Proposed Rule2025-06271
Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Policy Changes and Fiscal Year 2026 Rates; Requirements for Quality Programs; and Other Policy Changes
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
April 30, 2025
Issuing agencies
Health and Human Services DepartmentCenters for Medicare & Medicaid Services
Abstract
This proposed rule would revise the Medicare hospital inpatient prospective payment systems (IPPS) for operating and capital- related costs of acute care hospitals; make changes relating to Medicare graduate medical education (GME) for teaching hospitals; update the payment policies and the annual payment rates for the Medicare prospective payment system (PPS) for inpatient hospital services provided by long-term care hospitals (LTCHs); update and make changes to requirements for certain quality programs; and make other policy-related changes.
Full Text
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[Federal Register Volume 90, Number 82 (Wednesday, April 30, 2025)]
[Proposed Rules]
[Pages 18002-18491]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-06271]
[[Page 18001]]
Vol. 90
Wednesday,
No. 82
April 30, 2025
Part II
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Parts 412, 413, et al.
Medicare Program; Hospital Inpatient Prospective Payment Systems for
Acute Care Hospitals and the Long-Term Care Hospital Prospective
Payment System and Policy Changes and Fiscal Year 2026 Rates;
Requirements for Quality Programs; and Other Policy Changes; Proposed
Rule
Federal Register / Vol. 90 , No. 82 / Wednesday, April 30, 2025 /
Proposed Rules
[[Page 18002]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 412, 413, 495, and 512
[CMS-1833-P]
RIN 0938-AV45
Medicare Program; Hospital Inpatient Prospective Payment Systems
for Acute Care Hospitals and the Long-Term Care Hospital Prospective
Payment System and Policy Changes and Fiscal Year 2026 Rates;
Requirements for Quality Programs; and Other Policy Changes
AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of
Health and Human Services (HHS).
ACTION: Proposed rule.
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SUMMARY: This proposed rule would revise the Medicare hospital
inpatient prospective payment systems (IPPS) for operating and capital-
related costs of acute care hospitals; make changes relating to
Medicare graduate medical education (GME) for teaching hospitals;
update the payment policies and the annual payment rates for the
Medicare prospective payment system (PPS) for inpatient hospital
services provided by long-term care hospitals (LTCHs); update and make
changes to requirements for certain quality programs; and make other
policy-related changes.
DATES: To be assured consideration, comments must be received at one of
the addresses provided in the ADDRESSES section, no later than 5 p.m.
EDT on June 10, 2025.
ADDRESSES: In commenting, please refer to file code CMS-1833-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
Comments, including mass comment submissions, must be submitted in
one of the following three ways (please choose only one of the ways
listed):
1. Electronically. You may (and we encourage you to) submit
electronic comments on this regulation to <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
Follow the instructions under the ``submit a comment'' tab.
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-1833-P, P.O. Box 8013,
Baltimore, MD 21244-8013.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments via
express or overnight mail to the following address ONLY: Centers for
Medicare & Medicaid Services, Department of Health and Human Services,
Attention: CMS-1833-P, Mail Stop C4-26-05, 7500 Security Boulevard,
Baltimore, MD 21244-1850.
For information on viewing public comments, we refer readers to the
beginning of the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT:
Donald Thompson, and Michele Hudson, (410) 786-4487 or
<a href="/cdn-cgi/l/email-protection#e1a5a0a2a1828c92cf898992cf868e97"><span class="__cf_email__" data-cfemail="82c6c3c1c2e1eff1aceaeaf1ace5edf4">[email protected]</span></a>, Operating Prospective Payment, MS-DRG Relative
Weights, Wage Index, Hospital Geographic Reclassifications, Graduate
Medical Education, Capital Prospective Payment, Excluded Hospitals,
Medicare Disproportionate Share Hospital (DSH) Payment Adjustment, Sole
Community Hospitals (SCHs), Medicare-Dependent Small Rural Hospital
(MDH) Program, Low-Volume Hospital Payment Adjustment, and Inpatient
Critical Access Hospital (CAH) Issues.
Emily Lipkin, Jim Mildenberger and Hyeyoung Kim, <a href="/cdn-cgi/l/email-protection#4f0b0e0c0f2c223c6127273c61282039"><span class="__cf_email__" data-cfemail="2367626063404e500d4b4b500d444c55">[email protected]</span></a>,
Long-Term Care Hospital Prospective Payment System and MS-LTC-DRG
Relative Weights Issues.
Lily Yuan, <a href="/cdn-cgi/l/email-protection#8fc1eaf8dbeaece7cfece2fca1e7e7fca1e8e0f9"><span class="__cf_email__" data-cfemail="6b250e1c3f0e08032b08061845030318450c041d">[email protected]</span></a>, New Technology Add-On Payments
Issues.
Mady Hue, <a href="/cdn-cgi/l/email-protection#d3beb2a1babfa6fdbba6b693b0bea0fdbbbba0fdb4bca5"><span class="__cf_email__" data-cfemail="f994988b90958cd7918c9cb99a948ad791918ad79e968f">[email protected]</span></a>, and Andrea Hazeley,
<a href="/cdn-cgi/l/email-protection#9ffef1fbedfafeb1f7fee5faf3fae6dffcf2ecb1f7f7ecb1f8f0e9"><span class="__cf_email__" data-cfemail="99f8f7fdebfcf8b7f1f8e3fcf5fce0d9faf4eab7f1f1eab7fef6ef">[email protected]</span></a>, MS-DRG Classifications Issues.
Radhika Puri, <a href="/cdn-cgi/l/email-protection#b3e1d2d7dbdad8d29dc3c6c1daf3d0dec09ddbdbc09dd4dcc5"><span class="__cf_email__" data-cfemail="134172777b7a78723d6366617a53707e603d7b7b603d747c65">[email protected]</span></a>, Rural Community Hospital
Demonstration Program Issues.
Jeris Smith, <a href="/cdn-cgi/l/email-protection#b3d9d6c1dac09dc0dedac7dbf3d0dec09ddbdbc09dd4dcc5"><span class="__cf_email__" data-cfemail="254f40574c560b56484c514d654648560b4d4d560b424a53">[email protected]</span></a>, Frontier Community Health
Integration Project (FCHIP) Demonstration Issues.
Lang Le, <a href="/cdn-cgi/l/email-protection#dbb7bab5bcf5b7be9bb8b6a8f5b3b3a8f5bcb4ad"><span class="__cf_email__" data-cfemail="395558575e17555c795a544a1751514a175e564f">[email protected]</span></a>, Hospital Readmissions Reduction
Program--Administration Issues.
Ngozi Uzokwe, <a href="/cdn-cgi/l/email-protection#600e070f1a094e151a0f0b170520030d134e0808134e070f16"><span class="__cf_email__" data-cfemail="640a030b1e0d4a111e0b0f1301240709174a0c0c174a030b12">[email protected]</span></a>, Hospital Readmissions
Reduction Program--Measures Issues.
Jennifer Tate, <a href="/cdn-cgi/l/email-protection#610b040f0f080704134f1500150421020c124f0909124f060e17"><span class="__cf_email__" data-cfemail="78121d1616111e1d0a560c190c1d381b150b5610100b561f170e">[email protected]</span></a>, Hospital-Acquired
Condition Reduction Program--Administration Issues.
Ngozi Uzokwe, <a href="/cdn-cgi/l/email-protection#59373e362330772c2336322e3c193a342a7731312a773e362f"><span class="__cf_email__" data-cfemail="2f4148405546015a554044584a6f4c425c0147475c01484059">[email protected]</span></a>, Hospital-Acquired Condition
Reduction Program--Measures Issues.
Julia Venanzi, <a href="/cdn-cgi/l/email-protection#0268776e6b632c74676c636c786b42616f712c6a6a712c656d74"><span class="__cf_email__" data-cfemail="fc968990959dd28a99929d928695bc9f918fd294948fd29b938a">[email protected]</span></a>, Hospital Inpatient
Quality Reporting Program and Hospital Value-Based Purchasing Program--
Administration Issues.
Melissa Hager, <a href="/cdn-cgi/l/email-protection#e9848c85809a9a88c781888e8c9ba98a849ac781819ac78e869f"><span class="__cf_email__" data-cfemail="177a727b7e646476397f7670726557747a64397f7f6439707861">[email protected]</span></a>, and Ngozi Uzokwe,
<a href="/cdn-cgi/l/email-protection#d4bab3bbaebdfaa1aebbbfa3b194b7b9a7fabcbca7fab3bba2"><span class="__cf_email__" data-cfemail="b5dbd2dacfdc9bc0cfdadec2d0f5d6d8c69bddddc69bd2dac3">[email protected]</span></a>--Hospital Inpatient Quality Reporting Program
and Hospital Value-Based Purchasing Program--Measures Issues Except
Hospital Consumer Assessment of Healthcare Providers and Systems
Issues.
Elizabeth Goldstein, <a href="/cdn-cgi/l/email-protection#d1b4bdb8abb0b3b4a5b9ffb6bebdb5a2a5b4b8bf91b2bca2ffb9b9a2ffb6bea7"><span class="__cf_email__" data-cfemail="c5a0a9acbfa4a7a0b1adeba2aaa9a1b6b1a0acab85a6a8b6ebadadb6eba2aab3">[email protected]</span></a>, Hospital
Inpatient Quality Reporting and Hospital Value-Based Purchasing--
Hospital Consumer Assessment of Healthcare Providers and Systems
Measures Issues.
Jennifer Tate, <a href="/cdn-cgi/l/email-protection#dab0bfb4b4b3bcbfa8f4aebbaebf9ab9b7a9f4b2b2a9f4bdb5ac"><span class="__cf_email__" data-cfemail="147e717a7a7d7271663a60756071547779673a7c7c673a737b62">[email protected]</span></a>, PPS-Exempt Cancer
Hospital Quality Reporting--Administration Issues.
Kristina Rabarison, <a href="/cdn-cgi/l/email-protection#602b12091314090e014e320102011209130f0e20030d134e0808134e070f16"><span class="__cf_email__" data-cfemail="ce85bca7bdbaa7a0afe09cafacafbca7bda1a08eada3bde0a6a6bde0a9a1b8">[email protected]</span></a>, PPS-Exempt
Cancer Hospital Quality Reporting Program-Measure Issues.
Ariel Cress, <a href="/cdn-cgi/l/email-protection#7736051e121b59340512040437141a04591f1f0459101801"><span class="__cf_email__" data-cfemail="92d3e0fbf7febcd1e0f7e1e1d2f1ffe1bcfafae1bcf5fde4">[email protected]</span></a>, Long-Term Care Hospital
Quality Reporting Program--Administration Issues.
Jessica Warren, <a href="/cdn-cgi/l/email-protection#93f9f6e0e0faf0f2bde4f2e1e1f6fdd3f0fee0bdfbfbe0bdf4fce5"><span class="__cf_email__" data-cfemail="fb919e888892989ad58c9a89899e95bb989688d5939388d59c948d">[email protected]</span></a>, and Lisa Marie Gomez,
<a href="/cdn-cgi/l/email-protection#d995b0aab894b8abb0bcf79eb6b4bca3e899bab4aaf7b1b1aaf7beb6af"><span class="__cf_email__" data-cfemail="c18da8b2a08ca0b3a8a4ef86aeaca4bbf081a2acb2efa9a9b2efa6aeb7">[email protected]</span></a>, Medicare Promoting Interoperability
Program.
Bridget Dickensheets, <a href="/cdn-cgi/l/email-protection#1577677c717270613b717c767e707b667d70706166557678663b7d7d663b727a63"><span class="__cf_email__" data-cfemail="a4c6d6cdc0c3c1d08ac0cdc7cfc1cad7ccc1c1d0d7e4c7c9d78accccd78ac3cbd2">[email protected]</span></a> and Mollie
Knight, <a href="/cdn-cgi/l/email-protection#721f1d1e1e1b175c191c1b151a0632111f015c1a1a015c151d04"><span class="__cf_email__" data-cfemail="036e6c6f6f6a662d686d6a646b7743606e702d6b6b702d646c75">[email protected]</span></a>, IPPS Market Basket Rebasing.
<a href="/cdn-cgi/l/email-protection#42010f0f0b1d1607030f02212f316c2a2a316c252d34"><span class="__cf_email__" data-cfemail="c1828c8c889e9584808c81a2acb2efa9a9b2efa6aeb7">[email protected]</span></a>, Transforming Episode Accountability Model
(TEAM).
SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following
website as soon as possible after they have been received: <a href="https://www.regulations.gov">https://www.regulations.gov</a>. Follow the search instructions on that website to
view public comments. CMS will not post on <a href="http://Regulations.gov">Regulations.gov</a> public
comments that make threats to individuals or institutions or suggest
that the commenter will take actions to harm an individual. CMS
continues to encourage individuals not to submit duplicative comments.
We will post acceptable comments from multiple unique commenters even
if the content is identical or nearly identical to other comments.
Plain Language Summary: In accordance with 5 U.S.C. 553(b)(4), a
[[Page 18003]]
plain language summary of this proposed rule may be found at <a href="https://www.regulations.gov/">https://www.regulations.gov/</a>.
Deregulation Request for Information (RFI): On January 31, 2025,
President Trump issued Executive Order (E.O.) 14192 ``Unleashing
Prosperity Through Deregulation,'' which states the Administration
policy to significantly reduce the private expenditures required to
comply with Federal regulations to secure America's economic prosperity
and national security and the highest possible quality of life for each
citizen. We would like public input on approaches and opportunities to
streamline regulations and reduce administrative burdens on providers,
suppliers, beneficiaries, and other interested parties participating in
the Medicare program. CMS has made available an RFI at <a href="https://www.cms.gov/medicare-regulatory-relief-rfi">https://www.cms.gov/medicare-regulatory-relief-rfi</a>. Please submit all comments
in response to this RFI through the provided weblink.
Tables Available on the CMS Website
The IPPS tables for this fiscal year (FY) 2026 proposed rule are
available on the CMS website at <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index</a>.html. Click on the link
on the left side of the screen titled ``FY 2026 IPPS Proposed rule Home
Page'' or ``Acute Inpatient--Files for Download.'' The LTCH PPS tables
for this FY 2026 proposed rule are available on the CMS website at
<a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/index.html">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/index.html</a> under the list item for Regulation
Number CMS-1833-P. For further details on the contents of the tables
referenced in this proposed rule, we refer readers to section VI. of
the Addendum to this FY 2026 IPPS/LTCH PPS proposed rule.
Readers who experience any problems accessing any of the tables
that are posted on the CMS websites, as previously identified, should
contact Michael Treitel, <a href="/cdn-cgi/l/email-protection#1d595c5e5d7e706e3375756e337a726b"><span class="__cf_email__" data-cfemail="4703060407242a34692f2f3469202831">[email protected]</span></a>.
I. Executive Summary and Background
A. Executive Summary
1. Purpose and Legal Authority
This FY 2026 IPPS/LTCH PPS proposed rule would make payment and
policy changes under the Medicare inpatient prospective payment system
(IPPS) for operating and capital-related costs of acute care hospitals
as well as for certain hospitals and hospital units excluded from the
IPPS. In addition, it would make payment and policy changes for
inpatient hospital services provided by long-term care hospitals
(LTCHs) under the long-term care hospital prospective payment system
(LTCH PPS). This proposed rule also would make policy changes to
programs associated with Medicare IPPS hospitals, IPPS-excluded
hospitals, and LTCHs. We are also proposing changes relating to
Medicare graduate medical education (GME) for teaching hospitals.
We are proposing several changes across pay for performance
programs. In the Hospital Value-Based Purchasing (VBP) Program, we are
proposing modifications to the Hospital-Level Total Hip Arthroplasty/
Total Knee Arthroplasty (THA/TKA) Complications measure beginning with
the FY 2033 program year. We are also providing notice of the technical
update to the five National Healthcare Safety Network (NHSN) Healthcare
Associated Infection (HAI) measures beginning with the FY 2028 program
year, and the technical update to remove the COVID-19 exclusion from
the six measures in the Clinical Outcomes domain beginning with the FY
2027 program year. Lastly, we provide previously and newly established
performance standards for the FY 2028 through FY 2031 program years for
the Hospital VBP Program. In the Hospital Acquired-Conditions (HAC)
Reduction Program, we are also providing notice of the technical update
to the five Centers for Disease Control National Control (CDC) NHSN
healthcare-associated infection (HAI) measures. In the Hospital
Readmissions Reduction Program, we are proposing to add Medicare
Advantage (MA) beneficiaries to the six Hospital Readmissions Reduction
Program (HRRP) measures and make corresponding administrative updates.
In the PPS-Exempt Cancer Hospital Quality Reporting Program
(PCHQR), we are proposing to modify the public reporting requirements
and remove three existing measures.
In the Hospital Inpatient Quality Reporting (IQR) Program, we are
proposing to modify four existing quality measures and remove four
existing measures.
We also are proposing to update and codify the Extraordinary
Circumstances Exception (ECE) policy to clarify that CMS has the
discretion to grant an extension in response to an ECE request from a
hospital in the Hospital IQR, Hospital Readmissions Reduction, PCHQR,
HAC Reduction, and Hospital VBP Programs.
In the Medicare Promoting Interoperability Program, we are
proposing to define the electronic health record (EHR) reporting period
in CY 2026 and subsequent years as a minimum of any continuous 180-day
period within that calendar year for eligible hospitals and CAHs
participating in the Medicare Promoting Interoperability Program and to
make corresponding revisions at 42 CFR 495.4. We are proposing to
modify the Security Risk Analysis measure beginning with the EHR
reporting period in CY 2026. We are proposing to modify the Safety
Assurance Factors for EHR Resilience (SAFER) Guides measure beginning
with the EHR reporting period in CY 2026. We are proposing to add an
optional bonus measure under the Public Health and Clinical Data
Exchange objective for reporting data to a public health agency (PHA)
using the Trusted Exchange Framework and Common Agreement (TEFCA)
beginning with the EHR reporting period in CY 2026.
In the LTCH Quality Reporting Program (QRP), we are proposing to
remove one item from the LTCH Continuity Assessment Record and
Evaluation (CARE) Data Set (LCDS) with respect to patients who have
expired in the LTCH. We are also proposing to remove four Social
Determinant of Health (SDOH) standardized patient assessment data
elements from the LCDS. Next, we are proposing to amend the
reconsideration request process in the LTCH QRP. Finally, we include
Requests for Information (RFIs) on: (1) future measure concepts for the
LTCH QRP; (2) revisions to the data submission deadlines for assessment
data collected for the LTCH QRP; and (3) advancing digital quality
measurement (dQM) in the LTCH QRP.
The Transforming Episode Accountability Model (TEAM), a mandatory
alternative payment model that was finalized in the FY 2025 IPPS/LTCH
PPS final rule (89 FR 68986), aims to improve beneficiary care through
financial accountability for episodes categories that begin with one of
the following procedures: coronary artery bypass graft (CABG), lower
extremity joint replacement (LEJR), major bowel procedure, surgical
hip/femur fracture treatment (SHFFT), and spinal fusion. TEAM will test
whether financial accountability for these episode categories reduces
Medicare expenditures while preserving or enhancing the quality of care
for Medicare beneficiaries. In this proposed rule, we are proposing
updates to TEAM that would modify policies affecting participation of
new hospitals, quality measure and assessment, the construction of
target prices, the removal of certain health reporting elements, the
expansion of the Skilled
[[Page 18004]]
Nursing Facility (SNF) 3-Day Rule, and the removal of the
Decarbonization and Resilience Initiative (DRI). Additionally, the
policies in this proposed rule reflect our commitment to ensuring
TEAM's incentives help to drive beneficiary quality of care
improvements and reductions in Medicare spending.
Under various statutory authorities, we either discuss continued
program implementation or propose to make changes to the Medicare IPPS,
the LTCH PPS, other related payment methodologies and programs for FY
2026 and subsequent fiscal years, and other policies and provisions
included in this proposed rule. These statutory authorities include,
but are not limited to, the following:
<bullet> Section 1886(d) of the Social Security Act (the Act),
which sets forth a system of payment for the operating costs of acute
care hospital inpatient stays under Medicare Part A (Hospital
Insurance) based on prospectively set rates. Section 1886(g) of the Act
requires that, instead of paying for capital-related costs of inpatient
hospital services on a reasonable cost basis, the Secretary use a
prospective payment system (PPS).
