radius by road, as measured 

from the Federal courthouse; 

• City of Juneau, and 80-kilometer 

(50-mile) radius by road, as measured 

from the Federal courthouse; 

• Rest of the State of Alaska. 

As stated in the November 2004 IPF 

PPS final rule, we update the COLA 

factors according to updates established 

by the OPM. However, sections 1911 

through 1919 of the Nonforeign Area 

Retirement Equity Assurance Act, as 

contained in subtitle B of title XIX of the 

National Defense Authorization Act 

(NDAA) for Fiscal Year 2010 (Pub. L. 

111–84, October 28, 2009), transitions 

the Alaska and Hawaii COLAs to 

locality pay. Under section 1914 of Pub. 

L. 111–84, locality pay is being phased 

in over a 3-year period beginning in 

January 2010, with COLA rates frozen as 

of the date of enactment, October 28, 

2009, and then proportionately reduced 

to reflect the phase-in of locality pay. 

When we published the proposed 

COLA factors in the January 2011 IPF 

PPS proposed rule (76 FR 4998), we 

inadvertently selected the FY 2010 

COLA rates which had been reduced to 

account for the phase-in of locality pay. 

We did not intend to propose the 

reduced COLA rates because that would 

have understated the adjustment. Since 

the 2009 COLA rates did not reflect the 

phase-in of locality pay, we finalized 

the FY 2009 COLA rates for RY 2010 

through RY 2014. 

In the FY 2013 IPPS/LTCH final rule 

(77 FR 53700 through 53701), CMS 

established a methodology for FY 2014 

to update the COLA factors for Alaska 

and Hawaii. Under that methodology, 

we use a comparison of the growth in 

the Consumer Price Indices (CPIs) in 

Anchorage, Alaska and Honolulu, 

Hawaii relative to the growth in the 

overall CPI as published by the Bureau 

of Labor Statistics (BLS) to update the 

COLA factors for all areas in Alaska and 

Hawaii, respectively. As discussed in 

the FY 2013 IPPS/LTCH proposed rule 

(77 FR 28145), because BLS publishes 

CPI data for only Anchorage, Alaska and 

Honolulu, Hawaii, our methodology for 

updating the COLA factors uses a 

comparison of the growth in the CPIs for 

those cities relative to the growth in the 

overall CPI to update the COLA factors 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 25043 

for all areas in Alaska and Hawaii, 

respectively. We believe that the relative 

price differences between these cities 

and the United States (as measured by 

the CPIs mentioned above) are generally 

appropriate proxies for the relative price 

differences between the ‘‘other areas’’ of 

Alaska and Hawaii and the United 

States. 

The CPIs for ‘‘All Items’’ that BLS 

publishes for Anchorage, Alaska, 

Honolulu, Hawaii, and for the average 

U.S. city are based on a different mix of 

commodities and services than is 

reflected in the nonlabor-related share 

of the IPPS market basket. As such, 

under the methodology we established 

to update the COLA factors, we 

calculated a ‘‘reweighted CPI’’ using the 

CPI for commodities and the CPI for 

services for each of the geographic areas 

to mirror the composition of the IPPS 

market basket nonlabor-related share. 

The current composition of BLS’ CPI for 

‘‘All Items’’ for all of the respective 

areas is approximately 40 percent 

commodities and 60 percent services. 

However, the nonlabor-related share of 

the IPPS market basket is comprised of 

60 percent commodities and 40 percent 

services. Therefore, under the 

methodology established for FY 2014 in 

the FY 2013 IPPS/LTCH PPS final rule, 

we created reweighted indexes for 

Anchorage, Alaska, Honolulu, Hawaii, 

and the average U.S. city using the 

respective CPI commodities index and 

CPI services index and applying the 

approximate 60/40 weights from the 

IPPS market basket. This approach is 

appropriate because we would continue 

to make a COLA for hospitals located in 

Alaska and Hawaii by multiplying the 

nonlabor-related portion of the 

standardized amount by a COLA factor. 

Under the COLA factor update 

methodology established in the FY 2014 

IPPS/LTCH final rule, we adjust 

payments made to hospitals located in 

Alaska and Hawaii by incorporating a 

25-percent cap on the CPI-updated 

COLA factors. We note that OPM’s 

COLA factors were calculated with a 

statutorily mandated cap of 25 percent, 

and since at least 1984, we have 

exercised our discretionary authority to 

adjust Alaska and Hawaii payments by 

incorporating this cap. In keeping with 

this historical policy, we would 

continue to use such a cap, as our 

proposal is based on OPM’s COLA 

factors. We believe this approach is 

appropriate because our CPI-updated 

COLA factors use the 2009 OPM COLA 

factors as a basis. 

In FY 2015 IPF PPS rulemaking, we 

adopted the same methodology for the 

COLA factors applied under the IPPS 

because IPFs are hospitals with a similar 

mix of commodities and services. We 

think it is appropriate to have a 

consistent policy approach with that of 

other hospitals in Alaska and Hawaii. 

Therefore, in the FY 2015 IPF PPS final 

rule, we adopted the cost of living 

adjustment factors shown in the 

Addendum for IPFs located in Alaska 

and Hawaii. Under IPPS COLA policy, 

the COLA updates are determined every 

four years, when the IPPS market basket 

is rebased. Since the IPPS COLA factors 

were last updated in FY 2014, they are 

not scheduled to be updated again until 

FY 2018. As such, we propose to 

continue using the existing IPF PPS 

COLA factors in effect in FY 2015 for FY 

2016. The IPF PPS COLA factors for FY 

2016 are shown in the Addendum of 

this proposed rule. 

4. Proposed Adjustment for IPFs With a 

Qualifying Emergency Department (ED) 

The IPF PPS includes a facility-level 

adjustment for IPFs with qualifying EDs. 

We provide an adjustment to the 

Federal per diem base rate to account 

for the costs associated with 

maintaining a full-service ED. The 

adjustment is intended to account for 

ED costs incurred by a freestanding 

psychiatric hospital with a qualifying 

ED or a distinct part psychiatric unit of 

an acute care hospital or a CAH, for 

preadmission services otherwise 

payable under the Medicare Outpatient 

Prospective Payment System (OPPS), 

furnished to a beneficiary on the date of 

the beneficiary’s admission to the 

hospital and during the day 

immediately preceding the date of 

admission to the IPF (see § 413.40(c)(2)), 

and the overhead cost of maintaining 

the ED. This payment is a facility-level 

adjustment that applies to all IPF 

admissions (with one exception 

described below), regardless of whether 

a particular patient receives 

preadmission services in the hospital’s 

ED. 

The ED adjustment is incorporated 

into the variable per diem adjustment 

for the first day of each stay for IPFs 

with a qualifying ED. That is, IPFs with 

a qualifying ED receive an adjustment 

factor of 1.31 as the variable per diem 

adjustment for day 1 of each stay. If an 

IPF does not have a qualifying ED, it 

receives an adjustment factor of 1.19 as 

the variable per diem adjustment for day 

1 of each patient stay. 

The ED adjustment is made on every 

qualifying claim except as described 

below. As specified in 

§ 412.424(d)(1)(v)(B), the ED adjustment 

is not made when a patient is 

discharged from an acute care hospital 

or CAH and admitted to the same 

hospital’s or CAH’s psychiatric unit. We 

clarified in the November 2004 IPF PPS 

final rule (69 FR 66960) that an ED 

adjustment is not made in this case 

because the costs associated with ED 

services are reflected in the DRG 

payment to the acute care hospital or 

through the reasonable cost payment 

made to the CAH. 

Therefore, when patients are 

discharged from an acute care hospital 

or CAH and admitted to the same 

hospital or CAH’s psychiatric unit, the 

IPF receives the 1.19 adjustment factor 

as the variable per diem adjustment for 

the first day of the patient’s stay in the 

IPF. 

For FY 2016, we are proposing to 

continue to retain the 1.31 adjustment 

factor for IPFs with qualifying EDs. A 

complete discussion of the steps 

involved in the calculation of the ED 

adjustment factor appears in the 

November 2004 IPF PPS final rule (69 

FR 66959 through 66960) and the May 

2006 IPF PPS final rule (71 FR 27070 

through 27072). 

E. Other Proposed Payment 

Adjustments and Policies 

1. Outlier Payment Overview 

The IPF PPS includes an outlier 

adjustment to promote access to IPF 

care for those patients who require 

expensive care and to limit the financial 

risk of IPFs treating unusually costly 

patients. In the November 2004 IPF PPS 

final rule, we implemented regulations 

at § 412.424(d)(3)(i) to provide a percase payment for IPF stays that are 

extraordinarily costly. Providing 

additional payments to IPFs for 

extremely costly cases strongly 

improves the accuracy of the IPF PPS in 

determining resource costs at the patient 

and facility level. These additional 

payments reduce the financial losses 

that would otherwise be incurred in 

treating patients who require more 

costly care and, therefore, reduce the 

incentives for IPFs to under-serve these 

patients. 

We make outlier payments for 

discharges in which an IPF’s estimated 

total cost for a case exceeds a fixed 

dollar loss threshold amount 

(multiplied by the IPF’s facility-level 

adjustments) plus the Federal per diem 

payment amount for the case. 

In instances when the case qualifies 

for an outlier payment, we pay 80 

percent of the difference between the 

estimated cost for the case and the 

adjusted threshold amount for days 1 

through 9 of the stay (consistent with 

the median LOS for IPFs in FY 2002), 

and 60 percent of the difference for day 

10 and thereafter. We established the 80 

percent and 60 percent loss sharing 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

25044 Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 

ratios because we were concerned that 

a single ratio established at 80 percent 

(like other Medicare PPSs) might 

provide an incentive under the IPF per 

diem payment system to increase LOS 

in order to receive additional payments. 

After establishing the loss sharing 

ratios, we determined the current FY 

2015 fixed dollar loss threshold amount 

through payment simulations designed 

to compute a dollar loss beyond which 

payments are estimated to meet the 2 

percent outlier spending target. Each 

year when we update the IPF PPS, we 

simulate payments using the latest 

available data to compute the fixed 

dollar loss threshold so that outlier 

payments represent 2 percent of total 

projected IPF PPS payments. 

2. Proposed Update to the Outlier Fixed 

Dollar Loss Threshold Amount 

In accordance with the update 

methodology described in § 412.428(d), 

we propose to update the fixed dollar 

loss threshold amount used under the 

IPF PPS outlier policy. Based on the 

regression analysis and payment 

simulations used to develop the IPF 

PPS, we established a 2 percent outlier 

policy which strikes an appropriate 

balance between protecting IPFs from 

extraordinarily costly cases while 

ensuring the adequacy of the Federal 

per diem base rate for all other cases 

that are not outlier cases. 

Based on an analysis of the latest 

available data (that is, FY 2014 IPF 

claims) and rate increases, we believe it 

is necessary to update the fixed dollar 

loss threshold amount in order to 

maintain an outlier percentage that 

equals 2 percent of total estimated IPF 

PPS payments. To update the IPF outlier 

threshold amount for FY 2016, we 

propose to use FY 2014 claims data and 

the same methodology that we used to 

set the initial outlier threshold amount 

in the May 2006 IPF PPS final rule (71 

FR 27072 and 27073), which is also the 

same methodology that we used to 

update the outlier threshold amounts for 

years 2008 through 2015. Based on an 

analysis of this updated data, we 

estimate that IPF outlier payments as a 

percentage of total estimated payments 

are approximately 2.3 percent in FY 

2015. Therefore, we propose to update 

the outlier threshold amount to $9,825 

to maintain estimated outlier payments 

at approximately 2 percent of total 

estimated aggregate IPF payments for FY 

2016. 

3. Proposed Update to IPF Cost-toCharge Ratio Ceilings 

Under the IPF PPS, an outlier 

payment is made if an IPF’s cost for a 

stay exceeds a fixed dollar loss 

threshold amount plus the IPF PPS 

amount. In order to establish an IPF’s 

cost for a particular case, we multiply 

the IPF’s reported charges on the 

discharge bill by its overall cost-tocharge ratio (CCR). This approach to 

determining an IPF’s cost is consistent 

with the approach used under the IPPS 

and other PPSs. In the June 2003 IPPS 

final rule (68 FR 34494), we 

implemented changes to the IPPS policy 

used to determine CCRs for acute care 

hospitals because we became aware that 

payment vulnerabilities resulted in 

inappropriate outlier payments. Under 

the IPPS, we established a statistical 

measure of accuracy for CCRs in order 

to ensure that aberrant CCR data did not 

result in inappropriate outlier 

payments. 

As we indicated in the November 

2004 IPF PPS final rule (69 FR 66961), 

because we believe that the IPF outlier 

policy is susceptible to the same 

payment vulnerabilities as the IPPS, we 

adopted a method to ensure the 

statistical accuracy of CCRs under the 

IPF PPS. Specifically, we adopted the 

following procedure in the November 

2004 IPF PPS final rule: We calculated 

2 national ceilings, one for IPFs located 

in rural areas and one for IPFs located 

in urban areas. We computed the 

ceilings by first calculating the national 

average and the standard deviation of 

the CCR for both urban and rural IPFs 

using the most recent CCRs entered in 

the CY 2015 Provider Specific File. 

To determine the rural and urban 

ceilings, we multiplied each of the 

standard deviations by 3 and added the 

result to the appropriate national CCR 

average (either rural or urban). The 

upper threshold CCR for IPFs in FY 

2016 is 1.9041 for rural IPFs, and 1.6881 

for urban IPFs, based on CBSA-based 

geographic designations. If an IPF’s CCR 

is above the applicable ceiling, the ratio 

is considered statistically inaccurate, 

and we assign the appropriate national 

(either rural or urban) median CCR to 

the IPF. 

We apply the national CCRs to the 

following situations: 

• New IPFs that have not yet 

submitted their first Medicare cost 

report. We continue to use these 

national CCRs until the facility’s actual 

CCR can be computed using the first 

tentatively or final settled cost report. 

• IPFs whose overall CCR is in excess 

of 3 standard deviations above the 

corresponding national geometric mean 

(that is, above the ceiling). 

• Other IPFs for which the MAC 

obtains inaccurate or incomplete data 

with which to calculate a CCR. 

We are not proposing to make any 

changes to the application of the 

national CCRs or to the procedures for 

updating the CCR ceilings in FY 2016. 

However, we are proposing to update 

the FY 2016 national median and 

ceiling CCRs for urban and rural IPFs 

based on the CCRs entered in the latest 

available IPF PPS Provider Specific File. 

Specifically, for FY 2016, and to be used 

in each of the 3 situations listed above, 

using the most recent CCRs entered in 

the CY 2015 Provider Specific File we 

estimate the national median CCR of 

0.6210 for rural IPFs and the national 

median CCR of 0.4675 for urban IPFs. 

These calculations are based on the 

IPF’s location (either urban or rural) 

using the CBSA-based geographic 

designations. 

A complete discussion regarding the 

national median CCRs appears in the 

November 2004 IPF PPS final rule (69 

FR 66961 through 66964). 

IV. Other Payment Policy Issues 

A. ICD–10–CM and ICD–10–PCS 

Implementation 

We remind IPF providers that CMS is 

implementing the International 

Classification of Diseases, 10th 

Revision, Clinical Modification (ICD– 

10–CM) as the HIPAA designated code 

set for reporting diseases, injuries, 

impairments, other health related 

problems, their manifestations, and 

causes of injury as of October 1, 2015. 

Below is a brief history of key activities 

leading to the October 1, 2015 

implementation date. 

In the Standards for Electronic 

Transactions final rule, published in the 

Federal Register on August 17, 2000 (65 

FR 50312), the Department adopted the 

International Classification of Diseases, 

9th Revision, Clinical Modification 

(ICD–9–CM) as the HIPAA designated 

code set for reporting diseases, injuries, 

impairments, other health related 

problems, their manifestations, and 

causes of injury. Therefore, on January 

1, 2005 when the IPF PPS began, we 

used ICD–9–CM as the designated code 

set for the IPF PPS. IPF claims with a 

principal diagnosis included in Chapter 

Five of the ICD–9–CM are paid the 

Federal per diem base rate and all other 

applicable adjustments, including any 

applicable DRG adjustment. 

Together with the rest of the 

healthcare industry, CMS was 

scheduled to implement the 10th 

revision of the ICD coding scheme, that 

is, ICD–10–CM, on October 1, 2014. 

Hence, in the FY 2014 IPF PPS final rule 

(78 FR 46741–46742), we finalized a 

policy that ICD–10–CM codes will be 

used in IPF PPS. 

On April 1, 2014, the Protecting 

Access to Medicare Act of 2014 (PAMA) 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 25045 

(Pub. L. 113–93) was enacted. Section 

212 of PAMA, titled ‘‘Delay in 

Transition from ICD–9 to ICD–10 Code 

Sets,’’ provided that ‘‘[t]he Secretary of 

Health and Human Services may not, 

prior to October 1, 2015, adopt ICD–10 

code sets as the standard for code sets 

under section 1173(c) of the Social 

Security Act (42 U.S.C. 1320d-2(c)) and 

section 162.1002 of title 45, Code of 

Federal Regulations.’’ On May 1, 2014, 

the Secretary announced that HHS 

expected to issue an interim final rule 

that would require use of ICD–10–CM 

beginning October 1, 2015 and would 

continue to require use of ICD–9–CM 

through September 30, 2015. This 

announcement is available on the CMS 

Web site at http://cms.gov/Medicare/

Coding/ICD10/index.html. HHS 

finalized the new compliance date of 

October 1, 2015 for ICD–10–CM and 

ICD–10–PCS in an August 4, 2014 final 

rule titled ‘‘Administrative 

Simplification: Change to the 

Compliance Date for the International 

Classification of Diseases, 10th Revision 

(ICD–10–CM and ICD–10–PCS)’’ (79 FR 

45128). This rule also requires HIPAA 

covered entities to continue to use the 

ICD–9–CM code set through September 

30, 2015. Therefore, beginning October 

1, 2015, we require use of the ICD–10– 

CM and ICD–10–PCS codes for reporting 

the MS–DRG and comorbidity 

adjustment factors for IPF services. 

Every year, changes to the ICD–10– 

CM and the ICD–10–PCS coding system 

will be addressed in the IPPS proposed 

and final rules. The changes to the 

codes are effective October 1 of each 

year and must be used by acute care 

hospitals as well as other providers to 

report diagnostic and procedure 

information. The IPF PPS has always 

incorporated ICD–9–CM coding changes 

made in the annual IPPS update and 

will continue to do so for the ICD–10– 

CM and ICD–10–PCS coding changes. 

