Rule2025-14681
Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals (IPPS) and the Long-Term Care Hospital Prospective Payment System and Policy Changes and Fiscal Year (FY) 2026 Rates; Changes to the FY 2025 IPPS Rates Due to Court Decision; Requirements for Quality Programs; and Other Policy Changes; Health Data, Technology, and Interoperability: Electronic Prescribing, Real-Time Prescription Benefit and Electronic Prior Authorization
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
August 4, 2025
Effective
October 1, 2025
Issuing agencies
Health and Human Services DepartmentCenters for Medicare & Medicaid Services
Abstract
This final rule revises the Medicare hospital inpatient prospective payment systems (IPPS) for operating and capital-related costs of acute care hospitals; makes changes relating to Medicare graduate medical education (GME) for teaching hospitals; updates 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); updates and makes changes to requirements for certain quality programs; and makes other policy- related changes. We are also finalizing the provisions of the interim final action with comment period regarding the changes to the FY 2025 IPPS rates due to the court decision in Bridgeport Hosp. v. Becerra. Lastly, it finalizes certain updates to the ONC Health Information Technology (IT) Certification Program.
Full Text
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<title>Federal Register, Volume 90 Issue 147 (Monday, August 4, 2025)</title>
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[Federal Register Volume 90, Number 147 (Monday, August 4, 2025)]
[Rules and Regulations]
[Pages 36536-37308]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-14681]
[[Page 36535]]
Vol. 90
Monday,
No. 147
August 4, 2025
Part II
Department of Health and Human Services
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45 CFR Part 170
Centers for Medicare & Medicaid Services
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42 CFR Parts 412, 495, and 512
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Medicare Program; Hospital Inpatient Prospective Payment Systems for
Acute Care Hospitals (IPPS) and the Long-Term Care Hospital Prospective
Payment System and Policy Changes and Fiscal Year (FY) 2026 Rates;
Changes to the FY 2025 IPPS Rates Due to Court Decision; Requirements
for Quality Programs; and Other Policy Changes; Health Data,
Technology, and Interoperability: Electronic Prescribing, Real-Time
Prescription Benefit and Electronic Prior Authorization; Direct-
Interim-Final Rule
Federal Register / Vol. 90 , No. 147 / Monday, August 4, 2025 / Rules
and Regulations
[[Page 36536]]
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 412, 495, and 512
Office of the Secretary
45 CFR Part 170
[CMS-1833-F and CMS-1808-F] RINs 0938-AV45, 0938-AV34, and 0955-AA06
Medicare Program; Hospital Inpatient Prospective Payment Systems
for Acute Care Hospitals (IPPS) and the Long-Term Care Hospital
Prospective Payment System and Policy Changes and Fiscal Year (FY) 2026
Rates; Changes to the FY 2025 IPPS Rates Due to Court Decision;
Requirements for Quality Programs; and Other Policy Changes; Health
Data, Technology, and Interoperability: Electronic Prescribing, Real-
Time Prescription Benefit and Electronic Prior Authorization
AGENCY: Centers for Medicare & Medicaid Services (CMS) and Assistant
Secretary for Technology Policy (ASTP)/Office of the National
Coordinator for Health Information Technology (ONC) (collectively,
ASTP/ONC), Department of Health and Human Services (HHS).
ACTION: Final rules.
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SUMMARY: This final rule revises the Medicare hospital inpatient
prospective payment systems (IPPS) for operating and capital-related
costs of acute care hospitals; makes changes relating to Medicare
graduate medical education (GME) for teaching hospitals; updates 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); updates and makes changes
to requirements for certain quality programs; and makes other policy-
related changes. We are also finalizing the provisions of the interim
final action with comment period regarding the changes to the FY 2025
IPPS rates due to the court decision in Bridgeport Hosp. v. Becerra.
Lastly, it finalizes certain updates to the ONC Health Information
Technology (IT) Certification Program.
DATES: These final rules are effective on October 1, 2025. The
incorporation by reference of certain material listed in this document
is approved by the Director of the Federal Register as of October 1,
2025.
FOR FURTHER INFORMATION CONTACT: Donald Thompson, and Michele Hudson,
(410) 786-4487 or <a href="/cdn-cgi/l/email-protection#c185808281a2acb2efa9a9b2efa6aeb7"><span class="__cf_email__" data-cfemail="eaaeaba9aa898799c4828299c48d859c">[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#a6e2e7e5e6c5cbd588ceced588c1c9d0"><span class="__cf_email__" data-cfemail="0f4b4e4c4f6c627c2167677c21686079">[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#c48aa1b390a1a7ac84a7a9b7eaacacb7eaa3abb2"><span class="__cf_email__" data-cfemail="753b10022110161d351618065b1d1d065b121a03">[email protected]</span></a>, New Technology Add-On Payments
Issues.
Mady Hue, <a href="/cdn-cgi/l/email-protection#d4b9b5a6bdb8a1fabca1b194b7b9a7fabcbca7fab3bba2"><span class="__cf_email__" data-cfemail="f29f93809b9e87dc9a8797b2919f81dc9a9a81dc959d84">[email protected]</span></a>, and Andrea Hazeley,
<a href="/cdn-cgi/l/email-protection#77161913051216591f160d121b120e37141a04591f1f0459101801"><span class="__cf_email__" data-cfemail="64050a001601054a0c051e0108011d240709174a0c0c174a030b12">[email protected]</span></a>, MS-DRG Classifications Issues.
Radhika Puri, <a href="/cdn-cgi/l/email-protection#82d0e3e6eaebe9e3acf2f7f0ebc2e1eff1aceaeaf1ace5edf4"><span class="__cf_email__" data-cfemail="045665606c6d6f652a7471766d446769772a6c6c772a636b72">[email protected]</span></a>, Rural Community Hospital
Demonstration Program Issues.
Jeris Smith, <a href="/cdn-cgi/l/email-protection#d9b3bcabb0aaf7aab4b0adb199bab4aaf7b1b1aaf7beb6af"><span class="__cf_email__" data-cfemail="640e01160d174a17090d100c240709174a0c0c174a030b12">[email protected]</span></a>, Frontier Community Health
Integration Project (FCHIP) Demonstration Issues.
Lang Le, <a href="/cdn-cgi/l/email-protection#a1cdc0cfc68fcdc4e1c2ccd28fc9c9d28fc6ced7"><span class="__cf_email__" data-cfemail="a9c5c8c7ce87c5cce9cac4da87c1c1da87cec6df">[email protected]</span></a>, Hospital Readmissions Reduction
Program--Administration Issues.
Ngozi Uzokwe, <a href="/cdn-cgi/l/email-protection#c3ada4acb9aaedb6b9aca8b4a683a0aeb0edababb0eda4acb5"><span class="__cf_email__" data-cfemail="0e6069617467207b746165796b4e6d637d2066667d20696178">[email protected]</span></a>, Hospital Readmissions
Reduction Program--Measures Issues.
Jennifer Tate, <a href="/cdn-cgi/l/email-protection#ff959a919196999a8dd18b9e8b9abf9c928cd197978cd1989089"><span class="__cf_email__" data-cfemail="d9b3bcb7b7b0bfbcabf7adb8adbc99bab4aaf7b1b1aaf7beb6af">[email protected]</span></a>, Hospital-Acquired
Condition Reduction Program--Administration Issues.
Ngozi Uzokwe, <a href="/cdn-cgi/l/email-protection#adc3cac2d7c483d8d7c2c6dac8edcec0de83c5c5de83cac2db"><span class="__cf_email__" data-cfemail="d6b8b1b9acbff8a3acb9bda1b396b5bba5f8bebea5f8b1b9a0">[email protected]</span></a>, Hospital-Acquired Condition
Reduction Program--Measures Issues.
Julia Venanzi, <a href="/cdn-cgi/l/email-protection#701a051c19115e06151e111e0a1930131d035e1818035e171f06"><span class="__cf_email__" data-cfemail="8ee4fbe2e7efa0f8ebe0efe0f4e7ceede3fda0e6e6fda0e9e1f8">[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#90fdf5fcf9e3e3f1bef8f1f7f5e2d0f3fde3bef8f8e3bef7ffe6"><span class="__cf_email__" data-cfemail="cda0a8a1a4bebeace3a5acaaa8bf8daea0bee3a5a5bee3aaa2bb">[email protected]</span></a>, and Ngozi Uzokwe,
<a href="/cdn-cgi/l/email-protection#ec828b839685c2999683879b89ac8f819fc284849fc28b839a"><span class="__cf_email__" data-cfemail="18767f776271366d6277736f7d587b756b3670706b367f776e">[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#23464f4a59424146574b0d444c4f475057464a4d63404e500d4b4b500d444c55"><span class="__cf_email__" data-cfemail="71141d180b10131405195f161e1d15020514181f31121c025f1919025f161e07">[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#6e040b000007080b1c401a0f1a0b2e0d031d4006061d40090118"><span class="__cf_email__" data-cfemail="b5dfd0dbdbdcd3d0c79bc1d4c1d0f5d6d8c69bddddc69bd2dac3">[email protected]</span></a>, PPS-Exempt Cancer
Hospital Quality Reporting--Administration Issues.
