Proposed Rule2024-06764
Medicare Program; FY 2025 Inpatient Psychiatric Facilities Prospective Payment System-Rate Update
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Published
April 3, 2024
Issuing agencies
Health and Human Services DepartmentCenters for Medicare & Medicaid Services
Abstract
This rulemaking proposes to update the prospective payment rates, the outlier threshold, and the wage index for Medicare inpatient hospital services provided by Inpatient Psychiatric Facilities (IPF), which include psychiatric hospitals and excluded psychiatric units of an acute care hospital or critical access hospital. This rulemaking also proposes to revise the patient-level adjustment factors, the Emergency Department adjustment, and the payment amount for electroconvulsive therapy. These proposed changes would be effective for IPF discharges occurring during the fiscal year beginning October 1, 2024 through September 30, 2025 (FY 2025). In addition, this proposed rule seeks to adopt a new quality measure and modify reporting requirements under the IPF Quality Reporting Program beginning with the FY 2027 payment determination. Furthermore, this proposed rule solicits comments through Requests for Information (RFIs) regarding potential future revisions to the IPF PPS facility-level adjustments and regarding the development of a standardized IPF Patient Assessment Instrument.
Full Text
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[Federal Register Volume 89, Number 65 (Wednesday, April 3, 2024)]
[Proposed Rules]
[Pages 23146-23224]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-06764]
[[Page 23145]]
Vol. 89
Wednesday,
No. 65
April 3, 2024
Part III
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Part 412
Medicare Program; FY 2025 Inpatient Psychiatric Facilities Prospective
Payment System--Rate Update; Proposed Rule
Federal Register / Vol. 89, No. 65 / Wednesday, April 3, 2024 /
Proposed Rules
[[Page 23146]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 412
[CMS-1806-P]
RIN 0938-AV32
Medicare Program; FY 2025 Inpatient Psychiatric Facilities
Prospective Payment System--Rate Update
AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of
Health and Human Services (HHS).
ACTION: Proposed rule.
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SUMMARY: This rulemaking proposes to update the prospective payment
rates, the outlier threshold, and the wage index for Medicare inpatient
hospital services provided by Inpatient Psychiatric Facilities (IPF),
which include psychiatric hospitals and excluded psychiatric units of
an acute care hospital or critical access hospital. This rulemaking
also proposes to revise the patient-level adjustment factors, the
Emergency Department adjustment, and the payment amount for
electroconvulsive therapy. These proposed changes would be effective
for IPF discharges occurring during the fiscal year beginning October
1, 2024 through September 30, 2025 (FY 2025). In addition, this
proposed rule seeks to adopt a new quality measure and modify reporting
requirements under the IPF Quality Reporting Program beginning with the
FY 2027 payment determination. Furthermore, this proposed rule solicits
comments through Requests for Information (RFIs) regarding potential
future revisions to the IPF PPS facility-level adjustments and
regarding the development of a standardized IPF Patient Assessment
Instrument.
DATES: To be assured consideration, comments must be received at one of
the addresses provided below, by May 28, 2024.
ADDRESSES: In commenting, please refer to file code CMS-1806-P.
Comments, including mass comment submissions, must be submitted in
one of the following three ways (please choose only one of the ways
listed):
1. Electronically. You may submit electronic comments on this
regulation to <a href="http://www.regulations.gov">http://www.regulations.gov</a>. 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-1806-P, P.O. Box 8010,
Baltimore, MD 21244-8010.
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-1806-P, Mail
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT:
Nick Brock (410) 786-5148, for information regarding the inpatient
psychiatric facilities prospective payment system (IPF PPS).
Kaleigh Emerson (470) 890-4141, for information regarding the
inpatient psychiatric facilities quality reporting program (IPFQR).
SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following
website as soon as possible after they have been received: <a href="http://www.regulations.gov">http://www.regulations.gov</a>. Follow the search instructions on that website to
view public comments. CMS will not post on <a href="http://Regulations.gov">Regulations.gov</a> public
comments that make threats to individuals or institutions or suggest
that the commenter will take actions to harm an individual. CMS
continues to encourage individuals not to submit duplicative comments.
We will post acceptable comments from multiple unique commenters even
if the content is identical or nearly identical to other comments.
Plain Language Summary: In accordance with 5 U.S.C. 553(b)(4), a
plain language summary of this rule may be found at <a href="https://www.regulations.gov/">https://www.regulations.gov/</a>.
Availability of Certain Tables Exclusively Through the Internet on the
CMS Website
Addendum A to this proposed rule summarizes the proposed FY 2025
Inpatient Psychiatric Facilities Prospective Payment System (IPF PPS)
payment rates, outlier threshold, cost of living adjustment factors for
Alaska and Hawaii, national and upper limit cost-to-charge ratios, and
adjustment factors. In addition, Addendum B to this proposed rule shows
the complete listing of ICD-10 Clinical Modification and Procedure
Coding System codes, the FY 2025 IPF PPS comorbidity adjustment, and
electroconvulsive therapy procedure codes. The A and B Addenda are
available on the CMS website at: <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/tools.html">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/tools.html</a>.
Tables setting forth the FY 2025 Wage Index for Urban Areas Based
on Core-Based Statistical Area Labor Market Areas, the FY 2025 Wage
Index Based on CBSA Labor Market Areas for Rural Areas, and a county-
level crosswalk of the FY 2024 CBSA Labor Market Areas to the FY 2025
CBSA Labor Market Areas are available exclusively through the internet,
on the CMS website at <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/IPFPPS/WageIndex.html">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/IPFPPS/WageIndex.html</a>.
I. Executive Summary
A. Purpose
This proposed rule would update the prospective payment rates, the
outlier threshold, and the wage index for Medicare inpatient hospital
services provided by Inpatient Psychiatric Facilities (IPFs) for
discharges occurring during fiscal year (FY) 2025, (beginning October
1, 2024 through September 30, 2025). We are proposing to adopt the
Core-Based Statistical Area (CBSA) Labor Market Areas for the IPF PPS
wage index as defined in the Office of Management and Budget (OMB)
Bulletin 23-01. In addition, this rule includes a proposal to refine
the patient-level adjustment factors and increase the payment amount
for electroconvulsive therapy (ECT) treatments. We are not proposing
changes to the facility-level adjustment factors for FY 2025; however,
this proposed rule presents the results of our latest analysis and
includes a request for information relating to those results. This rule
also includes a clarification of the eligibility criteria for an IPF to
be approved to file all-inclusive cost reports. In addition, this
proposed rule includes a request for information regarding the creation
of a patient assessment instrument (PAI) as mandated by Section 4125 of
the Consolidated Appropriations Act (CAA), 2023 (hereafter referred to
as CAA, 2023) (Pub. L. 117-328). Lastly, this proposed rule discusses
quality measures and reporting requirements under the Inpatient
Psychiatric
[[Page 23147]]
Facilities Quality Reporting (IPFQR) Program.
B. Summary of the Major Provisions
1. Inpatient Psychiatric Facilities Prospective Payment System (IPF
PPS)
For the IPF PPS, we are:
<bullet> Proposing to revise the patient-level IPF PPS adjustment
factors and increase the ECT per treatment payment amount.
<bullet> Proposing to update the IPF PPS wage index to use the
CBSAs defined within OMB Bulletin 23-01.
<bullet> Clarifying the eligibility criteria for an IPF to be
approved to file all-inclusive cost reports. Only a government-owned or
tribally owned facility will be able to satisfy these criteria and will
be eligible to file its cost report using an all-inclusive rate or no
charge structure.
<bullet> Soliciting comments to inform elements to be included in
the IPF patient assessment instrument, which the CAA, 2023 requires the
Centers for Medicare & Medicaid Services (CMS) to develop for FY 2028.
<bullet> Soliciting comments to inform future refinements to the
IPF PPS facility-level adjustment factors.
<bullet> Making technical rate setting updates: The IPF PPS payment
rates are adjusted annually for inflation, as well as statutory and
other policy factors. This rule proposes to update:
++ The IPF PPS Federal per diem base rate from $895.63 to $874.93.
++ The IPF PPS Federal per diem base rate for providers who failed
to report quality data to $857.89.
++ The ECT payment per treatment from $385.58 to $660.30.
++ The ECT payment per treatment for providers who failed to report
quality data to $647.45.
++ The labor-related share from 78.7 percent to 78.8 percent.
++ The wage index budget neutrality factor to 0.9998. This proposed
rule would apply a refinement standardization factor of 0.9514.
++ The fixed dollar loss threshold amount from $33,470 to $35,590,
to maintain estimated outlier payments at 2 percent of total estimated
aggregate IPF PPS payments.
2. Inpatient Psychiatric Facilities Quality Reporting (IPFQR) Program
For the IPFQR Program, we are proposing to:
<bullet> Adopt the 30-Day Risk-Standardized All-Cause Emergency
Department (ED) Visit Following an IPF Discharge measure beginning with
the FY 2027 payment determination; and
<bullet> Modify reporting requirements to require IPFs to submit
patient-level data on a quarterly basis.
We also refer readers to our RFI in which we solicit comments to
inform elements to be included in the IPF patient assessment
instrument, which the CAA, 2023 requires the Centers for Medicare &
Medicaid Services (CMS) to develop and implement for Rate Year (RY)
2028.
C. Summary of Impacts
[GRAPHIC] [TIFF OMITTED] TP03AP24.000
II. Background
A. Overview of the Legislative Requirements of the IPF PPS
Section 124 of the Medicare, Medicaid, and 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 of Health and Human Services (the Secretary) develop
a per diem payment perspective system (PPS) for inpatient hospital
services furnished in psychiatric hospitals and excluded psychiatric
units including an adequate patient classification system that reflects
the differences in patient resource use and costs among psychiatric
hospitals and excluded psychiatric units. ``Excluded psychiatric unit''
means a psychiatric unit of an acute care hospital or of a Critical
Access Hospital (CAH), which is excluded from payment under the
Inpatient Prospective Payment System (IPPS) or CAH payment system,
respectively. These excluded psychiatric units will be paid under the
IPF PPS.
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 psychiatric distinct part units of CAHs.
Sections 3401(f) and 10322 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 jointly 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.
Section 1886(s)(2)(A)(ii) of the Act required the application of an
``other adjustment'' that reduced any update to an IPF PPS base rate by
a percentage point amount specified in section 1886(s)(3) of the Act
for the RY beginning in 2010 through the RY beginning in 2019. As noted
in the FY 2020 Inpatient Psychiatric Facilities Prospective Payment
System and Quality Reporting Updates for fiscal year Beginning October
1, 2019 final rule, for the RY beginning in 2019,
[[Page 23148]]
section 1886(s)(3)(E) of the Act required that the other adjustment
reduction be equal to 0.75 percentage point; that was the final year
the statute required the application of this adjustment. Because FY
2021 was a RY beginning in 2020, FY 2021 was the first year section
1886(s)(2)(A)(ii) of the Act did not apply since its enactment.
Sections 1886(s)(4)(A) through (D) of the Act require that for RY
2014 and each subsequent RY, IPFs that fail to report required quality
data with respect to such a RY will have their annual update to a
standard Federal rate for discharges reduced by 2.0 percentage points.
This may result in an annual update being less than 0.0 for a RY, and
may result in payment rates for the upcoming RY being less than such
payment rates for the preceding RY. Any reduction for failure to report
required quality data will apply only to the RY involved, and the
Secretary will not consider such reduction in computing the payment
amount for a subsequent RY. Additional information about the specifics
of the current IPFQR Program is available in the FY 2020 Inpatient
Psychiatric Facilities Prospective Payment System and Quality Reporting
Updates for fiscal year Beginning October 1, 2019 (FY 2020) final rule
(84 FR 38459 through 38468).
Section 4125 of the Consolidated Appropriations Act, 2023 (CAA,
2023) (Pub. L. 117-328), which amended section 1886(s) of the Act,
requires CMS to revise the Medicare prospective payment system for
psychiatric hospitals and psychiatric units. Specifically, section
4125(a) of the CAA, 2023 added section 1886(s)(5)(A) of the Act to
require the Secretary to collect data and information, as the Secretary
determines appropriate, to revise payments under the IPF PPS. CMS
discussed this data collection last year in the FY 2024 IPF PPS final
rule, as CMS was required to begin collecting this data and information
not later than October 1, 2024. As discussed in that rule, the Agency
has already been collecting data and information consistent with the
types set forth in the CAA, 2023 as part of our extensive and years-
long analyses and consideration of potential payment system
refinements. We refer readers to the FY 2024 Inpatient Psychiatric
Facilities Prospective Payment System--Rate Update (FY 2024 IPF PPS)
final rule (88 FR 51095 through 51098) where we discussed existing data
collection and requested information to inform future IPF PPS
revisions.
In addition, section 1886(s)(5)(D) of the Act, as added by section
4125(a) of the CAA, 2023 requires that the Secretary implement
revisions to the methodology for determining the payment rates under
the IPF PPS for psychiatric hospitals and psychiatric units, effective
for RY 2025 (FY 2025). The revisions may be based on a review of the
data and information collected under section 1886(s)(5)(A) of the Act.
As discussed in section III.C of this FY 2025 IPF PPS proposed rule, we
are proposing revisions to the IPF PPS patient-level adjustment factors
based on a review of cost and claims data.
Section 4125(b) of the CAA, 2023 amended section 1886(s)(4) of the
Act by inserting a new subparagraph (E), which requires IPFs
participating in the IPFQR Program to collect and submit to the
Secretary standardized patient assessment data, using a standardized
patient assessment instrument, for RY 2028 (FY 2028) and each
subsequent rate year. IPFs must submit such data with respect to at
least the admission and discharge of an individual, or more frequently
as the Secretary determines appropriate. For IPFs to meet this new data
collection and reporting requirement for RY 2028 and each subsequent
rate year, the Secretary must implement a standardized patient
assessment instrument that collects data with respect to the following
categories: functional status; cognitive function and mental status;
special services, treatments, and interventions; medical conditions and
comorbidities; impairments; and other categories as determined
appropriate by the Secretary. This patient assessment instrument must
enable comparison of such patient assessment data that IPFs submit
across all such IPFs to which such data are applicable.
Section 4125(b) of the CAA, 2023 further amended section 1886(s) of
the Act by adding a new subparagraph (6) that requires the Secretary to
implement revisions to the methodology for determining the payment
rates for psychiatric hospitals and psychiatric units (that is, payment
rates under the IPF PPS), effective for RY 2031 (FY 2031), as the
Secretary determines to be appropriate, to take into account the
patient assessment data described in paragraph (4)(E)(ii).
To implement and periodically update the IPF PPS, we have published
various proposed and final rules and notices in the Federal Register.
For more information regarding these documents, we refer readers to the
CMS website at <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/index.html">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/index.html</a>?redirect=/
InpatientPsychFacilPPS/.
B. Overview of the IPF PPS
On November 15, 2004, we published the RY 2005 IPF PPS final rule
in the Federal Register (69 FR 66922). The RY 2005 IPF PPS final rule
established the IPF PPS, as required by section 124 of the BBRA and
codified at 42 CFR part 412, subpart N. The RY 2005 IPF PPS final rule
set forth the Federal per diem base rate 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 previously and certain patient-
and facility-level payment adjustments for characteristics that were
found in the regression analysis to be associated with statistically
significant per diem cost differences, with statistical significance
defined as p less than 0.05. A complete discussion of the regression
analysis that established the IPF PPS adjustment factors can be found
in the RY 2005 IPF PPS final rule (69 FR 66933 through 66936).
The patient-level adjustments include age, Diagnosis-Related Group
(DRG) assignment, and comorbidities, as well as adjustments to reflect
higher per diem costs at the beginning of a patient's IPF stay and
lower costs for later days of the 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 an adjustment for the presence of a qualifying emergency
department (ED).
The IPF PPS provides additional payment policies for outlier cases,
interrupted stays, and a per treatment
[[Page 23149]]
payment for patients who undergo ECT. During the IPF PPS mandatory 3-
year transition period, stop-loss payments were also provided; however,
since the transition ended as of January 1, 2008, these payments are no
longer available.
C. Annual Requirements for Updating the IPF PPS
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 RY
2005 IPF PPS final rule, we implemented the IPF PPS using the following
update strategy:
<bullet> 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.
<bullet> Use a July 1 through June 30 annual update cycle.
<bullet> Allow the IPF PPS first update to be effective for
discharges on or after July 1, 2006 through June 30, 2007.
The RY 2005 final rule (69 FR 66922) implemented the IPF PPS. In
developing the IPF PPS, and to ensure that the IPF PPS can 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. That regression analysis is described
in detail in our RY 2004 IPF proposed rule (68 FR 66923; 66928 through
66933) and our RY 2005 IPF final rule (69 FR 66933 through 66960). 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 the RY 2005 IPF final rule, we explained the reasons for
delaying an update to the adjustment factors, derived from the
regression analysis, including waiting until we have IPF PPS data that
yields as much information as possible regarding the patient-level
characteristics of the population that each IPF serves. We indicated
that we did not intend to update the regression analysis and the
patient-level 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 (69 FR 66966).
On May 6, 2011, we published a final rule in the Federal Register
titled, ``Inpatient Psychiatric Facilities Prospective Payment System--
Update for Rate Year Beginning July 1, 2011 (RY 2012)'' (76 FR 26432),
which changed the payment rate update period to a RY that coincides
with a FY update. Therefore, final rules are now published in the
Federal Register in the summer to be effective on October 1st. When
proposing changes in IPF payment policy, a proposed rule is issued in
the spring, and the final rule in the summer to be effective on October
1st. For a detailed list of updates to the IPF PPS, we refer readers to
our regulations at 42 CFR 412.428. Beginning October 1, 2012, we
finalized that we would refer to the 12-month period from October 1
through September 30 as a ``fiscal year'' (FY) rather than a RY (76 FR
26435). Therefore, in this final rule we refer to rules that took
effect after RY 2012 by the FY, rather than the RY, in which they took
effect.
The most recent IPF PPS annual update was published in a final rule
on August 2, 2023 in the Federal Register titled, ``Medicare Program;
FY 2024 Inpatient Psychiatric Facilities Prospective Payment System--
Rate Update'' (88 FR 51054), which updated the IPF PPS payment rates
for FY 2024. That final rule updated the IPF PPS Federal per diem base
rates that were published in the FY 2023 IPF PPS Rate Update final rule
(87 FR 46846) in accordance with our established policies.
