Rule2024-16909
Medicare Program; FY 2025 Inpatient Psychiatric Facilities Prospective Payment System-Rate Update
Primary source
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Published
August 7, 2024
Effective
October 1, 2024
Issuing agencies
Health and Human Services DepartmentCenters for Medicare & Medicaid Services
Abstract
This final action updates 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 final action also revises the patient-level adjustment factors, the Emergency Department adjustment, and the payment amount for electroconvulsive therapy. These changes will be effective for IPF discharges occurring during the fiscal year (FY) beginning October 1, 2024 through September 30, 2025 (FY 2025). In addition, this final action finalizes the adoption of a new quality measure. It does not finalize modifications to the reporting requirements under the IPF Quality Reporting Program beginning with the FY 2027 payment determination. Furthermore, this final action summarizes comments received through Requests for Information 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 152 (Wednesday, August 7, 2024)]
[Rules and Regulations]
[Pages 64582-64675]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-16909]
[[Page 64581]]
Vol. 89
Wednesday,
No. 152
August 7, 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; Final Rule
Federal Register / Vol. 89 , No. 152 / Wednesday, August 7, 2024 /
Rules and Regulations
[[Page 64582]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 412
[CMS-1806-F]
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: Final action.
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SUMMARY: This final action updates 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 final action also
revises the patient-level adjustment factors, the Emergency Department
adjustment, and the payment amount for electroconvulsive therapy. These
changes will be effective for IPF discharges occurring during the
fiscal year (FY) beginning October 1, 2024 through September 30, 2025
(FY 2025). In addition, this final action finalizes the adoption of a
new quality measure. It does not finalize modifications to the
reporting requirements under the IPF Quality Reporting Program
beginning with the FY 2027 payment determination. Furthermore, this
final action summarizes comments received through Requests for
Information regarding potential future revisions to the IPF PPS
facility-level adjustments and regarding the development of a
standardized IPF Patient Assessment Instrument.
DATES: This final action is effective on October 1, 2024.
FOR FURTHER INFORMATION CONTACT: The IPF Payment Policy mailbox at
<a href="/cdn-cgi/l/email-protection#85ccd5c3d5e4fce8e0ebf1d5eae9ece6fcc5e6e8f6abededf6abe2eaf3"><span class="__cf_email__" data-cfemail="652c352335041c08000b11350a090c061c250608164b0d0d164b020a13">[email protected]</span></a> for general information.
Nick Brock (410) 786-5148, for information regarding the inpatient
psychiatric facilities prospective payment system (IPF PPS) and
regulatory impact analysis.
Kaleigh Emerson (470) 890-4141, for information regarding the
inpatient psychiatric facilities quality reporting program (IPFQR).
SUPPLEMENTARY INFORMATION:
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 final rule summarizes the fiscal year (FY) 2025
IPF PPS payment rates, outlier threshold, cost of living adjustment
factors (COLA) for Alaska and Hawaii, national and upper limit cost-to-
charge ratios, and adjustment factors. In addition, Addendum B to this
final rule shows the complete listing of ICD-10 Clinical Modification
(CM) and Procedure Coding System (PCS) codes, the FY 2025 IPF PPS
comorbidity adjustment, and electroconvulsive therapy (ECT) procedure
codes. Addenda A and B to this final rule 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
(CBSA) 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 final rule updates 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). This rule also adopts 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 refines the patient-level adjustment factors and
increases the payment amount for electroconvulsive therapy (ECT)
treatments. This final rule also clarifies the eligibility criteria for
an IPF to be approved to file all-inclusive cost reports. This rule
includes a summary of the public comments received to inform revisions
to the payment adjustments for rural location and teaching status,
along with a potential payment adjustment for safety net population. In
addition, this final rule includes a summary of the public comments
received in response to our request for information (RFI) 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
final rule updates quality measures and discusses reporting
requirements under the Inpatient Psychiatric 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 finalizing our proposals to:
<bullet> Revise the patient-level IPF PPS adjustment factors and
increase the ECT per treatment payment amount.
<bullet> Update the IPF PPS wage index to use the CBSAs defined
within OMB Bulletin 23-01.
<bullet> Clarify the eligibility criteria for an IPF to be approved
to file all-inclusive cost reports. Only a government-owned or tribally
owned facility satisfies these criteria and is eligible to file its
cost report using an all-inclusive rate or no charge structure.
<bullet> Make technical rate setting updates: The IPF PPS payment
rates will be adjusted annually for input price inflation, as well as
statutory and other policy factors.
This rule updates:
++ The IPF PPS Federal per diem base rate from $895.63 to $876.53.
++ The IPF PPS Federal per diem base rate for providers who failed
to report quality data to $859.48.
++ The ECT payment per treatment from $385.58 to $661.52.
++ The ECT payment per treatment for providers who failed to report
quality data to $648.65.
++ The labor-related share from 78.7 percent to 78.8 percent.
++ The wage index budget neutrality factor to 0.9996. This rule
applies a refinement standardization factor of 0.9524.
++ The fixed dollar loss threshold amount from $33,470 to $38,110,
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 finalizing our proposal to adopt the
30-Day Risk- Standardized All-Cause Emergency Department (ED) Visit
Following an IPF Discharge measure
[[Page 64583]]
beginning with the FY 2027 payment determination. We are not finalizing
our proposal to modify reporting requirements to require IPFs to submit
patient-level data on a quarterly basis.
We also refer readers to the summary of the comments to our RFI in
which we solicited comments to inform elements to be included in the
IPF PAI, 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] TR07AU24.000
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. 108-17-3) 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, 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 Inpatient
Psychiatric Facilities Prospective Payment System--Rate Update (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 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.
[[Page 64584]]
Sections IV.B, IV.C, and IV.D of this FY 2025 IPF PPS final rule
discuss final decisions about our proposed revisions under section
1886(s)(5)(D) of the Act for FY 2025.
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
We issued the RY 2005 IPF PPS final rule which appeared in the
November 15, 2004 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 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).
We issued a final rule which appeared in the May 6, 2011 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
[[Page 64585]]
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 will 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.
CMS issued the most recent IPF PPS annual update, which appeared 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.
Section 902 of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA) amended section 1871(a) of the Act and
requires the Secretary, in consultation with the Director of the Office
of Management and Budget, to establish and publish timelines for the
publication of Medicare final regulations based on the previous
publication of a Medicare proposed or interim final regulation. Section
902 of the MMA also states that the timelines for these regulations may
vary but shall not exceed 3 years after publication of the preceding
proposed or interim final regulation except under exceptional
circumstances.
This final rule finalizes provisions set forth in the April 3, 2024
Medicare Program; FY 2025 Inpatient Psychiatric Facilities Prospective
Payment System--Rate Update; Proposed Rule (89 FR 23145). In addition,
this final rule has been published within the 3-year time limit imposed
by section 902 of the MMA. Therefore, we believe that the final rule is
in accordance with the Congress' intent to ensure timely publication of
final regulations.
III. Analysis of and Responses to Public Comments
We received 69 public comments that pertain to proposed IPF PPS
payment policies, requests for information, and the proposed updates to
the IPFQR Program. Comments were from inpatient psychiatric facilities,
health systems, national and state level provider and patient advocacy
organizations, the Medicare Payment Advisory Commission (MedPAC), and
individuals. We reviewed each comment and grouped related comments,
after which we placed them in categories based on subject matter or
section(s) of the regulation affected. Summaries of the public comments
received and our responses to those comments are provided in the
appropriate sections in the preamble of this final rule.
In addition, we received a few comments that were out of the scope
of the FY 2025 IPF PPS proposed rule. We appreciate these comments but
note that, because they fall outside the scope of this rulemaking, we
do not address them in this rule. We will consider these comments as we
continue to develop policies for future rulemaking.
IV. Provisions of the FY 2025 IPF PPS Final Rule and Responses to
Comments
A. 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. FY 2025 IPF Market Basket Update
For FY 2025 (beginning October 1, 2024 and ending September 30,
2025), we proposed 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
proposed 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 was 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 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
[[Page 64586]]
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 the FY 2025 IPF PPS
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) was projected to be 0.4
percent. Accordingly, we proposed to reduce the 3.1 percent IPF market
basket increase by this 0.4 percentage point productivity adjustment,
as mandated by the Act. This resulted in a proposed FY 2025 IPF PPS
payment rate update of 2.7 percent (3.1-0.4 = 2.7). We also proposed
that if more recent data became 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 solicited comments on the proposed IPF market basket increase
and productivity adjustment for FY 2025.
Comment: Several commenters expressed concerns about the proposed
2021-based IPF market basket increase factor for FY 2025 of 3.1 percent
suggesting that the proposed rate increases might still be insufficient
to meet the growing costs of healthcare provision. They stated that
with the significant increase in the costs of labor, pharmaceuticals,
and supplies, the payment update is inadequate. Commenters stated that
labor-related inflation has been driven in large part by a severe
workforce shortage. The commenters also stated that hospitals are
turning to costlier contract labor to sustain operations; one commenter
noted that they believed that contract labor costs increased 258
percent from 2019 through 2023. The commenters stated these increased
costs are felt acutely by IPFs as they struggle to maintain highly
skilled technicians, clinical social workers, psychologists, and
therapists. They requested that CMS provide a more robust payment
update for FY 2025 and in the future, until a more accurate PPS
methodology can be adopted. Commenters also stated that the cumulative
effect of this inflationary pressure, coupled with the proposed
Medicare payment increases for FY 2025, will continue to have negative
effects on IPF operating margins. They cited the Medicare Payment
Advisory Commission, which determined that Medicare has failed to cover
the cost of caring for patients in hospital-based and freestanding
nonprofit IPFs since at least 2016. They further stated that when
looking at the 2022 Medicare cost reports for freestanding IPFs that
included a full of year of data, over half of the hospitals had a
negative operating margin. The commenter requested that CMS reassess
the data and methodology used to determine the annual market basket
update in light of continued inflationary pressures for hospitals.