Kristina Rabarison, <a href="/cdn-cgi/l/email-protection#d398a1baa0a7babdb2fd81b2b1b2a1baa0bcbd93b0bea0fdbbbba0fdb4bca5"><span class="__cf_email__" data-cfemail="e5ae978c96918c8b84cbb7848784978c968a8ba5868896cb8d8d96cb828a93">[email protected]</span></a>, PPS-Exempt
Cancer Hospital Quality Reporting Program--Measure Issues
Ariel Cress, <a href="/cdn-cgi/l/email-protection#19586b707c75375a6b7c6a6a597a746a3771716a377e766f"><span class="__cf_email__" data-cfemail="3372415a565f1d704156404073505e401d5b5b401d545c45">[email protected]</span></a>, Long-Term Care Hospital
Quality Reporting Program--Administration Issues.
Jessica Warren, <a href="/cdn-cgi/l/email-protection#dfb5baacacb6bcbef1a8beadadbab19fbcb2acf1b7b7acf1b8b0a9"><span class="__cf_email__" data-cfemail="b2d8d7c1c1dbd1d39cc5d3c0c0d7dcf2d1dfc19cdadac19cd5ddc4">[email protected]</span></a>, and Lisa Marie Gomez,
<a href="/cdn-cgi/l/email-protection#f6ba9f8597bb97849f93d8b1999b938cc7b6959b85d89e9e85d8919980"><span class="__cf_email__" data-cfemail="d79bbea4b69ab6a5beb2f990b8bab2ade697b4baa4f9bfbfa4f9b0b8a1">[email protected]</span></a>, Medicare Promoting Interoperability
Program.
Bridget Dickensheets, <a href="/cdn-cgi/l/email-protection#690b1b000d0e0c1d470d000a020c071a010c0c1d1a290a041a4701011a470e061f"><span class="__cf_email__" data-cfemail="51332338353634257f3538323a343f22393434252211323c227f3939227f363e27">[email protected]</span></a> and Mollie
Knight, <a href="/cdn-cgi/l/email-protection#4d202221212428632623242a25390d2e203e6325253e632a223b"><span class="__cf_email__" data-cfemail="44292b28282d216a2f2a2d232c30042729376a2c2c376a232b32">[email protected]</span></a>, IPPS Market Basket Rebasing.
<a href="/cdn-cgi/l/email-protection#1a59575753454e5f5b575a79776934727269347d756c"><span class="__cf_email__" data-cfemail="591a141410060d1c1814193a342a7731312a773e362f">[email protected]</span></a>, Transforming Episode Accountability Model
(TEAM)
Michael Lipinski, Office of Policy, Assistant Secretary for
Technology Policy (ASTP)/Office of the National Coordinator for Health
Information Technology (ASTP/ONC), 202-690-7151.
SUPPLEMENTARY INFORMATION:
Tables Available on the CMS Website
The IPPS tables for this fiscal year (FY) 2026 final 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 Final Rule Home
Page'' or ``Acute Inpatient--Files for Download.'' The LTCH PPS tables
for this FY 2026 final 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-F. For further details on the contents of the tables
referenced in this final rule, we refer readers to section VI. of the
Addendum to this FY 2026 IPPS/LTCH PPS final 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#3a7e7b797a59574914525249145d554c"><span class="__cf_email__" data-cfemail="db9f9a989bb8b6a8f5b3b3a8f5bcb4ad">[email protected]</span></a>.
I. Executive Summary and Background
A. Executive Summary
1. Purpose and Legal Authority
This FY 2026 IPPS/LTCH PPS final rule will make payment and policy
changes under the Medicare inpatient
[[Page 36537]]
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 makes 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 final rule also makes
policy changes to programs associated with Medicare IPPS hospitals,
IPPS-excluded hospitals, and LTCHs. We are also making changes relating
to Medicare graduate medical education (GME) for teaching hospitals.
In the Hospital Value-Based Purchasing (VBP) Program, we are
finalizing modifications to the Hospital-Level Total Hip Arthroplasty/
Total Knee Arthroplasty (THA/TKA) Complications measure beginning with
the FY 2033 program year. We also provide notice of the technical
update to the five National Healthcare Safety Network (NHSN) Healthcare
Associated Infection (HAI) measures beginning with the FY 2029 program
year, and the technical update to the six measures in the Clinical
Outcomes domain beginning with the FY 2027 program year. We are
finalizing removal of the Health Equity Adjustment (HEA) from the
program's scoring calculations in the FY 2026 program year. We provide
previously and newly established performance standards for FY 2027
through FY 2031 program years for the Hospital VBP Program.
In the Hospital-Acquired Condition (HAC) Reduction Program, we are
also providing notice of the technical update to the five Centers for
Disease Control and Prevention's (CDC) NHSN healthcare-associated
infection (HAI) measures.
In the Hospital Readmissions Reduction Program, we are finalizing
our proposal to add Medicare Advantage (MA) beneficiaries to the six
Hospital Readmissions Reduction Program (HRRP) measures beginning with
the FY 2027 program year; however, we are not finalizing our proposal
to include payment data for MA beneficiaries in the calculation of
aggregate payments for excess readmissions. We also are finalizing our
proposal to reduce the applicable period from 3-years to 2-years
beginning with the FY 2027 program year. We also provide notice of the
technical update to remove the COVID-19 exclusion from all six
readmission measures.
In the PPS-Exempt Cancer Hospital Quality Reporting Program
(PCHQR), we are finalizing our proposals to modify the public reporting
requirements and remove three existing measures.
In the Hospital Inpatient Quality Reporting (IQR) Program, we are
finalizing our proposals to modify four existing quality measures and
to remove four existing measures. We also are finalizing our proposal,
with modification, 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 with a modification.
In the Medicare Promoting Interoperability Program, we are
finalizing our proposal 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 finalizing our proposal, with modifications, to revise
the Security Risk Analysis measure beginning with the EHR reporting
period in CY 2026. We are finalizing our proposal to modify the Safety
Assurance Factors for EHR Resilience (SAFER) Guides measure beginning
with the EHR reporting period in CY 2026. We are finalizing our
proposal 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.
For the LTCH Quality Reporting Program (QRP), we are finalizing our
proposal 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 also are finalizing our proposal to remove four
Social Determinant of Health (SDOH) standardized patient assessment
data elements from the LCDS. Next, we are finalizing our proposal to
amend the reconsideration request process in the LTCH QRP. Finally, we
include summaries of comments received in response to 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 final rule, we finalizing 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
broadening of the Skilled Nursing Facility (SNF) 3-Day Rule, and the
removal of the Decarbonization and Resilience Initiative (DRI).
Additionally, the policies in this final rule reflect our commitment to
ensuring TEAM's incentives help to drive beneficiary quality of care
improvements and reductions in Medicare spending.
The Secretary of Health and Human Services has delegated
responsibilities to the Assistant Secretary for Technology Policy
(ASTP)/Office of the National Coordinator for Health Information
Technology (ONC) (collectively, ASTP/ONC \1\) for the implementation of
certain provisions in Title IV of the 21st Century Cures Act (Public
Law (Pub. L.)) 114-255, December 13, 2016) (Cures Act) that are
designed to: advance interoperability; support the access, exchange,
and use of electronic health information (EHI); and identify reasonable
and necessary activities that do not constitute information
blocking.\2\ ASTP/ONC is also responsible for implementation of certain
provisions of the Health Information Technology for Economic and
Clinical Health Act (Pub. L. 111-5, Feb. 17. 2009) (HITECH Act)
including: requirements that the National Coordinator perform duties
consistent with the development of a nationwide
[[Page 36538]]
health information technology infrastructure that allows for the
electronic use and exchange of information and that promotes a more
effective marketplace, greater competition, and increased consumer
choice, among other goals; and requirements to keep or recognize a
program or programs for the voluntary certification of health
information technology.
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\1\ On July 29, 2024, notice was posted in the Federal Register
that ONC would be dually titled to the Assistant Secretary for
Technology Policy and Office of the National Coordinator for Health
Information Technology (89 FR 60903).
\2\ Reasonable and necessary activities that do not constitute
information blocking, also known as information blocking exceptions,
are identified in 45 CFR part 171 subparts B, C and D. ONC's
official website, <a href="http://HealthIT.gov">HealthIT.gov</a>, offers a variety of resources on the
topic of Information Blocking, including fact sheets, recorded
webinars, and frequently asked questions. To learn more, please
visit: <a href="https://www.healthit.gov/topic/information-blocking/">https://www.healthit.gov/topic/information-blocking/</a>.
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Under various statutory authorities, we either discuss continued
program implementation or 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 final 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.
Section 1814(l)(4) of the Act requires, beginning with FY 2017,
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 assess a hospital's
performance relative to other hospitals with a similar proportion of
beneficiaries who are dually eligible for both Medicare and full
Medicaid benefits.
<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
[[Page 36539]]
(SGR) Reform Act of 2013 (Pub. L. 113-67) and amended by section
51005(a) of the Bipartisan Budget Act of 2018 (Pub. 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 final
rule. In general, these major provisions are being finalized 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 final rule is presented in section I.D. of the preamble
of this final rule.
a. 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 final
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. We note, as discussed elsewhere, in this final rule we are
finalizing the provisions of the interim final action with comment
period (IFC) (89 FR 80405) (hereinafter referred to as the FY 2025
IFC), that implemented revised Medicare wage index values for FY 2025,
established a transitional payment exception for low wage hospitals
significantly impacted by those revisions, and made conforming changes
to the hospital IPPS and LTCH PPS payment rates for FY 2025 to reflect
the removal of the low wage index hospital policy following the
appellate court decision in Bridgeport Hosp. v. Becerra.
