Proposed Rule2026-07203
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) 2027 Rates; Requirements for Quality Programs; and Other Policy Changes
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
April 14, 2026
Issuing agencies
Health and Human Services DepartmentCenters for Medicare & Medicaid Services
Abstract
This proposed rule would revise the Medicare hospital inpatient prospective payment systems (IPPS) for operating and capital- related costs of acute care hospitals; make changes relating to Medicare graduate medical education (GME) for teaching hospitals; update the payment policies and the annual payment rates for the Medicare prospective payment system (PPS) for inpatient hospital services provided by long-term care hospitals (LTCHs); update and make changes to requirements for certain quality programs; and make other policy-related changes.
Full Text
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[Federal Register Volume 91, Number 71 (Tuesday, April 14, 2026)]
[Proposed Rules]
[Pages 19312-19887]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-07203]
[[Page 19311]]
Vol. 91
Tuesday,
No. 71
April 14, 2026
Part III
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Parts 405, 412, 413, et al.
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) 2027 Rates;
Requirements for Quality Programs; and Other Policy Changes; Proposed
Rule
Federal Register / Vol. 91 , No. 71 / Tuesday, April 14, 2026 /
Proposed Rules
[[Page 19312]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 405, 412, 413, 415, 419, 495, and 512
[CMS-1849-P]
RINs 0938-AV79
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) 2027
Rates; Requirements for Quality Programs; and Other Policy Changes
AGENCY: Centers for Medicare & Medicaid Services (CMS) and Department
of Health and Human Services (HHS).
ACTION: Proposed rule.
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SUMMARY: This proposed rule would revise the Medicare hospital
inpatient prospective payment systems (IPPS) for operating and capital-
related costs of acute care hospitals; make changes relating to
Medicare graduate medical education (GME) for teaching hospitals;
update the payment policies and the annual payment rates for the
Medicare prospective payment system (PPS) for inpatient hospital
services provided by long-term care hospitals (LTCHs); update and make
changes to requirements for certain quality programs; and make other
policy-related changes.
DATES: To be assured consideration, comments must be received at one of
the addresses provided in the ADDRESSES section, no later than 5 p.m.
EDT on April 10, 2026.
ADDRESSES: In commenting, please refer to file code CMS-1849-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
Comments, including mass comment submissions, must be submitted in
one of the following three ways (please choose only one of the ways
listed):
1. Electronically. You may (and we encourage you to) submit
electronic comments on this regulation to <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
Follow the instructions under the ``submit a comment'' tab.
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-1849-P, P.O. Box 8013,
Baltimore, MD 21244-8013.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments via
express or overnight mail to the following address ONLY: Centers for
Medicare & Medicaid Services, Department of Health and Human Services,
Attention: CMS-1849-P, Mail Stop C4-26-05, 7500 Security Boulevard,
Baltimore, MD 21244-1850.
For information on viewing public comments, we refer readers to the
beginning of the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT: Donald Thompson, and Michele Hudson,
(410) 786-4487 or <a href="/cdn-cgi/l/email-protection#387c797b785b554b1650504b165f574e"><span class="__cf_email__" data-cfemail="3f7b7e7c7f5c524c1157574c11585049">[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, and Low-Volume Hospital
Payment Adjustment.
Emily Lipkin, Jim Mildenberger and Michael Raftery,
<a href="/cdn-cgi/l/email-protection#4c080d0f0c2f213f6224243f622b233a"><span class="__cf_email__" data-cfemail="1753565457747a64397f7f6439707861">[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#a2ecc7d5f6c7c1cae2c1cfd18ccacad18cc5cdd4"><span class="__cf_email__" data-cfemail="064863715263656e46656b75286e6e7528616970">[email protected]</span></a>, New Technology Add-On Payments
Issues.
Mady Hue, <a href="/cdn-cgi/l/email-protection#b4d9d5c6ddd8c19adcc1d1f4d7d9c79adcdcc79ad3dbc2"><span class="__cf_email__" data-cfemail="a0cdc1d2c9ccd58ec8d5c5e0c3cdd38ec8c8d38ec7cfd6">[email protected]</span></a>, and Andrea Hazeley,
<a href="/cdn-cgi/l/email-protection#ed8c83899f888cc3858c9788818894ad8e809ec385859ec38a829b"><span class="__cf_email__" data-cfemail="a7c6c9c3d5c2c689cfc6ddc2cbc2dee7c4cad489cfcfd489c0c8d1">[email protected]</span></a>, MS-DRG Classifications Issues.
David O'Reilly, <a href="/cdn-cgi/l/email-protection#b8fcd9ced1dc96f7caddd1d4d4c1f8dbd5cb96d0d0cb96dfd7ce"><span class="__cf_email__" data-cfemail="9fdbfee9f6fbb1d0edfaf6f3f3e6dffcf2ecb1f7f7ecb1f8f0e9">[email protected]</span></a>, Rural Community Hospital
Demonstration Program Issues.
Jeris Smith, <a href="/cdn-cgi/l/email-protection#6d07081f041e431e000419052d0e001e4305051e430a021b"><span class="__cf_email__" data-cfemail="29434c5b405a075a44405d41694a445a0741415a074e465f">[email protected]</span></a>, Frontier Community Health
Integration Project (FCHIP) Demonstration Issues.
Lang Le, <a href="/cdn-cgi/l/email-protection#9ff3fef1f8b1f3fadffcf2ecb1f7f7ecb1f8f0e9"><span class="__cf_email__" data-cfemail="83efe2ede4adefe6c3e0eef0adebebf0ade4ecf5">[email protected]</span></a>, Hospital Readmissions Reduction
Program and Hospital Acquired Condition Reduction Program--
Administration Issues.
Ngozi Uzokwe, <a href="/cdn-cgi/l/email-protection#c7a9a0a8bdaee9b2bda8acb0a287a4aab4e9afafb4e9a0a8b1"><span class="__cf_email__" data-cfemail="cea0a9a1b4a7e0bbb4a1a5b9ab8eada3bde0a6a6bde0a9a1b8">[email protected]</span></a>, Hospital Acquired Condition
Reduction Program and Hospital Readmissions Reduction Program--Measures
Issues.
Julia Venanzi, <a href="/cdn-cgi/l/email-protection#bcd6c9d0d5dd92cad9d2ddd2c6d5fcdfd1cf92d4d4cf92dbd3ca"><span class="__cf_email__" data-cfemail="147e61787d753a62717a757a6e7d547779673a7c7c673a737b62">[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#157870797c6666743b7d74727067557678663b7d7d663b727a63"><span class="__cf_email__" data-cfemail="fd909891948e8e9cd3959c9a988fbd9e908ed395958ed39a928b">[email protected]</span></a>, and Ngozi Uzokwe,
<a href="/cdn-cgi/l/email-protection#721c151d081b5c07081d19051732111f015c1a1a015c151d04"><span class="__cf_email__" data-cfemail="523c353d283b7c27283d39253712313f217c3a3a217c353d24">[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.
John Green, <a href="/cdn-cgi/l/email-protection#c8a2a7a0a6e6afbaadada6f988aba5bbe6a0a0bbe6afa7be"><span class="__cf_email__" data-cfemail="412b2e292f6f263324242f7001222c326f2929326f262e37">[email protected]</span></a>, PPS-Exempt Cancer Hospital
Quality Reporting Program--Administration Issues.
Kristina Rabarison, <a href="/cdn-cgi/l/email-protection#80cbf2e9f3f4e9eee1aed2e1e2e1f2e9f3efeec0e3edf3aee8e8f3aee7eff6"><span class="__cf_email__" data-cfemail="501b22392324393e317e023132312239233f3e10333d237e3838237e373f26">[email protected]</span></a>, PPS-Exempt
Cancer Hospital Quality Reporting Program--Measure Issues.
Ariel Cress, <a href="/cdn-cgi/l/email-protection#e1a09388848dcfa293849292a1828c92cf898992cf868e97"><span class="__cf_email__" data-cfemail="a1e0d3c8c4cd8fe2d3c4d2d2e1c2ccd28fc9c9d28fc6ced7">[email protected]</span></a>, Long-Term Care Hospital
Quality Reporting Program--Administration Issues.
Jessica Warren, <a href="/cdn-cgi/l/email-protection#18727d6b6b717b79366f796a6a7d76587b756b3670706b367f776e"><span class="__cf_email__" data-cfemail="8ee4ebfdfde7edefa0f9effcfcebe0ceede3fda0e6e6fda0e9e1f8">[email protected]</span></a>, and Lisa Marie Gomez,
<a href="/cdn-cgi/l/email-protection#90dcf9e3f1ddf1e2f9f5bed7fffdf5eaa1d0f3fde3bef8f8e3bef7ffe6"><span class="__cf_email__" data-cfemail="98d4f1ebf9d5f9eaf1fdb6dff7f5fde2a9d8fbf5ebb6f0f0ebb6fff7ee">[email protected]</span></a>, Medicare Promoting Interoperability
Program.
<a href="/cdn-cgi/l/email-protection#3b78767672646f7e7a767b58564815535348155c544d"><span class="__cf_email__" data-cfemail="57141a1a1e080312161a17343a24793f3f2479303821">[email protected]</span></a>, Transforming Episode Accountability Model
(TEAM).
<a href="/cdn-cgi/l/email-protection#07444d552a5f47646a74296f6f7429606871"><span class="__cf_email__" data-cfemail="adeee7ff80f5edcec0de83c5c5de83cac2db">[email protected]</span></a>, Comprehensive Care for Joint Replacement
Expanded (CJR-X) Model.
Katherine McDonald, <a href="/cdn-cgi/l/email-protection#6902081d010c1b00070c47040a0d060708050d290a041a4701011a470e061f"><span class="__cf_email__" data-cfemail="573c36233f32253e3932793a34333839363b3317343a24793f3f2479303821">[email protected]</span></a>, Amanda Michael,
<a href="/cdn-cgi/l/email-protection#dfbeb2beb1bbbef1b2b6bcb7bebab39fbcb2acf1b7b7acf1b8b0a9"><span class="__cf_email__" data-cfemail="d4b5b9b5bab0b5fab9bdb7bcb5b1b894b7b9a7fabcbca7fab3bba2">[email protected]</span></a>, and Kellie Shannon,
<a href="/cdn-cgi/l/email-protection#5239373e3e3b377c213a333c3c3d3c12313f217c3a3a217c353d24"><span class="__cf_email__" data-cfemail="d6bdb3bababfb3f8a5beb7b8b8b9b896b5bba5f8bebea5f8b1b9a0">[email protected]</span></a>, Organ Acquisition Payment, Reasonable Cost
Payment, and Appeals for Independent Organ Procurement Organizations
(IOPOs) and Histocompatibility Laboratories (HCLs).
SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following
website as soon as possible after they have been received: <a href="https://www.regulations.gov">https://www.regulations.gov</a>. Follow the search instructions on that website to
view public comments. CMS will not post on <a href="http://Regulations.gov">Regulations.gov</a> public
comments that make threats to individuals or institutions or suggest
that the commenter will take actions to harm an individual. CMS
continues to encourage individuals not to submit duplicative comments.
We will post acceptable comments from multiple unique commenters even
if the content is identical or nearly identical to other comments.
Plain Language Summary: In accordance with 5 U.S.C. 553(b)(4), a
[[Page 19313]]
plain language summary of this rule may be found at <a href="https://www.regulations.gov/">https://www.regulations.gov/</a>.
Tables Available on the CMS Website
The IPPS tables for this fiscal year (FY) 2027 proposed rule are
available on the CMS website at <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index</a>.html. Click on the link
on the left side of the screen titled ``FY 2027 IPPS Proposed Rule Home
Page'' or ``Acute Inpatient--Files for Download.'' The LTCH PPS tables
for this FY 2027 proposed rule are available on the CMS website at
<a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/index.html">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/index.html</a> under the list item for Regulation
Number CMS-1849-P. For further details on the contents of the tables
referenced in this proposed rule, we refer readers to section VI. of
the Addendum to this FY 2027 IPPS/LTCH PPS proposed rule.
Readers who experience any problems accessing any of the tables
that are posted on the CMS websites, as previously identified, should
contact Michael Treitel, <a href="/cdn-cgi/l/email-protection#4703060407242a34692f2f3469202831"><span class="__cf_email__" data-cfemail="7d393c3e3d1e100e5315150e531a120b">[email protected]</span></a>.
I. Executive Summary and Background
A. Executive Summary
1. Purpose and Legal Authority
This FY 2027 IPPS/LTCH PPS proposed rule would make payment and
policy changes under the Medicare inpatient prospective payment system
(IPPS) for operating and capital-related costs of acute care hospitals
as well as for certain hospitals and hospital units excluded from the
IPPS. In addition, it would make payment and policy changes for
inpatient hospital services provided by long-term care hospitals
(LTCHs) under the long-term care hospital prospective payment system
(LTCH PPS). This proposed rule also would make policy changes to
programs associated with Medicare IPPS hospitals, IPPS-excluded
hospitals, and LTCHs. We are also proposing to make changes relating to
Medicare graduate medical education (GME) and nursing and allied health
(NAH) education payments.
We are proposing to adopt the Advance Care Planning electronic
clinical quality measure (eCQM) in the Hospital Inpatient Quality
Reporting, PPS-Exempt Cancer Hospital (PCH) Quality Reporting, and
Medicare Promoting Interoperability Programs. We are proposing to adopt
five modified claims-based, risk-standardized mortality measures in the
Hospital Inpatient Quality Reporting Program and subsequently modify
these measures in the Hospital Value-Based Purchasing Program.
Other than these cross-program proposals, we are not proposing any
updates for the Hospital Value-Based Purchasing Program or the Hospital
Acquired-Conditions Reduction Program.
In the Hospital Readmissions Reduction Program, we are proposing to
adopt the Hospital 30-Day, All-Cause, Risk-Standardized Readmission
Rate Following Sepsis Hospitalization measure.
In addition to the cross-program proposals previously listed, in
the Hospital Inpatient Quality Reporting Program, we are proposing to
adopt two new quality measures, remove three measures, and modify three
current measures. We are also proposing to modify the data reporting
and submission requirements for electronic clinical quality measures
(eCQMs) and the Maternal Morbidity structural measure.
In addition to the cross-program proposal previously listed in the
PCH Quality Reporting Program, we are proposing to adopt one new
measure and remove one measure. We are also proposing to adopt data
reporting and submission requirements for eCQMs.
In addition to the cross-program proposal previously listed, in the
Medicare Promoting Interoperability Program, we propose to remove two
measures and two attestations; adopt a measure; modify one measure;
adopt one additional eCQM in alignment with the Hospital Inpatient
Quality Reporting Program; and remove three eCQMs in alignment with the
Hospital Inpatient Quality Reporting Program.
In the LTCH Quality Reporting Program (QRP), we are proposing to
remove two measures, beginning with the FY 2028 LTCH QRP. We also
propose the revision of the LTCH QRP Data Submission Deadlines
beginning with the FY 2029 LTCH QRP. Finally, we are soliciting public
comments on one Request for Information (RFI) on future measure
concepts for 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 tests
whether financial accountability for these episode categories reduces
Medicare expenditures while preserving or enhancing the quality of care
for Medicare beneficiaries. In this proposed rule, we propose updates
to TEAM that would modify policies affecting episode category triggers,
quality measure assessment, and the construction of target prices.
Additionally, we are soliciting public feedback on two Request for
Information (RFIs) regarding ambulatory surgical center episodes and
voluntary participation of hospitals with physician ownership.
The Comprehensive Care for Joint Replacement CJR Expanded (CJR-X)
Model builds upon the CJR Model test that ran from April 1, 2016 to
December 31, 2024. Based on the strength of evidence from the CJR
Model, the CMS Innovation Center is proposing to expand the model
nationally, including U.S. Territories in FY 2028. The model would
continue to focus on improving care and reducing spending for Medicare
beneficiaries undergoing lower extremity joint replacement (LEJR)
procedures. Participating hospitals would be held accountable for
spending and quality of care during an inpatient stay or hospital
outpatient procedure and for the 90 days following hospital discharge.
If finalized, the CJR-X Model would be mandatory for acute care
hospitals, except for those participating in TEAM, and acute care
hospitals located in Maryland. CJR-X would include some modifications
to the CJR Model. Some quality measures and payment methodology
policies have been updated in response to CJR Model evaluation results,
stakeholder feedback, and changes to national care delivery patterns
among both CJR and non-CJR hospitals.
Under various statutory authorities, we either discuss continued
program implementation or propose changes to the Medicare IPPS, the
LTCH PPS, other related payment methodologies and programs for FY 2027
and subsequent fiscal years, and other policies and provisions included
in this proposed rule. These statutory authorities include, but are not
limited to, the following:
<bullet> Section 1886(d) of the Social Security Act (the Act),
which sets forth a system of payment for the operating costs of acute
care hospital inpatient stays under Medicare Part A (Hospital
Insurance) based on prospectively set rates. Section 1886(g) of the Act
requires that, instead of paying for capital-related costs of inpatient
hospital services on a reasonable cost basis, the Secretary use a
prospective payment system (PPS).
[[Page 19314]]
<bullet> Section 1886(d)(1)(B) of the Act, which specifies that
certain hospitals and hospital units are excluded from the IPPS. These
hospitals and units are: rehabilitation hospitals and units; LTCHs;
psychiatric hospitals and units; children's hospitals; cancer
hospitals; extended neoplastic disease care hospitals; and hospitals
located outside the 50 States, the District of Columbia, and Puerto
Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, the
Northern Mariana Islands, and American Samoa). Religious nonmedical
health care institutions (RNHCIs) are also excluded from the IPPS.
<bullet> Sections 123(a) and (c) of the Balanced Budget Refinement
Act of 1999 (BBRA) (Public Law (Pub. L.) 106-113) and section 307(b)(1)
of the Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L.
106-554) (as codified under section 1886(m)(1) of the Act), which
provide for the development and implementation of a prospective payment
system for payment for inpatient hospital services of LTCHs described
in section 1886(d)(1)(B)(iv) of the Act.
<bullet> Section 1814(l)(4) of the Act requires, beginning with FY
2015, that CAHs that do not successfully demonstrate meaningful use of
certified electronic health record technology (CEHRT) for an EHR
reporting period for a cost reporting period shall be paid 100 percent
of reasonable costs rather than 101 percent of reasonable costs.
<bullet> Section 1886(a)(4) of the Act, which specifies that costs
of approved educational activities are excluded from the operating
costs of inpatient hospital services. Hospitals with approved graduate
medical education (GME) programs are paid for the direct costs of GME
in accordance with section 1886(h) of the Act. Hospitals paid under the
IPPS with approved GME programs are paid for the indirect costs of
training residents in accordance with section 1886(d)(5)(B) of the Act.
<bullet> Section 1886(d)(5)(F) of the Act provides for additional
Medicare IPPS payments to subsection (d) hospitals that serve a
significantly disproportionate number of low-income patients. These
payments are known as the Medicare disproportionate share hospital
(DSH) adjustment. Section 1886(d)(5)(F) of the Act specifies the
methods under which a hospital may qualify for the DSH payment
adjustment.
<bullet> Section 1886(b)(3)(B)(viii) of the Act, which requires the
Secretary to reduce the applicable percentage increase that would
otherwise apply to the standardized amount applicable to a subsection
(d) hospital for discharges occurring in a fiscal year if the hospital
does not submit data on measures in a form and manner, and at a time,
specified by the Secretary.
