Tables
Note: For purposes of this final rule, and to avoid confusion, we have retained
the designations of Tables 1 through 5 that were first used in the September
1, 1983 initial prospective payment final rule (48 FR 39844). Tables 1A, 1C,
1D, 3C, 4A, 4B, 4C, 4D, 4E, 4F, 5, 7A, 7B, 8A, 8B, and 10 are presented below.
The tables presented are as follows:
IV.Provisions of the Final Regulations
V. Collection of Information Requirements
[Federal Register: July 30, 1999 (Volume 64, Number 146)]
[Rules and Regulations]
[Page 41489-41538]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30jy99-21]
[[Page 41489]]
_______________________________________________________________________
Part II
Department of Health and Human Services
_______________________________________________________________________
Health Care Financing Administration
_______________________________________________________________________
42 CFR Parts 412, 413, 483, and 485
Medicare Program; Changes to the Hospital Inpatient Prospective Payment
Systems and Fiscal Year 2000 Rates; Final Rule
[[Page 41490]]
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
42 CFR Parts 412, 413, 483, and 485
[HCFA-1053-F]
RIN 0938-AJ50
Medicare Program; Changes to the Hospital Inpatient Prospective
Payment Systems and Fiscal Year 2000 Rates
AGENCY: Health Care Financing Administration (HCFA), HHS.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: We are revising the Medicare hospital inpatient prospective
payment systems for operating costs and capital-related costs to
implement changes arising from our continuing experience with the
systems. In addition, in the addendum to this final rule, we describe
changes in the amounts and factors necessary to determine rates for
Medicare hospital inpatient services for operating costs and capital-
related costs. These changes are applicable to discharges occurring on
or after October 1, 1999. We also set forth rate-of-increase limits as
well as policy changes for hospitals and hospital units excluded from
the prospective payment systems. Finally, we are revising certain
policies governing payment to hospitals for the direct costs of
graduate medical education.
DATES: The provisions of this final rule are effective October 1, 1999.
This rule is a major rule as defined in Title 5, United States Code,
section 804(2). Pursuant to 5 U.S.C. section 801(a)(1)(A), we are
submitting a report to Congress on this rule on July 30, 1999.
FOR FURTHER INFORMATION CONTACT:
Steve Phillips, (410) 786-4531, Operating Prospective Payment,
Diagnosis-Related Group (DRG), and Wage Index Issues.
Tzvi Hefter, (410) 786-4487, Capital Prospective Payment, Excluded
Hospitals, and Graduate Medical Education Issues.
SUPPLEMENTARY INFORMATION:
Availability of Copies and Electronic Access
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I. Background
A. Summary
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 pay for the capital-related costs of hospital inpatient
stays under a prospective payment system. Under these prospective
payment systems, 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).
Certain specialty hospitals are excluded from the prospective
payment systems. Under section 1886(d)(1)(B) of the Act, the following
hospitals and hospital units are excluded from the prospective payment
systems: psychiatric hospitals or units, rehabilitation hospitals or
units, children's hospitals, long-term care hospitals, and cancer
hospitals. For these hospitals and units, Medicare payment for
operating costs is based on reasonable costs subject to a hospital-
specific annual limit.
Under section 1886(a)(4) of the Act, costs incurred directly by a
hospital in connection with approved graduate medical education (GME)
programs are excluded from the operating costs of inpatient hospital
services. Hospitals with approved 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 regulations governing the hospital inpatient prospective
payment systems are located in 42 CFR part 412. The regulations
governing excluded hospitals and hospital units are located in parts
412 and 413, and the GME regulations are located in part 413.
B. Summary of the Provisions of the May 7, 1999 Proposed Rule
On May 7, 1999, we published a proposed rule in the Federal
Register (64 FR 24716) that set forth proposed changes to the Medicare
hospital inpatient prospective payment systems for both operating costs
and capital-related costs that would be effective for discharges
occurring on or after October 1, 1999. We also proposed changes
concerning GME costs and excluded hospitals and units, as well as
critical access hospitals (CAHs). On June 15, 1999, we issued a
correction notice (64 FR 31995) for the May 7, 1999 proposed rule. That
notice corrected Table 3C of the Addendum (which lists each hospital's
case-mix index and adjusted average hourly wage based on data on file
at HCFA as of February 22, 1999) and made several other technical
corrections.
In the proposed rule, we noted that the efforts that we were
undertaking to make the Medicare computer systems compliant on January
1, 2000, would not delay our ability to make timely and updated
payments to hospitals under the FY 2000 prospective payment systems
final rule. This statement still applies and the changes and updated
rates set forth in this final rule will be implemented on October 1,
1999.
The following is a summary of the contents of the proposed rule:
<bullet> In order to avoid compromising our ability to process and
pay hospital claims during the period leading up to and immediately
following January 1, 2000, we did not propose to implement any
revisions to the International Classification of Diseases, Ninth
Revision, Clinical Modification (ICD-9-CM) coding system. We did
propose to make some limited changes to certain DRG classifications for
FY 2000 and described other proposed decisions
[[Page 41491]]
concerning DRGs. We also recalibrated the DRG relative weights based on
the proposed DRG changes and updated Medicare claims data.
<bullet> We proposed an FY 2000 hospital wage index update, using
FY 1996 wage data, and revisions to the wage index based on hospital
redesignations. In addition, we proposed to begin excluding from the
wage index Part A physician wage costs that are teaching-related, as
well as resident and Part A certified registered nurse anesthetist
(CRNA) costs.
<bullet> We proposed several policy changes in the regulations in
42 CFR parts 412 and 413 and proposed to continue existing policy
concerning classifications of sole community hospitals; the indirect
medical education adjustment; and Medicare Geographic Classification
Review Board (MGCRB) decisions. In addition, we updated the qualifying
criteria for rural referral centers and proposed several changes to the
regulations governing payments for the direct costs of GME programs.
<bullet> We discussed the special exceptions process for certain
eligible hospitals to receive additional payments for major
construction or renovation projects that began soon after the start of
the capital prospective payment system and proposals that we had
received to change the eligibility criteria for these payments.
<bullet> We discussed a number of proposals concerning Medicare
payments to excluded hospitals and hospital units and CAHs. These
proposed changes related to limits on and adjustments to the proposed
target amounts for FY 2000; changes in bed size or status of excluded
hospitals or hospital units; payment for Medicare services furnished at
satellite hospital locations; responsibility for care of patients in
hospitals-within-hospitals; the allowable emergency response time for
CAHs located in frontier or other specifically defined remote areas;
and compliance with minimum data set requirements by CAHs with swing
bed approval.
<bullet> In the addendum to the proposed rule, we set forth
proposed changes to the amounts and factors for determining the FY 2000
prospective payment rates for operating costs and capital-related
costs. We also addressed update factors for determining the rate-of-
increase limits for cost reporting periods beginning in FY 2000 for
hospitals and hospital units excluded from the prospective payment
system.
<bullet> In Appendix A of the proposed rule, we set forth an
analysis of the impact that the proposed changes would have on affected
entities.
<bullet> In Appendix B of the proposed rule, we set forth the
technical appendix on the proposed FY 2000 capital cost model.
<bullet> In Appendix C of the proposed rule, as required by section
1886(e)(3)(B) of the Act, we set forth our report to Congress on our
initial estimate of a recommended update factor for FY 2000 for both
hospitals included in and hospitals excluded from the prospective
payment systems.
<bullet> In Appendix D of the proposed rule, as required by
sections 1886(e)(4) and (e)(5) of the Act, we included our
recommendation of the appropriate percentage change for FY 2000 for--
--Large urban area and other area average standardized amounts (and
hospital-specific rates applicable to sole community hospitals and
Medicare-dependent, small rural hospitals) for hospital inpatient
services paid for under the prospective payment system for operating
costs; and
--Target rate-of-increase limits to the allowable operating costs of
hospital inpatient services furnished by hospitals and hospital units
excluded from the prospective payment system.
<bullet> In the proposed rule, we discussed the recommendations
concerning hospital inpatient payment policies made by the Medicare
Payment Advisory Commission (MedPAC) and presented our responses to
those recommendations. Under section 1805(b) of the Act, MedPAC is
required to submit a report to Congress, not later than March 1 of each
year, that reviews and makes recommendations on Medicare payment
policies.
C. Public Comments Received in Response to the Proposed Rule
We received a total of 82 timely items of correspondence containing
multiple comments on the proposed rule. The main areas of concern
addressed by the commenters were removal of teaching-related and CRNA
costs from the wage index, payments for services furnished at satellite
hospital locations, and limits on the transfer of patients in
hospitals-within-hospitals. We also received a number of comments
relating to the eligibility criteria for hospitals to qualify for
capital exceptions payments.
Summaries of the public comments received and our responses to
those comments are set forth below under the appropriate section.
II. Changes to DRG Reclassifications and Recalibrations of Relative Weights
A. Background
Under the prospective payment system, we pay for inpatient hospital
services on the basis of a rate per discharge that varies by the DRG to
which a beneficiary's stay is assigned. The formula used to calculate
payment for a specific case takes an individual hospital's payment rate
per case and multiplies it 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.
Congress recognized that it would be necessary to recalculate the
DRG relative weights periodically to account for changes in resource
consumption. Accordingly, section 1886(d)(4)(C) of the Act requires
that the Secretary adjust the DRG classifications and relative weights
at least annually. These adjustments are made to reflect changes in
treatment patterns, technology, and any other factors that may change
the relative use of hospital resources.
As discussed in more detail in section II.B.8 of this preamble, we
are not implementing any revisions to the ICD-9-CM codes. We have
undertaken, and continue to undertake, major efforts to ensure that all
of the Medicare computer systems are ready to function on January 1,
2000. If we were to implement changes to the ICD-9-CM codes on October
1, 1999, we would endanger the functioning of the Medicare computer
systems, and, specifically, we might compromise our ability to process
hospital bills. We can, however, reclassify existing codes into
different DRGs, if appropriate.
The changes to the DRG classification system, and the recalibration
of the DRG weights for discharges occurring on or after October 1,
1999, are discussed below.