For FY 2026 and subsequent fiscal years, after considering the D.C.
Circuit's decision in Bridgeport Hosp. v. Becerra, we are discontinuing
the low wage index hospital policy and will 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 final rule, we
are using 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 will be
implemented in a budget neutral manner. This transitional exception
policy will apply to hospitals that benefitted from the FY 2024 low
wage index hospital policy and compares the hospital's FY 2026 wage
index to the hospital's FY 2024 wage index. If the hospital's FY 2026
wage index is decreasing by more than 9.75 percent from the hospital's
FY 2024 wage index, then the transitional payment exception for FY 2026
for that hospital is 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 are making this
policy budget neutral through an adjustment applied to the standardized
amounts for all hospitals.
b. Update to the IPPS Labor-Related Share
As discussed in section IV. of the preamble of this final rule, we
are finalizing our proposal 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 2023-based IPPS market basket, we calculated
a labor-related share of 66.0 percent, which we will use for discharges
occurring on or after October 1, 2025. The 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 IV.B.3. of the preamble
of this final 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 Readmissions Reduction Program
The Hospital Readmissions Reduction Program was established under
section 1886(q) of the Act, as amended by section 15002 of the 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 or procedures. In this
final rule, we are finalizing the following proposals, beginning with
the FY 2027 program year: (1) Refine all six readmission measures to
add Medicare Advantage patient cohort data; (2) reduce the applicable
period from 3-years to 2-years and update codified regulation language;
and (4) 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 with a modification. We also
[[Page 36540]]
provide notice of the technical update to remove the COVID-19 exclusion
from all six readmission measures. We are not finalizing the proposal
to include payment data for MA beneficiaries in the calculation of
aggregate payments for excess readmissions..
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 reduce hospital-acquired conditions. In this final rule,
we are making a technical update to the NHSN Healthcare Associated
Infection (HAI) measures baseline. We are also finalizing our proposal
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 with a modification.
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 final rule, we are finalizing modifications to the THA/TKA
Complications measure beginning with the FY 2033 program year. We also
provide 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
2029 program year. We also are finalizing our proposal 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 with a
modification. We are also finalizing our proposal to remove the
Program's HEA adjustment in the FY 2026 program year. Lastly, we
provide previously and newly established performance standards for FY
2027 through FY 2031 program years for the Hospital VBP Program.
f. 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 final rule, we are
finalizing several changes to the Hospital IQR Program. We are
finalizing modifications 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 finalizing the removal of 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 finalizing our
proposal 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 with a modification. Additionally, we sought comments
regarding measure concepts related to well-being and nutrition for
future consideration. We also sought comments on the path forward for
digital quality measurement and use of Fast Healthcare Interoperability
Resources (FHIR).
g. 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 this final rule, we are finalizing our
proposal 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 finalizing our proposals 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 program year. Lastly, we are finalizing our proposal 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 with a
modification.
h. Long-Term Care Hospital Quality Reporting Program (LTCH QRP)
For the LTCH QRP, we are finalizing our proposal to remove one item
from the LCDS with respect to patients who have expired in the LTCH. We
also are finalizing our proposal to removal of four SDOH standardized
patient assessment data elements from the LCDS. We are finalizing our
proposal to amend the reconsideration request process in the LTCH QRP.
Finally, we include a summary of comments received in response to
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.
i. 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. In
this final rule, we are finalizing several changes to the Medicare
Promoting Interoperability Program. Specifically, we are finalizing our
proposals: (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
[[Page 36541]]
``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.
j. Transforming Episode Accountability Model (TEAM)
In section XI.A. of the preamble of this final rule, we discuss the
changes we finalized and considered for 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 finalized 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) excluding Indian Health
Service (IHS) hospitals from TEAM participation; (4) adding the
Information Transfer Patient Reported Outcome-based Performance Measure
(Information Transfer PRO-PM); (5) applying a neutral quality measure
score for TEAM participants with insufficient quality data; (6) a
methodology to construct target prices when there are coding changes;
(7) reconstructing the normalization factor and prospective trend
factor; (8) replacing the Area Deprivation Index (ADI) with the
Community Deprivation Index (CDI); (9) using a 180-day lookback period
and Hierarchical Condition Categories (HCC) version 28 for beneficiary
risk adjustment; (10) eliminating downside financial risk for low
volume hospitals; (11) aligning the date range used for episode
attribution; (12) removing health equity plans and health related
social needs data reporting; (13) broadening the Skilled Nursing
Facility (SNF) 3-day rule waiver; (14) modifying the referral to
primary care services requirement; and (15) removing the
Decarbonization and Resilience Initiative (DRI).
k. ONC Health IT Certification Program Updates
In the Health Data, Technology, and Interoperability: Patient
Engagement, Information Sharing, and Public Health Interoperability
proposed rule (HTI-2 Proposed Rule) (89 FR 63498), which appeared in
the Federal Register on August 5, 2024, ASTP/ONC proposed a wide-
ranging set of updates to the ONC Health IT Certification Program. In
the Health Data, Technology, and Interoperability: Electronic
Prescribing, Real-Time Prescription Benefit and Electronic Prior
Authorization (HTI-4 final rule), which is being published as part of
the FY 2026 IPPS/LTCH final rule, ASTP/ONC is finalizing a limited
subset of the proposals in the HTI-2 proposed rule. In this section,
ASTP/ONC describes the HTI-2 proposals it is finalizing in this rule.
(1) New and Revised Standards and Certification Criteria
(a) Minimum Standards Code Sets Updates
In section III.B.5 of the preamble of the HTI-2 Proposed Rule,
ASTP/ONC proposed to adopt an updated baseline version of RxNorm,
identified as a minimum standard code set, in 45 CFR 170.207(d)
(Medications), and to reorganize the text of the regulation in 45 CFR
170.207(d). RxNorm is referenced in the ``electronic prescribing'' and
``real-time prescription benefit'' health IT certification criteria
ASTP/ONC is also finalizing in this final rule. ASTP/ONC is finalizing
these proposals in section XI.B.4.b.(2) of the preamble of this final
rule, with modifications. Consistent with 45 CFR 170.555, health IT
developers may use newer versions of the adopted baseline version of a
standard identified as a minimum standard on a voluntary basis.
(b) Revised Electronic Prescribing Certification Criterion
As discussed in section XI.B.4.b.(3) of the preamble of this final
rule, ASTP/ONC is finalizing proposed updates in the HTI-2 Proposed
Rule to the ``electronic prescribing'' criterion in 45 CFR
170.315(b)(3), with modifications. ASTP/ONC is finalizing that, for
technology certified to the criterion in 45 CFR 170.315(b)(3)
subsequent to June 30, 2020, health IT developers must update the
Health IT Module to use the National Council for Prescription Drug
Programs (NCPDP) SCRIPT standard version 2023011 and provide that
update to their customers in order to maintain certification of the
Health IT Module, by January 1, 2028. For the time period up to and
including December 31, 2027, ASTP/ONC is finalizing that developers
certifying a Health IT Module to 45 CFR 170.315(b)(3) may use either
the updated NCPDP SCRIPT standard version 2023011 or the NCPDP SCRIPT
standard version 2017071. ASTP/ONC is also finalizing that any Health
IT Modules for which a health IT developer seeks certification to the
updated criterion using NCPDP SCRIPT standard version 2023011 would
need to support electronic prior authorization transactions in
accordance with the standard. Finally, ASTP/ONC is finalizing a series
of additional updates to 45 CFR[thinsp]170.315(b)(3)(ii), including
removing transactions currently identified as optional for the
certification criterion.
(c) New Real-Time Prescription Benefit Criterion
As discussed in section XI.B.4.b.(4) of the preamble of this final
rule, ASTP/ONC is finalizing the proposal in the HTI-2 Proposed Rule to
adopt a ``real-time prescription benefit'' certification criterion in
45 CFR[thinsp]170.315(b)(4), with modifications. Real-time prescription
benefit tools empower providers and their patients to compare the
patient-specific cost of a drug to the cost of a suitable alternative,
compare prescription costs at different pharmacies, view information
about out-of-pocket costs, and learn whether prior authorization for a
specific drug is required. The certification criterion ASTP/ONC is
finalizing is based on the NCPDP Real-Time Prescription Benefit (RTPB)
standard version 13. ASTP/ONC is also finalizing a proposal to include
this certification criterion in the Base EHR definition in 45
CFR[thinsp]170.102 after January 1, 2028. ASTP/ONC is finalizing these
policies in order to implement section 119(b)(3) of Title I of the
Consolidated Appropriations Act, 2021 (Pub. L. 116-260).
(d) New Certification Criteria for Modular API Capabilities
As discussed in section XI.B.4.b.(5) of the preamble of this final
rule, ASTP/ONC is finalizing two health IT certification criteria for
``modular API capabilities'' proposed in the HTI-2 Proposed Rule.
Specifically, ASTP/ONC is finalizing certification criteria in 45 CFR
170.315(j)(20), ``Workflow triggers for decision support
interventions,'' and 45 CFR 170.315(j)(21), ``Subscriptions--client,''
both of which are cross-referenced by other certification criteria
ASTP/ONC is finalizing to support electronic prior authorization.