<bullet> Section 1886(d)(1)(B) of the Act, which specifies that
certain hospitals and hospital units are excluded from the IPPS. These
hospitals and units are: rehabilitation hospitals and units; LTCHs;
psychiatric hospitals and units; children's hospitals; cancer
hospitals; extended neoplastic disease care hospitals; and hospitals
located outside the 50 States, the District of Columbia, and Puerto
Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, the
Northern Mariana Islands, and American Samoa). Religious nonmedical
health care institutions (RNHCIs) are also excluded from the IPPS.
<bullet> Sections 123(a) and (c) of the Balanced Budget Refinement
Act of 1999 (BBRA) (Public Law (Pub. L.) 106-113) and section 307(b)(1)
of the Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L.
106-554) (as codified under section 1886(m)(1) of the Act), which
provide for the development and implementation of a prospective payment
system for payment for inpatient hospital services of LTCHs described
in section 1886(d)(1)(B)(iv) of the Act.
<bullet> Section 1814(l)(4) of the Act requires, beginning with FY
2015, that CAHs that do not successfully demonstrate meaningful use of
certified electronic health record technology (CEHRT) for an EHR
reporting period for a cost reporting period shall be paid 100 percent
of reasonable costs rather than 101 percent of reasonable costs.
<bullet> Section 1886(a)(4) of the Act, which specifies that costs
of approved educational activities are excluded from the operating
costs of inpatient hospital services. Hospitals with approved graduate
medical education (GME) programs are paid for the direct costs of GME
in accordance with section 1886(h) of the Act. Hospitals paid under the
IPPS with approved GME programs are paid for the indirect costs of
training residents in accordance with section 1886(d)(5)(B) of the Act.
<bullet> Section 1886(d)(5)(F) of the Act provides for additional
Medicare IPPS payments to subsection (d) hospitals that serve a
significantly disproportionate number of low-income patients. These
payments are known as the Medicare disproportionate share hospital
(DSH) adjustment. Section 1886(d)(5)(F) of the Act specifies the
methods under which a hospital may qualify for the DSH payment
adjustment.
<bullet> Section 1886(b)(3)(B)(viii) of the Act, which requires the
Secretary to reduce the applicable percentage increase that would
otherwise apply to the standardized amount applicable to a subsection
(d) hospital for discharges occurring in a fiscal year if the hospital
does not submit data on measures in a form and manner, and at a time,
specified by the Secretary.
<bullet> Section 1886(b)(3)(B)(ix) of the Act, which requires
downward adjustments to the applicable percentage increase, beginning
with FY 2015 (and beginning with FY 2022 for subsection (d) Puerto Rico
hospitals), for eligible hospitals that do not successfully demonstrate
meaningful use of CEHRT for an EHR reporting period for a payment
adjustment year.
<bullet> Section 1866(k) of the Act, which provides for the
establishment of a quality reporting program for hospitals described in
section 1886(d)(1)(B)(v) of the Act, referred to as ``PPS-exempt cancer
hospitals.''
<bullet> Section 1886(n) of the Act, which establishes the
requirements for an eligible hospital to be treated as a meaningful EHR
user for an EHR reporting period for a payment year or, for purposes of
subsection (b)(3)(B)(ix) of the Act, for a fiscal year.
<bullet> Section 1886(o) of the Act, which requires the Secretary
to establish a Hospital Value-Based Purchasing (VBP) Program, under
which value-based incentive payments are made in a fiscal year to
hospitals based on their performance on measures established for a
performance period for such fiscal year.
<bullet> Section 1886(p) of the Act, which establishes a Hospital-
Acquired Condition (HAC) Reduction Program, under which payments to
applicable hospitals are adjusted to provide an incentive to reduce
hospital-acquired conditions.
<bullet> Section 1886(q) of the Act, as amended by section 15002 of
the 21st Century Cures Act, which establishes the Hospital Readmissions
Reduction Program. Under the program, payments for discharges from an
applicable hospital as defined under section 1886(d) of the Act will be
reduced to account for certain excess readmissions. Section 15002 of
the 21st Century Cures Act directs the Secretary to compare hospitals
with respect to the number of their Medicare-Medicaid dual-eligible
beneficiaries in determining the extent of excess readmissions.
<bullet> Section 1886(r) of the Act, as added by section 3133 of
the Affordable Care Act, which provides for a reduction to
disproportionate share hospital (DSH) payments under section
1886(d)(5)(F) of the Act and for an additional uncompensated care
payment to eligible hospitals. Specifically, section 1886(r) of the Act
requires that, for fiscal year 2014 and each subsequent fiscal year,
subsection (d) hospitals that would otherwise receive a DSH payment
made under section 1886(d)(5)(F) of the Act will receive two separate
payments: (1) 25 percent of the amount they previously would have
received under the statutory formula for Medicare DSH payments in
section 1886(d)(5)(F) of the Act if subsection (r) did not apply (``the
empirically justified amount''), and (2) an additional payment for the
DSH hospital's proportion of uncompensated care, determined as the
product of three factors. These three factors are: (1) 75 percent of
the payments that would otherwise be made under section 1886(d)(5)(F)
of the Act, in the absence of section 1886(r) of the Act; (2) 1 minus
the percent change in the percent of individuals who are uninsured; and
(3) the hospital's uncompensated care amount relative to the
uncompensated care amount of all DSH hospitals expressed as a
percentage.
<bullet> Section 1886(m)(5) of the Act, which requires the
Secretary to reduce by 2 percentage points the annual update to the
standard Federal rate for discharges for a long-term care hospital
(LTCH) during the rate year for LTCHs that do not submit data on
quality measures in the form, manner, and at a time, specified by the
Secretary.
<bullet> Section 1886(m)(6) of the Act, as added by section
1206(a)(1) of the Pathway for Sustainable Growth Rate (SGR) Reform Act
of 2013 (Pub. L. 113-67) and amended by section 51005(a) of the
Bipartisan Budget Act of 2018 (Pub.
[[Page 18005]]
L. 115-123), which provided for the establishment of site neutral
payment rate criteria under the LTCH PPS, with implementation beginning
in FY 2016. Section 51005(b) of the Bipartisan Budget Act of 2018
amended section 1886(m)(6)(B) by adding new clause (iv), which
specifies that the IPPS comparable amount defined in clause (ii)(I)
shall be reduced by 4.6 percent for FYs 2018 through 2026.
<bullet> Section 1899B of the Act, which provides for the
establishment of standardized data reporting for certain post-acute
care providers, including LTCHs.
<bullet> Section 1115A of the Act authorizes the testing of
innovative payment and service delivery models that preserve or enhance
the quality of care furnished to Medicare, Medicaid, and Children's
Health Insurance Program (CHIP) beneficiaries while reducing program
expenditures.
2. Summary of the Major Provisions
The following is a summary of the major provisions in this proposed
rule. In general, these major provisions are being proposed as part of
the annual update to the payment policies and payment rates, consistent
with the applicable statutory provisions. A general summary of the
changes in this proposed rule is presented in section I.D. of the
preamble of this proposed rule.
a. Proposed Transition for the Discontinuation of the Low Wage Index
Hospital Policy
To help mitigate growing wage index disparities between high wage
and low wage hospitals, in the FY 2020 IPPS/LTCH PPS rule (84 FR 42326
through 42332), we adopted a policy to increase the wage index values
for certain hospitals with low wage index values (the low wage index
hospital policy). This policy was adopted in a budget neutral manner
through an adjustment applied to the standardized amounts for all
hospitals. We indicated our intention that this policy would be
effective for at least 4 years, beginning in FY 2020, in order to allow
employee compensation increases implemented by these hospitals
sufficient time to be reflected in the wage index calculation. We also
stated we intended to revisit the issue of the duration of this policy
in future rulemaking as we gained experience under the policy. In the
FY 2025 IPPS/LTCH PPS final rule (89 FR 69301 through 69308), we
adopted an extension of the low wage index hospital policy and the
related budget neutrality adjustment effective for at least three more
years, beginning in FY 2025, in order for sufficient wage data from
after the end of the COVID-19 Public Health Emergency to become
available.
As discussed in section III.F.5. of the preamble of this proposed
rule, on July 23, 2024, the Court of Appeals for the D.C. Circuit held
that the Secretary lacked authority under section 1886(d)(3)(E) of the
Act or under the ``adjustments'' language of section 1886(d)(5)(I)(i)
of the Act to adopt the low wage index hospital policy for FY 2020, and
that the policy and related budget neutrality adjustment must be
vacated. Bridgeport Hosp. v. Becerra, 108 F.4th 882, 887-91 & n.6 (D.C.
Cir. 2024). After considering the D.C. Circuit's decision in Bridgeport
Hosp. v. Becerra, in the FY 2025 IFC (89 FR 80405 through 80421), we
recalculated the FY 2025 IPPS hospital wage index to remove the low
wage index hospital policy for FY 2025. We also removed the low wage
index budget neutrality factor from the FY 2025 standardized amounts.
In addition, we established an interim transition policy for hospitals
significantly impacted by the removal of the FY 2025 low wage index
hospital policy using our authority under section 1886(d)(5)(I) of the
Act.
For FY 2026 and subsequent fiscal years, after considering the D.C.
Circuit's decision in Bridgeport Hosp. v. Becerra, we are proposing to
discontinue the low wage index hospital policy and would no longer
apply a low wage index budget neutrality factor to the standardized
amounts. As discussed in section III.F.7. of the preamble of this
proposed rule, we are proposing to use our authority under section
1886(d)(5)(I)(i) of the Act to adopt a narrow transitional exception to
the calculation of FY 2026 IPPS payments for low wage index hospitals
significantly impacted by the discontinuation of the low wage index
hospital policy, that would be implemented in a budget neutral manner.
This proposed transitional exception policy would apply to hospitals
that benefitted from the FY 2024 low wage index hospital policy and
would compare the hospital's proposed FY 2026 wage index to the
hospital's FY 2024 wage index. If the hospital's proposed FY 2026 wage
index is decreasing by more than 9.75 percent from the hospital's FY
2024 wage index, then the proposed transitional payment exception for
FY 2026 for that hospital would be equal to the additional FY 2026
amount the hospital would be paid under the IPPS if its FY 2026 wage
index were equal to 90.25 percent of its FY 2024 wage index. We
proposed to make this policy budget neutral through an adjustment
applied to the standardized amounts for all hospitals.
b. Proposed Update to the IPPS Labor-Related Share
As discussed in section IV. of the preamble of this proposed rule,
we are proposing to rebase and revise the 2018-based IPPS market basket
to reflect a 2023 base year. In addition, using the cost category
weights from the proposed 2023-based IPPS market basket, we calculated
a labor-related share of 66.0 percent, which we are proposing to use
for discharges occurring on or after October 1, 2025. The proposed
labor-related share of 66.0 percent is 1.6 percentage points lower than
the current labor-related share of 67.6 percent. As discussed in
section IVB.3. of the preamble of this proposed rule, this downward
revision to the labor-related share is primarily the result of
incorporating the more recent 2023 Medicare cost report data for Wages
and Salaries, Employee Benefits, and Contract Labor costs. This is
partially offset by an increase in the Professional Fees: Labor-Related
cost weight.
c. Hospital Readmission Reduction Program
We are proposing to make changes to policies for the Hospital
Readmissions Reduction Program, which was established under section
1886(q) of the Act, as amended by section 15002 of the 21st Century
Cures Act. The Hospital Readmissions Reduction Program requires a
reduction to a hospital's base operating DRG payment to account for
excess readmissions of selected applicable conditions. In this FY 2026
IPPS/LTCH PPS proposed rule, we are proposing the following policies:
(1) Refine all six readmission measures to add Medicare Advantage
patient cohort data; (2) remove the COVID-19 diagnosed patients measure
denominator exclusion from the all six readmission measures, beginning
with the FY 2026 program year; (3) reduce the applicable period from 3-
years to 2-years and update codified regulation language; (4) modify
the diagnosis-related group (DRG) payment ratios in the payment
adjustment formula to include MA beneficiaries; and (5) update and
codify the ECE policy to clarify that CMS has the discretion to grant
an extension in response to an ECE request from a hospital.
d. Hospital Acquired Condition (HAC) Reduction Program
Section 1886(p) of the Act establishes the HAC Reduction Program
under which payments to applicable hospitals are adjusted to provide an
incentive to
[[Page 18006]]
reduce hospital-acquired conditions. In this FY 2026 IPPS/LTCH PPS
proposed rule, we are making a technical update to the NHSN Healthcare
Associated Infection (HAI) measures baseline. We are also proposing to
update and codify the ECE policy to clarify that CMS has the discretion
to grant an extension in response to an ECE request from a hospital.
e. Hospital Value-Based Purchasing (VBP) Program
Section 1886(o) of the Act requires the Secretary to establish a
Hospital VBP Program under which value-based incentive payments are
made in a fiscal year to hospitals based on their performance on
measures established for a performance period for such fiscal year. In
this FY 2026 IPPS/LTCH PPS proposed rule, we are proposing
modifications to the THA/TKA Complications measure beginning with the
FY 2033 program year. We are also providing notice of the technical
update to remove the COVID-19 exclusion from the six measures in the
Clinical Outcomes domain beginning with the FY 2027 program year and
the technical update to the five NHSN Healthcare Associated Infection
(HAI) measures beginning with the FY 2028 program year. We also are
proposing to update and codify the ECE policy to clarify that CMS has
the discretion to grant an extension in response to an ECE request from
a hospital. We are also proposing to remove the Program's Health Equity
Adjustment. Lastly, we provide previously and newly established
performance standards for the FY 2028 through FY 2031 program years for
the Hospital VBP Program.
e. Hospital Inpatient Quality Reporting (IQR) Program
Under section 1886(b)(3)(B)(viii) of the Act, subsection (d)
hospitals are required to report data on measures selected by the
Secretary for a fiscal year in order to receive the full annual
percentage increase. In this FY 2026 IPPS/LTCH PPS proposed rule, we
are proposing several changes to the Hospital IQR Program. We are
proposing refinements to four measures currently in the Hospital IQR
Program measure set: (1) Hospital-Level, Risk-Standardized Complication
Rate (RSCR) Following Elective Primary Total Hip Arthroplasty (THA)
and/or Total Knee Arthroplasty (TKA) beginning with the April 1, 2023-
March 30, 2025 Reporting Period/2027 Payment Determination; (2)
Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR)
Following Acute Ischemic Stroke Hospitalization with Claims-Based Risk
Adjustment for Stroke Severity beginning with the July 1, 2023-June 30,
2025 Reporting Period/2027 Payment Determination; (3) the Hybrid
Hospital-Wide Readmission (HWR) measure beginning with the July 1,
2025, through June 30, 2026 Reporting Period/FY 2028 Payment
Determination; and (4) the Hybrid Hospital-Wide All-Cause Risk
Standardized Mortality (HWM) measure beginning with the July 1, 2025,
through June 30, 2026 Reporting Period/FY 2028 Payment Determination.
We are also proposing to remove four measures: (1) the Hospital
Commitment to Health Equity measure beginning with the CY 2024
reporting period/FY 2026 payment determination; (2) the COVID-19
Vaccination Coverage among HCP measure beginning with the CY 2024
reporting period/FY 2026 payment determination; (3) the Screening for
Social Drivers of Health measure beginning with the CY 2024 reporting
period/FY 2026 payment determination; and (4) the Screen Positive Rate
for Social Drivers of Health measure beginning with the CY 2024
reporting period/FY 2026 payment determination. We are proposing to
update and codify the ECE policy to clarify that CMS has the discretion
to grant an extension in response to an ECE request from a hospital.
Additionally, we seek comments regarding measure concepts related to
well-being and nutrition for future consideration. We also seek
comments on the path forward for digital quality measurement and use of
Fast Healthcare Interoperability Resources (FHIR).
f. PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program
Section 1866(k)(1) of the Act requires, for purposes of FY 2014 and
each subsequent fiscal year, that a hospital described in section
1886(d)(1)(B)(v) of the Act (a PPS-exempt cancer hospital, or a PCH)
submit data in accordance with section 1866(k)(2) of the Act with
respect to such fiscal year. In the FY 2026 IPPS/LTCH PPS proposed
rule, we are proposing to publicly report PCH data on both the Provider
Data Catalog and on Care Compare and to make corresponding changes to
regulatory text to replace references to ``Provider Data Catalog'' with
``CMS website''. We are also proposing to remove the (1) Hospital
Commitment to Health Equity, (2) the Screening for Social Drivers of
Health measure; and (3) the Screen Positive Rate for Social Drivers of
Health measure beginning with the CY 2024 reporting period/FY 2026
payment determination. Lastly, we are proposing to update and codify
the ECE policy to clarify that CMS has the discretion to grant an
extension in response to an ECE request from a hospital.
g. Long-Term Care Hospital Quality Reporting Program (LTCH QRP)
In the LTCH QRP, we are proposing to remove five items from the
LCDS. We are also proposing to amend the reconsideration request
process in the LTCH QRP. Finally, we include Requests for Information
(RFIs) on: (1) future measure concepts for the LTCH QRP; (2) revisions
to the data submission deadlines for assessment data collected for the
LTCH QRP; and (3) advancing digital quality measurement (dQM) in the
LTCH QRP.
h. Medicare Promoting Interoperability Program
Under sections 1886(b)(3)(B)(ix) and 1814(l)(4) of the Act,
respectively, eligible hospitals and CAHs are required to submit data
in accordance with section 1886(n) to successfully demonstrate
meaningful use of CEHRT for an EHR reporting period to avoid a downward
payment adjustment under Medicare for the associated fiscal year. We
are proposing several changes to the Medicare Promoting
Interoperability Program. Specifically, we are proposing: (1) to amend
the definition of ``EHR reporting period for a payment adjustment
year'' at 42 CFR 495.4 for eligible hospitals and CAHs participating in
the Medicare Promoting Interoperability Program to define the EHR
reporting period in CY 2026 and subsequent years as a minimum of any
continuous 180-day period within that calendar year; (2) to modify the
Security Risk Analysis measure to require eligible hospitals and CAHs
to attest ``yes'' to having conducted security risk management in
addition to the existing measure requirement to attest ``yes'' to
having conducted security risk analysis, beginning with the EHR
reporting period in CY 2026; (3) to modify the SAFER Guides measure by
requiring eligible hospitals and CAHs to attest ``yes'' to completing
an annual self-assessment using the eight SAFER Guides published in
January 2025, beginning with the EHR reporting period in CY 2026; and
(4) to add an optional bonus measure to the Public Health and Clinical
Data Exchange objective for eligible hospitals and CAHs that submit
health information to a public health agency (PHA) using the Trusted
Exchange Framework and Common Agreement\TM\ (TEFCA), and consistent
with other measure requirements, beginning with the EHR reporting
period in CY 2026.
[[Page 18007]]
i. Transforming Episode Accountability Model (TEAM)
In section XI.A. of the preamble of this proposed rule, we propose
changes to the Transforming Episode Accountability Model (TEAM). TEAM
is a 5-year mandatory model that will be tested under the authority of
section 1115A of the Act, beginning on January 1, 2026, and ending on
December 31, 2030. We are proposing changes to multiple areas of the
model, including: (1) a limited deferment period for certain hospitals;
(2) addressing the expiration of the Medicare Dependent Hospital
program; (3) adding the Information Transfer Patient Reported Outcome-
based Performance Measure (Information Transfer PRO-PM); (4) applying a
neutral quality measure score for TEAM participants with insufficient
quality data; (5) a methodology to construct target prices when there
are coding changes; (6) reconstructing the normalization factor and
prospective trend factor; (7) replacing the Area Deprivation Index
(ADI) with the Community Deprivation Index (CDI); (8) using a 180-day
lookback period and Hierarchical Condition Categories (HCC) version 28
for beneficiary risk adjustment; (9) aligning the date range used for
episode attribution; (10) removing health equity plans and health
related social needs data reporting; (11) expanding the Skilled Nursing
Facility (SNF) 3-day rule waiver; and (12) removing the Decarbonization
and Resilience Initiative (DRI).
3. Summary of Costs and Benefits
The following table provides a summary of the costs, savings, and
benefits associated with the major provisions described in section
I.A.2. of the preamble of this proposed rule.
