Centers for Medicare & Medicaid Services Issues Rule on Medicare Program

Targeted News Service

WASHINGTON, Aug. 17 -- The Department of Health & Human Services published the following rule in the Federal Register from the Centers for Medicare & Medicaid Services:

Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System Policy Changes and Fiscal Year 2016 Rates; Revisions of Quality Reporting Requirements for Specific Providers, Including Changes Related to the Electronic Health Record Incentive Program; Extensions of the Medicare-Dependent, Small Rural Hospital Program and the Low-Volume Payment Adjustment for Hospitals

A Rule by the Centers for Medicare & Medicaid Services on 08/17/2015

Publication Date: Monday, August 17, 2015

Agencies: Department of Health and Human Services

Centers for Medicare & Medicaid Services

Entry Type: Rule

Action: Final rule; interim final rule with comment period.

Document Citation: 80 FR 49325

Page: 49325 -49843 (519 pages)

CFR: 42 CFR 412

Agency/Docket Number: CMS-1632-F and IFC

Document Number: 2015-19049

Shorter URL: https://federalregister.gov/a/2015-19049

Action

Final Rule; Interim Final Rule With Comment Period.

Summary

We are revising the Medicare hospital inpatient prospective payment systems (IPPS) for operating and capital-related costs of acute care hospitals to implement changes arising from our continuing experience with these systems for FY 2016. Some of these changes implement certain statutory provisions contained in the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively known as the Affordable Care Act), the Pathway for Sustainable Growth Reform (SGR) Act of 2013, the Protecting Access to Medicare Act of 2014, the Improving Medicare Post-Acute Care Transformation Act of 2014, the Medicare Access and CHIP Reauthorization Act of 2015, and other legislation. We also are addressing the update of the rate-of-increase limits for certain hospitals excluded from the IPPS that are paid on a reasonable cost basis subject to these limits for FY 2016. As an interim final rule with comment period, we are implementing the statutory extensions of the Medicare-dependent, small rural hospital (MDH) Program and changes to the payment adjustment for low-volume hospitals under the IPPS.

We also are updating 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) for FY 2016 and implementing certain statutory changes to the LTCH PPS under the Affordable Care Act and the Pathway for Sustainable Growth Rate (SGR) Reform Act of 2013 and the Protecting Access to Medicare Act of 2014.

In addition, we are establishing new requirements or revising existing requirements for quality reporting by specific providers (acute care hospitals, PPS-exempt cancer hospitals, and LTCHs) that are participating in Medicare, including related provisions for eligible hospitals and critical access hospitals participating in the Medicare Electronic Health Record (EHR) Incentive Program. We also are updating policies relating to the Hospital Value-Based Purchasing (VBP) Program, the Hospital Readmissions Reduction Program, and the Hospital-Acquired Condition (HAC) Reduction Program.

DATES:

Effective Date: This final rule is effective on October 1, 2015.

Applicability Date: The provisions of the interim final rule with comment period portion of this rule (presented in section IV.L. of the preamble) are applicable for discharges on or after April 1, 2015 and on or before September 30, 2017.

Comment Period: To be assured consideration, comments on the interim final rule with comment period presented in section IV.L. of this document must be received at one of the addresses provided in the ADDRESSES section no later than 5 p.m. EST on September 29, 2015.

ADDRESSES:

In commenting, please refer to file code CMS-1632-IFC. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.

You may submit comments in one of four ways (no duplicates, please):

1. Electronically. You may (and we encourage you to) submit electronic comments on this regulation to http://www.regulations.gov. 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-1632-IFC, P.O. Box 8013, Baltimore, MD 21244-1850.

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-1632-IFC, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

4. By hand or courier. If you prefer, you may deliver (by hand or courier) your written comments before the close of the comment period to either of the following addresses:

a. For delivery in Washington, DC--Centers for Medicare & Medicaid Services, Department of Health and Human Services, Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 20201.

(Because access to the interior of the Hubert H. Humphrey Building is not readily available to persons without Federal Government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-in clock is available for persons wishing to retain a proof of filing by stamping in and retaining an extra copy of the comments being filed.)

b. For delivery in Baltimore, MD-- Centers for Medicare & Medicaid Services, Department of Health and Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.

If you intend to deliver your comments to the Baltimore address, please call the telephone number (410) 786-7195 in advance to schedule your arrival with one of our staff members.

Comments mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and received after the comment period.

For information on viewing public comments, we refer readers to the beginning of the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT:

Ing-Jye Cheng, (410) 786-4548 and Donald Thompson, (410) 786-4487, Operating Prospective Payment, MS-DRGs, Deficit Reduction Act Hospital-Acquired Acquired Conditions--Present on Admission (DRA HAC-POA) Program, Hospital-Acquired Conditions Reduction Program, Hospital Readmission Reductions Program, Wage Index, New Medical Service and Technology Add-On Payments, Hospital Geographic Reclassifications, Graduate Medical Education, Capital Prospective Payment, Excluded Hospitals, Medicare Disproportionate Share Hospital (DSH), Medicare-dependent, small rural hospital (MDH), and Low Volume Hospital Payment Adjustment Issues.

Michele Hudson, (410) 786-4487, Long-Term Care Hospital Prospective Payment System and MS-LTC-DRG Relative Weights Issues.

Siddhartha Mazumdar, (410) 786-6673, Rural Community Hospital Demonstration Program Issues.

Cindy Tourison, (410) 786-1093, Hospital Inpatient Quality Reporting and Hospital Value-Based Purchasing--Program Administration, Validation, and Reconsideration Issues.