[[Page 36542]]
(e) New Certification Criteria for Electronic Prior Authorization
In section III.B.20 of the preamble of the HTI-2 Proposed Rule,
ASTP/ONC proposed to adopt a ``prior authorization API--provider''
criterion in 45 CFR 170.315(g)(34). ASTP/ONC also proposed to adopt a
set of HL7[supreg] FHIR[supreg] implementation guides (IGs) in 45 CFR
170.215 for HHS use, including IGs referenced as part of the proposed
criterion for electronic prior authorization and other IGs that support
interoperable exchange of information between payers, providers, and
patients.
In section XI.B.4.b.(5) of the preamble of this final rule, ASTP/
ONC is finalizing three certification criteria in 45 CFR
170.315(g)(31), (32), and (33) for electronic prior authorization that
are based on the requirements originally proposed in 45 CFR
170.315(g)(34), with modifications. ASTP/ONC is also finalizing
adoption of the IGs proposed in section III.B.20 and incorporating
these specifications by reference in 45 CFR 170.299.
ASTP/ONC is finalizing these criteria to make available Health IT
Modules that can enable health care providers to conduct prior
authorization transactions using payer APIs established by CMS in the
Interoperability and Prior Authorization rule (89 FR 8758). Use of
these Health IT Modules will also support providers and clinicians
participating in the Promoting Interoperability programs and MIPS
Promoting Interoperability performance category required to report on
Electronic Prior Authorization measures.
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 final rule.
BILLING CODE 4120-01-P
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[GRAPHIC] [TIFF OMITTED] TR04AU25.037
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[GRAPHIC] [TIFF OMITTED] TR04AU25.038
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BILLING CODE 4120-01-C
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 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,
[[Page 36546]]
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.
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 Are Implemented in
This Final 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. Issuance of a Notice of Proposed Rulemaking and Summary of the
Proposed Provisions
The FY 2026 IPPS/LTCH PPS proposed rule appeared in the April 30,
2025, Federal Register (90 FR 18002). In the 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 proposed
to make.
1. Proposed Changes to MS-DRG Classifications and Recalibrations of
Relative Weights
In section II. of the preamble of the proposed rule, we included
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
[[Page 36547]]
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 the proposed rule, we proposed
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 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 the proposed rule, we proposed to
rebase and revise the IPPS market baskets to reflect a 2023 base year.
In section IV.B.3. of the preamble of the proposed rule, using the cost
category weights from the proposed 2023-based IPPS market basket, we
proposed 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 the proposed rule, we discussed
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 the proposed rule, we discussed
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 discussed
the proposed payment policy requirements for capital-related costs and
capital payments to hospitals for FY 2026.
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 discussed
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
[[Page 36548]]
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 included 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 the
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 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 proposed to establish the threshold amounts for outlier
cases. In addition, in section IV. of the Addendum of the proposed
rule, we addressed 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 proposed 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 the 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 the proposed rule, as required by sections
1886(e)(4) and (e)(5) of the Act, we provided our recommendations of
the appropriate percentage changes for FY 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 addressed these recommendations in Appendix B of the proposed rule.
For further information relating specifically to the MedPAC March 2025
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>.
E. Public Comments Received in Response to the FY 2026 IPPS/LTCH PPS
Proposed Rule
We received approximately 5,409 timely pieces of correspondence
containing multiple comments on the proposed rule that appeared in the
April 30, 2025 Federal Register (89 FR 18002) titled ``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'' (hereinafter referred to as the FY
2026 IPPS/LTCH PPS proposed rule). We note that some of these public
comments were outside of the scope of the proposed rule. These out-of-
scope public comments are not addressed with policy responses in this
final rule. Summaries of the public comments that are within the scope
of the proposed rule and our responses to those public comments are set
forth in the various sections of this final rule under the appropriate
heading.
II. 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.
[[Page 36549]]
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).
Comment: A commenter summarized the statutory and regulatory
history regarding the documentation and coding recoupment adjustments
required under section (7)(b) of the TMA, Abstinence Education, and QI
Programs Extension Act of 2007 (Pub. L. 110-90), as amended. The
commenter reiterated its position that the total level of adjustments
made by CMS under this section took back more than was authorized by
Congress and stated that section 7(b)(2) of Public Law 110-90 requires
CMS to increase the standardized amount by 0.9412% to avoid carrying
over into FY 2026 the -3.9% reduction to the standardized amount that
law required between FY 2013 and FY 2017.
Response: As of FY 2023, CMS completed the statutory requirements
of section 7(b)(1)(B) of Public Law 110-90 as amended by section 631 of
the American Taxpayer Relief Act of 2012 (ATRA, Pub. L. 112-240),
section 404 of the Medicare Access and CHIP Reauthorization Act of 2015
(MACRA) (Pub. L. 114-10), and section 15005 of the 21st Century Cures
Act (Pub. L. 114-255). As we discussed in the FY 2022 IPPS/LTCH PPS
final rule (86 FR 44794 through 44795), the FY 2021 IPPS/LTCH PPS final
rule (85 FR 58444 through 58445) and in prior rules, we believe section
414 of the MACRA and section 15005 of the 21st Century Cures Act set
forth the levels of positive adjustments for FYs 2018 through 2023.
Those adjustments added up to +2.9488 percentage points, not +3.9
percentage points, and we see no evidence that Congress enacted that
smaller adjustment schedule with the silent intent that CMS would later
make a permanent 0.9412% payment adjustment to reach a total +3.9
percentage point adjustment. To the contrary, section 414 of MACRA
instructs the agency to ``not make the adjustment (estimated to be an
increase of 3.2 percent) that would otherwise apply for discharges
occurring during fiscal year 2018 by reason of the completion of the
adjustments required under clause (ii).'' Because the adjustment ``that
would otherwise apply'' in fiscal year 2018 but for clause (1)(B)(iii)
was +3.9%, the commenter's suggestion to complete making that
adjustment now is inconsistent with the statute's text.
Subparagraph (b)(2) of Public Law 110-90 does not compel a contrary
result. As the U.S. Court of Appeals for the D.C. Circuit has
explained, that provision simply requires CMS ``to ignore recoupment
adjustments'' when ``calculat[ing] and apply[ing] the annual
`percentage increase' '' to base rates provided for in the Medicare
statute to account for inflation. Fresno Community Hospital & Medical
Center v. Cochran, 987 F.3d 158, 163 (D.C. Cir. 2021). The Secretary
has complied with that instruction. Similarly, the commenter's
citations to statements the agency made in the Federal Register about
its intent to unwind the reductions to the standardized amount the
agency made between FY 2013 and FY 2017 were made before Congress
passed clause (1)(B)(iii) and have been countermanded by that
provision. We therefore decline the commenter's suggestion to read into
section 7(b) of Public Law 110-90 implied authority to increase the
standardized payment amount by 0.9412%.
C. Changes to Specific MS-DRG Classifications
1. Discussion of Changes to Coding System and Basis for 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 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,
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.
[[Page 36550]]
Beginning with the MS-DRG classification change requests that are
submitted for FY 2027 consideration, we plan to inform requestors via
MEARIS<SUP>TM</SUP> if the MS-DRG classification change request is not
able to be considered with the upcoming fiscal year rulemaking cycle.
As in prior years, requests that may require more extensive analysis
may include those involving multiple MS-DRGs, overlapping logic across
multiple Major Diagnostic Categories (MDCs), special logic such as
diagnosis codes combined with procedure codes, and/or complex logic
including code clusters or multiple logic lists. Beginning with FY 2027
rulemaking, we will no longer summarize in the proposed and final rules
those requests that are not able to be considered for the upcoming FY.
As noted previously, interested parties had to submit MS-DRG
classification change requests for FY 2026 by October 20, 2024. As we
have discussed in prior rulemaking and as previously noted, we may not
be able to fully consider all of the requests that we receive for the
upcoming fiscal year. In the proposed rule, we noted those topics for
which further research and analysis are required, and which we will
continue to consider in connection with future rulemaking as summarized
in the discussion that follows. We further noted 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 were not
summarized or addressed in the discussion of the MS-DRG classification
change requests received for FY 2026.
As discussed in the proposed rule, 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 do the following:
<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.
In the proposed rule, we stated that we appreciated 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 also noted 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 noted 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
noted that, as discussed further in section II.C.5.c. of the preamble
of the 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 proposed modifications. In addition, we
stated that 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 noted in the
proposed rule 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 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 the FY 2026 IPPS/LTCH PPS proposed rule, we also noted that
we received an MS-DRG request related to cases reporting a hip or knee
procedure with a diagnosis of
[[Page 36551]]
periprosthetic joint infection (PJI) in MS-DRGs 463, 464, and 465. We
stated that in our review of the claims data to address that request we
noted that a subset of the cases also reported procedure code XW0V0P7.
As discussed in the proposed rule, 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. We stated that, for these reasons and those previously
described, we believed additional time was needed to review and
evaluate potential extensive modifications to the structure of these
MS-DRGs.
In the proposed rule, we noted that 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 stated 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. We
stated that 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.