III. Provisions of the Proposed Regulations
A. Proposed FY 2025 Market Basket Update and Productivity Adjustment
for the IPF PPS
1. Background
Originally, the input price index 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
inpatient rehabilitation facilities (IRFs), IPFs, long-term care
hospitals (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.
Since the IPF PPS inception, the market basket used to update IPF
PPS payments has been rebased and revised to reflect more recent data
on IPF cost structures. We last rebased and revised the IPF market
basket in the FY 2024 IPF PPS rule, where we adopted a 2021-based IPF
market basket, using Medicare cost report data for both Medicare
participating freestanding psychiatric hospitals and psychiatric units.
We refer readers to the FY 2024 IPF PPS final rule for a detailed
discussion of the 2021-based IPF PPS market basket and its development
(88 FR 51057 through 51081). References to the historical market
baskets used to update IPF PPS payments are listed in the FY 2016 IPF
PPS final rule (80 FR 46656).
2. Proposed FY 2025 IPF Market Basket Update
For FY 2025 (beginning October 1, 2024 and ending September 30,
2025), we are proposing to update the IPF PPS payments by a market
basket increase factor with a productivity adjustment as required by
section 1886(s)(2)(A)(i) of the Act. Consistent with historical
practice, we are proposing to estimate the market basket update for the
IPF PPS based on the most recent forecast available at the time of
rulemaking from IHS Global Inc. (IGI). IGI is a nationally recognized
economic and financial forecasting firm with which CMS contracts to
forecast the components of the market baskets and productivity
adjustment. For the proposed rule, based on IGI's fourth quarter 2023
forecast with historical data through the third quarter of 2023, the
2021-based IPF market basket increase factor for FY 2025 is 3.1
percent.
Section 1886(s)(2)(A)(i) of the Act requires that, after
establishing the increase factor for a FY, the Secretary shall reduce
such increase factor for FY 2012 and each subsequent FY, by the
productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of
the Act. Section 1886(b)(3)(B)(xi)(II) of the Act sets forth the
definition of this productivity adjustment. 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 ``productivity adjustment''). The United
States Department of Labor's Bureau of Labor Statistics (BLS) publishes
the official measures of productivity for the United States economy. We
note that previously the productivity measure referenced in section
1886(b)(3)(B)(xi)(II) of the Act was published by BLS as private
nonfarm business MFP. Beginning with the November 18, 2021 release of
productivity data, BLS replaced the
[[Page 23150]]
term ``multifactor productivity'' with ``total factor productivity''
(TFP). BLS noted that this is a change in terminology only and will not
affect the data or methodology. As a result of the BLS name change, the
productivity measure referenced in section 1886(b)(3)(B)(xi)(II) of the
Act is now published by BLS as private nonfarm business TFP. However,
as mentioned previously, the data and methods are unchanged. We refer
readers to <a href="http://www.bls.gov">www.bls.gov</a> for the BLS historical published TFP data. A
complete description of IGI's TFP projection methodology is available
on the CMS website at <a href="https://www.cms.gov/data-research/statistics-trends-and-reports/medicare-program-rates-statistics/market-basket-research-and-information">https://www.cms.gov/data-research/statistics-trends-and-reports/medicare-program-rates-statistics/market-basket-research-and-information</a>. In addition, in the FY 2022 IPF final rule
(86 FR 42611), we noted that effective with FY 2022 and forward, CMS
changed the name of this adjustment to refer to it as the productivity
adjustment rather than the MFP 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 (a RY that
coincides with a FY) and each subsequent RY. For this proposed rule,
based on IGI's fourth quarter 2023 forecast, the proposed productivity
adjustment for FY 2025 (the 10-year moving average of TFP for the
period ending FY 2025) is projected to be 0.4 percent. Accordingly, we
are proposing to reduce the 3.1 percent IPF market basket increase by
this 0.4 percentage point productivity adjustment, as mandated by the
Act. This results in a proposed FY 2025 IPF PPS payment rate update of
2.7 percent (3.1-0.4 = 2.7). We are also proposing that if more recent
data become available, we would use such data, if appropriate, to
determine the FY 2025 IPF market basket increase and productivity
adjustment for the final rule.
We solicit comment on the proposed IPF market basket increase and
productivity adjustment for FY 2025.
3. Proposed FY 2025 IPF 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 are proposing to continue to classify a cost category as
labor-related if the costs are labor-intensive and vary with the local
labor market.
Based on our definition of the labor-related share and the cost
categories in the 2021-based IPF market basket, we are proposing to
continue 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 Services; All Other: Labor-
Related Services; and a portion of the Capital-Related relative
importance from the 2021-based IPF market basket. For more details
regarding the methodology for determining specific cost categories for
inclusion in the labor-related share based on the 2021-based IPF market
basket, we refer readers to the FY 2024 IPF PPS final rule (88 FR 51078
through 51081).
The relative importance reflects the different rates of price
change for these cost categories between the base year (FY 2021) and FY
2025. Based on IGI's fourth quarter 2023 forecast of the 2021-based IPF
market basket, the sum of the FY 2025 relative importance moving
average of Wages and Salaries; Employee Benefits; Professional Fees:
Labor-Related; Administrative and Facilities Support Services;
Installation, Maintenance, and Repair Services; All Other: Labor-
Related Services is 75.7 percent. We are proposing, consistent with
prior rulemaking, that the portion of Capital-Related costs that are
influenced by the local labor market is 46 percent. Since the relative
importance for Capital-Related costs is 6.8 percent of the 2021-based
IPF market basket for FY 2025, we are proposing to take 46 percent of
6.8 percent to determine a labor-related share of Capital-Related costs
for FY 2025 of 3.1 percent. Therefore, we are proposing a total labor-
related share for FY 2025 of 78.8 percent (the sum of 75.7 percent for
the labor-related share of operating costs and 3.1 percent for the
labor-related share of Capital-Related costs). We are also proposing
that if more recent data become available, we would use such data, if
appropriate, to determine the FY 2025 labor-related share for the final
rule. For more information on the labor-related share and its
calculation, we refer readers to the FY 2024 IPF PPS final rule (88 FR
51078 through 51081).
Table 1 shows the proposed FY 2025 labor-related share and the
final FY 2024 labor-related share using the 2021- based IPF market
basket relative importance.
[[Page 23151]]
[GRAPHIC] [TIFF OMITTED] TP03AP24.001
We solicit comment on the proposed labor-related share for FY 2025.
B. Proposed Revisions to the IPF PPS Rates for FY Beginning October 1,
2024
The IPF PPS is based on a standardized Federal per diem base rate
calculated from the IPF average per diem costs and adjusted for budget
neutrality 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 RY 2005 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 budget neutrality 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 RY 2005
IPF PPS final rule (69 FR 66926).
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 (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. The information
concerning this standardization can be found in the RY 2005 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 RY 2005 IPF PPS final rule (69 FR 66932 through 66933) and in
the RY 2007 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 42 CFR 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 ECT payment per treatment appears in the FY 2014 IPF PPS
update notice (78 FR 46738 through 46740). These documents are
available on the CMS website at <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/index.html">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/index.html</a>.
As discussed in section III.B.2 of this proposed rule, we are
proposing to revise the patient-level adjustment factors and increase
the ECT payment amount for FY 2025. Section 1866(s)(5)(D)(iii) of the
Act, as added by section 4125(a) of the CAA, 2023, requires that
revisions to the IPF PPS adjustment factors must be made budget-
neutrally. Therefore, as discussed in section III.F of this proposed
rule, we are proposing to apply a standardization factor to the FY 2025
base rate that takes these refinements into account to keep total IPF
PPS payments budget neutral.
2. Proposed Increase in the Electroconvulsive Therapy (ECT) Payment per
Treatment
a. Background
In the RY 2005 IPF PPS final rule (69 FR 66951), we analyzed the
costs of IPF stays that included ECT treatment using the FY 2002 MedPAR
data. based on comments we received on the RY 2005
[[Page 23152]]
IPF PPS proposed rule. Consistent with the comments we received about
ECT, our analysis and review indicated that cases with ECT treatment
are substantially more costly than cases without ECT treatment. Based
on this analysis, in that final rule we finalized an additional payment
for each ECT treatment furnished during the IPF stay. This ECT payment
per treatment is made in addition to the per diem and outlier payments
under the IPF PPS. To receive the payment per ECT treatment, IPFs must
indicate on their claims the revenue code and procedure code for ECT
(Rev Code 901; procedure code 90870) and the number of units of ECT,
that is, the number of ECT treatments the patient received during the
IPF stay.
To establish the ECT per treatment payment, we used the pre-scaled
and pre-adjusted median cost for procedure code 90870 developed for the
Hospital Outpatient Prospective Payment System (OPPS), based on
hospital claims data. We explained in the RY 2005 IPF PPS final rule
that we used OPPS data because after a careful review and analysis of
IPF claims, we were unable to separate out the cost of a single ECT
treatment (69 FR 66922). We used the unadjusted hospital claims data
under the OPPS because we did not want the ECT payment under the IPF
PPS to be affected by factors that are relevant to OPPS, but not
specifically applicable to IPFs. The median cost was then standardized
and adjusted for budget neutrality. We also adjusted the ECT rate for
wage differences in the same manner that we adjust the per diem rate.
Since the ECT payment rate was established in the RY 2005 IPF PPS
rule, it has been updated annually by application of each year's market
basket, productivity adjustment, and wage index budget neutrality
factor to the previous year's ECT payment rate (referred to as our
``standard methodology'' in this section). While the ECT payment rate
has been updated each year by these factors, we have not recalculated
the ECT payment per treatment based on more recent cost data since the
establishment of the IPF PPS.
b. Proposed Increase to the Electroconvulsive Therapy Payment per
Treatment
For this FY 2025 IPF PPS proposed rule, we analyzed data in both
the IPF PPS and the OPPS. In the IPF PPS setting, our analysis of
recent IPF PPS data indicates that IPF costs have increased for stays
that include ECT treatments. As discussed in the next paragraph, our
analysis of these costs leads us to consider whether the current
payment per treatment for ECT is aligned with the additional costs
associated with stays that include ECT treatments. We began by
analyzing IPF stays with ECT treatment using the CY 2022 Medicare
Provider and Analysis Review (MedPAR) data. IPF stays with ECT
treatment comprised about 1.7 percent of all stays, which is a decrease
from the FY 2002 MedPAR data discussed in the RY 2005 IPF PPS final
rule, where stays with ECT treatment were 6.0 percent of all IPF stays.
A total of 288 IPF facilities had stays with ECT treatment in 2022,
with an average 6.7 units of ECT per stay. We compared the total cost
for stays with and without ECT treatment, and found that IPF stays with
ECT treatment were approximately three times more costly than IPF stays
without ECT treatment ($44,687.50 per stay vs. $15,432.30 per stay).
Most of the variance in cost was due to differences in the IPF length
of stay (LOS) (28.00 days for stays with ECT treatment vs. 13.43 days
for stays without ECT treatment). We note that the IPF PPS makes
additional per diem payments for longer lengths of stay, which makes
the total payment larger for a longer stay. However, we also observed
that there are differences in the per-day cost for stays with and
without ECT. We calculated the average cost per day for stays with and
without ECT treatment and found that stays with ECT treatment have an
average cost per day of $1,595.76, while stays without ECT treatment
have an average cost per day of $1,149.51.
Furthermore, as we discuss in section III.C.3.d.(2) of this
proposed rule, our latest regression analysis includes a control
variable to account for the presence of ECT during an IPF stay. That
control variable indicates that, holding all other patient-level and
facility-level factors constant, there is a statistically significant
increase in cost per day for IPF stays that include ECT, further
demonstrating that resource use is higher for IPF stays with ECT than
those without ECT. As we previously noted in the RY 2005 IPF PPS final
rule (69 FR 66922), IPF claims and cost data are not sufficiently
granular to identify the per-treatment cost of ECT. Therefore, we
examined the difference in ancillary costs for IPF stays with and
without ECT treatment. In the CY 2022 MedPAR data, the ancillary costs
per IPF stay with ECT treatment were $7,116.85 higher than ancillary
costs per IPF stay without ECT treatment. The ancillary costs were
calculated as follows: for each ancillary department (for example,
drugs or labs), the charges were multiplied by the department-level
CCR, and those department-level costs were summed across departments
for each stay. The average ancillary costs per stay were calculated
accordingly for stays with and without ECT treatment, revealing that
average ancillary costs per day are three times higher for stays with
ECT treatment: $99.36 for stays without ECT treatment versus $301.77
for stays with ECT treatment. Accounting for differences in length of
stay between stays with and without ECT, the average additional
ancillary cost per ECT unit was approximately $849.72.
Application of our standard methodology for updating the ECT
payment would result in an FY 2025 payment of $377.54 per ECT treatment
(based on the FY 2024 ECT payment amount of $385.58, increased by the
market basket update of 2.7 percent and reduced by the FY 2025 wage
index budget neutrality factor of 0.9998 and a refinement
standardization factor of 0.9536, which is the standardization factor
that would account for all other proposed refinements without
increasing the ECT per treatment). As we noted above, this ECT payment
would be added to the per diem and any applicable outlier payments for
the entire stay. CMS considered this rate in proposing to adjust the
ECT per treatment rate. However, the analysis of ancillary costs for
IPF stays with ECT treatment suggested that a further increase to the
current ECT payment amount per treatment could better align IPF PPS
payments with the increased costs of furnishing ECT. The ancillary cost
data show that costs for furnishing ECT have risen by a factor greater
than the standard methodology for updating the rate would adjust for.
It continues to be the case that, as we discussed in the RY 2005
IPF PPS final rule, current IPF cost and claims data are not
sufficiently granular to identify the per-treatment cost of ECT. We
believe that using the costs in the OPPS setting are the most accurate
for purposes of updating the ECT per treatment rate because we believe
this treatment requires comparable resources when performed in
outpatient and inpatient settings. Thus, we analyzed the most recent
OPPS cost information to consider changes to the ECT payment per
treatment for FY 2025.
The original methodology for determining the ECT payment per
treatment was based on the median cost for procedure code 90870
developed for the OPPS, as discussed in the RY 2005 IPF PPS final rule
(69 FR 66951). Since that time, the OPPS has adopted certain changes to
its methodology for calculating costs. In the CY 2013 OPPS/ASC final
rule with comment period (77
[[Page 23153]]
FR 68259 through 68270), CMS finalized a methodology for developing the
relative payment weights for Ambulatory Payment Classifications using
geometric mean costs instead of median costs. We explained that
geometric means better capture the range of costs associated with
providing services, including those cases where very efficient
hospitals have provided services at much lower costs. While medians and
geometric means both capture the impact of uniform changes, that is,
those changes that influence all providers, only geometric means
capture cost changes that are introduced slowly into the system on a
case-by-case or hospital-by-hospital basis, allowing us to detect
changes in the cost of services earlier.
We believe the rationale for using geometric mean cost in the OPPS
setting as the underpinning methodology for establishing payments
applies equally to the costs of providing ECT on a per treatment basis
under the IPF PPS. Therefore, in considering changes for the IPF PPS
ECT payment per treatment for FY 2025, we compared the costs observed
in the IPF setting to the geometric mean cost for an ECT treatment
posted as part of the CY 2024 OPPS/ASC update, which is based on CY
2022 outpatient hospital claims. Although we are proposing to increase
the ECT payment with reference to the CY 2024 OPPS ECT geometric mean
cost for FY 2025, we are not proposing to adopt the OPPS rate (which is
distinct from the geometric mean cost) for the ECT payment per
treatment for FY 2025 because the final OPPS rates include policy
decisions and payment rate updates that are specific to the OPPS. We
intend to continue to monitor the costs associated with ECT treatment
and may propose adjustments in the future as needed.
The pre-scaled and pre-adjusted CY 2024 OPPS geometric mean cost
for ECT is $675.93. Comparatively, the FY 2024 IPF ECT payment rate was
$385.58 (88 FR 51054). As discussed in the prior paragraphs, our
analysis of updated ancillary cost data indicates that the IPF PPS ECT
payment rate per treatment, when updated according to the standard
methodology alone, has not kept pace with the cost of furnishing the
treatment in the IPF setting. As we stated previously, we believe this
treatment requires comparable resources when performed in outpatient
and inpatient settings. Therefore, we are proposing to use the pre-
scaled and pre-adjusted CY 2024 OPPS geometric mean cost of $675.93 as
the basis for the IPF PPS ECT payment per treatment in FY 2025, as
discussed below. We are proposing to update $675.93 by the FY 2025 IPF
PPS payment rate update of 2.7 percent (3.1 percent IPF market basket
increase, reduced by the 0.4 percentage point productivity adjustment),
and the wage index budget neutrality factor of 0.9998 for FY 2025, in
alignment with our current standard methodology.
To account for budget neutrality, as discussed in section III.F of
this proposed rule, we are proposing to apply a refinement
standardization factor to the FY 2025 IPF PPS Federal per diem base
rate and to the ECT payment amount per treatment to account for this
proposed change to the ECT payment amount per treatment and all
proposed changes to the patient-level adjustment factors and to the ED
adjustment factor for FY 2025. We note that this proposed increase to
the ECT per treatment amount would be associated with a minor decrease
to the IPF Federal per diem base rate as a result of the refinement
standardization factor (0.9514 instead of 0.9536). We estimate that
this change would increase payments for IPFs that provide ECT, and
would decrease payments for IPFs that do not provide ECT. However, the
decrease in payments associated with this change would be no more than
approximately 0.2 percent, which would be offset by various other
proposed changes such as the proposed wage index changes, proposed
revisions to the IPF PPS patient-level adjustments, and the proposed
market basket increase for FY 2025.
We note that we have monitored the provision of ECT through
analysis of claims data since the beginning of the IPF PPS, and have
not observed any indicators that payment is inappropriately
incentivizing the provision of ECT to IPF patients. We intend to
continue monitoring the provision of ECT through further analysis of
IPF PPS claims data.
A detailed discussion of the distributional impacts of this
proposed change is found in section VIII.C of this proposed rule. We
welcome comments regarding our analysis, including any comments that
could inform our understanding of where ECT costs are allocated in cost
reports in order to potentially inform improved collection of data on
ECT treatment costs in the IPF setting. We also welcome comments on
whether it may be appropriate to collect additional ECT-specific costs
on the hospital cost report. Lastly, we are proposing that if more
recent data become available, we would use such data, if appropriate,
to determine the FY 2025 Federal per diem base rate and ECT payment per
treatment for the FY 2025 IPF PPS final rule.