One commenter stated that the proposed 3.1 percent increase in the
market basket is insufficient at this crucial time for many healthcare
facilities, especially those in rural and underserved areas. One
commenter recommended exploring all options to ensure that provider
reimbursement is adequate to meet patient needs. They further stated
that in the Medicare behavioral health arena, CMS has leverage to
improve financial stability for providers and their patients because
the IPF PPS authorizing statute did not specify an annual rate update,
giving the Secretary discretion in establishing an update methodology.
One commenter noted that in some instances, hospital beds go unused
despite increasing demand due to the lack of sufficient staffing. The
commenter suggested a 5-percent increase consistent with recently
experienced inflation, which they stated would be compounded by the
anticipated inflation during the coming year.
One commenter stated that from 2019 to 2023, costs per adjusted
discharge rose 25 percent; however, base payment rates for Medicare
have failed to keep pace with input price inflation. They recommended
CMS use data that better reflects the input price inflation that IPFs
have experienced and are projected to experience in 2025.
One commenter generally supported the proposed rate increase;
however, they noted that this increase is likely still at a level
insufficient to sustain capacity and improve access to high--quality
care effectively. One commenter supported increasing the IPF PPS rate
by 2.7 percent, noting that increased funding for IPFs would improve
access to care and quality of services. One commenter suggested that
CMS use more recent data, as proposed, that includes the recent
inflationary increases in costs. In absence of such data, they
requested that CMS consider an alternative approach to better align the
market basket increases with the rising cost of treating patients.
Response: We appreciate the commenters' concern regarding
inflationary pressure facing IPFs and the proposed FY 2025 market
basket update.
As stated in the FY 2024 IPF final rule (88 FR 51057), the 2021-
based IPF market basket is a fixed-weight, Laspeyres-type index that
measures price changes over time. Since the inception of the IPF PPS,
the IPF payment rates (with the exception of statutorily mandated
updates) have been updated by a projection of a market basket
percentage increase, consistent with other CMS PPS updates (including
for inpatient hospitals, skilled nursing facilities, and home health
agencies). CMS established this practice in the RY 2004 IPF PPS final
rule (69 FR 66928 through 66930), in accordance with section
1886(b)(3)(B)(ii) of the Act. Because the market basket is designed to
measure price inflation for IPF providers, it would not reflect
increases in costs associated with changes in the volume or intensity
of input goods and services (such as the quantity of labor used) or
Medicare allowable costs per risk-adjusted discharge.
As is our general practice, we proposed in the FY 2025 IPF proposed
rule (89 FR 23150) that if more recent data became available, we would
use such data, if appropriate, to derive the final FY 2025 IPF market
basket update for the final rule. As noted in that rule and above, the
projection of the 2021-based IPF market basket is based on the most
recent forecast from IGI, a nationally recognized economic and
financial forecasting firm with which CMS contracts to forecast the
price proxies of the market baskets. We also note that when developing
its forecast for labor prices, IGI considers overall labor market
conditions (including rise in contract labor employment due to tight
labor market conditions), as well as trends in contract labor wages,
which both have an impact on wage pressures for workers employed
directly by the hospital. For this final rule, based on the more recent
IGI second quarter 2024 forecast with historical data through the first
quarter of 2024, the projected 2021-based IPF market basket increase
factor for FY 2025 is 3.3 percent, which is 0.2 percentage point higher
than the projected FY 2025 market basket increase factor in the
proposed rule, and reflects an increase in compensation prices of 3.7
percent. We note that the 10-year historical average (2014 through
[[Page 64587]]
2023) growth rate of the 2021-based IPF market basket is 2.7 percent
with compensation prices increasing 2.9 percent.
Comment: One commenter recommended that CMS consider reconfiguring
how it projects its annual payment updates. They stated that most
years, CMS offers modest increases to the payment rates, largely driven
by its analysis of cost data from prior years. The commenter stated
that CMS payment updates have continued to lag, further expanding the
gap between the cost of providing care and the reimbursement received
from the public payers. They suggested that CMS work with its
Congressional partners to raise awareness and address the underfunding
of health care services. One commenter did not understand why the
proposed FY 2025 market basket increase is lower than the FY 2024
market basket increase or why the proposed FY 2025 productivity
adjustment is higher than the FY 2024 productivity adjustment (88 FR
51076 through 51077).
Response: The projection of the 2021-based IPF market basket is
based on the most recent forecast from IGI. The market basket
percentage increase is a forecast of the price pressures that IPFs are
expected to face in 2025. As projected by IGI and other independent
forecasters, upward price pressures are expected to be less significant
in 2025 relative to 2022 through 2024. IGI's latest forecast of prices
facing hospitals in FY 2025 reflects overall economic and industry-
specific influences. We note that these projections do not reflect
analysis of cost data from prior years, as stated by the commenter.
Comment: One commenter requested that CMS ensure mechanisms are put
in place to capture costs (that is, staffing, capital expense,
pharmaceuticals, emerging evidence-based interventions) accurately now
and in the future with as little administrative burden as possible.
Response: We appreciate the commenter's suggestion on the topic of
data collection. As stated in the FY 2024 IPF final rule, (88 FR 51057
through 51081), the 2021-based IPF market basket major cost weights
were derived using the 2021 Medicare cost reports (CMS Form 2552-10,
OMB No. 0938-0050) for freestanding and hospital-based IPFs. The
Medicare cost report data captures detailed expenses for IPFs
(including but not limited to wages and salaries, employee benefits,
contract labor, pharmaceuticals, and capital). We continue to encourage
all providers to report complete and accurate cost data on the Medicare
cost reports--particularly on Worksheet S3, part V, which in prior
years has had limited reporting as discussed in the FY 2024 IPF PPS
final rule (88 FR 51060), but importantly captures detailed
compensation costs.
Comment: One commenter opposed the proposal to reduce the federal
per diem base rate from $895.63 to $874.93. They stated with the cost
of labor, benefits, pharmacy, and other supplies increasing much
greater than inflation, a 2.31 percent decrease is unacceptable. They
stated that hospitals are already losing money at the current per diem
rate, and anything less than a market basket increase of at least 3
percent, which is comparable to other market basket increases, is
insufficient. They stated that there is a shortage of valuable IPF
beds, and that cutting reimbursement will exacerbate the issue.
Response: We appreciate the commenter's concern, and we note that
although we proposed a decrease to the federal per diem base rate, we
estimated that payments under the IPF PPS would increase by
approximately 2.6 percent overall after all payment adjustments are
applied. As stated in the FY 2025 IPF PPS proposed rule (89 FR 23149),
based on IGI's fourth quarter 2023 forecast with historical data
through the third quarter of 2023, we proposed a 2021-based IPF market
basket increase for FY 2025 of 3.1 percent. As mandated by the Act, we
also proposed to reduce the 3.1 percent IPF market basket increase by
the proposed 0.4 percentage point productivity adjustment, which was
also based on IGI's fourth quarter 2023 forecast. As stated in the FY
2025 IPF PPS proposed rule (89 FR 23153), for the proposed FY 2025
Federal per diem base rate, we applied the payment rate update of 2.7
percent to the FY 2024 Federal per diem base rate of $895.63. Then, we
also applied the proposed wage index budget neutrality factor of 0.9998
and a proposed refinement standardization factor of 0.9514 to yield a
proposed Federal per diem base rate of $874.93 for FY 2025. 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. Therefore, we proposed a refinement
standardization factor to be applied to the FY 2024 IPF PPS payment
rates to maintain budget neutrality for FY 2025. This proposed
refinement standardization factor reduced the proposed Federal per diem
base rate to account for the overall increase to payments
(approximately 5.1 percent) that would otherwise occur under the
revised IPF PPS adjustment factors. As indicated in the proposed rule,
we note that for this final rule, we are updating the refinement
standardization factor to 0.9524 based on more recent data. As proposed
(89 FR 23149), we are also updating the projected 2021-based IPF market
basket increase for FY 2025 to reflect IGI's more recent second quarter
2024 forecast with historical data through the first quarter of 2024.
For the final rule, the projected 2021-based IPF market basket increase
for FY 2025 is 3.3 percent. We believe the 2021-based IPF market basket
increase for FY 2025 adequately reflects the price increases IPFs are
projected to face since the index reflects the mix of inputs used to
provide IPF services.
Comment: Several commenters expressed concern about the application
of the productivity adjustment stating that the COVID-19 public health
emergency (PHE) has had unimaginable impacts on U.S. productivity and
that most estimates of labor productivity highlight uncharacteristic
reductions. They stated that even before the PHE, the CMS Office of the
Actuary (OACT) indicated that hospital productivity will be less than
the general economy-wide productivity, though they note the general
economy-wide measure is required by law to be used to derive the
productivity adjustment. They requested that CMS use its ``special
exceptions and adjustments'' authority to eliminate the productivity
adjustment for FY 2025.