Comment: A commenter (the manufacturer) thanked CMS for
consideration of its request to reassign 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 and expressed their
understanding that resources are limited such that not every request
may be considered each cycle. However, the commenter stated they were
hopeful that CMS would move forward with their recommendations, so that
hospitals supporting these case types in FY 2026 would be compensated
appropriately. The commenter provided additional information and
analyses for CMS' consideration, including analyses with the proposed
diagnosis code logic changes for MS-DRGs 456, 457, and 458, and stated
its findings reinforce that the reassignment request for FY 2026
involving MS-DRGs 426, 427, and 428; MS-DRGs 456, 457, and 458; and MS-
DRGs 447 and 448 to maintain payment accuracy and protect access to
care for Medicare beneficiaries requiring advanced sacropelvic fixation
is warranted, given the significant cost differences reported for these
cases compared to all other cases in related MS-DRGs.
Several commenters (members of an international society for spine
surgery) suggested that CMS finalize the requested reassignment of
cases reporting a sacroiliac joint fusion or pelvic fixation procedure
with another spinal fusion procedure code from the lower severity level
to the higher severity level spinal fusion MS-DRG in FY 2026 IPPS
rulemaking. The commenters stated that in comparison to standard spinal
fusion cases, procedures that include sacroiliac joint fusion and
pelvic fixation represent a substantial increase in surgical
complexity, operative time, and instrumentation cost. According to the
commenters, the addition of both sacroiliac joint fusion and pelvic
fixation adjunctive to spinal fusion introduces a level of surgical
intensity that is not currently accounted for in the existing MS-DRG
assignments. The commenters encouraged CMS to recognize the added
clinical burden and cost associated with these cases and assign them to
MS-DRGs that appropriately reflect their complexity.
A commenter stated that CMS should reconsider its rejection of the
request to reassign cases reporting procedures describing sacroiliac
joint and pelvic internal fixation devices using a tulip connector.
Another commenter stated that while there is an increased cost in
performing pelvic fixation, its use dramatically lowers the risk of
failure and reoperation, both of which lead to extraordinary cost
escalation for care of these patients. The commenter also stated that
long-term sustainability of the health care landscape depends on CMS
incentivizing and supporting better care for these spinal patients
through reassigning these higher cost cases to the higher paying MCC
MS-DRG in the relevant MS-DRG grouping.
In response to the discussion regarding the request to reassign
cases reporting procedure code XW0V0P7 (Introduction of antibiotic-
eluting bone void filler into bones, open approach, new technology
group 7) from the lower severity level to the highest (with MCC)
severity level MS-DRG among MS-DRGs 463, 464, and 465; MS-DRGs 466,
467, and 468; and MS-DRGs 492, 493, and 494, a commenter (the
manufacturer) expressed concern that CMS did not act on its request and
deferred the requested changes. The commenter stated its belief that
without action on its request, the payment outlook for cases reporting
procedure code XW0V0P7 for bone infection will result in underpayment
and suppress hospital adoption and patient access to improved clinical
outcomes. Additionally, the commenter stated that CMS' reasoning to
defer decision making on claims reporting procedure code XW0V0P7 was
based on the procedures non-O.R. designation and it was confusing to
them as most treatments of bone infection with the antibiotic-eluting
bone void filler (code XW0V0P7) are performed in the O.R. The commenter
further stated that CMS should reconsider its FY 2026 decision to
postpone action on the MS-DRG modification request to reassign cases
reporting procedure code XW0V0P7 and clarify the criteria for how
procedures are assigned O.R. versus non-O.R. status, as well as whether
having O.R. status for a procedure code is essential for the code to
potentially influence the MS-DRG assignment in the GROUPER. The
commenter provided additional information and analyses for CMS'
consideration and stated that cases
[[Page 36552]]
reporting procedure code XW0V0P7 show a compelling discrepancy in
resource use that should not be ignored.
With respect to our discussion regarding the request to modify the
GROUPER logic of MS-DRG 794, a commenter specifically stated they
appreciate CMS' ongoing examination of the GROUPER logic for the MS-
DRGs in MDC 15 (Newborns and Other Neonates with Conditions Originating
in Perinatal Period) to determine if restructuring the current MS-DRGs
would better recognize the clinical distinctions of these patient
populations.
Response: We thank the commenters for sharing their feedback on
these requests. As discussed in the proposed rule, 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 the relevant data for evaluating a potential change.
With respect to the comments received in response to our proposed
rule discussion of the request to modify the GROUPER logic of MS-DRGs
426, 427, and 428, MS-DRGs 456, 457, and 458, and MS-DRGs 447 and 448,
while many commenters stated their belief that a modification to the
logic of these MS-DRGs is warranted for FY 2026, we note that we did
not propose a change to the logic for FY 2026, nor did we state the
request was specifically rejected. Rather, we noted in the proposed
rule that we will continue to consider this request in connection with
future rulemaking. We appreciate the analysis that the commenter (the
manufacturer) performed and the findings it shared, including with the
proposed changes to the diagnosis code logic for MS-DRGs 456, 457, and
458; however, as discussed in the proposed rule, the proposed changes
for MS-DRGs 456, 457, and 458 involving diagnosis code logic were only
one of several considerations as to why additional time is needed to
evaluate the reassignment request (90 FR 18012). We note that the logic
for case assignment to MS-DRGs 456, 457, and 458 is also defined by
extensive fusions. In addition, MS-DRGs 426, 427, 428, 447, and 448
(that is, multiple level spinal fusions) recently became effective
October 1, 2024 which we are continuing to monitor. The data analysis
necessary to examine the intricate logic within the spinal fusion MS-
DRGs outlined in the request is complex and requires additional time
for careful consideration of case redistribution and potential relative
weight impacts, in connection with other related spinal fusion
procedure requests that may be discussed in future rulemaking.
With respect to the comment we received in response to our proposed
rule discussion of the request to reassign cases with ICD-10-PCS code
XW0V0P7 (Introduction of antibiotic-eluting bone void filler into
bones, open approach, new technology group 7) among MS-DRGs 463, 464,
and 465; MS-DRGs 466, 467, and 468; and MS-DRGs 492, 493, and 494,
while the commenter stated that CMS should reconsider the decision to
postpone action on the request to modify the MS-DRG logic for the
aforementioned MS-DRGs for FY 2026, we note that we did not propose a
change to the logic for FY 2026. Rather, we noted in the proposed rule
that we will continue to consider this request in connection with
future rulemaking. We appreciate the analysis that the commenter (the
manufacturer) performed and the findings it shared; however, we note
that in addition to assessing impacts in association with other MS-DRG
requests being considered, there are various types of bone void fillers
and additional data analysis would also need to be performed to assess
cases reporting the procedure codes describing those alternative
products for comparison. While we did not propose a change to the
assignment of these cases for FY 2026, we noted in our proposed rule
discussion that we will continue to consider this request in connection
with future rulemaking.
As previously discussed, we will continue to consider these issues
in connection with future rulemaking. As we develop and refine our
analysis of the claims data with respect to MS-DRGs in MDC 01, MDC 08,
and MDC 15, we welcome 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 the FY
2026 IPPS/LTCH PPS proposed rule we provided 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 the
proposed rule. We noted that this test software reflected the proposed
GROUPER logic for FY 2026. Therefore, it included 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 the 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 the proposed rule. Those
tables were not published in the Addendum to the 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 the 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 made 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 had access to the test software allowing them to build case
examples that reflect the proposals that were included in the proposed
rule. In addition, users were 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 were also 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. In the proposed rule
we also noted that, 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. As
such, we made 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>.
We noted in the proposed rule that the MCE manual is comprised of
two chapters: Chapter 1: Edit code lists provides a listing of each
edit, an
[[Page 36553]]
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. We also
stated that 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#115c42554356527d706262787778727065787e7f5279707f767451727c623f7979623f767e67"><span class="__cf_email__" data-cfemail="c5889681978286a9a4b6b6aca3aca6a4b1acaaab86ada4aba2a085a6a8b6ebadadb6eba2aab3">[email protected]</span></a> for our review and consideration.
In association with the proposed rule, we made available 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 diagnosis codes and ICD-10-PCS procedure
codes which 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>.
Comment: Commenters expressed appreciation that we provided a test
version of the ICD-10 MS-DRG GROUPER Software, Version 43, along with
mapping files to assist with analysis, however, the commenters stated
that this version essentially only allows for a case-by-case analysis
and a minimal batch analysis. The commenters stated that it would be
more beneficial to have a Batch z/OS version of the test GROUPER so
that it could be better utilized for broader and more meaningful
analysis purposes. The commenters requested that availability of a
Batch z/OS version of the test GROUPER be made publicly available for
all future rulemaking.
Response: We appreciate the commenters' feedback and will take the
suggestion into consideration.
Following are the changes that we proposed to the MS-DRGs for FY
2026. We invited 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 the FY 2026 IPPS/LTCH PPS proposed
rule. In some cases, we proposed changes to the MS-DRG classifications
based on our analysis of claims data and clinical appropriateness. In
other cases, we proposed to maintain the existing MS-DRG
classifications based on our analysis of claims data and clinical
appropriateness. As discussed in the 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 referred to these claims data as the ``September 2024
update of the FY 2024 MedPAR file.''
As explained in previous rulemaking (76 FR 51487), 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.
[[Page 36554]]
[GRAPHIC] [TIFF OMITTED] TR04AU25.039
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 the 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 2 years of data. This analysis includes 2 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 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.