B. DRG Reclassification
1. General
Cases are classified into DRGs for payment under the prospective
payment system based on the principal diagnosis, up to eight additional
diagnoses, and up to six procedures performed during the stay, as well
as age, sex, and discharge status of the patient. The diagnosis and
procedure information is reported by the hospital using ICD-9-CM codes.
The Medicare fiscal intermediary enters the information into its claims
processing system and subjects it to a series of automated screens
called the
[[Page 41492]]
Medicare Code Editor (MCE). These screens are designed to identify
cases that require further review before classification into a DRG can
be accomplished.
After screening through the MCE and any further development of the
claims, cases are classified by the GROUPER software program into the
appropriate DRG. The GROUPER program was developed as a means of
classifying each case into a DRG on the basis of the diagnosis and
procedure codes and demographic information (that is, sex, age, and
discharge status). It is used both to classify past cases in order to
measure relative hospital resource consumption to establish the DRG
weights and to classify current cases for purposes of determining
payment. The records for all Medicare hospital inpatient discharges are
maintained in the Medicare Provider Analysis and Review (MedPAR) file.
The data in this file are used to evaluate possible DRG classification
changes and to recalibrate the DRG weights.
Currently, cases are assigned to one of 499 DRGs in 25 major
diagnostic categories (MDCs). Most MDCs are based on a particular organ
system of the body (for example, MDC 6, Diseases and Disorders of the
Digestive System); however, some MDCs are not constructed on this basis
since they involve multiple organ systems (for example, MDC 22, Burns).
In general, cases are assigned to an MDC based on the principal
diagnosis before assignment to a DRG. However, there are five DRGs to
which cases are directly assigned on the basis of procedure codes.
These are the DRGs for liver, bone marrow, and lung transplants (DRGs
480, 481, and 495, respectively) and the two DRGs for tracheostomies
(DRGs 482 and 483). Cases are assigned to these DRGs before
classification to an MDC.
Within most MDCs, cases are then divided into surgical DRGs (based
on a surgical hierarchy that orders individual procedures or groups of
procedures by resource intensity) and medical DRGs. Medical DRGs
generally are differentiated on the basis of diagnosis and age. Some
surgical and medical DRGs are further differentiated based on the
presence or absence of complications or comorbidities (CC).
Generally, GROUPER does not consider other procedures; that is,
nonsurgical procedures or minor surgical procedures generally not
performed in an operating room are not listed as operating room (OR)
procedures in the GROUPER decision tables. However, there are a few
non-OR procedures that do affect DRG assignment for certain principal
diagnoses, such as extracorporeal shock wave lithotripsy for patients
with a principal diagnosis of urinary stones.
We proposed several changes to the DRG classification system for FY
2000 and other decisions concerning DRGs. The proposed changes, the
comments we received concerning them, and the final DRG changes are set
forth below. Unless otherwise noted, our DRG analysis is based on the
full (100 percent) FY 1998 MedPAR file, which contains data from bills
received through March 31, 1999.
2. MDC 15 (Newborns and Other Neonates with Conditions Originating in
the Perinatal Period)
In the May 7, 1999 proposed rule, we noted that the following codes
in the newborn observation series are included in the allowable
secondary diagnoses under DRG 391 (Normal Newborn):
V29.0, Observation for suspected infectious disease
V29.1, Observation for suspected neurological condition
V29.8, Observation for other specified suspected condition
V29.9, Observation for unspecified suspected condition
There are two related codes, however, that currently are not included
as allowable secondary diagnoses under DRG 391: V29.2 (Observation for
suspected respiratory condition) and V29.3 (Observation for suspected
genetic or metabolic condition). (In the proposed rule, we incorrectly
stated that V29.3 was titled "Observation for other genetic
problem.") Diagnosis codes V29.2 and V29.3 (as well as the other V29.x
codes noted above) are used to indicate that the newborn was suspected
of having an abnormal condition resulting from exposure from the mother
or the birth process, but is without signs or symptoms and, after
examination and observation, no abnormal condition is found to exist.
Currently, when either V29.2 or V29.3 is the only secondary diagnosis
for an otherwise healthy newborn, the case is assigned to DRG 390
(Neonate with Other Significant Problems). Based on a belief that the
presence of diagnosis code V29.2 or V29.3 should not exclude a newborn
from being classified as normal, we proposed to include diagnosis codes
V29.2 and V29.3 in the list of allowable secondary diagnoses under DRG
391 (Normal Newborn).
We received one comment on this proposal.
Comment: The commenter questioned whether any of the codes in the
V29 series should be assigned to DRG 391. The commenter believes that
the infants assigned to diagnosis code in the V29 series do not belong
in the same clinical group as "normal newborn." The commenter
recommended that, before moving codes V29.2 and V29.3 to DRG 391, we
should examine data such as the average length of stay for DRGs 390 and
391 and those cases coded with V29.x. Citing one hospital's experience,
the commenter noted that 2.7 percent of the cases in DRG 391 were
assigned a secondary diagnosis of V29.0 (Observation for suspected
infectious disease). In addition, cases with secondary diagnosis codes
V29.1, V29.8, and V29.9 represented less than 1 percent each of all
cases in DRG 391. The commenter also reported that, for DRG 390, less
than 1 percent of cases were assigned a secondary diagnosis code of
V29.2 or V29.3. The commenter believes that the length of stay and
resource consumption for these cases should be compared to other cases
assigned to DRG 390 and DRG 391 to determine whether a separate DRG
should be created to adequately categorize these infants.
Response: The experience of the hospital reported by the commenter
indicates that newborn cases with a secondary diagnosis of V29.2 or
V29.3 represent a small percentage of newborn cases. Medicare data do
not contain enough data on newborns to verify this.
In the FY 1998 MedPAR file, there are only nine cases assigned to
DRG 390 and none to DRG 391. In fact, in FY 1998, there were only 18
cases assigned to all of MDC 15. Because of the lack of data on
newborns in the Medicare claims file, the relative weights and lengths
of stay for the DRGs in MDC 15 are based on non-Medicare data collected
from 19 States. (See the September 1, 1995 final rule (60 FR 45781) for
a detailed discussion of this policy.) Therefore, we rely closely on
experts outside of HCFA when we make any changes in MDC 15. We had
received information before publication of the proposed rule suggesting
that V29.2 and V29.3 should be included with the other V29.x codes in
DRG 391. After verifying with our medical consultants that this
information was clinically accurate, we proposed to make this DRG
classification change. We do note that the average lengths of stay for
DRG 390 and 391 do not differ dramatically (3.4 and 3.1 days,
respectively). However, the relative weight for DRG 390 is
significantly higher than that for DRG 391 (1.5908 and 0.1516,
respectively). Thus, we believe the amount of resource use devoted to
newborns in DRG 390 is not
[[Page 41493]]
connected to the amount of time spent in the hospital.
The commenter did not provide any length of stay or resource use
data nor did the commenter provide any reason that codes V29.2 or V29.3
should be treated differently than the other codes in category V29.x.
We believe that DRG 390, as its title indicates, should be used to
classify newborns with significant problems. Newborns who exhibit no
signs or symptoms and are merely evaluated or observed for a suspected
condition that is ruled out should not be classified with newborns who
have significant problems that require treatment.
We note that DRG 391 includes newborns who have minor problems or
conditions that require treatment. For example, some newborns with
jaundice, newborns with scalp injuries or mild birth asphyxia, and
newborns with minor skin infections are all classified to DRG 391.
Thus, that DRG does contain newborn cases for which some medical
treatment must be provided. We believe that including newborns observed
for suspected respiratory, genetic, or metabolic conditions in DRG 391
is clinically appropriate. Therefore, as proposed, we will include
V29.2 and V29.3 as allowable secondary diagnoses under DRG 391, as are
the rest of the codes in that category.
3. MDC 19 (Mental Diseases and Disorders)
We proposed to revise the title of DRG 425, "Acute Adjustment
Reaction and Disturbances of Psychosocial Dysfunction" under MDC 19 to
read "Acute Adjustment Reaction and Psychosocial Dysfunction."
Correspondents had stated that the terms "disturbances" and
"dysfunction" were redundant since the terms have similar meanings.
We received one comment in support of this revision. Therefore, we
are adopting this proposed revision as final.
4. MDC 22 (Burns)
In the July 31, 1998 final rule (63 FR 40957), we implemented an
extensive redesign of the DRGs for burns to more appropriately capture
the variation in resource use associated with different classes of burn
patients. After these DRGs went into effect on October 1, 1998, we were
contacted by several hospitals about our inclusion of the fifth digit
"0" on codes 948.10 through 948.90 to capture cases of full-thickness
burns. These hospitals stated that codes in category 948 with a fifth
digit of "0" should not be assigned to DRGs 506 through 509 as full-
thickness burns since not all of these cases will have a full-thickness
(third degree) burn. The fifth digit "0" can capture cases in which
there actually is no third degree burn. The hospitals requested that we
consider removing from the full-thickness burn DRGs 506 through 509 all
codes in the 948 category with a fifth digit of "0" as follows:
948.00 Body burn involving less than 10 percent of body surface, third
degree less than 10 percent or unspecified
948.10 Body burn involving 10 to 19 percent of body surface, third
degree less than 10 percent or unspecified
948.20 Body burn involving 20 to 29 percent of body surface, third
degree less than 10 percent or unspecified
948.30 Body burn involving 30 to 39 percent of body surface, third
degree less than 10 percent or unspecified
948.40 Body burn involving 40 to 49 percent of body surface, third
degree less than 10 percent or unspecified
948.50 Body burn involving 50 to 59 percent of body surface, third
degree less than 10 percent or unspecified
948.60 Body burn involving 60 to 69 percent of body surface, third
degree less than 10 percent or unspecified
948.70 Body burn involving 70 to 79 percent of body surface, third
degree less than 10 percent or unspecified
948.80 Body burn involving 80 to 89 percent of body surface, third
degree less than 10 percent or unspecified
948.90 Body burn involving 90 percent or more of body surface, third
degree less than 10 percent or unspecified.