One commenter stated that hospitals continue to encounter
difficulties obtaining nurses and nursing assistants to care for
patients, and these struggles could potentially be exacerbated by the
recently finalized minimum staffing requirement at nursing facilities.
They argued that these issues should be accounted for when determining
a productivity factor. One commenter requested CMS lower the
productivity adjustment factor to the rate used in FY 2024, which was
0.2 percentage point.
Response: Section 1886(s)(2)(A)(i) of the Act requires the
application of the productivity adjustment described in section
1886(b)(3)(xi)(II) of the Act. As required by statute, the FY 2025
productivity adjustment is derived based on the 10-year moving average
growth in economy-wide productivity for the period ending FY 2025. We
acknowledge the concerns of the commenters regarding the
appropriateness of the productivity adjustment and potential impacts of
other rulemaking, including minimum nurse staffing requirements;
however, we are required pursuant to section 1886(s)(2)(A)(i) of the
Act to apply the
[[Page 64588]]
specific productivity adjustment. Because that provision specifically
requires application of the productivity adjustment, we do not believe
section 1886(s) of the Act permits the Secretary discretion to remove
it from the calculation of the market basket update.
As stated in the FY 2025 IPF proposed rule (89 FR 23149), the
United States Department of Labor's Bureau of Labor Statistics (BLS)
publishes the official measures of annual economy-wide, private nonfarm
business total factor productivity (previously referred to as annual
economy-wide, private nonfarm business multifactor productivity). IGI
forecasts total factor productivity consistent with BLS methodology by
forecasting the detailed components of TFP. 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>.
We believe our methodology for the productivity adjustment is
consistent with the statute that states the productivity adjustment is
equal to the 10-year moving average of changes in annual economy-wide
private nonfarm business multi-factor productivity (as projected by the
Secretary for the 10-year period ending with the applicable fiscal
year, year, cost reporting period, or other annual period).
The FY 2025 proposed productivity adjustment of 0.4 percent was
based on IGI's forecast of the 10-year moving average of annual
economy-wide private nonfarm business TFP, reflecting historical data
through 2022 as published by BLS and forecasted TFP for 2023 through
2025. The higher productivity adjustment for FY 2025 (0.4 percent
proposed and 0.5 percent for the final rule) compared to FY 2024 (0.2
percent) is primarily a result of incorporating BLS revised historical
data through 2022 and preliminary historical growth in TFP for 2023,
and an updated forecast for TFP growth for 2024 reflecting higher
expected growth in economic output.
Finally, we note that CMS appreciates the concerns that the
commenter raised about challenges related to staffing. We remain
focused on improving the health and safety of patients seeking care at
IPFs, and ensuring access to care.
Comment: Several commenters stated that in FYs 2022, 2023, and
2024, CMS provided market basket updates of 2.7 percent, 4.1 percent,
and 3.5 percent, respectively. They claimed that CMS's actual figures
have demonstrated the deficiency in these figures, with recent
estimates showing the market basket for these years to be 5.3 percent,
4.8 percent, and 3.7 percent, respectively. The commenters argued that
the ongoing shortcomings of the market basket perpetuate underpayments
to IPFs since future payment adjustments continue to be based on these
updates. They stated that given ongoing inflationary pressure, cost
increases, and the inadequacy of the prior year market basket updates,
they believe CMS's proposed update for FY 2025 will be insufficient to
cover costs. They stated that while they appreciate that CMS will
update the market basket in the final rule based on more recent data,
they are concerned that it will still be inadequate. They noted that
when CMS underestimates the market basket update under the Skilled
Nursing Facility Prospective Payment System (PPS) and the capital input
price index used in the Inpatient Prospective Payment System (IPPS),
CMS makes a forecast error adjustment when the error exceeds a
threshold. The commenters requested a consistent policy between these
payment systems and implementation of a forecast error adjustment.
Commenters, anticipating that CMS may respond that rulemaking
procedures under section 1871 of the Act would not permit adoption of a
forecast error adjustment for the FY 2023 IPF PPS update because such a
policy was not proposed, argued that, because the IPF market basket
update for FY 2025 has been made subject to public comment in the FY
2025 IPF PPS proposed rule, CMS could finalize a forecast error
adjustment.
Several commenters stated that they believed the persistent gap
between the forecasted market basket percentage increase and the actual
market basket percentage increase is indefensible on policy grounds,
particularly when considering what the commenters described as an
overwhelming urgency of the behavioral health service shortages facing
the United States. The commenters requested that CMS apply a 0.7
percentage point increase to the per diem base rate for FY 2025 to
account for the forecast error for FY 2023.
Several commenters requested that CMS make a one-time 3.5 percent
adjustment to the IPF market basket in FY 2025 to account for what the
commenters consider to be underpayments from FYs 2022 through FY 2024.
One commenter requested that CMS adopt a one-time forecast error
adjustment to the FY 2025 IPF PPS update based on the 3.9 percentage
points difference in the IPF PPS market basket in FYs 2021, 2022, and
2023.
Response: We appreciate the concerns of commenters; however, we did
not propose and are not finalizing a forecast error adjustment for the
IPF PPS for FY 2025. As we have noted in prior years, the IPF market
basket updates are set prospectively, which means that the update
relies on a mix of both historical data for part of the period for
which the update is calculated and forecasted data for the remainder.
For instance, the FY 2025 market basket update in this final rule
reflects historical data through the first quarter of CY 2024 and
forecasted data through the third quarter of CY 2025.
While there is no precedent for adjusting for market basket
forecast error in the IPF payment update, a forecast error can be
calculated for a prior year by comparing the actual market basket
increase for a given year less the forecasted market basket increase.
Due to the uncertainty regarding future price trends, forecast errors
can be both positive and negative. As of now, the cumulative forecast
error since IPF PPS inception (rate year 2007 to FY 2023) is -0.2
percent, which reflects that forecasted market basket updates for each
payment year for IPFs were higher than the actual market basket updates
from 2012 through 2020 (with the exception of 2018); the opposite was
true for 2021 through 2023. Only considering the forecast error for
years when the IPF market basket update was lower than the actual
market basket update does not consider the full experience and impact
of forecast error.
Comment: One commenter stated that the increasing number of
beneficiaries who are choosing Medicare Advantage (MA) over Medicare
fee-for-service is causing additional strain on overall IPF margins.
They stated that MA is increasing the overall cost to care for patients
by unilaterally implementing overly restrictive medical necessity and
prior authorization processes and increasing the administrative burden
of obtaining payments. They stated that although MA plans are receiving
higher increases in payment rates than providers, the rate increases
paid to MA plans are not actually materializing in the form of higher
payments to providers. The commenter recommended CMS adjust Medicare
fee-for-service payments to compensate for MA losses incurred.
Response: We appreciate the concerns regarding payment adequacy
under the IPF PPS; however, we do not agree that it would be
appropriate to adjust IPF PPS payments to compensate providers for
losses that IPFs may incur under other payors. Section 124 of the BBRA
mandated that the Secretary develop a per diem PPS for inpatient
hospital
[[Page 64589]]
services furnished in psychiatric hospitals and psychiatric units. As
required by Sec. 412.424(c)(6)(ii), the FY 2025 IPF PPS Federal per
diem base rate is based on an increase factor to adjust for the most
recent estimate of increases in the prices of an appropriate market
basket of goods and services provided by inpatient psychiatric
facilities. Specifically, we applied the 2021-based IPF market basket
increase for FY 2025, reduced by the productivity adjustment, which as
noted earlier in this final rule measures expected price inflation for
IPF providers in FY 2025.
Final Decision: After consideration of the comments received, we
are finalizing our proposal to update IPF PPS payment rates using the
latest available productivity-adjusted market basket increase factor.
Based on IGI's more recent second quarter 2024 forecast with historical
data through the first quarter of 2024, the projected 2021-based IPF
market basket increase for FY 2025 rule is 3.3 percent and the
projected productivity adjustment is 0.5 percent.
3. 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 will 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 proposed 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 proposed 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 was 75.7 percent. We proposed, 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 was 6.8 percent of the 2021-based
IPF market basket for FY 2025, we proposed 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 proposed 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 also proposed that if more
recent data became 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). We solicited comments on the proposed labor-related share for
FY 2025.
Comment: One commenter supported the proposed increase in the
labor-related share of the IPF market basket for FY 2025. The commenter
expected the increase in the labor-related share given their concerns
about labor costs increasing at a higher rate than other hospital costs
during the pandemic. They also requested that CMS consider a period
less than 5 years for the next rebasing and revising of the IPF market
basket, as they believe the current labor share based on FY 2021 cost
reports may not fully reflect the increased weight for labor in the
overall index that hospital experienced during the COVID-19 PHE.
Response: We appreciate the commenter's request for CMS to consider
a shorter period than 5 years for the next rebasing. We generally
rebase the IPF market basket every 5 years, in part because the cost
weights obtained from the Medicare cost reports generally do not
indicate a significant change in the weights over shorter intervals.
However, we acknowledge the commenter's concern and the possible impact
of the PHE on the cost weights. We regularly monitor the Medicare cost
report data to assess whether a rebasing is technically appropriate,
and we will continue to do so in the future. Consistent with historical
practice, a rebasing of the IPF market basket would be proposed in
rulemaking and subject to public comments.