------------------------------------------------------------------------
Description of costs, transfers, savings,
Provision description and benefits
------------------------------------------------------------------------
Proposed Transition for the As discussed in section III.F.7. of the
Discontinuation of the Low preamble of this proposed rule, we are
Wage Index Hospital Policy. proposing to use our authority under
section 1886(d)(5)(I)(i) of the Act to
adopt a narrow transitional exception to
the calculation of FY 2026 IPPS payments
for low wage index hospitals
significantly impacted by the
discontinuation of the low wage index
hospital policy, that would be
implemented in a budget neutral manner.
We proposed to make this policy budget
neutral through an adjustment applied to
the standardized amounts for all
hospitals.
Proposed Update to the IPPS As discussed in section IV. of the
Labor-Related Share. preamble of this proposed rule, we are
proposing to rebase and revise the 2018-
based IPPS market basket to reflect a
2023 base year. In addition, using the
cost category weights from the proposed
2023-based IPPS market basket, we
calculated a labor-related share of 66.0
percent, which we are proposing to use
for discharges occurring on or after
October 1, 2025. The proposed labor-
related share of 66.0 percent is 1.6
percentage points lower than the current
labor-related share of 67.6 percent.
This proposed change is budget neutral.
Proposed Update to the IPPS As discussed in Appendix A of this
Payment Rates and Other proposed rule, acute care hospitals are
Payment Policies. estimated to experience an increase of
approximately $4.0 billion in FY 2026,
primarily driven by the changes in FY
2026 operating payments, uncompensated
care payments, and capital payments and
the expiration of the temporary changes
in the low-volume hospital program and
the expiration of the MDH program on
October 1, 2025.
Proposed Update to the LTCH As discussed in Appendix A of this
PPS Payment Rates and Other proposed rule, based on the best
Payment Policies. available data for the 328 LTCHs in our
database, we estimate that the proposed
changes to the payment rates and factors
that we present in the preamble of and
Addendum of this proposed rule, which
reflect the proposed update to the LTCH
PPS standard Federal payment rate for FY
2026, would result in an estimated
increase in payments in FY 2026 of
approximately $61 million.
Changes to the Hospital We estimated that our changes for the
Readmission Reduction Hospital Readmissions Reduction Program
Program. will result in no financial impact for
the FY 2027 payment determination or
subsequent years.
Changes to the Value-Based We estimated that there will be no net
Incentive Payments under the financial impact to the Hospital VBP
Hospital VBP Program. Program for the FY 2026 program year in
the aggregate because, by law, the
amount available for value-based
incentive payments under the program in
a given year must be equal to the total
amount of base operating MS-DRG payment
amount reductions for that year, as
estimated by the Secretary. The
estimated amount of base operating MS-
DRG payment amount reductions for the FY
2026 program year and, therefore, the
estimated amount available for value-
based incentive payments for FY 2026
discharges is approximately $1.7
billion.
Proposed Changes to the HAC We estimated that our changes for the HAC
Reduction Program. Reduction Program will result in no
financial impact for the FY 2027 payment
determination or subsequent years.
Changes to the Hospital IQR Across 3,050 IPPS hospitals, we estimated
Program. that our changes for the Hospital IQR
Program will result in a maximum
decrease of 660,577 hours and
$18,008,959 to the information
collection burden for the FY 2026
payment determination or subsequent
years.
Proposed Changes to the PCHQR Across 11 PCHs, we estimated that our
Program. changes for the PCHQR Program will
result in a maximum decrease of 153
hours and $7,765 to the information
collection burden for the FY 2026
program year or subsequent years.
Changes to the LTCH QRP...... Across 330 LTCHs, we estimated that our
proposed changes for the FY 2026 LTCH
QRP would result in a total information
collection burden increase of 4 hours
and $187.60 associated with updates to
our reconsideration policy. We estimated
that our proposed changes for the FY
2028 LTCH QRP would result in a decrease
of 2,633.51 hours associated with our
policies and updated burden estimates
and a total cost decrease of
approximately $180,016.80.
Changes to the Medicare Across 4,550 eligible hospitals and CAHs,
Promoting Interoperability we estimated that our changes for the
Program. Medicare Promoting Interoperability
Program will not result in a change to
the information collection burden for
the EHR reporting period in CY 2026 and
subsequent years.
Transforming Episode We estimate for the TEAM proposals
Accountability Model (TEAM). included in this proposed rule that
there would be no significant change
from the savings estimate in the FY 2025
IPPS/LTCH PPS final rule. Therefore, we
estimate testing TEAM would result in
saving the Medicare program $481 million
across the 5 performance years.
------------------------------------------------------------------------
B. Background Summary
1. Acute Care Hospital Inpatient Prospective Payment System (IPPS)
Section 1886(d) of the Act sets forth a system of payment for the
operating costs of acute care hospital inpatient stays under Medicare
Part A (Hospital Insurance) based on prospectively set rates. Section
1886(g) of the Act requires the Secretary to use a prospective payment
system (PPS) to pay for the capital-related costs of inpatient hospital
services for these ``subsection (d) hospitals.'' Under these PPSs,
Medicare payment for hospital inpatient operating and capital-related
costs is made at predetermined, specific rates for each hospital
discharge. Discharges are classified according to a list of diagnosis-
related groups (DRGs).
The base payment rate is comprised of a standardized amount that is
divided into a labor-related share and a nonlabor-related share. The
labor-related share is adjusted by the wage index applicable to the
area where the hospital is located. If the hospital is located in
Alaska or Hawaii, the nonlabor-related share is adjusted by a cost-of-
living adjustment (COLA) factor. This base payment rate is multiplied
by the DRG relative weight.
If the hospital treats a high percentage of certain low-income
patients, it receives a percentage add-on payment applied to the DRG-
adjusted base payment rate. This add-on payment, known as the
disproportionate share hospital (DSH) adjustment, provides for a
percentage increase in Medicare payments to hospitals that qualify
under either of two statutory formulas designed to identify hospitals
that serve a disproportionate share of low-income
[[Page 18008]]
patients. For qualifying hospitals, the amount of this adjustment
varies based on the outcome of the statutory calculations. The
Affordable Care Act revised the Medicare DSH payment methodology and
provides for an additional Medicare payment beginning on October 1,
2013, that considers the amount of uncompensated care furnished by the
hospital relative to all other qualifying hospitals.
If the hospital is training residents in an approved residency
program(s), it receives a percentage add-on payment for each case paid
under the IPPS, known as the indirect medical education (IME)
adjustment. This percentage varies, depending on the ratio of residents
to beds.
Additional payments may be made for cases that involve new
technologies or medical services that have been approved for special
add-on payments. In general, to qualify, a new technology or medical
service must demonstrate that it is a substantial clinical improvement
over technologies or services otherwise available, and that, absent an
add-on payment, it would be inadequately paid under the regular DRG
payment. In addition, certain transformative new devices and certain
antimicrobial products may qualify under an alternative inpatient new
technology add-on payment pathway by demonstrating that, absent an add-
on payment, they would be inadequately paid under the regular DRG
payment.
The costs incurred by the hospital for a case are evaluated to
determine whether the hospital is eligible for an additional payment as
an outlier case. This additional payment is designed to protect the
hospital from large financial losses due to unusually expensive cases.
Any eligible outlier payment is added to the DRG-adjusted base payment
rate, plus any DSH, IME, and new technology or medical service add-on
adjustments and, beginning in FY 2023 for IHS and Tribal hospitals and
hospitals located in Puerto Rico, the new supplemental payment.
Although payments to most hospitals under the IPPS are made on the
basis of the standardized amounts, some categories of hospitals are
paid in whole or in part based on their hospital-specific rate, which
is determined from their costs in a base year. For example, sole
community hospitals (SCHs) receive the higher of a hospital-specific
rate based on their costs in a base year (the highest of FY 1982, FY
1987, FY 1996, or FY 2006) or the IPPS Federal rate based on the
standardized amount. SCHs are the sole source of care in their areas.
Specifically, section 1886(d)(5)(D)(iii) of the Act defines an SCH as a
hospital that is located more than 35 road miles from another hospital
or that, by reason of factors such as an isolated location, weather
conditions, travel conditions, or absence of other like hospitals (as
determined by the Secretary), is the sole source of hospital inpatient
services reasonably available to Medicare beneficiaries. In addition,
certain rural hospitals previously designated by the Secretary as
essential access community hospitals are considered SCHs.
With the recent enactment of section 2202 of the Full-Year
Continuing Appropriations and Extensions Act, 2025, under current law,
the Medicare-dependent, small rural hospital (MDH) program is effective
through September 30, 2025. For discharges occurring on or after
October 1, 2007, but before October 1, 2025, an MDH receives the higher
of the Federal rate or the Federal rate plus 75 percent of the amount
by which the Federal rate is exceeded by the highest of its FY 1982, FY
1987, or FY 2002 hospital-specific rate. MDHs are a major source of
care for Medicare beneficiaries in their areas. Section
1886(d)(5)(G)(iv) of the Act defines an MDH as a hospital that is
located in a rural area (or, as amended by the Bipartisan Budget Act of
2018, a hospital located in a State with no rural area that meets
certain statutory criteria), has not more than 100 beds, is not an SCH,
and has a high percentage of Medicare discharges (not less than 60
percent of its inpatient days or discharges in its cost reporting year
beginning in FY 1987 or in two of its three most recently settled
Medicare cost reporting years). As section 2202 of the Full-Year
Continuing Appropriations and Extensions Act, 2025 extended the MDH
program through FY 2025 only, beginning on October 1, 2025, the MDH
program will no longer be in effect absent a change in law. Because the
MDH program is not authorized by statute beyond September 30, 2025,
beginning October 1, 2025, all hospitals that previously qualified for
MDH status under section 1886(d)(5)(G) of the Act will no longer have
MDH status and will be paid based on the IPPS Federal rate.
Section 1886(g) of the Act requires the Secretary to pay for the
capital-related costs of inpatient hospital services in accordance with
a prospective payment system established by the Secretary. The basic
methodology for determining capital prospective payments is set forth
in our regulations at 42 CFR 412.308 and 412.312. Under the capital
IPPS, payments are adjusted by the same DRG for the case as they are
under the operating IPPS. Capital IPPS payments are also adjusted for
IME and DSH, similar to the adjustments made under the operating IPPS.
In addition, hospitals may receive outlier payments for those cases
that have unusually high costs.
The existing regulations governing payments to hospitals under the
IPPS are located in 42 CFR part 412, subparts A through M.
2. Hospitals and Hospital Units Excluded From the IPPS
Under section 1886(d)(1)(B) of the Act, as amended, certain
hospitals and hospital units are excluded from the IPPS. These
hospitals and units are: Inpatient rehabilitation facility (IRF)
hospitals and units; long-term care hospitals (LTCHs); Inpatient
psychiatric hospitals (IPF) and units; children's hospitals; cancer
hospitals; extended neoplastic disease care hospitals, and hospitals
located outside the 50 States, the District of Columbia, and Puerto
Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, the
Northern Mariana Islands, and American Samoa). Religious nonmedical
health care institutions (RNHCIs) are also excluded from the IPPS.
Various sections of the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-
33), the Medicare, Medicaid and SCHIP [State Children's Health
Insurance Program] Balanced Budget Refinement Act of 1999 (BBRA, Pub.
L. 106-113), and the Medicare, Medicaid, and SCHIP Benefits Improvement
and Protection Act of 2000 (BIPA, Pub. L. 106-554) provide for the
implementation of PPSs for IRF hospitals and units, LTCHs, and
psychiatric hospitals and units (referred to as inpatient psychiatric
facilities (IPFs)). (We note that the annual updates to the LTCH PPS
are included along with the IPPS annual update in this document.
Updates to the IRF PPS and IPF PPS are issued as separate documents.)
Children's hospitals, cancer hospitals, hospitals located outside the
50 States, the District of Columbia, and Puerto Rico (that is,
hospitals located in the U.S. Virgin Islands, Guam, the Northern
Mariana Islands, and American Samoa), and RNHCIs continue to be paid
solely under a reasonable cost-based system, subject to a rate-of-
increase ceiling on inpatient operating costs. Similarly, extended
neoplastic disease care hospitals are paid on a reasonable cost basis,
subject to a rate-of-increase ceiling on inpatient operating costs.
The existing regulations governing payments to excluded hospitals
and hospital units are located in 42 CFR parts 412 and 413.
[[Page 18009]]
3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
The Medicare prospective payment system (PPS) for LTCHs applies to
hospitals described in section 1886(d)(1)(B)(iv) of the Act, effective
for cost reporting periods beginning on or after October 1, 2002. The
LTCH PPS was established under the authority of sections 123 of the
BBRA and section 307(b) of the BIPA (as codified under section
1886(m)(1) of the Act). Section 1206(a) of the Pathway for SGR Reform
Act of 2013 (Pub. L. 113-67) established the site neutral payment rate
under the LTCH PPS, which made the LTCH PPS a dual rate payment system
beginning in FY 2016. Under this statute, effective for LTCH's cost
reporting periods beginning in FY 2016 cost reporting period, LTCHs are
generally paid for discharges at the site neutral payment rate unless
the discharge meets the patient criteria for payment at the LTCH PPS
standard Federal payment rate. The existing regulations governing
payment under the LTCH PPS are located in 42 CFR part 412, subpart O.
Beginning October 1, 2009, we issue the annual updates to the LTCH PPS
in the same documents that update the IPPS.
4. Critical Access Hospitals (CAHs)
Under sections 1814(l), 1820, and 1834(g) of the Act, payments made
to critical access hospitals (CAHs) (that is, rural hospitals or
facilities that meet certain statutory requirements) for inpatient and
outpatient services are generally based on 101 percent of reasonable
cost. Reasonable cost is determined under the provisions of section
1861(v) of the Act and existing regulations under 42 CFR part 413.
5. Payments for Graduate Medical Education (GME)
Under section 1886(a)(4) of the Act, costs of approved educational
activities are excluded from the operating costs of inpatient hospital
services. Hospitals with approved graduate medical education (GME)
programs are paid for the direct costs of GME in accordance with
section 1886(h) of the Act. The amount of payment for direct GME costs
for a cost reporting period is based on the hospital's number of
residents in that period and the hospital's costs per resident in a
base year. The existing regulations governing payments to the various
types of hospitals are located in 42 CFR part 413. Section
1886(d)(5)(B) of the Act provides that prospective payment hospitals
that have residents in an approved GME program receive an additional
payment for each Medicare discharge to reflect the higher patient care
costs of teaching hospitals relative to non-teaching hospitals. The
additional payment is based on the indirect medical education (IME)
adjustment factor, which is calculated using a hospital's ratio of
residents to beds and a multiplier, which is set by Congress. Section
1886(d)(5)(B)(ii)(XII) of the Act provides that, for discharges
occurring during FY 2008 and fiscal years thereafter, the IME formula
multiplier is 1.35. The regulations regarding the indirect medical
education (IME) adjustment are located at 42 CFR 412.105.
C. Summary of Provisions of Recent Legislation That Would Be
Implemented in This Proposed Rule
1. The Full-Year Continuing Appropriations and Extensions Act, 2025
(Pub. L. 119-4)
Section 2201 of the Full-Year Continuing Appropriations and
Extensions Act, 2025 extended through FY 2025 the modified definition
of a low-volume hospital and the methodology for calculating the
payment adjustment for low-volume hospitals that had been in effect for
FYs 2019 through 2024. Specifically, under section 1886(d)(12)(C)(i) of
the Act, as amended, for FYs 2019 through 2025, a subsection (d)
hospital qualifies as a low-volume hospital if it is more than 15 road
miles from another subsection (d) hospital and has less than 3,800
total discharges during the fiscal year. Under section 1886(d)(12)(D)
of the Act, as amended, for discharges occurring in FYs 2019 through
September 30, 2025, the Secretary determines the applicable percentage
increase using a continuous, linear sliding scale ranging from an
additional 25 percent payment adjustment for low-volume hospitals with
500 or fewer discharges to a zero percent additional payment for low-
volume hospitals with more than 3,800 discharges in the fiscal year.
Section 2202 of the Full-Year Continuing Appropriations and
Extensions Act, 2025 amended sections 1886(d)(5)(G)(i) and
1886(d)(5)(G)(ii)(II) of the Act to provide for an extension of the MDH
program through FY 2025 (that is, through September 30, 2025).
D. Summary of the Proposed Provisions
In this proposed rule, we set forth proposed payment and policy
changes to the Medicare IPPS for FY 2026 operating costs and capital-
related costs of acute care hospitals and certain hospitals and
hospital units that are excluded from IPPS. In addition, we set forth
proposed changes to the payment rates, factors, and other payment and
policy-related changes to programs associated with payment rate
policies under the LTCH PPS for FY 2026.
The following is a general summary of the changes that we are
proposing to make in this proposed rule.
1. Proposed Changes to MS-DRG Classifications and Recalibrations of
Relative Weights
In section II. of the preamble of this proposed rule, we include
the following:
<bullet> Proposed changes to MS-DRG classifications based on our
yearly review for FY 2026.
<bullet> Proposed recalibration of the MS-DRG relative weights.
<bullet> A discussion of the proposed FY 2026 status of new
technologies approved for add-on payments for FY 2025, a presentation
of our evaluation and analysis of the FY 2026 applicants for add-on
payments for high-cost new medical services and technologies (including
public input, as directed by the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 (MMA) Public Law 108-173,
obtained in a town hall meeting for applications not submitted under an
alternative pathway), and a discussion of the proposed status of FY
2026 new technology applicants under the alternative pathways for
certain medical devices and certain antimicrobial products.
2. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals
In section III. of the preamble of this proposed rule, we propose
revisions to the wage index for acute care hospitals and the annual
update of the wage data. Specific issues addressed include, but are not
limited to, the following:
<bullet> The proposed FY 2026 wage index update using wage data
from cost reporting periods beginning in FY 2022.
<bullet> Calculation, analysis, and implementation of the proposed
occupational mix adjustment to the wage index for acute care hospitals
for FY 2026 based on the 2022 Occupational Mix Survey.
<bullet> Proposed application of the rural, imputed and frontier
State floors, and proposed transition for the discontinuation of the
low wage index hospital policy.
<bullet> Proposed revisions to the wage index for acute care
hospitals, based on hospital redesignations and reclassifications under
sections 1886(d)(8)(B), (d)(8)(E), and (d)(10) of the Act.
<bullet> Proposed adjustment to the wage index for acute care
hospitals for FY 2026 based on commuting patterns of
[[Page 18010]]
hospital employees who reside in a county and work in a different area
with a higher wage index.
<bullet> Proposed labor-related share for applying the FY 2026 wage
index.
3. Proposed Rebasing and Revising of the IPPS Market Baskets
In section IV. of the preamble of this proposed rule, we propose to
rebase and revise the IPPS market baskets to reflect a 2023 base year.
In section IV.B.3. of the preamble of this proposed rule, using the
cost category weights from the proposed 2023-based IPPS market basket,
we propose to use a labor-related share of 66.0 percent for the
national standardized amounts for all IPPS hospitals (including
hospitals in Puerto Rico) that have a wage index value that is greater
than 1.0000.
4. Payment Adjustment for Medicare Disproportionate Share Hospitals
(DSHs) for FY 2026
In section V. of the preamble of this proposed rule, we discuss the
following:
<bullet> Proposed calculation of Factor 1 and Factor 2 of the
uncompensated care payment methodology.
<bullet> Proposed methodological approach for determining Factor 3
of the uncompensated care payment for FY 2026, which is the same
methodology that was used for FY 2025.
<bullet> Proposed methodological approach for determining the
amount of interim uncompensated care payments using the average of the
most recent 3 years of discharge data.
5. Other Decisions and Proposed Changes to the IPPS for Operating Costs
In section VI. of the preamble of this proposed rule, we discuss
proposed changes or clarifications of a number of the provisions of the
regulations in 42 CFR parts 412 and 413, including the following:
<bullet> Proposed inpatient hospital market basket update for FY
2026.
<bullet> Proposed updated national and regional case-mix values and
discharges for purposes of determining RRC status.
<bullet> Proposed conforming amendments to reflect the statutory
extension of the temporary changes to the low-volume hospital payment
adjustment through September 30, 2025.
<bullet> Proposed conforming amendments to reflect the statutory
extension of the MDH program through September 30, 2025.
<bullet> A direct graduate medical education (GME) and indirect
medical education (IME) policy proposal for calculating full-time
equivalent counts and caps for cost reporting periods other than 12
months; and a notice of closure of two teaching hospitals and
opportunities to apply for available slots.