We will continue to publish coding 

changes in a Transmittal/Change 

Request, similar to how coding changes 

are announced by the IPPS and LTCH 

PPS. The coding changes relevant to the 

IPF PPS are also published in the IPF 

PPS proposed and final rules, or in IPF 

PPS update notices. In § 412.428(e), we 

indicate that CMS will publish 

information pertaining to the annual 

update for the IPF PPS, which includes 

describing the ICD–9–CM coding 

changes and DRG classification changes 

discussed in the annual update to the 

hospital IPPS regulations. Because ICD– 

10–CM will be implemented on October 

1, 2015, we need to update the 

regulation language at § 412.428(e) to 

refer to ICD–10–CM, rather than ICD–9– 

CM. Therefore, we propose to revise 

§ 412.428(e) to state that the information 

we will publish annually in the Federal 

Register to describe IPF PPS updates 

would describe the ICD–10–CM coding 

changes and DRG classification changes 

discussed in the annual update to the 

hospital inpatient prospective payment 

system regulations. In the FY 2015 IPF 

PPS final rule (79 FR 45945 through 

46946), the MS–DRGs were converted so 

that the MS–DRG assignment logic uses 

ICD–10–CM/PCS codes directly. When 

an IPF submits a claim for discharges, 

the ICD–10–CM/PCS diagnosis and 

procedure codes will be assigned to the 

correct MS–DRG. In the FY 2015 IPF 

PPS final rule, we also identified the 

ICD–10–CM/PCS codes that are eligible 

for comorbidity payment adjustments 

under the IPF PPS (79 FR 45947 through 

45955). 

The ICD–10–CM guidelines are 

updated each year along with the ICD– 

10–CM code set. To find the annual 

coding guidelines, go to CDC’s Web site 

at http://www.cdc.gov/nchs/icd/

icd10cm.htm or the annual ICD–10–CM 

updates posted on the CMS ICD–10 Web 

site at http://www.cms.gov/Medicare/

Coding/ICD10/index.html. 

B. Status of Future Refinements 

For RY 2012, we identified several 

areas of concern for future refinement, 

and we invited comments on these 

issues in our RY 2012 proposed and 

final rules. For further discussion of 

these issues and to review the public 

comments, we refer readers to the RY 

2012 IPF PPS proposed rule (76 FR 

4998) and final rule (76 FR 26432). 

We have delayed making refinements 

to the IPF PPS until we have completed 

a thorough analysis of IPF PPS data on 

which to base those refinements. 

Specifically, we will delay updating the 

adjustment factors derived from the 

regression analysis until we have IPF 

PPS data that include as much 

information as possible regarding the 

patient-level characteristics of the 

population that each IPF serves. We 

have begun the necessary analysis to 

better understand IPF industry practices 

so that we may refine the IPF PPS in the 

future, as appropriate. 

IPF Covered Services 

The IPF PPS established the Federal 

per diem base rate for each patient day 

in an IPF from the national average 

routine operating, ancillary, and capital 

costs. Preliminary analysis reveals that 

in 2012 to 2013, over 20 percent of IPF 

stays show no reported ancillary costs, 

such as laboratory and drug costs, in 

cost reports or charges on claims. The 

majority of these stays with zero 

ancillary costs or charges were in forprofit, free-standing IPF hospitals. We 

would expect that patients admitted to 

an IPF would undergo laboratory testing 

as part of the admission history and 

physical. We would also expect that 

most patients requiring hospitalization 

for active psychiatric treatment would 

need drugs. Therefore, we were 

surprised when the analysis showed 

such a large number of stays reporting 

no laboratory services and no drugs 

were provided throughout the 

hospitalization. Until further analysis is 

completed, we can only surmise that the 

stays did not require ancillaries and 

therefore, were not provided, or that the 

ancillary services were separately billed. 

We remind the industry that CMS 

pays only the inpatient psychiatric 

facility for services furnished to a 

Medicare beneficiary who is an 

inpatient of that inpatient psychiatric 

facility, except for certain professional 

services, and that payments made under 

this subpart are payments in full for all 

inpatient hospital services, provided 

directly or under arrangement (see 42 

CFR 412.404(d)), as specified in 42 CFR 

409.10. 

The covered services specified in 

§ 409.10(a), which apply to IPFs, 

include the following: Bed and board; 

nursing services and other related 

services; use of hospital or CAH 

facilities; medical social services; drugs, 

biologicals, supplies, appliances, and 

equipment; certain other diagnostic or 

therapeutic services; medical or surgical 

services provided by certain interns or 

residents-in-training; and transportation 

services, including transport by 

ambulance. 

Only the professional services listed 

in § 409.10(b) can be separately billed 

for a Medicare beneficiary who is an 

inpatient at an IPF, including services of 

physicians, physician assistants, nurse 

practitioners, clinical nurse specialists, 

certified nurse mid-wives, anesthetists, 

and qualified psychologists. (see 

§ 409.10(b) for specifics on how these 

professions and services are defined. 

These regulations are available online at 

the electronic Code of Federal 

Regulations, at http://www.ecfr.gov/cgibin/text-idx?c=ecfr&tpl=%2Findex.tpl.) 

Ancillary costs such as laboratory 

costs and drugs are already included in 

the Medicare IPF PPS per diem payment 

and should not be unbundled and billed 

separately to Medicare. We expect that 

the IPF would be recording the cost of 

all drugs provided to its Medicare 

patients on its Medicare cost reports, 

and reporting charges for those drugs on 

its Medicare claims. We expect that 

when an IPF contracts with an outside 

laboratory to provide services to its 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

25046 Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 

2The statute uses the term ‘‘rate year’’ (RY). 

However, beginning with the annual update of the 

inpatient psychiatric facility prospective payment 

system (IPF PPS) that took effect on July 1, 2011 

(RY 2012), we aligned the IPF PPS update with the 

annual update of the ICD–9–CM codes, effective on 

October 1 of each year. This change allowed for 

annual payment updates and the ICD–9–CM coding 

update to occur on the same schedule and appear 

in the same Federal Register document, promoting 

administrative efficiency. To reflect the change to 

the annual payment rate update cycle, we revised 

the regulations at 42 CFR 412.402 to specify that, 

beginning October 1, 2012, the RY update period 

would be the 12-month period from October 1 

through September 30, which we refer to as a 

‘‘fiscal year’’ (FY) (76 FR 26435). Therefore, with 

respect to the IPFQR Program, the terms ‘‘rate year’’, 

as used in the statute, and ‘‘fiscal year’’ as used in 

the regulation, both refer to the period from October 

1 through September 30. For more information 

regarding this terminology change, we refer readers 

to section III. of the RY 2012 IPF PPS final rule (76 

FR 26434 through 26435). 

Medicare inpatients, the IPF would 

instruct the laboratory to bill the IPF 

and not to bill Medicare. Similarly, 

drugs provided to IPF Medicare 

inpatients where Medicare is the 

primary payer should not be billed to 

Part D or to other insurers. 

We are continuing to analyze claims 

and cost report data that do not include 

ancillary charges or costs, and will be 

sharing our findings with the Center for 

Program Integrity and the Office of 

Financial Management for further 

investigation, as the results warrant. Our 

refinement analysis is dependent on 

recent precise data for costs, including 

ancillary costs. We will continue to 

collect these data until an accurate 

refinement analysis can be performed. 

Therefore, we are not proposing 

refinements in this proposed rule. Once 

we have gathered timely and accurate 

data, we will analyze that data with the 

expectation of a refinement update in 

future rulemaking. We invite comments 

on this issue of zero ancillary costs to 

better understand industry practices. 

V. Inpatient Psychiatric Facilities 

Quality Reporting (IPFQR) Program 

A. Background 

1. Statutory Authority 

Section 1886(s)(4) of the Act, as added 

and amended by sections 3401(f) and 

10322(a) of the Affordable Care Act, 

requires the Secretary to implement a 

quality reporting program for inpatient 

psychiatric hospitals and psychiatric 

units. Section 1886(s)(4)(A)(i) of the Act 

requires that, for FY 2014 2 and each 

subsequent fiscal year, the Secretary 

must reduce any annual update to a 

standard Federal rate for discharges 

occurring during the rate year by 2.0 

percentage points for any inpatient 

psychiatric hospital or psychiatric unit 

that does not comply with quality data 

submission requirements with respect to 

an applicable fiscal year. 

As provided in section 

1886(s)(4)(A)(ii) of the Act, the 

application of the reduction for failure 

to report under section 1886(s)(4)(A)(i) 

of the Act may result in an annual 

update of less than 0.0 percent for a 

fiscal year, and may result in payment 

rates under section 1886(s)(1) of the Act 

being less than the payment rates for the 

preceding year. In addition, section 

1886(s)(4)(B) of the Act requires that the 

application of the reduction to a 

standard Federal rate update be 

noncumulative across fiscal years. Thus, 

any reduction applied under section 

1886(s)(4)(A) of the Act will apply only 

with respect to the fiscal year rate 

involved and the Secretary may not take 

into account the reduction in computing 

the payment amount under the system 

described in section 1886(s)(1) of the 

Act for subsequent years. 

Section 1886(s)(4)(C) of the Act 

requires that, for FY 2014 (October 1, 

2013, through September 30, 2014) and 

each subsequent year, each psychiatric 

hospital and psychiatric unit must 

submit to the Secretary data on quality 

measures as specified by the Secretary. 

The data must be submitted in a form 

and manner and at a time specified by 

the Secretary. Under section 

1886(s)(4)(D)(i) of the Act, measures 

selected for the quality reporting 

program must have been endorsed by 

the entity with a contract under section 

1890(a) of the Act. The National Quality 

Forum (NQF) currently holds this 

contract. 

Section 1886(s)(4)(D)(ii) of the Act 

provides that, in the case of a specified 

area or medical topic determined 

appropriate by the Secretary for which 

a feasible and practical measure has not 

been endorsed by the entity with a 

contract under section 1890(a) of the 

Act, the Secretary may specify a 

measure that is not so endorsed as long 

as due consideration is given to 

measures that have been endorsed or 

adopted by a consensus organization 

identified by the Secretary. Pursuant to 

section 1886(s)(4)(D)(iii) of the Act, the 

Secretary must publish the measures 

applicable to the FY 2014 IPFQR 

Program no later than October 1, 2012. 

Section 1886(s)(4)(E) of the Act 

requires the Secretary to establish 

procedures for making public the data 

submitted by inpatient psychiatric 

hospitals and psychiatric units under 

the IPFQR Program. These procedures 

must ensure that a facility has the 

opportunity to review its data prior to 

the data being made public. The 

Secretary must report quality measures 

that relate to services furnished by the 

psychiatric hospitals and units on the 

CMS Web site. 

2. Covered Entities 

In the FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53645), we established that 

the IPFQR Program’s quality reporting 

requirements cover those psychiatric 

hospitals and psychiatric units paid 

under Medicare’s IPF PPS (42 CFR 

412.404(b)). Generally, psychiatric 

hospitals and psychiatric units within 

acute care and critical access hospitals 

that treat Medicare patients are paid 

under the IPF PPS. Consistent with 

prior rules, we continue to use the term 

‘‘inpatient psychiatric facility’’ (IPF) to 

refer to both inpatient psychiatric 

hospitals and psychiatric units. This 

usage follows the terminology in our IPF 

PPS regulations at § 412.402. For more 

information on covered entities, we 

refer readers to the FY 2013 IPPS/LTCH 

PPS final rule (77 FR 53645). 

3. Considerations in Selecting Quality 

Measures 

Our objective in selecting quality 

measures is to balance the need for 

information on the full spectrum of care 

delivery and the need to minimize the 

burden of data collection and reporting. 

We have focused on measures that 

evaluate critical processes of care that 

have significant impact on patient 

outcomes and support CMS and HHS 

priorities for improved quality and 

efficiency of care provided by IPFs. We 

refer readers to the FY 2013 IPPS/LTCH 

PPS final rule Section 4.a. (77 FR 53645 

through 53646) for a detailed discussion 

of the considerations taken into account 

in selecting quality measures. 

Before being proposed for inclusion in 

the IPFQR Program, measures are placed 

on a list of measures under 

consideration, which is published 

annually by December 1 on behalf of 

CMS by the NQF. In compliance with 

section 1890A(a)(2) of the Act, measures 

proposed for the IPFQR Program were 

included in 2 publicly available 

documents: ‘‘List of Measures under 

Consideration for December 1, 2013,’’ 

and ‘‘List of Measures under 

Consideration for December 1, 2014’’ 

(http://www.qualityforum.org/Setting_

Priorities/Partnership/Measure_

Applications_Partnership.aspx). The 

Measure Applications Partnership 

(MAP), a multi-stakeholder group 

convened by the NQF, reviews the 

measures under consideration for the 

IPFQR Program, among other Federal 

programs, and provides input on those 

measures to the Secretary. The MAP’s 

2014 and 2015 recommendations for 

quality measures under consideration 

are captured in the following 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 25047 

3Behavioral Health Endorsement Maintenance 

2014, Phase 2, Technical Report, 67, (May 9, 2014). 

Available at http://www.qualityforum.org/

Publications/2014/05/Behavioral_Health_

Endorsement_Maintenance_2014_-_Phase_II.aspx. 

4 Ibid. 

5Centers for Disease Control and Prevention. 

Annual Smoking-Attributable Mortality, Years of 

Potential Life Lost, and Productivity Losses— 

United States, 2000–2004.’’ Morb Mortal Wkly Rep. 

2008. 57(45): 1226–1228. Available at: http://www.

cdc.gov/mmwr/preview/mmwrhtml/

mm5745a3.htm. 

6U.S. Department of Health and Human Services. 

‘‘The health consequences of smoking: a report of 

the Surgeon General.’’ Atlanta, GA, U.S. 

Department of Health and Human Services, Centers 

for Disease Control and Prevention, National Center 

for Chronic Disease Prevention and Health 

Promotion, Office on Smoking and Health, 2004. 

7Fiore, Michael C., Goplerud, Eric, Shroeder, 

Steven A. (2010). The Joint Commission’s New 

Tobacco Cessation Measures—Will Hospitals Do the 

Right Thing? N Engl J Med 2012; 366:1172–1174. 

Available at http://www.nejm.org/doi/full/10.1056/

nejmp1115176. 

8Lasser K, Boyd JW, Woolhandler S, 

Himmelstein, DU, McCormick D, Bor DH. Smoking 

and mental illness: A population-based prevalence 

study. JAMA. 2000;284(20):2606–2610. 

documents: ‘‘MAP Pre-Rulemaking 

Report: 2014 Recommendations on 

Measures for More than 20 Federal 

Programs’’ (http://

www.qualityforum.org/Publications/

2014/01/MAP_Pre-Rulemaking_Report_

_2014_Recommendations_on_

Measures_for_More_than_20_Federal_

Programs.aspx) and ‘‘Process and 

Approach for MAP Pre-Rulemaking 

Deliberations 2015’’ (http://

www.qualityforum.org/Publications/

2015/01/Process_and_Approach_for_

MAP_Pre-Rulemaking_Deliberations_

2015.aspx). We considered the input 

and recommendations provided by the 

MAP in selecting all measures for the 

Program, including those discussed 

below. 

B. Retention of IPFQR Program 

Measures Adopted in Previous Payment 

Determinations 

Since the inception of the IPFQR 

Program in FY 2013, we have adopted 

a total of 14 mandatory measures. In the 

FY 2013 IPPS/LTCH PPS final rule (77 

FR 53646 through 53652), we adopted 

six chart-abstracted IPF quality 

measures for the FY 2014 payment 

determination and subsequent years. In 

the FY 2014 IPPS/LTCH PPS final rule 

(78 FR 50889 through 50895), we added 

2 measures for the FY 2016 payment 

determination and subsequent years. In 

the FY 2015 IPF PPS final rule (79 FR 

45963 through 45974), we finalized the 

addition of 2 new measures to the 

IPFQR Program to those already adopted 

for the FY 2016 payment determination 

and subsequent years, and finalized four 

quality measures for the FY 2017 

payment determination and subsequent 

years. 

C. Proposed Removal of HBIPS–4 From 

the IPFQR Program Measure Set for the 

FY 2017 Payment Determination and 

Subsequent Years 

We first adopted HBIPS–4 Patients 

Discharged on Multiple Antipsychotic 

Medications in the FY 2013 IPPS/LTCH 

PPS final rule (77 FR 53649 through 

53650). We refer readers to that rule for 

a detailed discussion of the measure. At 

the time that we adopted the measure, 

it was NQF-endorsed and intended for 

use in conjunction with HBIPS–5 

Patients Discharged on Multiple 

Antipsychotic Medications with 

Appropriate Justification. However, 

NQF removed its endorsement of 

HBIPS–4 in January 2014. The NQF’s 

Behavioral Health Steering Committee, 

in its May 2014 Technical Expert Panel 

Report, found that current evidence 

indicated that HBIPS–4 ‘‘does not allow 

for the distinction of differences in 

providers . . . .’’ 3 Moreover, the 

Steering Committee noted that HBIPS– 

4 ‘‘is not a measure of quality of patient 

care . . . and there is insufficient 

evidence to warrant the endorsement of 

this measure given the use of HBIPS–5, 

which addresses patients discharged on 

multiple antipsychotic medications 

with appropriate justification.’’ 4 For 

these reasons, the Steering Committee 

did not re-endorse HBIPS–4. 

As we stated in the FY 2013 IPPS/

LTCH PPS final rule, we originally 

proposed HBIPS–4, in part, because 

HBIPS–4 and HBIPS–5 were intended to 

be reported as a set (77 FR 53649). 

However, as discussed above, NQF no 

longer believes HBIPS–4 is necessary in 

that set, and we agree. We have the 

authority to maintain measures that are 

not NQF-endorsed under section 

1886(s)(4)(D)(ii) of the Act. However, 

based on the loss of NQF endorsement 

and because providers must still submit 

data for HBIPS–5, which we believe 

sufficiently includes the information 

HBIPS–4 was intended to collect, we 

believe removal of HBIPS–4 from the 

IPFQR Program is warranted. We note 

that the data collection period for FY 

2016 has ended and providers are 

required to submit this data before this 

rule will be finalized. Therefore, FY 

2017 is the first year that we would be 

able to remove this measure from the 

program. 

In summary, Table 19, below, 

identifies the measure that we are 

proposing to remove beginning with the 

FY 2017 payment determination. We 

request comment on this proposal. 

TABLE 19—IPFQR PROGRAM MEASURE PROPOSED TO BE REMOVED FOR THE FY 2017 PAYMENT DETERMINATION AND

SUBSEQUENT YEARS

NQF No. Measure ID Measure 

N/A .................................................. HBIPS–4 ........................................ Patients Discharged on Multiple Antipsychotic Medications 

D. New Quality Measures Proposed for 

the FY 2018 Payment Determination 

and Subsequent Years 

For the FY 2018 payment 

determination and subsequent years, we 

are proposing five new measures. The 

sections below outline our rationale for 

proposing these measures. 