Comment: One commenter encouraged CMS to consider collecting
information on staffing. The commenter noted that CMS calculates a
labor share for IPFs of 78.8 percent for FY 2025, which they note is
higher than other institutional settings (e.g., labor costs comprise
less than 70 percent of IPPS hospital costs, 74 percent of inpatient
rehabilitation facility costs, and 71 percent of skilled nursing
facility costs). However, they noted there was little available
information on the mix (and quantity) of staff employed by IPFs and how
staff spend their time across various IPF tasks (such as inpatient
assessment, counseling, drug management, nursing care, and behavioral
monitoring). They further stated that IPF staffing data would provide
essential insights into the variation in costs and quality of care
across providers, enabling CMS (and Medicare beneficiaries, if data
were publicly available) to better understand the services they are
purchasing and using. The commenter stated there is a precedent in
Medicare for regularly collecting staffing information, as SNFs are
required to submit detailed staffing data through the Payroll Based
Journal. The commenter stated payroll data are considered the gold
standard for measuring staffing; the data are submitted electronically
and can be audited by other data sources.
Response: We appreciate the commenter's suggestion to collect more
information on staffing at IPFs. We will take these comments into
consideration as we explore the possibility of collecting this
information in the future.
Final Decision: After consideration of the comments, we are
finalizing a FY 2025 labor-related share based on the latest available
data. Based on IGI's second quarter 2024 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. Since the relative importance for
Capital-Related costs is 6.7 percent of the 2021-based IPF market
basket for FY 2025, we take 46 percent of 6.7 percent to determine a
labor-related share of Capital-Related costs for FY 2025 of 3.1
percent. Therefore, the total labor-related share for FY 2025 is 78.8
[[Page 64590]]
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).
Table 1 shows the final FY 2025 labor-related share and the final
FY 2024 labor-related share using the 2021-based IPF market basket
relative importance.
[GRAPHIC] [TIFF OMITTED] TR07AU24.001
B. Revisions to the IPF PPS Rates for FY 2025
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 requires 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 will 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 will 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 Electroconvulsive Therapy (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 IV.B.2 of this final rule, we proposed 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 IV.F of this final rule, we proposed
to apply a
[[Page 64591]]
standardization factor to the FY 2025 base rate that takes these
refinements into account to keep total IPF PPS payments budget neutral.
2. 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 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. Increase to the Electroconvulsive Therapy Payment per Treatment
For the 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 led 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 IV.C.3.d.(2) of this final
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.
We noted that the application of our standard methodology for
updating the ECT payment would have resulted in an FY 2025 payment of
$377.54. We note that for this final rule, that figure is $378.23 per
ECT treatment, based on the FY 2024 ECT payment amount of $385.58,
increased by the market basket update of 2.8 percent and reduced by the
FY 2025 wage index budget neutrality factor of 0.9996 and a refinement
standardization factor of 0.9546, 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 showed that costs for furnishing ECT have risen by a factor
greater than the standard methodology for updating the rate will 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
[[Page 64592]]
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 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 proposed to increase the
ECT payment with reference to the CY 2024 OPPS ECT geometric mean cost
for FY 2025, we did not propose 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 proposed 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 proposed 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. We also proposed to
update this amount based on more recent data of the market basket,
productivity adjustment, and wage index budget neutrality factor.
To account for budget neutrality, as discussed in section IV.F of
this final rule, we proposed 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 noted 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 estimated that this change would
increase payments for IPFs that provide ECT, and would decrease
payments for IPFs that do not provide ECT. However, we explained that
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 noted 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 stated that we intend to
continue monitoring the provision of ECT through further analysis of
IPF PPS claims data. In addition, we presented a detailed discussion of
the distributional impacts of this proposed change and we welcomed
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 welcomed comments on
whether it may be appropriate to collect additional ECT-specific costs
on the hospital cost report. Lastly, we proposed that if more recent
data became 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.
Comment: The majority of commenters supported our proposal to
increase the ECT payment per treatment, noting that the increased
payment would help protect access to this treatment for patients who
need it. A few commenters suggested that we could phase in the increase
over several years, thus mitigating a reduction to the base rate
through the refinement standardization. One of these commenters
suggested tying each smaller increase to a quality measure, thus
providing additional oversight measures to monitor for unintended
consequences, while another advocated for phasing in the increase over
three years or phasing in the resulting budget neutrality factor over
multiple years. One commenter recommended implementing a smaller
increase until more detailed data on ECT costs is available in IPF cost
reports.
Response: We appreciate the commenters' support for this proposal
regarding the ECT payment per treatment. As we noted in the preamble to
the FY 2025 proposed rule, the decrease in payments associated with
this change would be no more than approximately 0.2 percent, or a
reduction to the IPF federal per diem base rate of approximately $2.03,
which we noted would be offset for particular providers 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 do not agree that the
effect of the increase in the ECT payment per treatment on the base
rate is substantial enough to warrant phasing in over time. In response
to the commenter who suggested tying increases to a quality measure, we
thank you for your comment and will consider your suggestion when
developing future measures. We will also continue monitoring ECT costs
as we receive
[[Page 64593]]
more data on ancillary costs in the future.
Comment: One commenter noted that ECT costs are reported on cost
report line 76, and requested that the outdated term ``Electroshock
Therapy'' in the cost report instructions be changed to
``Electroconvulsive Therapy'' or ECT.
Response: We thank commenters for their suggestion and will
consider revising the cost report terminology. We note that the
Medicare Claims Processing Manual (CPM) 100-04; chapter 3, Sec.
190.7.3, uses the suggested terminology.
Comment: Two commenters were critical of the use of ECT out of
concern for patient safety or concern that the treatment is not
sufficiently regulated.
Response: We appreciate commenters expressing their concerns;
however, these comments are out of scope of this rule because our
proposal did not relate to coverage of ECT or the practice of medicine.
Rather, we proposed to refine the payment for a procedure paid for
under the IPF PPS. We remind readers that CMS's coverage requirements
for ECT can be found at: <a href="https://www.cms.gov/medicare-coverage-database/search-results.aspx?keyword=electroconvulsive+therapy&keywordType=starts&areaId=all&docType=NCA,CAL,NCD,MEDCAC,TA,MCD,6,3,5,1,F,P&contractOption=all">https://www.cms.gov/medicare-coverage-database/search-results.aspx?keyword=electroconvulsive+therapy&keywordType=starts&areaId=all&docType=NCA,CAL,NCD,MEDCAC,TA,MCD,6,3,5,1,F,P&contractOption=all</a>.
Final Decision: After consideration of the comments received, we
are finalizing our proposal to use the pre-scaled and preadjusted CY
2024 OPPS geometric mean cost of $675.93 as the basis for the IPF PPS
ECT payment per treatment in FY 2025. Accordingly, we will apply the
final FY 2025 IPF PPS payment rate update of 2.8 percent (3.3 percent
IPF market basket percentage increase, reduced by the 0.5 percentage
point productivity adjustment), the final refinement standardization
factor of 0.9524, and the final wage index budget neutrality factor of
0.9996 for FY 2025, in alignment with our current standard methodology.
A complete discussion of the final FY 2025 ECT payment per treatment
and final refinement standardization factor is found in section II.B.3
of this final rule. A detailed discussion of the distributional impacts
of this proposed change is found in section VIII.C of this final rule.
As we stated in the proposed rule, we intend to continue monitoring
the provision of ECT through further analysis of IPF PPS claims data.
(89 FR 23153)
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 are no changes to the ECT
procedure codes used on IPF claims in the final update to the ICD-10-
PCS code set for FY 2025. 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. 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 final FY 2025 Federal per
diem base rate, we applied the payment rate update of 2.8 percent--that
is, the final 2021-based IPF market basket percentage increase for FY
2025 of 3.3 percent reduced by the final productivity adjustment of 0.5
percentage point--the final wage index budget neutrality factor of
0.9996 (as discussed in section IV.D.1 of this final rule), and a final
refinement standardization factor of 0.9524 (as discussed in section
IV.F of this final rule) to the FY 2024 Federal per diem base rate of
$895.63, yielding a final Federal per diem base rate of $876.53 for FY
2025. As discussed in section IV.B.2 of this final rule, we are
finalizing our proposal to increase the ECT payment per treatment for
FY 2025 in addition to our routine updates to the rate. We applied the
2.8 percent IPF market basket update, the 0.9996 wage index budget
neutrality factor, and the 0.9524 refinement standardization factor to
the final payment per treatment based on the CY 2024 OPPS geometric
mean cost of $675.93, yielding a final ECT payment per treatment of
$661.52 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 applied a 2.0 percentage point
reduction to the annual update to the Federal per diem 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 will apply a 0.8 percent payment rate update--that is, the
final IPF market basket increase for FY 2025 of 3.3 percent reduced by
the productivity adjustment of 0.5 percentage point for an update of
2.8 percent, and further reduced by 2.0 percentage points in accordance
with section 1886(s)(4)(A)(i) of the Act. We will also apply the
refinement standardization factor of 0.9524 and the wage index budget
neutrality factor of 0.9996 to the FY 2024 Federal per diem base rate
of $895.63, yielding a Federal per diem base rate of $859.48 for FY
2025.
<bullet> For IPFs that fail to report required data under the IPFQR
Program, we will apply the 0.8 percent annual payment rate update, the
0.9524 refinement standardization factor, and the 0.9996 wage index
budget neutrality factor to the payment per treatment based on the CY
2024 OPPS geometric mean cost of $675.93, yielding an ECT payment per
treatment of $648.65 for FY 2025.