Pierre Yong, (410) 786-8896, Hospital Inpatient Quality Reporting--Measures Issues Except Hospital Consumer Assessment of Healthcare Providers and Systems Issues.

Elizabeth Goldstein, (410) 786-6665, Hospital Inpatient Quality Reporting--Hospital Consumer Assessment of Healthcare Providers and Systems Measures Issues.

Mary Pratt, (410) 786-6867, LTCH Quality Data Reporting Issues.

Kim Spalding Bush, (410) 786-3232, Hospital Value-Based Purchasing Efficiency Measures Issues.

James Poyer, (410) 786-2261, PPS-Exempt Cancer Hospital Quality Reporting Issues.

Deborah Krauss, (410) 786-5264, and Alexandra Mugge, (410) 786-4457, EHR Incentive Program Clinical Quality Measure Related Issues.

Elizabeth Myers, (410) 786-4751, EHR Incentive Program Nonclinical Quality Measure Related Issues.

Lauren Wu, (202) 690-7151, Certified EHR Technology Related Issues.

Kellie Shannon, (410) 786-0416, Simplified Cost Allocation Methodology Issues

SUPPLEMENTARY INFORMATION:

Electronic Access

Inspection of Public Comments: All public 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 public comments received before the close of the comment period on the following Web site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to view public comments.

This Federal Register document is also available from the Federal Register online database through Federal Digital System (FDsys), a service of the U.S. Government Printing Office. This database can be accessed via the Internet at: http://www.gpo.gov/fdsys.

Tables Available Only Through the Internet on the CMS Web site

In the past, a majority of the tables referred to throughout this preamble and in the Addendum to the proposed rule and the final rule were published in the Federal Register as part of the annual proposed and final rules. However, beginning in FY 2012, some of the IPPS tables and LTCH PPS tables are no longer published in the Federal Register. Instead, these tables are generally only available through the Internet. The IPPS tables for this final rule are available through the Internet on the CMS Web site at: http://www.cms.hhs.gov/Medicare/medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. Click on the link on the left side of the screen titled, "FY 2016 IPPS Final Rule Home Page" or "Acute Inpatient--Files for Download". The LTCH PPS tables for this FY 2016 final rule are available through the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/index.html under the list item for Regulation Number CMS-1632-F. For further details on the contents of the tables referenced in this final rule, we refer readers to section VI. of the Addendum to this final rule.

Readers who experience any problems accessing any of the tables that are posted on the CMS Web sites identified above should contact Michael Treitel at (410) 786-4552.

I. Executive Summary and Background

A. Executive Summary

1. Purpose and Legal Authority

This final rule makes payment and policy changes under the Medicare inpatient prospective payment systems (IPPS) for operating and capital-related costs of acute care hospitals as well as for certain hospitals and hospital units excluded from the IPPS. In addition, it makes payment and policy changes for inpatient hospital services provided by long-term care hospitals (LTCHs) under the long-term care hospital prospective payment system (LTCH PPS). It also makes policy changes to programs associated with Medicare IPPS hospitals, IPPS-excluded hospitals, and LTCHs.

This interim final rule with comment period implements the provisions of the Medicare Access and CHIP Reauthorization Act of 2015 which extended the MDH Program and changes to the low-volume payment adjustment for hospitals through FY 2017.

Under various statutory authorities, we are making changes to the Medicare IPPS, to the LTCH PPS, and to other related payment methodologies and programs for FY 2016 and subsequent fiscal years. These statutory authorities include, but are not limited to, the following:

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).

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; and short-term acute care hospitals located in the Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa. Religious nonmedical health care institutions (RNHCIs) are also excluded from the IPPS.

Sections 123(a) and (c) of Public Law 106-113 and section 307(b)(1) of Public Law 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 long-term care hospitals (LTCHs) described in section 1886(d)(1)(B)(iv) of the Act.

Sections 1814(l), 1820, and 1834(g) of the Act, which specify that payments are made to critical access hospitals (CAHs) (that is, rural hospitals or facilities that meet certain statutory requirements) for inpatient and outpatient services and that these payments are generally based on 101 percent of reasonable cost.

Section 1866(k) of the Act, as added by section 3005 of the Affordable Care Act, which establishes a quality reporting program for hospitals described in section 1886(d)(1)(B)(v) of the Act, referred to as "PPS-Exempt Cancer Hospitals."

Section 1886(d)(4)(D) of the Act, which addresses certain hospital-acquired conditions (HACs), including infections. Section 1886(d)(4)(D) of the Act specifies that, by October 1, 2007, the Secretary was required to select, in consultation with the Centers for Disease Control and Prevention (CDC), at least two conditions that: (a) Are high cost, high volume, or both; (b) are assigned to a higher paying MS-DRG when present as a secondary diagnosis (that is, conditions under the MS-DRG system that are complications or comorbidities (CCs) or major complications or comorbidities (MCCs); and (c) could reasonably have been prevented through the application of evidence-based guidelines. Section 1886(d)(4)(D) of the Act also specifies that the list of conditions may be revised, again in consultation with CDC, from time to time as long as the list contains at least two conditions. Section 1886(d)(4)(D)(iii) of the Act requires that hospitals, effective with discharges occurring on or after October 1, 2007, submit information on Medicare claims specifying whether diagnoses were present on admission (POA). Section 1886(d)(4)(D)(i) of the Act specifies that effective for discharges occurring on or after October 1, 2008, Medicare no longer assigns an inpatient hospital discharge to a higher paying MS-DRG if a selected condition is not POA.

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. A payment for indirect medical education (IME) is made under section 1886(d)(5)(B) of the Act.