<bullet> Section 1886(r) of the Act, as added by section 3133 of
the Affordable Care Act, which provides for a reduction to 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)(6) of the Act, as added by section
1206(a)(1) of the Pathway for Sustainable Growth Rate (SGR) Reform Act
of 2013 (Pub. L. 113-67) and amended by section 51005(a) of the
Bipartisan Budget Act of 2018 (Pub. 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 2027.
<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 1886(b)(3)(B)(viii) of the Act, which establishes
the Hospital Inpatient Quality Reporting Program, 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 establishes
payment adjustments under the Medicare Promoting Interoperability
Program by requiring 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. Additionally, Section
1886(n) of the Act establishes the requirements for an eligible
hospital to be treated as a meaningful EHR user of CEHRT for an EHR
reporting period for a payment adjustment year or, for purposes of
subsection (b)(3)(B)(ix) of the Act, for a fiscal 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(o) of the Act, which requires the Secretary
to establish a Hospital Value-Based Purchasing (VBP) Program, under
which value-based incentive payments are made in a fiscal year to
hospitals based on their performance on measures established for a
performance period for such fiscal year.
<bullet> Section 1886(p) of the Act, which establishes a Hospital-
Acquired Condition (HAC) Reduction Program, under which payments to
applicable hospitals are adjusted to provide an incentive to reduce
hospital-acquired conditions.
<bullet> Section 1886(q) of the Act, as amended by section 15002 of
the 21st Century Cures Act, which establishes the Hospital Readmissions
Reduction Program. Under the program, payments for discharges from an
applicable hospital as defined under section 1886(d) of the Act will be
reduced to account for certain excess readmissions. Section 15002 of
the 21st Century Cures Act directs the Secretary to compare hospitals
with respect to the number of their Medicare-Medicaid dual-eligible
beneficiaries in determining the extent of excess readmissions.
<bullet> Section 1886(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
[[Page 19315]]
measures in the form, manner, and at a time, specified by the
Secretary.
<bullet> Section 1115A of the Act authorizes the testing of
innovative payment and service delivery models that preserve or enhance
the quality of care furnished to Medicare, Medicaid, and Children's
Health Insurance Program (CHIP) beneficiaries while reducing program
expenditures.
2. Summary of the Major Provisions
The following is a summary of the major provisions in this proposed
rule. In general, these major provisions are being proposed as part of
the annual update to the payment policies and payment rates, consistent
with the applicable statutory provisions. A general summary of the
changes in this proposed rule is presented in section I.D. of the
preamble of this proposed rule.
a. Proposed Requirements To Prohibit Unlawful Discrimination by
Graduate Medical Education Programs and Nursing and Allied Health
Education Programs
In section V.F.2. of the preamble of this proposed rule, we discuss
our proposal to require that, in addition to meeting other applicable
requirements, an approved medical residency training program must not
discriminate, or promote or encourage discrimination, on the basis of
race, color, national origin, sex, age, disability, or religion,
including the use of those characteristics or intentional proxies for
those characteristics as a selection criterion for employment, program
participation, resource allocation, or similar activities,
opportunities, or benefits. In V.G.3. of the preamble of this proposed
rule, we discuss similar proposals with respect to approved nursing and
allied health education programs and accreditors.
b. Proposed Modifications to the Criteria for New Residency Programs
In section V.F.3. of the preamble of this proposed rule, we discuss
our proposed modifications to the criteria for identifying new
residency programs under 42 CFR 413.79(l). We propose that, in addition
to receiving initial accreditation by the appropriate accrediting body,
for a residency program to be considered new, at least 90 percent of
the individual residents must not have previous experience training in
another program in the same specialty. The proposed requirement
includes exceptions for small residency programs, displaced residents,
and residents admitted via a binding third-party matching program. In
determining whether a program is genuinely new for cap-building
purposes, we would also no longer consider the previous employment of
the program director or faculty.
c. Hospital Readmissions Reduction Program (HRRP)
In this FY 2027 IPPS/LTCH PPS proposed rule, we are proposing to
adopt the Hospital 30-Day, All-Cause, Risk-Standardized Readmission
Rate Following Sepsis Hospitalization measure beginning with an early
look for the FY 2028 program year, and use beginning with the FY 2029
program year.
d. Hospital Value-Based Purchasing (VBP) Program
In this FY 2027 IPPS/LTCH PPS proposed rule, we are proposing
modifications to five condition-specific and procedure-specific
mortality measures beginning with the FY 2032 program year: (1)
Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following
Acute Myocardial Infarction (AMI) Hospitalization measure; (2) Hospital
30-Day, All-Cause, Risk-Standardized Mortality Rate Following Heart
Failure Hospitalization measure; (3) Hospital 30-Day, All-Cause, Risk-
Standardized Mortality Rate Following Pneumonia Hospitalization
measure; (4) Hospital 30-Day, All-Cause, Risk-Standardized Mortality
Rate Following Chronic Obstructive Pulmonary Disease (COPD)
Hospitalization measure; and (5) Hospital 30-Day, All-Cause, Risk-
Standardized Mortality Rate Following Coronary Artery Bypass Graft
(CABG) Surgery measure. We also include requests for information on two
topics: (1) measuring emergency room access and timeliness in Hospital
Inpatient Quality Reporting and Value-Based Purchasing Programs; (2)
potential future use of the Adult Community-Onset Sepsis Standardized
Mortality Ratio measure in the Hospital Inpatient Quality Reporting
Program.
e. Hospital Inpatient Quality Reporting Program
In this FY 2027 IPPS/LTCH PPS proposed rule, we are proposing
several changes to the Hospital Inpatient Quality Reporting Program. We
are proposing to adopt three new measures: (1) Excess Days in Acute
Care After Hospitalization for Diabetes measure beginning with the FY
2029 payment determination; (2) Advance Care Planning eCQM beginning
with the FY 2030 payment determination; (3) Hospital Harm-Postoperative
Venous Thromboembolism eCQM beginning with the FY 2030 payment
determination. We are also proposing to adopt five modified mortality
measures in the Hospital Inpatient Quality Reporting Program beginning
with the FY 2028 payment determination before subsequently modifying
them in the Hospital Value-Based Purchasing Program: (1) Hospital 30-
Day, All-Cause, Risk-Standardized Mortality Rate Following Acute
Myocardial Infarction (AMI) Hospitalization measure; (2) Hospital 30-
Day, All-Cause, Risk-Standardized Mortality Rate Following Heart
Failure Hospitalization measure; (3) Hospital 30-Day, All-Cause, Risk-
Standardized Mortality Rate Following Pneumonia Hospitalization
measure; (4) Hospital 30-Day, All-Cause, Risk-Standardized Mortality
Rate Following Chronic Obstructive Pulmonary Disease (COPD)
Hospitalization measure; and (5) Hospital 30-Day, All-Cause, Risk-
Standardized Mortality Rate Following Coronary Artery Bypass Graft
(CABG) Surgery measure. We are proposing modifications to three claims-
based measures beginning with the FY 2028 payment determination: (1)
Excess Days in Acute Care after Hospitalization for Acute Myocardial
Infarction; (2) Excess Days in Acute Care after Hospitalization for
Heart Failure; and (3) Excess Days in Acute Care after Hospitalization
for Pneumonia. We are proposing to remove three measures: (1) Venous
Thromboembolism Prophylaxis (VTE-1) eCQM; (2) Intensive Care Unit
Venous Thromboembolism Prophylaxis (VTE-2) eCQM; and (3) Discharged on
Antithrombotic Therapy (STK-02) eCQM beginning with the FY 2030 payment
determination. We are also proposing changes to data reporting and
submission requirements for eCQMs and structural measures: (1)
mandatory reporting for the Malnutrition Care Score eCQM beginning with
the FY 2030 payment determination; (2) mandatory reporting for the
Hospital Harm eCQMs after 2 years of self-selected reporting beginning
with the FY 2030 payment determination; and (3) an update to the
reporting of the Maternal Morbidity Structural measure beginning with
the FY 2028 payment determination. We also include requests for
information on three topics: (1) measuring emergency room access and
timeliness in Hospital Inpatient Quality Reporting and Value-Based
Purchasing Programs; (2) potential future use of the Adult Community-
Onset Sepsis Standardized Mortality Ratio measure in the Hospital
Inpatient Quality Reporting Program; and (3) Birthing-Friendly Hospital
designation modification to expand designation criteria.
[[Page 19316]]
f. PPS-Exempt Cancer Hospital (PCH) Quality Reporting Program
In this FY 2027 IPPS/LTCH PPS proposed rule, we are proposing to
adopt two new measures: (1) Advance Care Planning eCQM beginning with
the FY 2030 program year; and (2) Malnutrition Care Score eCQM
beginning with the FY 2030 program year. We are also proposing to
remove the COVID-19 Vaccination Coverage Among Healthcare Personnel
(HCP COVID-19 Vaccination) measure beginning with the FY 2028 program
year. In addition, we propose establishing reporting and submission
requirements for eCQMs in this program.
g. Long-Term Care Hospital Quality Reporting Program (LTCH QRP)
In the LTCH QRP, we are proposing to remove two measures, beginning
with the FY 2028 LTCH QRP. We also propose the revision of the LTCH QRP
Data Submission Deadlines beginning with the FY 2029 LTCH QRP. We are
also soliciting public comments on one Request for Information (RFI) on
future measure concepts for the LTCH QRP.
h. Medicare Promoting Interoperability Program
We are proposing several changes to the Medicare Promoting
Interoperability Program. Specifically, we are proposing: (1) to revise
the definition of certified EHR technology (CEHRT) for the Medicare
Promoting Interoperability Program based on Assistant Secretary for
Technology Policy and Office of the National Coordinator for Health
Information Technology (ASTP/ONC) proposals to update the ONC Health IT
Certification Program; (2) to remove attestations related to ONC Direct
Review and ONC-Authorized Certification Body (ONC-ACB) Surveillance;
(3) to remove the Support Electronic Referral Loops by Sending Health
Information measure and the Support Electronic Referral Loops by
Receiving and Reconciling Health Information measure; (4) to modify the
Electronic Prior Authorization measure; (5) to adopt the Unique Device
Identifiers (UDIs) for Implantable Medical Devices measure within the
Public Health and Clinical Data Exchange objective; (6) to adopt two
new eCQMs in alignment with the Hospital Inpatient Quality Reporting
Program; and (7) to remove three eCQMs in alignment with the Hospital
Inpatient Quality Reporting Program.
i. Transforming Episode Accountability Model (TEAM)
In section X.A. of the preamble of this proposed rule, we discuss
the changes we propose for the Transforming Episode Accountability
Model (TEAM). TEAM is a 5-year mandatory model tested under the
authority of section 1115A of the Act, that started on January 1, 2026,
and will end on December 31, 2030. We propose changes to a few areas of
the model, including: (1) adding X Medicare Severity Diagnosis Related
Groups (MS-DRGs) that would initiate a spinal fusion anchor
hospitalization; (2) clarifying quality measure performance periods for
certain quality measures; (3) using a rolling historical Composite
Quality Score (CQS) baseline period for certain quality measures; (4)
adding an Ambulatory Payment Classification (APC) and MS-DRG update
factor to target prices; and (5) using the full baseline period to
construct the prospective normalization factor. We are also soliciting
feedback on two Request for Information (RFIs) for ambulatory surgical
center episodes and potential voluntary participation of physician
owned hospitals in future years of the model.
j. Comprehensive Care for Joint Replacement Expanded (CJR-X) Model
In section X.C. of the preamble of this proposed rule, we propose
expansion of the CJR Model. The CJR-X Model would be a mandatory model
that would be tested under the authority of section 1115A of the Act,
beginning on October 1, 2027 for acute care hospitals paid under the
IPPS and OPPS with limited exclusions. Participating hospitals would be
accountable for the cost and quality of care for LEJR episodes from the
hospital inpatient or hospital outpatient admission through 90 days
after the beneficiary is discharged from the hospital or hospital
outpatient procedure. We propose multiple policies for CJR-X,
including: (1) an October 1, 2027 start date; (2) acute care hospitals
as the participant and accountable entity; (3) LEJR as the episode of
care; (4) five quality measures and a composite quality score (CQS) to
assess quality performance; (5) regional risk-adjusted target prices
that include capped normalization and trend factors; (6) pricing-
specific policies for certain hospitals, such as low volume hospitals
and high duals hospitals; (7) provider and beneficiary overlap
permitted with most models; (8) allowing participant hospitals to have
financial arrangements; (9) waiving certain Medicare Program
requirements; (10) permitting beneficiary-identifiable and regional
aggregated data sharing; and (11) options for Alternative Payment Model
(APM) participation.
3. Summary of Costs and Benefits
The following table provides a summary of the costs, savings, and
benefits associated with the major provisions described in section
I.A.2. of the preamble of this proposed rule.
BILLING CODE 4120-01-P
[[Page 19317]]
[GRAPHIC] [TIFF OMITTED] TP14AP26.000
[[Page 19318]]
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 6202 of the Consolidated
Appropriations Act (CAA), 2026 (Pub. L. 119-75), under current law, the
Medicare-dependent, small rural hospital (MDH) program is effective
through December 31, 2026. For discharges occurring on or after October
1, 2007, but before January 1, 2027, 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 6202 of the CAA, 2026 extended the MDH program through December
31, 2026, beginning on January 1, 2027, the MDH program will no longer
be in effect absent a change in law. Because the MDH program is not
authorized by statute beyond December 31, 2026, beginning January 1,
2027, all hospitals that previously qualified for MDH status under
section 1886(d)(5)(G) of the Act will no longer have MDH status and
will be paid based on the IPPS Federal rate.
Section 1886(g) of the Act requires the Secretary to pay for the
capital-related costs of inpatient hospital services in accordance with
a prospective payment system established by the Secretary. The basic
methodology for determining capital prospective payments is set forth
in our regulations at 42 CFR 412.308 and 412.312. Under the capital
IPPS, payments are adjusted by the same DRG for the case as they are
under the operating IPPS. Capital IPPS payments are also adjusted for
IME and DSH, similar to the adjustments made under the operating IPPS.
In addition, hospitals may receive outlier payments for those cases
that have unusually high costs. The existing regulations governing
payments to hospitals under the IPPS are located in 42 CFR part 412,
subparts A through M.
2. Hospitals and Hospital Units Excluded From the IPPS
Under section 1886(d)(1)(B) of the Act, as amended, certain
hospitals and hospital units are excluded from the IPPS. These
hospitals and units are: Inpatient rehabilitation facility (IRF)
hospitals and units; long-term care hospitals (LTCHs); Inpatient
psychiatric hospitals (IPF) and units; children's hospitals; cancer
hospitals; extended neoplastic disease care hospitals, and hospitals
located outside the 50 States, the District of Columbia, and Puerto
Rico (that is, hospitals located in the
[[Page 19319]]
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 Proposed Rule--Consolidated Appropriations Act, 2026 (Pub. L. 119-
75)
Section 6201 of the Consolidated Appropriations Act (CAA), 2026
extended through the portion of FY 2027 occurring on October 1, 2026,
through December 31, 2026, 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 2025.
Specifically, under section 1886(d)(12)(C)(i) of the Act, as amended,
for FYs 2019 through 2026 and the portion of FY 2027 occurring on
October 1, 2026 through December 31, 2026, 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 December
31, 2026, 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 6202 of the CAA, 2026 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 the first quarter of FY 2027 (that is, through December
31, 2026).
D. Summary of the Proposed Provisions
In this proposed rule, we set forth proposed payment and policy
changes to the Medicare IPPS for FY 2027 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 2027.
The following is a general summary of the changes that we are
proposing 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 2027.
<bullet> Proposed recalibration of the MS-DRG relative weights.
<bullet> A discussion of the proposed FY 2027 status of new
technologies approved for add-on payments for FY 2026, a presentation
of our evaluation and analysis of the FY 2027 applicants for add-on
payments for high-cost new medical services and technologies (including
public input, as directed by
[[Page 19320]]
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) with proposals
for certain FDA market authorized technologies, and a discussion of the
proposed status of FY 2027 new technology applicants under the
alternative pathways for certain medical devices and certain
antimicrobial products.
<bullet> A proposal to repeal the alternative pathway for new
technology add-on payment and OPPS device pass-through applications,
and require all applicants for new technology add-on payments and OPPS
device pass-through payments to demonstrate that they meet all
eligibility requirements to receive add-on payments and/or pass-through
payments (as discussed in section II.E.7. of the preamble of this
proposed rule).
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 2027 wage index update using wage data
from cost reporting periods beginning in FY 2023.
<bullet> Calculation, analysis, and implementation of the proposed
occupational mix adjustment to the wage index for acute care hospitals
for FY 2027 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 2027 based on commuting patterns of hospital employees
who reside in a county and work in a different area with a higher wage
index.
<bullet> The proposed transition for the discontinuation of the low
wage index hospital policy.
<bullet> Proposed labor-related share for applying the FY 2027 wage
index.
3. Payment Adjustment for Medicare Disproportionate Share Hospitals
(DSHs) for FY 2027
In section IV. of the preamble of the proposed rule, we discuss the
following:
<bullet> Proposed calculation of Factor 1 and Factor 2 of the
uncompensated care payment methodology.
<bullet> Proposed methodology for determining Factor 3 of the
uncompensated care payment for FY 2027, which is the same methodology
that was used for FY 2026.
<bullet> Proposed methodology for determining the amount of interim
uncompensated care payments, using the average of the most recent 3
years of discharge data.
4. Other Decisions and Proposed Changes to the IPPS for Operating Costs
In section V. 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
2027.
<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 December 31, 2026.
<bullet> Proposed conforming amendments to reflect the statutory
extension of the MDH program through December 31, 2026.
<bullet> Proposed requirements to prohibit unlawful discrimination
by graduate medical education programs and nursing and allied health
education programs.
<bullet> Proposed modifications to the criteria for identifying new
residency programs for purposes of direct graduate medical education
(GME) and indirect medical education (IME) payments; proposed
clarifications of the methodology for calculating direct GME and IME
payments following a teaching hospital merger; and a notice of closure
of two teaching hospitals and opportunities to apply for available
slots.
<bullet> Proposed nursing and allied health (NAH) education program
Medicare Advantage (MA) add-on rates and direct GME MA percent
reductions for CY 2024; and proposed changes to the regulations for
determining net costs of approved NAH education programs and changes to
the procedures for allocating indirect NAH costs.
<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 2027 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 2027 Hospital Value-Based Purchasing
Program.
<bullet> Proposed changes to the requirements of the Hospital-
Acquired Condition Reduction Program--Updating the proposed estimate of
the financial impacts for the FY 2027 Hospital-Acquired Conditions
Reduction Program.
<bullet> Discussion of and proposed changes relating to the
implementation of the Rural Community Hospital Demonstration Program in
FY 2027.
5. Proposed FY 2027 Policy Governing the IPPS for Capital-Related Costs
In section VI. of the preamble of the proposed rule, we discuss the
proposed payment policy requirements for capital-related costs and
capital payments to hospitals for FY 2027.