1. TOB–3 Tobacco Use Treatment 

Provided or Offered at Discharge and 

the Subset Measure TOB–3a Tobacco 

Use Treatment at Discharge (NQF 

#1656) 

Tobacco use is one of the greatest 

contributors of morbidity and mortality 

in the United States, accounting for 

more than 435,000 deaths annually.5

Smoking is a known cause of multiple 

cancers, heart disease, stroke, 

complications of pregnancy, chronic 

obstructive pulmonary disease, other 

respiratory problems, poorer wound 

healing, and many other diseases.6 This 

health issue has significant implications 

for persons with mental illness and 

substance use disorders. Tobacco use is 

much higher among people with coexisting mental health conditions than 

for the general population.7 One study 

has estimated that these individuals are 

twice as likely to smoke as the rest of 

the population.8 Tobacco use also 

creates a heavy financial cost to both 

individuals and society. Smokingmstockstill on DSK4VPTVN1PROD with PROPOSALS2

25048 Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 

9Centers for Disease Control and Prevention. 

‘‘Best Practices for Comprehensive Tobacco Control 

Programs—2007.’’ Atlanta, GA, Department of 

Health and Human Services, Centers for Disease 

Control and Prevention, National Center for Chronic 

Disease Prevention and Health Promotion, Office on 

Smoking and Health, 2007. 

10U.S. Department of Health and Human 

Services. ‘‘The health consequences of smoking: a 

report of the Surgeon General.’’ Atlanta, GA, U.S. 

Department of Health and Human Services, Centers 

for Disease Control and Prevention, National Center 

for Chronic Disease Prevention and Health 

Promotion, Office on Smoking and Health, 2004. 

11Fiore MC, Jae ́n CR, Baker TB, et al. Treating 

Tobacco Use and Dependence: 2008 Update. 

Clinical Practice Guideline. Rockville, MD: U.S. 

Department of Health and Human Services. Public 

Health Service. May 2008, available at http://www.

ncbi.nlm.nih.gov/books/NBK63952. 

12Prochaska, JJ, et al. ‘‘Efficacy of Initiating 

Tobacco Dependence Treatment in Inpatient 

Psychiatry: A Randomized Controlled Trial.’’ Am. 

J. Pub. Health. 2013 August 15; e1-e9. 

13Fiore, Michael C., Goplerud, Eric, Shroeder, 

Steven A. (2010). The Joint Commission’s New 

Tobacco Cessation Measures—Will Hospitals Do the 

Right Thing? N Engl J Med 2012; 366:1172–1174, 

available at http://www.nejm.org/doi/full/10.1056/

nejmp1115176. 

14Prochaska, JJ, et al. ‘‘Efficacy of Initiating 

Tobacco Dependence Treatment in Inpatient 

Psychiatry: A Randomized Controlled Trial.’’ Am. 

J. Pub. Health. 2013 August 15; e1–e9. 

15 Ibid. 

16TOB–3 and TOB–3a Measure Specifications, 

available at http://www.jointcommission.org/assets/ 

1/6/HIQR_Jan2015_v4_4a_1_EXE.zip 

17 Ibid. 

18TOB–3 and TOB–3a Measure Specifications, 

available at https://www.qualitynet.org/dcs/Content

Server?c=Page&pagename=QnetPublic%2FPage

%2FQnetTier4&cid=1228773989482. 

19See Fiore MC, Jae ́n CR, Baker TB, et al. Treating 

Tobacco Use and Dependence: 2008 Update. 

Clinical Practice Guideline. Rockville, MD: U.S. 

Department of Health and Human Services. Public 

Health Service. May 2008. Available at http://www.

ncbi.nlm.nih.gov/books/NBK63952. The specific 

strategy is further specified in Strategy 4A. 

20Centers for Disease Control and Prevention. 

Annual Smoking-Attributable Mortality, Years of 

Potential Life Lost, and Productivity Losses— 

United States, 2000–2004.’’ Morb Mortal Wkly Rep. 

2008. 57(45): 1226–1228. Available at: http://www.

cdc.gov/mmwr/preview/mmwrhtml/

mm5745a3.htm. 

21U.S. Department of Health and Human 

Services. ‘‘The health consequences of smoking: a 

report of the Surgeon General.’’ Atlanta, GA, U.S. 

Department of Health and Human Services, Centers 

for Disease Control and Prevention, National Center 

for Chronic Disease Prevention and Health 

Promotion, Office on Smoking and Health, 2004. 

22Fiore, Michael C., Goplerud, Eric, Shroeder, 

Steven A. (2010). The Joint Commission’s New 

Tobacco Cessation Measures—Will Hospitals Do the 

Right Thing? N Engl J Med 2012; 366:1172–1174 

Available at: http://www.nejm.org/doi/full/10.1056/ 

nejmp1115176. 

attributable health care expenditures are 

estimated at $96 billion per year in 

direct medical expenses and $97 billion 

in lost productivity.9

Strong and consistent evidence 

demonstrates that timely tobacco 

dependence interventions for patients 

using tobacco can significantly reduce 

the risk of developing a tobacco-related 

disease, as well as provide improved 

health outcomes for those already 

suffering from a tobacco-related 

disease.10 Even a minimal intervention 

has been shown to result in cessation.11

Research discloses that tobacco users 

hospitalized with psychiatric illnesses 

who enter into smoking-cessation 

treatment can successfully overcome 

their tobacco dependence; 12 however, 

‘‘studies show that many hospitals do 

not consistently provide cessation 

services to their patients.’’ 13 Evidence 

also suggests that tobacco cessation 

treatment does not increase, and may 

even decrease, the risk of rehospitalization for tobacco users 

hospitalized with psychiatric 

illnesses.14 Research further 

demonstrates that effective tobacco 

cessation support across the care 

continuum can be provided with only 

minimal additional provider effort and 

without harm to the mental health 

recovery process.15

TOB–3 (NQF #1656) is a chartabstracted measure that identifies those 

patients 18 years of age and older who 

have used tobacco products within 30 

days of admission and who ‘‘were 

referred to or refused evidence-based 

outpatient counseling AND received or 

refused a prescription for FDA-approved 

cessation medication upon 

discharge.’’ 16 TOB–3a is a subset of 

TOB–3 and identifies those IPF 

‘‘patients who were referred to 

evidence-based outpatient counseling 

AND received a prescription for FDAapproved cessation medication upon 

discharge as well as those who were 

referred to outpatient counseling and 

had reason for not receiving a 

prescription for medication.’’ 17

Providers must report this measure set 

as ‘‘an overall rate which includes all 

patients to whom tobacco treatment was 

provided, or offered and refused, at the 

time of hospital discharge (TOB–3), and 

a second rate, a subset of the first, which 

includes only those patients who 

received tobacco use treatment at 

discharge. (TOB–3a).’’ 18 For more 

information on the measure 

specifications, we refer readers to the 

Specifications Manual for National 

Hospital Inpatient Quality Measures at 

https://www.qualitynet.org/dcs/Content

Server?c=Page&pagename=QnetPublic

%2FPage%2FQnetTier4&cid=122877

3989482. Providing counseling and 

recommending cessation medication are 

core strategies of the Treating Tobacco 

Use and Dependence Guidelines.19 For 

the reasons stated above, we believe that 

adoption of the TOB–3/TOB–3a 

measure set, which assesses IPFs’ 

offering of these tobacco use cessation 

treatments to IPF patients, would result 

in better overall health outcomes for IPF 

patients. 

Furthermore, the adoption of this 

measure set would strengthen related 

measures already in place in the IPFQR 

Program. Currently, the IPFQR Program 

includes 2 other tobacco cessation 

measures: (1) Tobacco Use Screening 

(TOB–1), a chart-abstracted measure 

that assesses hospitalized patients who 

are screened within the first 3 days of 

admission for tobacco use (cigarettes, 

smokeless tobacco, pipe, and cigar) 

within the previous 30 days; and (2) The 

Tobacco Use Treatment Provided or 

Offered (TOB–2), which includes the 

subset, Tobacco Use Treatment (TOB– 

2a). TOB–2/TOB–2a is a chartabstracted measure set reported as an 

overall rate that includes all patients to 

whom tobacco use treatment was 

provided, or offered and refused, and a 

second rate, a subset of the first, which 

includes only those patients who 

received tobacco use treatment. TOB–1 

and TOB–2/TOB–2a provide a picture of 

care given during the hospital stay. In 

contrast, TOB–3/TOB–3a present the 

care given at discharge. Together, these 

3 measures/measure sets present a 

broader picture of the entire episode of 

care. If the TOB–3/TOB–3a measure set 

is adopted, the IPFQR Program’s 

measure set would showcase both the 

facility’s practice of screening patients 

for tobacco use and the outcomes of a 

facility’s practice of offering 

opportunities to stop during the course 

of the stay and upon discharge. Further, 

the adoption of TOB–3/TOB–3a could 

alert IPFs to gaps in treatment for 

smoking cessation intervention at 

discharge if rates for these measures are 

low. This knowledge would support the 

development of quality improvement 

plans and better engage patients in 

treatment. 

We believe that public reporting of 

this information would provide 

consumers and other stakeholders with 

useful information in choosing among 

different facilities for patients who use 

tobacco products. In addition, this 

measure set promotes the National 

Quality Strategy priority of Effective 

Prevention and Treatment, particularly 

with respect to the leading causes of 

mortality, starting with cardiovascular 

disease. As noted above, tobacco use is 

one of the greatest contributors of 

morbidity and mortality in the United 

States,20 contributing to various forms 

of cardiovascular disease, among many 

other conditions.21 ‘‘Tobacco use 

remains the chief preventable cause of 

illness and death in our society.’’ 22

Cessation interventions can significantly 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 25049 

23U.S. Department of Health and Human 

Services. ‘‘The health consequences of smoking: a 

report of the Surgeon General.’’ Atlanta, GA, U.S. 

Department of Health and Human Services, Centers 

for Disease Control and Prevention, National Center 

for Chronic Disease Prevention and Health 

Promotion, Office on Smoking and Health, 2004. 

24Ross, S. (2005). Alcohol Use Disorders in the 

Elderly. Primary Psychiatry, 12(1):32–40. 

25AL Mirand and JW Welte. Alcohol 

consumption among the elderly in a general 

population, Erie County, New York. Am J Public 

Health. 1996 July; 86(7): 978–984. 

26Although the measure refers to ‘‘hospitals,’’ the 

measure is specified for all in-patient settings. 

https://www.qualitynet.org/dcs/

ContentServer?c=Page&pagename=QnetPublic%

2FPage%2FQnetTier4&cid=1228773989482. 

27SUB–2 and SUB–2a Measure Specifications, 

available at https://www.qualitynet.org/dcs/

ContentServer?c=Page&pagename=QnetPublic%

2FPage%2FQnetTier4&cid=1228773989482. 

28 Ibid. 

29SUB–2 and SUB–2a Measure Specifications, 

available at https://www.qualitynet.org/dcs/

ContentServer?c=Page&pagename=QnetPublic%

2FPage%2FQnetTier4&cid=1228773989482. 

30Stephen Ross. Alcohol Use Disorders in the 

Elderly. Psychiatry Weekly (no date). Available at: 

http://www.psychweekly.com/aspx/article/

ArticleDetail.aspx?articleid=19. 

reduce the risk of developing tobaccorelated disease,23 leading to decreases in 

cardiovascular disease, among other 

diseases, and, ultimately, mortality. 

Encouraging intervention would 

promote effective treatment of tobacco 

use, and may contribute to prevention of 

the many diseases that are associated 

with tobacco use. 

For these reasons, we included TOB– 

3/TOB–3a in our ‘‘List of Measures 

under Consideration for December 1, 

2014.’’ The MAP provided input on the 

measure set and supported its inclusion 

in the IPFQR Program in its report 

‘‘Process and Approach for MAP PreRulemaking Deliberations 2015’’ 

available at http://www.qualityforum.

org/WorkArea/linkit.aspx?Link

Identifier=id&ItemID=78711. Moreover, 

this measure set is NQF-endorsed for 

the IPF setting in conformity with the 

statutory criteria for measure selection 

under section 1886(s)(4)(D)(i) of the Act. 

We invite public comments on our 

proposal to adopt the TOB–3 and TOB– 

3a measure set for the FY 2018 payment 

determination and subsequent years. 

2. SUB–2 Alcohol Use Brief Intervention 

Provided or Offered and SUB–2a 

Alcohol Use Brief Intervention (NQF 

#1663) 

Individuals with mental health 

conditions experience substance use 

disorders (SUDs) at a much higher rate 

than the general population. Individuals 

with the most serious mental illnesses 

have the highest rates of SUDs. Cooccurring SUDs often go undiagnosed 

and, without treatment, contribute to a 

longer persistence of disorders, poorer 

treatment outcomes, lower rates of 

medication adherence, and greater 

impairments to functioning. 

Substance abuse, particularly alcohol 

abuse, is a significant problem in the 

elderly. Alcohol use disorders are the 

most prevalent type of addictive 

disorder in individuals ages 65 and 

over.24 Roughly 6 percent of the elderly 

are considered to be heavy users of 

alcohol.25 Alcohol abuse is often 

associated with depression and 

contributes to the etiology of many 

serious medical conditions, including 

liver disease and cardiovascular disease. 

For these reasons, it is important to 

assess IPFs’ efforts to offer alcohol abuse 

treatment to those patients who screen 

positive for alcohol abuse. 

SUB–2 includes ‘‘[p]atients 18 years 

of age and older who screened positive 

for unhealthy alcohol use who received 

or refused a brief intervention during 

the hospital 26 stay.’’ 27 SUB–2a includes 

‘‘[p]atients who received the brief 

intervention during the hospital 

stay.’’ 28 The measure set is chartabstracted and ‘‘is reported as an overall 

rate which includes all patients to 

whom a brief intervention was 

provided, or offered and refused, and a 

second rate, a subset of the first, which 

includes only those patients who 

received a brief intervention.’’ 29 For 

more information on the measure 

specifications, we refer readers to the 

Specifications Manual for National 

Hospital Inpatient Quality Measures at 

https://www.qualitynet.org/dcs/

ContentServer?c=Page&pagename=

QnetPublic%2FPage

%2FQnetTier4&cid=1228773989482. 

We believe that the addition of the 

SUB–2/SUB–2a measure set to the 

related existing substance abuse 

measure in the IPFQR Program would 

improve the overall quality of care that 

patients receive in IPF settings, as well 

as overall patient health outcomes. We 

previously adopted the SUB–1 measure 

(Alcohol Use Screening (SUB–1) (NQF 

#1661)) (78 FR 50890 through 50892). 

SUB–1 assesses ‘‘hospitalized patients 

18 years of age and older who are 

screened during the hospital stay using 

a validated screening questionnaire for 

unhealthy alcohol use.’’ SUB–1 alone 

does not provide a full picture of an 

IPF’s response to this screening. 

However, when linked to SUB–2/SUB– 

2a, the IPF measure set depicts the rate 

at which patients are screened for 

potential alcohol abuse and the rate at 

which those who screen positive accept 

the offered interventions. Further, the 

adoption of SUB–2/SUB 2a could alert 

IPFs to gaps in treatment for 

interventions if rates are low, which 

supports the development of quality 

improvement plans and better patient 

engagement in treatment. In addition, 

data for the SUB–2/SUB–2a measure set, 

in combination with the SUB–1 

measure, would afford consumers useful 

information in choosing among different 

facilities, particularly for patients who 

may require assistance with unhealthy 

alcohol use. 

Additionally, we believe that this 

measure set promotes the National 

Quality Strategy priority of Effective 

Prevention and Treatment for the 

leading causes of mortality, starting 

with cardiovascular disease. As noted 

above, alcohol use disorders are the 

most prevalent type of addictive 

disorder in individuals ages 65 and 

over 30 and contribute to serious medical 

conditions, including cardiovascular 

disease and liver disease. Encouraging 

interventions would promote treatment 

of unhealthy alcohol use and may 

contribute to prevention of the many 

diseases that are associated with alcohol 

abuse, including cardiovascular disease. 

For these reasons, we included the 

SUB–2/SUB–2a measure set in our ‘‘List 

of Measures under Consideration for 

December 1, 2014.’’ The MAP provided 

input on the measure set and supported 

its inclusion in the IPFQR Program in its 

report ‘‘Process and Approach for MAP 

Pre-Rulemaking Deliberations 2015’’ 

available at http://

www.qualityforum.org/WorkArea/

linkit.aspx?LinkIdentifier=

id&ItemID=78711. Moreover, this 

measure set is NQF-endorsed for the IPF 

setting, in conformity with the statutory 

criteria for measure selection under 

section 1886(s)(4)(D)(i) of the Act. 

We invite public comments on our 

proposal to adopt the SUB–2/SUB–2a 

measure set for the FY 2018 payment 

determination and subsequent years. 

3. Transition Record With Specified 

Elements Received by Discharged 

Patients (Discharges from an Inpatient 

Facility to Home/Self Care or Any Other 

Site of Care) (NQF #0647) and Removal 

of HBIPS–6 

Effective and timely communication 

of a patient’s clinical status and other 

relevant information at the time of 

discharge from an inpatient facility is 

essential for supporting appropriate 

continuity of care. Establishment of an 

effective transition from one treatment 

setting to another is enhanced by 

providing patients and their caregivers 

with sufficient information regarding 

treatment during hospitalization. 

Receiving discharge instructions can 

assist the patient in understanding how 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

25050 Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 

31 Jack BW, Chetty VK, Anthony D, et al. A 

reengineered hospital discharge program to 

decrease rehospitalization. Ann Intern Med 2009; 

150:178–187. 

32Transition Record with Specified Elements 

Received by Discharged Patients (Discharges from 

an Inpatient Facility to Home/Self Care or Any 

Other Site of Care) Measure Specifications. 

Available at http://www.qualityforum.org/Qps/

0647. 

33 Ibid. 

34See http://www.ama-assn.org/ama/pub/

physician-resources/physician-consortiumperformance-improvement/about-pcpi.page? The 

AMA–PCPI ‘‘is nationally recognized for measure 

development, specification and testing of measures, 

and enabling use of measures in electronic health 

records (EHRs) . . . [the organization] develops, 

tests, implements and disseminates evidence-based 

measures that reflect the best practices and best 

interest of medicine . . .’’ 

35Medicare Payment Advisory Commission. 

Promoting Greater Efficiency in Medicare. June 

2007. Available at: http://www.medpac.gov/

documents/reports/Jun07_EntireReport.pdf. 

36US DHHS. ‘‘National Healthcare Disparities 

Report 2013.’’ Available at: http://www.ahrq.gov/

research/findings/nhqrdr/nhdr13/chap7.html. 

37 Guide to Patient and Family Engagement: 

Environmental Scan Report. May 2012. Agency for 

Healthcare Research and Quality. Rockville, MD. 