IPFs must include a valid procedure code for ECT services provided
to IPF beneficiaries to bill for ECT services, as described in our
Medicare Claims Processing Manual, Chapter 3, Section 190.7.3
(available at <a href="https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf">https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf</a>). There were no changes to the ECT
procedure codes used on IPF claims in the final update to the ICD-10-
PCS code set for FY 2024. Addendum B to this proposed rule shows the
ECT procedure codes for FY 2025 and is available on the CMS website at
<a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/tools.html">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/tools.html</a>.
3. Proposed Update of the Federal per Diem Base Rate and
Electroconvulsive Therapy Payment per Treatment
The current (FY 2024) Federal per diem base rate is $895.63 and the
ECT payment per treatment is $385.58. For the proposed FY 2025 Federal
per diem base rate, we applied the payment rate update of 2.7
percent,--that is, the proposed 2021-based IPF market basket increase
for FY 2025 of 3.1 percent reduced by the proposed productivity
adjustment of 0.4 percentage point--the proposed wage index budget
neutrality factor of 0.9998 (as discussed in section III.D.1 of this
proposed rule), and a proposed refinement standardization factor of
0.9514 (as discussed in section III.F of this proposed rule) to the FY
2024 Federal per diem base rate of $895.63, yielding a proposed Federal
per diem base rate of $874.93 for FY 2025. As discussed in section
III.B.2 of this proposed rule, we are proposing to increase the ECT
payment per treatment for FY 2025 in addition to our routine updates to
the rate. We applied the proposed 2.7 percent payment rate update, the
proposed 0.9998 wage index budget neutrality factor, and the proposed
0.9514 refinement standardization factor to the proposed payment per
treatment based on the CY 2024 OPPS geometric mean cost of $675.93,
yielding a proposed ECT payment per treatment of $660.30 for FY 2025.
Section 1886(s)(4)(A)(i) of the Act requires that for RY 2014 and
each subsequent RY, in the case of an IPF that fails to report required
quality data with respect to such RY, the Secretary will reduce any
annual update to a standard Federal rate for discharges during the RY
by 2.0 percentage points. Therefore, we are applying a 2.0 percentage
point reduction to the annual update to the Federal per diem
[[Page 23154]]
base rate and the proposed ECT payment per treatment as follows:
<bullet> For IPFs that fail to report required data under the IPFQR
Program, we would apply a 0.7 percent payment rate update--that is, the
proposed IPF market basket increase for FY 2025 of 3.1 percent reduced
by the proposed productivity adjustment of 0.4 percentage point for an
update of 2.7 percent, and further reduced by 2.0 percentage points in
accordance with section 1886(s)(4)(A)(i) of the Act. We would also
apply the proposed refinement standardization factor of 0.9514 and the
proposed wage index budget neutrality factor of 0.9998 to the FY 2024
Federal per diem base rate of $895.63, yielding a proposed Federal per
diem base rate of $857.89 for FY 2025.
<bullet> For IPFs that fail to report required data under the IPFQR
Program, we would apply the proposed 0.7 percent annual payment rate
update, the proposed 0.9514 refinement standardization factor, and the
proposed 0.9998 wage index budget neutrality factor to the proposed
payment per treatment based on the CY 2024 OPPS geometric mean cost of
$675.93, yielding a proposed ECT payment per treatment of $647.45 for
FY 2025.
We are proposing that if more recent data become available, we
would use such data, if appropriate, to determine the FY 2025 Federal
per diem base rate and ECT payment per treatment for the FY 2025 IPF
final rule.
C. Proposed Updates and Revisions to the IPF PPS Patient-Level
Adjustment Factors
1. Overview of the IPF PPS Adjustment Factors and Proposed Revisions
The current (FY 2024) IPF PPS payment adjustment factors were
derived from a regression analysis of 100 percent of the FY 2002
Medicare Provider and Analysis Review (MedPAR) data file, which
contained 483,038 cases. For a more detailed description of the data
file used for the regression analysis, we refer readers to the RY 2005
IPF PPS final rule (69 FR 66935 through 66936).
For FY 2025, we are proposing to implement revisions to the
methodology for determining payment rates under the IPF PPS. As we
noted earlier in this FY 2025 IPF PPS proposed rule, section
1886(s)(5)(D) of the Act, as added by section 4125(a) of the CAA, 2023
requires that the Secretary implement revisions to the methodology for
determining the payment rates under the IPF PPS for psychiatric
hospitals and psychiatric units, effective for RY 2025 (FY 2025). The
revisions may be based on a review of the data and information
collected under section 1886(s)(5)(A) of the Act. Accordingly, we are
proposing to revise the patient-level IPF PPS payment adjustment
factors as discussed in section III.C.4. of this proposed rule,
effective for FY 2025. We have developed proposed adjustment factors
based on a regression analysis of IPF cost and claims data, which is
discussed in greater detail in the following sections of this proposed
rule. The primary sources of this analysis are CY 2019 through 2021
MedPAR files and Medicare cost report data (CMS Form 2552-10, OMB No.
0938-0050) \1\ from the FY 2019 through 2021 Hospital Cost Report
Information System (HCRIS). For each year (2019 through 2021), if a
provider did not have a Medicare cost report for that year, we used the
provider's most recent available Medicare cost report prior to the year
for which a Medicare cost report was missing, going back to as early as
2018. Section III.C.3 of this proposed rule discusses the development
of the proposed revised case-mix adjustment regression.
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\1\ <a href="https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202206-0938-017">https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202206-0938-017</a>.
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2. History of IPF PPS Cost and Claims Analyses
In the FY 2023 IPF PPS proposed rule (87 FR 19428 through 19429),
we briefly discussed past analyses and areas of interest for future
refinement, about which we previously solicited comments. CMS also
released a technical report posted to the CMS website \2\ accompanying
the rule, summarizing these analyses. In that same proposed rule, we
described the results of the agency's latest analysis of the IPF PPS
and solicited comments on certain topics from the report. We summarized
the considerations and findings related to our analyses of the IPF PPS
adjustment factors in the FY 2023 IPF PPS final rule (46864 through
46865).
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\2\ <a href="https://www.cms.gov/files/document/technical-report-medicare-program-inpatient-psychiatric-facilities-prospective-payment-system.pdf">https://www.cms.gov/files/document/technical-report-medicare-program-inpatient-psychiatric-facilities-prospective-payment-system.pdf</a>.
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In the FY 2024 IPF PPS proposed rule (88 FR 21269 through 21272),
we requested information from the public to inform revisions to the IPF
PPS required by the CAA, 2023. Specifically, we sought information
about which data and information would be most appropriate and useful
for the purposes of refining IPF PPS payments. We requested information
related to the specific types of data and information mentioned in the
CAA, 2023. We also solicited comments on the reporting of ancillary
charges, such as labs and drugs, on IPF claims. Lastly, we presented
and solicited comments on the latest results of our analysis of social
drivers of health (SDOH).
In response to the requests for information, commenters offered a
number of suggestions for further analysis, including recommendations
to consider adjusting payment for patients with sleep apnea, violent
behavior, and patients that transfer from an acute care unit. We
discuss the analysis conducted and our findings, as related to patient-
level adjustment factors, in section III.C.3 of this proposed rule.
The primary goal in refining the IPF PPS payment adjustment factors
is to pay each IPF an appropriate amount for the efficient delivery of
care to Medicare beneficiaries. The system must be able to account
adequately for each IPF's case-mix to allow for both fair distribution
of Medicare payments and access to adequate care for those
beneficiaries who require more costly care. As required by section
1886(s)(5)(D)(iii) of the Act, as added by section 4125(a) of the CAA,
2023, proposed revisions to the IPF PPS adjustment factors must be
budget neutral. As discussed in section III.F of this proposed rule, we
are applying a refinement standardization factor to the proposed IPF
PPS payment rates to maintain budget neutrality for FY 2025.
3. Development of the Proposed Revised Case-Mix Adjustment Regression
To ensure that the IPF PPS continues to account adequately for each
IPF's case-mix, we performed an extensive regression analysis of the
relationship between the per diem costs and both patient and facility
characteristics to identify those characteristics associated with
statistically significant cost differences. We discuss the results of
this regression analysis in section III.C.3.e. of this proposed rule.
We further discuss proposed revisions to the IPF PPS patient-level
adjustment factors based on this regression analysis in section III.C.4
of this proposed rule.
As discussed in greater detail in section III.C.3.c. of this
proposed rule, we computed a per diem cost for each Medicare inpatient
psychiatric stay, including routine operating, ancillary, and capital
components using information from the CY 2019 through CY 2021 MedPAR
files and data from the 2019 through 2021 Medicare cost reports,
backfilling with Medicare cost reports from the most recent prior year
when necessary.
We began with a 100 percent sample of the CY 2019 through CY 2021
MedPAR data files, which contain a
[[Page 23155]]
total of 1,111,459 stays from 1,684 IPFs. As discussed in section
III.C.3.b. of this proposed rule, we applied several data restrictions
and exclusions to obtain the set of data used for our regression
analysis. The MedPAR data files used for this regression analysis
contain a total of 806,611 stays from 1,643 IPFs, which reflect the
removal of 41 providers and 304,848 stays with missing or erroneous
data. To include as many IPFs as possible in the regression, we used
the cost report information for each provider corresponding to the year
of claims, when available, and substituted the most recent prior
available cost report information for routine cost and ancillary cost
to charge ratios if the corresponding year's data was not available.
a. Data Sources
For the regression analysis, we chose to use a combined set of CY
2019 through 2021 MedPAR data. Our analysis showed that using a
combined set of data from multiple years yields the most stable and
consistent result. When we looked at the results for each year
individually, we found that some DRGs and comorbidity categories were
not statistically significant due in part to small sample size. In
addition, during FY 2020, the U.S. healthcare system undertook an
unprecedented response to the Public Health Emergency (PHE) declared by
the Secretary of the Department of Health and Human Services on January
31, 2020 in response to the outbreak of respiratory disease caused by a
novel (new) coronavirus that has been named ``SARS CoV 2'' and the
disease it causes, which has been named ``coronavirus disease 2019''
(abbreviated ``COVID-19''). We believe the aggregated three-year
regression serves to smooth the impact of changes in utilization driven
by the COVID-19 PHE, as well as significant changes in staffing and
labor costs that commenters noted in response to the FY 2023 and FY
2024 IPF PPS proposed rules. As discussed earlier in this proposed
rule, we used 2019 through 2021 Medicare cost report data to retain as
many records as possible for analysis.
We also used several other data sources to identify the IPF
population for analysis and to construct variables in the regression
model:
<bullet> Provider of Services (POS) File: The POS file contains
facility characteristics including name, address, and types of services
provided.
<bullet> Provider Specific Data for Public Use Files for the IPF
PPS: The Provider Specific File (PSF) contains data used to calculate
COLA factors and identify the Core-Based Statistical Area (CBSA). CBSA
is used to match providers with corresponding wage index data, which is
used to adjust the calculation of the Federal per diem base rate to
account for geographic differences in costs.
<bullet> Common Working File (CWF) Inpatient Claims Data: The CWF
contains data regarding ECT treatments provided during an IPF stay.
Among the 1,643 providers included in the regression analysis
sample, the majority had their most recent Medicare cost report
information corresponding to the year of the MedPAR data file.
Specifically, for the CY 2019 MedPAR data file, 99.5 percent (1,551
providers) used FY 2019 Medicare cost reports, and 0.5 percent (8
providers) used FY 2018 Medicare cost reports. For CY 2020, 99.7
percent (1,523 providers) used FY 2020 Medicare cost reports, and 0.3
percent (5 providers) used FY 2019 Medicare cost reports. For CY 2021,
97.6 percent (1,435 providers) used FY 2021 Medicare cost reports, and
2.4 percent (35 providers) used FY 2020 Medicare cost reports. This
approach allowed us to use the most current and relevant cost report
data, ensuring the robustness and accuracy of our analysis.
b. Trims and Assumptions
To identify the IPF population for analysis, we matched MedPAR
records to facility-level information from Medicare cost reports, the
POS file, and the PSF. We included MedPAR stays that met the following
criteria:
<bullet> Hospital CMS Certification Number (CCN) contains ``40,''
``41,'' ``42,'' ``43,'' or ``44'' in the third and fourth position or a
special unit code of ``S'' or ``M'' for psychiatric unit or psychiatric
unit in a critical access hospital.
<bullet> Beneficiary primary payer code is equal to ``Z'' or blank,
indicating Medicare is the primary payer.
<bullet> Group Health Organization (GHO) paid code is equal to zero
or blank, indicating that a GHO has not paid the facility for the stay.
<bullet> National Claims History (NCH) claim type code is equal to
``60,'' an inpatient claim.
<bullet> Number of utilization days was greater than zero.
To promote the accuracy and completeness of data included in the
regression model, we completed a series of trimming steps to remove
missing and outlier data. Before any trims or exclusions were applied,
there were 1,684 providers in the MedPAR data file. First, we matched
facilities from the MedPAR dataset to the most recent Medicare cost
report file available from CY 2018 to CY 2021, and excluded facilities
that did not have a Medicare cost report available from 2018 to 2021.
If facilities had more than one Medicare cost report in a given year,
we used the Medicare cost report representing the longest time span. We
identified 1 provider in CY 2019, 5 providers in CY 2020, and 4
providers in CY 2021 that had no available Medicare cost report
information. In total, we excluded data from 5 unique providers that
had no available Medicare cost report information from CY 2019 to CY
2021.
Next, we trimmed facilities with extraordinarily high or low costs
per day. We removed facilities with outlier routine per diem costs,
defined as those falling outside of the range of the mean logarithm of
routine costs per diem plus or minus 3.00 standard deviations. We also
removed stays with outlier total per diem costs, defined as those
falling outside the range of the mean per diem cost by facility type
(psychiatric hospitals and psychiatric units) plus or minus 3.00
standard deviations. The average and standard deviations of the total
per diem cost (routine and ancillary costs) were computed separately
for stays in psychiatric hospitals and psychiatric units because we did
not want to systematically exclude a larger proportion of cases from
one type of facility. In applying these trims across all three data
years used in our regression model, there were 104 providers with
routine per diem costs outside 3.00 standard deviations from the mean,
and 47 providers with total per diem costs outside 3.00 standard
deviations from the mean. Specifically, this includes 24 providers in
CY 2019, 41 providers in CY 2020, and 39 providers in CY 2021 excluded
for outlier routine per diem costs. We identified 25 providers in CY
2019, 1 provider in CY 2020, and 21 providers in CY 2021 that we
excluded for outlier total per diem costs. In total, we excluded data
from 23 unique providers with outlier routine per diem costs and 8
unique providers with outlier total per diem costs.
We also removed stays at providers without a POS file or PSF. There
were 5 providers without a POS file or PSF during the period CY 2019 to
CY 2021; therefore, we are excluding data from these 5 providers. Only
1 unique provider was entirely excluded with no POS file or PSF from CY
2019 to CY 2021. Additionally, 1 provider was excluded because no stays
had one of the recognized IPF PPS DRGs assigned.
In summary, the application of these data preparation steps
resulted in excluding 5 providers because they did not have a cost
report available from 2018 to 2021, 23 providers with routine per diem
costs outside 3.00 standard
[[Page 23156]]
deviations from the mean, and 8 providers with total per diem costs
outside 3.00 standard deviations from the mean. We also excluded 1
provider without a POS file or PSF, 1 provider with no stays with IPF
PPS DRGs, and 3 providers based on IPF stays restrictions. In total,
the exclusion of these 41 providers resulted in the removal of 304,848
stays from our original total of 1,111,459 stays.
We considered trimming stays from facilities where 95 percent or
more of stays had no ancillary charges because we assumed that the cost
data from these facilities were inaccurate or incomplete. This is the
trimming methodology that we applied to the analysis described in the
technical report released along with the FY 2023 IPF PPS proposed rule.
As previously discussed, the IPF PPS regression model uses the sum of
routine and ancillary costs as the dependent variable, and we assumed
that data from facilities without ancillary charge data would be
inadequate to capture variation in costs. When we examined the claims
from 2018, which we used for prior analysis, this trimming step
resulted in removing almost one-quarter of total stays from the
unrestricted 2018 MedPAR dataset (82,491 out of 364,080 total stays).
This trimming step also resulted in disproportionate exclusion of
certain types of facilities, particularly freestanding psychiatric
hospitals that were for-profit or government-operated, as well as all-
inclusive rate providers. Approximately 55 percent of stays from
freestanding facilities would be removed, compared to just 0.3 percent
of stays in psychiatric units. In the analysis described in the FY 2023
IPF PPS proposed rule (87 FR 19429), we attempted to address this
disproportionate removal of stays by facility type by applying weights
by facility type and ownership in the regression model to account for
excluded providers and to avoid biasing the sample towards stays from
providers in psychiatric units.
In response to the analysis described in the FY 2023 IPF PPS
proposed rule (87 FR 19429), commenters raised concerns about the large
number of stays excluded from the regression analysis, and questioned
whether the ancillary charge data were truly missing, as all-inclusive
rate providers are not required to report separate ancillary charges.
We agree that this trimming step reduces the representativeness of the
IPF population used in the regression model and may increase the
potential for bias of the regression coefficients used for payment
adjustments. Furthermore, as discussed in section III.E.4. of this
proposed rule, we are clarifying cost reporting requirements and
implementing operational changes that we believe will increase the
accuracy of the cost information reported in the future. Specifically,
CMS will issue instructions to the MACs and put in place edits for cost
reporting periods beginning on or after October 1, 2024, ensuring that
only government-owned or tribally owned IPF hospitals will be permitted
to file an all-inclusive cost report. All other IPF hospitals would be
required to have a charge structure and to report ancillary costs and
charges on their cost reports. We expect that this proposed change
would support increased accuracy of future payment refinements to the
IPF PPS.
When we examined the claims from CY 2019 to CY 2021, this trimming
step would have resulted in a loss of a significant number of providers
(324 providers in CY 2019, 330 providers in CY 2020, and 336 providers
in CY 2021). Due to the concerns that commenters previously raised
(which we summarized in the FY 2024 IPF PPS final rule (88 FR 51097
through 51098)), and to include as many claims as possible in the
regression analysis, we have not trimmed stays from facilities with
zero or minimal ancillary charges. As a result, we observed a
significant reduction in data loss when comparing our latest regression
model with the model described in the FY 2023 IPF PPS proposed rule. By
including, rather than trimming, facilities with low or no ancillary
charge data, we prevented the loss of 288 providers across the three
years, allowing for a more inclusive analysis. These providers
accounted for approximately 194,673 stays included in our data set.