Section 1886(b)(3)(B)(viii) of the Act, which requires the Secretary to reduce the applicable percentage increase in payments to a subsection (d) hospital for 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.

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 meeting performance standards established for a performance period for such fiscal year.

Section 1886(p) of the Act, as added by section 3008 of the Affordable Care Act, which establishes an adjustment to hospital payments for hospital-acquired conditions (HACs), or a Hospital-Acquired Condition (HAC) Reduction Program, under which payments to applicable hospitals are adjusted to provide an incentive to reduce hospital-acquired conditions.

Section 1886(q) of the Act, as added by section 3025 of the Affordable Care Act and amended by section 10309 of the Affordable Care Act, which establishes the "Hospital Readmissions Reduction Program" effective for discharges from an "applicable hospital" beginning on or after October 1, 2012, under which payments to those hospitals under section 1886(d) of the Act will be reduced to account for certain excess readmissions.

Section 1886(r) of the Act, as added by section 3133 of the Affordable Care Act, which provides for a reduction to disproportionate share hospital payments under section 1886(d)(5)(F) of the Act and for a new 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 disproportionate share hospital 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 section 1886(d)(5)(F) of the Act for DSH ("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; (2) 1 minus the percent change in the percent of individuals under the age of 65 who are uninsured (minus 0.1 percentage points for FY 2014, and minus 0.2 percentage points for FY 2015 through FY 2017); and (3) a hospital's uncompensated care amount relative to the uncompensated care amount of all DSH hospitals expressed as a percentage.

Section 1886(m)(6) of the Act, as added by section 1206(a)(1) of the Pathway for SGR Reform Act of 2013 (Pub. L. 113-67), which provided for the establishment of site neutral payment rate criteria under the LTCH PPS with implementation beginning in FY 2016.

Section 1206(b)(1) of the Pathway for SGR Reform Act of 2013, which further amended section 114(c) of the MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c) and 10312(a) of the Affordable Care Act, by retroactively reestablishing and extending the statutory moratorium on the full implementation of the 25-percent threshold payment adjustment policy under the LTCH PPS so that the policy will be in effect for 9 years (except for "grandfathered" hospital-within-hospitals (HwHs), which are permanently exempt from this policy); and section 1206(b)(2) (as amended by section 112(b) of Pub. L. 113-93), which together further amended section 114(d) of the MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c) and 10312(a) of the Affordable Care Act to establish a new moratoria (subject to certain defined exceptions) on the development of new LTCHs and LTCH satellite facilities and a new moratorium on increases in the number of beds in existing LTCHs and LTCH satellite facilities beginning January 1, 2015 and ending on September 30, 2017; and section 1206(d), which instructs the Secretary to evaluate payments to LTCHs classified under section 1886(b)(1)(C)(iv)(II) of the Act and to adjust payment rates in FY 2015 or FY 2016 under the LTCH PPS, as appropriate, based upon the evaluation findings.

Section 1886(m)(5)(D)(iv) of the Act, as added by section 1206(c) of the Pathway for SGR Reform Act of 2013, which provides for the establishment, no later than October 1, 2015, of a functional status quality measure under the LTCH QRP for change in mobility among inpatients requiring ventilator support.

Section 1899B of the Act, as added by the Improving Medicare Post-Acute Care Transformation Act of 2014 (the IMPACT Act of 2014), which imposes new data reporting requirements for certain postacute care providers, including LTCHs.

Section 1886(d)(12) of the Act, as amended by section 204 of the Medicare Access and CHIP Reauthorization Act of 2015, which extended, through FY 2017, changes to the inpatient hospital payment adjustment for certain low-volume hospitals; and section 1886(d)(5)(G) of the Act, as amended by section 205 of the Medicare Access and CHIP Reauthorization Act of 2015, which extended, through FY 2017, the Medicare-dependent, small rural hospital (MDH) program.

2. Summary of the Major Provisions

a. MS-DRG Documentation and Coding Adjustment

Section 631 of the American Taxpayer Relief Act (ATRA, Pub. L. 112-240) amended section 7(b)(1)(B) of Public Law 110-90 to require the Secretary to make a recoupment adjustment to the standardized amount of Medicare payments to acute care hospitals to account for changes in MS-DRG documentation and coding that do not reflect real changes in case-mix, totaling $11 billion over a 4-year period of FYs 2014, 2015, 2016, and 2017. This adjustment represents the amount of the increase in aggregate payments as a result of not completing the prospective adjustment authorized under section 7(b)(1)(A) of Public Law 110-90 until FY 2013. Prior to the ATRA, this amount could not have been recovered under Public Law 110-90.

While our actuaries estimated that a -9.3 percent adjustment to the standardized amount would be necessary if CMS were to fully recover the $11 billion recoupment required by section 631 of the ATRA in one year, it is often our practice to delay or phase in rate adjustments over more than one year, in order to moderate the effects on rates in any one year. Therefore, consistent with the policies that we have adopted in many similar cases, we made a -0.8 percent recoupment adjustment to the standardized amount in FY 2014 and FY 2015. For FY 2016, we are making an additional -0.8 percent recoupment adjustment to the standardized amount.

b. Reduction of Hospital Payments for Excess Readmissions

We are making changes in policies to the Hospital Readmissions Reduction Program, which is established under section 1886(q) of the Act, as added by section 3025 of the Affordable Care Act. The Hospital Readmissions Reduction Program requires a reduction to a hospital's base operating DRG payment to account for excess readmissions of selected applicable conditions. For FYs 2013 and 2014, these conditions are acute myocardial infarction, heart failure, and pneumonia. For FY 2014, we established additional exclusions to the three existing readmission measures (that is, the excess readmission ratio) to account for additional planned readmissions. We also established additional readmissions measures, chronic obstructive pulmonary disease (COPD), and total hip arthroplasty and total knee arthroplasty (THA/TKA), to be used in the Hospital Readmissions Reduction Program for FY 2015 and future years. We expanded the readmissions measures for FY 2017 and future years by adding a measure of patients readmitted following coronary artery bypass graft (CABG) surgery.