C. Updates and Revisions to the IPF PPS Patient-Level Adjustment
Factors
1. Overview of the IPF PPS Adjustment Factors and 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 proposed to implement revisions to the methodology
for determining payment rates under the IPF PPS. As we noted earlier in
this FY 2025 IPF PPS final 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 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 proposed to revise the patient-level IPF PPS
payment adjustment factors as discussed in section IV.C.4. of this
final rule, effective for FY 2025. We explained that we 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 final rule. The primary sources of this analysis are
CY 2019 through 2021 MedPAR files and Medicare cost report data (CMS
[[Page 64594]]
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 IV.C.3 of this final rule
discusses the development of the proposed revised case-mix adjustment
regression and the final case-mix regression analysis upon which we are
basing our final revisions to the FY 2025 IPF PPS patient-level
adjustment factors.
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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 will 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 IV.C.3 of this final rule.
In the FY 2025 IPF PPS proposed rule, we explained that 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. We stated that 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. We also noted that 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. We explained that we applied a
refinement standardization factor to the proposed IPF PPS payment rates
to maintain budget neutrality for FY 2025.
3. Development of the Revised Case-Mix Adjustment Regression
In the proposed rule, we explained that 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 IV.C.3.e. of this final rule. We further discuss final policies
related to the proposed revisions to the IPF PPS patient-level
adjustment factors based on this regression analysis in section IV.C.4
of this final rule.
As we discussed in the 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 total of 1,111,459 stays from 1,684
IPFs. We explained in the proposed rule that 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 stated in the proposed rule that 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. We noted that 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, we noted that 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 stated that 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. We also explained in the proposed rule
that we used 2019 through 2021 Medicare cost report data to retain as
many records as possible for analysis.
In addition, we explained that we 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
[[Page 64595]]
contains data regarding ECT treatments provided during an IPF stay.
In the proposed rule, we noted that 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. We explained that 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
In the proposed rule, we explained that 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
further explained that 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.
We noted in the proposed rule that we completed a series of
trimming steps to remove missing and outlier data, to promote the
accuracy and completeness of data included in the regression model. We
stated that before any trims or exclusions were applied, there were
1,684 providers in the MedPAR data file. We described these trimming
steps in detail in the proposed rule.
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 excluded 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 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.
In the proposed rule, we explained that 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. We noted that 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 will be
inadequate to capture variation in costs. We explained that 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). We stated that 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. We noted that
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.
We explained that 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 stated that we agree that this trimming step
reduces the representativeness of the IPF population used in the
regression model and may increase the potential
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for bias of the regression coefficients used for payment adjustments.
Furthermore, as discussed in section IV.E.4. of this final 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, we explain that 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. We further explain that all other
IPF hospitals will be required to have a charge structure and to report
ancillary costs and charges on their cost reports. We expect this
change will support increased accuracy of future payment refinements to
the IPF PPS.
In this year's proposed rule, we explained that when we examined
the claims from CY 2019 to CY 2021, we observed that 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 explained that we did not trim stays from facilities with
zero or minimal ancillary charges. As a result, we noted that 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. We further stated that 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. We noted that these providers accounted for
approximately 194,673 stays included in our data set.
We clarified that the regression results presented in the proposed
rule did not include 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
In the proposed rule, we explained that the IPF PPS regression
model uses the natural logarithm of per diem total cost as the
dependent variable. We stated that 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. We explained that 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 noted that 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.
We further explained that 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. We explained that
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. We
stated that 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.
As discussed in the proposed rule, we winsorized the distributions
of the 17 ancillary cost centers from Worksheet C of the cost report at
the 2nd and 98th percentiles to address extreme cost-to-charge ratios.
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.
In addition, we explained that 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 indices
and COLAs corresponding to each MedPAR data year. We stated that 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 stated that 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 explained that 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
In the proposed rule, we stated that the independent variables in
the regression model are patient-level and facility-level
characteristics that affect the dependent variable in the model, which
is per diem cost. As discussed in the following sections, we noted that
the updated regression model for the proposed rule included adjustment-
related variables and control variables. We explained that adjustment-
related variables are used for adjusting payment, and we proposed to
revise the IPF PPS patient-level adjustment factors based on the
regression results for many of the adjustment-related variables in the
model. We further explained that 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 did not propose 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 final 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 proposed rule, we
explained that the updated regression model for the FY 2025 IPF PPS
proposed rule removed the occupancy control variables and the control
variable for IPFs that do not bill for ancillary charges. In addition,
we explained that we retained the control variable for patients
receiving ECT and added control variables for the data year. We also
explained that we added a control variable for the presence of ED
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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. As we discussed in the FY 2025 IPF PPS proposed rule, we
considered the potential negative impact to rural facilities of
retaining the occupancy control variables in the regression model. We
stated that 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 stated that 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 IV.E.4 of this final 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 explained in the proposed rule that we considered whether to
include a control variable for facilities that do not report ancillary
charges. We stated that 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 noted that facilities that did not report ancillary
charges also tended to have lower routine costs; that is, our analysis
showed that these facilities will have overall lower costs per day,
regardless of whether ancillary costs were considered in the cost
variable. We explained 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. We
stated that 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 IV.B.2. of this FY 2025 IPF PPS final rule, we continue to
observe that IPF stays with ECT have significantly higher costs per
day. We proposed to continue paying for ECT on a per-treatment basis;
therefore, we explained that we included a control variable to account
for the additional costs associated with ECT, which will continue to be
paid for outside the regression model.
Similarly, we stated that 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. We explained that our
regression model for the FY 2025 IPF PPS proposed rule includes all
costs associated with each IPF stay, including ED costs. As we
explained in the proposed rule, we proposed 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 stated that we included control variables for the data
year. We stated that 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
In the proposed rule, we presented the results of our regression
model, which we noted includes a total of 806,611 stays, and had an r-
squared value of 0.32340, meaning that the independent variables
included in the regression model were able to explain approximately
32.3 percent of the variation in per diem cost among IPF stays.
In the proposed rule, we explained that except for the teaching
variable, each of the adjustment factors we presented was 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 stated that we presented 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 in
the proposed rule represent a percentage increase or decrease in per
diem cost for IPF stays with each characteristic. In the case of the
teaching variable, we noted that the result presented in the proposed
rule is the un-exponentiated regression coefficient. As discussed in
section IV.D of this final 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. We explained that the
coefficient for teaching status presented in the proposed rule can be
interpreted in the same way.
We explained that for certain categorical variables, including DRG,
age, length of stay, and the year control variables, results for the
reference groups were not shown. We stated that the DRG reference group
is DRG 885, because this DRG represents the majority of IPF PPS stays.
In addition, we explained that 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. We
further explained that the reference
[[Page 64598]]
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, we stated that the year control reference group is
CY 2021. We stated that each of these reference groups effectively has
an adjustment factor of 1.00 in the regression model.
Lastly, we stated that 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 (***), as
notated in the table presented in the proposed rule.
We received several comments regarding the regression methodology
discussed in the proposed rule.
Comment: Two commenters expressed support for the regression
methodology used to develop revised adjustment factors for the IPF PPS.
In particular, MedPAC expressed support for the proposal to include
stays at facilities with low or no ancillary charge information, as
well as including multiple years of data, in the calculation of the
updated patient-level adjustments for FY 2025. MedPAC further
encouraged CMS to continue to monitor and update the weights as needed
using the most recent data available.
Response: We appreciate the support from these commenters, and we
intend to continue to monitor IPF PPS payments and costs to consider
potential future updates as appropriate.
Comment: One commenter expressed concerns about CMS's piecemeal
approach to implementing the updated coefficients. This commenter
stated that CMS should update not only the patient-level adjustment
factors as proposed but also the updated facility-level coefficients
(i.e., the teaching and rural adjustments) that were derived from the
same regression model. This commenter further stated that if CMS did
not plan to use these updated facility-level adjustments, it should
have run a constrained regression, which would have resulted in
different patient-level adjustment factors. From a technical
perspective, this commenter stated that it is inappropriate to use
patient-level and facility-level adjustments that were derived from
separate regression analyses.
Response: We appreciate these methodological concerns from the
commenter; however, we do not agree that the proposed approach is
technically inappropriate. Although the commenter asserted that CMS
would not be using the regression-derived facility-level adjustments,
this is not an accurate assertion. As we discussed in the proposed
rule, we proposed a number of revisions to the patient-level adjustment
factors as well as changes to the CBSA delineations. We proposed to
maintain the existing facility-level adjustment factors for FY 2025
because we believe it is important to minimize the scope of changes
that would impact payments to facilities in any single year. However,
as we discussed in the proposed rule, CMS is considering using the
regression-derived facility-level adjustment factors for payment in
future years, and we solicited comments on potentially making such
revisions in future rulemaking.
Regarding the suggestion to apply a constrained regression
analysis, we do not believe this methodology would be appropriate. We
note that a constrained regression analysis of the type the commenter
suggested would apply mathematical constraints such that the
coefficients for rural status and teaching status would remain at their
current levels. A constrained regression analysis would therefore
calculate the patient-level and control variables that minimize the sum
of squared errors, given the constraints on the rural and teaching
coefficients. We agree with the commenter's assertion that a
constrained regression analysis would yield different patient-level
adjustment factors for FY 2025. As a result, if CMS were to propose
revisions to the facility-level adjustment factors in a future year, a
constrained regression methodology of the type that the commenter
recommended could result in further changes to the patient-level
adjustment factors, which would be contrary to the goal of minimizing
the impact of revisions in a single year, which CMS articulated in the
proposed rule. Rather, in the case of the application of the
regression-derived adjustment factors to the IPF PPS, we have
controlled for aggregate changes in spending by applying a refinement
standardization factor to the IPF PPS Federal per diem base rate. We
believe that our proposed regression analysis appropriately
incorporates the relevant payment variables and control variables into
the regression model and produces results that can be implemented in
accordance with our stated goals. We will take the commenter's
methodological suggestions into consideration to potentially inform
future changes to the IPF PPS, if appropriate.