We agreed with the hospitals and proposed that the codes listed
above be removed from DRGs 506 through 509 and added to DRG 510
(Nonextensive Burns with CC or Significant Trauma) and DRG 511
(Nonextensive Burns without CC or Significant Trauma). Hospitals have
been instructed in Coding Clinic for ICD-9-CM, Fourth Quarter, 1994
(pages 22 through 28) to code the site of the burn first (codes 940
through 947), when known. Codes from category 948 may be used as a
principal diagnosis only when the site of the burn is not specified.
Category 948 is used as an additional code to provide information on
the percentage of total body that is burned or to show the percentage
of burn that was third degree. When hospitals report codes properly,
full-thickness burns would be assigned to a code for burn of the
specific site (940 through 947). This site code also shows the degree
of the burn. Furthermore, for those rare cases in which the site is not
provided, but it is known that 10 percent or more of the body has a
third degree burn, hospitals may report this information through the
use of category 948 with a fifth digit of "1" through "9." All of
these cases would continue to be classified as full-thickness burns in
DRGs 506 through 509. Therefore, the proposed removal of codes 948.1
through 948.9 with a fifth digit of "0" would not prevent cases from
being assigned to one of the full-thickness DRGs when there is a third
degree burn and the case is correctly coded.
Comment: One commenter stated that while it is true that codes in
category 948 with a fifth digit of "0" may be assigned when there is
no third degree burn, fifth digit "0" is also used to report cases
that have a body surface of 1 to 9 percent involved in third degree
burns. The commenter suggested that consideration be given to these
cases as the presence of a third degree burn represents additional risk
to the patient.
Response: We agree with the commenter that the presence of third
degree burns represents additional risk to the patient and may result
in a higher resource use. More accurately capturing this fact was one
of the primary purposes in revising the burn DRGs in FY 1999. However,
as the commenter noted, in category 948, the fifth digit of "0"
includes cases with no third degree burns as well as third degree burns
involving 1 to 9 percent of the body surface. It is precisely because
many of the cases coded in 948 with a "0" fifth digit have no third
degree burns that we believe it is not appropriate to include these
codes in DRGs 506 through 509. As stated above, hospitals have been
instructed to code the site of the burn first (codes 940 through 947),
when known. These codes capture information on the site of the burn as
well as whether the burn is a third degree burn. Therefore, by using
the more precise codes in the 940 through 947 series, hospitals will be
appropriately assigning cases with minor third degree burns to DRGs 506
through 509.
We are adopting as final our proposal to remove codes in the 948
category with a fifth digit of "0" from the list of full-thickness
burns.
5. Surgical Hierarchies
Some inpatient stays entail multiple surgical procedures, each one
of which, occurring by itself, could result in
[[Page 41494]]
assignment of the case to a different DRG within the MDC to which the
principal diagnosis is assigned. It is, therefore, necessary to have a
decision rule by which these cases are assigned to a single DRG. The
surgical hierarchy, an ordering of surgical classes from most to least
resource intensive, performs that function. Its application ensures
that cases involving multiple surgical procedures are assigned to the
DRG associated with the most resource-intensive surgical class.
Because the relative resource intensity of surgical classes can
shift as a function of DRG reclassification and recalibration, we
reviewed the surgical hierarchy of each MDC, as we have for previous
reclassifications, to determine if the ordering of classes coincided
with the intensity of resource utilization, as measured by the same
billing data used to compute the DRG relative weights.
A surgical class can be composed of one or more DRGs. For example,
in MDC 5, the surgical class "heart transplant" consists of a single
DRG (DRG 103), and the class "major cardiovascular procedures"
consists of two DRGs (DRGs 110 and 111). Consequently, in many cases,
the surgical hierarchy has an impact on more than one DRG. The
methodology for determining the most resource-intensive surgical class
involves weighting each DRG for frequency to determine the average
resources for each surgical class. For example, assume surgical class A
includes DRGs 1 and 2 and surgical class B includes DRGs 3, 4, and 5.
Assume also that the average charge of DRG 1 is higher than that of DRG
3, but the average charges of DRGs 4 and 5 are higher than the average
charge of DRG 2. To determine whether surgical class A should be higher
or lower than surgical class B in the surgical hierarchy, we would
weight the average charge of each DRG by frequency (that is, by the
number of cases in the DRG) to determine average resource consumption
for the surgical class. The surgical classes would then be ordered from
the class with the highest average resource utilization to that with
the lowest, with the exception of "other OR procedures" as discussed
below.
This methodology may occasionally result in a case involving
multiple procedures being assigned to the lower-weighted DRG (in the
highest, most resource-intensive surgical class) of the available
alternatives. However, given that the logic underlying the surgical
hierarchy provides that the GROUPER searches for the procedure in the
most resource-intensive surgical class, this result is unavoidable.
We note that, notwithstanding the foregoing discussion, there are a
few instances when a surgical class with a lower average relative
weight is ordered above a surgical class with a higher average relative
weight. For example, the "other OR procedures" surgical class is
uniformly ordered last in the surgical hierarchy of each MDC in which
it occurs, regardless of the fact that the relative weight for the DRG
or DRGs in that surgical class may be higher than that for other
surgical classes in the MDC. The "other OR procedures" class is a
group of procedures that are least likely to be related to the
diagnoses in the MDC but are occasionally performed on patients with
these diagnoses. Therefore, these procedures should be considered only
if no other procedure more closely related to the diagnoses in the MDC
has been performed.
A second example occurs when the difference between the average
weights for two surgical classes is very small. We have found that
small differences generally do not warrant reordering of the hierarchy
since, by virtue of the hierarchy change, the relative weights are
likely to shift such that the higher-ordered surgical class has a lower
average weight than the class ordered below it.
Based on the preliminary recalibration of the DRGs, we proposed to
modify the surgical hierarchy as set forth below. However, in
developing the proposed rule, we were unable to test the effects of
proposed revisions to the surgical hierarchy and to reflect these
changes in the proposed relative weights due to the unavailability of
revised GROUPER software at the time the proposed rule was prepared.
Rather, we simulated most major classification changes to approximate
the placement of cases under the proposed reclassification and then
determined the average charge for each DRG. These average charges then
serve as our best estimate of relative resource use for each surgical
class. We tested the proposed surgical hierarchy changes after the
revised GROUPER was received. The final changes in the DRG relative
weights are reflected in this final rule.
We proposed to revise the surgical hierarchy for the Pre-MDC DRGs
and MDC 3 (Diseases and Disorders of the Ear, Nose, Mouth and Throat)
as follows:
<bullet> In the Pre-MDC DRGs, we proposed to reorder Lung
Transplant (DRG 495) above Bone Marrow Transplant (DRG 481).
<bullet> In MDC 3, we proposed to reorder Tonsil and Adenoid
Procedure Except Tonsillectomy and/or Adenoidectomy Only (DRGs 57 and
58) above Cleft Lip and Palate Repair (DRG 52).
We received two comments in support of the two surgical hierarchy
proposals. In addition, based on a test of the proposed revisions using
the most recent MedPAR file and the revised GROUPER software, we have
found that the revisions are still supported by the data and no
additional changes are indicated. Therefore, we are incorporating the
proposed revisions and reorders in this final rule.
6. Refinement of Complications and Comorbidities (CC) List
There is a standard list of diagnoses that are considered CCs. We
developed this list using physician panels to include those diagnoses
that, when present as a secondary condition, would be considered a
substantial complication or comorbidity. In previous years, we have
made changes to the standard list of CCs, either by adding new CCs or
by deleting CCs already on the list. In the May 7, 1999 proposed rule,
we did not propose to delete any of the diagnosis codes on the CC list.
In the September 1, 1987 final notice concerning changes to the DRG
classification system (52 FR 33143), we modified the GROUPER logic so
that certain diagnoses included on the standard list of CCs would not
be considered a valid CC in combination with a particular principal
diagnosis. Thus, we created the CC Exclusions List. We made these
changes to preclude coding of CCs for closely related conditions, to
preclude duplicative coding or inconsistent coding from being treated
as CCs, and to ensure that cases are appropriately classified between
the complicated and uncomplicated DRGs in a pair.
In the May 19, 1987 proposed notice concerning changes to the DRG
classification system (52 FR 18877), we explained that the excluded
secondary diagnoses were established using the following five
principles:
<bullet> Chronic and acute manifestations of the same condition
should not be considered CCs for one another (as subsequently corrected
in the September 1, 1987 final notice (52 FR 33154)).
<bullet> Specific and nonspecific (that is, not otherwise specified
(NOS)) diagnosis codes for a condition should not be considered CCs for
one another.
<bullet> Conditions that may not co-exist, such as partial/total,
unilateral/bilateral, obstructed/unobstructed, and benign/malignant,
should not be considered CCs for one another.
[[Page 41495]]
<bullet> The same condition in anatomically proximal sites should
not be considered CCs for one another.
<bullet> Closely related conditions should not be considered CCs
for one another.
The creation of the CC Exclusions List was a major project
involving hundreds of codes. The FY 1988 revisions were intended to be
only a first step toward refinement of the CC list in that the criteria
used for eliminating certain diagnoses from consideration as CCs were
intended to identify only the most obvious diagnoses that should not be
considered complications or comorbidities of another diagnosis. For
that reason, and in light of comments and questions on the CC list, we
have continued to review the remaining CCs to identify additional
exclusions and to remove diagnoses from the master list that have been
shown not to meet the definition of a CC. (See the September 30, 1988
final rule for the revision made for the discharges occurring in FY
1989 (53 FR 38485); the September 1, 1989 final rule for the FY 1990
revision (54 FR 36552); the September 4, 1990 final rule for the FY
1991 revision (55 FR 36126); the August 30, 1991 final rule for the FY
1992 revision (56 FR 43209); the September 1, 1992 final rule for the
FY 1993 revision (57 FR 39753); the September 1, 1993 final rule for
the FY 1994 revisions (58 FR 46278); the September 1, 1994 final rule
for the FY 1995 revisions (59 FR 45334); the September 1, 1995 final
rule for the FY 1996 revisions (60 FR 45782); the August 30, 1996 final
rule for the FY 1997 revisions (61 FR 46171); the August 29, 1997 final
rule for the FY 1998 revisions (62 FR 45966); and the July 31, 1998
final rule for the FY 1999 revisions (63 FR 40954).) In the May 7, 1999
proposed rule, we did not propose to add or delete any codes from the
CC list.