In this final rule, we are making a refinement to the pneumonia readmissions measure, which expands the measure cohort for the FY 2017 payment determination and subsequent years. Specifically, we are finalizing a modified version of the expanded pneumonia cohort from what we had specified in the FY 2016 IPPS/LTCH PPS proposed rule such that the modified version includes patients with a principal discharge diagnosis of pneumonia or aspiration pneumonia, and patients with a principal discharge diagnosis of sepsis with a secondary diagnosis of pneumonia coded as present on admission. However, we are not including patients with a principal discharge diagnosis of respiratory failure or patients with a principal discharge diagnosis of sepsis if they are coded as having severe sepsis as we had previously proposed. In addition, we are adopting an extraordinary circumstance exception policy that will align with existing extraordinary circumstance exception policies for other IPPS quality reporting and payment programs and will allow hospitals that experience an extraordinary circumstance (such as a hurricane or flood) to request a waiver for use of data from the affected time period.

c. Hospital Value-Based Purchasing (VBP) Program

Section 1886(o) of the Act requires the Secretary to establish a Hospital VBP Program under which value-based incentive payments are made in a fiscal year to hospitals based on their performance on measures established for a performance period for such fiscal year.

For FY 2016, we are adopting one additional measure beginning with the FY 2018 program year and one measure beginning with the FY 2021 program year. We also are removing two measures beginning with the FY 2018 program year. In addition, we are moving one measure to the Safety domain and removing the Clinical Care--Process subdomain and renaming the Clinical Care--Outcomes subdomain as the Clinical Care domain. Finally, we are signaling our intent to propose in future rulemaking to expand one measure and to update the standard population data we use to calculate several measures beginning with the FY 2019 program year.

d. Hospital-Acquired Condition (HAC) Reduction Program

Section 1886(p) of the Act, as added under section 3008(a) of the Affordable Care Act, establishes an incentive to hospitals to reduce the incidence of hospital-acquired conditions by requiring the Secretary to make an adjustment to payments to applicable hospitals effective for discharges beginning on October 1, 2014 and for subsequent program years. This 1-percent payment reduction applies to a hospital whose ranking is in the top quartile (25 percent) of all applicable hospitals, relative to the national average, of conditions acquired during the applicable period and on all of the hospital's discharges for the specified fiscal year. The amount of payment shall be equal to 99 percent of the amount of payment that would otherwise apply to such discharges under section 1886(d) or 1814(b)(3) of the Act, as applicable.

In this final rule, we are making three changes to existing Hospital-Acquired Condition Reduction Program policies: (1) An expansion to the population covered by the central line-associated bloodstream infection (CLABSI) and catheter-associated urinary tract infection (CAUTI) measures to include patients in select nonintensive care unit sites within a hospital; (2) an adjustment to the relative contribution of each domain to the Total HAC Score which is used to determine if a hospital will receive the payment adjustment; and (3) a policy that will align with existing extraordinary circumstance exception policies for other IPPS quality reporting and payment programs and will allow hospitals to request a waiver for use of data from the affected time period.

e. DSH Payment Adjustment and Additional Payment for Uncompensated Care

Section 3133 of the Affordable Care Act modified the Medicare disproportionate share hospital (DSH) payment methodology beginning in FY 2014. Under section 1886(r) of the Act, which was added by section 3133 of the Affordable Care Act, starting in FY 2014, DSHs will receive 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. The remaining amount, equal to 75 percent of what otherwise would have been paid as Medicare DSH payments, will be paid as additional payments after the amount is reduced for changes in the percentage of individuals that are uninsured. Each Medicare DSH hospital will receive an additional payment based on its share of the total amount of uncompensated care for all Medicare DSH hospitals for a given time period.

In this final rule, we are updating our estimates of the three factors used to determine uncompensated care payments for FY 2016. We are continuing to use the methodology we established in FY 2015 to calculate the uncompensated care payment amounts for merged hospitals such that we combine uncompensated care data for the hospitals that have undergone a merger in order to calculate their relative share of uncompensated care. We also are changing the time period of the data used to calculate the uncompensated care payment amounts to be distributed.

f. Changes to the LTCH PPS

Under the current LTCH PPS, all discharges are paid under the LTCH PPS standard Federal payment rate. In this final rule, we are implementing section 1206 of the Pathway for SGR Reform Act, which requires the establishment of an alternative site neutral payment rate for Medicare discharges from an LTCH that fail to meet certain statutory defined criteria, beginning with LTCH discharges occurring in cost reporting periods beginning on or after October 1, 2015. We include provisions regarding the application of the site neutral payment rate and the criteria for exclusion from the site neutral payment rate, as well as provisions on a number of methodological and implementation issues, such as the criterion for a principal diagnosis relating to a psychiatric diagnosis or to rehabilitation, the intensive care unit (ICU) criterion, the ventilator criterion, the definition of "immediately preceded" by a subsection (d) hospital discharge, limitation on beneficiary charges in the context of the new site neutral payment rate, and the transitional blended payment rate methodology for FY 2016 and FY 2017.