Final Decision: After consideration of the comments, we are
finalizing our proposed regression methodology as discussed in the
proposed rule.
We note that the regression results for this final rule have been
updated based on more recent available data, as proposed. Specifically,
we note that in reviewing the methodology used to calculate the IPF PPS
regression model presented in the proposed rule, we discovered that the
computer code incorrectly failed to assign several sleep apnea codes to
the proposed Chronic Obstructive Pulmonary Disease and Sleep Apnea
comorbidity category. As a result, our regression model underestimated
the magnitude of the adjustment factor for this comorbidity category
and slightly overestimated the magnitude of the adjustment factor for
other independent variables in the model. We note that most of the
changes in the adjustment factors in Table 2 are within the threshold
of rounding, and therefore do not result in differences to the proposed
adjustment factors for payment. We further discuss the impact of these
changes to the adjustment factors in section IV.C.4 of this final rule.
This revised final model has an r-squared value of 0.32490, meaning
that the independent variables included in the regression model were
able to explain approximately 32.5 percent of the variation in per diem
cost among IPF stays. We discuss the results of these changes to the
final adjustment factors in section IV.C.4 of this final rule, and we
discuss the final refinement standardization factor in section IV.F of
this final rule.
Table 2 below shows the final calculated adjustment factors and
significance level, as well as the number and percent of stays
associated with each independent variable. Columns 6 and 7 of Table 2
show the lower and upper bounds of the 95-percent confidence interval
(CI). For this final rule, we continue to consider 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
(***).
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4. 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. We
proposed 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). In the proposed rule,
however, we noted that we 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 final rule. We explained that 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 proposed routine coding updates for FY 2025 for our
longstanding code first and IPF PPS comorbidities. Furthermore, as
discussed in section IV.C.4.a.(2) of this final rule, we proposed to
adopt a sub-regulatory process for future routine coding updates.
a. Updates 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 which appeared in the August 6,
2014 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>.
(2) Adoption of 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 final 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
proposed to follow the same process beginning in FY 2025. This means
that for routine coding updates that incorporate new or revised codes,
we proposed to adopt these changes through a sub-regulatory process.
Beginning in FY 2025, we will 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 proposed 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. We stated that these coding updates would take effect April
1, 2025. We explained that 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 noted we would summarize and respond to any comments on these
April and October coding changes in the FY 2026 IPF PPS final rule.
We further stated that this proposed update aims to allow
flexibility in the ICD-10 code update process for the IPF PPS and
reduce the lead time for making routine coding updates to the IPF PPS
code first list, comorbidities, and ECT coding categories. In addition,
we noted that the IPPS sub-regulatory process continues to manage DRG
assignment changes which apply to the DRG assignments used in the IPF
PPS. Finally, we clarified that we only anticipate applying 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 solicited public comments on this proposed rule.
[[Page 64603]]
We did not receive any comments on our proposal to adopt routine
coding updates that incorporate new or revised codes through a sub-
regulatory process. We are finalizing the use of a sub-regulatory
process, as proposed.
(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 proposed to continue our existing code first policy. We did not
receive any comments on our proposal to continue the existing code-
first policy, and we are finalizing the policy as proposed. As
discussed in section IV.C.4.a.(2) of this final rule, we are also
finalizing our proposal to adopt a sub-regulatory approach to handle
the coding updates, which will remove the requirement to discuss coding
updates in the Federal Register during regulatory updates prior to
implementation and which will mirror the approach taken by the IPPS.
The final 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) Revisions to MS-DRG Adjustment Factors
For FY 2025, we proposed 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 proposed to maintain DRG adjustments for 15 of
the existing 17 IPF MS-DRGs for which we currently adjust payment in FY
2024. We proposed 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 also proposed to revise the
adjustment factors for the DRG adjustments based on the results of the
regression analysis described in the proposed rule. In accordance with
our longstanding policy, we proposed 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.
We proposed to implement all of these revisions to the DRG
adjustments budget-neutrally, and we provided a detailed discussion of
the distributional impacts of these proposed changes. Lastly, we
proposed that if more recent data become available, we would use such
data, if appropriate, to determine the FY 2025 DRG adjustment factors.
(a) Replacement of DRGs
We proposed 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 explained
that 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. We explained
that 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 proposed 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.
(b) Additions of DRGs
We proposed to recognize DRG adjustments for two DRGs associated
with poisoning; specifically, DRGs 917 (Poisoning and toxic effects of
drugs w MCC) and 918 (Poisoning and toxic effects of drugs w/out MCC).
As we discussed in the proposed rule, we 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.
(c) Revisions to Adjustment Factors for Existing DRG Adjustments
We proposed to revise the adjustment factors for the remaining 15
of the existing 17 DRGs that currently receive a DRG adjustment in FY
2024. We stated that these revisions were based on the results of our
latest regression analysis described in section IV.C.3 of the proposed
rule.
We also stated that 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
[[Page 64604]]
DRG 896 (Alcohol, Drug Abuse or Dependence w/out rehab therapy w MCC)
were not statistically significant. We explained that for each of these
DRGs, we examined whether the current adjustment factor falls within
the confidence interval for our latest regression analysis. We stated
that the current adjustment for DRG 882 is 1.02, and this falls within
the confidence interval of 0.96798 to 1.07811 for the regression model
discussed in the proposed rule. We stated that 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. However, we stated that for DRGs 887 and
896, the current adjustment factors (0.92 and 0.88, respectively) did
not fall within the confidence interval for each of these DRGs.
Therefore, we proposed to apply an adjustment factor of 1.00 for IPF
stays with these DRGs.
(d) Summary of Comments on the Proposed MS-DRG Updates for FY 2025
We received comments regarding the proposed changes to the MS-DRG
adjustments, which are summarized in the following paragraphs.
Comment: Several commenters expressed support for revising the DRG
adjustments as proposed; however, a number of these commenters urged
CMS to consider developing separate adjustment factors for IPF stays
that are currently all grouped into DRG 885. Specifically, commenters
expressed concern that a single DRG that accounts for 74.79% of stays
does not appropriately capture differences in patient resource
utilization between patients being treated for Bipolar Disorders and
Schizophrenias (ICD 20-F31 diagnoses) and those patients being treated
for Depressive Disorders and Unspecified Mood disorders (ICD F32-F39
diagnoses.
Response: We appreciate the support that commenters expressed for
the proposed DRG revisions. Likewise, we appreciate concerns that
commenters raised regarding subcategories of conditions within DRG 885.
We agree with commenters about the importance of adjusting IPF PPS
payment to recognize differences in resource utilization between
patients with different conditions. However, contrary to the
commenters' suggestion, our analysis does not find that there are
statistically significant differences in resources costs or cost per
day when we compare different groups of principal diagnoses within DRG
885.
Using the same regression model described in section IV.C.3 of this
final rule, we added the following categorical variables:
<bullet> Bipolar Disorders and Schizophrenia--Stays with principal
diagnosis in the ICD-10-CM code family of F20, F21, F22, F23, F24, F25,
F26, F27, F28, F29, F30, or F31
<bullet> Depression and Mood Disorders--Stays with principal
diagnosis in the ICD-10-CM code family of F32, F33, or F39; or with
principal diagnosis of F349 or F3489.
<bullet> Other--All other DRG 885 stays.
For this analysis, we applied Bipolar Disorders and Schizophrenia
as the reference group; therefore, there is no adjustment factor
assigned in Table 3. The adjustment factors for other categories can be
interpreted as the cost per day relative to the reference category.
Table 3 also presents the significance level and confidence interval
for each factor. We note than none of these factors is considered
significant because the p-value was not less than or equal to the
significance level of 0.05 (*), 0.01 (**), and 0.001 (***) for any of
these factors.
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Lastly, we acknowledge that even though there may be differences in
total cost or differences in cost per day for treating patients with
these conditions, other adjustment factors in the IPF PPS, such as the
age adjustment or the variable per diem adjustment may account for
these differences in cost for such patients.
Final Decision: After consideration of the comments received, we
are finalizing our proposal to revise the DRG adjustments based on the
latest regression analysis. A detailed discussion of the distributional
impacts of this proposed change is found in section VIII.C of this
final rule. Tables 4 through 6 summarize the final DRG changes based on
the final regression analysis discussed in section IV.C.3.e of this FY
2025 IPF PPS final rule.
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These changes to the DRG adjustments will be included in Addendum
A, 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>. The website includes the final DRG
adjustment factors for FY 2025.
b. Payment for Comorbid Conditions
(1) Revisions to Comorbidity Adjustments
The intent of the comorbidity adjustments is to recognize the
increased costs associated with active 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 active 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).
[[Page 64607]]
As discussed in section IV.C.4.a.(1) of this final rule, it is our
policy to maintain the same diagnostic coding set for IPFs that is used
under the IPPS for providing the same psychiatric care. The 17
comorbidity categories formerly defined using ICD-9-CM codes were
converted to ICD-10-CM/PCS in 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 IV.C.4.a.(2) of this final rule,
we proposed 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 final rule.