In addition, because we are not making changes to the ICD-9-CM
codes for FY 2000, we are not modifying the current list for new or
deleted codes. Therefore, there are no revisions to the CC Exclusions
List for FY 2000.
7. Review of Procedure Codes in DRGs 468, 476, and 477
Each year, we review cases assigned to DRG 468 (Extensive OR
Procedure Unrelated to Principal Diagnosis), DRG 476 (Prostatic OR
Procedure Unrelated to Principal Diagnosis), and DRG 477 (Nonextensive
OR Procedure Unrelated to Principal Diagnosis) in order to determine
whether it would be appropriate to change the procedures assigned among
these DRGs.
DRGs 468, 476, and 477 are reserved for those cases in which none
of the OR procedures performed is related to the principal diagnosis.
These DRGs are intended to capture atypical cases, that is, those cases
that do not occur with sufficient frequency to represent a distinct,
recognizable clinical group. DRG 476 is assigned to those discharges in
which one or more of the following prostatic procedures are performed
and are unrelated to the principal diagnosis:
60.0 Incision of prostate
60.12 Open biopsy of prostate
60.15 Biopsy of periprostatic tissue
60.18 Other diagnostic procedures on prostate and periprostatic tissue
60.21 Transurethral prostatectomy
60.29 Other transurethral prostatectomy
60.61 Local excision of lesion of prostate
60.69 Prostatectomy NEC
60.81 Incision of periprostatic tissue
60.82 Excision of periprostatic tissue
60.93 Repair of prostate
60.94 Control of (postoperative) hemorrhage of prostate
60.95 Transurethral balloon dilation of the prostatic urethra
60.99 Other operations on prostate
All remaining OR procedures are assigned to DRGs 468 and 477, with
DRG 477 assigned to those discharges in which the only procedures
performed are nonextensive procedures that are unrelated to the
principal diagnosis. The original list of the ICD-9-CM procedure codes
for the procedures we consider nonextensive procedures, if performed
with an unrelated principal diagnosis, was published in Table 6C in
section IV of the Addendum to the September 30, 1988 final rule (53 FR
38591). As part of the final rules published on September 4, 1990,
August 30, 1991, September 1, 1992, September 1, 1993, September 1,
1994, September 1, 1995, August 30, 1996, and August 29, 1997, we moved
several other procedures from DRG 468 to 477, and some procedures from
DRG 477 to 468. (See 55 FR 36135, 56 FR 43212, 57 FR 23625, 58 FR
46279, 59 FR 45336, 60 FR 45783, 61 FR 46173, and 62 FR 45981,
respectively.) No procedures were moved in FY 1999, as noted in the
July 31, 1998 final rule (63 FR 40962).
a. Adding Procedure Codes to MDCs
We annually conduct a review of procedures producing DRG 468 or 477
assignments on the basis of volume of cases in these DRGs with each
procedure. Our medical consultants then identify those procedures
occurring in conjunction with certain principal diagnoses with
sufficient frequency to justify adding them to one of the surgical DRGs
for the MDC in which the diagnosis falls. Based on this year's review,
we identified several procedures that we proposed to move to surgical
DRGs for additional MDCs so that they are not assigned to DRG 468. We
did not identify any necessary changes in procedures under DRG 477 and,
therefore, did not propose to move any procedures from DRG 477 to one
of the surgical DRGs.
First, we proposed to move three codes from DRG 468 to MDC 1
(Diseases and Disorders of the Nervous System), all of which would be
assigned to DRGs 7 and 8 (Peripheral and Cranial Nerve and Other
Nervous System Procedure).\1\ Procedure code 38.7 (Interruption of the
vena cava) is sometimes performed in conjunction with treatment for the
principal diagnosis 434.11 (Cerebral embolism with infarction), which
is assigned to MDC 1. Our medical advisors believe that procedure code
38.7 is appropriately performed for some neurological conditions such
as a cerebral embolism with infarction. Because the current DRG
configuration does not allow this assignment, we proposed to add
procedure code 38.7 to DRGs 7 and 8.
---------------------------------------------------------------------------
\1\ A single title combined with two DRG numbers is used to
signify pairs. Generally, the first DRG is for cases with CC and the
second DRG is for cases without CC. If a third number is included,
it represents cases with patients who are age 0-17. Occasionally, a
pair of DRGs is split between age >17 and age 0-17.
---------------------------------------------------------------------------
Second, we proposed that procedure codes 83.92 (Insertion or
replacement of skeletal muscle stimulator) and 83.93 (Removal of
skeletal muscle stimulator) both be categorized with other procedures
on the nervous system. These procedures can be performed on patients
with a principal diagnosis in MDC 1, such as 344.00 (Quadriplegia
unspecified) or 344.31 (Monoplegia of lower limb, affecting dominant
side). Therefore, these two codes would also be assigned to DRGs 7 and
8.
Third, procedure code 39.50 (Angioplasty or atherectomy of
noncoronary vessel) is not currently assigned to MDC 4 (Diseases and
Disorders of the Respiratory System). This procedure is performed for
patients who develop pulmonary embolism. The principal diagnosis for
pulmonary embolism is in MDC 4, and, to increase clinical coherence, we
proposed to add procedure code 39.50 to that MDC in DRGs 76 and 77
(Other Respiratory System OR Procedures).
Fourth, insertion of totally implantable infusion pump (procedure
code 86.06) is not assigned to MDC 5 (Diseases and Disorders of the
Circulatory System) in the current DRG configuration. Infusion pumps
should
[[Page 41496]]
be assigned to all MDCs in which subcutaneous insertion of the pump is
appropriate. Procedure code 86.06 may be performed on patients with a
principal diagnosis in MDC 5 such as 451.83 (Phlebitis and
thrombophlebitis of the deep veins of other extremities). Therefore, we
proposed to add procedure code 86.06 to DRG 120 (Other Circulatory
System OR Procedures) in MDC 5.
We received two comments on these MDC and DRG assignments, both of
which concurred with our proposed changes. Therefore, we are adopting
them as final.
b. Reassignment of Procedures Among DRGs 468, 476, and 477
We also reviewed the list of procedures that produce assignments to
DRGs 468, 476, and 477 to ascertain if any of those procedures should
be moved from one of these DRGs to another based on average charges and
length of stay. Generally, we move only those procedures for which we
have an adequate number of discharges to analyze the data. Based on our
review this year, we did not propose to move any procedures from DRG
468 to DRGs 476 or 477, from DRG 476 to DRGs 468 or 477, or from DRG
477 to DRGS 468 or 476.
8. Changes to the ICD-9-CM Coding System
As described in section II.B.1 of this preamble, the ICD-9-CM is a
coding system that is used for the reporting of diagnoses and
procedures performed on a patient. In September 1985, the ICD-9-CM
Coordination and Maintenance Committee was formed. This is a Federal
interdepartmental committee, co-chaired by the National Center for
Health Statistics (NCHS) and HCFA, that is charged with the mission of
maintaining and updating the ICD-9-CM system. That mission includes
approving coding changes, and developing errata, addenda, and other
modifications to the ICD-9-CM to reflect newly developed procedures and
technologies and newly identified diseases. The Committee is also
responsible for promoting the use of Federal and non-Federal
educational programs and other communication techniques with a view
toward standardizing coding applications and upgrading the quality of
the classification system.
The NCHS has lead responsibility for the ICD-9-CM diagnosis codes
included in the Tabular List and Alphabetic Index for Diseases, while
HCFA has lead responsibility for the ICD-9-CM procedure codes included
in the Tabular List and Alphabetic Index for Procedures.
The Committee encourages participation in the above process by
health-related organizations. In this regard, the Committee holds
public meetings for discussion of educational issues and proposed
coding changes. These meetings provide an opportunity for
representatives of recognized organizations in the coding field, such
as the American Health Information Management Association (AHIMA)
(formerly American Medical Record Association (AMRA)), the American
Hospital Association (AHA), and various physician specialty groups as
well as physicians, medical record administrators, health information
management professionals, and other members of the public, to
contribute ideas on coding matters. After considering the opinions
expressed at the public meetings and in writing, the Committee
formulates recommendations, which then must be approved by the
agencies.
The Committee presented proposals for coding changes for FY 2000 at
public meetings held on June 4 and November 2, 1998. Even though the
Committee conducted public meetings and considered approval of coding
changes for FY 2000 implementation, we are not implementing any changes
to ICD-9-CM codes for FE 2000. We have undertaken, and continue to
undertake, major efforts to ensure that all of the Medicare computer
systems are ready to function on January 1, 2000. If we were to make
system changes to capture additions, deletions, and modifications to
ICD-9-CM codes for FY 2000, we would endanger the functioning of the
Medicare computer systems, and, specifically, we might compromise our
ability to process hospital bills. Therefore, the code proposals
presented at the public meetings held on June 4 and November 2, 1998,
that (if approved) ordinarily would have been included as new codes for
October 1, 1999, are not included in this final rule. These code
changes to ICD-9-CM will be considered for inclusion in the annual
update for FY 2001. The initial meeting for consideration of coding
changes for implementation in FY 2001 was held on May 13, 1999.
Copies of the minutes of the 1998 meetings and the May 13, 1999
meeting can be obtained from the HCFA Home Page at http://www.hcfa.gov/
medicare/icd9cm.htm or from http://www.hcfa.gov/events, click on
"meetings and workshops" link, and then click on "reports of the
ICD-9-CM coordination and maintenance committee" link. Paper copies of
these minutes are no longer available and the mailing list has been
discontinued. We encourage commenters to address suggestions on coding
issues involving diagnosis codes to: Donna Pickett, Co-Chairperson;
ICD-9-CM Coordination and Maintenance Committee; NCHS; Room 1100; 6525
Belcrest Road; Hyattsville, Maryland 20782. Comments may be sent by E-
mail to dfp4@cdc.gov.