6. Proposed Changes to the Payment Rates for Certain Excluded
Hospitals: Rate-of-Increase Percentages
In section VIII. of the preamble of the proposed rule, we discuss
the following:
<bullet> Proposed changes to payments to certain excluded hospitals
for FY 2027.
<bullet> Proposed continued implementation of the Frontier
Community Health Integration Project (FCHIP) Demonstration.
7. Proposed Changes to the LTCH PPS
In section VIII. 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 2027.
8. Proposed Changes Relating to Quality Data Reporting for Specific
Providers and Suppliers
In section IX. of the preamble of the proposed rule, we addressed
the following:
<bullet> Proposed changes to the requirements for the Hospital
Inpatient Quality Reporting Program.
<bullet> Proposed changes to the requirements for the PCH Quality
Reporting Program.
[[Page 19321]]
<bullet> Proposed changes to the requirements for the Long-Term
Care Hospital Quality Reporting Program.
<bullet> Proposed changes to requirements pertaining to eligible
hospitals and CAHs participating in the Medicare Promoting
Interoperability Program.
9. Other Proposals and Comment Solicitations Included in the Proposed
Rule
Section X.A. of the preamble of this proposed rule includes
proposed changes to TEAM that would affect episodes, quality measure
assessment, and pricing methodology. We are also soliciting comment on
an ambulatory surgical center episode RFI and a voluntary hospitals
with physician ownership RFI.
Section X.B. of the preamble of the proposed rule, includes a
proposed revision to the provider-based location criteria regulations
applicable to off-campus facilities or organizations (Sec. 413.65).
Section X.C. of the preamble of the proposed rule includes
proposals for the CJR-X Model with policies affecting participation,
episodes, quality measure and assessment, pricing methodology, model
overlap, financial arrangements, waivers of Medicare Program
requirements, data sharing, and APM options.
In section X.D. of the preamble of this proposed rule, we are
proposing the following:
<bullet> To reconcile non-renal organ acquisition costs for
independent organ procurement organizations (IOPOs) and
histocompatibility laboratories (HCLs), and to require the Medicare
Administrative Contractor to establish, adjust if necessary, and
publish the IOPO non-renal standard acquisition charges (SACs) and the
HCL testing rates.
<bullet> To change certain existing policy and proposing to codify
certain longstanding Medicare reasonable cost reimbursement policies,
applicable to all providers reimbursed for all or for some of their
services on a reasonable cost basis.
<bullet> To clarify and codify cost allocation principles.
<bullet> To codify the discretionary Administrator review of CMS
reviewing official determinations with respect to appeals under Sec.
413.420(g) for IOPOs and HCLs.
10. Other Provisions of the Proposed Rule
Section X.A. of the preamble of the proposed rule includes our
discussion of the MedPAC Recommendations.
Section X.B. of the preamble of the proposed rule includes a
descriptive listing of the public use files associated with the
proposed rule.
Section XI. of the preamble of the proposed rule includes the
collection of information requirements for entities based on our
proposals.
11. 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 this proposed rule, we
set forth proposed changes to the amounts and factors for determining
the proposed FY 2027 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 propose to establish the threshold amounts for outlier
cases. In addition, in section V. of the Addendum of the proposed rule,
we address the proposed update factors for determining the rate-of-
increase limits for cost reporting periods beginning in FY 2027 for
certain hospitals excluded from the IPPS.
12. Determining Prospective Payment Rates for LTCHs
In section V. of the Addendum of this proposed rule, we set forth
proposed changes to the amounts and factors for determining the
proposed FY 2027 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
2027. We propose 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.
13. Impact Analysis
In Appendix A of this proposed rule, we set forth an analysis of
the impact the proposed changes would have on affected acute care
hospitals, LTCHs, and other entities.
14. Recommendation of Update Factors for Operating Cost Rates of
Payment for Hospital Inpatient Services
In Appendix B of this proposed rule, as required by sections
1886(e)(4) and (e)(5) of the Act, we provide our recommendations of the
appropriate percentage changes for FY 2027 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.
15. 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 2026 recommendations concerning hospital inpatient
payment policies address the update factor for hospital inpatient
operating costs and capital-related costs for hospitals under the IPPS.
We address these recommendations in Appendix B of the proposed rule.
For further information relating specifically to the MedPAC March 2026
report or to obtain a copy of the report, contact MedPAC at (202) 220-
3700 or visit MedPAC's website at <a href="https://www.medpac.gov">https://www.medpac.gov</a>.
II. Proposed Changes to Medicare Severity Diagnosis-Related Group (MS-
DRG) Classifications and Relative Weights
A. Background
Section 1886(d) of the Act specifies that the Secretary shall
establish a classification system (referred to as diagnosis-related
groups (DRGs)) for inpatient discharges and adjust payments under the
IPPS based on appropriate weighting factors assigned to each DRG.
Therefore, under the IPPS, Medicare pays for inpatient hospital
services on a rate per discharge basis that varies according to the DRG
to which a beneficiary's stay is assigned. The formula used to
calculate payment for a specific case multiplies an individual
hospital's payment rate per case by the weight of the DRG to which the
case is assigned. Each DRG weight represents the average resources
required to care for cases in that particular DRG, relative to the
average resources used to treat cases in all DRGs.
Section 1886(d)(4)(C) of the Act requires that the Secretary adjust
the DRG classifications and relative weights at least annually to
account for changes in resource consumption. These
[[Page 19322]]
adjustments are made to reflect changes in treatment patterns,
technology, and any other factors that may change the relative use of
hospital resources.
B. Adoption of the MS-DRGs and MS-DRG Reclassifications
For information on the adoption of the MS-DRGs in FY 2008, we refer
readers to the FY 2008 IPPS final rule with comment period (72 FR 47140
through 47189).
For general information about the MS-DRG system, including yearly
reviews and changes to the MS-DRGs, we refer readers to the previous
discussions in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR
43764 through 43766) and the FYs 2011 through 2026 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; 89 FR
69000 through 69109; 90 FR 36549 through 36649, respectively).
For discussion regarding our previously finalized policies
(including our historical adjustments to the payment rates) relating to
the effect of changes in documentation and coding that do not reflect
real changes in case mix, we refer readers to the FY 2023 IPPS/LTCH PPS
final rule (87 FR 48799 through 48800).
C. Proposed Changes to Specific MS-DRG Classifications
1. Discussion of Changes to Coding System and Basis for Proposed FY
2027 MS-DRG Updates
a. International Classification of Diseases, 10th Revision (ICD-10)
Providers use the International Classification of Diseases, 10th
Revision (ICD-10) coding system to report diagnoses and procedures for
Medicare hospital inpatient services under the MS-DRG system. The ICD-
10 coding system includes the International Classification of Diseases,
10th Revision, Clinical Modification (ICD-10-CM) for diagnosis coding
and the International Classification of Diseases, 10th Revision,
Procedure Coding System (ICD-10-PCS) for inpatient hospital procedure
coding, as well as the ICD-10-CM and ICD-10-PCS Official Guidelines for
Coding and Reporting.
b. Basis for Proposed FY 2027 MS-DRG Updates
The deadline for interested parties to submit MS-DRG classification
change requests for FY 2027 was October 20, 2025. 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 01/31/2029.
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.
As discussed in the FY 2026 IPPS/LTCH PPS final rule (90 FR 36550),
beginning with FY 2027 rulemaking we are no longer summarizing in the
proposed and final rules those requests that are not able to be
considered for the upcoming FY. As noted, requests that 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.
In December 2025, we informed requestors via MEARIS<SUP>TM</SUP> if
their MS-DRG classification change request was not able to be
considered with the FY 2027 rulemaking cycle.
Interested parties should submit any MS-DRG classification change
requests, including any comments and suggestions for FY 2028
consideration by October 20, 2026 via MEARIS<SUP>TM</SUP> at: <a href="https://mearis.cms.gov/public/home">https://mearis.cms.gov/public/home</a>. We will inform requestors via MEARIS\TM\ if
the MS-DRG classification change request is not able to be considered
with the upcoming fiscal year rulemaking cycle.
As we did for the FY 2026 IPPS/LTCH PPS proposed rule, for this FY
2027 IPPS/LTCH PPS proposed rule we are providing a test version of the
ICD-10 MS-DRG GROUPER Software, Version 44, so that the public can
better analyze and understand the impact of the proposals included in
this FY 2027 IPPS/LTCH PPS proposed rule. We note that this test
software reflects the proposed GROUPER logic for FY 2027. Therefore, it
includes the new diagnosis and procedure codes that are effective for
FY 2027 as reflected in Table 6A.--New Diagnosis Codes--FY 2027 and
Table 6B.--New Procedure Codes--FY 2027 associated with this FY 2027
IPPS/LTCH PPS proposed rule and does not include the diagnosis codes
that are invalid beginning in FY 2027 as reflected in Table 6C.--
Invalid Diagnosis Codes--FY 2027 and Table 6D.--Invalid Procedure
Codes--FY 2027 associated with this FY 2027 IPPS/LTCH PPS proposed
rule. These tables are not published in the Addendum to this FY 2027
IPPS/LTCH PPS proposed rule, but are available on the CMS website at:
<a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index</a>.html as described in section VI. of the
Addendum to this FY 2027 IPPS/LTCH PPS proposed rule. Because the
diagnosis and procedure codes no longer valid for FY 2027 are not
reflected in the test software, we are making available a supplemental
file in Table 6P.1a that includes the mapped Version 44 FY 2027 ICD-10-
CM codes and the deleted Version 43 FY 2026 ICD-10-CM codes and Table
6P.1b that includes the mapped Version 44 FY 2027 ICD-10-PCS codes and
the deleted Version 43.1 FY 2026 ICD-10-PCS codes that should be used
for testing purposes with users' available claims data. Therefore,
users will have access to the test software allowing them to build case
examples that reflect the proposals included in this FY 2027 IPPS/LTCH
PPS proposed rule. In addition, users will be able to view the draft
version of the ICD-10 MS-DRG
[[Page 19323]]
Definitions Manual, Version 44 that contains the documentation for
proposed FY 2027 ICD-10 MS-DRG GROUPER Version 44 logic changes and
will also be able to view a draft version of the Definitions of
Medicare Code Edits (MCE) Manual to review any changes that will become
effective October 1 for FY 2027. As a result of new and modified code
updates approved after the annual spring ICD-10 Coordination and
Maintenance Committee meeting, any further changes to the MCE will be
reflected in the finalized Definitions of Medicare Code Edits (MCE)
Manual, made available in association with the annual IPPS/LTCH PPS
final rule. We are making available the draft FY 2027 ICD-10 MCE
Version 44 Manual file on the CMS website at: <a href="https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software">https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software</a>.
The MCE manual is comprised of two chapters: Chapter 1: Edit code
lists provides a listing of each edit, an explanation of each edit, and
as applicable, the diagnosis and/or procedure codes for each edit, and
Chapter 2: Code list changes summarizes the changes in the edit code
lists (for example, additions and deletions) from the prior release of
the MCE software. The public may submit any questions, comments,
concerns, or recommendations regarding the MCE to the CMS mailbox at
<a href="/cdn-cgi/l/email-protection#35786671677276595446465c535c5654415c5a5b765d545b5250755658461b5d5d461b525a43"><span class="__cf_email__" data-cfemail="da97899e889d99b6bba9a9b3bcb3b9bbaeb3b5b499b2bbb4bdbf9ab9b7a9f4b2b2a9f4bdb5ac">[email protected]</span></a> for our review and consideration.
The test version of the ICD-10 MS-DRG GROUPER Software, Version 44,
the draft version of the ICD-10 MS-DRG Definitions Manual, Version 44,
the draft version of the Definitions of Medicare Code Edits Manual,
Version 44, and the supplemental mapping files in Tables 6P.1a and
6P.1b of the FY 2026 and FY 2027 ICD-10-CM diagnosis codes and ICD-10-
PCS procedure codes are available at <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software</a>.
The following are the changes that we are proposing to the MS-DRGs
for FY 2027. We are inviting public comments on each of the MS-DRG
classification proposed changes, as well as our proposals to maintain
certain existing MS-DRG classifications discussed in this FY 2027 IPPS/
LTCH PPS proposed rule. In some cases, we are proposing changes to the
MS-DRG classifications based on our analysis of claims data and
clinical appropriateness. In other cases, we are proposing to maintain
the existing MS-DRG classifications based on our analysis of claims
data and clinical appropriateness. For this FY 2027 IPPS/LTCH PPS
proposed rule, our MS-DRG analysis was based on ICD-10 claims data from
the September 2025 update of the FY 2025 MedPAR file, which contains
hospital bills received from October 1, 2024 through September 30,
2025. In our discussion of the proposed MS-DRG reclassification
changes, we refer to these claims data as the ``September 2025 update
of the FY 2025 MedPAR file.''
In deciding whether to propose to make further modifications to the
MS-DRGs for particular circumstances brought to our attention, we
consider whether the resource consumption and clinical characteristics
of the patients with a given set of conditions are significantly
different than the remaining patients represented in the MS-DRG. We
evaluate patient care costs using average costs and lengths of stay and
rely on clinical factors to determine whether patients are clinically
distinct or similar to other patients represented in the MS-DRG. In
evaluating resource costs, we consider both the absolute and percentage
differences in average costs between the cases we select for review and
the remainder of cases in the MS-DRG. We also consider variation in
costs within these groups; that is, whether observed average
differences are consistent across patients or attributable to cases
that are extreme in terms of costs or length of stay, or both. Further,
we consider the number of patients who will have a given set of
characteristics and generally prefer not to create a new MS-DRG unless
it would include a substantial number of cases.
In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58448), we finalized
our proposal to expand our existing criteria to create a new
complication or comorbidity (CC) or major complication or comorbidity
(MCC) subgroup within a base MS-DRG. Specifically, we finalized the
expansion of the criteria to include the NonCC subgroup for a three-way
severity level split. We stated we believed that applying these
criteria to the NonCC subgroup would better reflect resource
stratification as well as promote stability in the relative weights by
avoiding low volume counts for the NonCC level MS-DRGs. We noted that
in our analysis of MS-DRG classification requests for FY 2021 that were
received by November 1, 2019, as well as any additional analyses that
were conducted in connection with those requests, we applied these
criteria to each of the MCC, CC, and NonCC subgroups.
As discussed in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58661),
we continue to apply the criteria to create subgroups, including
application of the NonCC subgroup criteria, in our annual analysis of
MS-DRG classification requests, consistent with our approach since FY
2021 when we finalized the expansion of the criteria to include the
NonCC subgroup for a three-way severity level split. Accordingly, in
our analysis of the MS-DRG classification requests for FY 2027 that we
received by October 20, 2025, 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 19324]]
[GRAPHIC] [TIFF OMITTED] TP14AP26.001
In general, once the decision has been made to propose to make
further modifications to the MS-DRGs as described previously, such as
creating a new base MS-DRG, or in our evaluation of a specific MS-DRG
classification request to split (or subdivide) an existing base MS-DRG
into severity levels, all five criteria must be met for the base MS-DRG
to be split (or subdivided) by a CC subgroup. We note that in our
analysis of requests to create a new MS-DRG, we typically evaluate the
most recent year of MedPAR claims data available. For example, we
stated earlier that for this FY 2027 IPPS/LTCH PPS proposed rule, our
MS-DRG analysis was based on ICD-10 claims data from the September 2025
update of the FY 2025 MedPAR file. However, in our evaluation of
requests to split an existing base MS-DRG into severity levels, as
noted in prior rulemaking (80 FR 49368), we typically analyze the most
recent two years of data. This analysis includes two years of MedPAR
claims data to compare the data results from one year to the next to
avoid making determinations about whether additional severity levels
are warranted based on an isolated year's data fluctuation and also, to
validate that the established severity levels within a base MS-DRG are
supported. The first step in our process of evaluating if the creation
of a new CC subgroup within a base MS-DRG is warranted is to determine
if all the criteria is satisfied for a three-way split. In applying the
criteria for a three-way split, a base MS-DRG is initially subdivided
into the three subgroups: MCC, CC, and NonCC. Each subgroup is then
analyzed in relation to the other two subgroups using the volume
(Criteria 1 and 2), average cost (Criteria 3 and 4), and reduction in
variance (Criteria 5). If the criteria fail, the next step is to
determine if the criteria are satisfied for a two-way split. In
applying the criteria for a two-way split, a base MS-DRG is initially
subdivided into two subgroups: ``with MCC'' and ``without MCC'' (1_23)
or ``with CC/MCC'' and ``without CC/MCC'' (12_3). Each subgroup is then
analyzed in relation to the other using the volume (Criteria 1 and 2),
average cost (Criteria 3 and 4), and reduction in variance (Criteria
5). If the criteria for both of the two-way splits fail, then a split
(or CC subgroup) would generally not be warranted for that base MS-DRG.
If the three-way split fails on any one of the five criteria and all
five criteria for both two-way splits (1_23 and 12_3) are met, we would
apply the two-way split with the highest R2 value. We note that if the
request to split (or subdivide) an existing base MS-DRG into severity
levels specifies the request is for either one of the two-way splits
(1_23 or 12_3), in response to the specific request, we will evaluate
the criteria for both of the two-way splits; however, we do not also
evaluate the criteria for a three-way split.
2. MDC 04 (Diseases and Disorders of the Respiratory System)
a. Short-Term External Heart Assist Systems
For this FY 2027 IPPS/LTCH PPS proposed rule, we received a request
to reassign cases reporting procedure codes describing the insertion of
a short-term external heart assist device from MDC 04 MS-DRGs 163, 164,
and 165 (Major Chest Procedures with MCC, with CC, and without CC/MCC,
respectively) to MDC 05 (Diseases and Disorders of the Circulatory
System) MS-DRG 215 (Other Heart Assist System Implant). According to
the requestor, when patients are admitted with pulmonary conditions,
such as pulmonary embolism, and have Impella[supreg] Ventricular
Support Systems inserted for cardiac support during a thrombectomy
procedure, MS-DRGs 163, 164, or 165 are assigned. The requestor stated
that cases reporting procedure codes describing the insertion of
Impella[supreg] Ventricular Support Systems that are assigned to MS-
DRGs 163, 164, or 165 require resources similar to cases that are
assigned to MS-DRG 215. The requestor further requested that if CMS
does not reassign cases reporting procedure codes describing the
insertion of a short-term external heart assist device to MS-DRG 215,
in the alternative, CMS should consider creating new MS-DRGs for cases
reporting procedure codes describing the insertion of a short-term
external heart assist device and major chest procedures.
In reviewing this request, we note that acute massive pulmonary
embolism can lead to right ventricular (RV) failure and cardiogenic
shock, requiring urgent treatment. Thrombolytic therapy is the standard
treatment for high-risk pulmonary embolism in hemodynamically unstable
patients. However, in cases where thrombolytics are contraindicated or
ineffective, mechanical circulatory support can serve as a rescue
therapy. While extracorporeal membrane oxygenation (ECMO) is commonly
utilized, Impella[supreg] Ventricular Support Systems can offer right
ventricular support in patients with pulmonary embolism-induced
cardiogenic shock.\1\ Impella[supreg] Ventricular Support Systems are
[[Page 19325]]
temporary heart assist devices intended to provide mechanical
circulatory support by temporarily assisting the pumping function of
the heart to provide adequate circulation of blood to critical organs
while also allowing damaged heart muscle the opportunity to rest and
recover in patients who need short-term support.