We present our regression results in section III.C.3.e. of this
proposed rule without the application of any trimming or subsequent
weighting to account for the removal of stays from facilities with zero
or minimal ancillary charges.
c. Calculation of the Dependent Variable
The IPF PPS regression model uses the natural logarithm of per diem
total cost as the dependent variable. We computed a per diem cost for
each Medicare inpatient psychiatric stay, including routine operating,
ancillary, and capital components, using information from the combined
CY 2019 through 2021 MedPAR file and data from the 2018 through 2021
Medicare cost reports. For each MedPAR CY, we examined the
corresponding Medicare cost report, and if a provider's cost-to-charge
ratio was missing from the matching year's cost report, we looked at
the provider's cost report from the prior year to obtain the most
recent cost-to-charge value for the provider. We applied a prior-year
cost-to-charge ratio to 8 providers from the CY 2019 MedPAR claims, 5
providers from the CY 2020 MedPAR claims, and 35 providers from the CY
2021 MedPAR claims.
To calculate the total cost per day for each inpatient psychiatric
stay, routine costs were estimated by multiplying the routine cost per
day from the IPF's Medicare cost report (Worksheet D-1, Part II, column
1, line 38) by the number of Medicare covered days in the MedPAR stay
record. Ancillary costs were estimated by multiplying each departmental
cost-to-charge ratio (calculated by dividing the amount obtained from
Worksheet C, columns 5, by the sum of Worksheet C, columns 6 and 7) by
the corresponding ancillary charges in the MedPAR stay record. The
total cost per day was calculated by summing routine and ancillary
costs for the stay and dividing it by the number of Medicare covered
days for each day of the stay.
To address extreme cost-to-charge ratios, we winsorized the
distributions of the 17 ancillary cost centers from Worksheet C of the
cost report at the 2nd and 98th percentiles. That is, if the cost-to-
charge ratio was missing and there was a charge on the claim, the cost-
to-charge ratio was imputed to the calculated median value for each
respective cost center.
The total cost per day (also referred to as per diem cost) was
adjusted for differences in cost across geographic areas using the FY
2019 through 2021 IPF wage index and COLA corresponding to each MedPAR
data year. We adjusted the labor-related portion of the per diem cost
using the IPF wage index to account for geographic differences in labor
cost and adjusted the non-labor portion of the per diem cost by the
COLA adjustment factors for IPFs in Alaska and Hawaii. We used IPF PPS
labor-related share and non-labor-related share finalized for each
year, FY 2019 through FY 2021, to determine the amount of the per diem
cost that is adjusted by the wage index and the COLA, respectively. We
calculated the adjusted cost using the following formula:
Wage adjusted per diem cost = per diem cost/(wage index * labor-related
share + COLA * (1-labor-related share)).
d. Independent Variables
Independent variables in the regression model are patient-level and
facility-level characteristics that affect
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the dependent variable in the model, which is per diem cost. As
discussed in the following sections, the updated regression model for
this proposed rule includes adjustment-related variables and control
variables. Adjustment related variables are used for adjusting payment,
and as we discuss in section III.C.4 of this proposed rule, we are
proposing to revise the IPF PPS patient-level adjustment factors based
on the regression results for many of the adjustment-related variables
in the model. Control variables are used to account for variation in
the dependent variable that is associated with factors outside the
adjustment factors of the payment model.
(1) Adjustment-Related Variables
Patient-level adjustment-related variables included in the
regression model are variables for DRG assignment, comorbidity
categories, age, and length of stay. We note that facility-level
adjustment-related variables for rural status and teaching status are
also included in the model; however, we are not proposing revisions to
the rural or teaching adjustments for FY 2025. We discuss the latest
results of the regression analysis for facility-level adjustments in
greater detail in section IV.A. of this proposed rule.
(2) Control Variables
The regression model used to determine IPF PPS payment adjustments
in the RY 2005 IPF PPS final rule (69 FR 66922) included control
variables to account for facilities' occupancy rate, a control variable
to indicate if the patient received ECT, and a control variable for
IPFs that do not bill for ancillary charges. In the updated regression
model for this FY 2025 IPF PPS proposed rule, we have removed the
occupancy control variables and the control variable for IPFs that do
not bill for ancillary charges. In addition, we have retained the
control variable for patients receiving ECT and added control variables
for the data year. We also added a control variable for the presence of
ED charges on the claim. We discuss considerations related to these
control variables and others in the following paragraphs.
The 2004 regression model included two control variables for
occupancy rate. One was a continuous variable for the facility's
logarithmic-transformed occupancy rate. The other was a categorical
variable indicating a facility had an occupancy rate below 30 percent.
Both of these variables were found to be associated with statistically
significant increases in cost. In the RY 2005 IPF PPS final rule, we
adopted the structural approach and included these control variables in
the regression. We explained that it was appropriate to control for
variations in the occupancy rate in estimating the effects of the
payment variables on per diem cost to avoid compensating facilities for
inefficiency associated with underutilized fixed costs (69 FR 66934).
As we discussed in the FY 2023 IPF PPS proposed rule, our analysis
found that the occupancy control variables were associated with rural
status. We solicited comments on the potential removal of the occupancy
control variables from the model (87 FR 19429). In response, we
received several comments in support of removing the occupancy control
variables, due to the relationship between these control variables and
the rural adjustment (87 FR 46865). Commenters cited the importance of
rural IPFs as the primary points of care and access for many Medicare
beneficiaries who cannot travel to urban areas for mental health
services. We considered the potential negative impact to rural
facilities of retaining the occupancy control variables in the
regression model. We agree with the commenters who noted the importance
of maintaining stability in payments for rural IPFs; therefore, we did
not include any occupancy control variables in our regression model.
In addition, we considered including a control variable for IPFs
that do not bill for ancillary services. As we discussed in the RY 2005
IPF PPS final rule (69 FR 66936), we included variables in the
regression to control for psychiatric hospitals that do not bill
ancillary costs. However, at that time, the number of IPFs who did not
bill for ancillary costs was relatively small and consisted mostly of
government-operated facilities. As we discuss later in section III.E.4
of this proposed rule, an increasing number of IPFs have stopped
reporting ancillary charges on their claims, which means that ancillary
cost information is not available for stays at these IPFs.
We considered whether to include a control variable for facilities
that do not report ancillary charges. We considered that the inclusion
of a control variable would only account for differences in the level
of cost between IPFs with and without reported ancillary costs and
would not facilitate comparison of costs between all IPFs in our
sample. In addition, we found that facilities that did not report
ancillary charges also tended to have lower routine costs; that is, our
analysis showed that these facilities would have overall lower costs
per day, regardless of whether ancillary costs were considered in the
cost variable. We considered that the inclusion of a control variable
in the regression model would account for these differences in overall
cost, which would impact the size of payment-related adjustment factors
that are correlated with the prevalence of missing ancillary charge
data. For this reason, in developing a regression model for proposing
revisions to the IPF PPS, we did not include a control variable to
account for facilities that report zero or minimal ancillary charges.
As noted earlier, the original model also included a control
variable for the presence of ECT. This is because ECT is paid on a per-
treatment basis under the IPF PPS. As discussed in more detail in
section III.B.2. of this FY 2025 IPF PPS proposed rule, we continue to
observe that IPF stays with ECT have significantly higher costs per
day. We are proposing to continue paying for ECT on a per-treatment
basis; therefore, we included a control variable to account for the
additional costs associated with ECT, which would continue to be paid
for outside the regression model.
Similarly, we included a control variable for stays with emergency
department (ED)-related charges. The original model did not include an
ED control variable, because ED costs were excluded from the dependent
variable of IPF per diem costs. Our regression model for this FY 2025
IPF PPS proposed rule includes all costs associated with each IPF stay,
including ED costs. As discussed in section III.D.4. of this proposed
rule, we are proposing to calculate the ED adjustment in accordance
with our longstanding methodology, separate from the regression model.
However, we included a control variable for stays with ED charges to
control for the additional costs associated with ED admissions, which
are paid under the ED adjustment outside the regression model.
Lastly, we included control variables for the data year. Because
the model used a combined set of data from 3 years, these control
variables are included in the model to account for differences in cost
levels between 2019, 2020, and 2021, which would be driven by economic
inflation and other external factors unrelated to the independent
variables in the regression model.
e. Regression Results
Table 2 presents the results of our regression model. We discuss
these results and our related proposals to
[[Page 23158]]
revise the IPF PPS patient-level adjustment factors in section III.C.4
of this proposed rule.
This regression model includes a total of 806,611 stays, and the r-
squared value of the model is 0.32340, meaning that the independent
variables included in the regression model can explain approximately
32.3 percent of the variation in per diem cost among IPF stays.
Except for the teaching variable, each of the adjustment factors in
Table 2 is the exponentiated regression coefficient of our regression
model, which as we previously noted uses the natural logarithm of per
diem total cost as the dependent variable. We present the exponentiated
regression results, as these most directly translate to the way that
IPF PPS adjustment factors are calculated for payment purposes. That
is, the exponentiated adjustment factors presented below represent a
percentage increase or decrease in per diem cost for IPF stays with
each characteristic. In the case of the teaching variable, the result
in Table 2 is the un-exponentiated regression coefficient. As discussed
in section III.D of this proposed rule, the current IPF PPS teaching
adjustment is calculated as 1 + a facility's ratio of interns and
residents to beds, raised to the power of 0.5150. The coefficient for
teaching status presented in Table 2 can be interpreted in the same
way.
For certain categorical variables, including DRG, age, length of
stay, and the year control variables, results for the reference groups
are not shown in Table 2. The DRG reference group is DRG 885, because
this DRG represents the majority of IPF PPS stays. The age reference
group is the Under 45 category, because this group is associated with
the lowest costs after accounting for all other patient characteristics
in the model. The reference group for length of stay is 10 days, which
corresponds to the reference group used in the original regression
model from the RY 2005 IPF PPS final rule. Lastly, the year control
reference group is CY 2021. Each of these reference groups not shown in
Table 2 effectively has an adjustment factor of 1.00 in the regression
model.
As shown in Column 5 of Table 2, we considered the regression
factors to be statistically significant when the p-value was less than
or equal to the significance level of 0.05 (*), 0.01 (**), and 0.001
(***). Columns 6 and 7 of Table 2 show the lower and upper bounds of
the 95-percent confidence interval (CI).
BILLING CODE 4120-01-P
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BILLING CODE 4120-01-C
4. Proposed Updates and Revisions to the IPF PPS Patient-Level
Adjustments
The IPF PPS includes payment adjustments for the following patient-
level 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. As
discussed in section III.C.3. of this proposed rule, we are proposing
to derive updated IPF PPS adjustment factors for FY 2025 using a
regression analysis of data from the CY 2019 through 2021 MedPAR data
files and Medicare cost report data from the 2018 through FY 2021
Hospital Cost Report Information System (HCRIS). However, we have used
more recent claims (specifically, the December, 2023 update of the FY
2023 IPF PPS MedPAR claims) and cost data from the January, 2024 update
of the provider-specific file (PSF) to simulate payments to finalize
the outlier fixed dollar loss threshold amount and to assess the impact
of the IPF PPS updates. More information about the data used for the
impact simulations is found in section VIII.C of this FY 2025 IPF PPS
proposed rule. As discussed in section III.C.3. of this proposed rule,
by adjusting for DRGs, comorbidities, age, and length of the stay,
along with the facility-level variables and control variables in the
model, we were able to explain approximately 32.3 percent of the
variation in per diem cost among IPF stays.
In addition, we are proposing routine coding updates for FY 2025
for our longstanding code first and IPF PPS comorbidities. Furthermore,
as discussed in section III.C.4.a.(2) of this proposed rule, we are
proposing to adopt a sub-regulatory process for future routine coding
updates.
a. Proposed Updated and Revisions to MS-DRG Assignment
(1) Background
We believe it is important to maintain for IPFs the same diagnostic
coding and DRG classification 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 (MS-DRGs) that were utilized at the time under
the IPPS. In the RY 2009 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 RY
2009 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 RY 2009 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 discussed in detail in the RY 2004 IPF
proposed rule (68 FR 66923; 66928 through 66933) and the RY 2005 IPF
final rule (69 FR 66933 through 66960). 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.
In the FY 2015 IPF PPS final rule published August 6, 2014 in the
Federal Register titled, ``Inpatient Psychiatric Facilities Prospective
Payment System--Update for FY Beginning October 1, 2014 (FY 2015)'' (79
FR 45945 through 45947), we finalized conversions of the ICD-9-CM-based
MS-DRGs to ICD-10-CM/PCS-based MS-DRGs, which were implemented on
October 1, 2015. Further information on the ICD-10-CM/PCS MS-DRG
conversion project can be found on the CMS ICD-10-CM website at <a href="https://www.cms.gov/medicare/coding-billing/icd-10-codes/icd-10-ms-drg-conversion-project">https://www.cms.gov/medicare/coding-billing/icd-10-codes/icd-10-ms-drg-conversion-project</a>.
[[Page 23162]]
(2) Proposal To Adopt Sub-Regulatory Process for Publication of Coding
Changes
As discussed in the FY 2015 IPF PPS proposed rule (79 FR 26047)
every year, changes to the ICD-10-CM and the ICD-10-PCS coding system
have been 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. In accordance with Sec. 412.428(e), we have
historically described in the IPF PPS proposed and final rules the ICD-
10-CM coding changes and DRG classification changes that have been
discussed in the annual proposed and final hospital IPPS regulations.
This has typically involved a discussion in the proposed rule about
coding updates to be effective October 1 of each year, with a summary
of comments in the final rule along with a description of additional
finalized codes for October.
In the FY 2022 IPPS/LTCH PPS final rule (86 FR 44950 through
44956), we adopted an April 1 implementation date for ICD-10-CM
diagnosis and ICD-10-PCS procedure code updates in addition to the
annual October 1 update of ICD-10-CM diagnosis and ICD-10-PCS procedure
codes, beginning with April 1, 2022. In that rule, we noted the intent
of this April 1 implementation date is to allow flexibility in the ICD-
10 code update process. Currently, as noted earlier in this proposed
rule, the IPF PPS uses the IPPS DRG assignments, which are applied to
IPF PPS claims; these DRG assignments reflect the change in process
that the IPPS adopted for FY 2022. To maintain consistency with IPPS
policy, we are proposing to follow the same process beginning in FY
2025. This means that for routine coding updates that incorporate new
or revised codes, we are proposing to adopt these changes through a
sub-regulatory process. Beginning in FY 2025, we would operationalize
such coding changes in a Transmittal/Change Request, which would align
with the way coding changes are announced under the IPPS.
For example, we are proposing that for April 2025, we would adopt
routine coding updates for the IPF PPS comorbidity categories, code
first policy, ECT code list, and DRG assignment via sub-regulatory
guidance. These coding updates would take effect April 1, 2025. In
accordance with Sec. 412.428(e), we would describe these coding
changes, along with any coding updates that would be effective for
October 1, 2025, in the FY 2026 IPF PPS proposed rule. We would
summarize and respond to any comments on these April and October coding
changes in the FY 2026 IPF PPS final rule.
The proposed update aims to allow flexibility in the ICD-10 code
update process for the IPF PPS and reduces the lead time for making
routine coding updates to the IPF PPS code first list, comorbidities,
and ECT coding categories. In addition, the IPPS sub-regulatory process
continues to manage DRG assignment changes which apply to the DRG
assignments used in the IPF PPS. Finally, we are clarifying that we
would only apply this sub-regulatory process for routine coding
updates. Any future substantive revisions to the IPF PPS DRG
adjustments, comorbidities, code first policy, or ECT payment policy
would be proposed through notice and comment rulemaking. We solicit
public comments on this proposal.
(3) Routine Coding Updates for DRG Assignments
The diagnoses for each IPF MS-DRG will be updated as of October 1,
2024, using the final IPPS FY 2025 ICD-10-CM/PCS code sets. The FY 2025
IPPS/LTCH PPS final rule will include tables of the changes to the ICD-
10-CM/PCS code sets that underlie the proposed FY 2025 IPF MS-DRGs.
Both the FY 2025 IPPS final rule and the tables of final changes to the
ICD-10-CM/PCS code sets, which underlie the FY 2025 MS-DRGs, will be
available on the CMS IPPS website at <a href="https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps">https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps</a>.
(4) Code First
As discussed in the ICD-10-CM Official Guidelines for Coding and
Reporting, certain conditions have both an underlying etiology and
multiple body system manifestations due to the underlying etiology. For
such conditions, the ICD-10-CM has a coding convention that requires
the underlying condition be sequenced first, followed by the
manifestation. Wherever such a combination exists, there is a ``use
additional code'' note at the etiology code, and a ``code first'' note
at the manifestation code. These instructional notes indicate the
proper sequencing order of the codes (etiology followed by
manifestation). In accordance with the ICD-10-CM Official Guidelines
for Coding and Reporting, when a primary (psychiatric) diagnosis code
has a code first note, the provider will follow the instructions in the
ICD-10-CM Tabular List. The submitted claim goes through the CMS
processing system, which will identify the principal diagnosis code as
non-psychiatric and search the secondary codes for a psychiatric code
to assign a DRG code for adjustment. The system will continue to search
the secondary codes for those that are appropriate for comorbidity
adjustment. For more information on the code first policy, we refer
readers to the RY 2005 IPF PPS final rule (69 FR 66945). We also refer
readers to sections I.A.13 and I.B.7 of the FY 2020 ICD-10-CM Coding
Guidelines, which is available at <a href="https://www.cdc.gov/nchs/data/icd/10cmguidelinesFY2020_final.pdf">https://www.cdc.gov/nchs/data/icd/10cmguidelinesFY2020_final.pdf</a>. 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-10-CM (79 FR 46009). In FY 2018, FY
2019, and FY 2020, there were no changes to the final ICD-10-CM codes
in the IPF Code First table. For FY 2021 and FY 2022, there were 18
ICD-10-CM codes deleted from the final IPF Code First table. For FY
2023, there were 2 ICD-10-CM codes deleted and 48 ICD-10-CM codes added
to the IPF Code First table. For FY 2024, there were no proposed
changes to the Code First Table.
We are proposing to continue our existing code first policy. As
outlined in our proposal to incorporate a sub-regulatory process for
the publication of coding changes, we are proposing to adopt a sub-
regulatory approach to handle the coding updates, which removes the
requirement to discuss coding updates in the Federal Register during
regulatory updates prior to implementation, which would mirror the
approach taken by the IPPS. The proposed FY 2025 Code First table is
shown in Addendum B on the CMS website at <a href="https://www.cms.gov/Medicare/Medicare-Fee-forServicePayment/InpatientPsychFacilPPS/tools.html">https://www.cms.gov/Medicare/Medicare-Fee-forServicePayment/InpatientPsychFacilPPS/tools.html</a>.