Questions and comments concerning the procedure codes should be
addressed to: Patricia E. Brooks, Co-Chairperson; ICD-9-CM Coordination
and Maintenance Committee; HCFA, Center for Health Plans and Providers,
Plan and Provider Purchasing Policy Group, Division of Acute Care; C4-
07-07; 7500 Security Boulevard; Baltimore, Maryland 21244-1850.
Comments may be sent by E-mail to pbrooks@hcfa.gov.
We received one comment in support of our decision not to update
ICD-9-CM codes given the magnitude of system changes needed during the
period leading up to the year 2000.
9. Other Issues
a. Implantation of Muscle Stimulator
In the July 31, 1998 final rule, we responded to a comment on the
DRG assignment for implantation of a muscle stimulator (63 FR 40964).
In that document, we stated that we would readdress this issue after
reviewing the FY 1998 MedPAR file.
There is concern in the manufacturing industry that the current DRG
assignment for the implantation of a muscle stimulator and the
associated tendon transfer for quadriplegics is inappropriate. When the
procedures are performed during two separate admissions, the tendon
transfer (procedure code 82.56 (Other hand tendon transfer or
transplantation)) is assigned to DRGs 7 and 8, and the insertion of the
muscle stimulator (procedure code 83.92 (Insertion or replacement of
skeletal muscle stimulator)) is assigned to DRG 468. However, when both
procedures are performed in the same admission, the case is assigned to
DRGs 7 and 8.
As discussed in section II.B.7.a of this preamble, in the May 7,
1999 proposed rule, we proposed to assign code 83.92 to DRGs 7 and 8 in
MDC 1. Therefore, if a case involves either procedure code 82.56 or
83.92, or both procedure codes, the case would be assigned to DRGs 7
and 8.
A presentation on one type of muscle stimulator was made by a
device manufacturer before the ICD-9-CM Coordination and Maintenance
Committee on November 2, 1998. The manufacturer strongly suggested that
a
[[Page 41497]]
new code assignment be made for the procedure for insertion of this
stimulator and that it be placed in category 04.9 (Other operations on
cranial and peripheral nerves). However, based on comments received by
the Committee, there was an overwhelming response from the coding
community that a new code should not be created. The commenters believe
that these codes (82.56 and 83.92) adequately described the procedures
since the patient receives a tendon transfer in addition to the
skeletal muscle stimulator insertion. This is done so that the
quadriplegic patient can achieve some hand grasping ability where there
was none before. Some quadriplegic patients receive the tendon transfer
on one admission and the stimulator insertion on a subsequent
admission. Others have both procedures performed on the same admission.
Since the tendon transfer and stimulator insertion are being performed
on quadriplegic patients, a condition found in MDC 1, we proposed to
add procedure codes 82.56 and 83.92 to DRGs 7 and 8. We did not receive
any comments on this proposal. Therefore, we are adopting it as final.
b. Pancreas Transplant
Through a Medicare Coverage Issues Manual revision (Transmittal No.
115, April 1999), HCFA announced that, effective July 1, 1999, Medicare
covers whole organ pancreas transplantation (procedure codes 52.80 or
52.83) if it is performed simultaneous with or after a kidney
transplant.
Pancreas transplantation is generally limited to those patients
with severe secondary complications of diabetes, including kidney
failure. However, pancreas transplantation is sometimes performed on
patients with labile diabetes and hypoglycemic unawareness.
Pancreas transplantation for diabetic patients who have not
experienced end-stage renal failure secondary to diabetes continue to
be excluded from coverage. Medicare also excludes coverage of
transplantation of partial pancreatic tissue or islet cells. Claims
processing instructions to intermediaries were contained in Program
Memorandum Transmittal No. A-99-16 (April 1999).
We received one comment regarding the coverage and claims
processing instructions for pancreas transplants.
Comment: The commenter requested clarification on the date of
coverage for services related to pancreas transplantation services
furnished on or after July 1, 1999. Specifically, the commenter asked
whether coverage is effective for admissions, discharges, or actual
transplant surgery on or after that date. In addition, the commenter
believes that if the resource use for a pancreas-kidney transplant is
significantly greater than for a kidney transplant alone, then a new
DRG should be created for the dual transplant. Finally, the commenter
was unsure how hospitals should report the organ acquisition costs
attributable to pancreas. Specifically, the commenter wanted to know if
the costs should be included, on the hospital cost report with the
kidney costs or whether a separate organ acquisition cost center will
be established for pancreas acquisition costs.
Response: As stated in Transmittal No. 115, coverage is effective
for dates of service on or after July 1, 1999. Therefore, any pancreas
transplant performed on or after July 1, 1999 is covered by Medicare if
all other qualifying criteria are met.
Under the current DRG classification, if a kidney transplant and a
pancreas transplant are performed simultaneously on a patient with
chronic renal failure secondary to diabetes with renal manifestations
(diagnosis codes 250.40 through 250.43), the case is assigned to DRG
302 (Kidney Transplant) in MDC 11 (Disease and Disorders of the Kidney
and Urinary Tract. If a pancreas transplant is performed following a
kidney transplant (that is, in a different hospital admission) on a
patient with chronic renal failure secondary to diabetes with renal
manifestations, the case is assigned to DRG 468 (Major OR Procedure
Unrelated to Principal Diagnosis) because pancreas transplant is not
assigned to MDC 11, the MDC to which a principal diagnosis of chronic
renal failure secondary to diabetes is assigned.
If a kidney and pancreas transplant are performed simultaneously or
if a pancreas transplant is performed following a kidney transplant, on
a patient with chronic renal failure secondary to diabetes with
ketoacidosis (diagnosis codes 250.10 through 250.13), diabetes with
hyperosmolarity (diagnosis codes 250.20 through 250.23), diabetes with
other coma (diagnosis codes 250.30 through 250.33), diabetes with other
specified manifestations (diagnosis codes 250.80 through 250.83), or
diabetes with unspecified complication (diagnosis codes 250.90 through
250.93), the case would be assigned to DRG 292 or 293 (Other Endocrine,
Nutritional and Metabolic OR Procedures) in MDC 10 (Endocrine,
Nutritional, and Metabolic Diseases and Disorders). As the commenter
notes, it is possible that the resource use for a pancreas-kidney
transplant or a pancreas-only transplant might be significantly
different from a kidney-only transplant. We intend to review the
Medicare data in our FY 1999 MedPAR file in order to analyze whether we
should either reassign these transplants to a different DRG or create a
new DRG. We will announce any proposals on that issue in the FY 2001
proposed rule, which will be published in the Spring of 2000.
A separate organ acquisition cost center has been established for
pancreas transplantation. The Medicare cost report will include a
separate line to account for pancreas transplantation costs. In
addition, in this final rule, we are making a conforming change to '
412.2(e)(4) to include pancreas in the list of organ acquisition costs
that are paid on a reasonable cost basis.
c. Immunotherapy
Effective October 1, 1994, procedure code 99.28 (Injection or
infusion of biological response modifier [BRM] as an antineoplastic
agent) was created. This procedure is also known as BRM therapy or
immunotherapy. At that time, we designated the code as a Anon-OR@ code
that does not affect DRG assignment.
Comment: One commenter, a manufacturer of a biologic response
modifier, requested that we create a new DRG for BRM therapy or assign
cases in which BRM therapy is performed to an existing DRG with a high
relative weight. The commenter suggested that DRG 403 (Lymphoma and
Non-Acute Leukemia with CC) would be an appropriate DRG. The
manufacturer=s particular drug is used in the treatment of metastatic
renal cell carcinoma and metastatic melanoma.
Response: Using the 100 percent FY 1998 MedPAR file that contains
bills through December 31, 1998, we performed an analysis of the cases
for which procedure code 99.28 was reported. Based on the commenter's
request, for purposes of this analysis we examined cases only for
hospitals that use the particular drug manufactured by the commenter.
We identified 121 cases in 19 DRGs in 9 MDCs. No more than 31 cases
were assigned to any one particular DRG. Of the 121 cases identified,
31 cases were assigned to DRG 318 (Kidney and Urinary Tract Neoplasms
with CC) and 30 of the cases were assigned to DRG 82 (Respiratory
Neoplasms). There was a wide range of charges (between approximately
$1,300 and $125,000 per case) associated with this therapy. The average
length of stay was approximately 5 days. Due to the limited number of
cases that were
[[Page 41498]]
distributed throughout 19 DRGs and the variation of charges, we
concluded that it would be inappropriate to classify these cases into a
single DRG. Because of the numerous principal diagnoses reported with
BRM therapy, a single DRG for procedure code 99.28 would need to be
placed in the pre-MDC DRG category. Similarly, it would be impossible
to classify these cases into DRG 403 because only a few cases were
coded with a principal diagnosis assigned to MDC 17 (Myeloproliferative
Diseases and Disorders, and Poorly Differentiated Neoplasms), the MDC
that includes DRG 403. Finally, the variation in charges reflected in
the 121 cases do not persuade us that there is an analytic basis for
combining these cases into one DRG. Using the FY 1999 MedPAR, we intend
to do a full analysis of these cases, which we will discuss in the FY
2001 proposed rule.
As a final note, any DRG classification change for procedure code
99.28 must be appropriate for all cases that receive BRM therapy, not
just those that use the commenter's drug. Even if we might consider
such an assignment appropriate, we have no way to distinguish between
different drug therapies assigned to the same procedure code. The FY
1998 MedPAR file we analyzed contained 930 cases with procedure code
99.28. These 930 cases were assigned to 18 MDCs.
d. Heart Assist Devices
Effective May 5, 1997, we revised Medicare coverage of heart assist
devices to allow coverage of a ventricular assist device used for
support of blood circulation postcardiotomy if certain conditions were
met. In the August 29, 1997 final rule (62 FR 45973), we moved
procedure code 37.66 (Implant of an implantable pulsatile heart assist
device) from DRGs 110 and 111 (Major Cardiovascular Procedures) to DRG
108 (Other Cardiothoracic Procedures) to improve payment for these
procedures. In the July 31, 1998 final rule (63 FR 40956), in a further
effort to improve payment for these cases, we moved procedure code
37.66 to DRGs 104 and 105 (Cardiac Valve and Other Major Cardiothoracic
Procedures).