<bullet> Proposed nursing and allied health education (NAHE)
program Medicare Advantage (MA) add-on rates and direct GME MA percent
reductions for CY 2024; and proposed regulatory changes regarding the
calculation of net cost of NAHE.
<bullet> Proposed update to and revision to the payment adjustment
for certain immunotherapy cases.
<bullet> Proposed changes to the requirements of the Hospital
Readmissions Reduction Program--Updating the proposed estimate of the
financial impacts for the FY 2026 Hospital Readmissions Reduction
Program.
<bullet> Proposed changes to the requirements of the Hospital
Value-Based Purchasing Program--Updating the proposed estimate of the
financial impacts for the FY 2026 Hospital Value-Based Purchasing
Program.
<bullet> Proposed changes to the requirements of the Hospital-
Acquired Conditions Reduction Program--Updating the proposed estimate
of the financial impacts for the FY 2026 Hospital-Acquired Conditions
Reduction Program.
<bullet> Discussion of and proposed changes relating to the
implementation of the Rural Community Hospital Demonstration Program in
FY 2025.
6. Proposed FY 2026 Policy Governing the IPPS for Capital-Related Costs
In section VII. of the preamble of the proposed rule, we discuss
the proposed payment policy requirements for capital-related costs and
capital payments to hospitals for FY 2025.
7. Proposed Changes to the Payment Rates for Certain Excluded
Hospitals: Rate-of-Increase Percentages
In section VIII. of the preamble of the proposed rule, we discuss
the following:
<bullet> Proposed changes to payments to certain excluded hospitals
for FY 2026.
<bullet> Proposed continued implementation of the Frontier
Community Health Integration Project (FCHIP) Demonstration.
8. Proposed Changes to the LTCH PPS
In section IX. of the preamble of the proposed rule, we set forth
proposed changes to the LTCH PPS Federal payment rates, factors, and
other payment rate policies under the LTCH PPS for FY 2026.
9. Proposed Changes Relating to Quality Data Reporting for Specific
Providers and Suppliers
In section X. of the preamble of the proposed rule, we addressed
the following:
<bullet> Solicitation of comment on adopting measures across the
hospital quality reporting and value-based purchasing programs which
capture more forms of unplanned post-acute care and encourage hospitals
to improve discharge processes.
<bullet> Proposed changes to the requirements for the Hospital IQR
Program.
<bullet> Proposed changes to the requirements for the PCHQR
Program.
<bullet> Proposed changes to the requirements for the LTCH QRP, and
requests for information on future measure concepts, revisions to the
data submission deadlines for assessment data collection, and advancing
digital quality measurement (dQM) in the LTCH QRP.
<bullet> Proposed changes to requirements pertaining to eligible
hospitals and CAHs participating in the Medicare Promoting
Interoperability Program.
10. Other Proposals and Comment Solicitations Included in the Proposed
Rule
Section XI. of the preamble of the proposed rule includes proposed
changes to TEAM that would affect participation, quality measure and
assessment, pricing methodology, health data reporting, waivers of
Medicare Program requirements, and the Decarbonization and Resilience
Initiative.
11. Other Provisions of the Proposed Rule
Section XII.A. of the preamble of the proposed rule includes our
discussion of the MedPAC Recommendations.
Section XII.B. of the preamble of the proposed rule includes a
descriptive listing of the public use files associated with this
proposed rule.
Section XIII. of the preamble of the proposed rule includes the
collection of information requirements for entities based on our
proposals.
Section XIV. of the preamble of the proposed rule includes
information regarding our responses to public comments.
12. Determining Prospective Payment Operating and Capital Rates and
Rate-of-Increase Limits for Acute Care Hospitals
In sections II. and III. of the Addendum of the proposed rule, we
set forth proposed changes to the amounts and factors for determining
the
[[Page 18011]]
proposed FY 2026 prospective payment rates for operating costs and
capital-related costs for acute care hospitals, including cost-of-
living adjustment (COLA) factors for IPPS hospitals located in Alaska
and Hawaii. We are proposing to establish the threshold amounts for
outlier cases. In addition, in section IV. of the Addendum of the
proposed rule, we address the proposed update factors for determining
the rate-of-increase limits for cost reporting periods beginning in FY
2026 for certain hospitals excluded from the IPPS.
13. Determining Prospective Payment Rates for LTCHs
In section V. of the Addendum of the proposed rule, we set forth
proposed changes to the amounts and factors for determining the
proposed FY 2026 LTCH PPS standard Federal payment rate and other
factors used to determine LTCH PPS payments under both the LTCH PPS
standard Federal payment rate and the site neutral payment rate in FY
2026. We are proposing to establish the adjustments for the wage index,
labor-related share, the cost-of-living adjustment, and high-cost
outliers, including the applicable fixed-loss amounts and the LTCH
cost-to-charge ratios (CCRs) for both payment rates.
14. Impact Analysis
In Appendix A of this proposed rule, we set forth an analysis of
the impact the proposed changes would have on affected acute care
hospitals, LTCHs, and other entities.
15. Recommendation of Update Factors for Operating Cost Rates of
Payment for Hospital Inpatient Services
In Appendix B of this proposed rule, as required by sections
1886(e)(4) and (e)(5) of the Act, we provide our recommendations of the
appropriate percentage changes for FY 2026 for the following:
<bullet> A single average standardized amount for all areas for
hospital inpatient services paid under the IPPS for operating costs of
acute care hospitals (and hospital-specific rates applicable to SCHs
and MDHs).
<bullet> Target rate-of-increase limits to the allowable operating
costs of hospital inpatient services furnished by certain hospitals
excluded from the IPPS.
<bullet> The LTCH PPS standard Federal payment rate and the site
neutral payment rate for hospital inpatient services provided for LTCH
PPS discharges.
16. Discussion of Medicare Payment Advisory Commission Recommendations
Under section 1805(b) of the Act, MedPAC is required to submit a
report to Congress, no later than March 15 of each year, in which
MedPAC reviews and makes recommendations on Medicare payment policies.
MedPAC's March 2025 recommendations concerning hospital inpatient
payment policies address the update factor for hospital inpatient
operating costs and capital-related costs for hospitals under the IPPS.
We address these recommendations in Appendix B of this proposed rule.
For further information relating specifically to the MedPAC March 2024
report or to obtain a copy of the report, contact MedPAC at (202) 220-
3700 or visit MedPAC's website at <a href="https://www.medpac.gov">https://www.medpac.gov</a>.
II. Proposed Changes to Medicare Severity Diagnosis-Related Group (MS-
DRG) Classifications and Relative Weights
A. Background
Section 1886(d) of the Act specifies that the Secretary shall
establish a classification system (referred to as diagnosis-related
groups (DRGs)) for inpatient discharges and adjust payments under the
IPPS based on appropriate weighting factors assigned to each DRG.
Therefore, under the IPPS, Medicare pays for inpatient hospital
services on a rate per discharge basis that varies according to the DRG
to which a beneficiary's stay is assigned. The formula used to
calculate payment for a specific case multiplies an individual
hospital's payment rate per case by the weight of the DRG to which the
case is assigned. Each DRG weight represents the average resources
required to care for cases in that particular DRG, relative to the
average resources used to treat cases in all DRGs.
Section 1886(d)(4)(C) of the Act requires that the Secretary adjust
the DRG classifications and relative weights at least annually to
account for changes in resource consumption. These adjustments are made
to reflect changes in treatment patterns, technology, and any other
factors that may change the relative use of hospital resources.
B. Adoption of the MS-DRGs and MS-DRG Reclassifications
For information on the adoption of the MS-DRGs in FY 2008, we refer
readers to the FY 2008 IPPS final rule with comment period (72 FR 47140
through 47189).
For general information about the MS-DRG system, including yearly
reviews and changes to the MS-DRGs, we refer readers to the previous
discussions in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR
43764 through 43766) and the FYs 2011 through 2025 IPPS/LTCH PPS final
rules (75 FR 50053 through 50055; 76 FR 51485 through 51487; 77 FR
53273; 78 FR 50512; 79 FR 49871; 80 FR 49342; 81 FR 56787 through
56872; 82 FR 38010 through 38085; 83 FR 41158 through 41258; 84 FR
42058 through 42165; 85 FR 58445 through 58596; 86 FR 44795 through
44961; 87 FR 48800 through 48891; 88 FR 58654 through 58787; and 89 FR
69000 through 69109, respectively).
For discussion regarding our previously finalized policies
(including our historical adjustments to the payment rates) relating to
the effect of changes in documentation and coding that do not reflect
real changes in case mix, we refer readers to the FY 2023 IPPS/LTCH PPS
final rule (87 FR 48799 through 48800).
C. Proposed Changes to Specific MS-DRG Classifications
1. Discussion of Changes to Coding System and Basis for Proposed FY
2026 MS-DRG Updates
a. International Classification of Diseases, 10th Revision (ICD-10)
Providers use the International Classification of Diseases, 10th
Revision (ICD-10) coding system to report diagnoses and procedures for
Medicare hospital inpatient services under the MS-DRG system. The ICD-
10 coding system includes the International Classification of Diseases,
10th Revision, Clinical Modification (ICD-10-CM) for diagnosis coding
and the International Classification of Diseases, 10th Revision,
Procedure Coding System (ICD-10-PCS) for inpatient hospital procedure
coding, as well as the ICD-10-CM and ICD-10-PCS Official Guidelines for
Coding and Reporting.
b. Basis for Proposed FY 2026 MS-DRG Updates
The deadline for interested parties to submit MS-DRG classification
change requests for FY 2026 was October 20, 2024. All requests are
submitted to CMS via Medicare Electronic Application Request
Information System<SUP>TM</SUP> (MEARIS<SUP>TM</SUP>), accessed at
<a href="https://mearis.cms.gov">https://mearis.cms.gov</a>. Specifically, as indicated on the
MEARIS<SUP>TM</SUP> site, the MS-DRG classification change request
process may be used for requests to create, modify, or delete MS-DRGs,
[[Page 18012]]
change ICD-10-CM diagnosis code(s) severity level designations, change
ICD-10-PCS procedure code(s) Operating Room (O.R.) designations, or to
review the CC Exclusions List or the surgical hierarchy.
Within MEARIS<SUP>TM</SUP>, we have built in several resources to
support users, including a ``Resources'' section available at <a href="https://mearis.cms.gov/public/resources">https://mearis.cms.gov/public/resources</a> with technical support available under
``Useful Links'' at the bottom of the MEARIS<SUP>TM</SUP> site.
Questions regarding the MEARIS<SUP>TM</SUP> system can be submitted to
CMS using the form available under ``Contact'', also at the bottom of
the MEARIS<SUP>TM</SUP> site.
We note that the burden associated with this information collection
requirement is the time and effort required to collect and submit the
data in the request for MS-DRG classification changes to CMS. The
aforementioned burden is subject to the Paperwork Reduction Act (PRA)
of 1995 and approved under OMB control number 0938-1431 and has an
expiration date of 09/30/2025.
Interested parties should submit any MS-DRG classification change
requests, including any comments and suggestions for FY 2027
consideration by October 20, 2025 via MEARIS<SUP>TM</SUP> at: <a href="https://mearis.cms.gov/public/home">https://mearis.cms.gov/public/home</a>.
As we have discussed in prior rulemaking, we may not be able to
fully consider all of the requests that we receive for the upcoming
fiscal year. We have found that, with the implementation of ICD-10,
some types of requested changes to the MS-DRG classifications require
more extensive research to identify and analyze all of the data that
are relevant to evaluating the potential change. We note in the
discussion that follows those topics for which further research and
analysis are required, and which we will continue to consider in
connection with future rulemaking. We further note that we also
received recommendations and feedback that did not involve requests to
create, modify, or delete MS-DRGs, change code designations, or to
review the CC Exclusions List or the surgical hierarchy, which
therefore are not summarized or addressed in this discussion of the MS-
DRG classification change requests received for FY 2026.
We received requests to modify the GROUPER logic in several MS-DRGs
under MDC 08 (Diseases and Disorders of the Musculoskeletal System and
Connective Tissue) and a request to modify the GROUPER logic for MS-DRG
794 (Neonate with Other Significant Problems) under MDC 15 (Newborns
and Other Neonates with Conditions Originating in Perinatal Period).
Specifically, we received requests to--
<bullet> Modify the GROUPER logic of new MS-DRG 426 (Multiple Level
Combined Anterior and Posterior Spinal Fusion Except Cervical with MCC
or Custom-Made Anatomically Designed Interbody Fusion Device), new MS-
DRG 427 (Multiple Level Combined Anterior and Posterior Spinal Fusion
Except Cervical with CC), and new MS-DRG 428 (Multiple Level Combined
Anterior and Posterior Spinal Fusion Except Cervical without CC/MCC);
new MS-DRG 447 (Multiple Level Spinal Fusion Except Cervical with MCC
or Custom-Made Anatomically Designed Interbody Fusion Device) and new
MS-DRG 448 (Multiple Level Spinal Fusion Except Cervical without MCC);
and MS-DRGs 456, 457, and 458 (Spinal Fusion Except Cervical with
Spinal Curvature, Malignancy, Infection or Extensive Fusions with MCC,
with CC, and without CC/MCC, respectively) by reassigning cases with an
ICD-10-PCS code that describes fusion of a sacroiliac joint using an
internal fixation device with tulip connector or insertion of an
internal fixation device with tulip connector into a pelvic bone with
another spinal fusion procedure code that currently map to the lower
severity level MS-DRG to the highest severity level (with MCC) MS-DRG.
<bullet> Modify the GROUPER logic of MS-DRGs 463, 464, and 465
(Wound Debridement and Skin Graft Except Hand for Musculoskeletal and
Connective Tissue Disorders with MCC, with CC, and without CC/MCC,
respectively); MS-DRGs 466, 467, and 468 (Revision of Hip or Knee
Replacement with MCC, with CC, and without CC/MCC, respectively); and
MS-DRGs 492, 493, and 494 (Lower Extremity and Humerus Procedures
Except Hip, Foot and Femur with MCC, with CC, and without CC/MCC,
respectively) by reassigning cases with ICD-10-PCS code XW0V0P7
(Introduction of antibiotic-eluting bone void filler into bones, open
approach, new technology group 7) that currently map to the lower
severity level MS-DRG to the highest severity level (with MCC) MS-DRG.
<bullet> Modify the GROUPER logic of MS-DRG 794. The requestor
recommended that ICD-10-CM diagnosis codes P09.6 (Abnormal findings on
neonatal screening for neonatal hearing loss), Z13.0 (Encounter for
screening for diseases of the blood and blood-forming organs and
certain disorders involving the immune mechanism), Z82.5 (Family
history of asthma and other chronic lower respiratory diseases) and
Z82.79 (Family history of other congenital malformations, deformations
and chromosomal abnormalities), be added to the MS-DRG 795 (Normal
Newborn) ``only secondary diagnosis'' list so that they would result in
assignment to MS-DRG 795 when coded with a principal diagnosis code
from ICD-10-CM category Z38 (Liveborn infants according to place of
birth and type of delivery) instead of MS-DRG 794.
We appreciate the submissions and related analyses provided by the
requestors for our consideration as we review MS-DRG classification
change requests for FY 2026; however, we note the complexity of the
GROUPER logic for these MS-DRGs in connection with these requests
requires more extensive analyses to identify and evaluate all the data
relevant to assessing these potential modifications. Specifically, we
note that MS-DRGs 426, 427, 428, 447, and 448 recently became effective
October 1, 2024 (FY 2025) and as discussed in the FY 2025 IPPS/LTCH PPS
proposed rule (89 FR 35982 through 35983) and final rule (89 FR 69049
through 69053) in consideration of any future modifications to the
current structure of the logic for case assignment to MS-DRGs 456, 457,
and 458 we noted that additional analysis would be needed because the
logic is also defined by diagnosis code logic as well as extensive
fusions. We also note that, as discussed further in section II.C.5.c.
of the preamble of this FY 2026 IPPS/LTCH PPS proposed rule, we
identified additional inconsistencies related to the diagnosis code
logic for MS-DRGs 456, 457, and 458 for which we are proposing
modifications. In addition, analyzing the impact of restructuring the
logic in these MS-DRGs with respect to procedure codes describing
fusion of a sacroiliac joint using an internal fixation device with
tulip connector necessitates evaluating the impact across numerous
other MS-DRGs in MDC 08, as well as MS-DRG 028 (Spinal Procedures with
MCC), MS-DRG 029 (Spinal Procedures with CC or Spinal
Neurostimulators), and MS-DRG 030 (Spinal Procedures without CC/MCC)
under MDC 01 (Diseases and Disorders of the Nervous System) since the
procedure codes describing fusion of a sacroiliac joint using an
internal fixation device with tulip connector also map to these MS-
DRGs.
With respect to the request to reassign cases reporting procedure
code XW0V0P7 from the lower severity level to the highest (with MCC)
severity level in the previously listed MS-DRGs, we note that the
procedure to insert a bone void filler is designated as a non-operating
room (Non-O.R.) procedure and believe that the key factor that
[[Page 18013]]
would contribute to resource utilization in these cases is the fact
that the patients have an infection(s) which require additional
resources. As discussed in section II.C.5.a. of the preamble of this FY
2026 IPPS/LTCH PPS proposed rule, we also received an MS-DRG request
related to cases reporting a hip or knee procedure with a diagnosis of
periprosthetic joint infection (PJI) in MS-DRGs 463, 464, and 465. In
our review of the claims data to address that request we noted that a
subset of the cases also reported procedure code XW0V0P7. Consistent
with our established process, we must also consider if there are
additional factors, such as the severity of illness with other
secondary CC/MCC conditions reported and any other O.R. procedures or
services provided, such as mechanical ventilation, that may be
contributing to the consumption of resources for these cases. For these
reasons and those previously described, we believe additional time is
needed to review and evaluate potential extensive modifications to the
structure of these MS-DRGs.
With respect to the request to modify the GROUPER logic of MS-DRG
794, as discussed in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69061
through 69065), we acknowledged that MS-DRG 794 utilizes ``fall-
through'' logic, meaning if a diagnosis code is not assigned to any of
the other MS-DRGs, then assignment ``falls-through'' to MS-DRG 794. As
discussed in the FY 2025 IPPS/LTCH PPS rule, we stated we have started
to examine the GROUPER logic that would determine the assignment of
cases to the MS-DRGs in MDC 15, including MS-DRGs 794 and 795, to
determine where further refinements could potentially be made to better
account for differences in clinical complexity and resource
utilization. However, as we have noted in prior rulemaking (72 FR
47152), we stated we cannot adopt the same approach to refine the
newborn MS-DRGs because of the extremely low volume of Medicare
patients there are in these MS-DRGs. We believe it is appropriate to
consider the request to add ICD-10-CM diagnosis codes P09.6 (Abnormal
findings on neonatal screening for neonatal hearing loss), Z13.0
(Encounter for screening for diseases of the blood and blood-forming
organs and certain disorders involving the immune mechanism), Z82.5
(Family history of asthma and other chronic lower respiratory diseases)
and Z82.79 (Family history of other congenital malformations,
deformations and chromosomal abnormalities) to the MS-DRG 795 (Normal
Newborn) ``only secondary diagnosis'' list in connection with our
continued examination of the GROUPER logic that would determine the
assignment of cases to the MS-DRGs in MDC 15 in future rulemaking,
rather than proposing to change the MS-DRG assignment of individual
ICD-10-CM diagnosis codes at this time. Additional time is needed to
fully and accurately evaluate cases currently grouping to the MS-DRGs
in MDC 15 to consider if restructuring the current MS-DRGs would better
recognize the clinical distinctions of these patient populations.
We will continue to monitor the data as we consider these issues in
connection with future rulemaking. As we continue the analysis of the
claims data with respect to MS-DRGs in MDC 08, MDC 01, and MDC 15, we
welcome public comments and feedback on other factors that should be
considered in the potential restructuring of these MS-DRGs. Feedback
and other suggestions may be directed to MEARIS<SUP>TM</SUP> at:
<a href="https://mearis.cms.gov/public/home">https://mearis.cms.gov/public/home</a>. As noted, interested parties should
submit any MS-DRG classification change requests, including any
comments and suggestions for FY 2027 consideration by October 20, 2025
via MEARIS<SUP>TM</SUP> at: <a href="https://mearis.cms.gov/public/home">https://mearis.cms.gov/public/home</a>.