Available at: http://www.ahrq.gov/research/

findings/final-reports/ptfamilyscan/ptfamily1.html. 

38http://www.qualityforum.org/Publications/

2012/10/MAP_Families_of_Measures.aspx. 

39http://www.qualityforum.org/Publications/

2014/08/2014_Input_on_Quality_Measures_for_

Dual_Eligible_Beneficiaries.aspx. 

40 In the FY 2013 IPPS/LTCH PPS final rule, we 

adopted HBIPS–6, beginning with the FY 2014 

payment determination (77 FR 53650–53651). We 

refer readers to that rule for a detailed discussion 

of this measure. 

41See https://manual.jointcommission.org/

releases/TJC2014A1/. 

to maintain and enhance his/her care 

when discharged to home or any other 

site, and studies have shown that 

readmissions can be prevented by 

providing detailed, personalized 

information to patients pre-discharge.31

The Transition Record with Specified 

Elements Received by Discharged 

Patients (Discharges from on Inpatient 

Facility to Home/Self Care or Any other 

Site of Care) measure is a chartabstracted measure that captures the 

‘‘[p]ercentage of patients, regardless of 

age, discharged from an inpatient 

facility to home or other site of care, or 

their caregiver(s), who received a 

transition record (and with whom a 

review of all included information was 

documented) at the time of 

discharge.’’ 32 At a minimum, the 

transition record should include: 

• Reason for inpatient admission; 

• Major procedures and tests 

performed during inpatient stay and 

summary of results; 

• Principal diagnosis at discharge; 

• Current medication list; 

• Studies pending at discharge; 

• Patient instructions; 

• Advance directive or surrogate 

decision maker documented or reason 

for not providing advance care plan; 

• 24-hour/7-day contact information, 

including physician for emergencies 

related to inpatient stay; 

• Contact information for obtaining 

results of studies pending at discharge; 

• Plan for follow-up care; and 

• Primary physician, other health 

care professional, or site designated for 

follow-up care.33

The measure was developed by the 

American Medical Association— 

convened Physician Consortium for 

Performance Improvement (AMAconvened PCPI), ‘‘a national, physicianled initiative dedicated to improving 

patient health and safety.’’ 34 For more 

information on this measure, including 

its specifications, we refer the readers to 

the AMA-convened PCPI list of 

measures at http://www.qualityforum.

org/Qps/0647. 

The Transition Record with Specified 

Elements Received by Discharged 

Patients (Discharges from an Inpatient 

Facility to Home/Self Care or Any other 

Site of Care) measure seeks to prevent 

gaps in care transitions caused by the 

patient receiving inadequate or 

insufficient information that lead to 

avoidable adverse events and cost CMS 

approximately $15 billion due to 

avoidable patient readmissions.35

We believe that public reporting of 

this measure would afford patients and 

their families or caregivers useful 

information in choosing among different 

facilities and would promote the 

National Quality Strategy priority of 

Communication and Care Coordination. 

As articulated by HHS, ‘‘Care 

coordination is a conscious effort to 

ensure that all key information needed 

to make clinical decisions is available to 

patients and providers. It is defined as 

the deliberate organization of patient 

care activities between 2 or more 

participants involved in a patient’s care 

to facilitate appropriate delivery of 

health care services.’’ 36 This proposed 

measure would promote appropriate 

care coordination by specifying that 

patients discharged from an inpatient 

facility receive relevant and meaningful 

transition information. This measure 

also would promote Person and Family 

Engagement, ‘‘a set of behaviors by 

patients, family members, and health 

professionals and a set of organizational 

policies and procedures that foster both 

the inclusion of patients and family 

members as active members of the 

health care team and collaborative 

partnerships with providers and 

provider organizations.’’ 37 This 

proposed measure would inform 

patients of their status at discharge, 

empowering them to become active 

members in their care. Additionally, the 

inclusion in this measure of an advance 

care plan would support open 

communication of the patient’s, and his/ 

her caregiver’s/surrogate’s, wishes, 

resulting in improved patient-provider 

communication. 

For these reasons, we included this 

measure in our ‘‘List of Measures under 

Consideration for December 1, 2014.’’ 

The MAP provided input on the 

measure and supported its inclusion in 

the IPFQR Program in its report 

‘‘Process and Approach for MAP PreRulemaking Deliberations 2015’’ 

available at http://www.qualityforum.

org/WorkArea/linkit.aspx?Link

Identifier=id&ItemID=78711. In 

addition, the MAP had previously 

suggested this measure as one that could 

fill a gap in communication between the 

provider and patient at discharge 38 and 

recommended that the measure be used 

for dual eligible patients (that is, 

patients with both Medicare and 

Medicaid coverage), who comprise a 

significant beneficiary population 

served within IPFs.39 Moreover, this 

measure set is NQF-endorsed for the IPF 

setting, in conformity with the statutory 

criteria for measure selection under 

section 1886(s)(4)(D)(i) of the Act. 

If finalized, we propose that this 

measure would replace the existing 

HBIPS–6 Post-Discharge Continuing 

Care Plan measure.40 We believe that 

the Transition Record with Specified 

Elements Received by Discharged 

Patients (Discharges from an Inpatient 

Facility to Home/Self Care or Any Other 

Site of Care) measure is a more effective 

and robust measure than HBIPS–6 for 

use in the IPF setting. Specifically, 

HBIPS–6 requires discharge plans to 

only have 4 components: 

• Reason for hospitalization; 

• Principal diagnosis; 

• Discharge medications; and 

• Next level of care 

recommendations.41

In contrast, the Transition Record 

with Specified Elements Received by 

Discharged Patients (Discharges from an 

Inpatient Facility to Home/Self Care or 

Any Other Site of Care) measure 

requires additional elements, including 

those described below, which are 

intended to improve quality of care, 

decrease costs, and increase beneficiary 

engagement. 

First, the proposed measure requires 

the provider to communicate both 

studies pending at discharge as well as 

contact information so that patients or 

their families can obtain the results of 

those studies. Approximately 40 percent 

of discharged patients have test results 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 25051 

42 Kripalani S, LeFevre F, Phillips CO, et al. 

Deficits in communication and information transfer 

between hospital based and primary care 

physicians: implications for patient safety and 

continuity of care. JAMA2007;297(8):831–841. 

43 Kripalani S, LeFevre F, Phillips CO, et al. 

Deficits in communication and information transfer 

between hospital based and primary care 

physicians: implications for patient safety and 

continuity of care. JAMA 2007;297(8):831–841. 

44Medicare Payment Advisory Commission. 

Promoting Greater Efficiency in Medicare. June 

2007. Available at: http://www.medpac.gov/

documents/reports/Jun07_EntireReport.pdf. 

45Timely Transmission of Transition Record 

(Discharged from Inpatient Facility to Home/Self 

Care or Any Other Site of Care), available at http:// 

www.ama-assn.sorg/apps/listserv/x-check/

qmeasure.cgi?submit=PCPI. 

46US DHHS. ‘‘National Healthcare Disparities 

Report 2013.’’ Available at: http://www.ahrq.gov/

research/findings/nhqrdr/nhdr13/chap7.html. 47http://www.qualityforum.org/Publications/

2012/10/MAP_Families_of_Measures.aspx. 48http://www.qualityforum.org/Publications/

2014/08/2014_Input_on_Quality_Measures_for_

Dual_Eligible_Beneficiaries.aspx. 49 In the FY 2013 IPPS/LTCH PPS final rule, we 

adopted HBIPS–7 Post Discharge Continuing Care 

Plan Transmitted to the Next Level of Care Provider 

Upon Discharge, beginning with the FY 2014 

payment determination (77 FR 53651–53652). We 

refer readers to that rule for a detailed discussion 

of this measure. 

50https://manual.jointcommission.org/releases/

TJC2014A1/. 

that are pending and about a quarter of 

such test results require further action 

that, if not taken in a timely manner, 

could result in potentially avoidable 

negative outcomes.42 HBIPS–6 does not 

require providers to specify studies 

pending at discharge. 

Second, the transition record is also 

required to contain a list of major 

procedures and tests that were 

performed during the hospitalization 

and summary results. HBIPS–6 does not 

include this requirement. We believe it 

is important for a patient to understand 

which tests were performed on him/her 

and for what purpose, understanding 

the outcome and consequences of these 

tests. This knowledge may serve to 

empower patients to seek additional 

care or follow-up when necessary, 

reducing the risk of avoidable 

consequences and readmissions. 

Third, the transition record in the 

proposed measure is required to include 

patient instructions while HBIPS–6 has 

no such requirement. Without 

instructions, the patient may not take 

the necessary steps for recovery, leading 

to complications and/or readmissions. 

Fourth, the proposed measure 

requires both of the following: (1) 24- 

hour/7-day contact information 

including physicians for emergencies 

related to inpatient stay; and (2) the 

primary physician, other health care 

professional, or sites designated for 

follow-up care. HBIPS–6 does not have 

these requirements. Again, this 

information can lead to reduced 

complications and an increased 

likelihood of appropriate follow-up 

care, resulting in reduced readmissions. 

Finally, the elements required for the 

proposed transition record measure are 

far better aligned than HBIPS–6 with the 

elements required in the Summary of 

Care record required by the Electronic 

Health Record (EHR) Incentive Program 

for eligible hospitals and critical access 

hospitals and with the guidance on 

discharge planning provided by the 

Medicare Learning Network available at 

https://www.cms.gov/Outreach-andEducation/Medicare-Learning-NetworkMLN/MLNProducts/Downloads/

Discharge-Planning-BookletICN908184.pdf. 

In summary, we believe that the 

Transition Record with Specified 

Elements Received by Discharged 

Patients (Discharges from an Inpatient 

Facility to Home/Self Care or Any Other 

Site of Care) measure is more robust 

than HBIPS–6 because it includes these 

and other elements that are currently 

absent from HBIPS–6. Therefore, we 

propose to adopt the Transition Record 

with Specified Elements Received by 

Discharged Patients (Discharges from an 

Inpatient Facility to Home/Self Care or 

Any Other Site of Care) measure for the 

FY 2018 payment determination and 

subsequent years, and, if adopted, to 

remove HBIPS–6. We invite public 

comments on these proposals. 

4. Timely Transmission of Transition 

Record (Discharges From an Inpatient 

Facility to Home/Self Care or Any Other 

Site of Care) (NQF #0648) and Removal 

of HBIPS–7 

The literature shows infrequent 

communication between hospital 

physicians and primary care 

practitioners and that the availability of 

discharge summaries at the patient’s 

first post-discharge visit with the 

primary care practitioner is low, which 

affects the quality of care provided to 

patients.43 The Timely Transmission of 

Transition Record (Discharges from an 

Inpatient Facility to Home/Self Care or 

Any Other Site of Care) measure (NQF 

#0648) is a chart-abstracted measure 

developed by AMA-convened PCPI to 

narrow gaps in care transition that result 

in adverse health outcomes for patients 

and cost CMS about $15 billion due to 

readmissions,44 as discussed above. 

This measure captures the ‘‘[p]ercentage 

of patients, regardless of age, discharged 

from an inpatient facility to home or any 

other site of care for whom a transition 

record was transmitted to the facility or 

primary physician or other health care 

professional designated for follow-up 

care within 24 hours of discharge.’’ 45

For more information on this measure, 

including its specifications, we refer the 

readers to http://www.qualityforum.org/ 

Qps/0648. 

We believe that public reporting of 

this measure will afford consumers, and 

their families or caregivers, useful 

information in choosing among different 

facilities because it communicates how 

quickly a summary of the patient’s 

record will be transmitted to his or her 

other treating facilities and physicians, 

improving care, as outlined above. We 

further believe that this measure will 

promote the National Quality Strategy 

priority of Communication and Care 

Coordination. As discussed above, 

according to HHS, ‘‘Care coordination is 

a conscious effort to ensure that all key 

information needed to make clinical 

decisions is available to patients and 

providers. It is defined as the deliberate 

organization of patient care activities 

between 2 or more participants involved 

in a patient’s care to facilitate 

appropriate delivery of health care 

services.’’ 46 This proposed measure 

enables a patient’s primary care 

physician or other healthcare 

practitioner to timely receive a 

transition record of the inpatient 

hospitalization. 

For these reasons, we included this 

measure in our ‘‘List of Measures under 

Consideration for December 1, 2014.’’ 

The MAP provided input on the 

measure and supported its inclusion in 

the IPFQR Program (http://www.quality

forum.org/WorkArea/linkit.aspx?Link

Identifier=id&ItemID=78711). In 

addition, the MAP had previously 

suggested this measure as one that could 

fill a gap in communication 47 and 

recommended that the measure be used 

for dual eligible patients (that is, 

patients with both Medicare and 

Medicaid coverage), who comprise a 

significant beneficiary population 

served within IPFs.48 Moreover, this 

measure set is NQF-endorsed for the IPF 

setting, in conformity with the statutory 

criteria for measure selection under 

section 1886(s)(4)(D)(i) of the Act. 

If finalized, we propose that this 

measure would replace the existing 

HBIPS–7 Post Discharge Continuing 

Care Plan Transmitted to the Next Level 

of Care Provider Upon Discharge 

measure.49 HBIPS–7 requires that the 

continuing care plan be transmitted to 

the next care provider no later than the 

fifth day post discharge.50 The Timely 

Transmission of Transition Record 

(Discharges from an Inpatient Facility to 

Home/Self Care or Any Other Site of 

Care) measure requires transmission to 

the next level of care within 24 hours 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

25052 Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 

51 van Walraven C, Seth R, Austin PC, Laupacis 

A. (2002). Effect of discharge summary availability 

during postdischarge visits on hospital readmission. 

Journal of General Internal Medicine 17:186–192. 

52 Jack BW, Chetty VK, Anthony D, et al. (2009). 

A reengineered hospital discharge program to 

decrease rehospitalization. Ann Intern Med.150 

(3),178–187. 

53The American Diabetes Association, APA, the 

American Association of Clinical Endocrinologists, 

and the North American Association for the Study 

of Obesity (2004). Consensus development 

conference on antipsychotic drugs and obesity and 

diabetes. Diabetes Care, 27, 596–601. Marder, 

Stephen R., M.D., et al. Physical Health Monitoring 

of Patients with Schizophrenia. Am J Psychiatry. 

2004 Aug;161(8):1334–49. 

54The American Diabetes Association, APA, the 

American Association of Clinical Endocrinologists, 

and the North American Association for the Study 

of Obesity (2004). Consensus development 

conference on antipsychotic drugs and obesity and 

diabetes. Diabetes Care, 27, 596–601. 

55 Ibid. 

56 Ibid. 

57The American Diabetes Association (2006). 

Antipsychotic Medications and the Risk of Diabetes 

and Cardiovascular Disease. Available at: http://

professional.diabetes.org/admin/UserFiles/file/CE/

AntiPsych%20Meds/Professional%20Tool%20%2

31(1).pdf (emphasis added). 

58Roohafsza, H, Khani, A, Afshar, H, 

Garakyaraghi, A, Ghodsi, B. Lipid profile in 

antipsychotic drug users: A comparative study. 

ARYA Atheroscler. May 2013; 9(3): 198–202 

(emphasis added). 

59 De Hert, M., Dekker, J.M. & Wood, D. (2009). 

Cardiovascular disease and diabetes in people with 

severe mental illness. Position statement from the 

European Psychiatric Association (EPA), supported 

by the European Association for the Study of 

Diabetes (EASD) and the European Society of 

Cardiology (ESC). Eur Psychiatry, 24, 412–424; 

Zolnierek, C.D. (2009). Non-psychiatric 

hospitalization of people with mental illnesses: A 

systematic review. Journal of Advanced Nursing, 

65(8), 1570–1583. 

60National Association of State Mental Health 

Program Directors Medical Directors Council 

(2006). Morbidity and mortality in people with 

serious mental illness. Available at: http://www.

nasmhpd.org/docs/publications/MDCdocs/

Mortality%20and%20Morbidity%20Final%20

Report%208.18.08.pdf. 

61The Mount Sinai Conference was conferred to 

‘‘focus on specific questions regarding the 

pharmacotherapy of schizophrenia . . . Participants 

in the conference were selected based on their 

knowledge of and contributions to the literature in 

this area . . . Also in attendance [were] various 

groups concerned with improving 

psychopharmacology in routine practice settings.’’ 

Marder, Stephen R., M.D., et al. Physical Health 

Monitoring of Patients with Schizophrenia. Am J 

Psychiatry. 2004 Aug;161(8):1334–49. 

62Marder, Stephen R., M.D., et al. Physical Health 

Monitoring of Patients with Schizophrenia. Am J 

Psychiatry. 2004 Aug;161(8):1334–49. 

63See e.g., Brooks, Megan. ‘‘Metabolic Screening 

in Antipsychotic Users: Whose Job Is It?’’ Medscape 

Medical News. 8 May 2012. Available at http://

www.medscape.com/viewarticle/763468. Mittal D, 

Li C, Viverito K, Williams JS, Landes RD, Thapa PB, 

Owen R. Monitoring for metabolic side effects 

among outpatients with dementia receiving 

antipsychotics. Psychiatr Serv. 2014 Sep 

1;65(9):1147–53. 

64Nasrallah, H. A, MD (2012). There is no excuse 

for failing to provide metabolic monitoring for 

patients receiving antipsychotics. Current 

Psychiatry, 4 (citing Mitchell AJ, Delaffon V, 

Vancampfort D, et al. Guideline concordant 

monitoring of metabolic risk in people treated with 

antipsychotic medication: systematic review and 

meta-analysis of screening practices. Psychol Med. 

2012;42(1):125–147.) 

of discharge. More timely 

communication of vital information 

regarding the inpatient hospitalization 

results in better care, reduction of 

systemic medical errors, and improved 

patient outcomes. Studies show that the 

risks of re-hospitalization are lower 

when primary care providers have 

access to patients’ post-discharge 

records at the first post-discharge 

visit,51 52 which may be within a day (or 

days) of discharge. Critically, the 

availability of the discharge record to 

the next level provider within 24 hours 

after discharge supports more effective 

care coordination and patient safety, 

since a delay in communication can 

result in medication or treatment errors. 

Thus, we believe that replacing HBIPS– 

7 with the Timely Transmission of 

Transition Record (Discharges from an 

Inpatient Facility to Home/Self Care or 

Any Other Site of Care) measure would 

increase the quality of care provided to 

patients, reduce avoidable readmissions, 

and increase patient safety. 

We invite public comments on our 

proposals to adopt the Timely 

Transmission of Transition Record 

(Discharges from an Inpatient Facility to 

Home/Self Care or Any Other Site of 

Care) measure for the FY 2018 payment 

determination and subsequent years 

and, if adopted, our removal of HBIPS– 

7. 