In addition, we are making changes to address certain statutory requirements related to an LTCH's average length of stay criterion and discharge payment percentage. We also are providing technical clarifications relating to our FY 2015 implementation of the new statutory moratoria on the establishment of new LTCHs and LTCH satellite facilities (subject to certain defined exceptions) and on bed increases in existing LTCHs and LTCH satellite facilities as well as making a technical revision to the regulations to more clearly reflect our established policies.

g. Hospital Inpatient Quality Reporting (IQR) Program

Under section 1886(b)(3)(B)(viii) of the Act, hospitals are required to report data on measures selected by the Secretary for the Hospital IQR Program in order to receive the full annual percentage increase in payments. In past years, we have established measures for reporting data and the process for submittal and validation of the data.

In this final rule, we are updating considerations for measure removal and retention. In addition, we are removing nine chart-abstracted measures for the FY 2018 payment determination and subsequent years: Six of these measures are "topped-out" (STK-01, STK-06, STK-08, VTE-1, VTE-2, and VTE-3) and two of the measures are suspended (IMM-1 and SCIP-Inf-4). However, we are retaining the electronic versions of five of the chart-abstracted measures finalized for removal.

We are refining two previously adopted measures for the FY 2018 payment determination and subsequent years. We are also adding seven new measures: Three new claims-based measures and one structural measure for the FY 2018 payment determination and subsequent years; and three new claims-based measures for the FY 2019 payment determination and subsequent years.

Further, for the FY 2018 payment determination, we are requiring hospitals to report a minimum of 4 electronic clinical quality measures. Under this modification to our proposal, no NQS domain distribution will be required. We are requiring that hospitals submit one quarter of electronic clinical quality measure data from either Q3 or Q4 of CY 2016 with a submission deadline of February 28, 2017. For the reporting of electronic clinical quality measures, hospitals may be certified either to the CEHRT 2014 or 2015 Edition, but must submit using the QRDA I format. We plan to finalize public reporting of electronic data in next year's rulemaking after the conclusion and assessment of the validation pilot. Six previously adopted measures (ED-1, ED-2, PC-01, STK-04, VTE-5, and VTE-6) must still be submitted via chart-abstraction regardless of whether they are also submitted as electronic clinical quality measures. We are also continuing our policy regarding STK-01 to clarify that hospitals need not report the STK-01 measure as part of the STK measure set if reporting electronically, because no electronic specification existed for STK-01. Beginning with the FY 2018 payment determination, we are expanding our previously established extraordinary circumstances extensions/exemptions policy (79 FR 50277) to allow hospitals to utilize the existing Extraordinary Circumstances Exception (ECE) form to request exemptions based on hardships in reporting eCQMs.

Finally, we are modifying the existing processes for validation of chart-abstracted Hospital IQR Program data to remove one stratum.

h. Long-Term Care Quality Reporting Program (LTCH QRP)

Section 3004(a) of the Affordable Care Act amended section 1886(m)(5) of the Act to require the Secretary to establish the Long-Term Care Hospital Quality Reporting Program (LTCH QRP). This program applies to all hospitals certified by Medicare as LTCHs. Beginning with the FY 2014 payment determination and subsequent years, the Secretary is required to reduce any annual update to the standard Federal rate for discharges occurring during such fiscal year by 2 percentage points for any LTCH that does not comply with the requirements established by the Secretary.

The IMPACT Act of 2014 amended the Act in ways that affect the LTCH QRP. Specifically, section 2(a) of the IMPACT Act of 2014 added section 1899B of the Act, and section 2(c)(3) of the IMPACT Act of 2014 amended section 1886(m)(5) of the Act. Under section 1899B(a)(1) of the Act, the Secretary must require post-acute care (PAC) providers (defined in section 1899B(a)(2)(A) of the Act to include HHAs, SNFs, IRFs, and LTCHs) to submit standardized patient assessment data in accordance with section 1899B(b) of the Act, data on quality measures required under section 1899B(c)(1) of the Act, and data on resource use and other measures required under section 1899B(d)(1) of the Act. The Act also sets out specified application dates for each of the measures. The Secretary must specify the quality, resource use, and other measures not later than the applicable specified application date defined in section 1899B(a)(2)(E) of the Act.

In this final rule, we are establishing three previously finalized quality measures: One measure establishes the newly NQF-endorsed status of that quality measure; two other measures are for the purpose of establishing the cross-setting use of the previously finalized quality measures, in order to satisfy the IMPACT Act of 2014 requirement of adopting quality measures under the domains of skin integrity and falls with major injury. We are adopting an application of a fourth previously finalized LTCH functional status measure in order to meet the requirement of the IMPACT Act of 2014 to adopt a cross-setting measure under the domain of functional status, such as self-care or mobility. All four measures effect the FY 2018 annual payment update determination and beyond.

In addition, we will publicly report LTCH quality data beginning in fall 2016, on a CMS Web site, such as Hospital Compare. We will initially publicly report quality data on four quality measures.

Finally, we are lengthening our quarterly data submission deadlines from 45 days to 135 days beyond the end of each calendar year quarter beginning with quarter four (4) 2015 quality data. We are making this change in order to align with other quality reporting programs, and to allow an appropriate amount of time for LTCHs to review and correct quality data prior to the public posting of that data.