As we did for the FY 2025 IPPS/LTCH PPS proposed rule, for this FY
2026 IPPS/LTCH PPS proposed rule we are providing a test version of the
ICD-10 MS-DRG GROUPER Software, Version 43, so that the public can
better analyze and understand the impact of the proposals included in
this FY 2026 IPPS/LTCH PPS proposed rule. We note that this test
software reflects the proposed GROUPER logic for FY 2026. Therefore, it
includes the new diagnosis and procedure codes that are effective for
FY 2026 as reflected in Table 6A.--New Diagnosis Codes--FY 2026 and
Table 6B.--New Procedure Codes--FY 2026 associated with this FY 2026
IPPS/LTCH PPS proposed rule and does not include the diagnosis codes
that are invalid beginning in FY 2026 as reflected in Table 6C.--
Invalid Diagnosis Codes--FY 2026 and Table 6D.--Invalid Procedure
Codes--FY 2026 associated with this FY 2026 IPPS/LTCH PPS proposed
rule. These tables are not published in the Addendum to this FY 2026
IPPS/LTCH PPS proposed rule, but are available on the CMS website at:
<a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index</a>.html as described in section VI. of the
Addendum to this FY 2026 IPPS/LTCH PPS proposed rule. Because the
diagnosis and procedure codes no longer valid for FY 2026 are not
reflected in the test software, we are making available a supplemental
file in Table 6P.1a that includes the mapped Version 43 FY 2026 ICD-10-
CM codes and the deleted Version 42 FY 2025 ICD-10-CM codes and Table
6P.1b that includes the mapped Version 43 FY 2026 ICD-10-PCS codes and
the deleted Version 42.1 FY 2025 ICD-10-PCS codes that should be used
for testing purposes with users' available claims data. Therefore,
users will have access to the test software allowing them to build case
examples that reflect the proposals included in this FY 2026 IPPS/LTCH
PPS proposed rule. In addition, users will be able to view the draft
version of the ICD-10 MS-DRG Definitions Manual, Version 43 that
contains the documentation for proposed FY 2026 ICD-10 MS-DRG GROUPER
Version 43 logic changes and will also be able to view a draft version
of the Definitions of Medicare Code Edits (MCE) Manual to review any
changes that will become effective October 1 for FY 2026. As a result
of new and modified code updates approved after the annual spring ICD-
10 Coordination and Maintenance Committee meeting, any further changes
to the MCE will be reflected in the finalized Definitions of Medicare
Code Edits (MCE) Manual, made available in association with the annual
IPPS/LTCH PPS final rule. We are making available the draft FY 2026
ICD-10 MCE Version 43 Manual file on the CMS website at: <a href="https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software">https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software</a>.
The MCE manual is comprised of two chapters: Chapter 1: Edit code
lists provides a listing of each edit, an explanation of each edit, and
as applicable, the diagnosis and/or procedure codes for each edit, and
Chapter 2: Code list changes summarizes the changes in the edit code
lists (for example, additions and deletions) from the prior release of
the MCE software. The public may submit any questions, comments,
concerns, or recommendations regarding the MCE to the CMS mailbox at
<a href="/cdn-cgi/l/email-protection#763b25322431351a1705051f101f1517021f1918351e1718111336151b05581e1e0558111900"><span class="__cf_email__" data-cfemail="aee3fdeafce9edc2cfddddc7c8c7cdcfdac7c1c0edc6cfc0c9cbeecdc3dd80c6c6dd80c9c1d8">[email protected]</span></a> for our review and consideration.
The test version of the ICD-10 MS-DRG GROUPER Software, Version 43,
the draft version of the ICD-10 MS-DRG Definitions Manual, Version 43,
the draft version of the Definitions of Medicare Code Edits Manual,
Version 43, and the supplemental mapping files in Tables 6P.1a and
6P.1b of the FY 2025 and FY 2026 ICD-10-CM
[[Page 18014]]
diagnosis codes and ICD-10-PCS procedure codes are available at <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software</a>.
The following are the changes that we are proposing to the MS-DRGs
for FY 2026. We are inviting public comments on each of the MS-DRG
classification proposed changes, as well as our proposals to maintain
certain existing MS-DRG classifications discussed in this FY 2026 IPPS/
LTCH PPS proposed rule. In some cases, we are proposing changes to the
MS-DRG classifications based on our analysis of claims data and
clinical appropriateness. In other cases, we are proposing to maintain
the existing MS-DRG classifications based on our analysis of claims
data and clinical appropriateness. For this FY 2026 IPPS/LTCH PPS
proposed rule, our MS-DRG analysis was based on ICD-10 claims data from
the September 2024 update of the FY 2024 MedPAR file, which contains
hospital bills received from October 1, 2023 through September 30,
2024. In our discussion of the proposed MS-DRG reclassification
changes, we refer to these claims data as the ``September 2024 update
of the FY 2024 MedPAR file.''
In deciding whether to propose to make further modifications to the
MS-DRGs for particular circumstances brought to our attention, we
consider whether the resource consumption and clinical characteristics
of the patients with a given set of conditions are significantly
different than the remaining patients represented in the MS-DRG. We
evaluate patient care costs using average costs and lengths of stay and
rely on clinical factors to determine whether patients are clinically
distinct or similar to other patients represented in the MS-DRG. In
evaluating resource costs, we consider both the absolute and percentage
differences in average costs between the cases we select for review and
the remainder of cases in the MS-DRG. We also consider variation in
costs within these groups; that is, whether observed average
differences are consistent across patients or attributable to cases
that are extreme in terms of costs or length of stay, or both. Further,
we consider the number of patients who will have a given set of
characteristics and generally prefer not to create a new MS-DRG unless
it would include a substantial number of cases.
In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58448), we finalized
our proposal to expand our existing criteria to create a new
complication or comorbidity (CC) or major complication or comorbidity
(MCC) subgroup within a base MS-DRG. Specifically, we finalized the
expansion of the criteria to include the NonCC subgroup for a three-way
severity level split. We stated we believed that applying these
criteria to the NonCC subgroup would better reflect resource
stratification as well as promote stability in the relative weights by
avoiding low volume counts for the NonCC level MS-DRGs. We noted that
in our analysis of MS-DRG classification requests for FY 2021 that were
received by November 1, 2019, as well as any additional analyses that
were conducted in connection with those requests, we applied these
criteria to each of the MCC, CC, and NonCC subgroups.
As discussed in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58661),
we continue to apply the criteria to create subgroups, including
application of the NonCC subgroup criteria, in our annual analysis of
MS-DRG classification requests, consistent with our approach since FY
2021 when we finalized the expansion of the criteria to include the
NonCC subgroup for a three-way severity level split. Accordingly, in
our analysis of the MS-DRG classification requests for FY 2026 that we
received by October 20, 2024, as well as any additional analyses that
were conducted in connection with those requests, we applied these
criteria to each of the MCC, CC, and NonCC subgroups, as described in
the following table.
----------------------------------------------------------------------------------------------------------------
Three-way split 123 (MCC vs Two-way split 1_23 MCC Two-way split 12_3
Criteria No. CC vs NonCC) vs (CC+NonCC) (MCC+CC) vs NonCC
----------------------------------------------------------------------------------------------------------------
1. At least 500 cases in the MCC/CC/ 500+ cases for MCC group; 500+ cases for MCC 500+ cases for
NonCC group. and 500+ cases for CC group; and 500+ cases (MCC+CC) group; and
group; and 500+ cases for for (CC+NonCC) group. 500+ cases for NonCC
NonCC group. group.
2. At least 5% of the patients are 5%+ cases for MCC group; 5%+ cases for MCC 5%+ cases for (MCC+CC)
in the MCC/CC/NonCC group. and 5%+ cases for CC group; and 5%+ cases group; and 5%+ cases
group; and 5%+ cases for for (CC+NonCC) group. for NonCC group.
NonCC group.
3. There is at least a 20% 20%+ difference in average 20%+ difference in 20%+ difference in
difference in average cost between cost between MCC group and average cost between average cost between
subgroups. CC group; and 20%+ MCC group and (MCC+CC) group and
difference in average cost (CC+NonCC) group. NonCC group.
between CC group and NonCC
group.
4. There is at least a $2,000 $2,000+ difference in $2,000+ difference in $2,000+ difference in
difference in average cost between average cost between MCC average cost between average cost between
subgroups. group and CC group; and MCC group and (MCC+CC) group and
$2,000+ difference in (CC+NonCC) group. NonCC group.
average cost between CC
group and NonCC group.
5. The R2 of the split groups is R2 >3.0 for the three-way R2 >3.0 for the two- R2 >3.0 for the two-
greater than or equal to 3. split within the base MS- way 1_23 split within way 12_3 split within
DRG. the base MS-DRG. the base MS-DRG.
----------------------------------------------------------------------------------------------------------------
In general, once the decision has been made to propose to make
further modifications to the MS-DRGs as described previously, such as
creating a new base MS-DRG, or in our evaluation of a specific MS-DRG
classification request to split (or subdivide) an existing base MS-DRG
into severity levels, all five criteria must be met for the base MS-DRG
to be split (or subdivided) by a CC subgroup. We note that in our
analysis of requests to create a new MS-DRG, we typically evaluate the
most recent year of MedPAR claims data available. For example, we
stated earlier that for this FY 2026 IPPS/LTCH PPS proposed rule, our
MS-DRG analysis was based on ICD-10 claims data from the September 2024
update of the FY 2024 MedPAR file. However, in our evaluation of
requests to split an existing base MS-DRG into severity levels, as
noted in prior rulemaking (80 FR 49368), we typically analyze the most
recent two years of data. This analysis includes two years of MedPAR
claims data to compare the data results from one year to the next to
avoid making determinations about whether additional severity levels
are warranted based on an isolated year's data fluctuation and also, to
validate that the established severity levels within a base MS-DRG are
supported. The first step in our process of evaluating if the creation
of a new CC subgroup within a base MS-DRG is warranted is to determine
if all the criteria is satisfied for a three-way split. In applying the
criteria for a three-way split, a base MS-DRG is initially subdivided
into the three subgroups: MCC, CC, and NonCC. Each
[[Page 18015]]
subgroup is then analyzed in relation to the other two subgroups using
the volume (Criteria 1 and 2), average cost (Criteria 3 and 4), and
reduction in variance (Criteria 5). If the criteria fail, the next step
is to determine if the criteria are satisfied for a two-way split. In
applying the criteria for a two-way split, a base MS-DRG is initially
subdivided into two subgroups: ``with MCC'' and ``without MCC'' (1_23)
or ``with CC/MCC'' and ``without CC/MCC'' (12_3). Each subgroup is then
analyzed in relation to the other using the volume (Criteria 1 and 2),
average cost (Criteria 3 and 4), and reduction in variance (Criteria
5). If the criteria for both of the two-way splits fail, then a split
(or CC subgroup) would generally not be warranted for that base MS-DRG.
If the three-way split fails on any one of the five criteria and all
five criteria for both two-way splits (1_23 and 12_3) are met, we would
apply the two-way split with the highest R2 value. We note that if the
request to split (or subdivide) an existing base MS-DRG into severity
levels specifies the request is for either one of the two-way splits
(1_23 or 12_3), in response to the specific request, we will evaluate
the criteria for both of the two-way splits; however, we do not also
evaluate the criteria for a three-way split.
2. Pre-MDC MS-DRG 018 Chimeric Antigen Receptor (CAR) T-Cell and Other
Immunotherapies
We received a request to review the recent MS-DRG assignments to
Pre-MDC MS-DRG 018 (Chimeric Antigen Receptor (CAR) T-cell and Other
Immunotherapies) and to clarify how decisions for the assignment of
cell and gene therapies will be made moving forward. According to the
requestor, for FY 2025, CMS did not assign prademagene zamikeracel
(PZ), an autologous genetically engineered cell-based gene therapy, to
MS-DRGs that would create clinical homogeneity and therefore, the
mapping of these cases to MS-DRG 018 instead implied that estimated
post-approval product pricing takes precedent for cell and gene
therapies over clinical homogeneity principles. The requestor
acknowledged that CMS has previously clarified that therapies mapped to
Pre-MDC MS-DRG 018 do not need to be CAR T-cell products or utilized in
the treatment of cancer and stated it concurs with that approach.
However, the requestor indicated that the mapping of PZ to Pre-MDC MS-
DRG 018 for FY 2025 also raised the following questions:
<bullet> Why was PZ mapped to Pre-MDC MS-DRG 018 when a different
product (eladocagene exuparvovec) that is also delivered via operating
room administration methods was mapped to other non-pre-MDC MS-DRGs?
<bullet> Why did CMS indicate that Lantidra, a recently approved
cellular therapy, would map to the same MS-DRGs as existing insulin
delivery therapies and technologies used to treat the subset of
patients with hard-to-control Type 1 diabetes complicated by severe
hypoglycemia who cannot receive a whole pancreas transplant instead of
to Pre-MDC MS-DRG 018?
<bullet> Does CMS intend a future split of Pre-MDC MS-DRG 018
between medical and surgical cell and gene therapies to recognize the
clinical resource differential between the two modalities, even if the
500 case volume threshold is not reached?
<bullet> Why was a product delivered via allogeneic stem cell
transplant procedure (Orca-T) mapped to Pre-MDC MS-DRG 018 instead of
Pre-MDC MS-DRG 014 (Allogeneic Bone Marrow Transplant)?
<bullet> If products delivered via stem cell transplant should be
mapped to Pre-MDC MS-DRG 018 based on resource use, per the Orca-T
example, why are multiple gene therapy products delivered via stem cell
transplant instead mapped to Pre-MDC MS-DRGs 016 and 017 (Autologous
Bone Marrow Transplant with CC/MCC and without CC/MCC, respectively)?
The requestor stated the previously listed questions illustrate
examples of inconsistencies with the MS-DRG mappings of cell and gene
therapy products in recent years. The requestor recommended that CMS
review recent MS-DRG assignments for these products and consider
refinements to the approach. The requestor also urged CMS to clarify
how decisions for cell and gene therapies will be made in the future.
The requestor stated that if the intent of CMS is for Pre-MDC MS-DRG
018 to be a broad cell and gene therapy MS-DRG then a modification to
the title of Pre-MDC MS-DRG 018 should be proposed and therapies
currently assigned to other MS-DRGs should be re-mapped.
The requestor also suggested that CMS clarify the process by which
interested parties can submit comments on potential or proposed
procedure code mappings to the MS-DRGs for code proposals discussed at
the Spring ICD-10 Coordination and Maintenance (C&M) Committee meeting
since, given the timing, proposed code assignments are not published in
association with the annual IPPS/LTCH PPS proposed rule. Specifically,
the requestor stated there is no opportunity for interested parties to
provide feedback to CMS about the assignment of new codes to Pre-MDC
MS-DRG 018. The requestor stated that because MS-DRG 018 is a Pre-MDC
MS-DRG with a limited number of procedure codes mapping to it, it is
important for interested parties to have the ability to preview
potential assignments to this MS-DRG and provide feedback to CMS prior
to any final mapping decisions being made. The requestor acknowledged
that CMS previously responded to prior comments regarding the process
of commenting on the assignment of newly created codes; however, the
requestor suggested that CMS provide additional clarification.
Specifically, the requestor stated that the primary comment period with
respect to the Spring procedure code requests is the timeframe
following the ICD-10 C&M Committee meeting and that the materials
provided in association with the meeting do not contain mapping
requests submitted by the code requestor. The requestor indicated that
if it is to assume any new procedure code request could potentially be
mapped to Pre-MDC MS-DRG 018 and submits comments accordingly, that
would create an undue burden. The requestor submitted the following
questions regarding the process by which interested parties may submit
comments on potential procedure code mappings to MS-DRGs:
<bullet> Can mapping requests be submitted as part of the request
for a new ICD-10-PCS procedure code or do mapping requests need to go
through the MS-DRG modification process with an annual October
deadline?
<bullet> Can CMS provide information on mapping requests as part of
the ICD-10 C&M Committee meeting materials?
<bullet> Will comments submitted to the ICD-10 C&M Committee about
potential mappings be shared with the CMS teams associated with MS-DRG
mapping decisions?
<bullet> Should interested parties include the same comments that
are submitted to the ICD-10 C&M Committee in their proposed rule
comments?
<bullet> Will comments submitted as part of the proposed rule be
considered within scope for proposed codes presented during the spring
meeting that are subsequently finalized but not listed in Table 6A.--
New Diagnosis codes and Table 6B.--New Procedure Codes with proposed
mappings?
<bullet> Do CMS' prior responses indicate that interested parties
who submit comments on procedure code mappings should request code
proposals presented at the spring meeting be delayed until the fall
meeting?
The requestor recommended that CMS address the previously listed
[[Page 18016]]
questions and seek input on the process by which interested parties may
submit comments on potential procedure code mappings.
We appreciate the requestor's feedback and suggestions regarding
the classification of therapies to Pre-MDC MS-DRG 018 and the broader
topic of MS-DRG mappings of cell and gene therapy products for the
future. In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69008 through
69010), we summarized and responded to comments regarding the mapping
of procedure codes describing the application of PZ and other newly
established procedure codes to Pre-MDC MS-DRG 018. We note that we
previously addressed similar comments in the FY 2023 IPPS/LTCH PPS
final rule (87 FR 48806 through 48807), and we also noted that we
provided detailed summaries and responses to these same or similar
comments in the FY 2022 IPPS/LTCH PPS final rule (86 FR 44798 through
44806). We also refer the reader to the discussion in section II.D. of
this FY 2026 IPPS/LTCH PPS proposed rule, regarding the proposed
relative weight methodology for cases mapping to Pre- MDC MS-DRG 018
effective October 1, 2025, for FY 2026.
With respect to the requestor's suggestion that a modification to
the title of Pre-MDC MS-DRG 018 be proposed, we note that the requestor
did not provide a specific recommendation for FY 2026 consideration;
however, we acknowledge that there has been discussion related to
requests to revise the title to Pre-MDC MS-DRG 018 in prior rulemaking,
most recently in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69008
through 69010), and we continue to be interested in obtaining input
from members of the public on options to consider, recognizing there
are additional types of cell and gene therapies now mapping to Pre-MDC
MS-DRG 018. We will continue to review additional feedback and
suggestions in connection with future rulemaking.
In response to the requestor's assertion that there is no
opportunity for interested parties to submit feedback about MS-DRG
assignments, as we have discussed in prior rulemaking (87 FR 48807
through 48808) and as noted in the request, interested parties may use
current coding information as shown in the ICD-10 C&M Committee meeting
materials to consider the potential MS-DRG assignments for any
procedure codes that may be finalized after the Spring meeting and
submit public comments for consideration. As we have noted in prior
rulemaking, because the diagnosis and procedure code proposals that are
presented at the Spring ICD-10-CM C&M Committee meeting for an October
1 implementation (upcoming FY) are not finalized in time to include in
Table 6A.--New Diagnosis Codes and Table 6B.--New Procedure Codes in
association with the proposed rule, we use our established process to
examine the MS-DRG assignment for the predecessor codes to determine
the most appropriate MS-DRG assignment. Specifically, we review the
predecessor code and MS-DRG assignment most closely associated with the
new procedure code, and in the absence of claims data, we consider
other factors that may be relevant to the MS-DRG assignment, including
the severity of illness, treatment difficulty, complexity of service
and the resources utilized in the diagnosis and/or treatment of the
condition. We have noted in prior rulemaking that this process does not
automatically result in the new procedure code being assigned to the
same MS-DRG or to have the same designation (O.R. versus Non-O.R.) as
the predecessor code. In response to the question regarding the
inclusion of information on mapping requests as part of the ICD-10 C&M
Committee meeting materials, we note that, as announced at each ICD-10
C&M Committee meeting, there is no discussion of MS-DRGs, payment,
coverage, or billing at the ICD-10 C&M Committee meetings; therefore,
we do not include such information in the meeting materials made
publicly available in association with the meeting. Rather, we state
that any issues related to MS-DRGs or payment are addressed through
IPPS rulemaking. The purpose of the ICD-10 C&M Committee meeting is to
present code proposals based on requests received regarding coding
updates (that is, additions, deletions, or revisions). Therefore, while
mapping requests may be included in the submission of an ICD-10-PCS
procedure code request, that information is not included in the meeting
materials, nor is there any discussion about any mapping request(s)
during the meeting.