(5) Proposed Revisions to MS-DRG Adjustment Factors
For FY 2025, we are proposing to revise the payment adjustments for
designated psychiatric DRGs assigned to the claim based on the
patient's principal diagnosis, following our longstanding policy of
using the ICD-10-CM/PCS-based MS-DRG system. As discussed in the
following paragraphs, we are proposing to maintain DRG adjustments for
15 of the existing 17 IPF MS-DRGs for which we currently adjust payment
in FY 2024. We are proposing to replace two existing DRGs with two new
DRGs to reflect changes in coding practices over time and proposing to
add two DRGs that are associated with poisoning. We are also proposing
to
[[Page 23163]]
revise the adjustment factors for the DRG adjustments as described in
Table 3, based on the results of our latest regression analysis
described in Section III.C.3 of this proposed rule. Addendum A is
available on the CMS website at <a href="https://www.cms.gov/medicare/payment/prospective-payment-systems/inpatient-psychiatric-facility/tools-and-worksheets">https://www.cms.gov/medicare/payment/prospective-payment-systems/inpatient-psychiatric-facility/tools-and-worksheets</a>. The website includes the proposed DRG adjustment factors
for FY 2025. In accordance with our longstanding policy, we are
proposing that psychiatric principal diagnoses that do not group to one
of the 19 proposed designated MS-DRGs would still receive the Federal
per diem base rate and all other applicable adjustments; however, the
payment would not include an MS-DRG adjustment.
(a) Proposed Replacement of DRGs
We are proposing to remove DRGs 080 (Nontraumatic stupor & coma w
MCC) and 081 (Nontraumatic stupor & coma w/o MCC), and to replace these
with DRGs 947 (Signs and Symptoms w MCC) and 948 (Signs and Symptoms w/
out MCC). As previously discussed, we observed that the number of cases
in DRGs 080 and 081 have decreased significantly since 2004. We
selected DRGs 947 and 948 as the most clinically appropriate
replacements, because most of the ICD-10-CM codes that previously
grouped to DRGs 080 or 081 now group to DRGs 947 or 948. Table 3
compares the current adjustment factors for DRGs 080 and 081 to the
regression-derived adjustment factors for DRGs 947 and 948. As shown in
Table 3, the proposed adjustment factors for DRGs 947 and 948 would
each be greater than the current DRG adjustment for DRGs 080 and 081.
Therefore, we are proposing that claims with DRGs 080 or 081 would
still receive the Federal per diem base rate and all other applicable
adjustments; however, the payment would not include an MS-DRG
adjustment.
As discussed in section III.F of this proposed rule, we are
proposing to implement this revision to the DRG adjustments budget-
neutrally. A detailed discussion of the distributional impacts of this
proposed change is found in section VIII.C of this proposed rule.
Lastly, we are proposing that if more recent data become available, we
would use such data, if appropriate, to determine the FY 2025 DRG
adjustment factors.
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(b) Proposed Additions of DRGs
We are proposing to recognize DRG adjustments for two DRGs
associated with poisoning; specifically, DRG 917 (Poisoning and toxic
effects of drugs w MCC) and 918 (Poisoning and toxic effects of drugs
w/out MCC). As discussed earlier in this proposed rule, we have
identified that a small but increasing number of IPF stays contain
these poisoning-related DRG assignments, and that stays with these DRGs
have increased costs per day that are statistically significant. Table
4 summarizes the frequency of these stays and the proposed adjustment
factors for FY 2025. As discussed in section III.F of this proposed
rule, we are proposing to implement this revision to the DRG
adjustments budget-neutrally. A detailed discussion of the
distributional impacts of this proposed change is found in section
VIII.C of this proposed rule.
Lastly, we are proposing that if more recent data become available,
we would use such data, if appropriate, to determine the FY 2025 DRG
adjustment factors.
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(c) Proposed Revisions to Adjustment Factors for Existing DRG
Adjustments
We are proposing to revise the adjustment factors for the remaining
15 of the existing 17 DRGs that currently receive a DRG adjustment in
FY 2024. These proposed revisions are based on the results of our
latest regression analysis described in section III.C.3 of this
proposed rule.
As previously discussed, our analysis found that some of the
adjustment factors in the regression model for DRGs that currently
receive an adjustment are no longer statistically significant.
Specifically, we found that the adjustment factors for DRG 882
(Neuroses except depressive), DRG 887 (Other mental disorder
diagnoses), and DRG 896 (Alcohol, Drug Abuse or Dependence w/out rehab
therapy w MCC) were not statistically significant. For each of these
DRGs, we examined whether the current adjustment factor falls within
the confidence interval for our latest regression analysis. The current
adjustment for DRG 882 is 1.02, and this falls within the confidence
interval of 0.96798 to 1.07811 for the latest regression model
discussed in section III.C.3 of this proposed rule. We believe it would
be appropriate to maintain the current adjustment factor of 1.02 for
DRG 882, because the latest regression results indicate that the
current adjustment factor would be a reasonable approximation of the
increased costs associated with DRG 882. For DRGs 887 and 896; however,
the current adjustment factors (0.92 and 0.88, respectively) do not
fall within the confidence interval for each of these DRGs. Therefore,
we are proposing to apply an adjustment factor of 1.00 for IPF stays
with these DRGs.
Table 5 summarizes the frequency of these stays and the proposed
adjustment factors for FY 2025. As discussed in section III.F of this
proposed rule, we are proposing to implement this revision to the DRG
adjustments budget-neutrally. A detailed discussion of the
distributional impacts of this proposed change is found in section
VIII.C of this proposed rule.
Lastly, we are proposing that if more recent data become available,
we would use such data, if appropriate, to determine the FY 2025 DRG
adjustment factors.
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b. Proposed Payment for Comorbid Conditions
(1) Proposed Revisions to Comorbidity Adjustments
The intent of the comorbidity adjustments is to recognize the
increased costs associated with comorbid conditions by providing
additional payments for certain existing medical or psychiatric
conditions that are expensive to treat.
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,
LOS, or both treatment and LOS.
The current 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 applied. In
a code first situation, the submitted claim goes through the CMS
processing system, which identifies the principal diagnosis code as
non-psychiatric and searches the secondary codes for a psychiatric code
to assign an MS-DRG code for adjustment. The system continues to search
the secondary codes for those that are appropriate for a comorbidity
adjustment.
In our RY 2012 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).
As discussed in section C.4.a.(1) of this proposed rule, it is our
policy to
[[Page 23166]]
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 our FY 2015 IPF PPS final rule (79 FR 45947 through
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.
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
discharge claims, 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.
As previously discussed in section III.C.4.a.(2) of this proposed
rule, we are proposing to adopt an April 1 implementation date for ICD-
10-CM diagnosis and ICD-10-PCS procedure code updates, in addition to
the annual October 1 update, beginning with April 1, 2025 for the IPF
PPS. For FY 2025 and future years, coding updates related to the IPF
PPS comorbidity categories would be adopted following a sub-regulatory
process as discussed earlier in this proposed rule.
For FY 2025, we are proposing to revise the comorbidity adjustment
factors based on the results of the 2019 through 2021 regression
analysis described in section III.C.3.e. of this proposed rule. We are
also proposing additions and changes to the comorbidity categories for
which we adjust payment based on our analysis of ICD-10-CM codes
currently included in each category as well as public comments received
in response to the FY 2022 and FY 2023 IPF PPS proposed rules.
Based on analysis of the ICD-10-CM codes, we considered the
statistical significance of the adjustment factor and whether the
current (FY 2024) adjustment factor fell within the confidence interval
in the 2019 through 2021 regression to determine the FY 2025 IPF PPS
proposed comorbidity categories and adjustment factors. As previously
discussed for the DRG adjustment factors, when the regression factor is
not statistically significant, but the current adjustment factor is
within the confidence interval, we are proposing to maintain the
current adjustment factor. When a regression factor is not
statistically significant and the current adjustment factor is not
within the confidence interval, we are proposing to remove the
comorbidity category.
Specifically, we are proposing to increase the adjustment factors
for the Gangrene, Severe Protein Malnutrition, Oncology Treatment,
Poisoning, and Tracheostomy comorbidity categories based on the
adjustment factors derived from the regression analysis discussed in
section III.C.3 of this proposed rule. For these comorbidity
categories, the regression results produced a statistically significant
increase in the adjustment factors.
We are proposing to remove the comorbidity categories for the
Coagulation Factor Deficit, Drug/Alcohol Induced Mental Disorders, and
Infectious Diseases adjustment factors because the regression factor
for the ICD-10-CM codes associated with Coagulation Factor Deficit and
Infectious Diseases were not statistically significant, and the current
adjustment factors did not fall within the confidence intervals in the
2019 through 2021 regression.
The current adjustment factor for Drug/Alcohol Induced Mental
Disorders is 1.03; however, the adjustment factor derived from our
latest regression results was statistically significant at 0.96084,
meaning payments would be reduced if we applied the regression-derived
adjustment factor as a comorbidity adjustment for this category. In
order to understand the drivers of changing costs for the Drug/Alcohol
Induced Mental Disorders comorbidity category, we examined a subset of
ICD-10-CM codes within the comorbidity category associated with opioid
disorders which make up the majority of stays that qualify for the
current Drug/Alcohol Induced Mental Disorders comorbidity adjustment.
These opioid disorder codes are listed in Table 6. When we separately
analyzed these codes associated with opioid disorder, the results
suggested that patients with opioid disorder are significantly less
expensive than patients without opioid disorder. Because stays with
opioid disorders make up the majority of stays in the Drug/Alcohol
Induced Mental Disorders comorbidity category, we observe a
statistically-significant negative adjustment factor for the
comorbidity category overall. The application of a comorbidity
adjustment derived from our latest regression analysis would result in
reduced payments for all stays in this comorbidity category. We do not
believe it is appropriate to apply negative adjustment factors (that
is, adjustment factors less than 1.00) for comorbidities because that
would result in reduced rather than increased payments. Although we
apply adjustment factors less than 1.00 for DRGs, this is because the
DRG adjustment reflects the cost of stays relative to stays with the
baseline DRG 885. In contrast, comorbidity adjustments reflect the cost
relative to a stay with no comorbidities. A negative payment adjustment
would not be consistent with the intent of a comorbidity adjustment,
which is intended to provide additional payments to providers to
account for the costs of treating patients with comorbid conditions.
Therefore, we have not historically included any negative adjustment
factors for comorbid conditions.
Therefore, we are proposing to remove the Drug/Alcohol Induced
Mental Disorders comorbidity category beginning in FY 2025. IPF stays
that include these codes as a non-principal diagnosis would no longer
receive the current Drug/Alcohol Induced Mental Disorders comorbidity
category adjustment factor of 1.03; nor would they receive a reduction
in payment. However, many IPF stays that include these ICD-10-CM
diagnosis codes as a principal diagnosis would continue to receive a
DRG adjustment. We refer readers to section III.C.3.a of this proposed
rule for a detailed discussion of proposed DRG adjustments under the
IPF PPS.
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We believe removal of the Drug/Alcohol Induced Mental Disorders
comorbidity category under the IPF PPS would more appropriately align
payment with resource use, as reflected in the latest regression
results. As previously discussed in section III.F of this proposed
rule, all of these proposed revisions would be applied budget-
neutrally. Therefore, we believe the removal of the Drug/Alcohol
Induced Mental Disorders comorbidity adjustment would appropriately
increase the IPF PPS Federal per diem base rate and thereby increase
payment for IPF stays that are costlier. However, we are soliciting
comments on whether a lack of ancillary charge data may be contributing
to the results of our regression analysis as it relates to opioid
disorders. We note that our analysis of the ICD-10-CM codes associated
with opioid disorder also indicates that there is significant overlap
between facility characteristics and stays including opioid disorder
diagnoses. In particular, for-profit freestanding IPFs were found to
serve the majority of patients with opioid disorders. As discussed in
section III.E.4 of this proposed rule, our ongoing analysis has found
an increase in the number of for-profit freestanding IPFs that are
consistently reporting no ancillary charges or very minimal ancillary
charges on their cost report. As a result, we have previously noted
that data that is necessary for accurate Medicare ratesetting is
excluded from the information these facilities are reporting.
As stated previously, the regression factor for Drug/Alcohol
Induced Mental Disorders was statistically significant, but is less
than 1, meaning payments would be reduced if we applied it as a
comorbidity adjustment. We are interested in understanding whether
there is data and information that could better inform our
understanding of the costs of treating these conditions. In addition,
we are interested in understanding whether commenters believe it may be
more appropriate to maintain the existing Drug/Alcohol Induced Mental
Disorders comorbidity category adjustment factor of 1.03, given that
many providers that treat these patients also report minimal or no
ancillary charges on their claims and cost reports. We note that if we
were to maintain the adjustment factor of 1.03 for these IPF stays, we
expect it would have a negative impact on the refinement
standardization factor, thereby slightly reducing the IPF PPS Federal
per diem base rate and ECT per treatment amount.
We are also proposing to modify the Eating and Conduct Disorders
comorbidity category and redesignate it as the Eating Disorders
comorbidity category. That is, we are proposing to remove conduct
disorders from the codes eligible for a comorbidity adjustment. When we
separately analyzed the ICD-10-CM codes for eating disorders
(specifically, F5000 Anorexia nervosa, unspecified, F5001
[[Page 23168]]
Anorexia nervosa, restricting type, F5002 Anorexia nervosa, binge
eating/purging type, and F509 Eating disorder, unspecified) and conduct
disorders (F631 Pyromania, F6381 Intermittent explosive disorder, and
F911 Conduct disorder, childhood-onset type), our regression results
identified a positive, statistically significant adjustment factor
associated with eating disorders. In contrast, conduct disorders had a
negative and non-significant factor. These results suggest that eating
disorders are associated with an increased level of resource use
compared to conduct disorders, and that only eating disorders have an
increase resource use at a level that is statistically significant.
Based on these findings, we are proposing to remove conduct disorders
from the proposed newly designated Eating Disorders comorbidity
category.
In addition, we are proposing to modify the Chronic Obstructive
Pulmonary Disease comorbidity category to include ICD-10-CM codes
associated with sleep apnea (specifically, G4733 Obstructive sleep
apnea (adult) (pediatric), 5A09357 Assistance with Respiratory
Ventilation, <24 Hrs, CPAP, Z9981 Dependence on supplemental oxygen,
and Z9989 Dependence on other enabling machines and devices). In
response to the FY 2023 and FY 2024 IPF PPS proposed rules, commenters
requested that CMS analyze the additional cost associated with patients
with sleep apnea. Patients with sleep apnea often need to use a
continuous positive airway pressure (CPAP) machine with a cord to
manage their condition. Based on the clinical expertise of CMS Medical
Officers, we determined that patients with sleep apnea in the IPF
setting would have increased ligature risk (that is, anything that
could be used to attach a cord, rope, or other material for the purpose
of hanging or strangulation), similar to the risk associated with
patients in the IPF setting that have chronic obstructive pulmonary
disease. We expect the additional staffing resources involved in
treating IPF patients with sleep apnea would be similar to the
resources involved in treating IPF patients with chronic obstructive
pulmonary disease, as patients with chronic obstructive pulmonary
disease may also require the presence of an additional device with a
cord in the patient's room, such as a bilevel positive airway pressure
(BiPAP) machine. We evaluated adding codes associated with sleep apnea
to our regression model, on the basis of our expectation that we would
observe higher costs associated with these codes that would be
comparable to the costs associated with chronic obstructive pulmonary
disease. The results of our 2019 through 2021 regression model suggest
that sleep apnea is in fact associated with an increased level of
resource use. Therefore, we are proposing to redesignate the Chronic
Obstructive Pulmonary Disease category as the Chronic Obstructive
Pulmonary Disease and Sleep Apnea comorbidity category.
Further, we analyzed costs associated with the ICD-10-CM codes in
Table 7 that indicate high-risk behavior. In response to the FY 2023
and FY 2024 IPF PPS proposed rules, commenters requested that CMS
analyze the additional cost associated with patients exhibiting violent
behavior during their stay in an IPF. We considered these comments in
coordination with CMS Medical Officers, and determined that patients
exhibiting violent behavior would require more intensive management
during an IPF stay. We determined that certain ICD-10-CM codes could
describe the types of high-risk behaviors that require intensive
management during an IPF stay. These could include patients exhibiting
violent behavior as well as other high-risk, non-violent behaviors. We
examined ICD-10-CM codes in the R45 code family (Symptoms and Signs
Related to Emotional State) that could indicate high-risk behavior
during an IPF stay, which would lead to increased resource use. The
regression analysis found that several codes, R451 Restlessness and
agitation, R454 Irritability and anger, and R4584 Anhedonia codes are
associated with a statistically significant adjustment factor. In other
words, patients presenting with restlessness and agitation,
irritability and anger, or anhedonia are more costly than patients who
do not present these conditions. Therefore, we are proposing to add a
new comorbidity category recognizing the costs associated with
Intensive Management for High-Risk Behavior.
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Lastly, we are proposing to maintain the adjustment factors for the
Developmental Disabilities and Uncontrolled Diabetes comorbidity
categories. Based on the regression analysis, the Developmental
Disabilities comorbidity category adjustment factor was not
statistically significant; however, the current adjustment factor is
within the confidence interval. As discussed in section III.C.3.a of
this proposed rule, a non-statistically significant adjustment factor
within the confidence interval indicates that the current adjustment
factor would be a reasonable approximation of the increased costs. The
Uncontrolled Diabetes comorbidity category adjustment factor did not
change from the current adjustment factor based on the 2019 through
2021 regression.
We are also proposing to decrease the adjustment factors for the
following comorbidity categories: Renal Failure--Acute, Artificial
Openings--Digestive & Urinary, Cardiac conditions, Renal Failure--
Chronic, Chronic Obstructive Pulmonary Disease, Infectious Diseases,
and Severe Musculoskeletal & Connective Tissue Diseases.
The regression analysis found the Renal Failure--Acute, Artificial
Openings--Digestive & Urinary, Cardiac conditions, Renal Failure--
Chronic, Chronic Obstructive Pulmonary Disease, Infectious Diseases,
and Severe Musculoskeletal & Connective Tissue Diseases comorbidity
categories resulted in a statistically significant adjustment factor.