We are making the FY 2026 ICD-10 MS-DRG GROUPER and Medicare Code
Editor (MCE) Software Version 43, the ICD-10 MS-DRG Definitions Manual
files Version 43 and the Definitions of Medicare Code Edits Manual
Version 43 available to the public on our 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>.
2. Pre-MDC MS-DRG 018 Chimeric Antigen Receptor (CAR) T-Cell and Other
Immunotherapies
In the FY 2026 IPPS/LTCH PPS proposed rule (90 FR 18015 through
18017), we discussed a request we received 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
[[Page 36555]]
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
questions and seek input on the process by which interested parties may
submit comments on potential procedure code mappings.
We stated in the proposed rule that we appreciated 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. As discussed 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 noted 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 referred the
reader to the discussion in section II.D. of the 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.
As discussed in the proposed rule, with respect to the requestor's
suggestion that a modification to the title of Pre-MDC MS-DRG 018 be
proposed, we noted that the requestor did not provide a specific
recommendation for FY 2026 consideration; however, we acknowledged 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 stated
that 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
stated 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 proposed rule discussion, 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
[[Page 36556]]
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
noted in the proposed rule 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. We noted that 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
noted in the proposed rule 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 noted in the proposed rule 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 noted in the
proposed rule 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 noted in the proposed rule 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 referred the
reader to section II.C.11. of the preamble of the FY 2026 IPPS/LTCH PPS
proposed rule for additional information regarding the ICD-10 C&M
Committee meeting process.
As discussed in the proposed rule, 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 referred 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.
We stated that 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 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.
We stated that our analysis of the September 2024 update of the FY
2024 MedPAR file yielded zero cases reporting the administration of
eladocagene exuparvovec; therefore, we believed it would be premature
to consider the creation of a new neurosurgical gene therapy MS-DRG at
this time. We also stated we appreciated
[[Page 36557]]
the detailed clinical information that the requestor provided and
acknowledged that cases involving neurosurgery are technically complex
and that patients undergoing these procedures tend to be critically
ill, many with rare diseases.
We noted 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 note that procedure code 00H033J
(Insertion of infusion device into brain, temporary, percutaneous
approach) that describes the procedure that uses the Smartflow[supreg]
Neuro Cannula was approved and finalized as reflected in the FY 2026
ICD-10-PCS code update files that were made publicly available on the
CMS website on June 6, 2025 at: <a href="https://www.cms.gov/medicare/coding-billing/icd-10-codes">https://www.cms.gov/medicare/coding-billing/icd-10-codes</a>.
We also noted, 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.
Comment: A commenter (the requestor) expressed appreciation for the
clarification CMS provided regarding the submission of comments related
to coding requests presented during the Spring ICD-10 Coordination and
Maintenance Committee Meeting and that comments submitted after the
Spring meeting will be shared with the groups responsible for
considering MS-DRG mappings. The commenter stated that while some
stakeholders may have the resources and expertise to review meeting
materials, infer potential requested mappings for all therapies
requesting new codes and submit mapping comments accordingly, many
stakeholders will not. The commenter stated that if an applicant is
requesting an MS-DRG mapping as part of the ICD-10-PCS process, this
should be made explicitly public in the meeting materials, even if it
is not discussed in the meeting itself. The commenter also stated that
CMS should not ask or expect all stakeholders to know enough about
clinical care and CMS' mapping processes to be able to suggest an
alternative mapping for a code, if required. The commenter reiterated
its request for CMS to introduce a process by which stakeholders can
review requested MS-DRG mappings as part of, or in parallel to, the
ICD-10-PCS code request process. The commenter also requested that CMS
utilize its established process to review and reconsider MS-DRG
assignment when stakeholders raise concerns about CMS' assignment
instead of expecting stakeholders to propose alternative mappings.
Response: We thank the commenter for the feedback. In response to
the commenter's assertion that not all stakeholders may have the
resources and expertise to review meeting materials, infer potential
requested mappings for all therapies requesting new codes and submit
mapping comments accordingly, we note that we have made all of the
information and materials necessary to conduct those actions publicly
available via the CMS website. Specifically, the ICD-10 Coordination
and Maintenance Committee Meeting materials are available at: <a href="https://www.cms.gov/medicare/coding-billing/icd-10-codes/icd-10-coordination-maintenance-committee-materials">https://www.cms.gov/medicare/coding-billing/icd-10-codes/icd-10-coordination-maintenance-committee-materials</a>, and the meeting process is summarized
in the annual rulemakings 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>. In addition,
the ICD-10 MS-DRG Definitions Manual is made publicly available via 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>.
In response to the commenter's statement that if an applicant is
requesting an MS-DRG mapping as part of the ICD-10-PCS process it
should be made public in the meeting materials even if it is not
discussed in the meeting itself, we note that, as discussed in the
preamble of the proposed rule (90 FR 18016) and this final rule, the
purpose of the ICD-10 Coordination and Maintenance 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, we disagree that the information should be
included in the meeting materials. We underscore that the focus of the
ICD-10 Coordination and Maintenance Committee meetings is on updates
and maintenance to the ICD-10 code sets and not about how a potential
new code may be designated or assigned under the IPPS, which is
addressed through rulemaking. These are two separate and distinct
processes, each with their own objectives and timelines.
In response to the commenter's statement that CMS should not ask or
expect all stakeholders to know enough about clinical care and CMS'
mapping processes to be able to suggest an alternative mapping for a
code, if required, we note that under our established process, we
consider requests for MS-DRG classification changes on an annual basis
that are submitted via MEARIS<SUP>TM</SUP> at: <a href="https://mearis.cms.gov/public/home">https://mearis.cms.gov/public/home</a> by the designated October 20 deadline for the upcoming
fiscal year. If a proposal is subsequently put forth in rulemaking and
members of the public submit comments expressing disagreement with that
proposal (for example, proposed new MS-DRG(s), proposed reassignment of
diagnosis and/or procedure codes, or their designation), the public
comments routinely provide the rationale behind the disagreement as
well as alternative suggestions) for our consideration, which we may be
able to further evaluate. With respect to the mapping process, as
discussed in the preamble of the proposed rule (90 FR 18016) and this
final rule, under our established process, when a new procedure code is
finalized, 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.
Comment: A commenter (the requestor) expressed appreciation that
CMS shared the types of concerns and questions raised by stakeholders
about the rationale for mapping new ICD-10-PCS codes for novel
therapies into Pre-MDC MS-DRG 018; however, the commenter requested
that CMS discuss
[[Page 36558]]
the rationale for mapping Orca-T allogeneic T-cell immunotherapy to
Pre-MDC MS-DRG 018.
Response: We thank the commenter for the feedback. The procedure
code proposal for Orca-T allogeneic T-cell immunotherapy was discussed
at the March 19-20, 2024 ICD-10 Coordination and Maintenance Committee
meeting. We refer the reader to the meeting materials on the CMS
website at: <a href="https://www.cms.gov/medicare/coding-billing/icd-10-codes/icd-10-coordination-maintenance-committee-materials">https://www.cms.gov/medicare/coding-billing/icd-10-codes/icd-10-coordination-maintenance-committee-materials</a> for additional
information regarding the request. ICD-10-PCS codes XW033BA
(Introduction of Orca-T allogeneic T-cell immunotherapy into peripheral
vein, percutaneous approach, new technology group 10) and XW043BA
(Introduction of Orca-T allogeneic T-cell immunotherapy into central
vein, percutaneous approach, new technology group 10) became effective
October 1, 2024, for FY 2025. Under our established process, we
reviewed the predecessor code assignments. The predecessor codes for
Orca-T allogeneic T-cell immunotherapy (hereafter referred to as Orca-
T) are procedure codes 3E033GC (Introduction of other therapeutic
substance into peripheral vein, percutaneous approach) and 3E043GC
(Introduction of other therapeutic substance into central vein,
percutaneous approach) that are designated as non-O.R. and do not
affect MS-DRG assignment. We then reviewed other factors associated
with Orca-T. Notably, Orca-T is a precision-engineered allogeneic stem
cell and T-cell immunotherapy biologic (that is, a combination therapy
comprised of immune cells, including regulatory T-cells (Tregs) and
conventional T-cells (Tcons), and stem cells) that is in clinical
trials and regulated under FDA section 351 of the Public Health Service
Act (PHSA) as a biologic.
Allogeneic hematopoietic stem cell transplant (alloHSCT) can
provide a curative therapy for many patients with advanced hematologic
malignancies. Unfortunately, despite advancements in identifying
matching donors and medical care, patients can experience a variety of
post-transplant complications including Graft Versus Host Disease
(GvHD), infection and organ failure. GvHD is a condition in which the
donated cells attack the recipient's tissues which can lead to end
organ damage.
Orca-T is derived from an HLA matched donor and combines progenitor
stem cells along with highly purified T-cells in the form of regulatory
T-cells (Tregs, a specialized CD4+ T cell subset) and conventional T-
cells (Tcons). Because of its purified nature, the Tregs can
proliferate and exist in a patient's tissues in a fashion not normally
possible. While the stem cells serve to build a long term immune system
in the recipient, the Tregs act to protect the patient's tissues and
organs from GvHD and other toxicities. The Tcons component is designed
to accelerate the reconstitution of a patient's immune system,
mediating the graft-versus-leukemic effect, graft-versus-infection and
the inflammatory responses, providing protection against infection.