In response to the requestor's question regarding whether comments
submitted to the ICD-10 C&M Committee about potential mappings are
shared with the CMS staff associated with MS-DRG mapping decisions, we
note that the comments are shared. With respect to whether interested
parties should include the same comments submitted to the ICD-10 C&M
Committee in the comments submitted in response to the proposed rule,
we note that what comments to include and submit for each process is up
to the commenter. In response to the question of whether comments
submitted in response to the proposed rule would be considered within
scope for proposed codes presented during the Spring meeting that are
subsequently finalized but not listed in Table 6A.--New Diagnosis codes
and Table 6B.--New Procedure Codes with proposed mappings, we note that
the procedure code update files reflecting the newly finalized codes
are made publicly available following the receipt and review of public
comments received by the established deadline for the Spring coding
topics, and that interested parties may choose to submit public
comments on MS-DRG assignment for the agency's consideration. Lastly,
in response to the question of whether interested parties considering
submitting comments on procedure code mappings should request code
proposals associated with the Spring meeting be delayed until the Fall
meeting, we similarly note that the decision on what comments a
commenter decides to include and submit in response to a code proposal
is up to the commenter. We refer the reader to section II.C.11. of the
preamble of this FY 2026 IPPS/LTCH PPS proposed rule for additional
information regarding the ICD-10 C&M Committee meeting process.
In connection with the comments and questions about how products
are grouped under the IPPS MS-DRGs, specifically with respect to cell
and gene therapies under Pre-MDC MS-DRG 018, for FY 2026, we also
received a request to create a new neurosurgical gene therapy MS-DRG to
more accurately reflect the clinical characteristics and resource
intensity required for the administration of neurosurgical gene
therapies, including eladocagene exuparvovec, for patients diagnosed
with Aromatic L-amino acid decarboxylase (AADC) deficiency. We refer
the reader to the FY 2022 IPPS/LTCH PPS final rule (86 FR 44895) and
the FY 2023 IPPS/LTCH PPS final rule (87 FR 48853 through 48854) for
discussion regarding eladocagene exuparvovec.
The requestor (the manufacturer), expressed its appreciation for
CMS' efforts to reassign cases reporting procedure code XW0Q316
(Introduction of eladocagene exuparvovec into cranial cavity and brain,
percutaneous approach, new technology group 6) to a surgical MS-DRG as
discussed in the FY 2022 IPPS/LTCH PPS final rule (86 FR 44895).
According to the requestor, the decision appropriately reclassified
cases involving eladocagene exuparvovec from a Non-O.R. procedure to an
operating room (O.R.) procedure due to
[[Page 18017]]
the requirement for intraputaminal administration via a burr hole in
the skull. However, the requestor did not agree with the current
assignment to MS-DRGs 628, 629, and 630 (Other Endocrine, Nutritional
and Metabolic O.R. Procedures with MCC, with CC, and without CC/MCC,
respectively) in MDC 10, or MS-DRGs 987, 988, and 989 (Non-Extensive
O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and
without MCC/CC, respectively). According to the requestor, the clinical
characteristics and average costs of the cases currently assigned to
MS-DRGs 628, 629, and 630 are significantly different from those
associated with eladocagene exuparvovec neurosurgical gene therapy for
rare disease.
The requestor stated that CMS denied the request to create a new
MS-DRG for FY 2023, stating that it would continue to explore
appropriate mechanisms to address low volume MS-DRGs indicated for rare
diseases; however, after receiving responses to the Request for
Information (RFI), the requestor stated that there have not been any
changes proposed to the IPPS. The requestor stated its belief that
assigning cases for this gene therapy and the rare disease indicated to
a new MS-DRG is both appropriate and warranted. According to the
requestor, the current MS-DRGs that eladocagene exuparvovec cases group
to do not adequately reflect the clinical characteristics or resource
needs associated with treatment which may deter hospitals from
providing this therapy.
The requestor also stated there are approximately 68 gene therapy
trials in the U.S. for central nervous system disorders for which over
30 of the 68 trials involve the gene therapy being administered
directly into the brain parenchyma. According to the requestor, gene
therapies administered surgically, including with neurosurgery, are
extremely complicated, resource-intensive procedures for hospitals to
undertake. These procedures require highly specialized surgeons,
surgical equipment, and staff. Patients undergoing these procedures may
also require continuous monitoring and longer hospital stays. The
requestor stated the more intensive needs of these patients are not
adequately captured in existing MS-DRGs and the creation of a new MS-
DRG for neurosurgical gene therapy would help CMS proactively shape
payment policy for this evolving class of therapies, thus allowing
appropriate payment to support patient access to these treatments.
Our analysis of the September 2024 update of the FY 2024 MedPAR
file yielded zero cases reporting the administration of eladocagene
exuparvovec, therefore, we believe it would be premature to consider
the creation of a new neurosurgical gene therapy MS-DRG at this time.
We appreciate the detailed clinical information that the requestor
provided and acknowledge that cases involving neurosurgery are
technically complex and that patients undergoing these procedures tend
to be critically ill, many with rare diseases.
We note that we did receive a new procedure code request to
identify and describe the Smartflow[supreg] Neuro Cannula as the
delivery mechanism to administer eladocagene exuparvovec that was
included as a topic in the Spring 2025 ICD-10 Coordination and
Maintenance Committee Update materials. We refer the reader to the CMS
website at: <a href="https://www.cms.gov/Medicare/Coding/ICD10/C-and-M-Meeting-Materials">https://www.cms.gov/Medicare/Coding/ICD10/C-and-M-Meeting-Materials</a> for additional detailed information regarding the request,
and the related materials.
We continue to welcome additional feedback and comments on other
options to consider on how to appropriately address low volume, high-
cost treatments for rare diseases.
We also note, as discussed in prior rulemaking, that this category
of therapies continues to evolve, and we are in the process of
carefully considering the feedback we have previously received about
ways in which we can continue to appropriately reflect resource
utilization while maintaining clinical coherence and stability in the
relative weights under the IPPS MS-DRGs. We appreciate the
recommendations and suggestions for consideration we have received and
will continue to examine these complex issues in connection with future
rulemaking. We acknowledge that there may be distinctions to account
for as we continue to gain more experience in the use of these
therapies and have additional claims data to analyze.
3. MDC 01 (Diseases and Disorders of the Nervous System)
a. Logic for MS-DRGs 023 Through 027
For this FY 2026 IPPS/LTCH PPS proposed rule, we received three
separate but related requests to review the MS-DRG assignments for a
subset of procedures assigned to MS-DRGs 023 through 027. In this
section of the preamble of this FY 2026 IPPS/LTCH PPS proposed rule, we
discuss each of these separate, but related requests.
The first request was to create a new MS-DRG for cases involving
``chemotherapy implants'' and cases involving ``epilepsy with
neurostimulator.'' The requestor noted chemotherapy implants are used
to treat patients with brain tumors. They are implanted into the brain
during the craniotomy procedure at the time of tumor resection. Upon
implantation, these devices immediately release radiation or
chemotherapeutic agents. This approach enables treatment to be
initiated at the time of tumor resection without undue delay.
``Epilepsy with neurostimulator'' cases involve devices used in the
treatment of medically intractable epilepsy. The neurostimulator is
implanted in the skull via a craniotomy and is connected to electrodes
that are implanted on the surface of the brain or in the brain through
either a craniotomy or a burr hole(s). According to the requestor, like
the procedure to insert a chemotherapy implant, the craniotomy
procedure to insert the neurostimulator lead is performed under general
anesthesia and the procedure typically takes four hours.
The requestor performed their own analysis of Medicare claims data
and stated they found that the average costs of cases involving
chemotherapy implants and cases involving epilepsy with
neurostimulators are significantly higher than the average costs of
other procedures currently grouped within MS-DRG 023. The requestor
asserted that as a result, these cases are not being adequately paid
under the current MS-DRG. Therefore, given the limited options within
the existing MS-DRG structure, the requestor recommended that CMS
extract cases reporting the insertion of a chemotherapy implant and
cases reporting a neurostimulator generator inserted into the skull
with the insertion of a neurostimulator lead into the brain, and a
principal diagnosis of epilepsy from MS-DRG 023 and create a new MS-DRG
for these cases with a payment rate that better aligns with the
resource utilization associated with these procedures. The requestor
stated that this recommendation appeared to be reasonable, given that
CMS has already determined that these two subsets of cases are
clinically coherent by virtue of them being currently assigned to the
same MS-DRG.
To begin our analysis, we reviewed the GROUPER logic for MS-DRGs
023 and 024. The requestor is correct that currently, cases involving
``chemotherapy implants'' and cases involving ``epilepsy with
neurostimulator'' are assigned to the higher severity level MS-DRG 023.
MS-
[[Page 18018]]
DRGs 023 and 024 contain a logic list referred to as ``Chemotherapy
Implant.'' This logic list includes the following four ICD-10-PCS
codes:
------------------------------------------------------------------------
ICD-10-PCS code Description
------------------------------------------------------------------------
00H004Z................ Insertion of radioactive element, cesium-131
collagen implant into brain, open approach.
3E0Q005................ Introduction of other antineoplastic into
cranial cavity and brain, open approach.
3E0Q305................ Introduction of other antineoplastic into
cranial cavity and brain, percutaneous
approach.
3E0Q705................ Introduction of other antineoplastic into
cranial cavity and brain, via natural or
artificial opening.
------------------------------------------------------------------------
The ``Chemotherapy Implant'' logic list was created for cases
reporting the implantation of a chemotherapeutic agent and devices
implanted in the brain, such as implantable chemotherapeutic wafers.
Additionally, MS-DRGs 023 and 024 contain a logic list referred to as
``Epilepsy Principal Diagnosis'' that includes 58 ICD-10-CM diagnosis
codes that describe epilepsy, and a logic list referred to as
``Neurostimulator'' that includes the following three ICD-10-PCS
procedure code combinations:
<bullet> 0NH00NZ (Insertion of neurostimulator generator into
skull, open approach), in combination with 00H00MZ (Insertion of
neurostimulator lead into brain, open approach);
<bullet> 0NH00NZ (Insertion of neurostimulator generator into
skull, open approach), in combination with 00H03MZ (Insertion of
neurostimulator lead into brain, percutaneous approach); and
<bullet> 0NH00NZ (Insertion of neurostimulator generator into
skull, open approach), in combination with 00H04MZ (Insertion of
neurostimulator lead into brain, percutaneous endoscopic approach).
These two logic lists were created to capture cases involving the
use of the RNS[supreg] neurostimulator, a treatment option for persons
diagnosed with medically intractable epilepsy. The RNS[supreg]
neurostimulator includes a cranially implanted programmable
neurostimulator connected to one or two depth and/or subdural cortical
strip leads that are surgically placed in or on the brain at the
seizure focus. The implanted neurostimulator continuously monitors
brain electrical activity and is programmed by a physician to detect
abnormal patterns of electrical activity that the physician believes
may lead to seizures (epileptiform activity).
We refer the reader to the ICD-10 MS-DRG Definitions Manual,
Version 42.1 (available on the CMS website at: <a href="https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software">https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software</a>) for complete documentation of the
GROUPER logic for MS-DRGs 023 and 024.
We then examined claims data from the September 2024 update of the
FY 2024 MedPAR file for all cases in MS-DRG 023 and compared the
results to cases reporting one of the four procedure codes that appear
under the logic list referred to as ``Chemotherapy Implant'' in MS-DRG
023 and for all cases reporting a neurostimulator generator inserted
into the skull with the insertion of a neurostimulator lead into the
brain (including cases involving the use of the RNS[supreg]
neurostimulator), and a principal diagnosis of epilepsy. The following
table shows our findings:
MS-DRG 023--All Cases Compared to Cases Reporting the Insertion of a
Chemotherapy Implant and Cases Reporting a Neurostimulator Generator
Inserted Into the Skull With the Insertion of a Neurostimulator Lead
Into the Brain and a Principal Diagnosis of Epilepsy
------------------------------------------------------------------------
Average
MS-DRG Number of length of Average
cases stay costs
------------------------------------------------------------------------
MS-DRG 023--All cases................. 12,136 10 $51,132
Cases reporting the insertion of a 176 6.4 49,743
chemotherapy implant.................
Cases with principal diagnosis of 68 2.4 66,303
epilepsy with neurostimulator
generator inserted into the skull and
insertion of a neurostimulator lead
into brain...........................
------------------------------------------------------------------------
As shown in the table, for MS-DRG 023, we identified a total of
12,136 cases, with an average length of stay of 10 days and average
costs of $51,132. Of the 12,136 cases in MS-DRG 023, there were 176
cases reporting the insertion of a chemotherapy implant with an average
length of stay of 6.4 days and average costs of $49,743. Additionally,
there were 68 cases describing a neurostimulator generator inserted
into the skull with the insertion of a neurostimulator lead into the
brain (including cases involving the use of the RNS[supreg]
neurostimulator) that had a principal diagnosis of epilepsy with an
average length of stay of 2.4 days and average costs of $66,303.
As the data show, the 68 cases in MS-DRG 023 describing a
neurostimulator generator inserted into the skull with the insertion of
a neurostimulator lead into the brain (including cases involving the
use of the RNS[supreg] neurostimulator) and a principal diagnosis of
epilepsy have average costs that are higher than the average costs of
all cases in MS-DRG 023 ($66,303 compared to $51,132), and they have an
average length of stay that is shorter (2.4 days compared to 10 days).
The 176 cases in MS-DRG 023 reporting the insertion of a chemotherapy
implant have average costs that are lower than the average costs of all
cases in MS-DRG 023 ($49,743 compared to $51,132), and they have an
average length of stay that is shorter (6.4 days compared to 10 days).
We reviewed the claims data, and do not believe the data support
creating a new MS-DRG for cases reporting the insertion of a
chemotherapy implant and cases describing a neurostimulator generator
inserted into the skull with the insertion of a neurostimulator lead
into the brain (including cases involving the use of the RNS[supreg]
neurostimulator) and a principal diagnosis of epilepsy. The results of
the claims analysis as
[[Page 18019]]
previously summarized indicate the cases reporting the insertion of a
chemotherapy implant demonstrate comparable resource utilization with
other cases in their currently assigned MS-DRG. Further, the claims
data analysis indicates that these two subsets of cases, that is cases
reporting the insertion of a chemotherapy implant and cases describing
a neurostimulator generator inserted into the skull with the insertion
of a neurostimulator lead into the brain (including cases involving the
use of the RNS[supreg] neurostimulator) and a principal diagnosis of
epilepsy and cases reporting the insertion of a chemotherapy implant,
do not demonstrate comparable resource utilization. The cases in MS-DRG
023 reporting the insertion of a chemotherapy implant have average
costs that are lower than the average costs of cases describing a
neurostimulator generator inserted into the skull with the insertion of
a neurostimulator lead into the brain and a principal diagnosis of
epilepsy ($49,743 compared to $66,303), and they have an average length
of stay that is longer (6.4 days compared to 2.4 days).
Therefore, based on review of the claims data, we are not proposing
to create a new-MS-DRG for cases reporting the insertion of a
chemotherapy implant and cases describing a neurostimulator generator
inserted into the skull with the insertion of a neurostimulator lead
into the brain (including cases involving the use of the RNS[supreg]
neurostimulator) and a principal diagnosis of epilepsy for FY 2026.
However, while our analysis of the claims data does not support
creating a new MS-DRG for cases reporting the insertion of a
chemotherapy implant and cases describing a neurostimulator generator
inserted into the skull with the insertion of a neurostimulator lead
into the brain (including cases involving the use of the RNS[supreg]
neurostimulator) and a principal diagnosis of epilepsy, as discussed,
cases describing a neurostimulator generator inserted into the skull
with the insertion of a neurostimulator lead into the brain (including
cases involving the use of the RNS[supreg] neurostimulator) and a
principal diagnosis of epilepsy have average costs that are higher than
the average costs of all cases in MS-DRG 023, with a shorter average
length of stay. Accordingly, we determined that further analysis of
cases reporting a neurostimulator generator inserted into the skull
with the insertion of a neurostimulator lead into the brain (including
cases involving the use of the RNS[supreg] neurostimulator), and a
principal diagnosis of epilepsy is needed in conjunction with the
separate but related requests we received to review the MS-DRG
assignments for a subset of procedures also assigned to MS-DRGs 023
through 027 for this FY 2026 IPPS/LTCH PPS proposed rule to ensure
clinical coherence between these cases and the other cases with which
they may potentially be grouped, as discussed later in this section.
As noted previously, MS-DRGs 023 and 024 contain a logic list
referred to as ``Chemotherapy Implant'' that includes the following
four ICD-10-PCS codes:
------------------------------------------------------------------------
ICD-10-PCS code Description
------------------------------------------------------------------------
00H004Z................ Insertion of radioactive element, cesium-131
collagen implant into brain, open approach.
3E0Q005................ Introduction of other antineoplastic into
cranial cavity and brain, open approach.
3E0Q305................ Introduction of other antineoplastic into
cranial cavity and brain, percutaneous
approach.
3E0Q705................ Introduction of other antineoplastic into
cranial cavity and brain, via natural or
artificial opening.
------------------------------------------------------------------------
During our review of the GROUPER logic for MS-DRGs 023 and 024, we
identified that the following four ICD-10-PCS procedure codes
describing the insertion of a radioactive element were inadvertently
excluded from the ``Chemotherapy Implant'' logic list:
------------------------------------------------------------------------
ICD-10-PCS code Description
------------------------------------------------------------------------
00H001Z................ Insertion of radioactive element into brain,
open approach.
00H005Z................ Insertion of radioactive element, palladium-103
collagen implant into brain, open approach.
00H031Z................ Insertion of radioactive element into brain,
percutaneous approach.
00H041Z................ Insertion of radioactive element into brain,
percutaneous endoscopic approach.
------------------------------------------------------------------------
In review of this finding, we analyzed claims data from the
September 2024 update of the FY 2024 MedPAR file for MS-DRGs 023, 024,
025, 026, and 027 for all cases and for cases reporting procedure codes
00H001Z, 00H005Z, 00H031Z, or 00H041Z. The findings from our analysis
are shown in the following table.
----------------------------------------------------------------------------------------------------------------
Average
MS-DRG Number of length of Average
cases stay costs
----------------------------------------------------------------------------------------------------------------
023............................... All cases............................ 12,136 10 $51,132
Cases reporting 00H001Z, 00H005Z, 0 0 0
00H031Z, or 00H041Z.
024............................... All cases............................ 4,624 5 35,516
Cases reporting 00H001Z, 00H005Z, 0 ........... 0
00H031Z, or 00H041Z.
025............................... All cases............................ 21,059 8.6 40,215
Cases reporting 00H001Z, 00H005Z, 4 3.8 40,199
00H031Z, or 00H041Z.
026............................... All cases............................ 5,833 4.1 28,404
Cases reporting 00H001Z, 00H005Z, 0 0 0
00H031Z, or 00H041Z.
027............................... All cases............................ 7,049 1.9 23,059
Cases reporting 00H001Z, 00H005Z, 0 0 0
00H031Z, or 00H041Z.
----------------------------------------------------------------------------------------------------------------
[[Page 18020]]
As the data show, we found four cases reporting procedure code
00H001Z, 00H005Z, 00H031Z, or 00H041Z in MS-DRG 025, with average costs
of $40,199 and an average length of stay of 3.8 days. We reviewed this
issue and note radioactive elements are inserted into the brain to
deliver a targeted concentrated dose of radiation directly to a brain
tumor or tumor bed. They are primarily used to treat recurrent brain
metastases or other aggressive brain cancers, as it allows for high-
dose radiation delivery specifically to the tumor site while minimizing
damage to surrounding healthy brain tissue. Although we did not
identify many cases, we believe the four procedure codes describing the
insertion of a radioactive element into the brain are clinically
aligned with the procedure codes currently included in the
``Chemotherapy Implant'' logic list in MS-DRGs 023 and 024.
Therefore, for clinical consistency we are proposing to add
procedure codes 00H001Z, 00H005Z, 00H031Z, and 00H041Z to the
``Chemotherapy Implant'' logic list in MS-DRGs 023 and 024, effective
October 1, 2025, for FY 2026. We are also proposing to change the
description of the logic list in MS-DRGs 023 and 024 from
``Chemotherapy Implant'' to ``Antineoplastic Implant'' to better
reflect the GROUPER logic that includes ICD-10-PCS procedure codes
describing antineoplastic agents implanted in the brain.