3. Summary of Costs and Benefits

Adjustment for MS-DRG Documentation and Coding Changes. We are making a -0.8 percent recoupment adjustment to the standardized amount for FY 2016 to implement, in part, the requirement of section 631 of the ATRA that the Secretary make an adjustment totaling $11 billion over a 4-year period of FYs 2014, 2015, 2016, and 2017. This recoupment adjustment represents the amount of the increase in aggregate payments as a result of not completing the prospective adjustment authorized under section 7(b)(1)(A) of Public Law 110-90 until FY 2013. Prior to the ATRA, this amount could not have been recovered under Public Law 110-90.

While our actuaries estimated that a -9.3 percent recoupment adjustment to the standardized amount would be necessary if CMS were to fully recover the $11 billion recoupment required by section 631 of the ATRA in FY 2014, it is often our practice to delay or phase in rate adjustments over more than one year, in order to moderate the effects on rates in any one year. Therefore, consistent with the policies that we have adopted in many similar cases and the adjustment we made for FY 2014, we are making a -0.8 percent recoupment adjustment to the standardized amount in FY 2016. Taking into account the cumulative effects of this adjustment and the adjustments made in FYs 2014 and 2015, we currently estimate that approximately $5 to $6 billion would be left to recover under section 631 of the ATRA by the end of FY 2016. We have not yet addressed the specific amount of the final adjustment required under section 631 of the ATRA for FY 2017. We intend to address this adjustment in the FY 2017 IPPS rulemaking. However, we note that section 414 of the MACRA (Pub. L. 114-10), enacted on April 16, 2015, replaced the single positive adjustment we intended to make in FY 2018 with a 0.5 percent positive adjustment for each of FYs 2018 through 2023. The provision under section 414 of the MACRA does not impact our FY 2016 recoupment adjustment, and we will address this MACRA provision in future rulemaking.

Changes to the Hospital Readmissions Reduction Program. We are making a refinement to the pneumonia readmissions measure, which will expand the measure cohort for the FY 2017 payment determination and subsequent years. In addition, we are adopting an extraordinary circumstance exception policy that will align with existing extraordinary circumstance exception policies for other IPPS quality reporting and payment programs and will allow hospitals that experience an extraordinary circumstance (such as a hurricane or flood) to request a waiver for use of data from the affected time period. These changes will not significantly impact the program in FY 2016, but could impact future years, depending on actual experience.

Overall, in this final rule, we estimate that 2,666 hospitals will have their base operating DRG payments reduced by their proxy FY 2016 hospital-specific readmissions adjustment. As a result, we estimate that the Hospital Readmissions Reduction Program will save approximately $420 million in FY 2016, an increase of $6 million over the estimated FY 2015 savings.

Value-Based Incentive Payments under the Hospital VBP Program. We estimate that there will be no net financial impact to the Hospital VBP Program for the FY 2016 program year in the aggregate because, by law, the amount available for value-based incentive payments under the program in a given year must be equal to the total amount of base operating MS-DRG payment amount reductions for that year, as estimated by the Secretary. The estimated amount of base operating MS-DRG payment amount reductions for the FY 2016 program year and, therefore, the estimated amount available for value-based incentive payments for FY 2016 discharges is approximately $1.5 billion.

Changes to the HAC Reduction Program for FY 2016. We are making three changes to existing HAC Reduction Program policies: (1) An expansion to the population covered by the central line-associated bloodstream infection (CLABSI) and catheter-associated urinary tract infection (CAUTI) measures to include patients in select nonintensive care unit sites within a hospital; (2) an adjustment to the relative contribution of each domain to the Total HAC Score that is used to determine if a hospital will receive the payment adjustment; and (3) a policy that will align with existing extraordinary circumstance exception policies for other IPPS quality reporting and payment programs and will allow hospitals to request a waiver for use of data from the affected period. Hospitals in the top quartile of HAC scores will continue to have their HAC Reduction Program payment adjustment applied, as required by law. However, because a hospital's Total HAC score and its ranking in comparison to other hospitals in any given year depend on several different factors, any significant impact due to the HAC Reduction Program changes for FY 2016, including which hospitals receive the adjustment, will depend on actual experience.

Medicare DSH Payment Adjustment and Additional Payment for Uncompensated Care. Under section 1886(r) of the Act (as added by section 3313 of the Affordable Care Act), disproportionate share hospital payments to hospitals under section 1886(d)(5)(F) of the Act are reduced and an additional payment for uncompensated care is made to eligible hospitals beginning in FY 2014. Hospitals that receive Medicare DSH payments will receive 25 percent of the amount they previously would have received under the current statutory formula for Medicare DSH payments in section 1886(d)(5)(F) of the Act. The remainder, equal to an estimate of 75 percent of what otherwise would have been paid as Medicare DSH payments, will be the basis for determining the additional payments for uncompensated care after the amount is reduced for changes in the percentage of individuals that are uninsured and additional statutory adjustments. Each hospital that receives Medicare DSH payments will receive an additional payment for uncompensated care based on its share of the total uncompensated care amount reported by Medicare DSHs. The reduction to Medicare DSH payments is not budget neutral.

For FY 2016, we are providing that the 75 percent of what otherwise would have been paid for Medicare DSH is adjusted to approximately 63.69 percent of the amount to reflect changes in the percentage of individuals that are uninsured and additional statutory adjustments. In other words, approximately 47.76 percent (the product of 75 percent and 63.69 percent) of our estimate of Medicare DSH payments prior to the application of section 3133 of the Affordable Care Act is available to make additional payments to hospitals for their relative share of the total amount of uncompensated care. We project that Medicare DSH payments and additional payments for uncompensated care made for FY 2016 will reduce payments overall by approximately 1 percent as compared to the Medicare DSH payments and uncompensated care payments distributed in FY 2015. The additional payments have redistributive effects based on a hospital's uncompensated care amount relative to the uncompensated care amount for all hospitals that are estimated to receive Medicare DSH payments, and the payment amount is not directly tied to a hospital's number of discharges.