We received one comment regarding the DRG classification of
procedure code 37.66.
Comment: The commenter recommended that we either reclassify heart
assist device cases to DRG 103 (Heart Transplant) or create a new DRG
specifically for this device and technology. The commenter cited a
discrepancy between the cost of the device implantation and payment for
DRGs 104 and 105 as the basis for these recommendations.
Response: We refer the reader to our response to a similar comment
in the August 29, 1997 final rule (62 FR 45967). We note that the FY
1998 MedPAR file has 22 cases coded with procedure code 37.66. Of these
22 cases, 8 cases were assigned to DRG 103 (Heart Transplant) and 4
cases to DRG 483 (Tracheostomy Except for Face, Mouth, and Neck
Diagnoses). The remaining 10 cases would have been assigned to DRGs 104
and 105 under the current classification.
C. Recalibration of DRG Weights
We proposed to use the same basic methodology for the FY 2000
recalibration as we did for FY 1999. (See the July 31, 1998 final rule
(63 FR 40965).) That is, we recalibrated the weights based on charge
data for Medicare discharges. However, we used the most current charge
information available, the FY 1998 MedPAR file. (For the FY 1999
recalibration, we used the FY 1997 MedPAR file.) The MedPAR file is
based on fully coded diagnostic and surgical procedure data for all
Medicare inpatient hospital bills.
The final recalibrated DRG relative weights are constructed from FY
1998 MedPAR data, based on bills received by HCFA through March 1999,
from all hospitals subject to the prospective payment system and short-
term acute care hospitals in waiver States. The FY 1998 MedPAR file
includes data for approximately 11.3 million Medicare discharges.
The methodology used to calculate the DRG relative weights from the
FY 1998 MedPAR file is as follows:
<bullet> All the claims were regrouped using the DRG classification
revisions discussed above in section II.B of this preamble.
<bullet> Charges were standardized to remove the effects of
differences in area wage levels, indirect medical education (IME) and
disproportionate share hospital (DSH) payments, and, for hospitals in
Alaska and Hawaii, the applicable cost-of-living adjustment.
<bullet> The average standardized charge per DRG was calculated by
summing the standardized charges for all cases in the DRG and dividing
that amount by the number of cases classified in the DRG.
<bullet> We then eliminated statistical outliers, using the same
criteria as were used in computing the current weights--that is, all
cases that are outside of 3.0 standard deviations from the mean of the
log distribution of both the charges per case and the charges per day
for each DRG.
<bullet> The average charge for each DRG was then recomputed
(excluding the statistical outliers) and divided by the national
average standardized charge per case to determine the relative weight.
A transfer case is counted as a fraction of a case based on the ratio
of its length of stay to the geometric mean length of stay of the cases
assigned to the DRG. That is, a 5-day length of stay transfer case
assigned to a DRG with a geometric mean length of stay of 10 days is
counted as 0.5 of a total case.
<bullet> We established the relative weight for heart and heart-
lung, liver, and lung transplants (DRGs 103, 480, and 495) in a manner
consistent with the methodology for all other DRGs except that the
transplant cases that were used to establish the weights were limited
to those Medicare-approved heart, heart-lung, liver, and lung
transplant centers that have cases in the FY 1998 MedPAR file.
(Medicare coverage for heart, heart-lung, liver, and lung transplants
is limited to those facilities that have received approval from HCFA as
transplant centers.)
<bullet> Acquisition costs for kidney, heart, heart-lung, liver,
and lung transplants continue to be paid on a reasonable cost basis.
Unlike other excluded costs, the acquisition costs are concentrated in
specific DRGs (DRG 302 (Kidney Transplant); DRG 103 (Heart Transplant
for Heart and Heart-Lung Transplants); DRG 480 (Liver Transplant); and
DRG 495 (Lung Transplant)). Because these costs are paid separately
from the prospective payment rate, it is necessary to make an
adjustment to prevent the relative weights for these DRGs from
including the effect of the acquisition costs. Therefore, we subtracted
the acquisition charges from the total charges on each transplant bill
that showed acquisition charges before computing the average charge for
the DRG and before eliminating statistical outliers.
When we recalibrated the DRG weights for previous years, we set a
threshold of 10 cases as the minimum number of cases required to
compute a reasonable weight. We used that same case threshold in
recalibrating the DRG weights for FY 2000. Using the FY 1998 MedPAR
data set, there are 40 DRGs that contain fewer than 10 cases. We
computed the weights for the 40 low-volume DRGs by adjusting the FY
1999 weights of these DRGs by the percentage change in the average
weight of the cases in the other DRGs.
The weights developed according to the methodology described above,
using the final DRG classification changes, result in an average case
weight that is different from the average case weight
[[Page 41499]]
before recalibration. Therefore, the new weights are normalized by an
adjustment factor, so that the average case weight after recalibration
is equal to the average case weight before recalibration. This
adjustment is intended to ensure that recalibration by itself neither
increases nor decreases total payments under the prospective payment
system.
Section 1886(d)(4)(C)(iii) of the Act requires that, beginning with
FY 1991, reclassification and recalibration changes be made in a manner
that ensures that the aggregate payments are neither greater than nor
less than the aggregate payments that would have been made without the
changes. Although normalization is intended to achieve this effect,
equating the average case weight after recalibration to the average
case weight before recalibration does not necessarily achieve budget
neutrality with respect to aggregate payments to hospitals because
payment to hospitals is affected by factors other than average case
weight. Therefore, as we have done in past years and as discussed in
section II.A.4.b of the Addendum to this final rule, we make a budget
neutrality adjustment to ensure that the requirement of section
1886(d)(4)(C)(iii) of the Act is met.
D. Use of Non-MedPAR Data for Reclassification and Recalibration of the
DRGs
1. Introduction
As in past years, in the DRG reclassification and recalibration
process for the FY 2000 final rule, we used the MedPAR file, which
consists of data for approximately 11.3 million Medicare discharges. In
the FY 1999 final rulemaking process, we used the FY 1997 MedPAR file
to recalibrate DRGs and evaluate possible changes to DRG
classifications; for this FY 2000 final rule, we used the FY 1998
MedPAR file. The Conference Report that accompanied the Balanced Budget
Act of 1997 stated that "in order to ensure that Medicare
beneficiaries have access to innovative new drug therapies, the
conferees believe that HCFA should consider, to the extent feasible,
reliable, validated data other than Medicare Provider Analysis and
Review (MedPAR) data in annually recalibrating and reclassifying the
DRGs" (H.R. Conf. Rep. No. 105-217 at 734 (1997)).
Consistent with that language, we considered non-MedPAR data in the
rulemaking process for FY 1999 and in developing the May 7, 1999
proposed rule for FY 2000. We received non-MedPAR data from entities on
behalf of the manufacturer of a specific drug, platelet inhibitors. The
manufacturer was seeking to obtain a new DRG assignment for cases
involving platelet inhibitors. The non-MedPAR data purported to show
cases involving platelet inhibitors. As discussed in the proposed rule,
we concluded it was not feasible to use the non-MedPAR data submitted
to us because, among other things, we did not have information to
verify that the cases actually involved the drug, nor did we have
information to verify that the cases reflected a representative sample
(and did not simply reflect high cost cases).
Effective October 1, 1998, we implemented a code for platelet
inhibitors, but until we receive bills for Medicare discharges
occurring during FY 1999, the MedPAR data do not enable us to
distinguish between cases with platelet inhibitors and cases without
platelet inhibitors (63 FR 40963). Representatives of the
pharmaceutical company first presented us with non-MedPAR data during
the rulemaking process for FY 1999. The data were compiled by a health
information company, and purported to show, for cases from a sample of
hospitals, the average standardized charges (as calculated by the
health information company) for different classes of patients.
In the FY 1999 final rule, we stated a number of reasons for
rejecting the non-MedPAR data we had received. Basically, the data were
unreliable and the data's use was not feasible--the data could not be
validated or verified.
After publication of the July 31, 1998 final rule, we met and
corresponded on several occasions with the manufacturers, vendors, and
legal representatives of the pharmaceutical company in an effort to
resolve data issues. We reiterated that, among other things, we needed
to know for each case the hospital that furnished the services. Before
the publication of the proposed rule, we had not received information
necessary to validate the data or the data's representativeness.
We remain open to considering non-MedPAR data in the DRG
reclassification and recalibration process, but, consistent with the
Conference Report, as well as our longstanding policies, the data must
be "reliable" and "validated." The July 31, 1998 final rule
reflected the major factors that we consider in evaluating whether data
are feasible, reliable, and validated; however, because we believed it
might be useful, we discussed these issues in much greater detail in
the May 7, 1999 proposed rule.
2. The DRG Reclassification and Recalibration Process
In order to understand whether it is feasible to use non-MedPAR
data, and whether the data are reliable and validated, it is critical
to understand the DRG recalibration and reclassification process. As
described earlier, one of the first steps in the annual DRG
recalibration is that the Medicare hospital inpatient claims (in the
MedPAR file) from the preceding Federal fiscal year are classified
using the DRG classification system (proposed or final) for the
upcoming year. Cases are classified into DRGs based on the principal
diagnosis, up to eight additional diagnoses, and up to six procedures
performed during the stay, as well as age, sex, and discharge status of
the patient. Each case is classified into one and only one DRG.
As the term suggests, the relative weight for each DRG reflects
relative resource use. The recalibration process requires data that
enable us to compare resource use across DRGs. As explained earlier, as
part of the recalibration process, we standardize the charges reflected
on each Medicare claim to remove the effects of area wage differences,
the IME adjustment, and the DSH adjustment; in order to standardize
charges, we need to know which hospital furnished the service. For each
DRG, we calculate the average of the standardized charges for the cases
classified to the DRG. To calculate DRG relative weights, we compare
average standardized charges across DRGs.