Establishment of a successful allograft requires an approach that
balances an enhancement of the graft-vs-tumor and graft-vs-infection
effects while avoiding or limiting GvHD. While some immunotherapeutic
agents treat an active disease process, the specialized cells in Orca-T
are intended to immunologically mitigate significant post allograft
complications such as GvHD and infection.
We note that both CAR T-cell therapy and Orca T-cell therapy are
forms of immunotherapies that are indicated for patients diagnosed with
acute lymphoblastic leukemia (ALL), among other types of cancer. One of
the challenges experienced to date with the treatment of ALL is GvHD,
which is what Orca-T is formulated to address. We also note that there
are other procedure codes describing both allogeneic CAR T-cell and
non-CAR T-cell immunotherapy currently assigned to MS-DRG 018.
Therefore, we believe the assignment of Orca T-cell immunotherapy to
Pre-MDC MS-DRG 018 is appropriate.
Comment: A commenter stated that the procedure code describing
valoctocogene roxaparvovec is listed in Table 6B in association with
the proposed rule and a proposed mapping to Pre-MDC MS-DRG 018, but CMS
did not discuss any rationale for this proposal in the rule text. The
commenter stated that the title of Pre-MDC MS-DRG 018 is Chimeric
Antigen Receptor (CAR) T-Cell and Other Immunotherapies, and
valoctocogene roxaparvovec is an off-the-shelf in vivo gene therapy
that is neither a CAR-T nor an immunotherapy. Additionally, according
to the commenter, it does not require the same types of complex and
specialized clinical resources to administer as the other therapies
assigned to Pre-MDC MS-DRG 018. The commenter further stated that, as a
result, and without any discussion or explanation from CMS about why
its medical advisors have proposed this, they assume that this proposed
assignment is simply based on the manufacturer's request to assign its
product to Pre-MDC MS-DRG 018 as part of the ICD-10-PCS code request
application. The commenter stated that CMS' acceptance of this
requested mapping is concerning as it seems that resource homogeneity
is the only factor being relied upon. The commenter stated its
understanding is that CMS has always discussed the importance of
balancing both clinical and resource homogeneity when considering MS-
DRG assignments for new therapies. The commenter provided an example
stating that CMS assigned several hematopoietic stem cell gene
therapies to autologous transplant MS-DRGs 016 and 017 (Autologous Bone
Marrow Transplant with CC/MCC and without CC/MCC, respectively) based
on the clinical similarity of the services being provided to the
patient, rather than basing assignment on price point. According to the
commenter, if the latter had been deemed more critical at the time of
those assignments, then CMS would have assigned the therapies to Pre-
MDC MS-DRG 018 as well. The commenter also stated that CMS did not
propose to map eladocagene exuparvovec to MS-DRG 018 after denying its
request for a new MS-DRG (as discussed later in this section), though
eladocagene exuparvovec has a similar price point. The commenter stated
it cannot determine any consistent logic guiding the variation in
recent mapping proposals and decisions.
The commenter requested that CMS not finalize the proposed mapping
of valoctocogene roxaparvovec to Pre-MDC MS-DRG 018 due to differences
in clinical complexity and resource use. The commenter stated that CMS
should use its established mapping process and input from its clinical
advisors to assign valoctocogene roxaparvovec to a more clinically
appropriate MS-DRG.
Response: In response to the commenter's request that CMS not
finalize the proposed mapping of valoctocogene roxaparvovec to Pre-MDC
MS-DRG 018 because it is neither a CAR-T nor an immunotherapy and does
not require the same types of complex and specialized clinical
resources to administer as the other therapies assigned to Pre-MDC MS-
DRG 018, we note that, as discussed in prior rulemaking, consideration
is given to the similarities and differences in resource utilization
among patients in each MS-DRG and we strive to ensure that resource
utilization is relatively consistent across patients in each MS-DRG.
However, some variation in resource intensity will remain among the
patients in each MS-DRG because
[[Page 36559]]
the definition of the MS-DRG is not so specific that every patient is
identical, rather the average pattern of resource intensity of a group
of patients in an MS-DRG can be predicted. We note that historically,
in the development of the DRGs, the initial step in the determination
of the DRG had been the assignment of the appropriate MDC based on the
principal diagnosis, however, beginning with the eighth version of the
GROUPER (CMS 8.0), the initial step in DRG assignment was based on the
procedure being performed, thus the creation of the Pre-MDC DRGs, where
the patient is assigned to these DRGs independent of the MDC of the
principal diagnosis. Therefore, the logic for case assignment to Pre-
MDC MS-DRG 018 does not preclude the assignment of other therapies
indicated in the treatment of patients with different diagnoses. In our
review of the MS-DRG assignment of valoctocogene roxaparvovec, we
recognized that this technology is defined as a gene therapy. We also
note that similar to the discussions in prior rulemaking with respect
to the difficulty in predicting what the associated costs will be in
the future for CAR T-cell and other immunotherapies that remain under
development (87 FR 48806), it is also difficult to predict what the
associated costs will be in the future for cell and gene therapies that
remain under development or in clinical trials.
In response to the commenter's assertion that CMS did not use its
established mapping process and input from its clinical advisors to
assign valoctocogene roxaparvovec to a more clinically appropriate MS-
DRG, as discussed in the preamble of the proposed rule (90 FR 18016)
and this final rule, and as noted in prior rulemaking, 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. As noted previously and in
prior rulemaking, 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.). We note that the proposal to create
new procedure codes that describe the administration of valoctocogene
roxaparvovec was discussed at the September 10, 2024 ICD-10
Coordination and Maintenance Committee meeting. The predecessor codes
to describe the administration of valoctocogene roxaparvovec are ICD-
10-PCS codes 3E033GC (Introduction of other therapeutic substance into
peripheral vein, percutaneous approach) and 3E043GC (Introduction of
other therapeutic substance into central vein, percutaneous approach)
which are designated as non-O.R. and do not impact MS-DRG assignment.
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 code request, including a recording of the
discussion and the related meeting materials. We also note that the
procedure codes to describe the administration of valoctocogene
roxaparvovec were approved and finalized as reflected in Table 6B.--New
Procedure Codes associated with the proposed rule and this final rule
(and available via the CMS website at: <a href="https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps">https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps</a>) as well as
reflected in the FY 2026 ICD-10-PCS code update files that were made
publicly available on the CMS website on June 6, 2025 at: <a href="https://www.cms.gov/medicare/coding-billing/icd-10-codes">https://www.cms.gov/medicare/coding-billing/icd-10-codes</a>. As discussed in
section II.C.11. of the preamble of the FY 2026 IPPS/LTCH PPS proposed
rule and this final rule, the code titles are adopted as part of the
ICD-10 Coordination and Maintenance Committee meeting process that have
been finalized after the review of public comments. As also discussed
in the preamble of the proposed rule (90 FR 18067) and this final rule,
we proposed the MDC and MS-DRG assignments for the new diagnosis codes
and procedure codes as set forth in Table 6A.--New Diagnosis Codes and
Table 6B.--New Procedure Codes associated with the proposed rule.
Therefore, the public has the opportunity to comment and provide
feedback on the proposed assignments for CMS' consideration, which is
subsequently included in the final rule with a summary of the comments
and feedback and CMS' response, as is reflected in the discussion in
this section of this final rule.
In response to the commenter's statement that valoctocogene
roxaparvovec does not require the same types of complex and specialized
clinical resources to administer as other therapies assigned to Pre-MDC
MS-DRG 018, we note that valoctocogene roxaparvovec is indicated in the
treatment of Hemophilia A, an X-linked genetic disorder that results in
a dysfunction in the gene encoding for Factor VIII which is essential
for proper coagulation. Patients may have varying degrees of functional
activity of Factor VIII with severe activity (< 1IU per deciliter)
resulting in spontaneous hemorrhage. This can result in life
threatening hemorrhages into the brain or lead to debilitating
hemorrhages in the soft tissues or joints leading to chronic pain or
arthropathy. While prophylactic regimens may improve outcomes, they do
not address the underlying dysfunctional gene encoding for Factor VIII.
Valoctocogene roxaparvovec is a one-time therapy that uses an adeno-
associated virus (AAV5) to deliver a functional copy of the F8 gene
which is responsible for the production of Factor VIII.
Valoctocogene roxaparvovec is similar to other gene based therapies
currently assigned to Pre-MDC MS-DRG 18 such as prademagene zamikeracel
(Zevaskyn<SUP>TM</SUP>) and CAR T-cell therapy in that these treatments
involve introduction of genetic material into a patient's cells to
treat a disease process. CAR T-cell therapy uses a patient's
genetically modified T-cells to treat cancer while prademagene
zamikeracel and valoctocogene roxaparvovec introduce functional
deoxyribonucleic acid (DNA) copies into a patient's skin and liver,
respectively, to correct an inherited genetic dysfunction. While they
are similar in character to the hematopoietic stem cell gene therapies
assigned to autologous transplant MS-DRGs 016 and 017 (Autologous Bone
Marrow Transplant with CC/MCC and without CC/MCC, respectively),
resource utilization differs. Prademagene zamikeracel and valoctocogene
roxaparvovec involve introduction of genetic material into mature cells
while hematopoietic gene therapy involves introduction of genetic
material into stem cells which require a level of resource utilization
more akin to other therapies in MS-DRGs 016 and 017.