Implementation of Legislative Extensions Relating to the Payment Adjustment for Low-Volume Hospitals and the Medicare-Dependent, Small Rural Hospital Program. The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (Pub. L. 114-10) extended certain provisions relating to the payment adjustment for low-volume hospitals under section 1886(d)(12) of the Act and extended the Medicare-dependent, small rural hospital (MDH) Program. Section 204 of the MACRA extended the temporary changes to the low-volume hospital qualifying criteria and payment adjustment for IPPS hospital discharges occurring on or after April 1, 2015 through September 30, 2017. Section 205 of the MACRA extended the MDH program for IPPS hospital discharges occurring on or after April 1, 2015 through September 30, 2017. We project that IPPS payments for FY 2016 will increase by approximately $322 million as a result of the statutory extensions of certain provisions of the low-volume hospital payment adjustment and approximately $96 million for the MDH program compared to such payments in absence of these extensions.

Update to the LTCH PPS Payment Rates and Other Payment Factors. Based on the best available data for the 419 LTCHs in our data base, we estimate that the changes to the payment rates and factors that we are presenting in the preamble and Addendum of this final rule, including the application of the new site neutral payment rate required by section 1886(m)(6)(A) of the Act, the update to the LTCH PPS standard Federal payment rate for FY 2016, and the changes to short-stay outlier and high-cost outlier payments will result in an estimated decrease in payments from FY 2015 of approximately $250 million.

Hospital Inpatient Quality Reporting (IQR) Program. In this final rule, we are removing nine measures for the FY 2018 payment determination and subsequent years. We are adding seven measures to the Hospital IQR Program for the payment determination; four for the FY 2018 payment determination and subsequent years and three for FY 2019 payment determination and subsequent years. We also are requiring hospitals to report 4 of the 28 Hospital IQR Program electronic clinical quality measures that align with the Medicare EHR Incentive Program. We estimate that our policies for the adoption and removal of measures will result in total hospital costs of $169 million across 3,300 IPPS hospitals.

Changes in LTCH Payments Related to the LTCH QRP Proposals. We believe that the increase in costs to LTCHs related to our LTCH QRP policies in this final rule is zero. We refer readers to sections VIII.C. of the preamble of this final rule for detailed discussion of the policies.

B. Summary

1. Acute Care Hospital Inpatient Prospective Payment System (IPPS)

Section 1886(d) of the Social Security Act (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 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 provided for a new additional Medicare payment that considers the amount of uncompensated care provided by the hospital. Payment under this methodology began in FY 2014.

If the hospital is an approved teaching hospital, 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. 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.

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.

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 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.

We note that the Medicare Access and CHIP Reauthorization Act of 2015 (Pub. L. 114-10), enacted on April 16, 2015, extended the Medicare-dependent, small rural hospital (MDH) program through FY 2017. Through and including FY 2006, an MDH received the higher of the Federal rate or the Federal rate plus 50 percent of the amount by which the Federal rate was exceeded by the higher of its FY 1982 or FY 1987 hospital-specific rate. For discharges occurring on or after October 1, 2007, through FY 2017, 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, has no 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).

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: Rehabilitation hospitals and units; long-term care hospitals (LTCHs); psychiatric hospitals and units; children's hospitals; certain cancer hospitals; and short-term acute care hospitals located in Guam, the U.S. Virgin Islands, 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 rehabilitation hospitals and units (referred to as inpatient rehabilitation facilities (IRFs)), LTCHs, and psychiatric hospitals and units (referred to as inpatient psychiatric facilities (IPFs)). (We note that the annual updates to the LTCH PPS are now included as part of the IPPS annual update document. Updates to the IRF PPS and IPF PPS are issued as separate documents.) Children's hospitals, certain cancer hospitals, short-term acute care hospitals located in Guam, the U.S. Virgin Islands, 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, as updated annually by the percentage increase in the IPPS operating market basket.

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 section 123 of the BBRA and section 307(b) of the BIPA (as codified under section 1886(m)(1) of the Act). During the 5-year (optional) transition period, a LTCH's payment under the PPS was based on an increasing proportion of the LTCH Federal rate with a corresponding decreasing proportion based on reasonable cost principles. Effective for cost reporting periods beginning on or after October 1, 2006, all LTCHs are paid 100 percent of the Federal rate. Section 1206(a) of Public Law 113-67 established the site neutral payment rate under the LTCH PPS. Under this statute, based on a rolling effective date that is linked to the date on which a given LTCH's Federal FY 2016 cost reporting period begins, LTCHs will be paid for LTCH discharges at the new 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.

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)(1)(A) 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.

C. Summary of Provisions of Recent Legislation Discussed in This Final Rule

The American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240), enacted on January 2, 2013, made a number of changes that affect the IPPS. We announced changes related to certain IPPS provisions for FY 2013 in accordance with sections 605 and 606 of Public Law 112-240 in a notice that appeared in the Federal Register on March 7, 2013 (78 FR 14689).

The Pathway for SGR Reform Act of 2013 (Pub. L. 113-67), enacted on December 26, 2013, also made a number of changes that affect the IPPS and the LTCH PPS. We implemented changes related to the low-volume hospital payment adjustment and MDH provisions for FY 2014 in accordance with sections 1105 and 1106 of Public Law 113-67 in an interim final rule with comment period that appeared in the Federal Register on March 18, 2014 (79 FR 15022).