As mentioned previously, for this FY 2026 IPPS/LTCH PPS proposed
rule, we received three separate but related requests to review and
reconsider the MS-DRG assignments for a subset of procedures assigned
to MS-DRGs 023 through 027. The second and third request involve the
MS-DRG assignment of cases reporting procedure codes describing the
insertion of deep brain stimulators (DBS). Deep brain stimulation is a
surgical treatment that involves the implantation of a neurostimulator,
used in the treatment of essential tremor, Parkinson's disease,
dystonia, epilepsy, obsessive-compulsive disorder and chronic pain. A
DBS system consists of one or two leads that are placed
stereotactically at defined targets deep within the brain via one or
two burr holes created in the skull. The lead is then connected to an
extension that is tunneled under the skin, down the neck, and connected
to a programmable neurostimulator generator that is placed under the
skin.
The second request we received was to reassign cases reporting the
implantation of a DBS system from the lower (without MCC) severity
level MS-DRG 024 to the higher (MCC) severity level MS-DRG 023, even if
there is no MCC reported. The requestor suggested that if finalized,
the title for MS-DRG 023 should be revised to reflect ``Craniotomy with
Acute Complex Central Nervous System Principal Diagnosis with MCC or
Chemotherapy Implant or Major Device Implant or Epilepsy with
Neurostimulator.''
The requestor performed their own analysis and stated they found
that the majority of cases reporting the implantation of a DBS system
are assigned to the lower severity level MS-DRG 024. The requestor also
stated that in their analysis, the cases reporting the implantation of
a DBS system assigned to MS-DRG 024 have average costs that are 20%
greater than all cases in MS-DRG 024. The requestor asserted that
reassigning cases reporting the implantation of a DBS system from the
lower (without MCC) severity level MS-DRG 024 to the higher (with MCC)
severity level MS-DRG 023, even if there is no MCC reported, would
better recognize hospital resource utilization when the DBS systems are
inserted.
The requestor identified cases reporting the implantation of a DBS
system by the presence of the following procedure code combinations:
<bullet> 0JH60DZ (Insertion of multiple array stimulator generator
into chest subcutaneous tissue and fascia, open approach), in
combination with 00H00MZ (Insertion of neurostimulator lead into brain,
open approach);
<bullet> 0JH60DZ (Insertion of multiple array stimulator generator
into chest subcutaneous tissue and fascia, open approach), in
combination with 00H03MZ (Insertion of neurostimulator lead into brain,
percutaneous approach);
<bullet> 0JH60EZ (Insertion of multiple array rechargeable
stimulator generator into chest subcutaneous tissue and fascia, open
approach), in combination with 00H00MZ (Insertion of neurostimulator
lead into brain, open approach); and
<bullet> 0JH60EZ (Insertion of multiple array rechargeable
stimulator generator into chest subcutaneous tissue and fascia, open
approach), in combination with 00H03MZ (Insertion of neurostimulator
lead into brain, percutaneous approach).
To begin our analysis, we again reviewed the GROUPER logic for MS-
DRGs 023 and 024. The GROUPER logic for MS-DRGs 023 and 024 also
contains 78 procedure code combinations representing the insertion of
neurostimulator generator and a neurostimulator lead that are captured
under a list referred to as ``Major Device Implant.'' The procedure
codes describing the insertion of a neurostimulator generator on this
list describe insertion of the neurostimulator generator into the
subcutaneous areas of the chest, back, or abdomen, as well as into the
skull. The procedure codes describing the insertion of a
neurostimulator lead describe the insertion of the lead into the brain
or the cerebral ventricle. We refer the reader to the ICD-10 MS-DRG
Definitions Manual, Version 42.1 (available on the CMS website at:
<a href="https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software">https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software</a>) for complete
documentation of the GROUPER logic for MS-DRGs 023 and 024.
In our analysis of this issue, we agree that the four procedure
code combinations discussed previously that were identified by this
requestor are included in the ``Major Device Implant'' logic list of
MS-DRGs 023 and 024, but we note that 32 additional procedure code
combinations exist on the ``Major Device Implant'' logic list that also
describe the implantation of a DBS system by describing the insertion
of a neurostimulator generator into the subcutaneous areas of the
chest, back, or abdomen in combination with a code describing the
insertion of a neurostimulator lead into the brain. We refer the reader
to Table 6P.2a associated with this FY 2026 IPPS/LTCH PPS proposed rule
(and available 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>) for the list of the 36 ICD-10-PCS
procedure code combinations in the logic of MS-DRGs 023 and 024 in the
``Major Device Implant'' logic list that we identified that describe
the implantation of a DBS system and therefore were included in our
analysis.
We then examined claims data from the September 2024 update of the
FY 2024 MedPAR file for all cases in MS-DRGs 023 and 024 and compared
the results to cases reporting the implantation of a DBS system by
reporting a procedure code combination that describes the insertion of
a neurostimulator generator into the subcutaneous areas of the chest,
back, or abdomen in combination with a code describing the insertion of
a neurostimulator lead into the brain. The following table shows our
findings:
[[Page 18021]]
MS-DRGs 023 and 024--All Cases Compared to Cases Reporting the Insertion of a Deep Brain Stimulation System
----------------------------------------------------------------------------------------------------------------
Average
MS-DRG Number of length of Average costs
cases stay
----------------------------------------------------------------------------------------------------------------
MS-DRG 023--All cases........................................... 12,136 10 $51,132
Cases reporting the implantation of a DBS system................ 26 8.3 81,947
MS-DRG 024--All cases........................................... 4,624 5 35,516
Cases reporting the implantation of a DBS system................ 432 1.7 43,032
----------------------------------------------------------------------------------------------------------------
As shown in the table, for MS-DRG 023, we identified a total of
12,136 cases, with an average length of stay of 10 days and average
costs of $51,132. Of the 12,136 cases in MS-DRG 023, there were 26
cases reporting the implantation of a DBS system with an average length
of stay of 8.3 days and average costs of $81,947. For MS-DRG 024, we
identified a total of 4,624 cases, with an average length of stay of 5
days and average costs of $35,516. Of the 4,624 cases in MS-DRG 024,
there were 432 cases reporting the implantation of a DBS system with an
average length of stay of 1.7 days and average costs of $43,032.
We reviewed the claims data, and the data do not support
reassignment of the cases reporting the implantation of a DBS system
from MS-DRG 024 to MS-DRG 023 even if there is no MCC reported. The
results of the claims analysis as previously summarized indicate the
cases reporting the implantation of a DBS system, without reporting a
secondary diagnosis designated as an MCC, that are currently assigned
to MS-DRG 024, have average costs that are lower than the average costs
of all cases in MS-DRG 023 ($43,032 compared to $51,132), and they have
an average length of stay that is shorter (1.7 days compared to 10
days). While the average costs of these cases are higher than the
average costs of all cases in MS-DRG 024 ($43,032 compared to $35,516),
we believe it would not be appropriate to reassign these cases into the
higher severity level MS-DRG 023, even if there is no MCC reported,
because the cases would not be coherent with regard to resource
utilization. The cases reporting the implantation of a DBS system,
without reporting a secondary diagnosis designated as an MCC, that are
currently assigned to MS-DRG 024 have average costs that are $8,100
lower than the average costs of all cases in MS-DRG 023. Therefore, we
are not proposing to reassign cases reporting the implantation of a DBS
system from the lower (without MCC) severity level MS-DRG 024 to the
higher (with MCC) severity level MS-DRG 023, even if there is no MCC
reported. However, while the analysis of the claims data does not
support reassigning the cases reporting the implantation of a DBS
system from the lower (without MCC) severity level MS-DRG 024 to the
higher (MCC) severity level MS-DRG 023 even if there is no MCC
reported, as discussed, our analysis of the claims data found the
average costs of the cases reporting the implantation of a DBS system
are higher than all cases in their respective MS-DRGs, while the
average lengths of stay are shorter. Accordingly, and as discussed
later in this section, we determined that further analysis of cases
reporting the implantation of a DBS system is needed in conjunction
with the separate but related requests we received to review the MS-DRG
assignments for a subset of procedures also assigned to MS-DRGs 023
through 027 for this FY 2026 IPPS/LTCH PPS proposed rule to ensure
clinical coherence between these cases and the other cases with which
they may potentially be grouped.
The third request we received was to have all cases reporting the
concomitant insertion of a DBS generator and lead assigned to MS-DRGs
023 and 024. This requestor performed their own analysis and stated
they found 76 claims reporting procedure codes describing the insertion
of a DBS generator and a lead assigned to MS-DRGs 026 and 027
(Craniotomy and Endovascular Intracranial Procedures with CC, and
without CC/MCC, respectively) and found that the average costs of these
cases were 54% and 63% higher than the average of all cases in MS-DRGs
026 and 027, respectively. The requestor stated that placement of a
complete DBS system, which requires placement of both the generator and
the lead, during a single procedure, appears to be an efficacious and
well-tolerated procedure. The requestor asserted that the relatively
low reimbursement in MS-DRGs 026 and 027 can limit patient access to a
single stage procedure.
This requestor identified cases reporting the implantation of a DBS
system by the presence of the following procedure code combinations:
<bullet> 0JH60DZ (Insertion of multiple array stimulator generator
into chest subcutaneous tissue and fascia, open approach), in
combination with 00H00MZ (Insertion of neurostimulator lead into brain,
open approach);
<bullet> 0JH60DZ (Insertion of multiple array stimulator generator
into chest subcutaneous tissue and fascia, open approach), in
combination with 00H03MZ (Insertion of neurostimulator lead into brain,
percutaneous approach);
<bullet> 0JH60EZ (Insertion of multiple array rechargeable
stimulator generator into chest subcutaneous tissue and fascia, open
approach), in combination with 00H00MZ (Insertion of neurostimulator
lead into brain, open approach); and
<bullet> 0JH60EZ (Insertion of multiple array rechargeable
stimulator generator into chest subcutaneous tissue and fascia, open
approach), in combination with 00H03MZ (Insertion of neurostimulator
lead into brain, percutaneous approach);
<bullet> 0JH60BZ (Insertion of single array stimulator generator
into chest subcutaneous tissue and fascia, open approach), in
combination with 00H00MZ (Insertion of neurostimulator lead into brain,
open approach); and
<bullet> 0JH60BZ (Insertion of single array stimulator generator
into chest subcutaneous tissue and fascia, open approach), in
combination with 00H03MZ (Insertion of neurostimulator lead into brain,
percutaneous approach).
To begin our analysis, we again reviewed the GROUPER logic for MS-
DRG 023 and 024. As mentioned previously, the GROUPER logic for MS-DRGs
023 and 024 contains 78 procedure code combinations representing the
insertion of neurostimulator generator and a neurostimulator lead that
are captured under a list referred to as ``Major Device Implant.'' The
procedure codes describing the insertion of a neurostimulator generator
on this list describe insertion of the neurostimulator generator into
the subcutaneous areas of the chest, back, or abdomen, as well as into
the skull.
[[Page 18022]]
In reviewing this request, we noted that the procedure code
combinations in MS-DRG 023 and 024 captured under the ``Major Device
Implant'' logic list that describe the insertion of a neurostimulator
generator into the subcutaneous areas of the chest, back, or abdomen,
all describe the insertion of a multiple array stimulator generator or
a rechargeable multiple array stimulator generator. Procedure code
combinations describing the insertion of a single array stimulator
generator or a rechargeable single array stimulator generator into the
subcutaneous areas of the chest, back, or abdomen and a neurostimulator
lead are not captured under the ``Major Device Implant'' logic list,
therefore MS-DRGs 025, 026, and 027 (Craniotomy and Endovascular
Intracranial Procedures with MCC, with CC, and without CC/MCC,
respectively) are assigned based on the reporting of the ICD-10-PCS
procedure code describing the insertion of the neurostimulator into the
brain. We refer the reader to the ICD-10 MS-DRG Definitions Manual,
Version 42.1 (available on the CMS website at: <a href="https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software">https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software</a>) for complete documentation of the
GROUPER logic for MS-DRGs 023, 024, 025, 026, and 027.
We identified 36 ICD-10-PCS procedure code combinations that would
describe the implantation of a DBS system with a single array
stimulator generator or a rechargeable single array stimulator
generator and the insertion of a neurostimulator lead into the brain.
We refer the reader to Table 6P.2b associated with this FY 2026 IPPS/
LTCH PPS proposed rule (and available 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>) for the list
of the 36 ICD-10-PCS procedure code combinations we identified that
describe the implantation of a DBS system with a single array
stimulator generator or a rechargeable single array stimulator
generator and the insertion of a neurostimulator lead into the brain.
We then examined claims data from the September 2024 update of the
FY 2024 MedPAR file for all cases in MS-DRGs 025, 026, and 027 and
compared the results to cases reporting a procedure code combination
that describes the insertion of a single array stimulator generator or
a rechargeable single array stimulator generator into the subcutaneous
areas of the chest, back, or abdomen in combination with a code
describing the insertion of a neurostimulator lead into the brain. The
following table shows our findings:
MS-DRGs 025, 026, and 027--All Cases Compared to Cases Reporting the Insertion of a Single Array Generator and
Insertion of Neurostimulator Lead Into Brain
----------------------------------------------------------------------------------------------------------------
Average
MS-DRG Number of length of Average costs
cases stay
----------------------------------------------------------------------------------------------------------------
MS-DRG 025--All cases........................................... 21,059 8.6 $40,215
Cases reporting the insertion of a single array generator and 5 5 73,168
insertion of neurostimulator lead into brain...................
MS-DRG 026--All cases........................................... 5,833 4.1 28,404
Cases reporting the insertion of a single array generator and 25 2.3 42,002
insertion of neurostimulator lead into brain...................
MS-DRG 027--All cases........................................... 7,049 1.9 23,059
Cases reporting the insertion of a single array generator and 78 1.4 39,381
insertion of neurostimulator lead into brain...................
----------------------------------------------------------------------------------------------------------------
As shown in the table, for MS-DRG 025, we identified a total of
21,059 cases, with an average length of stay of 8.6 days and average
costs of $40,215. Of those 21,059 cases, there were 5 cases reporting
the insertion of a single array generator and insertion of
neurostimulator lead into brain with average costs higher than the
average costs in the FY 2024 MedPAR file for MS-DRG 025 ($73,168
compared to $40,215) and a shorter average length of stay (5 days
compared to 8.6 days). In MS-DRG 026, we identified a total of 5,833
cases, with an average length of stay of 4.1 days and average costs of
$28,404. Of the 5,833 cases in MS-DRG 026, there were 25 cases
reporting the insertion of a single array generator and insertion of
neurostimulator lead into brain with average costs higher than the
average costs in the FY 2024 MedPAR file for MS-DRG 026 ($42,002
compared to $28,404) and a shorter average length of stay (2.3 days
compared to 4.1 days). In MS-DRG 027, we identified a total of 7,049
cases, with an average length of stay of 1.9 days and average costs of
$23,059. Of the 7,049 cases in MS-DRG 027, there were 78 cases
reporting the insertion of a single array generator and insertion of
neurostimulator lead into brain with average costs higher than the
average costs in the FY 2024 MedPAR file for MS-DRG 027 ($39,381
compared to $23,059) and a shorter average length of stay (1.4 days
compared to 1.9 days). As the data show, the cases in MS-DRGs 025, 026,
and 027 reporting the insertion of a single array generator and
insertion of neurostimulator lead into brain have average costs that
are higher than the average costs of all cases in their respective MS-
DRGs.
We reviewed the clinical issues and note a deep brain stimulator
typically has one or two leads implanted in the brain, depending on
whether one or both sides of the brain need treatment. A single array
stimulator generator has one port where one lead can be connected. A
multiple array stimulator generator has two or more ports where two or
more leads can be connected. We believe the procedure code combinations
that describe the insertion of a single array stimulator generator or a
rechargeable single array stimulator generator into the subcutaneous
areas of the chest, back, or abdomen in combination with a code
describing the insertion of a neurostimulator lead into the brain are
clinically coherent with the procedure code combinations in MS-DRG 023
and 024 captured under the ``Major Device Implant'' logic list that
describe the insertion of a multiple array stimulator generator or a
rechargeable multiple array stimulator generator into the subcutaneous
areas of the chest, back, or abdomen in combination with a code
describing the insertion of a neurostimulator lead into the brain.
To determine how the resources for this subset of cases compared to
cases in MS-DRGs 023 and 024 as a whole, we examined the average costs
and length of stay for cases in MS-DRGs 023 and 024. Our findings are
shown in this table.
[[Page 18023]]
----------------------------------------------------------------------------------------------------------------
Average
MS-DRG Number of length of Average costs
cases stay
----------------------------------------------------------------------------------------------------------------
MS-DRG 023--All cases........................................... 12,136 10 $51,132
MS-DRG 024--All cases........................................... 4,624 5 35,516
----------------------------------------------------------------------------------------------------------------
We reviewed the data and note the cases in MS-DRGs 025, 026, and
027 reporting the insertion of a single array generator and insertion
of neurostimulator lead into brain have average costs that are higher
and the average length of stay is shorter than all cases in MS-DRGs 023
and 024. We agree with the requestor that cases reporting the insertion
of a single array generator and insertion of neurostimulator lead into
brain are more resource intensive and are clinically distinct from
other cases currently assigned to MS-DRGs 025, 026, and 027. However,
we do not believe proposing to reassign all cases reporting the
procedure code combination describing a single array generator and
insertion of neurostimulator lead into brain to MS-DRGs 023 and 024,
would fully address the difference in resource utilization in these
cases.
To explore other mechanisms to address this request, we then
reexamined the separate but related requests discussed previously to
review the MS-DRG assignments for a subset of procedures assigned to
MS-DRGs 023 through 027. In examining these requests, we note that the
first request was to reassign cases involving ``chemotherapy implants''
and cases involving ``epilepsy with neurostimulator'' from MS-DRG 023
and to create a new MS-DRG for these cases. While analysis of the
claims data do not support creating a new MS-DRG for cases reporting
the insertion of a chemotherapy implant and cases describing a
neurostimulator generator inserted into the skull with the insertion of
a neurostimulator lead into the brain (including cases involving the
use of the RNS[supreg] neurostimulator) and a principal diagnosis of
epilepsy, our analysis of that request found cases describing a
neurostimulator generator inserted into the skull with the insertion of
a neurostimulator lead into the brain (including cases involving the
use of the RNS[supreg] neurostimulator) and a principal diagnosis of
epilepsy have average costs that are higher than the average costs of
all cases in MS-DRG 023, with a shorter average length of stay.
The second request we received was to reassign cases reporting the
implantation of a DBS system from the lower (without MCC) severity
level MS-DRG 024 to the higher (MCC) severity level MS-DRG 023 even if
there is no MCC reported. While analysis of the claims data does not
support reassigning the cases reporting the implantation of a DBS
system from the lower (without MCC) severity level MS-DRG 024 to the
higher (MCC) severity level MS-DRG 023 even if there is no MCC
reported, our analysis of that request found the average costs of the
cases reporting the implantation of a DBS system are higher than all
cases in their respective MS-DRGs, while the average lengths of stay
are shorter. Lastly, our analysis of the third request demonstrates the
cases reporting the insertion of a single array generator and insertion
of neurostimulator lead into brain have average costs that are higher
than the average costs of all cases in their respective MS-DRGs, while
the average lengths of stay are shorter.
We reviewed these issues and note intracranial neurostimulator
implants, such as deep brain stimulators and RNS[supreg]
neurostimulators, are similar in that these intracranial
neurostimulators are implanted surgically and include placement of a
neurostimulator generator and insertion of leads into specific brain
regions to deliver electrical stimulation. Additionally, based on our
data analysis, cases reporting the insertion of intracranial
neurostimulator implants are clinically coherent in that they are
similar in terms of technical complexity and hospital resource use as
reflected by the similarity in average costs and average lengths of
stay.
We explored creating a new base MS-DRG for cases reporting the
insertion of an intracranial neurostimulator implant and compared the
analysis discussed previously using the claims data from the September
2024 update of the FY 2024 MedPAR file. The following table illustrates
our findings for all 654 cases reporting procedure codes describing the
insertion of an intracranial neurostimulator implant.