While payment would still be increased when the claim includes one of
these comorbidity categories, the proposed adjustment factors for FY
2025 would be less than the current adjustment factors for these
categories. The proposed FY 2025 comorbidity adjustment factors are
displayed in Table 8, and can be found in Addendum A, available on the
CMS website at <a href="https://www.cms.gov/medicare/payment/prospective-payment-systems/inpatient-psychiatric-facility/tools-and-worksheets">https://www.cms.gov/medicare/payment/prospective-payment-systems/inpatient-psychiatric-facility/tools-and-worksheets</a>.
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As discussed in section III.F of this proposed rule, we are
proposing to implement revisions to the comorbidity category
adjustments budget-neutrally. A detailed discussion of the
distributional impacts of these proposed changes is found in section
VIII.C of this proposed rule.
We solicit comments on these proposed revisions to the comorbidity
category adjustment factors. Lastly, we are proposing that if more
recent data become available, we would use such data, if appropriate,
to determine the final FY 2025 comorbidity category adjustment factors.
(2) Proposed Coding Updates for FY 2025
For FY 2025, we are proposing to add 2 ICD-10-CM/PCS codes to the
Oncology Treatment comorbidity category. The proposed FY 2025
comorbidity codes are shown in Addenda B, available on the CMS website
at <a href="https://www.cms.gov/medicare/payment/prospective-payment-systems/inpatient-psychiatric-facility/tools-and-worksheets">https://www.cms.gov/medicare/payment/prospective-payment-systems/inpatient-psychiatric-facility/tools-and-worksheets</a>.
In accordance with the policy established in the FY 2015 IPF PPS
final rule (79 FR 45949 through 45952), we reviewed all new FY 2025
ICD-10-CM codes to remove codes that were site ``unspecified'' in terms
of laterality from the FY 2023 ICD-10-CM/PCS codes in instances where
more specific codes are available. As we stated in the FY 2015 IPF PPS
final rule, we believe that specific diagnosis codes that narrowly
identify anatomical sites where disease, injury, or a condition exists
should be used when coding patients' diagnoses whenever these codes are
available. We finalized in the FY 2015 IPF PPS rule, that we would
remove site ``unspecified'' codes from the IPF PPS ICD-10-CM/PCS codes
in instances when laterality codes (site specified codes) are
available, as the clinician should be able to identify a more specific
diagnosis based on clinical assessment at the medical encounter. There
were no proposed changes to the FY 2025 ICD-10-CM/PCS codes, therefore,
we are not proposing to remove any of the new codes.
c. Proposed Patient Age Adjustments
As explained in the RY 2005 IPF PPS final rule (69 FR 66922), we
analyzed the impact of age on per diem cost by examining the age
variable (range of ages) for payment adjustments. In general, we found
that the cost per day increases with age. The older age groups are
costlier than the under 45 age group, the differences in per diem cost
increase for each successive age group, and the differences are
statistically significant. While our regression analysis of CY 2019
through CY 2021 data supports maintaining a payment adjustment factor
based on age as was established in the RY 2005 IPF PPS final rule, the
results suggest that revisions to the adjustment factor for age are
warranted.
For FY 2025, we are proposing to revise the patient age adjustments
as shown in Addendum A of this proposed rule, which is available on the
CMS website at (see <a href="https://www.cms.gov/medicare/payment/prospective-payment-systems/inpatient-psychiatric-facility/tools-and-worksheets">https://www.cms.gov/medicare/payment/prospective-payment-systems/inpatient-psychiatric-facility/tools-and-worksheets</a>).
We are proposing to adopt the patient age adjustments derived from the
regression
[[Page 23171]]
model using a blended set of 2019 through 2021 data, as discussed in
section III.C.3 of this proposed rule. Table 9 summarizes the current
and proposed patient age adjustment factors for FY 2025. As discussed
in section III.F of this proposed rule, we are proposing to implement
this revision to the patient age adjustments budget-neutrally. A
detailed discussion of the distributional impacts of this proposed
change is found in section VIII.C of this proposed rule.
We solicit comment on these proposed revisions to the patient age
adjustment factors. Lastly, we are proposing that if more recent data
become available, we would use such data, if appropriate, to determine
the final FY 2025 patient age adjustment factors.
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d. Proposed Variable Per Diem Adjustments
We explained in the RY 2005 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.
As discussed in the RY 2005 IPF PPS final rule, where a complete
discussion of the variable per diem adjustments can be found, we used a
regression analysis to estimate the average differences in per diem
cost among stays of different lengths (69 FR 66947 through 66950). 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 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 2025, we are proposing to revise the variable per diem
adjustment factors as indicated in the table below, and shown in
Addendum A to this rule, which is available on the CMS website at
<a href="https://www.cms.gov/medicare/payment/prospective-payment-systems/inpatient-psychiatric-facility/tools-and-worksheets">https://www.cms.gov/medicare/payment/prospective-payment-systems/inpatient-psychiatric-facility/tools-and-worksheets</a>. We are proposing
to increase the adjustment factors for days 1 through 9. As shown in
Table 10, the results of the latest regression analysis indicate that
there is not a statistically significant decrease in cost per day after
day 10; therefore, we are proposing that days 10 and above would
receive a 1.00 adjustment. Table 10 summarizes the current and proposed
variable per diem adjustment factors for FY 2025. As discussed in
section III.F of this proposed rule, we are proposing to implement this
revision to the variable per diem adjustments budget-neutrally. A
detailed discussion of the distributional impacts of this proposed
change is found in section VIII.C of this proposed rule.
We solicit comments on these proposed revisions to the variable per
diem adjustment factors. Lastly, we are proposing that if more recent
data become available, we would use such data, if appropriate, to
determine the
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final FY 2025 variable per diem adjustment factors.
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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.
We are proposing to use the existing regression-derived facility-level
adjustment factors established in the RY 2005 IPF final rule for FY
2025.
As previously discussed, in section I.A of this proposed rule, we
are proposing to revise the methodology for determining payments under
the IPF PPS as required by the CAA, 2023. We are not proposing changes
to the facility-level adjustment factors for rural location and
teaching status for FY 2025; however, section IV.A of this proposed
rule includes a request for information regarding potential future
updates to these facility-level adjustments. We are particularly
interested in comments on the results of our updated regression
analysis as they apply to facility-level adjustors.
1. Wage Index Adjustment
a. Background
As discussed in the RY 2007 IPF PPS final rule (71 FR 27061), and
the RY 2009 IPF PPS (73 FR 25719) and RY 2010 IPF PPS notices (74 FR
20373), 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 of the IPF in an urban or rural
area, as defined in Sec. 412.64(b)(1)(ii)(A) and (C).
Due to the variation in costs and because of the differences in
geographic wage levels, in the RY 2005 IPF PPS final rule, we required
that payment rates under the IPF PPS be adjusted by a geographic wage
index. We proposed and finalized a policy to use the unadjusted, pre-
floor, pre-reclassified IPPS hospital wage index to account for
geographic differences in IPF labor costs. We implemented use of the
pre-floor, pre-reclassified IPPS hospital wage data to compute the IPF
wage index since there was not an IPF-specific wage index available. We
believe that IPFs generally compete in the same labor market as IPPS
hospitals therefore, the pre-floor, pre-reclassified IPPS hospital wage
data should be reflective of labor costs of IPFs. We believe this pre-
floor, pre-reclassified IPPS hospital wage index to be the best
available data to use as proxy for an IPF-specific wage index. As
discussed in the RY 2007 IPF PPS final rule (71FR 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
considering geographic reclassifications, floors, and other adjustments
made to the wage index under the IPPS. For a complete description of
these IPPS wage index adjustments, we refer readers to the FY 2019
IPPS/LTCH PPS final rule (83 FR 41362 through 41390). Our wage index
policy at Sec. 412.424(a)(2) provides that we use the best Medicare
data available to estimate costs per day, including an appropriate wage
index to adjust for wage differences.
When the IPF PPS was implemented in the RY 2005 IPF PPS final rule,
with
[[Page 23173]]
an effective date of January 1, 2005, the pre-floor, pre-reclassified
IPPS hospital wage index that was available at the time was the FY 2005
pre-floor, pre-reclassified IPPS hospital wage index. Historically, the
IPF wage index for a given RY has used the pre-floor, pre-reclassified
IPPS hospital wage index from the prior FY as its basis. This has been
due in part to the pre-floor, pre-reclassified IPPS hospital wage index
data that were available during the IPF rulemaking cycle, where an
annual IPF notice or IPF final rule was usually published in early May.
This publication timeframe was relatively early compared to other
Medicare payment rules because the IPF PPS follows a RY, which was
defined in the implementation of the IPF PPS as the 12-month period
from July 1 to June 30 (69 FR 66927). Therefore, the best available
data at the time the IPF PPS was implemented was the pre-floor, pre-
reclassified IPPS hospital wage index from the prior FY (for example,
the RY 2006 IPF wage index was based on the FY 2005 pre-floor, pre-
reclassified IPPS hospital wage index).
In the RY 2012 IPF PPS final rule, we changed the reporting year
timeframe for IPFs from a RY to FY, which begins October 1 and ends
September 30 (76 FR 26434 through 26435). In that FY 2012 IPF PPS final
rule, we continued our established policy of using the pre-floor, pre-
reclassified IPPS hospital wage index from the prior year (that is,
from FY 2011) as the basis for the FY 2012 IPF wage index. This policy
of basing a wage index on the prior year's pre-floor, pre-reclassified
IPPS hospital wage index has been followed by other Medicare payment
systems, such as hospice and inpatient rehabilitation facilities. By
continuing with our established policy, we remained consistent with
other Medicare payment systems.
In FY 2020, we finalized the IPF wage index methodology to align
the IPF PPS wage index with the same wage data timeframe used by the
IPPS for FY 2020 and subsequent years. Specifically, we finalized the
use of the pre-floor, pre-reclassified IPPS hospital wage index from
the FY concurrent with the IPF FY as the basis for the IPF wage index.
For example, the FY 2020 IPF wage index was based on the FY 2020 pre-
floor, pre-reclassified IPPS hospital wage index rather than on the FY
2019 pre-floor, pre-reclassified IPPS hospital wage index.
We explained in the FY 2020 proposed rule (84 FR 16973), that using
the concurrent pre-floor, pre-reclassified IPPS hospital wage index
will result in the most up-to-date wage data being the basis for the
IPF wage index. We noted that it would also result in more consistency
and parity in the wage index methodology used by other Medicare payment
systems. We indicated that the Medicare skilled nursing facility (SNF)
PPS already used the concurrent IPPS hospital wage index data as the
basis for the SNF PPS wage index. We proposed and finalized similar
policies to use the concurrent pre-floor, pre-reclassified IPPS
hospital wage index data in other Medicare payment systems, such as
hospice and inpatient rehabilitation facilities. Thus, the wage
adjusted Medicare payments of various provider types are based upon
wage index data from the same timeframe. For FY 2025, we are proposing
to continue to use the concurrent pre-floor, pre-reclassified IPPS
hospital wage index as the basis for the IPF wage index.
In the FY 2023 IPF PPS final rule (87 FR 46856 through 46859), we
finalized a permanent 5-percent cap on any decrease to a provider's
wage index from its wage index in the prior year, and we stated that we
would apply this cap in a budget neutral manner. In addition, we
finalized a policy that a new IPF would be paid the wage index for the
area in which it is geographically located for its first full or
partial FY with no cap applied because a new IPF would not have a wage
index in the prior FY. We amended the IPF PPS regulations at Sec.
412.424(d)(1)(i) to reflect this permanent cap on wage index decreases.
We refer readers to the FY 2023 IPF PPS final rule for a more detailed
discussion about this policy.
We are proposing to apply the IPF wage index adjustment to the
labor-related share of the national IPF PPS base rate and ECT payment
per treatment. The proposed labor-related share of the IPF PPS national
base rate and ECT payment per treatment is 78.8 percent in FY 2025.
This percentage reflects the labor-related share of the 2021-based IPF
market basket for FY 2025 and is 0.1 percentage point higher than the
FY 2024 labor-related share (see section III.A.3 of this proposed
rule).
b. Office of Management and Budget (OMB) Bulletins
(1) Background
The wage index used for the IPF PPS is calculated using the
unadjusted, pre-reclassified and pre-floor IPPS wage index data and is
assigned to the IPF based on the labor market area in which the IPF is
geographically located. IPF labor market areas are delineated based on
the Core-Based Statistical Area (CBSAs) established by the OMB.
Generally, OMB issues major revisions to statistical areas every 10
years, based on the results of the decennial census. However, OMB
occasionally issues minor updates and revisions to statistical areas in
the years between the decennial censuses through OMB Bulletins. These
bulletins contain information regarding CBSA changes, including changes
to CBSA numbers and titles. OMB bulletins may be accessed online at
<a href="https://www.whitehouse.gov/omb/information-for-agencies/bulletins/">https://www.whitehouse.gov/omb/information-for-agencies/bulletins/</a>. In
accordance with our established methodology, the IPF PPS has
historically adopted any CBSA changes that are published in the OMB
bulletin that corresponds with the IPPS hospital wage index used to
determine the IPF wage index and, when necessary and appropriate, has
proposed and finalized transition policies for these changes.
In the RY 2007 IPF PPS final rule (71 FR 27061 through 27067), we
adopted the changes discussed in the 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 RY 2009 IPF PPS notice, we incorporated the CBSA
nomenclature changes published in the most recent OMB bulletin that
applied to the IPPS hospital wage index used to determine the current
IPF wage index and stated that we expected 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).
Subsequently, CMS adopted the changes that were published in past
OMB bulletins in the FY 2016 IPF PPS final rule (80 FR 46682 through
46689), the FY 2018 IPF PPS rate update (82 FR 36778 through 36779),
the FY 2020 IPF PPS final rule (84 FR 38453 through 38454), and the FY
2021 IPF PPS final rule (85 FR 47051 through 47059). We direct readers
to each of these rules for more information about the changes that were
adopted and any associated transition policies.
As discussed in the FY 2023 IPF PPS final rule, we did not adopt
OMB Bulletin 20-01, which was issued March 6, 2020, because we
determined this bulletin had no material impact on
[[Page 23174]]
the IPF PPS wage index. This bulletin creates only one Micropolitan
statistical area, and Micropolitan areas are considered rural for the
IPF PPS wage index. That is, the constituent county of the new
Micropolitan area was considered rural effective as of FY 2021 and
would continue to be considered rural if we adopted OMB Bulletin 20-01.
Finally, on July 21, 2023, OMB issued Bulletin 23-01, which revises
the CBSA delineations based on the latest available data from the 2020
census. This bulletin contains information regarding updates of
statistical area changes to CBSA titles, numbers, and county or county
equivalents.
(2) Proposed Implementation of New Labor Market Area Delineations
We believe it is important for the IPF PPS to use, as soon as is
reasonably possible, the latest available labor market area
delineations to maintain a more accurate and up-to-date payment system
that reflects the reality of population shifts and labor market
conditions. We believe that using the most current delineations would
increase the integrity of the IPF PPS wage index system by creating a
more accurate representation of geographic variations in wage levels.
We have carefully analyzed the impacts of adopting the new OMB
delineations and find no compelling reason to delay implementation.
Therefore, we are proposing to implement the new OMB delineations as
described in the July 21, 2023, OMB Bulletin No. 23-01, effective
beginning with the FY 2025 IPF PPS wage index. We are proposing to
adopt the updates to the OMB delineations announced in OMB Bulletin No.
23-01 effective for FY 2025 under the IPF PPS.
As previously discussed, we finalized a 5-percent permanent cap on
any decrease to a provider's wage index from its wage index in the
prior year. For more information on the permanent 5-percent cap policy,
we refer readers to the FY 2023 IPF PPS final rule (87 FR 46856 through
46859). In addition, we are proposing to phase out the rural adjustment
for IPFs that are transitioning from rural to urban based on these CBSA
revisions, as discussed in section III.D.1.c. of this proposed rule.
(a) Micropolitan Statistical Areas
OMB defines a ``Micropolitan Statistical Area'' as a CBSA
associated with at least one urban cluster that has a population of at
least 10,000, but less than 50,000 (75 FR 37252). We refer to these as
Micropolitan Areas. After extensive impact analysis, consistent with
the treatment of these areas under the IPPS as discussed in the FY 2005
IPPS final rule (69 FR 49029 through 49032), we determined the best
course of action would be to treat Micropolitan Areas as ``rural'' and
include them in the calculation of each state's IPF PPS rural wage
index. We refer readers to the FY 2007 IPF PPS final rule (71 FR 27064
through 27065) for a complete discussion regarding treating
Micropolitan Areas as rural. We are not proposing any changes to this
policy for FY 2025.
(b) Change to County-Equivalents in the State of Connecticut
The June 6, 2022 Census Bureau Notice (87 FR 34235 through 34240),
OMB Bulletin No. 23-01 replaced the 8 counties in Connecticut with 9
new ``Planning Regions.'' Planning regions now serve as county-
equivalents within the CBSA system. We have evaluated the changes and
are proposing to adopt the planning regions as county equivalents for
wage index purposes. We believe it is necessary to adopt this migration
from counties to planning region county-equivalents to maintain
consistency with OMB updates. We are providing the following crosswalk
for each county in Connecticut with the current and proposed FIPS
county and county-equivalent codes and CBSA assignments.
[GRAPHIC] [TIFF OMITTED] TP03AP24.014
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(c) Urban Counties That Would Become Rural Under the Revised OMB
Delineations
As previously discussed, we are proposing to implement the new OMB
labor market area delineations (based upon OMB Bulletin No. 23-01)
beginning in FY 2025. Our analysis shows that a total of 53 counties
(and county equivalents) and 15 providers are located in areas that
were previously considered part of an urban CBSA but would be
considered rural beginning in FY 2025 under these revised OMB
delineations. Table 12 lists the 53 urban counties that would be rural
if we finalize our proposal to implement the revised OMB delineations.
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We are proposing that the wage data for all providers located in
the counties listed above would now be considered rural, beginning in
FY 2025, when calculating their respective state's rural wage index.
This rural wage index value would also be used under the IPF PPS. We
recognize that rural areas typically have lower area wage index values
than urban areas, and providers located in these counties may
experience a negative impact in their IPF payment due to the proposed
adoption of the revised OMB delineations. However, as discussed in
section III.D.1.c of this proposed rule, providers located in these
counties would receive a rural adjustment beginning in FY 2025, which
would mitigate the impact of decreases to the wage index for these
providers. In addition, the permanent 5-percent cap on wage index
decreases under the IPF PPS would further mitigate large wage index
decreases for providers in these areas.