For FY 2025, we proposed to revise the comorbidity adjustment
factors based on the results of the 2019 through 2021 regression
analysis described in section IV.C.3.e. of this final rule. We proposed
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 proposed 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 proposed to remove the comorbidity category.
Specifically, we proposed 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 IV.C.3 of this final rule. For these comorbidity categories,
the regression results produced a statistically significant increase in
the adjustment factors.
We did not receive any comments on our proposal to increase the
adjustment factors for the Gangrene, Severe Protein Malnutrition,
Oncology Treatment, Poisoning, and Tracheostomy comorbidity categories.
We are finalizing the increased the adjustment factors for these
comorbidity categories as proposed.
We proposed 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. 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 7. 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 proposed 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 IV.C.3.a of this final 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 more appropriately aligns
payment with resource use, as reflected in the latest regression
results. As previously discussed in section IV.F of this final 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 solicited 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
IV.E.4 of this final 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 noted that these IPFs do not report
complete information on patient-level cost for the patients treated in
these hospitals.
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 stated that we were 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 stated that we were 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 noted that if we were to maintain the adjustment factor of
1.03 for these IPF stays, we expected 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.
Comment: Two commenters opposed the proposed removal of the
Coagulation Factor Deficit and Infectious Disease comorbidity
categories, stating that these comorbidities do result in increased
resource use. Commenters explained that when patients test positive for
infectious diseases after admission, the facility cannot discharge the
patient due to the infectious disease. The commenters noted additional
[[Page 64609]]
resources are needed in these cases not only to treat the infected
patient, but to prevent the spread of the infection to the rest of the
patient population.
Response: We thank commenters for their feedback. However, the
results of our regression analysis do not support a payment adjustment
for coagulation factor deficit or infectious disease. As shown in Table
2, the adjustment factor derived from the regression is not
statistically significant. This suggests that the cost of treating IPF
patients with these conditions is not significantly different than
treating IPF patients without these conditions. Therefore, removing
these comorbidity categories more appropriately aligns payment with
resource use.
Comment: A few commenters opposed the proposed removal of the Drug/
Alcohol Induced Mental Disorders comorbidity category. The commenters
stated that patients with drug- and alcohol-induced mental conditions
are more complex to care for and therefore often require increased
levels of care and medical management. One commenter expressed concern
in regard to the proposed removal of the Drug/Alcohol Induced Mental
Disorders comorbidity category, considering the prevalence of substance
use disorders in society. Additionally, commenters expressed concern
with CMS correlating a lack of ancillary cost data with lower cost
associated with treating IPF patients with drug- and alcohol-induced
mental disorders.
Response: We understand the commenters' concern for the overall
prevalence of substance abuse disorders, and how patients with
substance use disorder may require increased levels of care. As shown
in Table 2, the adjustment factor derived from the regression is
statistically significant, but is less than 1. This suggests that the
cost of treating IPF patients with these conditions is lower than
treating patients without these conditions, and therefore, removing
this comorbidity category more appropriately aligns payment with
resource use.
Additionally, we did not receive any public comments regarding data
and information that could better inform our understanding of the costs
of treating these conditions. We believe the best available data was
used in the regression. We anticipate that CMS will gain additional
cost information on the treatment of IPF patients with substance abuse
disorders and we intend to analyze such data for consideration in
future refinements of the IPF PPS.
Final Decision: After consideration of the comments received, we
are finalizing our proposal for FY 2025 to remove the Coagulation
Factor Deficit, Infectious Disease, and Drug/Alcohol Induced Mental
Disorders comorbidity categories. We note that we will continue to
collect data on these comorbidity categories for consideration in
future refinements of the IPF PPS. We encourage providers to report
complete cost information for future analyses.
We also proposed to modify the Eating and Conduct Disorders
comorbidity category and redesignate it as the Eating Disorders
comorbidity category. That is, we proposed 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 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, unlike
conduct disorders, and that only eating disorders have an increase
resource use at a level that is statistically significant. Based on
these findings, we proposed to remove conduct disorders from the
proposed newly designated Eating Disorders comorbidity category.
We did not receive any comments on our proposal to remove conduct
disorders from the current Eating and Conduct Disorders comorbidity
category. We are finalizing the newly designated Eating Disorders
comorbidity category as proposed.
In addition, we proposed to modify the Chronic Obstructive
Pulmonary Disease comorbidity category to include ICD-10-CM and ICD-10-
PCS 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 stated that 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 proposed to redesignate the
Chronic Obstructive Pulmonary Disease category as the Chronic
Obstructive Pulmonary Disease and Sleep Apnea comorbidity category.
Comment: One commenter supported redesignating the Chronic
Obstructive Pulmonary Disease category as the Chronic Obstructive
Pulmonary Disease and Sleep Apnea comorbidity category. The commenter
noted that patients using a CPAP machine require increased care and
medical management due to the need for 1:1 staffing to prevent ligature
issues.
Response: We appreciate the commenter's support for adding codes
associated with sleep apnea to the Chronic Obstructive Pulmonary
Disease comorbidity category. As discussed in section IV.C.4.b.(1),
when including sleep apnea codes to the Chronic Pulmonary Disease
comorbidity category, the adjustment factor was higher than the number
published in the proposed rule. This further supports the commenters'
assertion that the resource use for treating sleep apnea is higher than
for patients without sleep apnea.
Final Decision: After consideration of the comment received, we are
finalizing our proposal for FY 2025 to redesignate the Chronic
Obstructive Pulmonary Disease category as the Chronic Obstructive
Pulmonary Disease and Sleep Apnea comorbidity category.
[[Page 64610]]
Further, we analyzed costs associated with the ICD-10-CM codes in
Table 8 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 proposed to add a new
comorbidity category recognizing the costs associated with Intensive
Management for High-Risk Behavior.
Comment: Two commenters supported the proposed addition of a new
comorbidity category recognizing the costs associated with Intensive
Management for High-Risk Behavior. One commenter recommended that CMS
include codes for R456 Violent Behavior, R4585 Homicidal and suicidal
ideations, R45850 Homicidal ideation, and R45851 Suicidal ideation into
the proposed Intensive Management for High-Risk Behavior comorbidity
category.
Response: We appreciate the commenters' support regarding adding a
new comorbidity category recognizing the costs associated with
Intensive Management for High-Risk Behavior. As discussed in the
proposed rule, we analyzed costs associated with the ICD-10-CM codes
including R456 Violent Behavior, R4585 Homicidal and suicidal
ideations, R45850 Homicidal ideation, and R45851 Suicidal ideation. The
results of our regression analysis, as presented in the table below,
found that these codes are not associated with a statistically
significant positive adjustment factor, meaning, the cost of treating
IPF patients with these conditions is not significantly higher than
treating IPF patients without these conditions. Therefore, adding these
codes to the Intensive Management for High-Risk Behavior comorbidity
category would not align payment with resource use.
[GRAPHIC] [TIFF OMITTED] TR07AU24.010
Final Decision: After consideration of the comments received, we
are finalizing our proposal to add a new comorbidity category
recognizing the costs associated with Intensive Management for High-
Risk Behavior to include the codes indicated in Table 9.
BILLING CODE 4120-01-P
[[Page 64611]]
[GRAPHIC] [TIFF OMITTED] TR07AU24.011
BILLING CODE 4120-01-C
Lastly, we proposed 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 IV.C.3.a of
this final 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 did not receive any comments on our proposal to maintain the
adjustment factors for the Developmental Disabilities and Uncontrolled
Diabetes comorbidity categories. We are finalizing maintaining these
adjustment factors, as proposed.
We also proposed 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, 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, 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.
We did not receive any comments on our proposal 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, and Severe Musculoskeletal & Connective Tissue Diseases. We
are finalizing a decrease to these adjustment factors, as proposed.
The FY 2025 comorbidity adjustment factors are displayed in Table
10, 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>.
BILLING CODE 4120-01-P
[[Page 64612]]
[GRAPHIC] [TIFF OMITTED] TR07AU24.012
BILLING CODE 4120-01-C
As discussed in section IV.F of this final rule, we proposed to
implement revisions to the comorbidity category adjustments budget-
neutrally. A detailed discussion of the distributional impacts of these
changes is found in section VIII.C of this final rule.
(2) Coding Updates for FY 2025
For FY 2025, we proposed to add 2 ICD-10-CM/PCS codes to the
Oncology Treatment comorbidity category. The 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 did not propose to remove any of the new codes.
c. 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 proposed to revise the patient age adjustments as
shown in Addendum A of this final 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 proposed to adopt the patient age adjustments derived from the
regression model using a blended set of 2019 through 2021 data, as
discussed in section IV.C.3 of this final rule. Table 11 summarizes the
current and proposed patient age adjustment factors for FY 2025. As
discussed in section IV.F of this final rule, we proposed to implement
this revision to the patient age adjustments budget-neutrally. A
detailed discussion of the distributional impacts of this change is
found in section VIII.C of this final rule.
[[Page 64613]]
We solicited comments on these proposed revisions to the patient
age adjustment factors. Lastly, we proposed that if more recent data
become available, we would use such data, if appropriate, to determine
the final FY 2025 patient age adjustment factors.
We did not receive any comments on our proposal. We are finalizing
the revisions to the patient age adjustment factors as proposed.
[GRAPHIC] [TIFF OMITTED] TR07AU24.013
d. 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 IV.D.4
of this final rule.