---------------------------------------------------------------------------
\1\ Pandey, Asim MBBS<SUP>a,</SUP>*; Parajuli, Samriddhi
MBBS\b\; Khanal, Prajwal MBBS\c\; Khanal, Kunjan MBBS\d\; Yadav,
Ramsinhasan Prasad MBBS\e\. Hemodynamic improvement with Impella RP
in acute massive pulmonary embolism: a narrative review of
cardiovascular outcomes and pulmonary catheter pressure assessment.
Annals of Medicine & Surgery 87(7):p 4303-4309, July 2025. [verbar]
DOI: 10.1097/MS9.0000000000003431.
---------------------------------------------------------------------------
The requestor identified cases reporting procedure codes describing
the insertion of a short-term external heart assist device as reporting
ICD-10-PCS codes 02HA3RZ (Insertion of short-term external heart assist
system into the heart, percutaneous approach) and 5A0221D (Assistance
with cardiac output using impeller pump, continuous). While we agree
with the requestor that procedure code 02HA3RZ describes the insertion
of a short-term external heart assist device, we note that there are
additional ICD-10-PCS codes in the classification that also describe
the insertion of a short-term external heart assist device. Therefore,
in reviewing this request, we identified the five additional ICD-10-PCS
procedure codes that also describe the insertion of a short-term
external heart assist device listed in the following table and included
these codes in our analysis.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP14AP26.002
To begin our analysis, we examined claims data from the September
2025 update of the FY 2025 MedPAR file for MS-DRGs 163, 164, and 165 to
identify cases reporting ICD-10-PCS codes 02HA0RS, 02HA0RZ, 02HA3RS,
02HA3RZ, 02HA4RS, or 02HA4RZ. We agree with the requestor that when a
patient is admitted and has an Impella[supreg] external heart assist
device inserted, two ICD-10-PCS codes are assigned: a code that
describes the insertion of the short-term external heart assist device
and code 5A0221D that describes assistance with an impeller pump.
Because the assistance with an Impella[supreg] is always coded with
ICD-10-PCS code 5A0221D, we did not include this code in our analysis
as the presence of the code would be expected to be identified in all
cases. Our findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP14AP26.003
As shown in the table, we identified a total of 13,396 cases within
MS-DRG 163 with an average length of stay of 8.2 days and average costs
of $40,641. Of these 13,396 cases, there were 17 cases that reported a
procedure code describing the insertion of a short-term external heart
assist device with an average length of stay of 8.4 days and average
costs of $81,960. There were zero cases reporting a procedure code
describing the insertion of a short-term external heart assist device
in MS-DRGs 164 and 165. The data analysis shows that for the cases in
MS-DRG 163 reporting a procedure code describing the insertion of a
short-term external heart assist device, the average length of stay is
longer, and the average costs are higher when compared to all cases in
that MS-DRG.
To further review the consumption of hospital resources for cases
reporting a procedure code describing the insertion of a short-term
external heart assist device with a principal diagnosis of a pulmonary
condition, we reviewed the claims data to identify cases reporting ICD-
10-PCS codes 02HA0RS, 02HA0RZ, 02HA3RS, 02HA3RZ, 02HA4RS, or 02HA4RZ in
other MS-DRGs in MDC 04 (Diseases and Disorders of the Respiratory
System), specifically MS-DRGs 166, 167, and 168 (Other Respiratory
System O.R. Procedures with MCC, with CC, and without CC/MCC,
respectively) and MS-DRG 173 (Ultrasound Accelerated and Other
Thrombolysis with Principal Diagnosis Pulmonary Embolism). We refer the
reader to the ICD-10 MS-DRG Definitions Manual Version 43.1 (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 listing of the MS-DRGs in MDC 04. There were
zero cases reporting a procedure code describing the insertion of a
short-term external heart assist device with a principal diagnosis of a
pulmonary condition in MS-DRGs 166, 167, 168 or MS-DRG 173.
We then reviewed the claims data to further identify the principal
diagnoses that were reported to determine what factors may also be
contributing to the
[[Page 19326]]
higher average costs for the subset of cases that reported a procedure
code describing the insertion of a short-term external heart assist
device in MS-DRG 163. Our findings for the principal diagnoses that
were reported within the claims data from the September 2025 update of
the FY 2025 MedPAR file for this subset of cases are shown in the
following table:
[GRAPHIC] [TIFF OMITTED] TP14AP26.004
BILLING CODE 4120-01-C
As reflected in the table, all 17 cases reported a principal
diagnosis of pulmonary embolism. While the results of the claims
analysis as previously summarized indicate that the average costs of
cases that reported a procedure code describing the insertion of a
short-term external heart assist device are higher compared to the
average costs for all cases in MS-DRG 163, we cannot ascertain from the
claims data the additional resource use specifically attributable to
the insertion of the short-term external heart assist device during the
hospital stay as compared to the severity of illness of the patient and
other circumstances of the admission. These data show that while cases
that reported a procedure code describing the insertion of a short-term
external heart assist device and a principal diagnosis of pulmonary
embolism required greater resource utilization, there is a wide
variance in average costs and average length of stay depending on the
ICD-10-CM code reported as principal diagnosis. For example, the three
cases that reported a principal diagnosis of I26.02 (Saddle embolus of
pulmonary artery with acute cor pulmonale) had an average length of
stay of 7.3 days and average costs of $61,956, while the two cases that
reported a principal diagnosis of I26.92 (Saddle embolus of pulmonary
artery without acute cor pulmonale) had an average length of stay of
11.5 days and average costs of $111,452. When reviewing consumption of
hospital resources for this subset of cases, it is unclear to what
degree the higher average costs for these cases are attributable to the
severity of illness of the patient and other circumstances of the
admission as opposed to the insertion of a short-term external heart
assist device. There may have been other factors contributing to the
higher costs.
During our review of this issue and the examination of the cases
reporting procedure codes describing the insertion of a short-term
external heart assist device found in MS-DRG 163, as noted previously,
we found these cases all reported principal diagnosis of pulmonary
embolism. The ICD-10-codes that describe pulmonary embolism are
currently assigned to MDC 04 (Diseases and Disorders of the Respiratory
System). The diagnoses assigned to MDC 04 reflect conditions associated
with the respiratory system. In ICD-10 the body or organ system is the
axis of the classification, and diagnosis codes are classified by the
body or organ system affected. The concept of clinical coherence
generally requires that the patient characteristics included in the
definition of each MS-DRG relate to a common organ system or etiology
and that a specific medical specialty should typically provide care to
the patients in the DRG. These diagnosis codes would require
reassignment to MDC 05 (Diseases and Disorders of the Circulatory
System) to group to MDC 05 MS-DRG 215.
Although MDC 04 diagnoses such as pulmonary embolism can lead to RV
failure and cardiogenic shock, which might be reasonable indications
for the insertion of a short-term external heart assist device, it
would not be appropriate to move these diagnoses into MDC 05 because it
could inadvertently cause cases reporting these same MDC 04 diagnoses
with a respiratory system procedure to be assigned to an ``unrelated''
MS-DRG because whenever there is a surgical procedure reported on the
claim that is unrelated to the MDC to which the case was assigned based
on the principal diagnosis, it results in a MS-DRG assignment to a
surgical class referred to as ``unrelated operating room procedures''.
To further examine the impact of moving the diagnosis codes
describing pulmonary embolism into MDC 05, we analyzed claims data for
cases reporting a respiratory system O.R. procedure and a principal
diagnosis of pulmonary embolism. Our findings are reflected in the
following table.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP14AP26.005
[[Page 19327]]
As shown in the table, we identified 8,652 cases reporting a
respiratory system O.R. procedure and a principal diagnosis of
pulmonary embolism. If we were to move the diagnosis codes describing
pulmonary embolism to MDC 05, these cases would be assigned to the
surgical class referred to as ``unrelated operating room procedures''
as an unintended consequence because the surgical procedure reported on
the claim would be considered unrelated to the MDC to which the case
was assigned based on the principal diagnosis. The data also indicates
that there were more cases that reported an O.R. procedure assigned to
MDC 04 with a principal diagnosis describing pulmonary embolism than
there were cases that reported a procedure code describing the
insertion of a short-term external heart assist device, and a principal
diagnosis of pulmonary embolism in MDC 04 (8,652 cases versus 17 cases)
demonstrating that inpatient admissions for pulmonary embolism more
typically have an O.R. procedure assigned to MDC 04 performed and do
not report a procedure code describing the insertion of a short-term
external heart assist device.
We also reviewed the cases reporting an O.R. procedure assigned to
MDC 04 and a principal diagnosis describing pulmonary embolism to
identify the top ten O.R. procedures assigned to MDC 04 that were
reported within the claims data for these cases. Our findings are shown
in the following table:
[GRAPHIC] [TIFF OMITTED] TP14AP26.006
BILLING CODE 4120-01-C
As noted previously, if we were to move the diagnosis codes
describing pulmonary embolism to MDC 05, cases reporting one of the
O.R. procedures assigned to MDC 04 shown in the table would be assigned
to the surgical class referred to as ``unrelated operating room
procedures'' as an unintended consequence. Based on the results of our
analysis, we believe that the diagnosis codes describing pulmonary
embolism are most clinically aligned with the other diagnosis codes
assigned to MDC 04 (where they are currently assigned). Considering the
impact that moving the diagnoses describing pulmonary embolism to MDC
05 from MDC 04 would have, we also believe it would not be appropriate
to move these diagnoses into MDC 05 because it would inadvertently
cause cases reporting pulmonary embolism with O.R. procedures assigned
to MDC 04 to be assigned to an unrelated MS-DRG.
We then explored alternative options, as was requested. We noted
that the 17 cases reporting a procedure code describing the insertion
of a short-term external heart assist device had an average length of
stay of 8.4 days and average costs of $81,960, as compared to the
13,396 cases in MS-DRG 163 that had an average length of stay of 8.2
days and average costs of $40,641. While these cases reporting a
procedure code describing the insertion of a short-term external heart
assist device had average costs that were $41,319 higher than the
average costs of all cases in MS-DRG 163 (the highest severity level
``with MCC'' MS-DRG), there were only a total of 17 cases. The results
of the claims analysis demonstrate that there is not sufficient claims
data in the MedPAR file on which to assess the resource use of cases
reporting a procedure code describing the insertion of a short-term
external heart assist device with a principal diagnosis from MDC 04 to
consider the creation of a new MS-DRG. As noted previously, we cannot
ascertain from the claims data the resource use specifically
attributable to the insertion of a short-term external heart assist
device during the hospital stay. Accordingly, we do not believe that
the small subset of cases reporting a procedure code describing the
insertion of a short-term external heart assist device with a principal
diagnosis from MDC 04 warrants the creation of a new MS-DRG for these
cases at this time.
Lastly, we explored reassigning cases reporting a procedure code
describing the insertion of a short-term external heart assist device
with an O.R. procedure assigned to MDC 04 and a principal diagnosis
from MDC 04 to other MS-DRGs within MDC 04. However, our review did not
support reassignment of these cases to any other
[[Page 19328]]
surgical MS-DRGs in MDC 04, as MS-DRGs 163, 164 and 165, where the
cases are currently assigned, represent the highest surgical class in
the surgical hierarchy of MDC 04. The surgical hierarchy is an ordering
of surgical classes from most resource-intensive to least resource-
intensive. Application of this hierarchy ensures that cases involving
multiple surgical procedures are assigned to the MS-DRG associated with
the most resource-intensive surgical class. We note that discussion of
the surgical hierarchy is in section II.C.14. of the preamble of this
FY 2027 IPPS/LTCH PPS proposed rule.
While the data analysis reflects that cases that report a procedure
code describing the insertion of a short-term external heart assist
device with an O.R. procedure assigned to MDC 04 and a principal
diagnosis from MDC 04 demonstrate higher average costs in their
respective MS-DRGs, as discussed in prior rulemaking (86 FR 44878), the
MS-DRG system is a system of averages and it is expected that within
the diagnostic related groups, some cases may demonstrate higher than
average costs, while other cases may demonstrate lower than average
costs. We further note that section 1886(d)(5)(A) of the Act provides
for Medicare payments to Medicare-participating hospitals in addition
to the basic prospective payments for cases incurring extraordinarily
high costs. We will continue to evaluate the clinical coherence and
resource consumption costs that impact this subset of cases and their
current MS-DRG assignment.
Therefore, for the reasons stated previously, we are not proposing
to reassign cases reporting procedure codes describing the insertion of
a short-term external heart assist device from MDC 04 MS-DRGs 163, 164,
and 165 (Major Chest Procedures with MCC, with CC, and without CC/MCC,
respectively) to MDC 05 MS-DRG 215 (Other Heart Assist System Implant)
for FY 2027.
b. Fluorescence Guided Procedures of the Trunk Region Using
Pafolacianine
CYTALUX[supreg] (pafolacianine) is a folate receptor-targeted
fluorescent optical imaging agent used as an adjunct for the
identification of malignant and non-malignant pulmonary lesions in
adult patients with known or suspected lung cancer. CYTALUX[supreg]
binds to the folate receptors on these cancer cells and is endocytosed
into folate receptor positive cancer cells. CYTALUX[supreg] is
administered intravenously prior to thoracic resection procedures and
requires use of a near-infrared imaging (NIR) system to illuminate,
thereby making cancer visible within the surgical field.
CYTALUX[supreg] received FDA approval and is indicated as an adjunct
for intraoperative identification of malignant and non-malignant
pulmonary lesions in adult patients with known or suspected cancer in
the lung. We note that CYTALUX[supreg] for the lung indication was
approved for new technology add-on payments for FY 2024 (88 FR 58810
through 58818), FY 2025 (89 FR 69120 through 69126), and FY 2026 (90 FR
36668). We refer readers to section II.E.5 of the preamble of this FY
2027 IPPS/LTCH PPS proposed rule for a discussion regarding the
proposed FY 2027 status of technologies approved for FY 2026 new
technology add-on payments, including CYTALUX[supreg] for the lung
indication.
We received a request from the manufacturer of CYTALUX[supreg] to
modify the GROUPER logic of MS-DRGs 163, 164, and 165 (Major Chest
Procedures with MCC, with CC, and without CC/MCC, respectively) by
reassigning cases with an ICD-10-PCS code that describes fluorescence
guided surgery using CYTALUX[supreg] (pafolacianine) for the lung
indication that currently map to the lower severity level MS-DRG 165
(without CC/MCC) to the higher severity level MS-DRG 163 (with MCC) or
MS-DRG 164 (with CC). According to the requestor, the utilization of
CYTALUX[supreg] does not change the surgical procedure but adds
significant value and cost to the procedure by improving the surgeon's
ability to identify and completely resect malignant tissue. The
requestor performed their own analysis of Medicare claims data from 10/
1/2023-3/31/2025 and stated they found approximately 135 cases that
used CYTALUX[supreg] in thoracic resections and that they expect
adoption to accelerate as NIR systems become more widely available.
Additionally, the requestor stated they found 35% of the cases using
CYTALUX[supreg] within MS-DRG 165, and the average costs of these cases
exceeded the average costs of cases that did not report the usage of
CYTALUX[supreg]. When controlling for procedural and facility
variation, the requestor stated they found that CYTALUX cases in MS-DRG
165 were $1,515 (8%) higher in cost and that 60% of the cases using
CYTALUX[supreg] in MS-DRG DRG 165 received new technology add-on
payments averaging approximately $2,300. The requestor further asserted
that their review of the Inpatient Standard Analytical Files (SAF)
indicated underreporting of CYTALUX[supreg] costs due to unclear
inpatient drug billing guidance. The requestor stated they found that
64% of cases reporting an ICD-10-PCS code that describes fluorescence
guided surgery using CYTALUX[supreg] (pafolacianine) for the lung
indication fall into MS-DRGs 163 or 164. Additionally, the requestor
stated while they found that the average length of stay for cases
reporting CYTALUX[supreg] in MS-DRG 165 is lower (1.9 vs. 2.3 days),
the cost profile of these cases aligns more closely with the higher-
severity MS-DRGs 164 and 163. According to the requestor, this
misalignment leads to underpayment when CYTALUX[supreg] cases are
grouped into MS-DRG 165, therefore CMS should reassign cases with an
ICD-10-PCS code that describes fluorescence guided surgery using
CYTALUX[supreg] (pafolacianine) for the lung indication from MS-DRG 165
to MS-DRGs 163 or 164 to prevent barriers to hospital adoption of
CYTALUX[supreg] as NIR system availability expands nationwide.
The following ICD-10-PCS procedure codes describe fluorescence
guided surgery using CYTALUX[supreg] (pafolacianine) for the lung
indication.
BILLING CODE 4120-01-P
[[Page 19329]]
[GRAPHIC] [TIFF OMITTED] TP14AP26.007
In the ICD-10 MS-DRGs Definitions Manual Version 43.1, procedure
codes 8E0W0EN, 8E0W3EN, 8E0W4EN, 8E0W7EN and 8E0W8EN are designated as
non-O.R. procedures for purposes of MS-DRG assignment, therefore when
CYTALUX[supreg] is utilized during a procedure for the lung indication,
the ICD-10-PCS code describing the surgical procedure will determine
the surgical MS-DRG assignment based on the principal diagnosis
reported.
We examined claims data from the September 2025 update of the FY
2025 MedPAR file for MS-DRGs 163, 164, and 165 to identify cases
reporting one of the five procedure codes listed previously that
describe fluorescence guided surgery using CYTALUX[supreg]
(pafolacianine). Our findings are shown in the following table:
[GRAPHIC] [TIFF OMITTED] TP14AP26.008
BILLING CODE 4120-01-C
As shown in the table, in MS-DRG 163, we identified a total of
13,396 cases with an average length of stay of 8.2 days and average
costs of $40,641. Of those 13,396 cases, there were 14 cases reporting
one of five procedure codes that describe fluorescence guided surgery
using CYTALUX[supreg] (pafolacianine), with average costs lower than
the average costs in the FY 2025 MedPAR file for MS-DRG 163 ($30,818
compared to $40,641) and a shorter average length of stay (4.6 days
compared to 8.2 days). In MS-DRG 164, we identified a total of 14,384
cases with an average length of stay of 4 days and average costs of
$23,393. Of those 14,384 cases, there were 87 cases reporting one of
five procedure codes that describe fluorescence guided surgery using
CYTALUX[supreg] (pafolacianine), with average costs lower than the
average costs in the FY 2025 MedPAR file for MS-DRG 164 ($22,426
compared to $23,393) and a shorter average length of stay (2.7 days
compared to 4 days). In MS-DRG 165, we identified a total of 6,431
cases with an average length of stay of 2.3 days and average costs of
$17,981. Of those 6,431 cases, there were 58 cases reporting one of
five procedure codes that describe fluorescence guided surgery using
CYTALUX[supreg] (pafolacianine), with average costs higher than the
average costs in the FY 2025 MedPAR file for MS-DRG 165 ($20,854
compared to $17,981), and a shorter average length of stay (1.9 days
compared to 2.3 days).