(d) Rural Counties That Would Become Urban Under the Revised OMB
Delineations
As previously discussed, we are proposing to implement the new OMB
labor market area delineations (based upon OMB Bulletin No. 23-01)
beginning in FY 2025. Analysis of these OMB labor market area
delineations shows that a total of 54 counties (and county equivalents)
and 10 providers are located in areas that were previously considered
rural but would now be considered urban under the revised OMB
delineations. Table 13 lists the 54 rural counties that would be urban
if we finalize our proposal to implement the revised OMB delineations.
[[Page 23178]]
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We are proposing that when calculating the area wage index,
beginning with FY 2025, the wage data for providers located in these
counties would be included in their new respective urban CBSAs.
Typically, providers located in an urban area receive a wage index
value higher than or equal to providers located in their state's rural
area. We also note that providers located in these areas would no
longer be considered rural beginning in FY 2025. We refer readers to
section III.D.1.c of this proposed rule for a discussion of the
proposed policy to phase out the payment of the rural adjustment for
providers in these areas.
(e) Urban Counties That Would Move to a Different Urban CBSA Under the
New OMB Delineations
In certain cases, adopting the new OMB delineations would involve a
change only in CBSA name and/or number, while the CBSA continues to
encompass the same constituent counties. For example, CBSA 10540
(Albany-Lebanon, OR) would experience a change to its name, and become
CBSA 10540 (Albany, OR), while its one constituent county would remain
the same. Table 14 shows the current CBSA code and our proposed CBSA
code where we are proposing to change either the name or CBSA number
only. We are not discussing further in this section these proposed
changes because they are inconsequential changes with respect to the
IPF PPS wage index.
[[Page 23180]]
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In some cases, if we adopt the new OMB delineations, counties would
shift between existing and new CBSAs, changing the constituent makeup
of the CBSAs. We consider this type of change, where CBSAs are split
into multiple new CBSAs, or a CBSA loses one or more counties to
another urban CBSA to be significant modifications.
[[Page 23181]]
Table 15 lists the urban counties that would move from one urban
CBSA to another newly proposed or modified CBSA if we adopted the new
OMB delineations.
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BILLING CODE 4120-01-C
We have identified 68 IPF providers located in the affected
counties listed in Table 15. If providers located in these counties
move from one CBSA to another under the revised OMB delineations, there
may be impacts, either negative or positive, upon their specific wage
index values.
c. Proposed Adjustment for Rural Location
In the RY 2005 IPF PPS final rule, (69 FR 66954), 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. This 17-percent adjustment has
been part of the IPF PPS each year since the inception of the IPF PPS.
As discussed earlier in this rule, we are proposing a number of
revisions to the patient-level adjustment factors as well as changes to
the CBSA
[[Page 23188]]
delineations. In order to minimize the scope of changes that would
impact providers in any single year, we are proposing to use the
existing regression-derived adjustment factor, which was established in
RY 2005, for FY 2025 for IPFs located in a rural area as defined at
Sec. 412.64(b)(1)(ii)(C). See 69 FR 66954 for a complete discussion of
the adjustment for rural locations. However, as discussed in the
section IV.A of this FY 2025 IPF PPS proposed rule, we have completed
analysis of more recent cost and claims information and are soliciting
comments on those results.
As proposed earlier in this proposed rule, the adoption of OMB
Bulletin No. 23-01 in accordance with our established methodology would
determine whether a facility is classified as urban or rural for
purposes of the rural payment adjustment in the IPF PPS. Overall, we
believe implementing updated OMB delineations would result in the rural
payment adjustment being applied where it is appropriate to adjust for
higher costs incurred by IPFs in rural locations. However, we recognize
that implementing these changes would have distributional effects among
IPF providers, and that some providers would experience a loss of the
rural payment adjustment because of our proposals. Therefore, we
believe it would be appropriate to consider, as we have in the past,
whether a transition period should be used to implement these proposed
changes.
Prior changes to the CBSA delineations have included a phase-out
policy for the rural adjustment for IPFs transitioning from rural to
urban status. 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
in the United States and Puerto Rico based on the 2010 Census. We
adopted these new OMB CBSA delineations in the FY 2016 IPF final rule
(80 FR 46682 through 46689), and identified 105 counties and 37 IPFs
that would move from rural to urban status due to the new CBSA
delineations. To reduce the impact of the loss of the 17-percent rural
adjustment, we adopted a budget-neutral 3-year phase-out of the rural
adjustment for existing FY 2015 rural IPFs that became urban in FY 2016
and that experienced a loss in payments due to changes from the new
CBSA delineations. These IPFs received two-thirds of the rural
adjustment for FY 2016 and one-third of the rural adjustment in FY
2017. For FY 2018, these IPFs did not receive a rural adjustment.
For subsequent adoptions of OMB Bulletin No. 15-01 for FY 2018 (82
FR 36779 through 36780), OMB Bulletin 17-01 for FY 2020 (84 FR 38453
through 38454), and OMB Bulletin 18-04 for FY 2021 (85 FR 47053 through
47059), we identified that fewer providers were affected by these
changes than by the changes relating to the adoption of OMB Bulletin
13-01. We did not phase out the rural adjustment when adopting these
delineation changes.
For facilities located in a county that transitioned from rural to
urban in Bulletin 23-01, we considered whether it would be appropriate
to phase out the rural adjustment for affected providers consistent
with our past practice of using transition policies to help mitigate
negative impacts on hospitals of OMB Bulletin proposals that have a
material effect on a number of IPFs. Adoption of the updated CBSAs in
Bulletin 23-01 will change the status of 10 IPF providers currently
designated as ``rural'' to ``urban'' for FY 2025 and subsequent fiscal
years. As such, these 10 newly urban providers will no longer receive
the 17-percent rural adjustment. Consistent with the transition policy
adopted for IPFs in FY 2016 (80 FR 46682 through 4668980 FR 46682
through 46689), we are proposing a 3-year budget neutral phase-out of
the rural adjustment for IPFs located in the 54 rural counties that
will 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 10 IPFs
specifically is appropriate because we expect these IPFs will
experience a steeper and more abrupt reduction in their payments
compared to other IPFs. Therefore, we are proposing to phase out the
rural adjustment for these providers to reduce the impact of the loss
of the FY 2024 rural adjustment of 17-percent over FYs 2025, 2026, and
2027. This policy would allow IPFs that are classified as rural in FY
2024 and would be classified as urban in FY 2025 to receive two-thirds
of the rural adjustment for FY 2025. For FY 2026, these IPFs would
receive one-third of the rural adjustment. For FY 2027, these IPFs
would not receive a rural adjustment. We believe a 3-year budget-
neutral 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 2024 rural IPFs. The purpose of the gradual phase-out of
the rural adjustment for these providers is to mitigate potential
payment reductions and promote stability and predictability in payments
for existing rural IPFs that may need time to adjust to the loss of
their FY 2024 rural payment adjustment or that experience a reduction
in payments solely because of this re-designation. This policy would be
specifically for rural IPFs that become urban in FY 2025. We are not
proposing a transition policy for urban IPFs that become rural in FY
2025 because these IPFs will receive the full rural adjustment of 17-
percent beginning October 1, 2024. We solicit comments on this proposed
policy.
d. Proposed Wage Index 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 2025, we
are proposing to continue to apply a budget neutrality adjustment in
accordance with our existing budget neutrality policy. This policy
requires us to update the wage index in such a way that total estimated
payments to IPFs for FY 2025 are the same with or without the changes
(that is, in a budget neutral manner) by applying a budget neutrality
factor to the IPF PPS rates. We are proposing to use the following
steps to ensure that the rates reflect the FY 2025 update to the wage
indexes (based on the FY 2021 hospital cost report data) and the labor-
related share in a budget neutral manner:
Step 1: Simulate estimated IPF PPS payments, using the FY 2024 IPF
wage index values (available on the CMS website) and labor-related
share (as published in the FY 2024 IPF PPS final rule (88 FR 51054).
Step 2: Simulate estimated IPF PPS payments using the proposed FY
2025 IPF wage index values (available on the CMS website), and the
proposed FY 2025 labor-related share (based on the latest available
data as discussed previously).
Step 3: Divide the amount calculated in step 1 by the amount
calculated in step 2. The resulting quotient is the proposed FY 2025
budget neutral wage adjustment factor of 0.9995.
Step 4: Apply the FY 2025 budget neutral wage adjustment factor
from step 3 to the FY 2024 IPF PPS Federal per diem base rate after the
application of the IPF market basket increase reduced by the
productivity adjustment described in section III.A of this proposed
rule to determine the FY 2025 IPF PPS Federal per diem base rate. As
discussed in section III.F of this proposed rule, we are also proposing
to apply a refinement standardization
[[Page 23189]]
factor to determine the FY 2025 IPF PPS Federal per diem base rate.
2. Proposed Teaching Adjustment
Background
In the RY 2005 IPF PPS final rule, we implemented regulations at
Sec. 412.424(d)(1)(iii) to establish a facility-level 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 fulltime equivalent (FTE) interns and residents training in
the IPF and the IPF's average daily census.
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 RY
2005 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 (1 + [the number of
FTE residents training in the IPF's average daily census]). The
teaching variable is then raised to the 0.5150 power to result in the
teaching adjustment. This formula is subject to the limitations on the
number of FTE residents, which are described in this section of this
proposed rule.
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 (69 FR 66955). A complete discussion of the temporary
adjustment to the FTE cap to reflect residents due to hospital closure
or residency program closure appears in the RY 2012 IPF PPS proposed
rule (76 FR 5018 through 5020) and the RY 2012 IPF PPS final rule (76
FR 26453 through 26456).
In the regression analysis that informed the FY 2004 IPF PPS final
rule, 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 RY 2005 IPF PPS final rule (69 FR 66954 through 66957)
and the RY 2009 IPF PPS notice (73 FR 25721).
We are proposing to retain the coefficient value of 0.5150 for the
teaching adjustment to the Federal per diem base rate as we are not
proposing refinements to the facility-level payment adjustments for
rural location or teaching status for FY 2025. As noted earlier, given
the scope of changes to the wage index and patient-level adjustment
factors, we believe this will minimize the total impacts to providers
in any given year.
3. Proposed 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 area in which the IPF is located. As
we explained in the RY 2005 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. As a result of this
analysis, we provided a COLA in the RY 2005 IPF PPS final rule. We
refer readers to the FY 2024 IPF PPS final rule for a complete
discussion of the currently applicable COLA factors (88 FR 51088
through 51089).
We adopted a new methodology to update the COLA factors for Alaska
and Hawaii for the IPF PPS in the FY 2015 IPF PPS final rule (79 FR
45958 through 45960). For a complete discussion, we refer readers to
the FY 2015 IPF PPS final rule.
We also specified that the COLA updates would be determined every 4
years, in alignment with the IPPS market basket labor-related share
update (79 FR 45958 through 45960). Because the labor-related share of
the IPPS market basket was updated for FY 2022, the COLA factors were
updated in FY 2022 IPPS/LTCH rulemaking (86 FR 45547). As such, we also
finalized an update to the IPF PPS COLA factors to reflect the updated
COLA factors finalized in the FY 2022 IPPS/LTCH rulemaking effective
for FY 2022 through FY 2025 (86 FR 42621 through 42622). This is
reflected in Table 16 below. We are proposing to maintain the COLA
factors in Table 16 for FY 2025 in alignment with the policy described
in this paragraph.
[[Page 23190]]
[GRAPHIC] [TIFF OMITTED] TP03AP24.027
The proposed IPF PPS COLA factors for FY 2025 are also shown in
Addendum A to this proposed rule, which is available on the CMS website
at <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/tools.html">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/tools.html</a>.
4. Proposed Adjustment for IPFs With a Qualifying ED
The IPF PPS includes a facility-level adjustment for IPFs with
qualifying EDs. As defined in Sec. 412.402, qualifying emergency
department means an emergency department that is staffed and equipped
to furnish a comprehensive array of emergency services and meets the
requirements of 42 CFR 489.24(b) and Sec. 413.65.
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
psychiatric hospital with a qualifying ED, or an excluded psychiatric
unit of an IPPS hospital or a critical access hospital (CAH), and the
overhead cost of maintaining the ED. This payment applies to all IPF
admissions (with one exception which we describe in this section),
regardless of whether the patient was admitted through the ED. The ED
adjustment is made on every qualifying claim except as described in
this section of this proposed rule. As specified at Sec.
412.424(d)(1)(v)(B), the ED adjustment is not made when a patient is
discharged from an IPPS hospital or CAH, and admitted to the same IPPS
hospital's or CAH's excluded psychiatric unit. We clarified in the RY
2005 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 IPPS hospital or through the
reasonable cost payment made to the CAH.
a. Proposed Update for FY 2025
For FY 2025, we are proposing to update the adjustment factor from
1.31 to 1.53 for IPFs with qualifying EDs using the same methodology
used to determine ED adjustments in prior years. Thus, we are proposing
to use the following steps, as used in prior years, to calculate the
updated ED adjustment factor. (A complete discussion of the steps
involved in the calculation of the ED adjustment factors can be found
in the RY 2005 IPF PPS final rule (69 FR 66959 through 66960) and the
RY 2007 IPF PPS final rule (71 FR 27070 through 27072).)
Step 1: Estimate the proportion by which the ED costs of a stay
would increase the cost of the first day of the stay. Using the IPFs
with ED admissions in years 2019 through 2021, we divided the average
ED cost per stay when admitted through the ED ($519.97) by the average
cost per day ($1,338.93), which equals 0.39.
Step 2: Adjust the factor estimated in step 1 to account for the
fact that we would pay the higher first day adjustment for all cases in
the qualifying IPFs, not just the cases admitted through the ED. Since
on average, 66 percent of the cases in IPFs with ED admissions are
admitted through the ED, we multiplied 0.39 by 0.66, which equals 0.26.
Step 3: Add the adjusted factor calculated in the previous 2 steps
to the variable per diem adjustment derived from the regression
equation that we used to derive our other payment adjustment factors.
As discussed in section III.C.4.d. of this proposed rule, the proposed
first day payment factor for FY 2025 is 1.27. Adding 0.26, we obtained
a first day variable per adjustment for IPFs with a qualifying ED equal
to 1.53.
The ED adjustment is incorporated into the variable per diem
adjustment for the first day of each stay for IPFs with a qualifying
ED. We are proposing that those IPFs with a qualifying ED would receive
an adjustment factor of 1.53 as the variable per diem adjustment for
day 1 of each patient stay. If an IPF does not have a qualifying ED, we
are proposing that it would receive an adjustment factor of 1.27 as the
variable per diem adjustment for day 1 of each patient stay, as
discussed in section III.C.4.d. of this proposed rule. As discussed in
section III.F of this proposed rule, we are proposing to implement this
revision to the ED adjustment budget--neutrally by applying a
refinement standardization factor. A detailed discussion of the
distributional impacts of this proposed change is found in section
VIII.C of this proposed rule.
We solicit comment on this proposal. Lastly, we are proposing that
if more recent data become available, we would use such data, if
appropriate, to determine the FY 2025 ED adjustment factor.
b. Alternatives Considered
In response to the FY 2023 IPF PPS proposed rule (87 FR 19428
through 19429) comment solicitation on our technical report describing
the analysis of IPF PPS adjustments, two
[[Page 23191]]
commenters requested that we conduct further analysis related to the
exception for the ED adjustment. These commenters indicated that
patients transferred to an IPF from an acute care unit or hospital
often have higher costs per stay than patients with similar
comorbidities admitted from the community. Commenters requested that
CMS analyze data related to source of admission and consider a payment
adjustment to account for the resources used by these patients. In
response to these comments, we conducted a regression analysis to
investigate whether the source of admission is a statistically
significant variable in the cost of a patient's care in an IPF. We
analyzed the following sources of admission: clinic referral, transfer
from hospital (different facility), transfer from a SNF or Intermediate
Care Facility (ICF), transfer from another health care facility, court/
law enforcement, information not available, transfer from hospital
inpatient in the same facility, transfer from ambulatory surgical
center, and transfer from hospice. In this context, it is important to
note that the source of admission indicator ``court/law enforcement''
is not the equivalent of an involuntary admission; we do not currently
collect data on involuntary admissions.
The regression analysis found that the source of admission was not
a statistically significant factor in the cost of care. The results for
the two source of admission variables that indicate higher costs
(transfer from hospital inpatient in the same facility and transfer
from ambulatory surgical center) are accounted for by the known
difference in cost structures between hospital psychiatric units and
freestanding psychiatric hospitals. We considered the results of our
analysis, as well as the potential that adjusting payment based on
source of admission could inadvertently create incentives for IPFs to
prioritize certain admissions over others. Based on these
considerations, we are not proposing to add additional payment
adjustments based on source of admission (other than the existing
adjustment for a qualifying ED) to the IPF PPS in FY 2025.
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 RY
2005 IPF PPS final rule, we implemented regulations at Sec.
412.424(d)(3)(i) to provide a per case 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 costlier care; 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. The adjusted threshold amount
is equal to the outlier threshold amount adjusted for wage area,
teaching status, rural area, and the COLA adjustment (if applicable),
plus the amount of the Medicare IPF payment for the case. We
established the 80 percent and 60 percent loss sharing 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 to receive additional payments.
After establishing the loss sharing ratios, we determined the
current 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 estimated IPF PPS payments.
2. Proposed Update to the Outlier Fixed Dollar Loss Threshold Amount
In accordance with the update methodology described in Sec.
412.428(d), we are proposing 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. We are proposing to maintain the
established 2 percent outlier policy for FY 2025.
Our longstanding methodology for updating the outlier fixed dollar
loss threshold involves using the best available data, which is
typically the most recent available data. We note that for FY 2022 and
FY 2023 only, we made certain methodological changes to our modeling of
outlier payments, and we discussed the specific circumstances that led
to those changes for those years (86 FR 42623 through 42624; 87 FR
46862 through 46864). We direct readers to the FY 2022 and FY 2023 IPF
PPS proposed and final rules for a more complete discussion.