In evaluating whether it is appropriate to reclassify cases from
one DRG to another, we examine the average standardized charges for
those cases. The recalibration process and the reclassification process
are integrally related; to evaluate whether cases involving a certain
procedure should be reclassified, we need to have information that (1)
enables us to identify cases that involve the procedure and cases that
do not involve the procedure, and (2) enables us to determine
appropriate DRG relative weights if certain cases are reclassified.
3. Feasible, Reliable, Validated Data
As indicated above, the Conference Report reflected the conferees'
belief that, "to the extent feasible," HCFA should consider
"reliable, validated data" in recalibrating and reclassifying DRGs.
The concepts of reliability and validation are closely related. In
order for us to use non-MedPAR data, the non-MedPAR data must be
independently validated. When an entity submits non-MedPAR data, we
[[Page 41500]]
must be able to independently review the medical records and verify
that a particular procedure was performed for each of the cases that
purportedly involved the procedure. This verification requires the
identification of a particular Medicare beneficiary and the hospital
where the beneficiary was treated, as well as the dates involved.
Although it is unlikely that we would review 100 percent of thousands
of cases submitted for review, at a minimum, we must be able to
validate data through a random sampling methodology. We must also be
able to verify the charges that are reflected in the data.
Independent validation is particularly critical in part because the
non-MedPAR data might be submitted by (or on behalf of) entities that
have a financial interest in obtaining a new DRG assignment and in
obtaining the highest possible DRG relative weight. If we receive non-
MedPAR data that purport to reflect cases involving a certain procedure
and a certain level of charges, we must have some way to verify the
data.
Even if non-MedPAR data are reliable and verifiable, that does not
mean it is necessarily "feasible" to use the data for purposes of
recalibration and reclassification. In order to be feasible for these
purposes, the non-MedPAR data must enable us to appropriately measure
relative resource use across DRGs. It is critical that cases are
classified into one and only one DRG in the recalibration process, and
that we have information that enables us to standardize charges for
each case and determine appropriate DRG relative weights. Moreover, the
data must reflect a complete set of cases or, at a minimum, a
representative sample of hospitals and claims.
If cases are classified into more than one DRG (or into the
incorrect DRG) in the recalibration process, or if the non-MedPAR data
reflect an unrepresentative sample of cases, the measure of relative
resources would be distorted. For example, cases of percutaneous
transluminal coronary angioplasty (PTCA) treated with GPIIb/IIIa
platelet inhibitors (procedure code 99.20) are currently classified to
DRG 112. Prior to the publication of the proposed rule, the same drug
manufacturer discussed above provided us with information on the
average charges for a sample of cases that purportedly involve PTCA,
for the purpose of evaluating whether these cases should be moved to
the higher-weighted DRG 116. However, without adequate identification
of the cases to allow us to specifically identify all of the cases
treated with platelet inhibitors, the relative weight for DRG 112 would
reflect the costs of platelet inhibitor cases. This distortion would
result in excessive payments under DRG 112, and thus undermine the
integrity of the recalibration process.
Therefore, in order for the use of non-MedPAR data to be feasible,
generally we must be able to accurately and completely identify all of
the cases to be reclassified from one DRG to another. At a minimum, we
must have some mechanism for ensuring that DRG weights are not
inappropriately inflated (or deflated) to the extent that a DRG weight
reflects cases that would be reclassified to a different DRG.
In short, then, for use of non-MedPAR data to be feasible for
purposes of DRG recalibration and reclassification, the data must,
among other things (1) be independently verifiable, (2) reflect a
complete set of cases (or a representative sample of cases), and (3)
enable us to calculate appropriate DRG relative weights and ensure that
cases are classified to the "correct" DRG, and to one DRG only, in
the recalibration process.
4. Submission of Data
Finally, in order for use of non-MEDPAR data to be feasible, we
must have sufficient time to evaluate and test the data. The time
necessary to do so depends upon the nature and quality of the data
submitted. Generally, however, a significant sample of the data should
be submitted by August 1, approximately 8 months prior to the
publication of the proposed rule, so that we can test the data and make
a preliminary assessment as to the feasibility of the data's use.
Subsequently, a complete database should be submitted no later than
December 1 for consideration in conjunction with the next year's
proposed rule.
5. How the Prospective Payment System Ensures Access to New
Technologies
As noted at the outset of this discussion, the Conference Report
that accompanied the BBA indicated that we should consider non-MEDPAR
data, to the extent feasible, "in order to ensure that Medicare
beneficiaries have access to innovative new drug therapies" (H.R.
Conf. Rep. No. 105-217 at 734 (1997)). There seems to be a concern
that, if a new technology is introduced, and if the new technology is
costly, then Medicare would not make adequate payment if the new
technology is not immediately placed in a new DRG. This concern is
unfounded. As explained below, the Medicare hospital inpatient
prospective payment does ensure access to new drug therapies, and to
new technologies in general.
First, to the extent a case involving a new technology is extremely
costly relative to the cases reflected in the DRG relative weight, the
hospital might qualify for outlier payments, that is, additional
payments over and above the standard prospective payment rate.
Second, Medicare promotes access to new technologies by making
payments under the prospective payment system that are designed to
ensure that Medicare payments for a hospital's cases as a whole are
adequate. We establish DRGs based on factors such as clinical coherence
and resource utilization. Each diagnosis-related group encompasses a
variety of cases, reflecting a range of services and a range of
resources. Generally, then, each DRG reflects some higher cost cases
and some lower cost cases.
For some cases, the hospital's costs might be higher than the
payment under the prospective payment system; this does not mean that
the DRG classifications are "inappropriate." For other cases, the
hospital's costs will be lower than the payment under the prospective
payment system. We believe that Medicare makes appropriate payments for
a hospital's cases as a whole.
Each year we examine the best data available to assess whether DRG
changes are appropriate and to recalibrate DRG relative weights. As we
have indicated on numerous occasions, it usually takes 2 years from the
time a procedure is assigned a code to collect the appropriate MedPAR
data and then make an assessment as to whether a DRG change is
appropriate. This timetable applies to reclassifications that would
lead to decreased payment as well as those that would increase payment.
In fact, the introduction of new technologies itself might lead to
either higher than average costs or lower costs.
Our ability to evaluate and implement potential DRG changes depends
on the availability of validated, representative data. We believe that
our policies ensure access to new technologies and are critical to the
integrity of the recalibration process. We still remain open to using
non-MedPAR data if the data are reliable and validated and enable us to
appropriately measure relative resource use.
We received a number of comments regarding this issue, including
comments from MedPAC, pharmaceutical manufacturers (including two
manufacturers of platelet inhibitor drugs), an industry manufacturers'
association, and several
[[Page 41501]]
cardiologists. We received only one comment from a State hospital
association; otherwise, hospital associations were silent on this
issue.
Comment: MedPAC stated that HCFA's general criteria provide a valid
basis for assessing the feasibility and appropriateness of using
outside data to establish DRG assignments and relative weights for
specific technologies. MedPAC believes that it would be helpful to
entities that desire to submit useful data if HCFA would establish and
publish explicit data standards to guide their efforts. MedPAC
suggested the criteria might include the format and content of the
patient care records; the minimum sample size; required documentation
of sampling procedures; acceptable methods for ensuring that the
sampled providers were representative of the relevant provider
universe; and any other information that HCFA considered essential to
establish the validity and reliability of the submitted data. MedPAC
believes that the criteria would help to prevent misunderstandings and
ensure HCFA's ability to assess whether the submitted data were
adequate to serve as a basis for DRG assignment before actual MedPAR
claims become available.
Response: We appreciate the Commission's support of our general
criteria. We would prefer to gain further experience working with non-
MedPAR data before we develop any specific criteria regarding sample
sizes or methodologies. This will enable us to establish criteria that
realistically reflect the availability of such data and the general
suitability of the data for use in the DRG reclassification and
recalibration process. Our intent at this time is to address some
fundamental criteria that must be taken into consideration by outside
parties interested in submitting non-MedPAR data.
We note that the timetable we set forth in the proposed rule is
intended to provide adequate opportunity to permit outside parties to
conform their data to our needs through testing and resubmission. This
is the primary reason we believe it is generally necessary to have a
sample of the data 8 months prior to the publication of the proposed
rule. We are willing to meet with outside parties interested in
submitting non-MedPAR data for consideration, and would suggest that
those interested in submitting such data in the future should contact
us to discuss the specific data they wish to submit and whether the
data may be adequate.
Comment: One commenter, while supporting the idea that the data
must be reliable and verifiable, indicated that HCFA should consider
other means by which to accomplish this purpose. The commenter stated
that many of the sources for data are restricted from releasing
identifying elements of the data they collect. The commenter claimed,
for example, that they could validate the method by which the data were
assembled, thereby alleviating our concern that the cases may not
represent Medicare beneficiaries or that the reported charges are
inaccurate.
Response: We are open to considering any feasible method for
validating non-MedPAR data, and that is why at this time we are not
specifying explicit criteria for the types of data we will or will not
consider. Instead, we have outlined general guidelines and fundamental
objectives that must be met. One of those fundamental objectives is
that we must be able to validate the data and to accurately identify
cases to be reclassified during DRG recalibration.
In order to preserve the integrity of the DRG reclassification and
recalibration process, we generally believe it is imperative that we
are able to independently validate the data submitted. As noted
previously, if we receive non-MedPAR data that purport to reflect cases
involving a certain procedure and a certain level of charges, we must
have some way to verify that data. In addition, it is not enough to
simply decide that a particular diagnosis or procedure code should now
be classified to a higher-weighted DRG. Cases in the MedPAR data used
for recalibration with that diagnosis or procedure code should be
reclassified accordingly. Otherwise, these cases will affect the
calculation of the relative weights of other DRGs. Therefore, in order
to allow us to ensure the accuracy of DRG recalibration, we must have
some mechanism for ensuring that DRG weights are not inappropriately
inflated.