The 58 cases in MS-DRG 165 reporting one of five procedure codes
that describe fluorescence guided surgery using CYTALUX[supreg]
(pafolacianine), without a secondary diagnosis code designated as a CC
or MCC, have a shorter average length of stay (1.9 days versus 4 days)
and lower average costs ($20,854 versus $23,393) when compared to all
the cases in MS-DRG 164. Similarly, the 58 cases in MS-DRG 165
reporting one of five procedure codes that describe fluorescence guided
surgery using CYTALUX[supreg] (pafolacianine) have a shorter average
length of stay (1.9 days versus 8.2 days) and lower average costs
($20,854 versus $40,641) when compared to all the cases in MS-DRG 163.
While the data analysis reflects that cases that report one of five
procedure codes that describe fluorescence guided surgery using
CYTALUX[supreg] (pafolacianine), without a secondary diagnosis code
designated as a CC or MCC, demonstrate slightly higher average costs
compared to all the cases in MS-DRG 165, we believe these cases are
more suitably grouped to MS-DRG 165, where they are currently assigned,
based on the closer similarities in resource utilization compared to
all the cases in their respective MS-DRG. As discussed in prior
rulemaking (86 FR 44878), the MS-DRG system is a system of averages and
it is expected that within the diagnostic related groups, some cases
may demonstrate higher than average costs, while other cases may
demonstrate lower than average costs. We further note that section
1886(d)(5)(A) of the Act provides for Medicare payments to Medicare-
participating hospitals in addition to the basic prospective payments
for cases
[[Page 19330]]
incurring extraordinarily high costs. Moreover, the data do not
indicate cases reporting procedure codes that describe fluorescence
guided surgery using CYTALUX[supreg] (pafolacianine), without a
secondary diagnosis code designated as a CC or MCC, utilize similar
resources when compared to the cases assigned to MS-DRGs 163 and 164.
We believe it would be advantageous to allow for more claims data to be
analyzed in consideration of any future modifications to the MS-DRGs
for which fluorescence guided surgeries using CYTALUX[supreg]
(pafolacianine) are assigned. We will continue to evaluate the clinical
coherence and resource consumption costs that impact this subset of
cases and their MS-DRG assignment.
Therefore, for the reasons stated, for FY 2027, we are proposing to
maintain the current structure of MS-DRGs 163, 164, and 165.
3. MDC 05 (Diseases and Disorders of the Circulatory System):
WiSE[supreg] CRT System
The WiSE[supreg] CRT System is an implantable cardiac pacing system
that delivers left ventricular endocardial pacing (LVEP) specifically
for cardiac resynchronization therapy (CRT) without the use of wires or
leads going into the heart. The WiSE[supreg] CRT System was designed to
stimulate the endocardial surface of the left ventricle (LV) without a
transvenous LV lead. Working in conjunction with previously implanted
standard commercially available pacemakers or defibrillators, the
WiSE[supreg] CRT System utilizes a wireless ultrasound-based energy
transmission to a small, implanted electrode in the LV endocardium,
which converts the ultrasound signal into pacing energy. According to
the requestor, the WiSE[supreg] CRT System is engineered to benefit
patients with heart failure who were previously untreatable with
conventional CRT or who are considered at high risk for placement of a
coronary sinus (CS) lead for CRT upgrades. The WiSE[supreg] CRT system
consists of four components: the receiver, also known as the receiver
electrode or electrode (implanted via catheter), delivery sheath,
battery and transmitter. An external programmer is used to adjust
parameters of the battery. The WiSE[supreg] CRT System was approved for
new technology add-on payments for FY 2026 (90 FR 36821 through 36823).
We refer readers to section II.E.4.a of the preamble of this proposed
rule for a discussion regarding the proposed FY 2027 status of
technologies approved for FY 2026 new technology add-on payments,
including the WiSE[supreg] CRT System.
In support of the new technology add-on payment application that
was submitted for FY 2026 consideration, we received a request to
create new ICD-10-PCS codes to differentiate cardiac procedures that
involve the insertion of an implantable endocardial pacing system, such
as the WiSE[supreg] CRT System, and a code proposal was displayed in
association with the Spring 2025 ICD-10 Coordination and Maintenance
Committee Update. As a result, effective October 1, 2025 (FY 2026), we
implemented the following ICD-10-PCS procedure codes to identify the
insertion of the WiSE[supreg] CRT System: X2HN37B (Insertion of
endocardiac pacing electrode into left ventricle, percutaneous
approach, new technology group 11) in combination with XHH80HB
(Insertion of ultrasound transmitter and battery for endocardiac pacing
electrode into chest subcutaneous tissue and fascia, open approach, new
technology group 11). In the ICD-10 MS-DRGs Version 43.1, this
procedure code combination is assigned to MS-DRGs 242, 243, and 244
(Permanent Cardiac Pacemaker Implant with MCC, with CC, without MCC
respectively) in a logic list referred to as ``CARDIAC PACEMAKER
DEVICE'' that includes 720 other ICD-10-PCS procedure code combinations
that identify the insertion of cardiac pacemakers. When reported as
standalone procedures, ICD-10-PCS code X2HN37B is assigned to MDC 05
MS-DRGs 264 (Other Circulatory System O.R. Procedures) and ICD-10-PCS
code XHH80HB is assigned to MDC 05 MS-DRGs 258 and 259 (Cardiac
Pacemaker Device Replacement with and without MCC, respectively). We
refer the reader to the ICD-10 MS-DRG Definitions Manual Version 43.1,
which is available on the CMS website at: <a href="https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software">https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software</a> for complete documentation of the GROUPER
logic for MS-DRGs 242, 243, 244, 259, 259 and 264.
For this FY 2027 IPPS/LTCH PPS proposed rule, we received a request
to reassign the ICD-10-PCS procedure codes that describe the insertion
of the WiSE[supreg] CRT System from MS-DRGs 242, 243, and 244 to MS-
DRGs 228 and 229 (Other Cardiothoracic Procedures with and without MCC,
respectively). The requestor stated that insertion of the WiSE[supreg]
CRT System electrode, which is described by ICD-10-PCS code X2HN37B, is
similar both clinically and in terms of resource utilization, to the
procedure codes that describe the insertion of leadless pacemakers that
are currently assigned to MS-DRGs 228 and 229. The requestor further
stated that the cases assigned to MS-DRGs 242, 243, and 244 involve
traditional pacemaker devices with leads and are dissimilar to the
WiSE[supreg] CRT System. According to the requestor, based on clinical
function, implant methodology, and patient profile, the WiSE[supreg]
CRT System more closely aligns with leadless pacemaker technology than
with traditional pacemaker procedures as the use of multi-modality
imaging, arterial navigation, and ultrasound-guided transmitter
placement adds to both time and resource utilization, paralleling the
procedural profile of leadless pacemaker implantation rather than
traditional pacemaker surgery. Therefore, the requestor suggested that
CMS reassign ICD-10-PCS code X2HN37B that describes the insertion of
the electrode of the WiSE[supreg] CRT System to MS-DRGs 228 and 229 to
appropriately group the procedure with the leadless pacemaker cases.
To begin our analysis, we reviewed the procedure codes. As noted
previously, a code proposal was displayed as part of the ICD-10
Coordination and Maintenance Committee Spring 2025 update process to
create unique ICD-10-PCS codes to describe the insertion of an
implantable endocardial pacing system such as the WiSE[supreg] CRT
System. As discussed in prior rulemaking (86 FR 44805), we used our
established process to examine the MS-DRG assignment for the
predecessor codes to determine the most appropriate MS-DRG assignment
of new procedure codes X2HN37B and XHH80HB for FY 2026. Specifically,
we review the predecessor code and MS-DRG assignment most closely
associated with the new procedure code, and in the absence of claims
data, we consider other factors that may be relevant to the MS-DRG
assignment, including the severity of illness, treatment difficulty,
complexity of service and the resources utilized in the diagnosis and/
or treatment of the condition. We have noted in prior rulemaking that
this process does not automatically result in the new procedure code
being assigned to the same MS-DRG or to have the same designation (O.R.
versus Non-O.R.) as the predecessor code.
Because the codes that describe the insertion of the WiSE[supreg]
CRT System were effective October 1, 2025 (FY 2026), we would not
expect the codes to be reported in the FY 2025 claims data used for
this proposed rule. We examined claims data from the September 2025
update of the FY 2025
[[Page 19331]]
MedPAR file for MS-DRGs 242, 243, and 244 and confirmed that there were
zero cases reporting the procedure codes describing the insertion of
the WiSE[supreg] CRT System across MS-DRGs 242, 243, and 244.
We reviewed this issue and note the requestor is correct that the
ICD-10-PCS codes that describe the insertion of intracardiac
pacemakers, also known as ``leadless'' pacemakers, are currently
assigned to MS-DRGs 228 and 229. In leadless pacemakers, the components
are combined into a single device implanted within a heart chamber.
They do not require a chest incision, a subcutaneous pocket or a
tunneled lead. These devices are implanted via a femoral vein
transcatheter approach and then advanced into the heart chamber, fixed
to the chamber wall, and released. Conventional pacemakers are
comprised of a metal generator (battery + electronics) placed under the
skin in the upper chest, connected by one or more insulated wires
(leads) threaded into the heart. We agree that leadless pacemakers and
the WiSE[supreg] CRT System electrode are clinically coherent in that
both eliminate the need for traditional, wire-based leads that run from
the device to the heart muscle to transmit electrical impulses to the
heart. We believe that the electrode of the WiSE[supreg] CRT System is
more closely aligned with the leadless pacemakers assigned to MS-DRGs
228 and 229 as compared to the insertion of conventional pacemakers
assigned to MS-DRGs 242, 243, and 244. While our analysis did not
identify any cases reporting the procedure code that describes the
insertion of the electrode of the WiSE[supreg] CRT System, based on our
review of the clinical issues, and recognizing that it is expected that
some Medicare patients will receive the WiSE[supreg] CRT System on an
inpatient basis, we believe reassigning ICD-10-PCS code X2HN37B that
describes the insertion of the endocardiac pacing electrode into the
left ventricle from MS-DRG 264 to MDC 05 MS-DRGs 228 and 229 would
improve clinical coherence in these MS-DRGs.
For these reasons, for FY 2027, we are proposing to reassign
procedure code X2HN37B (Insertion of endocardiac pacing electrode into
left ventricle, percutaneous approach, new technology group 11) from
MS-DRG 264 to MS-DRGs 228 and 229 for clinical coherence and to better
account for the anticipated resources required. We are also proposing
to delete the procedure code combination of X2HN37B and XHH80HB from
the GROUPER logic of MS-DRGs 242, 243, and 244. Under this proposal,
procedure code X2HN37B will not need to be reported as part of a
procedure code combination or procedure code ``cluster'' to satisfy the
logic for assignment to MS-DRGs 228 and 229. When reported as a
standalone procedure, ICD-10-PCS code XHH80HB (Insertion of ultrasound
transmitter and battery for endocardiac pacing electrode into chest
subcutaneous tissue and fascia, open approach, new technology group 11)
will be assigned to proposed new MDC 05 MS-DRG 210 (Cardiac Pacemaker
Revision or Device Replacement with MCC) and proposed new MS-DRG 211
(Cardiac Pacemaker Revision or Device Replacement without MCC), which
are discussed later in this section.
Consistent with our annual review of the MS-DRGs, we consider
changes in resource consumption, treatment patterns, technology, and
any other factors that may change the relative use of hospital
resources. In our review of the claims data from the September 2025
update of the FY 2025 MedPAR file for this request, we identified a low
volume of cases for MS-DRGs 258 and 259 (Cardiac Pacemaker Device
Replacement with MCC and without MCC, respectively), where procedure
code XHH80HB is assigned when reported as a standalone procedure in
Version 43.1. Our findings are shown in the following table.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP14AP26.009
In light of the initial findings of only 35 cases for MS-DRG 258
and 68 cases in MS-DRG 259, we further reviewed the MedPAR claims data
for cases assigned to MS-DRGs 258 and 259 for the past 5 fiscal years.
As reflected in the following tables, these data indicate that the
number of cases grouping to MS-DRGs 258 and 259 has generally declined.
[GRAPHIC] [TIFF OMITTED] TP14AP26.010
[GRAPHIC] [TIFF OMITTED] TP14AP26.011
[[Page 19332]]
We note that, if, during our annual MS-DRG analysis we identify
that there are only a few patients in a respective MS-DRG, consistent
with our established process in deciding whether to propose to make
further modifications, we consider if there have been potential changes
in the clinical characteristics of the patients, treatment patterns, or
resource utilization. A principle of the MS-DRGs and the
characteristics of a meaningful DRG classification scheme is the
ability to detect such changes and accordingly, propose clinically
appropriate modifications that are also consistent with resource
utilization. We have noted in prior rulemaking that we prefer to have a
substantial number of cases in an MS-DRG because having larger
clinically cohesive groups within an MS-DRG provides greater stability
for annual updates to the relative payment weights. In light of these
considerations, and the low volume of cases in MS-DRGs 258 and 259, we
believed it was appropriate to further analyze how to potentially
reclassify these cases.
Accordingly, using the September 2025 update of the FY 2025 MedPAR
file, we examined whether there were other MS-DRGs to which these cases
could appropriately be reassigned. We note that surgical MS-DRGs 260,
261, and 262 (Cardiac Pacemaker Revision Except Device Replacement with
MCC, with CC, and without CC/MCC, respectively) also include procedure
codes related to cardiac pacemakers. A cardiac pacemaker device
replacement (generator change) is a procedure to change an old battery
(generator) for a new one. A cardiac pacemaker revision is a procedure
that may involve replacing, moving, or adding leads, or fixing the
pocket of the generator. While the terms are distinct, both cardiac
pacemaker revision and cardiac pacemaker replacement procedures are
performed in order to improve the way the cardiac pacemaker system
works.
As such, we reviewed the claims data from the September 2025 update
of the FY 2025 MedPAR file for MS-DRGs 260, 261, and 262 to examine the
resource utilization associated with cases assigned to these MS-DRGs.
Our findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP14AP26.012
As part of this analysis, we also reviewed the MS-DRGs for cases
reporting ICD-10-PCS codes describing cardiac pacemaker device
replacement procedures by severity claims data for MS-DRG 259 because
this MS-DRG includes cases reporting a CC as well as cases reporting a
NonCC. Therefore, we analyzed the claims data to determine the number
of cases, the average length of stay, and average costs for the cases
in MS-DRG 258 and 259 by severity level (1=MCC, 2=CC, and 3=NonCC). Our
findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP14AP26.013
As shown in the data, the 35 cases reporting an MCC in MS-DRG 258
have an average length of stay of 7 days with average costs of $28,275,
which is comparable to the cases in MS-DRG 260 reporting an MCC that
have an average length of stay of 7.5 days with average costs of
$29,313. The 42 cases reporting a CC in MS-DRG 259 have an average
length of stay of 4 days with average costs of $18,246, which is
comparable to the cases in MS-DRG 261 reporting an CC that have an
average length of stay of 3.5 days with average costs of $17,151. The
26 cases not reporting a CC or an MCC in MS-DRG 259 have an average
length of stay of 2 days with average costs of $14,552, which is
comparable to the cases in MS-DRG 262 not reporting a CC or an MCC that
have an average length of stay of 2.5 days with average costs of
$15,119.
We reviewed these findings and believe that it may no longer be
necessary to subdivide these MS-DRGs based on the cardiac pacemaker
revision or device replacement procedure codes reported. We note that
DRGs that differentiate cases reporting procedure codes describing
cardiac pacemaker device replacement from cases reporting procedure
codes describing cardiac pacemaker revisions have existed since 1983
(48 FR 39878) when Congress amended the Social Security Act to include
a national DRG-based hospital prospective payment system for all
Medicare patients.
Our analysis of claims data from the September 2025 update of the
FY 2025 MedPAR file shows that in the 43 years since the DRGs for cases
reporting cardiac pacemaker revision procedures and cases reporting
cardiac pacemaker device replacement procedures were created, the
resource utilization appears to now be aligned, and the cases are
clinically coherent, and therefore we believe it is appropriate to now
restructure these MS-DRGs accordingly. Specifically, we believe it
would be appropriate to delete MS-DRGs 258, 259, 260, 261, and 262, and
to create new MS-DRGs for cases reporting ICD-10-PCS codes describing
cardiac pacemaker revision or device replacement procedures, based on
our analysis and review of the cases grouping to these MS-DRGs.
The following table illustrates our simulation of the proposal.
[GRAPHIC] [TIFF OMITTED] TP14AP26.014
[[Page 19333]]
Consistent with our established process as discussed in section
II.C.1.b. of the preamble of this FY 2027 IPPS/LTCH PPS proposed rule,
once the decision has been made to propose to make further
modifications to the MS-DRGs, such as creating a new base MS-DRG, all
five criteria to create subgroups must be met for the base MS-DRG to be
split (or subdivided) by a CC subgroup. Therefore, we applied the
criteria to create subgroups in a base MS-DRG as discussed in section
II.C.1.b. of the preamble of this FY 2027 IPPS/LTCH PPS proposed rule.
As shown, a three-way split of the proposed new MS-DRG failed to meet
the criterion that there be at least a 20% difference in average costs
between the CC and NonCC subgroup.
[GRAPHIC] [TIFF OMITTED] TP14AP26.015
As discussed in section II.C.1.b. of the preamble of this FY 2027
IPPS/LTCH PPS proposed rule, if the criteria for a three-way split
fail, the next step is to determine if the criteria are satisfied for a
two-way split. We therefore applied the criteria for a two-way split
for the ``with MCC'' and ``without MCC'' subgroups and found that all
five criteria were met. The following table illustrates our findings.
[GRAPHIC] [TIFF OMITTED] TP14AP26.016
BILLING CODE 4120-01-C
For the proposed new MS-DRGs for cases reporting procedure codes
describing cardiac pacemaker revision or device replacement, there is
at least (1) 500 cases in the MCC group and 500 cases in the without
MCC group; (2) 5 percent of the cases in the MCC group and 5 percent in
the without MCC group; (3) a 20 percent difference in average costs
between the MCC group and the without MCC group; (4) a $2,000
difference in average costs between the MCC group and the without MCC
group; and (5) a 3-percent reduction in cost variance, indicating that
the proposed severity level splits increase the explanatory power of
the base MS-DRG in capturing differences in expected cost between the
proposed MS-DRG severity level splits by at least 3 percent and thus
improve the overall accuracy of the IPPS payment system.
Therefore, for FY 2027, we are proposing to delete MS-DRGs 258,
259, 260, 261, and 262 and to create two new MS-DRGs with a two-way
severity level split for cases reporting procedure codes describing
cardiac pacemaker revision or device replacement in MDC 05. These
proposed new MS-DRGs are proposed new MS-DRG 210 (Cardiac Pacemaker
Revision or Device Replacement with MCC) and proposed new MS-DRG 211
(Cardiac Pacemaker Revision or Device Replacement without MCC). We
refer the reader to Table 6P.2a associated with this FY 2027 IPPS/LTCH
PPS proposed rule (which is 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>) for the list of procedure codes we are
proposing to define in the logic for the proposed new MS-DRGs. We note
that discussion of the surgical hierarchy for the proposed modification
is discussed in section II.C.14. of the preamble of this FY 2027 IPPS/
LTCH PPS proposed rule.