5. Screening for Metabolic Disorders 

Studies show that both second 

generation antipsychotics (SGAs) and 

antipsychotics increase the risk of 

metabolic syndrome.53 Metabolic 

syndrome involves a cluster of 

conditions that occur together, 

including excess body fat around the 

waist, high blood sugar, high 

cholesterol, and high blood pressure, 

and increases the risk of coronary artery 

disease, stroke, and type 2 diabetes. 

Recognizing this problem, in February 

2004, the American Diabetes 

Association (ADA), the American 

Psychiatric Association (APA), the 

American Association of Clinical 

Endocrinologists, and the North 

American Association for the Study of 

Obesity released a consensus statement 

finding that the use of SGAs ‘‘have been 

associated with reports of dramatic 

weight gain, diabetes (even acute 

metabolic decompensation, for example, 

diabetic ketoacidosis [DKA]), and an 

atherogenic lipid profile (increased LDL 

cholesterol and triglyceride levels and 

decreased HDL cholesterol) . . . [and] 

[s]ubsequent drug surveillance and 

retrospective database analyses suggest 

that there is an association between 

specific SGAs and both diabetes and 

obesity.’’ 54 SGAs also have an effect on 

serum lipids and could result in 

dyslipidemia.55 Given these concerns, 

the group recommended that ‘‘baseline 

screening measures be obtained before, 

or as soon as clinically feasible after, the 

initiation of any antipsychotic 

medication,’’ including body mass 

index (BMI), blood pressure, fasting 

plasma glucose, and fasting lipid 

profile.56 Although the consensus 

statement specifically discussed the 

issues with SGAs, the ADA also 

emphasized that ‘‘all patients receiving 

antipsychotic medications [should] be 

screened’’ 57 and subsequent studies 

have found that ‘‘[i]n schizophrenic 

patients, the level of lipid profile had 

been increased in both atypical and 

conventional antipsychotic users’’ 58

Numerous other organizations have 

also made similar recommendations.59

For example, the National Association 

of State Mental Health Program 

Directors Medical Directors Council 

notes, ‘‘the second generation 

antipsychotic medications have become 

more highly associated with weight 

gain, diabetes, dyslipidemia, insulin 

resistance, and the metabolic 

syndrome.’’ They recommend the same 

screening as the consensus statement 

(BMI, blood pressure, fasting plasma 

glucose, and fasting lipid profile) and 

emphasize that this screening is ‘‘the 

standard of care for the general 

population.’’ 60 Likewise, the Mount 

Sinai Conference,61 convened in 2002, 

recommended that, for every patient 

with schizophrenia, ‘‘regardless of the 

antipsychotic prescribed,’’ mental 

health providers should, among other 

things: (1) Monitor and chart BMI; (2) 

measure plasma glucose levels (fasting 

or HbA1c); and (3) obtain a lipid 

profile.62

Despite these consensus statements 

and guidelines, many of which are over 

a decade old, screening for metabolic 

syndrome remains low and there 

appears to be disagreement regarding 

where the responsibility for this 

screening lies.63 Studies show a 

systematic lack of metabolic risk 

monitoring of patients who have been 

prescribed antipsychotics.64 Screening 

for metabolic syndrome may reduce the 

risk of preventable adverse events and 

improve the physical health status of 

the patient. Therefore, we believe it is 

necessary to include a measure of 

metabolic syndrome screening in the 

IPFQR Program. 

The Screening for Metabolic Disorders 

measure is a chart-abstracted measure 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 25053 

65 Development of Quality Measures for Inpatient 

Psychiatric Facilities. February 2015. U.S. 

Department of Health and Human Services, 

Assistant Secretary for Planning and Evaluation, 

Office of Disability, Aging, and Long-term Care 

Policy. Page xi, at http://aspe.hhs.gov/daltcp/

reports/2015/ipf.cfm. 

66MAP 2014 Recommendations on Measures for 

More than 20 Federal Programs, 179, at http://

www.qualityforum.org/Publications/2014/01/MAP_

Pre-Rulemaking_Report__2014_Recommendations_

on_Measures_for_More_than_20_Federal_

Programs.aspx. 

developed by CMS and defined as a 

percentage of discharges from an IPF for 

which a structured metabolic screening 

for 4 elements was completed in the 

past year. The denominator includes IPF 

patients discharged with one or more 

routinely scheduled antipsychotic 

medications during the measurement 

period. The numerator is the total 

number of patients who received a 

metabolic screening either prior to, or 

during, the index IPF stay. The 

screening must contain four tests: (1) 

BMI; (2) blood pressure; (3) glucose or 

HbA1c; and (4) a lipid panel—which 

includes total cholesterol (TC), 

triglycerides (TG), high density 

lipoprotein (HDL), and low density 

lipoprotein (LDL–C) levels. The 

screening must have been completed at 

least once in the 12 months prior to the 

patient’s date of discharge. Screenings 

can be conducted either at the reporting 

facility or another facility for which 

records are available to the reporting 

facility. The following patients are 

excluded from the measure: (1) Patients 

for whom a screening could not be 

completed within the stay due to the 

patient’s enduring unstable medical or 

psychological condition; and (2) 

patients with a length of stay equal to 

or greater than 365 days, or less than 3 

days. In section F.3. below, we propose 

a sampling methodology for this and 

certain other measures. 

Testing of this measure demonstrated 

that performance on the metabolic 

screening measure was low, on average, 

across the tested IPFs. The measure’s 

average performance rate of 42 percent 

signals a strong opportunity for 

improvement. During testing, the 

metabolic screening measure also 

demonstrated nontrivial variation in 

performance among IPFs (6.2–98.6 

percent). In addition, it demonstrated 

near-perfect agreement between chart 

abstractors (kappa of 0.93 for the 

measure numerator).65

We included the Screening for 

Metabolic Disorders measure (then 

titled ‘‘IPF Metabolic Screening’’) in our 

‘‘Measures Under Consideration List’’ in 

December 2013. The MAP did not 

recommend this measure, noting, ‘‘a 

different NQF-endorsed measure better 

addresses the needs of the program.’’ 66

However, the different NQF-endorsed 

measure was not identified by the MAP, 

and we are unaware of any screening 

measures for metabolic syndrome that 

are NQF-endorsed. We note that, when 

presented to the MAP, the denominator 

for this measure was the ‘‘total number 

of psychiatric inpatients admitted 

during the measurement period.’’ Based 

on testing and further feedback on the 

measure, we revised the measure by 

reducing its application to only those 

patients on antipsychotic medication; 

the denominator for the measure is now 

‘‘IPF patients discharged with one or 

more routinely scheduled antipsychotic 

medications during the measurement 

period.’’ We believe that this change 

was appropriate because, as discussed 

above, the patients most at risk for 

metabolic syndrome are those receiving 

antipsychotics and the APA and other 

consensus organizations recommend 

this screening for patients on 

antipsychotics. Furthermore, by limiting 

the application of the measure only to 

those receiving antipsychotics, we 

believe that we have reduced provider 

burden, both in terms of possible 

changes in practice that might result 

from the measure, as well as the direct 

burden resulting from its collection and 

reporting. 

We believe that this measure 

promotes the National Quality Strategy 

priority of Making Care Safer, which 

seeks to reduce risk that is caused by the 

delivery of healthcare. As discussed 

above, antipsychotics have been shown 

to be related to metabolic syndrome. 

The Screening for Metabolic Disorders 

measure is aimed at the prevention and 

treatment of serious side effects of these 

drugs. 

Section 1886(s)(4)(D)(ii) of the Act 

authorizes the Secretary to specify a 

measure that is not endorsed by NQF as 

long as due consideration is given to 

measures that have been endorsed or 

adopted by a consensus organization 

identified by the Secretary. We have 

been unable to identify any measures 

addressing screening for metabolic 

syndrome for the IPF setting that have 

been endorsed by the NQF or adopted 

by any other consensus organization. 

We believe the proposed measure for 

the Screening for Metabolic Disorders 

meets the measure selection exception 

requirement under section 

1886(s)(4)(D)(ii) of the Act. 

We invite public comments on our 

proposal to adopt this measure for the 

FY 2018 payment determination and 

subsequent years. 

6. Summary of Measures Proposed for 

Adoption and Removal for FY 2018 and 

Subsequent Years 

The measures that we are proposing 

to add to the IPFQR Program for the FY 

2018 payment determination and 

subsequent years are set forth in Table 

20, below. 

TABLE 20—IPFQR PROGRAM MEASURES PROPOSED FOR THE FY 2018 PAYMENT DETERMINATION AND SUBSEQUENT

YEARS

National Quality Strategy priority NQF No. Measure ID Measure 

Effective Prevention and Treatment ................ 1656 TOB–3 and 

TOB–3a.

Tobacco Use Treatment Provided or Offered at Discharge 

and the subset measure Tobacco Use Treatment at Discharge. 

Effective Prevention and Treatment ................ 1663 SUB–2 and 

SUB–2a.

Alcohol Use Brief Intervention Provided or Offered and SUB– 

2a Alcohol Use Brief Intervention. 

Communication and Care Coordination; Person and Family Engagement.0647 N/A ................. Transition Record with Specified Elements Received by Discharged 

Patients (Discharges from an Inpatient Facility to Home/Self 

Care or 

Any Other Site of Care). 

Communication and Care Coordination ........... 0648 N/A ................. Timely Transmission of Transition Record (Discharges from 

an 

Inpatient Facility to Home/Self Care or Any Other Site of 

Care). 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

25054 Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 

TABLE 20—IPFQR PROGRAM MEASURES PROPOSED FOR THE FY 2018 PAYMENT DETERMINATION AND SUBSEQUENT

YEARS—Continued 

National Quality Strategy priority NQF No. Measure ID Measure 

Making Care Safer ........................................... N/A N/A ................. Screening for Metabolic Disorders. 

The measures that we are proposing 

to remove beginning with the FY 2018 

payment determination are set forth in 

Table 21, below. 

TABLE 21—IPFQR PROGRAM MEASURES PROPOSED TO BE REMOVED FOR THE FY 2018 PAYMENT DETERMINATION AND

SUBSEQUENT YEARS

NQF No. Measure ID Measure 

0557 .................. HBIPS–6 ........................ Post-Discharge Continuing Care Plan 

(Removal of measure contingent upon adoption of proposed measure, Transition Record with 

Specified Elements Received by Discharged Patients (Discharges from an Inpatient Facility to 

Home/Self Care or 

Any Other Site of Care)). 

0558 .................. HBIPS–7 ........................ Post Discharge Continuing Care Plan Transmitted to the Next Level of Care Provider Upon Discharge (Removal of measure contingent upon adoption of proposed measure, Timely Transmission of Transition Record (Discharges from an Inpatient Facility to Home/Self Care or Any 

Other Site of Care)). 

If these proposals are adopted, the 

number of measures for the FY 2018 

IPFQR Program would total 16, as set 

forth in Table 22, below. 

TABLE 22—PREVIOUSLY ADOPTED AND PROPOSED MEASURES FOR FY 2018 AND SUBSEQUENT YEARS

NQF No. Measure ID Measure 

0640 .................. HBIPS–2 ........................ Hours of Physical Restraint Use. 

0641 .................. HBIPS–3 ........................ Hours of Seclusion Use. 

0560 .................. HBIPS–5 ........................ Patients Discharged on Multiple Antipsychotic Medications with Appropriate Justification. 

0576 .................. FUH ............................... Follow-up After Hospitalization for Mental Illness. 

1661 .................. SUB–1 ........................... Alcohol Use Screening. 

1663 .................. SUB–2 and SUB–2a ..... Alcohol Use Brief Intervention Provided or Offered and SUB–2a Alcohol Use Brief Intervention.* 

1651 .................. TOB–1 ........................... Tobacco Use Screening. 

1654 .................. TOB–2 ........................... Tobacco Use Treatment Provided or Offered and 

TOB–2a ......................... Tobacco Use Treatment. 

1656 .................. TOB–3 and TOB–3a ..... Tobacco Use Treatment Provided or Offered at Discharge and the subset measure Tobacco Use 

Treatment at Discharge.* 

1659 .................. IMM–2 ........................... Influenza Immunization. 

0647 .................. N/A ................................ Transition Record with Specified Elements Received by Discharged Patients (Discharges from an 

Inpatient Facility to Home/Self Care or Any Other Site of Care).* 

0648 .................. N/A ................................ Timely Transmission of Transition Record (Discharges from an Inpatient Facility to Home/Self 

Care or Any Other Site of Care).* 

N/A .................... N/A ................................ Screening for Metabolic Disorders.* 

N/A .................... N/A ................................ Influenza Vaccination Coverage Among Healthcare Personnel. 

N/A .................... N/A ................................ Assessment of Patient Experience of Care. 

N/A .................... N/A ................................ Use of an Electronic Health Record. 

* Measures proposed for the FY 2018 payment determination and future years. 

E. Possible IPFQR Program Measures 

and Topics for Future Consideration 

As we have previously indicated (79 

FR 45974 through 45975), we seek to 

develop a comprehensive set of quality 

measures to be available for widespread 

use for informed decision-making and 

quality improvement in the IPF setting. 

Therefore, through future rulemaking, 

we intend to propose new measures that 

will help further our goals of achieving 

better health care and improved health 

for Medicare beneficiaries who obtain 

inpatient psychiatric services through 

the widespread dissemination and use 

of quality information. 

We are developing a 30-day 

psychiatric readmission measure that is 

similar to the readmission measures 

currently in use for other CMS quality 

reporting programs, such as the Hospital 

Inpatient Quality Reporting Program. 

We anticipate that we will recommend 

additional measures for development or 

adoption in the future. We intend to 

develop a measure set that effectively 

assesses IPF quality across the range of 

services and diagnoses, encompasses all 

of the goals of the CMS quality strategy, 

addresses measure gaps identified by 

the MAP and others, and minimizes 

collection and reporting burden. We 

may also propose the removal of some 

measures in the future. 

We invite public comment on 

measures that we should consider. 

F. Changes to Reporting Requirements 

We are proposing to make the 

following changes to our reporting 

requirements for FY 2017 and 

subsequent years: 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 25055 

• Requiring that measures be reported 

as a single yearly count rather than by 

quarter and age; and 

• Requiring that aggregate population 

counts be reported as a single yearly 

number rather than by quarter. 

For FY 2018 and subsequent years we 

are also proposing to make one change, 

allowing uniform sampling 

requirements for certain measures. 

1. Proposed Changes to Reporting by 

Age and Quarter for FY 2017 Payment 

Determination and Subsequent Years 

In the FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53655 through 53656), we 

finalized our policy that IPFs must 

submit data for chart-abstracted 

measures to the Web-Based Measures 

Tool on an annual basis aggregated by 

quarter. We also finalized our policy 

that IPFs must submit data as required 

by The Joint Commission, which calls 

for IPFs to submit data for measures by 

age group. Since then, we have learned 

that obtaining data for each quarter and 

by age is burdensome to providers and 

the resultant number of cases is often 

too small to allow public reporting. That 

is, we do not report data on Hospital 

Compare for measures with fewer than 

11 cases; reporting by age and quarter 

often causes the number of cases to fall 

below 11. For example, for HBIPS–5, in 

Quarter 2 of 2013, only 5.75 percent of 

the data were reportable. Likewise, in 

Quarter 3 and Quarter 4 of 2013, for 

HBIPS–5, only 5.5 percent of the data 

were reportable. 

Therefore, beginning with FY 2017, 

we propose to require facilities to report 

data for chart-abstracted measures to the 

Web-Based Measures Tool on an 

aggregate basis by year, rather than by 

quarter, and to discontinue the 

requirement for reporting by age group. 

If adopted, we would require IPFs to 

report a single aggregate measure rate 

for each measure annually for each 

payment determination. 

We believe that this change would 

reduce provider burden because IPFs 

would report a single rate for each 

measure. In addition, we do not believe 

that quarterly data or data stratified by 

age are necessary for quality 

improvement activities. We are able to 

differentiate, and the public is able to 

view on Hospital Compare, those IPFs 

that perform well on measures from 

those for which quality improvement 

activities may be necessary based on an 

annual aggregate rate submission. We 

note, however, that in the future, if our 

evolving measures set, quality 

improvement goals, and experience 

with the program indicate a change is 

needed, we may reevaluate and reinstate 

the requirement for quarterly reporting. 

In Table 23, below, we set forth the 

proposed quality reporting and 

submission timelines for the FY 2017 

payment determination and subsequent 

years for all the measures except FUH 

and the Influenza Vaccination Coverage 

among Healthcare Personnel measures. 

We note that FUH is claims-based, and 

therefore does not require additional 

data submission. The Influenza 

Vaccination Coverage among Healthcare 

Personnel measure is reported to the 

Centers for Disease Control and 

Prevention, and we refer readers to the 

FY 2015 IPF PPS final rule for more 

information on the reporting timeline 

for this measure (79 FR 45969). 

TABLE 23—PROPOSED QUALITY REPORTING PERIODS AND TIMEFRAMES FOR THE FY 2017 PAYMENT DETERMINATION

AND SUBSEQUENT YEARS

Payment determination (FY) Reporting period for services provided Data submission timeframe 

2017 ..................................... January 1, 2015–December 31, 2015 ............................ July 1, 2016–August 15, 2016. 

We invite public comment on this 

proposal. 

2. Proposed Changes To Aggregate 

Population Count Reporting for FY 2017 

Payment Determination and Subsequent 

Years 

In the FY 2015 IPF PPS final rule (79 

FR 45973), we finalized our policy that 

IPFs must submit aggregate population 

counts for Medicare and non-Medicare 

discharges by age group, diagnostic 

group, and quarter, and sample size 

counts for measures for which sampling 

is performed. In section V.F.1. of this 

proposed rule, we are proposing to only 

require measure reporting as an annual 

aggregate rate, rather than by quarter. 

Likewise, beginning with the FY 2017 

payment determination, we propose to 

require non-measure data to be reported 

as an aggregate, yearly count rather. We 

invite public comment on this proposal. 

3. Proposed Changes to Sampling 

Requirements for FY 2018 Payment 

Determination and Subsequent Years 

Measure specifications for the 

measures that we have adopted and 

propose to adopt allow sampling for 

some measures; however, for other 

measures, IPFs must report data for all 

discharges/patients. In addition, the 

sampling requirements sometimes vary 

by measure. In response to these 

policies, in the FY 2014 IPPS/LTCH PPS 

final rule, some commenters noted that 

different sampling requirements in the 

measures could increase burden on 

facilities because these differences 

would require IPFs to have varying 

policies and procedures in place for 

each measure (78 FR 50901). Although 

we stated our belief that the importance 

of these measures and of gathering 

information for all discharges/patients 

outweighs the burden of various 

sampling requirements, we now believe 

that the additional measures proposed 

in this proposed rule tip the balance of 

benefit and burden. Therefore, and for 

the reasons provided below, we are 

proposing to allow a uniform sampling 

methodology both for measures that 

require sampling and for certain other 

measures. Specifically, we propose to 

allow The Joint Commission/CMS 

Global Initial Patient Population 

sampling in Section 2.9_Global Initial 

Patient Population found at https://

www.qualitynet.org/dcs/ContentServer

?c=Page&pagename=QnetPublic%2F

Page%2FQnetTier4&cid=12287

73989482. If this proposal is finalized, 

it will allow IPFs to take one, global 

sample for all measures specified in 

Table 24, thereby decreasing burden on 

these facilities and streamlining policies 

and procedures. 