For FY 2025, we proposed 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 proposed to increase the
adjustment factors for days 1 through 9. As shown in Table 12, 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 proposed that days 10 and above will receive a 1.00
adjustment. Table 12 summarizes the current and proposed variable per
diem adjustment factors for FY 2025. As discussed in section IV.F of
this final rule, we proposed 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 final rule.
We solicited comments on these proposed revisions to the variable
per diem adjustment factors. Lastly, we proposed that if more recent
data become available, we will use such data, if appropriate, to
determine the final FY 2025 variable per diem adjustment factors.
Comment: Two commenters supported the proposed revisions to the
variable per diem adjustments, noting that these revisions reflect
increased costs early in a stay.
Response: We thank the commenters for their support. As discussed
in section IV.C.4.b.(1) of this final rule, we have updated our
regression analysis to account for a programming error that
inadvertently excluded certain sleep apnea codes from the regression
model. The results of the latest regression analysis increase the
adjustment factor for the first day of the stay. This result further
supports the commenters' assertion that there are increased costs early
in an IPF stay.
Final Decision: After consideration of the comments received, we
are finalizing the revision of the IPF variable per diem adjustment
factors as shown in Table 12.
[[Page 64614]]
[GRAPHIC] [TIFF OMITTED] TR07AU24.014
D. 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 proposed to use the existing regression-derived facility-level
adjustment factors established in the RY 2005 IPF final rule and did
not propose changes to the facility-level adjustment factors for rural
location and teaching status for FY 2025. As discussed in the following
sections, we proposed updates to the FY 2025 IPF PPS wage index. In
addition, we proposed to update the ED adjustment for FY 2025 to
reflect more recent cost and claims data.
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, and 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 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
[[Page 64615]]
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 proposed 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
will apply this cap in a budget neutral manner. In addition, we
finalized a policy that a new IPF will 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 will 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.
For FY 2025, we proposed 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 IV.A.3 of this final
rule). We received several comments on this proposal, which are
discussed in the following paragraphs.
Comment: Several commenters requested CMS revise the IPF wage index
methodology. Specifically, a few commenters suggested CMS revise the
policy so that the post-reclassification and post-floor hospital IPPS
wage index is used to calculate the wage index for IPFs. The commenter
believes that the continued use of the pre-reclassification and pre-
floor hospital inpatient wage index is unreasonable because it places
IPFs at a disadvantage in the labor markets in which they operate
relative to hospitals in the same markets. Other commenters suggested
CMS exercise its authority to refine the IPF PPS by applying the pre-
floor, pre-reclassified IPPS hospital wage index for the CBSA in which
the nearest IPPS hospital is located where the pre-floor, pre-
classified IPPS hospital wage index for the CBSA in which the IPF is
located only includes data from a closed IPPS hospital. Commenters
stated they believe the closed hospital data is more likely to be
unreliable such that the application of the pre-floor, pre-reclassified
IPPS hospital wage index would result in an inappropriately deflated
wage index value. Commenters further noted that the closure of the only
IPPS hospital in the CBSA would suggest that the community is currently
underserved, and would make it particularly appropriate to ensure that
aberrant wage index data does not serve as an impediment to new IPF
services in a community. One commenter urged CMS to apply an out-
migration adjustment (OMA) to IPFs to account for the employment of
hospital employees who reside in one county but commute to work in a
county with a higher wage index.
Response: We appreciate the commenters' recommendations. We did not
propose the specific policies suggested by commenters, but we will take
them into consideration to potentially inform future rulemaking. We do
not believe that the continued use of the pre-reclassification and pre-
floor hospital inpatient wage index for FY 2024 is unreasonable or that
this policy puts IPFs at a disadvantage relative to hospitals in the
labor markets in which they operate. As we have previously discussed in
the RY 2007 final rule (71 FR 27066), we believe that the actual
location of an IPF (as opposed to the location of affiliated providers)
is most appropriate for determining the wage adjustment because the
prevailing wages in the area in which the IPF is located influence the
cost of a case. In that same RY 2007 final rule (71 FR 27066), we also
stated that we believe the ``rural floor'' is required only for the
acute care hospital payment system because section 4410 of the Balanced
Budget Act of 1997 (Pub. L. 105-33) applies specifically to acute care
hospitals and not excluded hospitals and excluded units. As we have
previously discussed, the IPF wage index is intended to be a relative
measure of the value of labor in prescribed labor market areas (87 FR
46857). There are a variety of reasons why our longstanding IPF wage
index policy have not applied floors or reclassifications, which, as we
previously noted, are not applied to the IPF wage index by statute. For
example, applying floors and reclassifications to the IPF wage index
would significantly increase administrative burden, both for IPFs and
for CMS, associated with IPFs reclassifying from one CBSA to another,
and it would significantly increase the complexity of the methodology.
Furthermore, because floors and reclassifications would be applied
budget-neutrally under the wage index, these policies would increase
the wage index for some IPFs while reducing IPF PPS payments for all
other IPFs, which would upset the long-settled expectations with which
IPFs across the country have been operating. For these reasons, we
believe using the pre-floor, pre-reclassified IPPS hospital wage index
is the most appropriate data to use as a proxy for an IPF wage index.
Regarding the suggestion to apply the wage index for the CBSA of
the nearest IPPS hospital in cases when an IPF's CBSA includes only a
closed IPPS hospital, we disagree with the commenter that wage data
from a hospital that has closed is more likely to be unreliable and
that such data would inappropriately deflate the wage index for that
CBSA. Rather, following
[[Page 64616]]
the longstanding methodology for calculating the wage index, wage data
from the period during which the hospital was open would be comparable
to wage data from the same period for hospitals located in other
geographical areas, and would provide an appropriate relative measure
of the value of labor in that CBSA's labor market area compared to
others. We do not believe that such wage data or the wage index of a
CBSA in this situation would serve as an impediment for either new or
existing IPF services in a community. In addition, we recognize that in
some cases, the closure of the only IPPS hospital in the CBSA could
suggest that the community is underserved; however, in other cases, the
lack of an IPPS hospital could be due to other factors, such as when an
area's only IPPS hospital converts to another hospital type such as a
critical access hospital. We note that at this time, there is only one
urban CBSA with no IPPS hospitals; however, there are also no IPFs
located in this CBSA.
Lastly, as discussed in the FY 2024 IPPS proposed rule (88 FR
26966), in constructing the proposed FY 2024 wage index, wage data was
included for facilities that were IPPS hospitals in FY 2020, inclusive
of those facilities that have since terminated their participation in
the Medicare program as hospitals, as long as those data did not fail
any of our edits for reasonableness. These edits excluded providers
with aberrant data that should not be included in the wage index. We
believe that including the wage data for these hospitals is, in
general, appropriate to reflect the economic conditions in the various
labor market areas during the relevant past period and to ensure that
the current wage index represents the labor market area's current wages
as compared to the national average of wages.
We appreciate the commenter's suggestion to apply an out-migration
adjustment to IPFs to account for employment of hospital staff who
commute to work in counties with a higher wage index. However, we note
that the out-migration adjustment is applied to the IPPS hospital wage
index under section 1886(d)(13) of the Act, which is a statutory
provision that specifically applies to subsection (d) hospitals paid
under the IPPS. As discussed in the prior paragraph, CMS does not
believe it is appropriate for the IPF PPS to apply an out-migration
adjustment that is not statutorily required, because such a policy
would increase administrative burden and have distributional impacts on
IPFs.
Comment: One commenter encouraged CMS to consider developing and
applying a low wage index hospital policy for rural and low wage index
IPFs similar to the policy in place for the IPPS wage index to ensure
that IPFs in low wage index and rural areas, which typically draw from
the same labor pool as IPPS hospitals, have adequate resources to
continue to provide access to care.
Response: We appreciate the suggestions from commenters; however,
we did not propose to apply a low-wage index policy for the IPF PPS
wage index and are not finalizing such a methodology. As we noted in
the FY 2025 IPF PPS proposed rule, our longstanding methodology for the
IPF wage index is derived from IPPS wage data, that is, the pre-
reclassified and pre-floor IPPS wage index. Thus, to the extent that
increasing wage index values under the IPPS for low-wage index
hospitals results in those hospitals increasing employee compensation,
this increase would be reflected in the IPPS wage data upon which the
IPF wage index is based and would be expected to result in higher wage
indices for these areas under the IPF PPS. We further note that IPPS
wage index values are based on historical data and typically lag by
four years. As a result, the hospital cost report data for FY 2021
would reflect any changes in employee compensation driven by the IPPS
low-wage index hospital policy, and under our proposal, this data would
become the basis for the IPF wage index in FY 2025. Therefore, any
effects of these changes would be extended to the IPF setting.
Final Decision: After consideration of the comments received, we
are finalizing our proposal for FY 2025 to continue to use the
concurrent pre-floor, pre-reclassified IPPS hospital wage index as the
basis for the IPF wage index. We will apply the IPF wage index
adjustment to the labor-related share of the national base rate and ECT
payment per treatment. The labor-related share of the national rate and
ECT payment per treatment will change from 78.7 percent in FY 2024 to
78.8 percent in FY 2025. This percentage reflects the labor-related
share of the 2021-based IPF market basket for FY 2025 (see section
IV.A.5 of this final 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.
[[Page 64617]]
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 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
condit
[…truncated; see source link]Indexed from Federal Register on August 7, 2024.
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