The Protecting Access to Medicare Act of 2014 (Pub. L. 113-93), enacted on April 1, 2014, also made a number of changes that affect the IPPS and LTCH PPS.

The Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act of 2014) (Pub. L. 113-185), enacted on October 6, 2014, made a number of changes that affect the Long-Term Care Quality Reporting Program (LTCH QRP).

The Medicare Access and CHIP Reauthorization Act of 2015 (Pub. L. 114-10) enacted on April 16, 2015, extended the MDH program and changes to the payment adjustment for low-volume hospitals through FY 2017.

1. American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240)

In this final rule, we are making policy changes to implement section 631 of the American Taxpayer Relief Act of 2012, which amended section 7(b)(1)(B) of Public Law 110-90 and requires a recoupment adjustment to the standardized amounts under section 1886(d) of the Act based upon the Secretary's estimates for discharges occurring in FY 2014 through FY 2017 to fully offset $11 billion (which represents the amount of the increase in aggregate payments from FYs 2008 through 2013 for which an adjustment was not previously applied).

2. Pathway for SGR Reform Act of 2013 (Pub. L. 113-67)

In this final rule, we are providing clarifications to prior policy changes, making new policy changes, and discussing the need for future policy changes to implement provisions under section 1206 of the Pathway for SGR Reform Act of 2013. These include:

Section 1206(a), which provides for the establishment of patient criteria for exclusion from the new site neutral payment rate under the LTCH PPS, beginning in FY 2016.

Section 1206(a)(3), which requires changes to the LTCH average length of stay criterion.

Section 1206(b)(1), which further amended section 114(c) of the MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c) and 10312(a) of the Affordable Care Act by retroactively reestablishing, and extending, the statutory moratorium on the full implementation of the 25-percent threshold payment adjustment policy under the LTCH PPS so that the policy will be in effect for 9 years (except for grandfathered hospitals-within-hospitals (HwHs), which it permanently exempted from this policy).

Section 1206(b)(2), which amended section 114(d) of the MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c) and 10312(a) of the Affordable Care Act to establish new moratoria (subject to certain defined exceptions) on the development of new LTCHs and LTCH satellite facilities and a new moratorium on increases in the number of beds in existing LTCHs and LTCH satellite facilities.

3. Protecting Access to Medicare Act of 2014 (Pub. L. 113-93)

In this final rule, we are clarifying or discussing our prior policy changes that implemented the following provisions (or portions of the following provisions) of the Protecting Access to Medicare Act of 2014 that are applicable to the IPPS and the LTCH PPS for FY 2016:

Section 112, which makes certain changes to Medicare LTCH provisions, including modifications to the statutory moratoria on the establishment of new LTCHs and LTCH satellite facilities.

Section 212, which prohibits the Secretary from requiring implementation of ICD-10 code sets before October 1, 2015.

4. Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act of 2014) (Pub. L. 113-185)

In this final rule, we are implementing portions of section 2 of the IMPACT Act of 2014, which, in part, requires LTCHs, among other postacute care providers, to report standardized patient assessment data, data on quality measures, and data on resource use and other measures.

5. The Medicare Access and CHIP Reauthorization Act of 2015 (Pub. L. 114-10)

In this document, as an interim final rule with comment period, we are implementing sections 204 and 205 of the Medicare Access and CHIP Reauthorization Act of 2015, which extended the MDH program and changes to the low-volume payment adjustment for hospitals through FY 2017.

D. Issuance of Notice of Proposed Rulemaking

Earlier this year, we published a proposed rule that set forth proposed changes for the Medicare IPPS for operating costs and for capital-related costs of acute care hospitals for FY 2016. The proposed rule appeared in the Federal Register on April 30, 2015 (80 FR 24324). We also set forth proposed changes to payments to certain hospitals that continue to be excluded from the IPPS and paid on a reasonable cost basis. In addition, in the proposed rule, we set forth proposed changes to the payment rates, factors, and other payment rate policies under the LTCH PPS for FY 2016.

Below is a summary of the major changes that we proposed to make.

1. Proposed Changes to MS-DRG Classifications and Recalibrations of Relative Weights

In section II. of the preamble of the proposed rule, we included--

Proposed changes to MS-DRG classifications based on our yearly review, including a discussion of the conversion of MS-DRGs to ICD-10 and the implementation of the ICD-10-CM and ICD-10-PCS systems.

Proposed application of the documentation and coding adjustment for FY 2016 resulting from implementation of the MS-DRG system.

Proposed recalibrations of the MS-DRG relative weights.

Proposed changes to hospital-acquired conditions (HACs) and a discussion of HACs, including infections, that would be subject to the statutorily required adjustment in MS-DRG payments for FY 2016.

A discussion of the FY 2016 status of new technologies approved for add-on payments for FY 2015 and a presentation of our evaluation and analysis of the FY 2016 applicants for add-on payments for high-cost new medical services and technologies (including public input, as directed by Pub. L. 108-173, obtained in a town hall meeting).

Dated: July 27, 2015.

Andrew M. Slavitt,

Acting Administrator, Centers for Medicare & Medicaid Services.

Dated: July 29, 2015.

Sylvia M. Burwell,

Secretary, Department of Health and Human Services.

Editor's note: For the full-text of this document, click this link or copy it into your browser: https://www.federalregister.gov/articles/2015/08/17/2015-19049/medicare-program-hospital-inpatient-prospective-payment-systems-for-acute-care-hospitals-and-the.

Myron Struck, editor, Targeted News Service, Springfield, Va., 703/304-1897; [email protected]; http://www.targetednews.com

-1222209