In our current and proposed measure 

set, the measures for which we propose 

to allow The Joint Commission/CMS 

Global sampling would include those 

outlined in Table 24, below. 

TABLE 24—MEASURES TO WHICH PROPOSED SAMPLING APPLIES * 

NQF No. Measure ID Measure 

0560 .................. HBIPS–5 ........................ Patients Discharged on Multiple Antipsychotic Medications with Appropriate Justification. 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

25056 Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 

TABLE 24—MEASURES TO WHICH PROPOSED SAMPLING APPLIES *—Continued 

NQF No. Measure ID Measure 

1661 .................. SUB–1 ........................... Alcohol Use Screening. 

1663 .................. SUB–2 and SUB–2a ..... Alcohol Use Brief Intervention Provided or Offered and SUB–2a Alcohol Use Brief Intervention.** 

1651 .................. TOB–1 ........................... Tobacco Use Screening. 

1654 .................. TOB–2 ...........................

TOB–2a .........................

Tobacco Use Treatment Provided or Offered and Tobacco Use Treatment. 

1656 .................. TOB–3 and TOB–3a ..... Tobacco Use Treatment Provided or Offered at Discharge and the subset measure Tobacco Use 

Treatment at Discharge.** 

1659 .................. IMM–2 ........................... Influenza Immunization. 

0647 .................. N/A ................................ Transition Record with Specified Elements Received by Discharged Patients (Discharges from an 

Inpatient Facility to Home/Self Care or Any Other Site of Care).** 

0648 .................. N/A ................................ Timely Transmission of Transition Record (Discharges from an Inpatient Facility to Home/Self 

Care or Any Other Site of Care).** 

N/A .................... N/A ................................ Screening for Metabolic Disorders.** 

* Measures proposed for removal have not been included in this table. If these measures (HBIPS–4, HBIPS–6, and HBIPS–7) are not removed, the sampling methodology would also apply to their collection and submission. 

** Measures proposed for the FY 2018 payment determination and future years. 

In section F.1. of this proposed rule, 

we are proposing to require reporting on 

measures as a yearly count rather than 

by quarter. Because The Joint 

Commission/CMS Global sampling 

guidelines specify sampling by quarter, 

we propose to modify their sampling 

guidelines by multiplying the ‘‘number 

of cases in the initial patient 

population’’ and the ‘‘number of cases 

to be sampled’’ by 4. In addition, since 

we require all IPFs to report data on all 

chart-abstracted measures even when 

the population size for a given measure 

is small or zero (78 FR 50901), we have 

modified the table to require reporting 

regardless of the number of cases. Thus, 

we propose the following sampling 

guidelines for the measures above: 

Number of 

cases in initial 

patient 

population 

Number of records to be 

sampled 

≥ 6,117 ............ 1,224. 

3,057–6,116 .... 20% of initial patient population. 

609–3,056 ....... 609. 

0–608 .............. All cases. 

As stated above, we believe this 

proposal will simplify processes and 

procedures for IPFs because uniform 

requirements will promote streamlined 

procedures and reporting. We also 

believe the proposal will decrease 

burden by allowing IPFs to identify a 

single, initial patient population for all 

of the measures specified in Table 24 

from which to calculate the sample size. 

Furthermore, we do not believe this 

approach will reduce quality 

improvement. Sampling calculations 

ensure that enough data are represented 

in the sample to determine accurate 

measure rates. Therefore, even with 

sampling, we believe that CMS, IPFs, 

and the public would be able to 

differentiate those IPFs who perform 

well on measures from those who do 

not. 

We invite public comment on this 

proposal, which would begin with the 

FY 2018 payment determination. 

G. Public Display and Review 

Requirements 

We are not proposing any changes to 

the public display and review 

requirements for the FY 2018 payment 

determination and subsequent years and 

refer readers to the FY 2014 IPPS/LTCH 

PPS final rule (78 FR 50897 through 

50898) for more information. 

H. Form, Manner, and Timing of Quality 

Data Submission 

1. Procedural and Submission 

Requirements 

We are not proposing any changes to 

the procedural and submission 

requirements for the FY 2018 payment 

determination and subsequent years and 

refer readers to the FY 2014 IPPS/LTCH 

PPS final rule (77 FR 50898 through 

50899) for more information on these 

previously finalized requirements. 

2. Proposed Change to the Reporting 

Periods and Submission Timeframes 

In the FY 2014 IPPS/LTCH PPS final 

rule (78 FR 50901), we finalized 

requirements for reporting periods and 

submission timeframes for the IPFQR 

Program measures. We are proposing 

one change to these requirements, as 

discussed above in section V.F.1. of this 

proposed rule. Specifically, we are 

proposing to no longer require that 

measure rates be reported quarterly and 

by age, but to only require an aggregate, 

yearly count. 

3. Population and Sampling 

In the FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53657 through 53658) and 

FY 2014 IPPS/LTCH PPS final rule (78 

FR 58901 through 58902), we finalized 

policies for population, sampling, and 

minimum case thresholds. We are 

proposing one change to these policies, 

as discussed above in section V.F.3. of 

this proposed rule. Specifically, we are 

proposing to allow uniform sampling on 

certain measures. 

4. Data Accuracy and Completeness 

Acknowledgement (DACA) 

Requirements 

We are not proposing any changes to 

the DACA requirements and refer 

readers to the FY 2013 IPPS/LTCH PPS 

final rule (77 FR 53658) for more 

information on these requirements. 

I. Reconsideration and Appeals 

Procedures 

In the FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53658 through 53660), we 

adopted a reconsideration process, later 

codified at § 412.434, whereby IPFs can 

request a reconsideration of their 

payment update reduction in the event 

that an IPF believes that its annual 

payment update has been incorrectly 

reduced for failure to meet all IPFQR 

Program requirements. We are not 

proposing any changes to the 

Reconsideration and Appeals Procedure 

and refer readers to the FY 2013 IPPS/ 

LTCH PPS final rule (77 FR 53658 

through 53660) and the FY 2014 IPPS/ 

LTCH PPS final rule (78 FR 50953) for 

further details on the reconsideration 

process. 

J. Exceptions to Quality Reporting 

Requirements 

We are not proposing any changes to 

the exceptions to quality reporting 

requirements and refer readers to the FY 

2013 IPPS/LTCH PPS final rule (77 FR 

53659 through 53660), where we 

initially finalized the policy as ‘‘Waivers 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 25057 

67http://www.bls.gov/ooh/healthcare/medicalrecords-and-health-information-technicians.html. 68http://www.whitehouse.gov/omb/ 

circulars_a076_a76_incl_tech_correction. 

69http://www.bls.gov/bls/infohome.htm. 

from Quality Reporting,’’ and the FY 

2015 IPF PPS final rule (79 FR 45978), 

where we re-named the policy as 

‘‘Exceptions to Quality Reporting 

Requirements’’ for more information. 

VI. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995 (PRA), we are required to 

publish a 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. 

To fairly evaluate whether an 

information collection should be 

approved by OMB, PRA section 

3506(c)(2)(A) 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 burden 

estimates. 

• The quality, utility, and clarity of 

the information to be collected. 

• Our effort to minimize the 

information collection burden on the 

affected public, including the use of 

automated collection techniques. 

We are soliciting public comment on 

each of the section 3506(c)(2)(A)- 

required issues for the following 

information collection requirements 

(ICRs). 

A. Wage Estimates 

We estimate that reporting data for the 

IPFQR Program measures can be 

accomplished by staff with a mean 

hourly wage of $16.42 per hour.67

Under OMB Circular A–76, in 

calculating direct labor, agencies should 

not only include salaries and wages, but 

also ‘‘other entitlements’’ such as fringe 

benefits.68 This Circular provides that 

the civilian position full fringe benefit 

cost factor is 36.25 percent. Therefore, 

using these assumptions, we estimate an 

hourly labor cost of $22.37 ($16.42 base 

salary + $5.95 fringe). The following 

table presents the mean hourly wage, 

the cost of fringe benefits (calculated at 

36.25 percent of salary), and the 

adjusted hourly wage. 

Occupation title Occupation 

code 

Mean hourly 

wage 

($/hr) 

Fringe benefit 

(at 36.25% in 

$/hr) 

Adjusted hourly wage 

($/hr) 

Medical Records and Health Information Technician ...................................... 29–2071 16.42 5.95 $22.37 

The BLS is ‘‘the principal Federal 

agency responsible for measuring labor 

market activity, working conditions, and 

price changes in the economy.’’ 69

Acting as an independent agency, the 

Bureau provides objective information 

for not only the government, but also for 

the public. The Bureau’s National 

Occupational Employment and Wage 

Estimates describes Medical Records 

and Health Information Technicians as 

those responsible for organizing and 

managing health information data. 

Therefore, we believe it is reasonable to 

assume that these individuals would be 

tasked with abstracting clinical data for 

these measures. In addition, the 

Hospital IQR Program uses this wage to 

calculate its burden estimates. 

B. ICRs Regarding the Inpatient 

Psychiatric Facility Quality Reporting 

(IPFQR) Program 

We refer readers to the FY 2015 IPF 

PPS final rule (79 FR 45978 through 

45980) for a detailed discussion of the 

burden for the program requirements 

that we have previously adopted. 

Below, we discuss only the changes in 

burden resulting from the provisions in 

this proposed rule. Although we 

propose provisions that impact both the 

FY 2017 and FY 2018 payment 

determinations, all of our proposals 

begin to apply to facilities in FY 2016. 

For example, data collection for the 

proposed measures begins in FY 2016, 

and the changes to the reporting 

requirements take effect beginning with 

reporting that is required in the summer 

of FY 2016. For purposes of calculating 

burden, we will attribute the costs 

associated with the proposals to the year 

in which these costs begin; for the 

purposes of all of the provisions in this 

proposed rule, that year is FY 2016. 

1. Changes in Time Required To ChartAbstract Data Based on Proposed 

Reporting Requirements 

As discussed in section V.F. of this 

preamble, we are proposing the 

following 3 changes regarding how 

facilities should report data for IPFQR 

Program measures: (1) Measures must be 

reported as a single yearly count rather 

than by quarter and age; (2) aggregate 

population counts must be reported as 

a single yearly number rather than by 

quarter; and (3) uniform sampling 

would be allowed for certain measures. 

We believe that these changes will 

lead to a decrease in burden since 

facilities would only be required to 

enter one aggregate number for both the 

numerator and denominator for each 

measure and will be allowed to pull one 

sample used to calculate the measures 

specified in Table 24 of this preamble. 

Consequently, we believe that the time 

required to chart-abstract data for these 

measures would be reduced by 20 

percent. Previously, we estimated 15 

minutes to chart-abstract data for each 

case (79 FR 45979). Because of our 

proposed changes to sampling and 

reporting data, we are revising the figure 

and now estimate 12 minutes (0.20 × 15 

minutes), a change of ¥3 min or ¥0.05 

hr. 

2. Estimated Burden of IPFQR Program 

Proposals 

In section V. of this preamble, we are 

proposing to adopt the following five 

measures: 

• TOB–3—Tobacco Use Treatment 

Provided or Offered at Discharge and 

the subset measure TOB–3a Tobacco 

Use Treatment at Discharge (National 

Quality Forum (NQF) #1656); 

• SUB–2—Alcohol Use Brief 

Intervention Provided or Offered and 

the subset measure SUB–2a (NQF 

#1663); 

• Transition Record with Specified 

Elements Received by Discharged 

Patients (Discharges from an Inpatient 

Facility to Home/Self Care or Any Other 

Site of Care) (NQF #0647); 

• Timely Transmission of Transition 

Record (Discharges from an Inpatient 

Facility to Home/Self Care or Any Other 

Site of Care) (NQF #0648); and 

• Screening for Metabolic Disorders. 

In the same section, we are also 

proposing to remove the following 3 

measures: 

• HBIPS–4 Patients Discharged on 

Multiple Antipsychotic Medications; 

• Hospital Based Inpatient 

Psychiatric Services (HBIPS)-6 PostDischarge Continuing Care Plan (NQF 

#0557), if Transition Record with 

Specified Elements Received by 

Discharged Patients (Discharges from an 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

25058 Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 

70 In the FY 2015 IPF PPS final rule we estimated 

1,626 IPFs and are adjusting that estimate by ¥9 

to account for more recent data. 

71 In the FY 2015 IPF PPS final rule we estimated 

556 cases per year and are adjusting that estimate 

by ¥125 to account for more recent data. 

Inpatient Facility to Home/Self Care or 

Any Other Site of Care) is adopted; and 

• HBIPS–7 Post-Discharge Continuing 

Care Plan Transmitted to the Next Level 

of Care Provider Upon Discharge (NQF 

#0558), if Timely Transmission of 

Transition Record (Discharges from an 

Inpatient Facility to Home/Self Care or 

Any Other Site of Care) (NQF #0648) is 

adopted. 

We believe that approximately 

1,617 70 IPFs will participate in the 

IPFQR Program for requirements 

occurring in FY 2016 and subsequent 

years. Based on data from CY 2013, we 

believe that each facility will submit 

measure data on approximately 431 71

cases per year. Therefore, we estimate 

that adopting five measures and 

removing 3 measures (for a net result of 

2 measures) will result in an increase in 

burden of 172.4 hours per facility (2 

measures × (431 cases/measure × 0.20 

hours/case)) or 278,770.80 hours across 

all IPFs (172.4 hours/facility × 1,617 

facilities). The increase in costs is 

approximately $3,856.59 per IPF 

($22.37/hour × 172.4 hours) or 

$6,236,102.80 across all IPFs 

(278,770.80 hours × $22.37/hour). 

Consistent with our estimates in the 

FY 2015 IPF PPS final rule (79 FR 

45979), we believe the estimated burden 

for training personnel on our proposals 

for data collection and submission is 2 

hours per facility or 3,234 hours (2 

hours/facility × 1,617 facilities) across 

all IPFs. Therefore, the cost for this 

training is $44.74 ($22.37/hour × 2 

hours) for each IPF or $72,344.58 

($22.37/hour × 3,234 hours) for all 

facilities. 

Finally, IPFs must submit to CMS 

aggregate population counts for 

Medicare and non-Medicare discharges 

by age group, and diagnostic group, and 

sample size counts for measures for 

which sampling is performed. As noted 

above, we are proposing five new 

measures beginning with the FY 2018 

payment determination. However, 

because, as further described above, we 

are eliminating reporting this nonmeasure data by quarter for all 

measures, we believe that the addition 

of five measures leads to a net negligible 

change in burden associated with nonmeasure data collection. 

C. Summary of Annual Burden 

Estimates for Proposed Requirements 

TABLE 25—PROPOSED ANNUAL RECORDKEEPING AND REPORTING REQUIREMENTS UNDER OMB CONTROL NUMBER

0938–1171 (CMS–10432) 

Preamble 

section(s) Proposed action Respondents 

Responses 

(per respondent) 

Burden per 

response 

(hours)* 

Total annual 

burden 

(hours) 

Labor 

cost of 

reporting 

($/hr) 

Total cost 

($) 

V.C. .............. Remove HBIPS–4 ......... 1,617 862 (431 cases/yr × 2 

measures).

0.20 278,770.80 22.37 6,236,102.80 

V. .................. Remove HBIPS–6 and 

HBIPS–7.

V. .................. Add NQF # 1656, # 

1663, # 0647, # 0648, 

and Screening for 

Metabolic Disorders.

Training .......................... .................... 1 ..................................... 2 3,234 .................... 72,344.58 

Total ...... ........................................ 1,617 863 ................................. 2.2 282,004.8 22.37 6,308,447.38 

D. ICRs Regarding the Hospital and 

Health Care Complex Cost Report 

(CMS–2552–10) 

This rule would not impose any new 

or revised collection of information 

requirements associated with CMS– 

2552–10 (as discussed under preamble 

section III.A.3.a.i.). Consequently, the 

cost report does not require additional 

OMB review under the authority of the 

Paperwork Reduction Act of 1995 (44 

U.S.C. 3501 et seq.). The report’s 

information collection requirements and 

burden estimates are approved by OMB 

under control number 0938–0052. 

E. Submission of PRA-Related 

Comments 

We submitted a copy of this proposed 

rule to OMB for its review of the rule’s 

information collection and 

recordkeeping requirements. The 

requirements are not effective until they 

have been approved by the OMB. 

To obtain copies of the supporting 

statement and any related forms for the 

proposed collections discussed above, 

please visit CMS’ Web site at 

www.cms.hhs.gov/ 

Paperwork@cms.hhs.gov, or call the 

Reports Clearance Office at 410–786– 

1326. 

We invite public comment on these 

potential information collection 

requirements. If you wish to comment, 

please submit your comments 

electronically as specified under the 

ADDRESSES caption of this proposed rule 

and identify the rule (CMS–1627–P). 

PRA-related comments must be 

received on/by June 23, 2015. 

VII. Regulatory Impact Analysis 

A. Statement of Need 

This proposed rule would update the 

prospective payment rates for Medicare 

inpatient hospital services provided by 

IPFs for discharges occurring during the 

FY beginning October 1, 2015, through 

September 30, 2016. We are applying 

the proposed FY 2012-based IPFspecific market basket increase of 2.7 

percent, less the productivity 

adjustment of 0.6 percentage point as 

required by 1886(s)(2)(A)(i) of the Act, 

and further reduced by 0.2 percentage 

point as required by sections 

1886(s)(2)(A)(ii) and 1886(s)(3)(D) of the 

Act. In this proposed rule, we propose 

to adopt an IPF-specific market basket 

and to update the IPF labor-related 

share; to adopt new OMB CBSA 

delineations for the FY 2016 IPF Wage 

Index; and to phase out the rural 

adjustment for 37 rural providers which 

would become urban providers as a 

result of the new CBSA delineations. 

Additionally, this rule reminds 

providers of the October 1, 2015 

implementation of the International 

Classification of Diseases, 10th 

Revision, Clinical Modification (ICD– 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 25059 

10–CM/PCS) for the IPF prospective 

payment system, updates providers on 

the status of IPF PPS refinements, and 

proposes new quality reporting 

requirements for the IPFQR Program. 