In our evaluation of this MS-DRG classification request, we also
noted that we identified 7,772 cases in base MS-DRG 264 (Other
Circulatory System O.R. Procedures) with an average length of stay of
9.4 days and average costs of $29,545. Accordingly, in connection with
our analysis we applied the five criteria as described in section
II.C.1.b. of the preamble of this FY 2027 IPPS/LTCH PPS proposed rule
to determine if it would be appropriate to subdivide cases currently
assigned to base MS-DRG 264 into severity levels. This analysis
includes two years of MedPAR claims data to compare the data results
from one year to the next to avoid making determinations about whether
additional severity levels are warranted based on an isolated year's
data fluctuation and also to validate that the established severity
levels within a base MS-DRG are supported. Therefore, we reviewed the
claims data for base MS-DRG 264 using the September 2024 update of the
FY 2024 MedPAR file and the September 2025 update of the FY 2025 MedPAR
file, which were used in our analysis of claims data for MS-DRG
reclassification requests for FY 2026 and FY 2027, respectively. Our
findings are shown in the following table:
[GRAPHIC] [TIFF OMITTED] TP14AP26.017
First, we applied the criteria to create subgroups for the three-
way severity level split. We found that the criterion that there be at
least 5% of the patients are in each of the MCC, CC, and NonCC
subgroups failed based on the data in both the FY 2024 and FY 2025
MedPAR files. The criterion that there be at least 500 cases for each
subgroup also was
[[Page 19334]]
not met, as shown in the table for both years. Specifically, for the
``with MCC'', ``with CC'', and ``without CC/MCC'' split, there were
only 154 cases in the ``without CC/MCC'' subgroup based on the data in
the FY 2024 MedPAR file and only 145 cases in the ``without CC/MCC''
subgroup based on the data in the FY 2025 MedPAR file.
As discussed in section II.C.1.b. of the preamble of this FY 2027
IPPS/LTCH PPS proposed rule, if the criteria for a three-way split
fail, the next step is to determine if the criteria are satisfied for a
two-way split. We therefore applied the criteria for a two-way split
for the ``with MCC'' and ``without MCC'' subgroups and found that all
five criteria were met for both years. For both years, there are at
least (1) 500 cases in the MCC group and 500 cases in the without MCC
group; (2) 5 percent of the cases in the MCC group and 5 percent in the
without MCC group; (3) a 20 percent difference in average costs between
the MCC group and the without MCC group; (4) a $2,000 difference in
average costs between the MCC group and the without MCC group; and (5)
a 3-percent reduction in cost variance, indicating that a ``with MCC''
and ``without MCC'' severity level split increases the explanatory
power of the base MS-DRG in capturing differences in expected cost
between the MS-DRG severity level splits by at least 3 percent and thus
improves the overall accuracy of the IPPS payment system.
As the claims data supports a two-way severity level split for
cases reporting other circulatory system O.R. Procedures, for FY 2027,
we are proposing to delete base MS-DRG 264 and proposing to create two
new MS-DRGs with a two-way severity level split for cases reporting
other circulatory system O.R. Procedures in MDC 05. These proposed new
MS-DRGs are proposed new MS-DRG 361 (Other Circulatory System O.R.
Procedures with MCC) and proposed new MS-DRG 362 (Other Circulatory
System O.R. Procedures without MCC). Under this proposal, we would
reassign the 1,447 listed procedure codes in the GROUPER logic of MS-
DRG 264 to new MS-DRGs 361 and 362. We refer the reader to the ICD-10
MS-DRG Version 43.1 Definitions Manual (which is available via the
internet on the CMS website 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>) for complete documentation of the GROUPER logic for MS-DRG
264. We note that discussion of the surgical hierarchy for the proposed
modification is discussed in section II.C.14. of the preamble of this
FY 2027 IPPS/LTCH PPS proposed rule.
4. MDC 08 (Diseases and Disorders of the Musculoskeletal System and
Connective Tissue)
a. Spinal Fusion and Pelvic Fixation Procedures
As discussed in the FY 2026 IPPS/LTCH PPS proposed rule (90 FR
18012 through 108013) and final rule (90 FR 36550 through 36552), we
received a request to 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.
In the FY 2026 IPPS/LTCH PPS final rule (90 FR 36552), we noted
that we would continue to consider the request in connection with
future rulemaking. We stated that the logic for MS-DRGs 456, 457, and
458 is defined by extensive fusions, in addition to specific diagnosis
code logic and that MS-DRGs 426, 427, 428, 447, and 448 had recently
become effective October 1, 2024, which we were continuing to monitor.
We also stated that the data analysis necessary to examine the
intricate logic within the spinal fusion MS-DRGs outlined in the
request is complex and would require 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.
For this FY 2027 IPPS/LTCH PPS proposed rule, we received another
request from the same manufacturer to reassign cases reporting the use
of the iFuse Bedrock<SUP>TM</SUP> Granite Implant System (also referred
to as tulip connector) in spinal fusion procedures that currently map
to the lower severity level MS-DRG to the highest severity level (with
MCC) MS-DRG for the previously listed MS-DRGs that were discussed in
connection with the FY 2026 IPPS/LTCH PPS rulemaking; MS-DRGs 426, 427,
428, 447, 448, 456, 457, and 448.
The requestor stated that historically, the junction between the
lumbar spine and the sacrum (the L5-S1 spinal level), has been the most
challenging level in which to achieve fusion. One of the primary
reasons is because of our upright posture and normal spinal curvature
that causes the L5-S1 intervertebral disc to become significantly
inclined (tilted forward). The requester indicated that this results in
significant shear load at this level, making this the level most likely
to break down, and the level most challenging to stabilize during a
fusion procedure. Per the requestor, the L5-S1 level is the junction
between the mobile spine above and the much more rigid sacrum/pelvis
below, leading to stress concentration at this level. The L5-S1 level
experiences the most axial load as it is the base of the spine
supporting the weight of the entire torso. Finally, the L5-S1 level
experiences progressively more stress/load with more levels of the
spine that are fused. The requestor stated that including additional
levels in the fusion construct results in additional lengthening of the
lever arm and increasing the loads acting at the L5-S1 level.
The requestor stated that anchorage of spinal instrumentation into
the sacrum is also challenging. The sacrum is narrow in the posterior
to anterior dimension, resulting in the need to place shorter screws.
The pedicles are larger diameter which results in diminished cortical
engagement of the screws. According to the requestor, the bone
structure of the sacrum is also suboptimal for screw anchorage as the
density of the sacrum is frequently diminished, particularly in older
adults, and especially in those with osteoporosis. The requestor stated
that the problem also exists for older adults without osteoporosis.
The requestor indicated that historically, surgeons added
additional spinal instrumentation fixation anchor points into the
pelvis (ilium and sacrum) to try and help solve the biomechanical and
anatomic challenges previously described. These anchors (typically
longer, larger diameter
[[Page 19335]]
pedicle-type screws) are placed into the ilium or placed crossing
through the sacrum and then into the ilium. These screws are then
connected to the spinal instrumentation and improve the biomechanical
stability of the spinal instrumentation construct. The requestor stated
that clinical practice has evolved to include pelvic fixation as an
integral part of spinal instrumentation with multi-level fusions ending
at the sacrum. The requestor stated that the current standard is to
include pelvic fixation in fusions of four levels or more.\2\ The
requestor added that recently, recommendations have been suggested to
include pelvic fixation in some instances if the fusion includes three
or more levels.\3\ The requestor stated that pelvic fixation is also
considered in shorter level fusion procedures in clinical scenarios
when there is increased risk of fusion failure, including patients with
high pelvic incidence (PI), high body mass index (BMI), and conditions
with sagittal plane deformity such as spondylolisthesis. The requestor
stated that surgeons performing revision lumbar surgery to treat an
existing pseudarthosis (that is, nonunion or failed fusion) commonly
include pelvic fixation to provide additional stability in these
challenging clinical situations.
---------------------------------------------------------------------------
\2\ Lee CS, Chung SS, Choi SW, Yu JW, Sohn MS. Critical length
of fusion requiring additional fixation to prevent nonunion of the
lumbosacral junction. Spine (Phila Pa 1976). 2010 Mar 15;35(6):E206-
11. doi: 10.1097/BRS.0b013e3181bfa518. PMID: 20195201.
\3\ Jankowski PP, Hashmi SZ, Lord EL, Heller JE, Essig DA,
Passias PG, Tahmasebpour P, Capobianco RA, Kleck CJ, Polly DW,
Zuckerman SL; Spinopelvic Study Group. Trends in Lumbosacral-Pelvic
Fixation Strategies. Int J Spine Surg. 2025 Sep 2;19(4):402-408.
doi: 10.14444/8765. PMID: 40514223.
---------------------------------------------------------------------------
According to the requestor, although pelvic fixation strategies and
implants have evolved since they were first introduced in the 1970s,
including the development of sacro-alar-iliac (SAI) screws in 2007,\4\
challenges with pelvic fixation persist. Studies indicate a 17%-23%
complication rate, including screw or rod breakages, loose screws, L5-
S1 pseudoarthrosis, and high revision rates.<SUP>5 6</SUP> Many
patients also experience sacroiliac (SI) joint pain and degeneration
after multilevel fusions to the sacrum.\7\ The SI joint often exhibits
pathological increased motion in spinal deformity patients \8\ and
continues to move even after single-implant pelvic fixation
<SUP>9 10</SUP> leading to suboptimal outcomes and loss of correction.
---------------------------------------------------------------------------
\4\ Kebaish, Khaled M. MD (Johns Hopkins Hospital); Gunne,
Albert Pull ter MD; Mohamed, Ahmed S. MD; Zimmerman, Ryan; Ko, Phebe
S. BS; Skolasky, Richard L. ScD; O'Brien, Joseph R. MD, MPH;
Sponseller, Paul D. MD. A New Low Profile Sacro-Pelvic Fixation
Using S2 Alar Iliac (S2AI) Screws in Adult Deformity Fusion to the
Sacrum: A Prospective Study with Minimum Two-Year Follow-Up: E-
Poster #21. Spine: Affiliated Society Meeting Abstracts 10( ):p 170,
September 2009.
\5\ Eastlack RK, Soroceanu A, Mundis GM Jr, et al. Rates of
Loosening, Failure, and Revision of Iliac Fixation in Adult
Deformity Surgery. Spine (Phila Pa 1976). 2022;47(14):986-994.
doi:10.1097/BRS.0000000000004356.
\6\ Odland K, Chanbour H, Zuckerman SL, Polly DW Jr. Spinopelvic
fixation failure in the adult spinal deformity population:
systematic review and meta-analysis. Eur Spine J. 2024
Jul;33(7):2751-2762. doi: 10.1007/s00586-024-08241-6. Epub 2024 Apr
15. Erratum in: Eur Spine J. 2025 Sep 18. doi: 10.1007/s00586-025-
09232-x. PMID: 38619634.
\7\ Manzetti M, Ruffilli A, Barile F, et al. Sacroiliac Joint
Degeneration and Pain After Spinal Arthrodesis: A Systematic Review.
Clin Spine Surg. 2023;36(4):169-182. doi:10.1097/
BSD.0000000000001341.
\8\ Mikula AL, Fogelson JL, Oushy S, Pinter ZW, Peters PA,
Abode-Iyamah K, Sebastian AS, Freedman B, Currier BL, Polly DW,
Elder BD. Change in pelvic incidence between the supine and standing
positions in patients with bilateral sacroiliac joint vacuum signs.
J Neurosurg Spine. 2021 Jan 15;34(4):617-622. doi: 10.3171/
2020.8.SPINE20742. PMID: 33450735.
\9\ Wei C, Zuckerman SL, Cerpa M, Ma H, Yang M, Yuan S, Lenke
LG. Can pelvic incidence change after spinal deformity correction to
the pelvis with S2-alar-iliac screws? Eur Spine J. 2021
Sep;30(9):2486-2494. doi: 10.1007/s00586-020-06658-3. Epub 2020 Nov
11. PMID: 33179128.
\10\ Cunningham BW, Sponseller PD, Murgatroyd AA, Kikkawa J,
Tortolani PJ. A comprehensive biomechanical analysis of sacral alar
iliac fixation: an in vitro human cadaveric model. J Neurosurg
Spine. 2019 Jan 4;30(3):367-375. doi: 10.3171/2018.8.SPINE18328.
PMID: 30611149.
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The requestor stated that currently, greater biomechanical loads
are being placed on spinopelvic constructs and surgeons are performing
an increasing number of multilevel fusions. Evolving surgical
techniques and instrumentation now allow for treatment of more severe
deformities, as well as the performance of surgery on patients with a
higher BMI and poor bone quality. According to the requestor, the iFuse
Bedrock<SUP>TM</SUP> Granite Implant System represents a next-
generation solution that allows for both pelvic fixation and sacroiliac
joint fusion. The requestor stated this implant is the first Food and
Drug Administration (FDA) cleared device designed for both
purposes,\11\ featuring a composite construction that includes a strong
inner threaded screw component and a 3D-printed porous fusion sleeve to
promote osseointegration. The requestor reported that there have been
no reported breakages of the implant in over 8,500 cases.\12\
---------------------------------------------------------------------------
\11\ U.S. Food and Drug Administration. 510(k) Premarket
Notification: iFuse Bedrock Granite<SUP>TM</SUP> Implant System.
Published May 26, 2022. Accessed October 15, 2024.
<a href="http://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfpmn/pmn.cfm?id=K220195">www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfpmn/pmn.cfm?id=K220195</a>
\12\ Eastlack RK, Menger RP, Turner JD, Ashcraft KR, Carlton
Recking W, Kleck CJ. Spinopelvic Fixation Using an Osseointegrative
Implant: Analysis of Postmarket Surveillance to Determine the
Failure Rate. Int J Spine Surg. 2025 Jun 12;19(3):273-278. doi:
10.14444/8720. PMID: 39890424; PMCID: PMC12268591.
---------------------------------------------------------------------------
The requestor asserted the iFuse Bedrock<SUP>TM</SUP> Granite
Implant System provides clinical advantages such as immediate and
durable stability of the spinal instrumentation construct, reducing the
likelihood of implant breakage due to its larger diameter and stronger
construction. The requestor stated the porous fusion sleeve facilitates
osseous integration, enhancing stability over time as it is designed
for permanent fusion of the SI joint. Per the requestor, multiple
implants can be placed on each side, either connected to a single rod
or to separate rods, providing multiple points of fixation across the
SI joints which increases construct stability and decreases SI joint
motion. According to the requestor, the iFuse Bedrock<SUP>TM</SUP>
Granite Implant System requires no changes to physician workflow,
requires no additional surgical dissection, does not increase surgical
time, or alter the length of hospital stay. The requestor stated that
the iFuse Bedrock<SUP>TM</SUP> Granite Implant System is cleared for
use with two navigation systems most frequently used in surgical
facilities across the country.
The ICD-10-PCS codes that may be reported to describe the iFuse
Bedrock<SUP>TM</SUP> Granite tulip connector device are:
[[Page 19336]]
[GRAPHIC] [TIFF OMITTED] TP14AP26.018
The previously listed procedure codes describing ``Insertion''
(ICD-10-PCS codes XNH6058, XNH6358, XNH7058, and XNH7358) are assigned
to MS-DRGs 515, 516, and 517 (Other Musculoskeletal System and
Connective Tissue O.R. Procedures with MCC, with CC, and without CC/
MCC, respectively) and the procedure codes describing ``Fusion'' (ICD-
10-PCS codes XRGE058, XRGE358, XRGF058, and XRGF358) are assigned to
MS-DRGs 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) and MS-DRGs 402, 426, 427, 428, 447, 448, 450, 451, 456, 457,
and 458 under MDC 08. We note that because the ICD-10-PCS codes
describing ``Insertion'' of internal fixation device with tulip
connector are not assigned to one of the spinal fusion MS-DRGs as a
standalone procedure, another ICD-10-PCS code describing a spinal
fusion procedure would need to be reported on the same claim to group
to one of the previously listed spinal fusion MS-DRGs. We refer the
reader to the ICD-10 MS-DRG Definitions Manual, Version 43.1, which is
available on the CMS website at: <a href="https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software">https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software</a> for complete documentation of the GROUPER logic for the
previously listed MS-DRGs.
For this FY 2027 IPPS/LTCH PPS proposed rule, we also received a
separate, but related request, from another manufacturer of devices
used in the performance of a spinal fusion procedure. Specifically, we
received a request to reassign cases reporting the use of the
aprevo[supreg] Intervertebral Body Fusion Device (hereafter referred to
as aprevo[supreg]) from MS-DRG 402 (Single Level Combined Anterior and
Posterior Spinal Fusion Except Cervical) to MS-DRG 450 (Single Level
Spinal Fusion Except Cervical with MCC or Custom-Made Anatomically
Designed Interbody Fusion Device) or alternatively, to reassign cases
reporting the use of aprevo[supreg] from MS-DRG 402 to MS-DRG 428, and
separately, to reassign cases reporting the use of aprevo[supreg] from
MS-DRG 428 to the higher severity level (with MCC) MS-DRG 426. We note
that we have previously discussed the reassignment of cases reporting
the use of the aprevo[supreg] technology in the FY 2024 IPPS/LTCH PPS
proposed rule (88 FR 26726 through 26729) and final rule (88 FR
58731through 58735, as corrected in the FY 2024 final rule correction
notice at 88 FR 77211), and in the FY 2025 IPPS/LTCH PPS proposed rule
(89 FR 35971 through 39585) and final rule (89 FR 69034 through 69061).
We also note that the aprevo[supreg] technology was approved for new
technology add-on payments for FY 2022 (86 FR 45127 through 45133), FY
2023 (87 FR 49468 through 49469) and FY 2024 (88 FR 58802). We refer
the reader to those rulemaking discussions for additional detailed
information regarding the aprevo[supreg] technology.
The ICD-10-PCS codes that may be reported to describe lumbar fusion
procedures that use the aprevo[supreg] device are:
[[Page 19337]]
[GRAPHIC] [TIFF OMITTED] TP14AP26.019
We note that for the Spring 2026 ICD-10-PCS code update, the
manufacturer of the aprevo[supreg] custom-made anatomically designed
interbody fusion device submitted a request to revise the descriptions
for the procedure codes that describe use of the aprevo[supreg] device.
The manufacturer requested that the description of the previously
listed codes (and nine other procedure codes that describe a cervical
fusion using a custom-made anatomically designed interbody fusion
device) be revised to specifically identify that the technology is
designed from a virtual anatomic model. The agenda and related meeting
materials for these specific topics are available 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>. We note that the deadline
for receipt of public comments for the proposals included in the Spring
2026 procedure code update is April 17, 2026; therefore, the final code
decisions on these proposals are not yet available for inclusion in
Table 6B.--New Procedure Codes associated with this FY 2027 IPPS/LTCH
PPS proposed rule. Under our established process, if the new and
revised procedure code proposals are finalized after review and
consideration of public comments following the Spring procedure code
update, the codes are specifically identified with a footnote in Table
6B.--New Procedure Codes and Table 6F.--Revised Procedure Code Titles
along with the MDC, MS-DRG assignment(s), and operating room (O.R.) or
non-operating room (non-O.R.) designation that is made publicly
available in association with the final rule on 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>. This established process includes initially reviewing
the predecessor codes' MS-DRG assignment and designation, while
considering other relevant factors (for example, severity of illness,
treatment difficulty, complexity of service and the resources utilized
in the diagnosis and/or treatment of the condition). The public may
provide feedback on these finalized assignments, which is then taken
into consideration for the following fiscal year.