We are proposing to update the IPF outlier threshold amount for FY
2025 using FY 2023 claims data and the same methodology that we have
used to set the initial outlier threshold amount each year beginning
with the RY 2007 IPF PPS final rule (71 FR 27072 and 27073). For this
FY 2025 IPF PPS rulemaking, consistent with our longstanding practice,
based on an analysis of the latest available data (the December 2023
update of FY 2023 IPF claims) and rate increases, we believe it is
necessary to update the fixed dollar loss threshold amount to maintain
an outlier percentage that equals 2 percent of total estimated IPF PPS
payments. Based on an analysis of these updated data, we estimate that
IPF outlier payments as a percentage of total estimated payments are
approximately 2.1 percent in FY 2024. Therefore, we are proposing to
update the outlier threshold amount to $35,590 to maintain estimated
outlier payments at 2 percent of total estimated aggregate IPF payments
for FY 2025. This proposed rule update is an increase from the FY 2024
threshold of $33,470.
Lastly, we are proposing that if more recent data become available
for the FY 2025 IPF PPS final rule, we would use such data as
appropriate to determine the final outlier fixed dollar loss threshold
amount for FY 2025.
3. Proposed Update to IPF Cost-to-Charge 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. 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-
to-charge ratio (CCR). This approach to determining an IPF's cost is
consistent with the approach
[[Page 23192]]
used under the IPPS and other PPSs. In the FY 2004 IPPS final rule (68
FR 34494), we implemented changes to the IPPS policy used to determine
CCRs for IPPS 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 to
ensure that aberrant CCR data did not result in inappropriate outlier
payments.
As indicated in the RY 2005 IPF PPS final rule (69 FR 66961), we
believe that the IPF outlier policy is susceptible to the same payment
vulnerabilities as the IPPS; therefore, we adopted a method to ensure
the statistical accuracy of CCRs under the IPF PPS. Specifically, we
adopted the following procedure in the RY 2005 IPF PPS final rule:
<bullet> Calculated two national ceilings, one for IPFs located in
rural areas and one for IPFs located in urban areas.
<bullet> 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 most recent Provider
Specific File (PSF) available.
For FY 2025, we are proposing to continue following this
methodology. 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 proposed
upper threshold CCR for IPFs in FY 2025 is 2.3362 for rural IPFs, and
1.8600 for urban IPFs, based on current 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 median CCRs to the following situations:
<bullet> New IPFs that have not yet submitted their first Medicare
cost report. We continue to use these national median CCRs until the
facility's actual CCR can be computed using the first tentatively or
final settled cost report.
<bullet> IPFs whose overall CCR is in excess of three standard
deviations above the corresponding national geometric mean (that is,
above the ceiling).
<bullet> Other IPFs for which the Medicare Administrative
Contractor (MAC) obtains inaccurate or incomplete data with which to
calculate a CCR.
We are proposing to update the FY 2025 national median and ceiling
CCRs for urban and rural IPFs based on the CCRs entered in the latest
available IPF PPS PSF.
Specifically, for FY 2025, to be used in each of the three
situations listed previously, using the most recent CCRs entered in the
CY 2023 PSF, we provide an estimated national median CCR of 0.5720 for
rural IPFs and a national median CCR of 0.4200 for urban IPFs. These
calculations are based on the IPF's location (either urban or rural)
using the current CBSA-based geographic designations. A complete
discussion regarding the national median CCRs appears in the RY 2005
IPF PPS final rule (69 FR 66961 through 66964).
Lastly, we are proposing that if more recent data become available,
we would use such data to calculate the rural and urban national median
and ceiling CCRs for FY 2025.
4. Requirements for Reporting Ancillary Charges and All-Inclusive
Status Eligibility Under the IPF PPS
a. Background
As discussed in section III.E.4.b of this proposed rule, to analyze
variation in cost between patients with different characteristics, it
is crucial for us to have complete cost information about each patient,
including data on ancillary services provided. Currently, IPFs and
psychiatric units are required to report ancillary charges on cost
reports. As specified at 42 CFR 413.20, hospitals are required to file
cost reports on an annual basis and maintain sufficient financial
records and statistical data for proper determination of costs payable
under the Medicare program.
However, our ongoing analysis has found a notable increase in the
number of IPFs, specifically for-profit freestanding IPFs, that appear
to be erroneously identifying on form CMS-2552-10, Worksheet S-2, Part
I, line 115, as eligible for filing all-inclusive cost reports. These
hospitals identifying as eligible for filing all-inclusive cost reports
(indicating that they have one charge covering all services) are
consistently reporting no ancillary charges or very minimal ancillary
charges and are not using charge information to apportion costs in
their cost report. Generally, based on the nature of IPF services and
the conditions of participation applicable to IPFs, we expect to see
ancillary services and correlating charges, such as labs and drugs, on
most IPF claims.\3\
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\3\ IPFs are subject to all hospital conditions of
participation, including 42 CFR 482.25, which specifies that ``The
hospital must have pharmaceutical services that meet the needs of
the patients,'' and 482.27, which specifies that ``The hospital must
maintain, or have available, adequate laboratory services to meet
the needs of its patients.''
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In the FY 2016 IPF PPS final rule (80 FR 46693 through 46694), we
discussed analysis conducted to better understand IPF industry
practices for future IPF PPS refinements. This analysis revealed that
in 2012 to 2013, over 20 percent of IPF stays show no reported
ancillary charges, such as laboratory and drug charges, on claims. In
the FY 2016 IPF PPS final rule (80 FR 46694), FY 2017 IPF PPS final
rule (81 FR 50513), FY 2018 IPF PPS final rule (82 FR 36784), FY 2019
IPF PPS final rule (83 FR 38588), and FY 2020 IPF PPS final rule (84 FR
38458), we reminded providers that we only pay the IPF for services
furnished to a Medicare beneficiary who is an inpatient of that IPF,
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.
On November 17, 2017, we issued Transmittal 12, which made changes
to the hospital cost report form CMS-2552-10 (OMB No. 0938-0050) and
included cost report level 1 edit 10710S, effective for cost reporting
periods ending on or after August 31, 2017. Edit 10710S required that
cost reports from psychiatric hospitals include certain ancillary costs
or the cost report will be rejected. On January 30, 2018, we issued
Transmittal 13, which changed the implementation date for Transmittal
12 to be for cost reporting periods ending on or after September 30,
2017. CMS suspended edit 10710S effective April 27, 2018, pending
evaluation of the application of the edit to all-inclusive rate
providers. We issued Transmittal 15 on October 19, 2018, reinstating
the requirement that cost reports from psychiatric hospitals, except
all-inclusive rate providers, include certain ancillary costs. This
requirement is still currently in place. For details, we refer readers
to see these Transmittals, which are available on the CMS website at
<a href="https://www.cms.gov/medicare/regulations-guidance/transmittals">https://www.cms.gov/medicare/regulations-guidance/transmittals</a>.
Under IPF PPS regulations at 42 CFR 412.404(e), all inpatient
psychiatric facilities paid under the IPF PPS must meet the
recordkeeping and cost reporting requirements as specified at Sec.
413.24. Historically, in accordance with Sec. 413.24(a)(1), most
hospitals that were approved to file all-inclusive cost reports were
Indian Health Services (IHS) hospitals, government-owned psychiatric
and acute care hospitals, and nominal charge hospitals. Although IPFs
are no longer reimbursed on the basis of reasonable costs, we continue
to expect that most IPFs, other than government-owned or tribally owned
[[Page 23193]]
IPFs, should report cost data that is based on an approved method of
cost finding and on the accrual basis of accounting. The option to
elect to file an all-inclusive rate cost report is limited to providers
that do not have a charge structure and that, therefore, must use an
alternative statistic to apportion costs associated with services
rendered to Medicare beneficiaries.
Current cost reporting rules allow hospitals that do not have a
charge structure to file an all-inclusive cost report using an
alternative cost allocation method. We refer readers to the Provider
Reimbursement Manual (PRM) 15-1; chapter 22, Sec. 2208 for detailed
information on the requirements to file an alternative method.
b. Challenges Related to Missing IPF Ancillary Cost Data
In general, most providers allocate their Medicare costs using
costs and charges as described at Sec. 413.53(a)(1)(i) and referred to
as the Departmental Method, which is the ratio of beneficiary charges
to total patient charges for the services of each ancillary department.
For cost reporting periods beginning on or after October 1, 1982, the
cost report uses the Departmental Method to apportion the cost of the
department to the Medicare program. Added to this amount is the cost of
routine services for Medicare beneficiaries, determined based on a
separate average cost per diem for all patients for general routine
patient care areas as required at Sec. 413.53(a)(1)(i) and (e); and
15-1, chapter 22, Sec. 2200.1.\4\
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\4\ IPFs are subject to all hospital conditions of
participation, including 42 CFR 482.25, which specifies that ``The
hospital must have pharmaceutical services that meet the needs of
the patients,'' and 482.27, which specifies that ``The hospital must
maintain, or have available, adequate laboratory services to meet
the needs of its patients.''
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We use cost-to-charge ratios (CCRs) from Medicare cost reports as
the method of establishing reasonable costs for hospital services and
as the basis for ratesetting for several hospital prospective payment
systems. In general, detailed ancillary cost and charge information is
necessary for accurate Medicare ratesetting. When hospitals identify as
all-inclusive, they are excluded from ratesetting because they do not
have CCRs but use an alternative basis for apportioning costs. When
hospitals erroneously identify as all-inclusive but have a charge
structure, data that is necessary for accurate Medicare ratesetting is
improperly excluded.
Since the issuance of Transmittal 15, we have continued to identify
an increase in the number of IPFs, specifically for-profit freestanding
IPFs, that appear to be erroneously identifying on form CMS- 2552-10,
Worksheet S-2, Part I, line 115, as filing all-inclusive cost reports.
In conjunction with the FY 2023 IPF PPS proposed rule (87 FR 19428
through 19429), we posted a report on the CMS website that summarizes
the results of the latest analysis of more recent IPF cost and claim
information for potential IPF PPS adjustments and requested comments
about the results summarized in the report. The report showed that
approximately 23 percent of IPF stays were trimmed from the data set
used in that analysis because they were stays at facilities where fewer
than 5 percent of their stays had ancillary charges. The report is
available on the CMS website at <a href="https://www.cms.gov/medicare/payment/prospective-payment-systems/inpatient-psychiatric-facility/ipf-reports-and-educational-resources">https://www.cms.gov/medicare/payment/prospective-payment-systems/inpatient-psychiatric-facility/ipf-reports-and-educational-resources</a>.
Section 4125 of the CAA, 2023 authorizes the Secretary to collect
data and information, specifically including charges related to
ancillary services, as appropriate to inform revisions to the IPF PPS.
In the FY 2024 IPF PPS proposed rule (88 FR 21270 through 21272),
we included a request for information (RFI) related to the reporting of
charges for ancillary services, such as labs and drugs, on IPF claims.
We were interested in better understanding IPF industry practices
pertaining to the billing and provision of ancillary services to inform
statutorily mandated IPF PPS refinements. We stated that we were
considering whether to require charges for ancillary services to be
reported on claims and potentially reject claims if no ancillary
services are reported, and whether to consider payment for such claims
to be inappropriate or erroneous and subject to recoupment.
In response to the comment solicitation, we received a comment from
MedPAC regarding facilities that do not report ancillary charges on
most or any of their claims. MedPAC stated that it is not known:
whether IPFs fail to report ancillary charges separately because they
were appropriately bundled with all other charges into an all-inclusive
per diem rate; if no ancillary charges were incurred because the IPF
cares for a patient mix with lower care needs or inappropriately fails
to furnish the kinds of care reflected in ancillary charges when
medically necessary; or if ancillary charges for services furnished
during the IPF stay are inappropriately billed outside of the IPF base
rate (unbundling). MedPAC recommended CMS conduct further investigation
into the lack of certain ancillary charges and whether IPFs are
providing necessary care and appropriately billing for inpatient
psychiatric services under the IPF PPS.
MedPAC also encouraged CMS to require the reporting of ancillary
charges and clarify the requirements related to IPFs' ``all-inclusive-
rate'' hospital status. MedPAC noted that it observed in cost report
data that IPFs that previously were not all-inclusive-rate hospitals
have recently changed to an all-inclusive-rate status. MedPAC noted
that the timing of many of these changes appears to correspond to CMS's
transmittals requiring ancillary services to be reported on cost
reports for IPFs that do not have an all-inclusive rate.
Other commenters, including IPFs and hospital associations,
responded to the RFI stating that the lack of ancillary charges on
claims does not indicate a lack of services being provided. The
commenters strongly opposed any claim-level editing and stated that
reporting ancillary charges at the claim level would be inefficient and
burdensome, particularly for government and IHS all-inclusive
hospitals.
c. Clarification of Eligibility Criteria for the Option To Elect To
File an All-Inclusive Cost Report
After taking into consideration the feedback we received from both
MedPAC and IPF providers, for FY 2025 we are clarifying the eligibility
criteria to be approved to file all-inclusive cost reports. Only
government-owned or tribally owned facilities are able to satisfy these
criteria, and thus only these facilities will be permitted to file an
all-inclusive cost report for cost reporting periods beginning on or
after October 1, 2024.
We remind readers that in order to be approved to file an all-
inclusive cost report, hospitals must either have an all-inclusive rate
(one charge covering all services) or a no-charge structure.\5\ We are
clarifying that this does not mean any hospital can elect to have an
all-inclusive rate or no-charge structure. Our longstanding policy as
discussed in the PRM 15-1, chapter 22, Sec. 2208.1, only allows a
hospital to use an all-inclusive rate or no charge structure if it has
never had a charge structure in place. In addition, we are clarifying
that our expectation is that any new IPF would have the ability to have
a charge structure under which it could allocate
[[Page 23194]]
costs and charges. As previously stated, only a government-owned or
tribally owned facility will be able to satisfy these criteria and will
be eligible to file its cost report using an all-inclusive rate or no
charge structure.
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\5\ PRM 15-1, chapter 22, Sec. 2208.1.
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For cost reporting periods beginning on or after October 1, 2024,
we will issue instructions to the MACs and put in place edits to
operationalize our longstanding policy that only government-owned or
tribally owned IPF hospitals are permitted to file an all-inclusive
cost report. All other IPF hospitals must have a charge structure and
must report ancillary costs and charges on their cost reports. IPFs
that have previously filed an all-inclusive cost report erroneously
will no longer be able to do so. We further note that to the extent
government-owned or tribally owned hospitals can report ancillary
charges on their cost reports, we strongly encourage them to do so to
allow CMS to review and analyze complete and accurate data.
We believe clarifying the current eligibility criteria to be
approved to file all-inclusive cost reports and implementing these
operational changes will appropriately require freestanding IPFs with
the ability to have a charge structure, that is, all IPFs other than
those which are government-owned or tribally owned, to track and report
ancillary charge information. In addition, we expect that more IPFs
reporting ancillary charge information will result in an increase of
IPFs having a CCR, which will in turn result in an increased number of
IPFs being included in ratesetting. Therefore, we believe these
operational changes will improve the quality of data reported, which
will result in increased accuracy of future payment refinements to the
IPF PPS.
Furthermore, we believe collecting charges of ancillary services
from freestanding IPFs supports the directive for competition under the
Executive Order on Promoting Competition in the American Economy as it
facilitates accurate payment, cost efficiency, and transparency.\6\
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\6\ <a href="https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy/">https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy/</a>.
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F. Refinement Standardization Factor
Section 1886(s)(5)(D)(iii) of the Act, as added by section 4125(a)
of the CAA, 2023, states that revisions in payment implemented pursuant
to section 1886(s)(5)(D)(i) for a rate year shall result in the same
estimated amount of aggregate expenditures under this title for
psychiatric hospitals and psychiatric units furnished in the rate year
as would have been made under this title for such care in such rate
year if such revisions had not been implemented. We interpret this to
mean that revisions in payment adjustments implemented for FY 2025 (and
for any subsequent fiscal year) must be budget neutral.
Historically, we have maintained budget neutrality in the IPF PPS
using the application of a standardization factor, which is codified in
our regulations at Sec. 412.424(c)(5) to account for the overall
positive effects resulting from the facility-level and patient-level
adjustments. As discussed in section III.B.1 of this proposed rule,
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
standardization factor by setting the total estimated IPF PPS payments,
taking into account all of the adjustment factors under the IPF PPS, 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 RY 2005 IPF PPS final
rule (69 FR 66926).
We believe the budget neutrality requirement of section 4125(a) of
the CAA, 2023 is consistent with our longstanding methodology for
maintaining budget neutrality under the IPF PPS. Therefore, for FY
2025, we are proposing to apply a refinement standardization factor in
accordance with our existing policy at Sec. 412.424(c)(5). This policy
requires us to update IPF PPS patient-level adjustment factors, ED
adjustment, and ECT per treatment amount as proposed in this FY 2025
IPF PPS proposed rule, in such a way that total estimated payments to
IPFs for FY 2025 are the same with or without the changes (that is, in
a budget neutral manner) by applying a refinement standardization
factor to the IPF PPS rates. We are proposing to use the following
steps to ensure that the rates reflect the FY 2025 update to the
patient-level adjustment factors (as previously discussed in section
III.C and III.D of this proposed rule, and summarized in Addendum A) in
a budget neutral manner:
Step 1: Simulate estimated IPF PPS payments using the FY 2024 IPF
patient-level and facility-level adjustment factor values and FY 2024
ECT payment per treatment (available on the CMS website).
Step 2: Simulate estimated IPF PPS payments using the proposed FY
2025 IPF patient-level and facility-level adjustment factor values (see
Addendum A of this proposed rule, which is available on the CMS
website) and ECT per treatment amount based on the CY 2022 geometric
mean cost for ECT under the OPPS.
Step 3: Divide the amount calculated in step 1 by the amount
calculated in step 2. The resulting quotient is the proposed FY 2025
refinement standardization factor of 0.9514.
Step 4: Apply the FY 2025 refinement standardization factor from
step 3 to the FY 2024 IPF PPS Federal per diem base rate and ECT per
treatment amount (based on the CY 2022 geometric mean cost for ECT
under the OPPS), after the application of the wage index budget
neutrality factor and the IPF market basket increase reduced by the
productivity adjustment described in section III.A of this proposed
rule to determine the FY 2025 IPF PPS Federal per diem base rate and FY
2025 ECT payment amount per treatment.
IV. Requests for Information (RFI) To Inform Future Revisions to the
IPF PPS in Accordance With the CAA, 2023
As discussed in the following sections, we are requesting
information on two main topics to inform future revisions to the IPF
PPS, in accordance with the CAA, 2023. First, we are requesting
information regarding potential revisions to the IPF PPS facility-level
adjustments. Second, we are requesting information regarding the
development of a patient assessment instrument under the IPFQR program.
Please note, each of these sections is a request for information
(RFI) only. In accordance with the impleme
[…truncated; see source link]Indexed from Federal Register on April 3, 2024.
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