In response to the commenter's assumption that the manufacturer
requested assignment to Pre-MDC MS-DRG 018 in association with its
procedure code request, we note that it did not. We also take this
opportunity to emphasize that, as has been discussed in prior
rulemaking with respect to gene therapies, 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
[[Page 36560]]
to appropriately reflect resource utilization while maintaining
clinical coherence and stability in the relative weights under the IPPS
MS-DRGs. We also note that valoctogene roxaparvovec is primarily
administered in the outpatient setting (for example, hemophilia
treatment centers). However, in rare instances when the therapy is
administered in the inpatient setting or the patient must be
transferred to the inpatient setting, providers are equipped with a
specific procedure code to report its use in connection with a
predictable payment mechanism under the IPPS.
Comment: A commenter stated they support appropriate and ongoing
refinement of the MS-DRG system and greater clarity with respect to how
CMS renders decisions regarding ICD-10-PCS codes mapped to Pre-MDC MS-
DRG 018. Another commenter recommended that CMS dedicate space in each
IPPS proposed rule to identify relevant ICD-10-PCS codes that might be
assigned to Pre-MS-DRG 018, along with preliminary rationales for these
potential assignments.
Response: We appreciate the commenters' feedback. We note that
while the establishment of Pre-MDC MS-DRG 018 has presented unique
operational considerations under the IPPS, there are also over 700
other MS-DRGs that warrant continued review for ongoing refinements. In
response to how CMS renders decisions regarding the mapping of
procedure codes to a Pre-MDC MS-DRG, as discussed in the preamble of
the proposed rule (90 FR 18068) and in this final rule, we review the
predecessor code and MS-DRG assignment most closely associated with the
new diagnosis or 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 or treatment of the
condition. As previously noted, this process does not automatically
result in the new diagnosis or procedure code being proposed for
assignment to the same MS-DRG or to have the same designation as the
predecessor code.
Comment: A commenter stated it is unclear why discussion of the
request to create a new MS-DRG to describe neurosurgical gene therapies
was included under the Pre-MDC MS-DRG 018 section of the proposed rule
instead of under MDC 10 (Endocrine, Nutritional and Metabolic Diseases
and Disorders) where prior discussions of eladocagene exuparvovec have
been included. The commenter indicated that if CMS placed this
discussion in the Pre-MDC MS-DRG 018 section in an effort to seek
comments about whether Pre-MDC MS-DRG 018 should be broadened to
include eladocagene exuparvovec and other gene therapies that it be
made explicit what information the agency is seeking from stakeholders
in advance of the FY 2027 IPPS/LTCH PPS rulemaking cycle. The commenter
also stated that if CMS intends for Pre-MDC MS-DRG 018 to be the
primary Pre-MDC MS-DRG for all cell and gene therapies until further
modifications can be made, the agency should propose to rename the MS-
DRG and be consistent with mapping practices and rationale. The
commenter further remarked that CMS' proposed rule analysis stated no
cases reporting eladocagene exuparvovec were found, however, according
to the commenter, because the product was not approved until November
2024, cases would not be expected to appear in the data.
Response: As stated in the preamble of the proposed rule (90 FR
18016), 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, which we believe was appropriately placed and discussed in that
section of the preamble of the proposed rule. As also explicitly stated
in the preamble of the proposed rule (90 FR 18017), 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, therefore, we believe that our intentions were clearly
stated. In response to the commenter's suggestion that a proposal to
revise the title for Pre-MDC MS-DRG 018 should be put forth if CMS aims
to temporarily designate Pre-MDC MS-DRG 018 as the primary Pre-MDC MS-
DRG for all cell and gene therapies, we note that, as also stated in
the preamble of the proposed rule, (90 FR 18016), 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 stated we will continue
to review additional feedback and suggestions in connection with future
rulemaking. In response to the commenter's remarks that CMS' proposed
rule analysis stated no cases were found to report the administration
of eladocagene exuparvovec and because the product was not approved
until November 2024, cases would not be expected to appear in the data,
we note that procedure code XW0Q316 (Introduction of eladocagene
exuparvovec into cranial cavity and brain, percutaneous approach, new
technology group 6) that describes the administration of eladocagene
exuparvovec became effective October 1, 2020 (FY 2021) and a single
case was previously identified in the data in MS-DRG 829
(Myeloproliferative Disorders or Poorly Differentiated Neoplasms with
Other Procedures with CC/MCC) with an average length of stay of 2 days
and average costs of $1,544, as discussed in the FY 2023 IPPS/LTCH PPS
final rule (87 FR 48854). We further note that, as also discussed in
prior rulemaking, the creation of a code to describe a technology that
is utilized in the performance of a procedure or service does not
require FDA approval of the technology nor is the proposed and final
assignment of a procedure code to an MS-DRG dependent upon a product's
FDA approval (86 FR 44806).
Several commenters provided general feedback on the subject of cell
and gene therapies for CMS' consideration in association with the Pre-
MDC MS-DRG 018 proposed rule discussion. Notably, commenters suggested
that CMS: (1) issue a Request for Information (RFI) to obtain
additional insight on provider experiences, including information on
the therapies under development and expected to become available in the
near future, as well as features of their administration and the
affected patient populations, (2) develop a payment model or long-term
solution for appropriate payment that also accounts for products whose
new technology add-on payment is expiring, and (3) ensure transparency
in the refinement process by collaborating with stakeholders.
We appreciate the commenters' recommendations and feedback as we
continue to examine the complexities involved with these therapies
under the IPPS. We intend to address any potential modifications to the
MS-DRGs through future notice and comment rulemaking.
3. MDC 01 (Diseases and Disorders of the Nervous System)
a. Logic for MS-DRGs 023 Through 027
As discussed in the FY 2026 IPPS/LTCH PPS proposed rule (90 FR
18017
[[Page 36561]]
through 18025), 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 final 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.
We noted in the proposed rule that 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 (Craniotomy with Acute Complex CNS Principal Diagnosis with MCC or
Antineoplastic Implant). 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, as discussed in the proposed rule, we
reviewed the GROUPER logic for MS-DRGs 023 and 024 (Craniotomy with
Acute Complex CNS Principal Diagnosis without MCC). We noted in the
proposed rule that 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-DRGs 023 and 024 contain a logic list referred to as ``Chemotherapy
Implant.'' This logic list includes the following four ICD-10-PCS
codes:
[GRAPHIC] [TIFF OMITTED] TR04AU25.040
We stated that 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, we noted 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 Responsive Neurostimulation (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.
As discussed in the preamble of the proposed rule, 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:
[[Page 36562]]
[GRAPHIC] [TIFF OMITTED] TR04AU25.041
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 stated we reviewed the claims data, and did 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. We stated that
the results of the claims analysis as 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, 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 did not propose
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 did 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 in the proposed
rule, 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, in the proposed rule we
stated 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 was 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 the FY 2026
IPPS/LTCH PPS proposed rule to ensure clinical coherence between these
cases and the other cases with which they would 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:
[GRAPHIC] [TIFF OMITTED] TR04AU25.042
[[Page 36563]]
In the proposed rule we stated that 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:
[GRAPHIC] [TIFF OMITTED] TR04AU25.043
In review of this finding, we stated 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.
[GRAPHIC] [TIFF OMITTED] TR04AU25.044
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 noted in the proposed rule 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 stated 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 proposed 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 also proposed 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.
Comment: Commenters supported the proposals to add procedure codes
00H001Z, 00H005Z, 00H031Z, and 00H041Z to the ``Chemotherapy Implant''
logic list in MS-DRGs 023 and 024 and to change the description of the
logic list in MS-DRGs 023 and 024 from ``Chemotherapy Implant'' to
``Antineoplastic Implant'', effective October 1, 2025, for FY 2026.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to add procedure codes 00H001Z, 00H005Z,
00H031Z, and 00H041Z to the ``Chemotherapy Implant'' logic list in MS-
DRGs 023 and 024, without modification, effective October 1, 2025, for
FY 2026. We are also finalizing the change of the description of the
logic list in MS-DRGs 023 and 024 from ``Chemotherapy Implant'' to
``Antineoplastic Implant''.
As mentioned previously, and as discussed in the 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.
[[Page 36564]]
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.''
We stated in the proposed rule that 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 percent 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.
We stated in the proposed rule that 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, as discussed in the proposed rule, 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 stated that 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 noted in the
proposed rule 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 the 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 stated 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:
[GRAPHIC] [TIFF OMITTED] TR04AU25.045
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.
In the proposed rule, we stated we reviewed the claims data, and
the data did 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
[[Page 36565]]
reported. We stated 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 stated 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 did not propose 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 did 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, we
stated 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
stated 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 the
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, as discussed in the proposed rule,
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).
In the proposed rule, we stated 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.
In reviewing this request, we noted in the proposed rule 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. We further noted that 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.
In the proposed rule, we stated 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 the FY 2026 IPPS/LTCH PPS proposed rule and this final
rule (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.
[[Page 36566]]
As discussed in the proposed rule, 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:
[GRAPHIC] [TIFF OMITTED] TR04AU25.046
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 M
[…truncated; see source link]Indexed from Federal Register on August 4, 2025.
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