Each of the previously listed procedure codes is currently assigned
to MDC 01 in MS-DRGs 028, 029, and 030, and to MDC 08 in MS-DRGs 402,
426, 427, 428, 447, 448, 450, 451, 456, 457, and 458.
As previously discussed, in the FY 2026 IPPS/LTCH PPS final rule
(90 FR 36552), we noted that we would continue to consider the request
to modify the GROUPER logic of MS-DRGs 426, 427, and 428 (with regard
to the reassignment of 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) in connection with future rulemaking
and stated that the logic for MS-DRGs 456, 457, and 458 is defined by
extensive fusions. Under ICD-10-PCS, an extensive fusion procedure is
defined as a spinal fusion procedure involving 8 or more thoracic
vertebral joint levels. For example, ICD-10-PCS code 0RG8070 (Fusion of
8 or more thoracic vertebral joints with autologous tissue substitute,
anterior approach, anterior column, open approach) describes an
extensive fusion procedure. An extensive fusion procedure may also be
reported with a combination of codes (cluster) that includes at least
one code describing fusion at the thoracic vertebral joint levels and
at least one code describing fusion at the lumbar vertebral joint
levels, such as ICD-10-PCS code 0RG7070 (Fusion of 2 to 7 thoracic
vertebral joints with autologous tissue substitute, anterior approach,
anterior column, open approach) and ICD-10-PCS code 0SG1070 (Fusion of
2 or more lumbar vertebral joints with autologous tissue substitute,
anterior approach, anterior column, open approach). We refer the reader
to Table 6P. 3a that is publicly available in association with this FY
2027 IPPS/LTCH PPS proposed rule on 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> for the list of procedure codes we analyzed to identify
an extensive fusion that is also reflected in the ICD-10 MS-DRG
Definitions
[[Page 19338]]
Manual, Version 43.1 under MS-DRGs 456, 457, and 458.
In review of these requests, we first analyzed claims data from the
September 2025 update of the FY 2025 MedPAR file for MS-DRGs 028, 029,
and 030 and for cases reporting a spinal fusion procedure with a
custom-made anatomically designed interbody fusion device, cases
reporting an SI joint fusion or spinal fusion procedure with insertion
of an internal fixation device with tulip connector, and cases
reporting an extensive fusion. We found zero cases reporting either
technology across MS-DRGs 028, 029, and 030. We found 4 cases reporting
an extensive fusion in MS-DRG 028, 4 cases reporting an extensive
fusion in MS-DRG 029, and zero cases reporting an extensive fusion in
MS-DRG 030. Findings from our analysis are shown in the following
table.
[GRAPHIC] [TIFF OMITTED] TP14AP26.020
As shown in the table, for MS-DRG 028, the four cases reporting an
extensive fusion had a longer average length of stay (16.8 days versus
12.2 days) and higher average costs ($122,802 versus $54,697) compared
to the average length of stay and average costs of all the cases in MS-
DRG 028. After further review of the data we considered three of the
four cases to be outlier cases (that is, unusually expensive cases)
because the costs for each of the three cases exceeded $100,000 and the
length of stay for each of the three cases was twice as long or longer
than the average length of stay of all the cases in MS-DRG 028. For MS-
DRG 029, the four cases reporting an extensive fusion had a comparable
average length of stay (6.8 days versus 6.1 days) and lower average
costs ($31,250 versus $32,288) compared to the average length of stay
and average costs of all the cases in MS-DRG 029.
We note that although the logic for case assignment to MS-DRGs 028,
029, and 030 includes procedure codes that describe a spinal fusion
procedure with a custom-made anatomically designed interbody fusion
device and procedure codes that describe an SI joint fusion with
insertion of an internal fixation device with tulip connector, as well
as procedure codes that describe an extensive fusion procedure, the MS-
DRG assigned is based on an MDC 01 principal diagnosis code that
describes a disease or disorder of the nervous system, therefore, we
would not expect to see a significant volume of cases reporting the
procedure codes that describe a spinal fusion procedure with a custom-
made anatomically designed interbody fusion device, an SI joint fusion
with insertion of an internal fixation device with tulip connector, or
an extensive fusion procedure in the data. Additionally, we note that
the indications for the aprevo[supreg] custom-made anatomically
designed interbody fusion device include adults with spinal deformities
and degenerative conditions and the indications for the iFuse
Bedrock<SUP>TM</SUP> Granite Implant System include patients with
sacroiliac joint dysfunction that is a direct result of SI joint
disruption and degenerative sacroiliitis as well as patients with
acute, non-acute, and non-traumatic fractures involving the SI joint.
The diagnosis codes describing these conditions are assigned to MDC 08,
therefore, it is expected that the majority of cases reporting the
procedure codes that describe a spinal fusion procedure with a custom-
made anatomically designed interbody fusion device, an SI joint fusion
with insertion of an internal fixation device with tulip connector, or
an extensive fusion procedure would group to the MDC 08 MS-DRGs instead
of to MDC 01 MS-DRGs 028, 029, and 030. We refer the reader to the ICD-
10 MS-DRG Definitions Manual Version 43.1 (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 MDC 01 and MDC 08.
We then analyzed claims data for MS-DRGs 402, 426, 427, 428, 447,
448, 450, 451, 456, 457, and 458 and for: (1) cases reporting a spinal
fusion procedure with a custom-made anatomically designed interbody
fusion device, (2) cases reporting an SI joint fusion or spinal fusion
procedure with insertion of an internal fixation device with tulip
connector, (3) cases reporting a fusion procedure with both
technologies (that is, a single case reporting a procedure code
describing a spinal fusion procedure with a custom-made anatomically
designed interbody fusion device and another procedure code(s)
describing an SI joint fusion or a spinal fusion procedure with
insertion of an internal fixation device with tulip connector, (4)
cases reporting an extensive fusion without either technology (that is,
aprevo[supreg] or iFuse Bedrock<SUP>TM</SUP> Granite Implant System),
(5) cases reporting an extensive fusion with a custom-made anatomically
designed interbody fusion device, (6) cases reporting an extensive
fusion with an SI joint fusion or spinal fusion procedure with
insertion of an internal fixation device with tulip connector, and (7)
cases reporting an extensive fusion with both technologies.
We note that the logic for case assignment to MS-DRGs 402, 447,
448, 450 and 451 does not include the procedure codes or the procedure
code clusters that describe an extensive fusion; therefore, no data for
extensive fusion cases are reflected in the table that follows for
those MS-DRGs. There were also zero cases found reporting both
technologies in MS-DRG 402. In addition, because the logic for case
assignment to MS-DRGs 426, 447, and 450 includes the reporting of a
custom-made anatomically designed interbody fusion device to group to
the respective MCC severity level MS-DRG, no data for cases reporting a
custom-made anatomically designed interbody fusion device are reflected
in the table that follows for MS-DRGs 427, 448, and 451. Findings from
our analysis are shown in the following table.
BILLING CODE 4120-01-P
[[Page 19339]]
[GRAPHIC] [TIFF OMITTED] TP14AP26.021
[[Page 19340]]
[GRAPHIC] [TIFF OMITTED] TP14AP26.022
BILLING CODE 4120-01-C
The findings show that the cases reporting a spinal fusion
procedure with the custom-made anatomically designed interbody fusion
device, cases reporting an SI joint fusion or spinal fusion procedure
with an internal fixation device with tulip connector, and cases
reporting both technologies generally had higher average costs with
variation in the average length of stay in comparison to the average
costs and average length of stay of all the cases in their respective
MS-DRG. The findings also show that cases reporting an extensive spinal
fusion procedure with or without either of the technologies had average
costs that are higher in
[[Page 19341]]
comparison to the average costs of all the cases in their respective
MS-DRG and generally had a comparable or longer average length of stay
in comparison to the average length of stay of all the cases in their
respective MS-DRG.
With regard to the request to reassign cases reporting a spinal
fusion procedure with the custom-made anatomically designed interbody
fusion device from MS-DRG 402 to MS-DRG 450 and the alternative request
to reassign cases reporting a spinal fusion procedure with the custom-
made anatomically designed interbody fusion device from MS-DRG 402 to
MS-DRG 428, we note that MS-DRG 402 is a base MS-DRG and therefore is
not subdivided into severity level subgroups. Additionally, the logic
for MS-DRG 402 is defined by single level combined anterior and
posterior spinal fusion procedures (except cervical) and the logic for
MS-DRG 428 is defined by multiple level combined anterior and posterior
spinal fusion procedures. Therefore, the reassignment of cases
reporting the use of a custom-made anatomically designed interbody
fusion device from MS-DRG 402 to MS-DRG 428 would not be feasible and
would not be consistent with the logic of these recently formed MS-DRGs
which is intended to differentiate a single level combined anterior and
posterior fusion from a multiple level combined anterior and posterior
spinal fusion. As discussed in the FY 2025 IPPS/LTCH PPS final rule (89
FR 69058 through 69059), in response to public comments, we previously
reviewed a request to reassign cases from the then proposed MS-DRG 402
to the then proposed MS-DRG 428 (both subsequently finalized) from this
same manufacturer.
Although the findings from our analysis show that the average costs
of the cases reporting the use of a custom-made anatomically designed
interbody fusion device in MS-DRG 402 are higher compared to all the
cases in MS-DRG 402 ($59,906 versus $38,483) with a longer average
length of stay (3.3 days versus 2.9 days), and are more similar to the
average costs of all the cases in MS-DRG 450 which are $48,325 with an
average length of stay of 7.9 days, we disagree with the requested
reassignment of cases reporting a spinal fusion procedure with the
custom-made anatomically designed interbody fusion device from MS-DRG
402 to MS-DRG 450 because MS-DRG 450 is subdivided into two severity
level subgroups and defined by single level spinal fusions (except
cervical), meaning either the anterior column of the spine or the
posterior column of the spine is fused in a single operative episode.
As previously discussed, the logic for case assignment to MS-DRG 402
reflects single level combined anterior and posterior spinal fusion
procedures, meaning both the anterior column of the spine and the
posterior column of the spine are fused in a single operative episode.
MS-DRG 402 is also not subdivided into severity levels. As such, the
logic for case assignment to MS-DRGs 402 and 450 reflects two different
types of spinal fusions that are clinically distinct procedures with
different resources.
As shown in our review of the requested reassignment of cases
reporting the use of a custom-made anatomically designed interbody
fusion device from MS-DRG 428 to MS-DRG 426, the average costs of the
51 cases in MS-DRG 428 are higher compared to all the cases in MS-DRG
428 ($75,595 versus $56,192) with a comparable average length of stay
(3.2 days versus 3.0 days), and the average costs of all the cases in
MS-DRG 426 are $99,235 with an average length of stay of 8.9 days.
However, we also note that there are 142 cases reporting the use of a
custom-made anatomically designed interbody fusion device in MS-DRG 426
with average costs of $103,797 and an average length of stay of 5.6
days. Because the logic for MS-DRG 426 includes cases that are
reassigned from MS-DRG 427 reporting the use of a custom-made
anatomically designed interbody fusion device with a CC, we expanded
our analysis to identify how many of the 142 cases would otherwise have
grouped to MS-DRG 427 in the absence of the current logic. Of the 142
cases reporting the use of a custom-made anatomically designed
interbody fusion device in MS-DRG 426, we found 22 cases were reported
with an MCC secondary diagnosis with average costs of $143,062 and an
average length of stay of 8.8 days and 120 cases were reported with a
CC secondary diagnosis with average costs of $96,598 and an average
length of stay of 5.1 days. We note that, as reflected in the
previously displayed table, the average costs of all the cases in MS-
DRG 427 is $68,506.
As shown in our review of MS-DRG 426, the 154 cases reporting a
fusion procedure with an internal fixation device with tulip connector
had average costs of $134,327 with an average length of stay of 9.3
days in comparison to the average costs of all the cases in MS-DRG 426
of $99,235 with an average length of stay of 8.9 days. We also
recognized a similar pattern in MS-DRGs 427, 428, 447, 448, 456, 457,
and 458 where the average costs for cases reporting a fusion procedure
with an internal fixation device with tulip connector had higher
average costs and a longer or comparable average length of stay
compared to the average costs and average length of stay of all the
cases in their respective MS-DRG.
Relatedly, our findings for cases reporting an extensive fusion
without either technology and our findings for cases reporting an
extensive fusion with either or both technologies for MS-DRGs 426, 427,
and 428 and MS-DRGs 456, 457, and 458 demonstrate higher average costs
in comparison to the average costs of all the cases in their respective
MS-DRG, including at the MCC level. Specifically, our data analysis
shows that cases reporting an extensive fusion without either
technology currently grouping to MS-DRGs 426, 427, and 428 have higher
average costs ($128,537, $103,226, and $81,054, respectively) compared
to the average costs of all the cases in their respective MS-DRG
($99,235, $68,506, and $56,192, respectively). Similarly, cases
reporting an extensive fusion without either technology currently
grouping to MS-DRGs 456, 457, and 458 have higher average costs
($92,132, $66,745, and $57,964, respectively) compared to the average
costs of all the cases in their respective MS-DRG ($79,972, $56,069,
and $40,771, respectively). Our data analysis also shows that cases
reporting an extensive fusion with either or both technologies
currently grouping to MS-DRGs 426, 427, and 428 have higher average
costs compared to the average costs of all the cases in their
respective MS-DRG. Overall, the 229 cases (65 + 151 + 13 = 229) in MS-
DRG 426 reporting an extensive fusion with either or both technologies
have average costs of $153,092 and an average length of stay of 10.3
days compared to the average cost and average length of stay of all the
cases in MS-DRG 426 ($99,235 and 8.9 days, respectively). The 247 cases
in MS-DRG 427 reporting an extensive fusion with either or both
technologies have costs of $129,777 and a length of stay of 7.0 days
compared to the average cost and average length of stay of all the
cases in MS-DRG 427 ($68,506 and 4.7 days, respectively). The 26 cases
(2 + 22 + 2 = 26) in MS-DRG 428 reporting an extensive fusion with
either or both technologies have average costs of $91,261 and an
average length of stay of 6.1 days compared to the average cost and
average length of stay of all the cases in MS-DRG 428 ($56,192 and 3.0
days, respectively). Additionally, cases reporting an extensive fusion
with either or both technologies currently grouping to MS-DRGs 456,
457, and 458
[[Page 19342]]
have higher costs and a longer length of stay compared to the average
costs and average length of stay of all the cases in their respective
MS-DRG. The 60 cases in MS-DRG 456 reporting an extensive fusion with
either or both technologies have a cost of $136,660 and a length of
stay of 12.7 days, the 121 cases in MS-DRG 457 reporting an extensive
fusion with either or both technologies have a cost of $91,823 and a
length of stay of 6.6 days, and the 10 cases in MS-DRG 458 reporting an
extensive fusion with either or both technologies have a cost of
$62,304 and a length of stay of 4.2 days.
Based on our review and analysis, we disagree with the requested
reassignment of cases from the lower severity level to the higher
severity level MS-DRG for cases reporting use of the aprevo[supreg]
custom-made anatomically designed interbody fusion device, as well as
for cases reporting use of the iFuse Bedrock<SUP>TM</SUP> Granite
Implant System. We believe that each technology is indicated for use in
complex spinal fusion procedures and requires increased resource
utilization. If we were to reassign cases from the lower severity level
to the higher severity level, that would not account for the cases at
the MCC level that are unable to be reassigned. Specifically, the cases
reporting use of the aprevo[supreg] custom-made anatomically designed
interbody fusion device and cases reporting use of the iFuse
Bedrock<SUP>TM</SUP> Granite Implant System at the MCC level would
continue to have higher average costs and a longer average length of
stay compared to all the other cases at the MCC level.
We also believe that extensive spinal fusion procedures, with or
without the use of either or both technologies, also demonstrate
increased resource utilization because extensive spinal fusion
procedures address various spinal deformities across multiple spinal
vertebral joint levels.
As such, to address the differences in resource utilization and
additional treatment options for the patients whose spinal condition
requires an extensive fusion procedure or a complex spinal fusion
procedure that uses either the aprevo[supreg] custom-made anatomically
designed interbody fusion device or the iFuse Bedrock<SUP>TM</SUP>
Granite Implant System, we are proposing a new base MS-DRG.
Consistent with our established process as discussed in section
II.C.1.b. of the preamble of this FY 2027 IPPS/LTCH PPS proposed rule,
once the decision has been made to propose to make further
modifications to the MS-DRGs, such as creating a new base MS-DRG, all
five criteria to create subgroups must be met for the base MS-DRG to be
split (or subdivided) by a CC subgroup. Therefore, we applied the
criteria to create subgroups in a base MS-DRG. We note that, as shown
in the table that follows, a three-way split of this proposed new base
MS-DRG was met.
[GRAPHIC] [TIFF OMITTED] TP14AP26.023
For the proposed new MS-DRGs for cases reporting an extensive
fusion or a complex spinal fusion procedure with either the
aprevo[supreg] custom-made anatomically designed interbody fusion
device or the iFuse Bedrock<SUP>TM</SUP> Granite Implant System, there
is at least (1) 500 cases in the MCC group, 500 cases in the with CC
group, and 500 cases in the without CC/MCC group; (2) 5 percent of the
cases in the MCC group, 5 percent of the cases in the CC group, and 5
percent of the cases in the without CC/MCC group; (3) a 20 percent
difference in average costs between the MCC group, the CC group, and
the without CC/MCC group; (4) a $2,000 difference in average costs
between the MCC group, the CC group, and the without CC/MCC group; and
(5) a 3-percent reduction in cost variance, indicating that the
proposed severity level splits increase the explanatory power of the
base MS-DRG in capturing differences in expected cost between the
proposed MS-DRG severity level splits by at least 3 percent and thus
improve the overall accuracy of the IPPS payment system.
Therefore, for FY 2027, we are proposing to create new MS-DRGs 523,
524, and 525 (Extensive or Complex Spinal Fusion Procedures Except
Cervical with MCC, with CC, and without CC/MCC, respectively).