B. Overall Impact 

We have examined the impact of this 

proposed rule as required by Executive 

Order 12866 on Regulatory Planning 

and Review (September 30, 1993), 

Executive Order 13563 on Improving 

Regulation and Regulatory Review 

(January 18, 2011), the Regulatory 

Flexibility Act (RFA) (September 19, 

1980, Pub. L. 96–354), section 1102(b) of 

the Social Security Act, section 202 of 

the Unfunded Mandates Reform Act of 

1995 (March 22, 1995; Pub. L. 104–4), 

Executive Order 13132 on Federalism 

(August 4, 1999) and the Congressional 

Review Act (5 U.S.C. 804(2)). 

Executive Orders 12866 and 13563 

direct 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 a major rules 

with economically significant effects 

($100 million or more in any 1 year). 

This proposed rule is not designated as 

economically ‘‘significant’’ under 

section 3(f)(1) of Executive Order 12866. 

We estimate that the total impact of 

these changes for FY 2016 payments 

compared to FY 2015 payments will be 

a net increase of approximately $80 

million. This reflects a $95 million 

increase from the update to the payment 

rates, as well as a $15 million decrease 

as a result of the update to the outlier 

threshold amount. Outlier payments are 

estimated to decrease from 2.3 percent 

in FY 2015 to 2.0 percent of total IPF 

payments in FY 2016. 

The RFA requires agencies to analyze 

options for regulatory relief of small 

entities if a rule has a significant impact 

on a substantial number of small 

entities. For purposes of the RFA, small 

entities include small businesses, 

nonprofit organizations, and small 

governmental jurisdictions. Most IPFs 

and most other providers and suppliers 

are small entities, either by nonprofit 

status or having revenues of $7.5 

million to $38.5 million or less in any 

1 year, depending on industry 

classification (for details, refer to the 

SBA Small Business Size Standards 

found at http://www.sba.gov/sites/ 

default/files/files/ 

Size_Standards_Table.pdf), or being 

nonprofit organizations that are not 

dominant in their markets. 

Because we lack data on individual 

hospital receipts, we cannot determine 

the number of small proprietary IPFs or 

the proportion of IPFs’ revenue derived 

from Medicare payments. Therefore, we 

assume that all IPFs are considered 

small entities. The Department of Health 

and Human Services generally uses a 

revenue impact of 3 to 5 percent as a 

significance threshold under the RFA. 

As shown in Table 26, we estimate 

that the overall revenue impact of this 

proposed rule on all IPFs is to increase 

Medicare payments by approximately 

1.6 percent. As a result, since the 

estimated impact of this proposed rule 

is a net increase in revenue across 

almost all categories of IPFs, the 

Secretary has determined that this 

proposed rule would have a positive 

revenue impact on a substantial number 

of small entities. MACs are not 

considered to be small entities. 

Individuals and States are not included 

in the definition of a small entity. 

In addition, section 1102(b) of the 

Social Security Act requires us to 

prepare a regulatory impact analysis if 

a rule 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 603 of the RFA. For purposes of 

section 1102(b) of the Act, we define a 

small rural hospital as a hospital that is 

located outside of a metropolitan 

statistical area and has fewer than 100 

beds. As discussed in detail below, the 

rates and policies set forth in this 

proposed rule would not have an 

adverse impact on the rural hospitals 

based on the data of the 275 rural units 

and 68 rural hospitals in our database of 

1,617 IPFs for which data were 

available. Therefore, the Secretary has 

determined that this proposed rule 

would not have a significant impact on 

the operations of a substantial number 

of small rural hospitals. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

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. In 2015, that 

threshold is approximately $144 

million. This proposed rule will not 

impose spending costs on state, local, or 

tribal governments in the aggregate, or 

by the private sector, of $144 million or 

more. 

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 proposed rule 

would not have a substantial effect on 

state and local governments. 

C. Anticipated Effects 

We discuss the historical background 

of the IPF PPS and the impact of this 

proposed rule on the Federal Medicare 

budget and on IPFs. 

1. Budgetary Impact 

As discussed in the November 2004 

and May 2006 IPF PPS final rules, we 

applied a budget neutrality factor to the 

Federal per diem base rate and ECT rate 

to ensure that total estimated payments 

under the IPF PPS in the 

implementation period would equal the 

amount that would have been paid if the 

IPF PPS had not been implemented. The 

budget neutrality factor includes the 

following components: outlier 

adjustment, stop-loss adjustment, and 

the behavioral offset. As discussed in 

the May 2008 IPF PPS notice (73 FR 

25711), the stop-loss adjustment is no 

longer applicable under the IPF PPS. 

As discussed in section III.D.1.e. of 

this proposed rule, we are using the 

wage index and labor-related share in a 

budget neutral manner by applying a 

wage index budget neutrality factor to 

the Federal per diem base rate and ECT 

rate. Therefore, the budgetary impact to 

the Medicare program of this proposed 

rule will be due to the estimated market 

basket update for FY 2016 of 2.7 percent 

(see section III.A.4. of this proposed 

rule) less the productivity adjustment of 

0.6 percentage point required by section 

1886 (s)(2)(A)(i) of the Act; further 

reduced by the ‘‘other adjustment’’ of 

0.2 percentage point under sections 

1886(s)(2)(A)(ii) and 1886 (s)(3)(D) of 

the Act; and the update to the outlier 

fixed dollar loss threshold amount. 

We estimate that the FY 2016 impact 

will be a net increase of $80 million in 

payments to IPF providers. This reflects 

an estimated $95 million increase from 

the update to the payment rates and a 

$15 million decrease due to the update 

to the outlier threshold amount to set 

total estimated outlier payments at 2.0 

percent of total estimated payments in 

FY 2016. This estimate does not include 

the implementation of the required 2 

percentage point reduction of the 

market basket increase factor for any IPF 

that fails to meet the IPF quality 

reporting requirements (as discussed in 

section VII.C.4. below). 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

25060 Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 

2. Impact on Providers 

To understand the impact of the 

changes to the IPF PPS on providers, 

discussed in this proposed rule, it is 

necessary to compare estimated 

payments under the IPF PPS rates and 

factors for FY 2016 versus those under 

FY 2015. We determined the percent 

change of estimated FY 2016 IPF PPS 

payments to FY 2015 IPF PPS payments 

for each category of IPFs. In addition, 

for each category of IPFs, we have 

included the estimated percent change 

in payments resulting from the update 

to the outlier fixed dollar loss threshold 

amount; the updated wage index data; 

the changes to wage index CBSAs; the 

changes to rural adjustment payments 

resulting from changes in rural or urban 

status, due to CBSA changes; the 

proposed labor-related share; and the 

estimated market basket update for FY 

2016, as adjusted by the productivity 

adjustment according to section 

1886(s)(2)(A)(i), and the ‘‘other 

adjustment’’ according to sections 

1886(s)(2)(A)(ii) and 1886(s)(3)(D) of the 

Act. 

To illustrate the impacts of the FY 

2016 changes in this proposed rule, our 

analysis begins with a FY 2015 baseline 

simulation model based on FY 2014 IPF 

payments inflated to the midpoint of FY 

2015 using IHS Global Insight Inc.’s 

most recent forecast of the market basket 

update (see section III.A.4. of this 

proposed rule); the estimated outlier 

payments in FY 2015; the CBSA 

delineations for IPFs based on OMB’s 

MSA definitions after June 2003; the FY 

2014 pre-floor, pre-reclassified hospital 

wage index; the FY 2015 labor-related 

share; and the FY 2015 percentage 

amount of the rural adjustment. During 

the simulation, the total estimated 

outlier payments are maintained at 2 

percent of total IPF PPS payments. 

Each of the following changes is 

added incrementally to this baseline 

model in order for us to isolate the 

effects of each change: 

• The update to the outlier fixed 

dollar loss threshold amount; 

• The FY 2015 pre-floor, prereclassified hospital wage index without 

the revised OMB delineations; 

• The FY 2015 updated CBSA 

delineations, based on OMB’s February 

28, 2013 Bulletin No. 13–01, as 

described in section III.D.1.c. of this 

proposed rule, with the proposed 

blended FY 2016 IPF wage index; 

• The FY 2016 rural adjustment, 

accounting for changes to rural or urban 

status due to the updated CBSA 

delineations, including the phase-out of 

the rural adjustment for the IPFs 

changing from rural to urban status, as 

described in section III.D.1.d; 

• The proposed FY 2016 labor-related 

share; 

• The estimated market basket update 

for FY 2016 of 2.7 percent less the 

productivity adjustment of 0.6 

percentage point reduction in 

accordance with section 1886(s)(2)(A)(i) 

of the Act and further reduced by the 

‘‘other adjustment’’ of 0.2 percentage 

point in accordance with sections 

1886(s)(2)(A)(ii) and 1886(s)(3)(D) of the 

Act. 

Our final comparison illustrates the 

percent change in payments from FY 

2015 (that is, October 1, 2014, to 

September 30, 2015) to FY 2016 (that is, 

October 1, 2015, to September 30, 2016) 

including all the changes in this 

proposed rule. 

TABLE 26—IPF IMPACT TABLE FOR FY 2016 

[% change in columns 3–9] 

Facility by type Number of 

IPFs Outlier Wage index 1 CBSA2

Change 

in rural 

adjustment 3

Labor related share 

(74.9%) 4

IPF market 

basket 

update 5

Total percent 

change 6

(1) (2) (3) (4) (5) (6) (7) (8) (9) 

All Facilities ....................................................... 1,617 ¥0.3 0.0 0.0 0.0 0.0 1.9 1.6 

Total Urban ................................................ 1,274 ¥0.3 0.0 0.0 0.0 0.2 1.9 1.8 

Total Rural ................................................. 343 ¥0.3 0.0 ¥0.2 0.2 ¥1.1 1.9 0.6 

Urban unit .................................................. 847 ¥0.4 0.0 0.0 0.0 0.2 1.9 1.7 

Urban hospital ............................................ 427 ¥0.1 ¥0.1 0.1 0.0 0.1 1.9 1.9 

Rural unit .................................................... 275 ¥0.3 0.1 ¥0.2 0.2 ¥1.1 1.9 0.5 

Rural hospital ............................................. 68 ¥0.1 0.0 ¥0.3 0.2 ¥1.0 1.9 0.7 

CBSA Change: 

Urban to Urban .......................................... 1,237 ¥0.3 0.0 0.0 0.1 0.2 1.9 1.8 

Rural to Rural ............................................. 340 ¥0.3 0.0 ¥0.2 0.1 ¥1.1 1.9 0.4 

Urban to Rural ........................................... 3 ¥0.1 3.1 ¥0.4 16.2 ¥1.1 1.9 20.1 

Rural to Urban ........................................... 37 ¥0.2 0.1 2.8 ¥4.1 ¥0.9 1.9 ¥0.5 

By Type of Ownership: 

Freestanding IPFs: 

Urban Psychiatric Hospitals: 

Government ........................................ 123 ¥0.3 0.1 0.0 0.0 0.1 1.9 1.8 

Non-Profit ............................................ 99 ¥0.1 0.4 0.1 0.0 0.4 1.9 2.7 

For-Profit ............................................. 205 0.0 ¥0.3 0.1 0.0 0.0 1.9 1.6 

Rural Psychiatric Hospitals: 

Government ........................................ 36 ¥0.1 0.2 ¥0.1 0.4 ¥0.8 1.9 1.5 

Non-Profit ............................................ 11 ¥0.5 ¥0.6 0.0 0.0 ¥0.3 1.9 0.5 

For-Profit ............................................. 21 0.0 0.0 ¥0.6 0.1 ¥1.3 1.9 0.1 

IPF Units: 

Urban: 

Government ........................................ 129 ¥0.6 ¥0.2 ¥0.1 0.0 0.3 1.9 1.2 

Non-Profit ............................................ 552 ¥0.4 0.2 0.0 ¥0.1 0.3 1.9 1.9 

For-Profit ............................................. 166 ¥0.3 ¥0.2 0.0 0.0 0.0 1.9 1.3 

Rural: 

Government ........................................ 69 ¥0.2 ¥0.1 ¥0.3 0.1 ¥1.3 1.9 0.0 

Non-Profit ............................................ 142 ¥0.3 0.2 ¥0.2 0.3 ¥0.9 1.9 0.8 

For-Profit ............................................. 64 ¥0.3 0.0 ¥0.2 0.2 ¥1.2 1.9 0.3 

By Teaching Status: 

Non-teaching .............................................. 1,420 ¥0.2 ¥0.1 0.0 0.0 ¥0.1 1.9 1.5 

Less than 10% interns and residents to 

beds ........................................................ 110 ¥0.3 0.2 ¥0.1 0.0 0.5 1.9 2.1 

10% to 30% interns and residents to beds 61 ¥0.7 0.4 ¥0.1 0.0 0.5 1.9 2.1 

More than 30% interns and residents to 

beds ........................................................ 26 ¥0.7 0.4 0.0 0.0 0.8 1.9 2.4 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 25061 

TABLE 26—IPF IMPACT TABLE FOR FY 2016—Continued 

[% change in columns 3–9] 

Facility by type Number of 

IPFs Outlier Wage index 1 CBSA2

Change 

in rural 

adjustment 3

Labor related share 

(74.9%) 4

IPF market 

basket 

update 5

Total percent 

change 6

(1) (2) (3) (4) (5) (6) (7) (8) (9) 

By Region: 

New England .............................................. 108 ¥0.3 0.8 0.0 0.0 0.7 1.9 3.2 

Mid-Atlantic ................................................ 243 ¥0.2 0.2 ¥0.1 0.0 0.6 1.9 2.4 

South Atlantic ............................................. 238 ¥0.2 ¥0.3 0.1 ¥0.1 ¥0.4 1.9 0.9 

East North Central ..................................... 259 ¥0.2 0.0 0.0 0.1 ¥0.2 1.9 1.6 

East South Central ..................................... 160 ¥0.2 ¥0.5 0.0 ¥0.1 ¥1.1 1.9 0.0 

West North Central .................................... 141 ¥0.4 0.0 0.1 0.0 ¥0.3 1.9 1.3 

West South Central .................................... 243 ¥0.2 ¥0.5 0.0 ¥0.1 ¥0.7 1.9 0.3 

Mountain .................................................... 103 ¥0.2 0.4 0.0 0.1 0.2 1.9 2.3 

Pacific ......................................................... 122 ¥0.4 0.5 0.0 0.1 1.3 1.9 3.4 

By Bed Size: 

Psychiatric Hospitals: 

Beds: 0–24 .......................................... 83 ¥0.1 0.0 0.1 ¥0.3 ¥0.7 1.9 0.8 

Beds: 25–49 ........................................ 77 ¥0.1 ¥0.4 0.3 ¥0.1 ¥0.2 1.9 1.4 

Beds: 50–75 ........................................ 84 ¥0.1 0.0 0.0 0.1 0.0 1.9 1.9 

Beds: 76 + .......................................... 251 ¥0.1 0.0 0.0 0.0 0.1 1.9 2.0 

Psychiatric Units: 

Beds: 0–24 .......................................... 662 ¥0.4 0.0 0.0 0.0 ¥0.3 1.9 1.2 

Beds: 25–49 ........................................ 301 ¥0.4 0.0 0.1 0.0 0.0 1.9 1.7 

Beds: 50–75 ........................................ 103 ¥0.3 0.1 0.0 0.0 0.1 1.9 1.9 

Beds: 76 + .......................................... 56 ¥0.4 ¥0.1 ¥0.2 0.0 0.5 1.9 1.7 

1 Includes a FY 2016 IPF wage index, current CBSA delineations, and a labor-related share of 0.69294. 

2 Includes a 50/50 FY 2016 proposed blended IPF wage index, new CBSA delineations, and a labor-related share of 0.69294. 

3 Includes a 50/50 FY 2016 proposed blended IPF wage index, new CBSA delineations, a labor-related share of 0.69294, and a rural adjustment. Providers changing from urban to rural status will receive a 17 percent rural adjustment, and providers changing from rural to urban status will receive 2/3 of the 17 percent rural adjustment in FY 2016. For those changing from urban to rural status, the total impact shown is affected by outlier threshold increasing, which results in smaller outlier 

payments as part of total payments. For those changing from rural to urban status, the outlier threshold is being lowered by 2/3 of 17 percent, which results in more 

providers being eligible for outlier payments, increasing the outlier portion of their total payments. 4 Includes a 50/50 FY 2016 proposed blended IPF wage index, new CBSA delineations, a labor-related share of 0.749, and a rural adjustment. 5This column reflects the payment update impact of the IPF-specific market basket update of 2.7 percent, a 0.6 percentage point reduction for the productivity adjustment as required by section 1886(s)(2)(A)(i) of the Act, and a 0.2 percentage point reduction in accordance with sections 1886(s)(2)(A)(ii) and 1886(s)(3)(D) of the 

Act. 6Percent changes in estimated payments from FY 2015 to FY 2016 include all of the changes presented in this proposed rule. Note, the products of these impacts 

may be different from the percentage changes shown here due to rounding effects. 

3. Results 

Table 26 above displays the results of 

our analysis. The table groups IPFs into 

the categories listed below based on 

characteristics provided in the Provider 

of Services (POS) file, the IPF provider 

specific file, and cost report data from 

HCRIS: 

• Facility Type 

• Location 

• Teaching Status Adjustment 

• Census Region 

• Size 

The top row of the table shows the 

overall impact on the 1,617 IPFs 

included in this analysis. 

In column 3, we present the effects of 

the update to the outlier fixed dollar 

loss threshold amount. We estimate that 

IPF outlier payments as a percentage of 

total IPF payments are 2.3 percent in FY 

2015. Thus, we are adjusting the outlier 

threshold amount in this proposed rule 

to set total estimated outlier payments 

equal to 2 percent of total payments in 

FY 2016. The estimated change in total 

IPF payments for FY 2016, therefore, 

includes an approximate 0.3 percent 

decrease in payments because the 

outlier portion of total payments is 

expected to decrease from 

approximately 2.3 percent to 2.0 

percent. 

The overall impact of this outlier 

adjustment update (as shown in column 

3 of Table 26), across all hospital 

groups, is to decrease total estimated 

payments to IPFs by 0.3 percent. The 

largest decrease in payments is 

estimated to reflect a 0.7 percent 

decrease in payments for IPFs located in 

teaching hospitals with an intern and 

resident Average Daily Census (ADC) 

ratio that is 10 percent or greater. 

In column 4, we present the effects of 

the budget-neutral proposed update to 

the IPF wage index. This represents the 

effect of using the most recent wage data 

available without taking into account 

the revised OMB delineations, which 

are presented separately in the next 

column. That is, the impact represented 

in this column is solely that of updating 

from the FY 2015 IPF wage index to the 

FY 2016 IPF wage index without any 

changes to the OMB delineations. We 

note that there is no projected change in 

aggregate payments to IPFs, as indicated 

in the first row of column 4. However, 

there will be distributional effects 

among different categories of IPFs. For 

example, we estimate the largest 

increase in payments to be 3.1 percent 

for IPFs changing from urban to rural 

status, and the largest decrease in 

payments to be 0.6 percent for rural 

non-profit freestanding IPFs. 