Cases Reporting the Insertion of an Intracranial Neurostimulator Implant
----------------------------------------------------------------------------------------------------------------
Average
Number of length of Average costs
cases stay
----------------------------------------------------------------------------------------------------------------
Cases with principal diagnosis of epilepsy with neurostimulator 68 2.4 $66,303
generator inserted into the skull and insertion of a
neurostimulator lead into brain................................
Cases reporting the implantation of a DBS system (insertion of a 26 8.3 81,947
multiple array generator and insertion of neurostimulator lead
into brain)--with MCC..........................................
Cases reporting the insertion of a multiple array generator and 1 9 44,475
insertion of neurostimulator lead into cerebral ventricle--with
MCC............................................................
Cases reporting the insertion of a single array generator and 5 5 73,168
insertion of neurostimulator lead into brain--with MCC.........
Cases reporting the insertion of a multiple array generator and 5 2.2 81,517
insertion of neurostimulator lead into cerebral ventricle--with
CC.............................................................
Cases reporting the insertion of a single array generator and 25 2.3 42,002
insertion of neurostimulator lead into brain--with CC..........
Cases reporting the implantation of a DBS system (insertion of a 432 1.7 43,032
multiple array generator and insertion of neurostimulator lead
into brain)--without MCC.......................................
Cases reporting the insertion of a multiple array generator and 14 1.7 48,258
insertion of neurostimulator lead into cerebral ventricle--
without CC/MCC.................................................
[[Page 18024]]
Cases reporting the insertion of a single array generator and 78 1.4 39,381
insertion of neurostimulator lead into brain--without CC/MCC...
-----------------------------------------------
Total....................................................... 654 2.1 47,163
----------------------------------------------------------------------------------------------------------------
We reviewed these data and do not believe proposing a new base MS-
DRG for these cases would better reflect hospital resource use. Because
there were only 654 cases identified, the analysis demonstrates both a
three-way and a two-way split of a new base MS-DRG would fail the
criterion that there be at least 500 cases for each subgroup. The
analysis also demonstrates the cases reporting a principal diagnosis of
epilepsy with neurostimulator generator inserted into the skull and
insertion of a neurostimulator lead into brain, and cases reporting the
insertion of a single or multiple array generator with a secondary
diagnosis designated as an MCC, would continue to have average costs
that are higher when compared to all other cases reporting the
insertion of an intracranial neurostimulator implant in a new MS-DRG.
We therefore explored an alternative mechanism to address these
requests.
We note that in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38015
through 38019), the FY 2021 IPPS/LTCH PPS final rule (85 FR 58459
through 58462) and the FY 2024 IPPS/LTCH PPS final rule (88 FR 58661
through 58667), we discussed requests we received to reassign cases
describing the insertion of a neurostimulator generator into the skull
in combination with the insertion of a neurostimulator lead into the
brain from MS-DRG 023 to MS-DRG 021 (Intracranial Vascular Procedures
with Principal Diagnosis Hemorrhage with CC). While acknowledging the
cases in MS-DRG 023 describing a neurostimulator generator inserted
into the skull with the insertion of a neurostimulator lead into the
brain (including cases involving the use of the RNS[supreg]
neurostimulators) and a principal diagnosis of epilepsy have average
costs that are similar to the average costs of cases in MS-DRG 021, we
have stated we did not support reassigning the cases describing a
neurostimulator generator inserted into the skull with the insertion of
a neurostimulator lead into the brain (including cases involving the
use of the RNS[supreg] neurostimulators) and a principal diagnosis of
epilepsy from MS-DRG 023 to MS-DRGs 020, 021, and 022 (Intracranial
Vascular Procedures with Principal Diagnosis Hemorrhage, with MCC, with
CC, without CC/MCC, respectively), as the cases in MS-DRGs 020, 021,
and 022 are defined by a principal diagnosis of a hemorrhage. We stated
that RNS[supreg] neurostimulators are not used to treat patients with
diagnosis of a hemorrhage and that we believe that it is inappropriate
to reassign cases representing a principal diagnosis of epilepsy to a
MS-DRG that contains cases that represent the treatment of intracranial
hemorrhage.
However, after further consideration, to explore other mechanisms
to address this request, we examined MS-DRGs 020, 021, and 022 to
reconsider the possibility of reassigning the cases reporting the
insertion of an intracranial neurostimulator implant as we have been
unable to identify another MS-DRG in MDC 01 that would be a more
appropriate MS-DRG assignment for these cases based on the indication
for and complexity of the procedures.
The GROUPER logic for MS-DRGs 020, 021, and 022 contains a list of
procedure codes describing intracranial vascular procedures that are
captured under a logic list referred to as ``Intracranial Vascular
Procedures'' and a list of diagnosis codes describing a diagnosis of a
hemorrhage that are captured under a logic list referred to as
``Hemorrhage Principal Diagnosis.'' During our review of MS-DRGs 020,
021, and 022, we identified 57 ICD-10-PCS procedure codes describing
the intracranial vascular procedures and 66 diagnosis codes describing
a diagnosis of intracranial hemorrhage that were inadvertently excluded
from these logic lists. We refer the reader to Table 6P.2c and Table
6P.2d associated with this FY 2026 IPPS/LTCH PPS proposed rule (and
available at: <a href="https://www.cms.gov/medicare/medicare-fee-for-service-payment/acuteinpatientpps">https://www.cms.gov/medicare/medicare-fee-for-service-payment/acuteinpatientpps</a>) for the lists of the 57 ICD-10-PCS procedure
codes and 66 ICD-10-CM diagnosis codes that we identified.
As these 57 procedure codes describe the intracranial vascular
procedures and the 66 diagnosis codes describe a diagnosis of
intracranial hemorrhage, we believe these codes are clinically aligned
with the codes currently included in the ``Intracranial Vascular
Procedures'' and the ``Hemorrhage Principal Diagnosis'' logic lists,
respectively in MS-DRGs 020, 021, and 022. Therefore, for clinical
consistency we are proposing to add the 57 procedure codes
``Intracranial Vascular Procedures'' logic list, and the 66 diagnosis
codes to the ``Hemorrhage Principal Diagnosis'' logic list of MS-DRGs
020, 021, and 022, effective October 1, 2025, for FY 2026.
In reviewing the claims data from the September 2024 update of the
FY 2024 MedPAR file and examining the clinical considerations, we
believe that the cases reporting the insertion of an intracranial
neurostimulator implant could more suitably group to MS-DRGs 020, 021,
and 022 and would lead to a grouping that is more coherent and better
reflects the clinical severity and resource use involved in these
cases. While we previously have stated that we believe it would be
inappropriate to reassign cases representing a principal diagnosis of
epilepsy to a MS-DRG that contains cases that represent the treatment
of intracranial hemorrhage, after further consideration, we no longer
believe maintaining a difference in assignment based on the indication
is warranted in this subset of cases based on the fact that both
treatments involve intracranial procedures and demonstrate comparable
resource utilization.
We also believe that cases reporting the insertion of an
intracranial neurostimulator implant, regardless of principal
diagnosis, share similar resource utilization such that it is no longer
necessary to subdivide these cases based on the diagnosis codes
reported. Accordingly, we believe it is appropriate to remove the
special logic defined as ``Epilepsy Principal Diagnosis'' from the
definition for assignment to the proposed modified MS-DRGs, as the
cases can be appropriately grouped along with cases reporting any MDC
01 diagnosis when reported with qualifying procedures, as part of the
proposed restructured MS-DRGs.
Therefore, we are proposing to add 114 procedure code combinations
to a new ``Intracranial Neurostimulator
[[Page 18025]]
Implant'' logic list in MS-DRGs 020, 021, and 022 that describe (1) the
insertion of multiple or single array neurostimulator generators with
the insertion of a neurostimulator lead into the brain or the cerebral
ventricle and (2) the insertion of neurostimulator generator inserted
into the skull with the insertion of a neurostimulator lead into the
brain. We are also proposing to delete the ``Major Device Implant,''
``Epilepsy Principal Diagnosis,'' ``Neurostimulator'' logic lists from
MS-DRGs 023 and 024. We refer the reader to Table 6P.2e associated with
this FY 2026 IPPS/LTCH PPS proposed rule (and available 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>) for the list of the 114 ICD-10-PCS procedure code
combinations we propose to add to a new ``Intracranial Neurostimulator
Implant'' logic list in MS-DRGs 020, 021, and 022.
To compare and analyze the impact of these potential modifications,
we ran a simulation using the claims data from the September 2024
update of the FY 2024 MedPAR file. The following table reflects the
simulation of our proposed changes in MS-DRGs 020, 021, and 022.
----------------------------------------------------------------------------------------------------------------
Average
MS-DRG Number of length of Average costs
cases stay
----------------------------------------------------------------------------------------------------------------
020............................. All Cases..................... 2,322 12.5 $71,9167
--add cases reporting 100 4.1 70,495
procedure codes describing
the insertion of an
intracranial neurostimulator
implant.
--add cases reporting one of 140 13.6 73,810
the 57 procedure codes
describing an intracranial
vascular procedure with one
of the 66 diagnosis codes
describing hemorrhage as
principal diagnosis.
Intracranial Vascular 2,562 12.2 71,964
Procedures with Principal
Diagnosis Hemorrhage or
Intracranial Neurostimulator
Implant with MCC.
021............................. All Cases..................... 642 7.8 48,421
--add cases reporting 134 2.2 47,421
procedure codes describing
the insertion of an
intracranial neurostimulator
implant.
--add cases reporting one of 45 9.3 54,617
the 57 procedure codes
describing an intracranial
vascular procedure with one
of the 66 diagnosis codes
describing hemorrhage as
principal diagnosis.
Intracranial Vascular 821 7 48,597
Procedures with Principal
Diagnosis Hemorrhage or
Intracranial Neurostimulator
Implant with CC.
022............................. All Cases..................... 385 2.4 28,243
--add cases reporting 420 1.5 41,525
procedure codes describing
the insertion of an
intracranial neurostimulator
implant.
--add cases reporting one of 1 1 24,744
the 57 procedure codes
describing an intracranial
vascular procedure with one
of the 66 diagnosis codes
describing hemorrhage as
principal diagnosis.
Intracranial Vascular 806 1.9 35,160
Procedures with Principal
Diagnosis Hemorrhage or
Intracranial Neurostimulator
Implant without CC/MCC.
----------------------------------------------------------------------------------------------------------------
We believe that this simulation supports that the resulting MS-DRG
assignments would be more clinically homogeneous, coherent and better
reflect hospital resource use. As the table shows, for MS-DRG 020,
there were a total of 2,322 cases with an average length of stay of
12.5 days and average costs of $71,916. For MS-DRG 021, there were a
total of 642 cases with an average length of stay of 7.8 days and
average costs of $48,421. For MS-DRG 022, there were a total of 385
cases with an average length of stay of 2.4 days and average costs of
$28,243. A review of this simulation shows that adding a new
``Intracranial Neurostimulator Implant'' logic list, while also adding
57 procedure codes to the ``Intracranial Vascular Procedures'' logic
list, and 66 diagnosis codes to the ``Hemorrhage Principal Diagnosis''
logic list in MS-DRGs 020, 021 and 022 has a limited effect on the
average costs of these MS-DRGs, while leading to a grouping that is
more coherent and better reflects the clinical severity and resource
use involved in these cases.
In summary, for FY 2026, to more appropriately reflect utilization
of resources for these procedures, we are proposing to add 114
procedure code combinations to a new ``Intracranial Neurostimulator
Implant'' logic list in MS-DRGs 020, 021, and 022 that describe (1) the
insertion of multiple or single array neurostimulator generators with
the insertion of a neurostimulator lead into the brain or the cerebral
ventricle and (2) the insertion of neurostimulator generator inserted
into the skull with the insertion of a neurostimulator lead into the
brain. We are also proposing to add 57 procedure codes to the
``Intracranial Vascular Procedures'' logic list, and 66 diagnosis codes
to the ``Hemorrhage Principal Diagnosis'' logic list of MS-DRGs 020,
021, and 022.
Additionally, we are also proposing to delete the ``Major Device
Implant,'' ``Epilepsy Principal Diagnosis,'' ``Neurostimulator'' logic
lists from MS-DRGs 023 and 024. Lastly, for consistency, we are
proposing to change the titles of MS-DRGs 020, 021, and 022 from
``Intracranial Vascular Procedures with Principal Diagnosis Hemorrhage
with MCC, with CC, and without CC/MCC, respectively'' to ``Intracranial
Vascular Procedures with Principal Diagnosis Hemorrhage or Intracranial
Neurostimulator Implant with MCC, with CC, and without CC/MCC,
respectively,'' proposing to change the title of MS-DRG 023 from
``Craniotomy with Major Device Implant or Acute Complex Central Nervous
System Principal Diagnosis with MCC or Chemotherapy Implant or Epilepsy
with Neurostimulator'' to ``Craniotomy with Acute Complex Central
Nervous System Principal Diagnosis with MCC or Antineoplastic
Implant,'' and proposing to change the title of MS-DRG 024 from
``Craniotomy with Major Device Implant or Acute Complex Central Nervous
System Principal Diagnosis without MCC'' to ``Craniotomy with Acute
Complex Central Nervous System Principal Diagnosis without MCC'' to
better reflect the assigned procedures effective October 1, 2025, for
FY 2026.
[[Page 18026]]
b. Hypertensive Encephalopathy
For this FY 2026 IPPS/LTCH PPS proposed rule, we received a request
to delete MS-DRGs 077, 078, and 079 (Hypertensive Encephalopathy with
MCC, with CC, and without CC/MCC, respectively). Hypertensive
encephalopathy refers to brain dysfunction that occurs when the brain's
blood vessels can no longer regulate blood flow due to severe or sudden
rises in blood pressure, causing brain swelling and damage. It is
characterized by the insidious onset of headache, nausea, and vomiting,
followed by non-localizing neurologic symptoms such as restlessness,
confusion, and, if the hypertension is not treated, seizures and coma.
The diagnosis is based on clinical presentation, elevated blood
pressure, and neurological examination, often supported by brain
imaging like CT or MRI. The treatment involves immediate and rapid
lowering of blood pressure with appropriate medications administered in
a controlled setting. ICD-10-CM diagnosis code I67.4 (Hypertensive
encephalopathy) is used to report this diagnosis.
The requestor noted that effective FY 2025, a ``use additional
code'' instructional note was added under diagnosis code I16.1
(Hypertensive emergency) in the ICD-10-CM Tabular List of Diseases and
Injuries. Specifically, the instructional note states, ``use additional
code, if applicable, to identify specific organ dysfunction, such as:''
and lists I67.4 as well as eight other ICD-10-CM diagnosis codes. The
requestor stated that the addition of this ``use additional code''
instructional note has sequencing implications and requires I67.4 to be
sequenced as a secondary diagnosis when hypertensive emergency and
hypertensive encephalopathy are documented. As the GROUPER logic for
MS-DRGs 077, 078, and 079 is defined by only diagnosis code I67.4, the
requestor stated there will no longer be cases grouping to medical MS-
DRGs 077, 078, and 079 because I67.4 will only be sequenced as a
secondary diagnosis and I16.1 will have to be sequenced as the
principal diagnosis. Instead, these cases will group to MDC 05
(Diseases and Disorders of the Circulatory System) medical MS-DRGs 304
and 305 (Hypertension with MCC and without MCC, respectively) since
I16.1 is assigned to those MS-DRGs.
To begin our analysis, we reviewed the ICD-10-CM Tabular List of
Diseases and Injuries. The requestor is correct a ``use additional
code'' instructional note was added under diagnosis code I16.1
(Hypertensive emergency) in the ICD-10-CM Tabular List of Diseases and
Injuries, effective FY 2025. According to 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.'' We note that no such ``code first'' note appears at
ICD-10-CM diagnosis code I67.4 (Hypertensive encephalopathy) in the
ICD-10-CM Tabular List of Diseases and Injuries meaning the sequencing
depends on the circumstances of the encounter when hypertensive
emergency and hypertensive encephalopathy are documented. If providers
have cases involving hypertensive emergency and hypertensive
encephalopathy for which they need ICD-10 coding assistance, we
encourage them to submit their questions to the American Hospital
Association's Central Office on ICD-10 at <a href="https://www.codingclinicadvisor.com/">https://www.codingclinicadvisor.com/</a>.
We then reviewed the GROUPER logic. The requestor is correct that
diagnosis code I67.4 is the only diagnosis code listed under the
heading of ``Principal Diagnosis'' in the ICD-10 MS-DRG Definitions
Manual for MS-DRGs 077, 078, and 079. We refer the reader to the ICD-10
MS-DRG Definitions Manual Version 42.1, which is available on the CMS
website at: <a href="https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software">https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software</a>, for
complete documentation of the GROUPER logic for MS-DRGs 077, 078, and
079. We note that a DRG for a principal diagnosis of hypertensive
encephalopathy (48 FR 39876) has existed since 1983 when Congress
amended the Social Security Act to include a national DRG-based
hospital prospective payment system for all Medicare patients.
We then examined claims data from the September 2024 update of the
FY 2024 MedPAR file for all cases in MS-DRGs 077, 078, and 079 to
consider the resources involved in the cases reporting a principal
diagnosis of hypertensive encephalopathy. Our findings are shown in
this table.
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 077--All cases........................................... 1,488 5.0 $13,176
MS-DRG 078--All cases........................................... 1,846 3.3 8,591
MS-DRG 079--All cases........................................... 243 2.4 6,729
----------------------------------------------------------------------------------------------------------------
The data reflect a moderately low volume of cases in MS-DRGs 077,
078, and 079, relatively. We then evaluated the reporting of
hypertensive encephalopathy in the inpatient setting over the past few
years in medical MS-DRGs 077, 078, and 079. We analyzed claims data for
MS-DRGs 077, 078, and 079 from the FY 2020 through the FY 2024 MedPAR
files, which were used in our analysis of claims data for MS-DRG
reclassification requests effective for FY 2022 through FY 2026 to
trend the number of cases assigned to these MS-DRGs over time. Our
findings are shown in the following graph:
[[Page 18027]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.000
The data show a general decline in the number of cases reporting
hypertensive encephalopathy as a principal diagnosis in medical MS-DRGs
077, 078, and 079 for the past 5 years. We note that as discussed in
prior rulemaking, the MS-DRGs are a classification system intended to
group together diagnoses and procedures with similar clinical
characteristics and utilization of resources. We generally seek to
identify sufficient sets of claims data with demonstrated clinical
similarity in developing diagnosis related groups rather than subsets
based on single diagnoses. After review of the findings indicating a
general decline in the number of cases reporting hypertensive
encephalopathy as a principal diagnosis, and consideration of the
intent of the MS-DRGs, we believe that there is no longer a clinical
reason to maintain the MS-DRGs for hypertensive encephalopathy (MS-DRGs
077, 078, and 079) as they are defined by the reporting of one
principal diagnosis code.
To explore mechanisms to ensure clinical coherence between cases
reporting hypertensive encephalopathy as a principal diagnosis and the
other cases with which they may potentially be grouped, we then
conducted an examination of all the MS-DRGs where I67.4 was also
reported as principal diagnosis to determine if the diagnosis was
included in any other MS-DRGs outside of MDC 01, to assess the current
MS-DRG assignment of this diagnosis code. Our findings are shown in the
following table.
Other MS-DRGs Reporting Hypertensive Encephalopathy as Principal
Diagnosis
------------------------------------------------------------------------
Average
MDC MS-DRG Description Number of length of Average
cases stay costs
------------------------------------------------------------------------
PRE.. 004 Tracheostomy with MV 1 52 $128,406
>96 Hours or
Principal Diagnosis
Except Face, Mouth
and Neck without
Major O.R.
Procedures.
01... 025 Craniotomy and 1 16 114,582
Endovascular
Intracranial
Procedures with MCC.
01... 026 Craniotomy and 1 6 79,934
Endovascular
Intracranial
Procedures with CC.
01... 028 Spinal Procedures 1 26 58,049
with MCC.
01... 037 Extracranial 4 5.5 27,923
Procedures with MCC.
01... 038 Extracranial 1 4 12,509
Procedures with CC.
01... 040 Peripheral, Cranial 5 8.2 29,325
Nerve and Other
Nervous System
Procedures with MCC.
01... 041 Peripheral, Cranial 8 4.9 14,909
Nerve and Other
Nervous System
Procedures with CC
or Peripheral
Neurostimulator.
981 Extensive O.R. 10 10.3 31,543
Procedures
[…truncated; see source link]Indexed from Federal Register on April 30, 2025.
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