Specifically, we are proposing to reassign cases reporting an extensive
spinal fusion procedure from MS-DRGs 426, 427, 428, 456, 457 and 458
and to reassign cases reporting a spinal fusion procedure with use of
the aprevo[supreg] custom-made anatomically designed interbody fusion
device or the iFuse Bedrock<SUP>TM</SUP> Granite Implant System from
MS-DRGs 402, 426, 427, 428, 447, 448, 450, 451, 456, 457 and 458 to
proposed new MS-DRGs 523, 524, and 525. We are also proposing to revise
the titles for MS-DRGs 426, 447, and 450 to remove the reference to
``Custom-made Anatomically Designed Interbody Fusion Device'' and to
revise the titles for MS-DRGs 456, 457, and 458 to remove the reference
to ``Extensive Fusions''. We note that discussion of the surgical
hierarchy for the proposed modification is discussed in section
II.C.14. of the preamble of this FY 2027 IPPS/LTCH PPS proposed rule.
b. Hip or Knee Procedures With Periprosthetic Joint Infection
In the FY 2026 IPPS/LTCH PPS proposed rule (90 FR 18049 through
18052) and final rule (90 FR 36606 through 36610), we discussed a
request we received to reassign cases reporting a hip or knee procedure
with a principal diagnosis of periprosthetic joint infection (PJI) from
the lower severity level ``without CC/MCC'' MS-DRG to the higher
severity level ``with CC'' MS-DRG when there is no major complication
or comorbidity (MCC) or complication or comorbidity (CC) reported for
the following MS-DRGs; 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), MS-DRGs 474, 475, and 476
(Amputation for Musculoskeletal System and Connective Tissue Disorders
with MCC, with CC, and without CC/MCC, respectively), MS-DRGs 480, 481,
and 482 (Hip and Femur Procedures Except Major Joint with MCC, with CC,
and without CC/MCC, respectively) and MS-DRG 485, 486, and 487 (Knee
Procedures with Principal Diagnosis of Infection with MCC, with CC, and
without CC/MCC, respectively). We stated that, based on our review and
analysis of the data, we disagreed with the request to reassign PJI
cases from the lower severity ``without CC/MCC'' level MS-DRG to the
higher severity ``with CC'' level MS-DRG suggested by the requestor as
the
[[Page 19343]]
average costs of the PJI cases in the ``without CC/MCC'' level were not
comparable and did not align with the average costs of all the cases at
the ``with CC'' level. We stated we believed that MS-DRGs 466, 467, and
468 appeared to group appropriately in their respective MS-DRG
assignments and noted that the logic for case assignment to MS-DRGs
485, 486, and 487 includes a principal diagnosis of infection and the
difference in average costs for the cases reporting a PJI with a hip or
knee procedure compared to the average costs of all the cases in their
respective MS-DRG was minimal. We stated we believed the data support
proposing a new base MS-DRG for the cases reporting a PJI with a hip or
knee procedure in MS-DRGs 463, 464, 465, 474, 475, 476, 480, 481, and
482 to better reflect the complexity of services, resource utilization,
and severity of illness of these patients. We applied the criteria to
create subgroups in a base MS-DRG as discussed in section II.C.1.b. of
the preamble of the FY 2026 IPPS/LTCH PPS proposed rule (90 FR 18014
through 18015) and final rule (90 FR 36553 through 36554) and noted
that the criteria for a two-way split was met. Therefore, for FY 2026
we proposed to create new MS-DRGs 403 and 404 (Hip or Knee Procedures
with Principal Diagnosis of Periprosthetic Joint Infection with MCC and
without MCC, respectively).
As discussed in the FY 2026 IPPS/LTCH PPS final rule (90 FR 36608
through 36610), several commenters expressed support for the proposal
to create proposed new MS-DRGs 403 and 404, however, a commenter stated
they encountered inconsistencies when grouping cases using the Version
43 test GROUPER that was made publicly available in association with
the FY 2026 IPPS/LTCH PPS proposed rule on the CMS website at: <a href="https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software">https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software</a>. The commenter also
stated they found an overlap of approximately 52 procedure codes among
the list of procedure codes analyzed by CMS made publicly available in
Table 6P.6a in connection with the proposed rule analysis and also
listed in the logic for MS-DRGs 466, 467, and 468 included in the Draft
Version 43 ICD-10 MS-DRG Definitions Manual. The commenter stated it
was unable to reconcile some of the shifts in case volume from the MS-
DRGs that were analyzed and those that shifted into the proposed new
MS-DRGs because it was not clear if the cases shifted because of the
procedure code overlap or because of programming within the Version 43
test GROUPER.
We acknowledged the commenter's findings and noted that under the
GROUPER software program, some collections of ICD-10-PCS procedure
codes have a different set of attributes, independent of those of the
codes that make them up (that is, their ``components''). We stated that
these collections of ICD-10-PCS procedure codes are called clusters and
that a routine program in the GROUPER, upstream of the MS-DRG
assignment logic, searches the claim for clusters. We noted that when a
cluster is found, it is added to the list of procedures found on the
claim. We stated that clusters may be ``restricted'' by Major
Diagnostic Category (MDC) and a restricted cluster inhibits the use of
its procedure code component attributes for the MDC's MS-DRG assignment
logic. We provided the example that procedure code cluster 0SPC0JZ
(Removal of synthetic substitute from right knee joint, open approach)
and 0SRT0JZ (Replacement of right knee joint, femoral surface with
synthetic substitute, open approach) may be recognized on a claim if
both codes appear (in any order) and the reporting of these codes
creates a new procedure code cluster ``@0045''. We stated that the
cluster @0045 has a different set of attributes than either code
0SPC0JZ or 0SRT0JZ by itself and is further ``restricted'' for MDC 08.
We noted that when the GROUPER logic determines that the MDC is 08, it
ignores the attributes of procedure codes 0SPC0JZ and 0SRT0JZ
individually, only using those of @0045. We indicated in that example
how the logic results in assignment of the claim to MS-DRGs 466, 467,
and 468 rather than MS-DRGs 463, 464, and 465. We stated that if the
principal diagnosis reported is not assigned under MDC 08, the cluster
would not restrict the interpretation of the component codes and their
individual attributes could be relevant as well as those of @0045.
As also discussed in the FY 2026 IPPS/LTCH PPS final rule (90 FR
36610), following publication of the FY 2026 IPPS/LTCH PPS proposed
rule, we identified that the intended grouping of cases to the proposed
new MS-DRGs 403 and 404 was impacted because of these cluster
restrictions under MDC 08; therefore, we removed the restrictions and
performed additional analysis. As a result of removing the
restrictions, and due to the existing overlapping procedure code logic
among a subset of the MDC 08 MS-DRGs, our analysis showed that further
redistribution of the cases under MDC 08 occurred, impacting the
remaining number of cases in MS-DRGs 466, 467, and 468 and MS-DRGs 485,
486, and 487, such that, those MS-DRGs no longer satisfied the criteria
for a 3-way split. We noted that under our established process for
applying the criteria to create subgroups within a base MS-DRG,
existing MS-DRGs 466, 467, and 468 would be deleted and a new base MS-
DRG for Revision of Hip or Knee Replacement would be established.
Additionally, we noted that under this established process, existing
MS-DRGs 485, 486, and 487 would be deleted and new MS-DRGs (2-way
split) for Knee Procedures with Principal Diagnosis of Infection with
and without MCC, respectively, would be established. Because these
findings associated with removal of the MDC 08 restrictions on the
procedure code clusters for existing MS-DRGs 466, 467, and 468 and MS-
DRGs 485, 486, and 487 were not identified until after publication of
the proposed rule, in addition to having an updated test Grouper that
reflected these potential changes, we did not finalize the creation of
proposed new MS-DRGs 403 and 404 for FY 2026. We stated that we may
further consider these potential MS-DRG changes for future rulemaking.
We refer the reader to the FY 2026 IPPS/LTCH PPS proposed and final
rulemaking discussions for additional detailed information.
As also discussed in the FY 2026 IPPS/LTCH PPS proposed rule (90 FR
18012 through 18013) and final rule (90 FR 36550 through 36552), we
received a request to modify the GROUPER logic of MS-DRGs 463, 464, and
465; MS-DRGs 466, 467, and 468; 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. We noted that the procedure to insert
a bone void filler is designated as a non-operating room (Non-O.R.)
procedure and stated our belief 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. We
further noted that, as discussed in section II.C.5.a. of the preamble
of the FY 2026 IPPS/LTCH PPS proposed rule (90 FR 18049 through 18052),
we received an MS-DRG request related to cases reporting a hip or knee
procedure with
[[Page 19344]]
a diagnosis of PJI in MS-DRGs 463, 464, and 465 (the same set of MS-
DRGs that were submitted to analyze ICD-10-PCS code XW0V0P7). We stated
that in our review of the claims data to address that specific request
we noted that a subset of the cases also reported procedure code
XW0V0P7 and 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.
As we discuss further in this section, based on our analysis of the
September 2025 update of the FY 2025 MedPAR file for this FY 2027 IPPS/
LTCH PPS proposed rule, we continue to believe it is appropriate to
propose new MS-DRGs 403 and 404 to better differentiate and reflect the
complexity of services, resource utilization, and severity of illness
for patients diagnosed with a PJI. For purposes of our analysis for
this FY 2027 IPPS/LTCH PPS proposed rule, in connection with the FY
2026 IPPS/LTCH PPS final rule discussion related to the findings about
the restriction logic and overlap of procedure codes, for proposed new
MS-DRGs 403 and 404 for FY 2027, we removed the restriction logic under
MDC 08 for the procedure code clusters within MS-DRGs 466, 467, and
468, and within MS-DRGs 485, 486, and 487. These changes are reflected
in the test version of the ICD-10 MS-DRG GROUPER Software, Version 44,
and the draft version of the ICD-10 MS-DRG Definitions Manual, Version
44, available in association with this FY 2027 IPPS/LTCH PPS proposed
rule (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>) so that the public can better analyze and
understand the impact of the proposals as summarized in the discussion
that follows.
Additionally, for this FY 2027 IPPS/LTCH PPS proposed rule, in
connection with the FY 2026 IPPS/LTCH PPS final rule discussion related
to the request for reassignment of cases with ICD-10-PCS code XW0V0P7
that currently map to the lower severity level MS-DRG to the highest
severity level (with MCC) MS-DRG, the requestor submitted a revised
request. Specifically, in addition to the previously listed MS-DRGs
identified for CMS' consideration for FY 2026, the requestor added MDC
08 MS-DRGs 474, 475, and 476 and MS-DRGs 480, 481, and 482, that are
also the subject of the request to reassign cases reporting a hip or
knee procedure with a principal diagnosis of PJI from the lower
severity level ``without CC/MCC'' MS-DRG to the higher severity level
``with CC'' MS-DRG, and further added MDC 08 MS-DRGs 477, 478, and 479
(Biopsies of Musculoskeletal System and Connective Tissue with MCC,
with CC, and without CC/MCC, respectively). We also note that
separately, this same requestor submitted a request for the
reassignment of cases reporting ICD-10-PCS code XW0V0P7 that currently
map to the lower severity level MS-DRG to the highest severity level
(with MCC) MS-DRG within MDC 10 for MS-DRGs 616, 617, and 618
(Amputation of Lower Limb for Endocrine, Nutritional and Metabolic
Disorders with MCC, with CC, without CC/MCC, respectively) and MS-DRGs
628, 629, and 630 (Other Endocrine, Nutritional and Metabolic O.R.
Procedures with MCC, with CC, without CC/MCC, respectively) that is
discussed separately in section II.C.5 of the preamble of this FY 2027
IPPS/LTCH PPS proposed rule.
Effective October 1, 2021, ICD-10-PCS code XW0V0P7 was created in
association with a new technology add-on payment application for
CERAMENT[supreg] G, a combination device-drug product intended to treat
bone infections (for example, osteomyelitis). It is an implantable bone
void filler that consists of hydroxyapatite and calcium sulfate, as
well as gentamicin sulfate, which is an antibacterial agent. We refer
the reader to the September 8, 2020 ICD-10 Coordination and Maintenance
Committee meeting materials available 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 information regarding the procedure
code request, including a transcript of the discussion and the related
meeting materials. We also note that CERAMENT[supreg] G was approved
for a new technology add-on payment beginning October 1, 2022 for the
indication of infection which expired on September 30, 2025. For FY
2026, CERAMENT[supreg] G was approved for a new technology add-on
payment for the indication of an open fracture. We refer the reader to
section II.E.4. of the preamble of the FY 2026 IPPS/LTCH PPS proposed
and final rules for additional discussion regarding CERAMENT[supreg] G
in association with the new technology add-on payment indication.
For the Spring 2026 ICD-10-PCS code update, the manufacturer of
CERAMENT[supreg] G submitted a request for a new code to describe
another antibiotic-eluting bone void filler product, CERAMENT[supreg]
V, in association with a new technology add-on payment application for
FY 2027. We refer the reader to section II.E.6. of the preamble of this
FY 2027 IPPS/LTCH PPS proposed rule for additional discussion regarding
CERAMENT[supreg] V in association with the new technology add-on
payment policy. The manufacturer also requested a revision to the
existing code, ICD-10-PCS code XW0V0P7, that is reported to identify
the administration of CERAMENT[supreg] G. CERAMENT[supreg] V is an
injectable synthetic bone void filler that consists of hydroxyapatite,
calcium sulfate, and the antibiotic vancomycin hydrochloride. The
manufacturer requested that the description of existing ICD-10-PCS code
XW0V0P7 be revised to specifically identify gentamicin and that a new
code be created to specifically identify vancomycin in association with
the new technology add-on payment application. The agenda and related
materials for these specific topics are available 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>. We note that the deadline
for receipt of public comments for the proposals included in the Spring
2026 procedure code update is April 17, 2026; therefore, the final code
decisions on these proposals are not yet available for inclusion in
Table 6B.--New Procedure Codes associated with this FY 2027 IPPS/LTCH
PPS proposed rule. Under our established process, if the new and
revised procedure code proposals are finalized after review and
consideration of public comments following the Spring update, the codes
are specifically identified with a footnote in Table 6B.--New Procedure
Codes and Table 6F.--Revised Procedure Code Titles along with the MDC,
MS-DRG assignment(s), and operating room (O.R.) or non-operating room
(non-O.R.) designation that is made publicly available in association
with the final rule on 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>. This
established process includes initially reviewing the predecessor codes
MS-DRG assignment and designation, while considering other relevant
factors (for example, severity of illness, treatment difficulty,
complexity of service and the resources utilized in the diagnosis and/
or treatment of the condition). The public may provide feedback on
these finalized assignments, which is then taken into consideration for
the following fiscal year.
Accordingly, to continue our analysis of cases reporting a hip or
knee procedure with a principal diagnosis of
[[Page 19345]]
PJI as discussed in the FY 2026 IPPS/LTCH PPS final rule with removal
of the restriction logic and to address the request to modify the
GROUPER logic by reassigning cases with ICD-10-PCS code XW0V0P7 that
currently map to the lower severity level MS-DRG to the highest
severity level (with MCC) MS-DRG, we reviewed claims data from the
September 2025 update of the FY 2025 MedPAR file for MS-DRGs 463, 464,
465, 466, 467, 468, 474, 475, 476, 477, 478, 479, 480, 481, 482, 485,
486, 487, 492, 493, and 494 and for: 1) cases reporting a principal
diagnosis of PJI with a hip or knee procedure based on the proposed
logic as reflected in Table 6P.3b, 2) cases reporting the insertion of
antibiotic-eluting bone void filler (code XW0V0P7) without a principal
diagnosis of PJI among all the cases in the respective MS-DRG (that is,
not limited to the proposed logic reflected in Table 6P.3b), and 3)
cases reporting both a principal diagnosis of PJI with a hip or knee
procedure and ICD-10-PCS code XW0V0P7 based on the proposed logic as
reflected in Table 6P.3b. We refer the reader to Table 6P. 3b that is
publicly available in association with this FY 2027 IPPS/LTCH PPS
proposed rule on 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> for the list of
diagnosis codes we analyzed to identify a PJI, for the procedure code
we analyzed to identify the insertion of antibiotic-eluting bone void
filler, and for the list of procedure codes we analyzed from the
previously listed MS-DRGs (excluding MS-DRGs 477, 478, and 479 that
were not the subject of the request) to identify a hip or knee
procedure. Findings from our analysis with removal of the restriction
logic are shown in the following table.
BILLING CODE 4120-01-P
[[Page 19346]]
[GRAPHIC] [TIFF OMITTED] TP14AP26.024
[[Page 19347]]
[GRAPHIC] [TIFF OMITTED] TP14AP26.025
[[Page 19348]]
[GRAPHIC] [TIFF OMITTED] TP14AP26.026
BILLING CODE 4120-01-C
The findings show that with removal of the restriction logic from
MS-DRGs 466, 467, and 468 there are zero cases reporting a principal
diagnosis of PJI with a hip or knee procedure in MS-DRGs 466, 467, and
468. With removal of the restriction logic, the cases that previously
grouped to MS-DRGs 466, 467, and 468 are redistributed to MS-DRGs 463,
464, and 465 based on the proposed Version 44 GROUPER logic and the
surgical hierarchy. Under the current ICD-10 MS-DRGs Version 43.1,
procedure code 0SP90JZ (Removal of synthetic substitute from right hip
joint, open approach) is listed in the logic for case assignment to MS-
DRGs 463, 464, and 465 and is also listed as part of a code cluster
with procedure code 0SR9019 (Replacement of right hip joint with metal
synthetic substitute, cemented, open approach) in the logic for case
assignment to MS-DRGs 466, 467, and 468. With removal of the cluster
restriction logic in MS-DRGs 466, 467, and 468, cases reporting
procedure code 0SP90JZ with a principal diagnosis assigned to MDC 08
will group to MS-DRGs 463, 464, and 465 under the proposed ICD-10 MS-
DRGs, Version 44. The findings also show that with removal of the
restriction logic from MS-DRGs 485, 486, and 487 further redistribution
of the cases occurs. Specifically, cases that previously grouped to MS-
DRGs 485, 486, and 487 now group or ``shift'' to other MS-DRGs. As a
result, the remaining number of cases in MS-DRGs 466, 467, and 468 and
MS-DRGs 485, 486, and 487 is reduced and those MS-DRGs no longer
satisfy the criteria for a 3-way split under application of our
established criteria for subgroups consistent with the discussion in
the FY 2026 IPPS/LTCH PPS final rule (90 FR 36610).
The findings show that for the cases reporting a principal
diagnosis of PJI with a hip or knee procedure in MS-DRGs 463, 464, 465,
474, 475, 476, 480, 481, 482, 485, 486, 487, 492, and 493, the average
length of stay is generally comparable or longer compared to the
average length of stay of all the cases in their respective MS-DRG.
Findings from our analysis also show that the average costs of the
cases reporting a principal diagnosis of PJI with a hip or knee
procedure in MS-DRGs 464, 465, 474, 475, 476, 480, 481, 482, 485, 486,
487, 492, and 493 are higher compared to the average costs of all the
cases in their respective MS-DRG. We note that the average length of
stay and the average costs of the 5 cases reporting a PJI with a hip or
knee procedure in MS-DRG 494 are shorter than (2.6 days versus 3.3
days) the average length of stay and lower than ($15,251 versus
$18,846) the average costs of all the cases in MS-DRG 494. We also note
that the average costs of the 3,262 cases reporting a principal
diagnosis of PJI with a hip or knee procedure in MS-DRG 463 are
approximately $49 less than the average costs of all the cases in MS-
DRG 463 ($44,259 versus $44,308). For the cases reporting procedure
code XW0V0P7 without a principal diagnosis of PJI in
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MS-DRGs 463, 464, 465, 466, 467, 474, 475, 477, 478, 480, 481, 482,
486, 492, and 493, we found that the average length of stay is
generally comparable or longer compared to the average length of stay
of all the cases in their respective MS-DRG. We note that there were
zero cases found reporting procedure code XW0V0P7 without a principal
diagnosis of PJI in MS-DRGs 468 and 476. Findings from our analysis
also show that the average costs of the cases reporting procedure code
XW0V0P7 without a principal diagnosis of PJI in MS-DRGs 463, 464, 465,
466, 467, 474, 475, 477, 478, 480, 481, 482, 486, 492, 493, and 494 are
higher compared to the average costs of all the cases in their
respective MS-DRG. We also note that the 7 cases in MS-DRG 479 have a
[…truncated; see source link]Indexed from Federal Register on April 14, 2026.
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