In column 5, we present the effects of 

the new OMB delineations and the 

proposed transition to the new 

delineations using the transitional IPF 

wage index. The FY 2016 IPF proposed 

transitional wage index is a blended 

wage index using 50 percent of the IPF’s 

FY 2016 wage index based on the new 

OMB delineations and 50 percent of the 

IPF’s FY 2016 wage index based on the 

OMB delineations used in FY 2015. In 

the aggregate, since these proposed 

updates to the wage index are applied 

in a budget-neutral manner, we do not 

estimate that these proposed updates 

would affect overall estimated payments 

to IPFs. However, we estimate that these 

proposed updates would have 

distributional effects. We estimate the 

largest increase in payments would be 

2.8 percent for IPFs changing from rural 

to urban status and the largest decrease 

in payments would be 0.6 percent for 

rural for-profit freestanding IPFs. 

In column 6, we present the effects of 

the changes to the rural adjustment 

under the new CBSA delineations. 

There are 3 urban IPFs which would be 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

25062 Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 

newly designated as rural IPFs, which 

would now receive a full 17 percent 

rural adjustment. We estimate that the 

largest increase in payments would be 

to these 3 newly-rural IPFs. Note that 

each column’s simulations include both 

regular and outlier payments; as regular 

payments increase, outlier payments 

decrease to maintain outlier payments at 

2 percent of total payments. As such, 

the increase to total IPF payments is 

estimated to be 16.2 percent. There are 

also 37 rural IPFs which would be 

newly designated as urban IPFs, where 

we proposed to phase out their rural 

adjustment over 3 years. These 37 

newly-urban providers would receive 2⁄3

of the 17 percent rural adjustment in FY 

2016, 1⁄3 of the 17 percent rural 

adjustment in FY 2017, and no rural 

adjustment for FY 2018 and subsequent 

years. As the regular payments for these 

37 providers decrease, their outlier 

payments increase to maintain outlier 

payments at 2 percent of total payments. 

We estimate that the largest decrease in 

payments would be 4.1 percent for these 

37 newly-urban providers. 

In column 7, we present the estimated 

effects of the proposed labor-related 

share. The proposed update to the IPF 

labor-related share is made in a budgetneutral manner and therefore would not 

affect total estimated IPF PPS payments. 

However, it would affect the estimated 

distribution of payments among 

providers. For example, we estimate the 

largest increase in payments would be 

1.3 percent to IPFs in the Pacific region. 

We estimate the largest decrease in 

payments would be 1.3 percent to rural 

for-profit freestanding IPFs and to rural 

IPF governmental units. 

In column 8, we present the estimated 

effects of the update to the IPF PPS 

payment rates of 1.9 percent, which are 

based on a proposed 2.7 percent IPFspecific market basket update, less the 

productivity adjustment of 0.6 

percentage point in accordance with 

section 1886(s)(2)(A)(i), and further 

reduced by 0.2 percentage point in 

accordance with section 

1886(s)(2)(A)(ii) and 1886(s)(3)(D). 

Finally, column 9 compares our 

estimates of the total changes reflected 

in this proposed rule for FY 2016 to the 

payments for FY 2015 (without these 

changes). This column reflects all 

proposed FY 2016 changes relative to 

FY 2015. The average estimated increase 

for all IPFs is approximately 1.6 percent. 

This estimated net increase includes the 

effects of the estimated 2.7 percent 

market basket update reduced by the 

productivity adjustment of 0.6 

percentage point, as required by section 

1886(s)(2)(A)(i) of the Act and further 

reduced by the ‘‘other adjustment’’ of 

0.2 percentage point, as required by 

sections 1886(s)(2)(A)(ii) and 

1886(s)(3)(D) of the Act. It also includes 

the overall estimated 0.3 percent 

decrease in estimated IPF outlier 

payments as a percent of total payments 

from the update to the outlier fixed 

dollar loss threshold amount. Since we 

are making the updates noted in 

columns 4 through 7 in a budget-neutral 

manner, they will not affect total 

estimated IPF payments in the 

aggregate. However, they will affect the 

estimated distribution of payments 

among providers. 

Overall, urban IPFs are estimated to 

experience a 1.8 percent increase in 

payments in FY 2016 and rural IPFs are 

estimated to experience a 0.6 percent 

increase in payments in FY 2016. The 

largest estimated decrease in payments 

is 0.5 percent for rural IPFs that 

transition to urban status as a result of 

the new OMB delineations. As noted 

previously, we proposed to mitigate the 

effects of the loss of the rural adjustment 

to these 37 providers by phasing the 

adjustment out over 3 years. The largest 

payment increase is estimated at 20.1 

percent for IPFs that transition from 

urban to rural status (thereby gaining 

the 17 percent rural adjustment), 

followed by a 3.4 percent increase for 

IPFs in the Pacific region. 

4. Effects of Updates to the IPFQR 

Program 

As discussed in section V. of this 

proposed rule and in accordance with 

section 1886(s)(4)(A)(i) of the Act, we 

will implement a 2 percentage point 

reduction in the FY 2018 market basket 

update for IPFs that have failed to 

comply with the IPFQR Program 

requirements for FY 2018, including 

reporting on the required measures. In 

section V. of this proposed rule, we 

discuss how the 2 percentage point 

reduction will be applied. For FY 2015, 

of the 1,725 IPFs eligible for the IPFQR 

Program, 31 IPFs (1.8 percent) did not 

receive the full market basket update 

because of the IPFQR Program; 10 of 

these IPFs chose not to participate and 

21 did not meet the requirements of the 

program. We anticipate that even fewer 

IPFs would receive the reduction for FY 

2016 as IPFs become more familiar with 

the requirements. Thus, we estimate 

that this policy will have a negligible 

impact on overall IPF payments for FY 

2016. 

Based on the proposals made in this 

rule, we estimate a total increase in 

burden of 174.4 hours per IPF or 

282,004.80 hours across all IPFs, 

resulting in a total increase in financial 

burden of $3,901.33 per IPF or 

$6,308,447.38 across all IPFs. As 

discussed in section VI. of this proposed 

rule, we will attribute the costs 

associated with the proposals to the year 

in which these costs begin; for the 

purposes of all the proposals in this 

proposed rule, that year is FY 2016. 

Further information on these estimates 

can be found in section VI. of this 

proposed rule. 

We intend to closely monitor the 

effects of this quality reporting program 

on IPFs and help facilitate successful 

reporting outcomes through ongoing 

stakeholder education, national 

trainings, and a technical help desk. 

5. Effect on Beneficiaries 

Under the IPF PPS, IPFs will receive 

payment based on the average resources 

consumed by patients for each day. We 

do not expect changes in the quality of 

care or access to services for Medicare 

beneficiaries under the FY 2016 IPF 

PPS, but we continue to expect that 

paying prospectively for IPF services 

would enhance the efficiency of the 

Medicare program. 

D. Alternatives Considered 

The statute does not specify an update 

strategy for the IPF PPS and is broadly 

written to give the Secretary discretion 

in establishing an update methodology. 

Therefore, we are updating the IPF PPS 

using the methodology published in the 

November 2004 IPF PPS final rule, but 

with a proposed IPF-specific market 

basket, and updated labor-related share, 

a proposed transitional wage index to 

implement new OMB CBSA 

designations, and a proposed phase-out 

of the rural adjustment for the 37 

providers changing from rural to urban 

status as a result of the updated OMB 

CBSA delineations used in the FY 2016 

IPF PPS transitional wage index. We 

considered implementing the new OMB 

designations for the FY 2016 IPF PPS 

wage index without a blend, but wanted 

to mitigate any negative effects of CBSA 

changes on IPFs. Additionally, we 

considered abruptly ending the rural 

adjustment for the 37 IPF providers 

which changed from rural to urban 

status as a result of the OMB CBSA 

changes. However, we wanted to 

propose relief from the effects of OMB’s 

new CBSA delineations to the 37 

providers which changed from rural to 

urban status. We also considered 

whether to allow a phase-in of the 

updated LRS, but decided that the 

impact of full implementation did not 

warrant a phase-in, especially given that 

we also proposed a transitional wage 

index and a phase-out of the rural 

adjustment for those IPFs which 

changed status from rural to urban 

under the new CBSAs. Additionally, for 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 25063 

the IPFQR Program, alternatives were 

not considered because the Program, as 

designed, best achieves quality 

reporting goals for the inpatient 

psychiatric care setting, while 

minimizing associated reporting 

burdens on IPFs. Section V. of this 

proposed rule discusses other benefits 

and objectives of the Program. 

E. Accounting Statement 

As required by OMB Circular A–4 

(available at http://

www.whitehouse.gov/omb/circulars_

a004_a-4), in Table 27 below, we have 

prepared an accounting statement 

showing the classification of the 

expenditures associated with the 

provisions of this proposed rule. The 

costs for data submission presented in 

Table 27 are calculated in section VI, 

which also discusses the benefits of data 

collection. This table provides our best 

estimate of the increase in Medicare 

payments under the IPF PPS as a result 

of the changes presented in this 

proposed rule and based on the data for 

1,617 IPFs in our database. Furthermore, 

we present the estimated costs 

associated with updating the IPFQR 

program. The increases in Medicare 

payments are classified as Federal 

transfers to IPF Medicare providers. 

TABLE 27—ACCOUNTING STATEMENT: 

CLASSIFICATION OF ESTIMATED EXPENDITURES

Change in Estimated Transfers From FY 

2015 IPF PPS to FY 2016 IPF PPS: 

Category Transfers 

Annualized 

Monetized 

Transfers.

$80 million. 

From Whom 

to Whom?.

Federal Government to IPF 

Medicare Providers. 

TABLE 27—ACCOUNTING STATEMENT: 

CLASSIFICATION OF ESTIMATED EXPENDITURES—Continued 

Change in Estimated Transfers From FY 

2015 IPF PPS to FY 2016 IPF PPS: 

Category Transfers 

FY 2016 Costs to Updating the Quality 

Reporting Program for IPFs: 

Category Costs 

Annualized 

Monetized 

Costs for 

IPFs to 

Submit Data 

(Quality 

Reporting 

Program) 

$6.31 million. 

In accordance with the provisions of 

Executive Order 12866, this proposed 

rule was reviewed by the Office of 

Management and Budget. 

List of Subjects in 42 CFR Part 412 

Administrative practice and 

procedure, Health facilities, Medicare, 

Puerto Rico, Reporting and 

recordkeeping requirements. 

For the reasons set forth in the 

preamble, the Centers for Medicare and 

Medicaid Services proposes to amend 

42 CFR chapter IV as set forth below: 

PART 412—PROSPECTIVE PAYMENT 

SYSTEMS FOR INPATIENT HOSPITAL 

SERVICES 

■ 1. The authority citation for part 412 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

Social Security Act (42 U.S.C. 1302 and 

1395hh), sec. 124 of Pub. L. 106–113 (113 

Stat. 1501A–332), sec. 1206 of Pub. L. 113– 

67, and sec. 112 of Pub. L. 113–93. 

■ 2. Section 412.428 is amended by 

revising paragraph (e) to read as follows: 

§ 412.428 Publication of Updates to the 

inpatient psychiatric facility prospective 

payment system. 

* * * * * 

(e) Describe the ICD–10–CM coding 

changes and DRG classification changes 

discussed in the annual update to the 

hospital inpatient prospective payment 

system regulations. 

* * * * * 

Dated: April 13, 2015. 

Andrew M. Slavitt, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Approved: April 22, 2015. 

Sylvia M. Burwell, 

Secretary. 

Note: The following addendum will 

not publish in the Code of Federal 

Regulations. 

Addendum—FY 2016 Proposed Rates and 

Adjustment Factors 

Per Diem Rate: 

Federal Per Diem Base Rate ........ $745.19 

Labor Share (0.749) ..................... 558.15 

Non-Labor Share (0.251) ............. 187.04 

Per Diem Rate Applying the 2 Percentage 

Point Reduction 

Federal Per Diem Base Rate ........ $730.56 

Labor Share (0.749) ..................... 547.19 

Non-Labor Share (0.251) ............. 183.37 

Fixed Dollar Loss Threshold Amount: 

$9,825. 

Wage Index Budget-Neutrality Factor: 

1.0041. 

Facility Adjustments: 

Rural Adjustment 

Factor.

1.17 

Teaching Adjustment 

Factor.

0.5150 

Wage Index ............... Pre-reclass Hospital 

Wage Index 

(FY2015) 

Cost of Living Adjustments (COLAs): 

Area Cost of living 

adjustment factor 

Alaska: 

City of Anchorage and 80-kilometer (50-mile) radius by road ............................................................................................... 1.23 

City of Fairbanks and 80-kilometer (50-mile) radius by road ................................................................................................ 1.23 

City of Juneau and 80-kilometer (50-mile) radius by road .................................................................................................... 1.23 

Rest of Alaska ........................................................................................................................................................................ 1.25 

Hawaii: 

City and County of Honolulu .................................................................................................................................................. 1.25 

County of Hawaii .................................................................................................................................................................... 1.19 

County of Kauai ...................................................................................................................................................................... 1.25 

County of Maui and County of Kalawao ................................................................................................................................ 1.25 

Patient Adjustments: 

ECT—Per Treatment ..................................................................................................................................................................... $320.82 

ECT—Per Treatment Applying the 2 Percentage Point Reduction ........................................................................................... 314.52 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

25064 Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 

Variable Per Diem Adjustments: 

Adjustment factor 

Day 1—Facility Without a Qualifying Emergency Department ..................................................................................................... 1.19 

Day 1—Facility With a Qualifying Emergency Department .......................................................................................................... 1.31 

Day 2 ............................................................................................................................................................................................. 1.12 

Day 3 ............................................................................................................................................................................................. 1.08 

Day 4 ............................................................................................................................................................................................. 1.05 

Day 5 ............................................................................................................................................................................................. 1.04 

Day 6 ............................................................................................................................................................................................. 1.02 

Day 7 ............................................................................................................................................................................................. 1.01 

Day 8 ............................................................................................................................................................................................. 1.01 

Day 9 ............................................................................................................................................................................................. 1.00 

Day 10 ........................................................................................................................................................................................... 1.00 

Day 11 ........................................................................................................................................................................................... 0.99 

Day 12 ........................................................................................................................................................................................... 0.99 

Day 13 ........................................................................................................................................................................................... 0.99 

Day 14 ........................................................................................................................................................................................... 0.99 

Day 15 ........................................................................................................................................................................................... 0.98 

Day 16 ........................................................................................................................................................................................... 0.97 

Day 17 ........................................................................................................................................................................................... 0.97 

Day 18 ........................................................................................................................................................................................... 0.96 

Day 19 ........................................................................................................................................................................................... 0.95 

Day 20 ........................................................................................................................................................................................... 0.95 

Day 21 ........................................................................................................................................................................................... 0.95 

After Day 21 ................................................................................................................................................................................... 0.92 

Age Adjustments: 

Age 

(in years) Adjustment factor 

Under 45 ........................................................................................................................................................................................ 1.00 

45 and under 50 ............................................................................................................................................................................ 1.01 

50 and under 55 ............................................................................................................................................................................ 1.02 

55 and under 60 ............................................................................................................................................................................ 1.04 

60 and under 65 ............................................................................................................................................................................ 1.07 

65 and under 70 ............................................................................................................................................................................ 1.10 

70 and under 75 ............................................................................................................................................................................ 1.13 

75 and under 80 ............................................................................................................................................................................ 1.15 

80 and over .................................................................................................................................................................................... 1.17 

DRG Adjustments: 

MS–DRG MS–DRG descriptions Adjustment factor 

056 ....................

057 ....................

Degenerative nervous system disorders w MCC ..........................................................................................

Degenerative nervous system disorders w/o MCC .......................................................................................

1.05 

080 ....................

081 ....................

Nontraumatic stupor & coma w MCC ............................................................................................................

Nontraumatic stupor & coma w/o MCC .........................................................................................................

1.07 

876 .................... O.R. procedure w principal diagnoses of mental illness ............................................................................... 1.22 

880 .................... Acute adjustment reaction & psychosocial dysfunction ................................................................................. 1.05 

881 .................... Depressive neuroses ...................................................................................................................................... 0.99 

882 .................... Neuroses except depressive .......................................................................................................................... 1.02 

883 .................... Disorders of personality & impulse control .................................................................................................... 1.02 

884 .................... Organic disturbances & mental retardation ................................................................................................... 1.03 

885 .................... Psychoses ...................................................................................................................................................... 1.00 

886 .................... Behavioral & developmental disorders .......................................................................................................... 0.99 

887 .................... Other mental disorder diagnoses ................................................................................................................... 0.92 

894 .................... Alcohol/drug abuse or dependence, left AMA ............................................................................................... 0.97 

895 .................... Alcohol/drug abuse or dependence w rehabilitation therapy ......................................................................... 1.02 

896 ....................

897 ....................

Alcohol/drug abuse or dependence w/o rehabilitation therapy w MCC ........................................................

Alcohol/drug abuse or dependence w/o rehabilitation therapy w/o MCC .....................................................

0.88 

Comorbidity Adjustments: 

Comorbidity Adjustment factor 

Developmental Disabilities ............................................................................................................................................................. 1.04 

Coagulation Factor Deficit ............................................................................................................................................................. 1.13 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Proposed Rules 25065 

Comorbidity Adjustment factor 

Tracheostomy ................................................................................................................................................................................ 1.06 

Eating and Conduct Disorders ...................................................................................................................................................... 1.12 

Infectious Diseases ........................................................................................................................................................................ 1.07 

Renal Failure, Acute ...................................................................................................................................................................... 1.11 

Renal Failure, Chronic ................................................................................................................................................................... 1.11 

Oncology Treatment ...................................................................................................................................................................... 1.07 

Uncontrolled Diabetes Mellitus ...................................................................................................................................................... 1.05 

Severe Protein Malnutrition ........................................................................................................................................................... 1.13 

Drug/Alcohol Induced Mental Disorders ........................................................................................................................................ 1.03 

Cardiac Conditions ........................................................................................................................................................................ 1.11 

Gangrene ....................................................................................................................................................................................... 1.10 

Chronic Obstructive Pulmonary Disease ....................................................................................................................................... 1.12 

Artificial Openings—Digestive & Urinary ....................................................................................................................................... 1.08 

Severe Musculoskeletal & Connective Tissue Diseases .............................................................................................................. 1.09 

Poisoning ....................................................................................................................................................................................... 1.11 

[FR Doc. 2015–09880 Filed 4–24–15; 4:15 pm] 

BILLING CODE 4120–01–P 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2