Comment: Some commenters stated that the criteria regarding the
feasibility of using the data are inconsistent with the intent of the
Conference Report language. The commenters contend that there is no
need to identify each case involving a new technology. Rather, the
agency can extrapolate the findings from a representative sample of
cases and estimate which cases must be moved from one DRG to another.
Two of the commenters stated that this approach was used in
reclassifying lithotripsy to an appropriate DRG, and that extrapolation
is used to some degree in setting the physician fee schedule and was
used in the proposed outpatient prospective payment system. One
commenter wanted us to clarify that we would accept a representative,
statistically valid sample of both non-HCFA and HCFA data that reflect
cases for a period of less than a full year, as well as requesting that
we specify the sources (for example, private payers, manufacturers of
medical technologies, or suppliers) from which we are willing to accept
such data.
Response: We did not rule out the use of extrapolation based on
non-MedPAR data in the proposed rule. In fact, we stated that the data
must reflect either a complete set of cases, or, at a minimum, a
representative sample of hospitals and claims. However, as stated
previously, the process of recalibrating the DRG weights requires that
cases be moved consistent with the reclassification of diagnosis or
procedure codes from one DRG to another. Failure to do so could lead to
inflated or deflated relative weights, which, in turn, result in over
or underpayments for cases in the affected DRGs.
We are attempting to accommodate the realities faced by outside
parties as they attempt to collect and present non-MedPAR data for
consideration. In addition, we will continue to explore our processes
for ways to incorporate such data while preserving the empirical and
clinical integrity of the recalibration process.
As noted by two commenters, in the September 3, 1986 final rule (51
FR 31486), we did, based on analysis by the Prospective Payment
Assessment Commission (ProPAC), assign all cases involving a principal
diagnosis of urinary stones treated by extracorporeal shock wave
lithotripsy (ESWL) to DRG 323 (Urinary stones, age >69 and/or CC).
Prior to this DRG change, ESWL cases were assigned to either DRG 323 or
DRG 324, depending on the presence of a CC or based on the patients age
(over 69). The Commission, an independent advisory body established by
Congress (and MedPAC's predecessor organization), obtained information
on ESWL procedure costs and other routine and ancillary hospital
service charges from the American Heart Association (AHA), the American
Urological Association, and seven hospitals that furnished ESWL. In
addition, ProPAC obtained a preliminary summary of a study conducted by
the Institute for Health Policy Analysis at Georgetown University
Medical Center. This study included cost data from 16 hospitals that
furnished lithotripsy. At the time of these studies, approximately 50
hospitals were furnishing ESWL. Because the ProPAC data were obtained
directly from hospitals and were verified by the Commission at the
[[Page 41502]]
hospital level, we believed the data were reliable and used the data as
a basis for reassigning ESWL cases to DRG 343 only. A full explanation
of the study and ProPAC's analysis and recommendations can be found in
the Technical Appendixes that accompanied ProPAC's April 1, 1986 Report
to Congress.
We have not precluded using either external or internal data that
represent less than a full year's worth of cases. For example, we could
examine a partial year's worth of cases from the current Federal fiscal
year rather than the preceding year's complete MedPAR. Once again,
however, a feasible approach must be developed to enable the
appropriate classification and recalibration of the DRG weights.
Finally, we do not believe it is necessary, or appropriate, to
identify in advance the sources from which we are willing to accept
data. At this time, we remain open to considering any data source that
is reliable, verifiable, and feasible. We would note, however, that
involving hospitals in any data collection would probably aid HCFA in
any validation effort. Generally, if we receive non-MedPAR data, we
will be contacting the hospitals that furnished the sources to verify
some or all of the data.
Comment: Two commenters stated the timeframe for submission of the
non-MedPAR data is unreasonable. They suggested that the submission of
data 7 months before the updated DRGs take effect (March 1) in the case
of internal HCFA data, and 8 months (February 1) in the case of
external data, would more appropriately ensure beneficiary access.
Response: The length of time necessary to validate non-MedPAR data
depends on the nature and quality of the data. In the proposed rule, we
stated that a significant sample of the data should be submitted by
August 1, approximately 8 months prior to the publication of the
proposed rule, so that we can verify and test the data and make a
preliminary assessment as to the feasibility of the data's use.
Subsequently, a complete database should be submitted no later than
December 1, approximately 4 months prior to the publication of the
proposed rule.
We do not believe that this timeframe is unreasonable. If we were
to adopt the commenter's suggestion, we would receive non-MedPAR data
only 2 months before the proposed rule is scheduled to be published
(April 1). This might not allow us sufficient time to ensure that the
data are reliable or valid prior to their use in preparing the proposed
rule.
We believe the timeframe we set forth is necessary to enable us to
independently validate any non-MedPAR data submitted. In order to
verify the data's reliability and validity, we believe we need to
review a sufficient number of the medical records associated with the
data. Expecting us to be able to accomplish this in a matter of weeks
after receiving the data (which is all the time that would be available
for data received in February due to the requirement to begin the
process of reclassifying and recalibrating the proposed DRGs by the end
of February in order for the proposed rule to be published by April 1)
is unrealistic.
Comment: Many of the commenters, including the manufacturer of the
platelet inhibitor drug, national associations representing device and
drug manufacturers, and individual cardiologists, argued that our
current process has inhibited the development of new medical
technologies, and that the criteria for the use of non-MedPAR data are
unworkable and would further slow the development of new technologies.
Several commenters asserted that certain new technologies (including
platelet inhibitors) are denied to Medicare beneficiaries due to
insufficient payment.
Response: After 15 years of administering the prospective payment
system, we do not have any independent evidence that Medicare
beneficiaries are being denied access to new technologies by hospitals
or physicians. Although we have always acknowledged that there is a
time-lag between the time new technologies are introduced and the point
at which we can begin to accurately identify their associated costs, we
believe this has not hampered Medicare beneficiaries' access to these
new technologies. The fact that under the prospective payment system a
hospital might lose money on some cases but will gain money on other
cases is well understood by hospitals. We received no comments from
hospitals or beneficiary advocates complaining about access to new
technologies in general or drug therapies in particular, and only a
brief comment from a State hospital association that indicated that the
use of non-MedPAR data should extend beyond drug therapies.
Furthermore, as provided in Sec. 489.53(a)(2), HCFA may terminate its
participation agreement with any hospital if HCFA finds that the
hospital places restrictions on the persons it will accept for
treatment and it fails either to exempt Medicare beneficiaries from
those restrictions or to apply them to Medicare beneficiaries the same
as to all people seeking care.
Comment: Several commenters, including the manufacturer of a
platelet inhibitor drug and individual cardiologists, specifically
commented on our discussion in the proposed rule of the attempts by the
manufacturer of the drug to introduce its data into the process, with
the objective that cases in which platelet inhibitor therapy is
administered should be reclassified from DRG 112 (Permanent
Cardiovascular Procedures) to DRG 116 (Other Permanent Cardiac
Pacemaker Implant or PTCA with Coronary Artery Stent Implant) for FY
2000. The commenters stated that HCFA has been unwilling to consider
the data. One commenter stated that HCFA refused to accept these data
when they were offered in December 1998.
Response: As discussed in great detail above, and also in the FY
1999 final rule, our review of the previous data submitted by the drug
manufacturer found the data to be insufficient. Despite our
consultation with the manufacturer's representatives in advance of
their submission of data during the rulemaking process for FY 1999
(that is during the first half of calendar year 1998), in which we
advised them that we must be able to identify individual hospitals and
patients in order to utilize the data, this information was not
included on over 90 percent of the cases submitted in May 1998. As
noted in the May 7, 1999 proposed rule, we continued to meet and
correspond with the manufacturers, contractors, and legal
representatives of the pharmaceutical company in an effort to resolve
data issues. At no time have we refused to consider any data offered by
the company or its agents.
However, our discussions with these parties led us to the
conclusion that it might be helpful to identify general criteria for
submission of non-MedPAR data in the proposed rule. In particular, we
were concerned that outside parties wishing to submit non-MedPAR data
were unfamiliar with our current process and the importance of
accurately reclassifying and recalibrating the DRGs. The DRG relative
weights are the principle factor in adjusting the prospective payments
for each of approximately 11 million Medicare discharges each year. In
addition to the potential financial implications to the Medicare Trust
Fund and to hospitals themselves if these weights are inaccurate,
inappropriately assigning cases to higher-weighted DRGs may create
incentives that are not in the best interest of Medicare beneficiaries.
We are hopeful that, by explaining the general criteria for
submitting non-
[[Page 41503]]
MedPAR data and receiving public comments on those criteria, we can
help to ensure that in the future those interested in submitting non-
MedPAR data will be better informed regarding how the process can work.
In particular, we believe the timeframe we set will enable us to work
effectively with those interested in submitting non-MedPAR data to help
them provide data that can be used.
Comment: A manufacturer of a platelet inhibitor drug expressed
concern that HCFA may assign a special DRG classification for patients
who receive coronary intervention with an angioplasty and treatment
with platelet inhibitor therapy, but not for acute coronary syndrome
patients who receive the same drugs without coronary intervention.
These latter cases are assigned to DRG 124 (Circulatory Disorders
Except Acute Myocardial Infarction, with Cardiac Catheterization and
Complex Diagnoses) or DRG 140 (Angina Pectoris). The commenter stated
that if we were to modify payment for one use and not the other, it
would potentially create a financial incentive for expensive, risky,
and invasive treatment. Making payment provisions for both indications
at the same time, on the other hand, will give neither use an advantage
over the other. We were asked by the commenter to evaluate platelet
inhibitor therapy cases assigned to DRG 124 or DRG 140.
Response: Because this is the first comment we have received
regarding the noncoronary intervention use of the therapy, an extensive
study of DRGs 124 and 140 before publication of this final rule was not
feasible. We will evaluate this issue as part of our annual update for
FY 2001, when we will have MedPAR data capturing injection or infusion
of platelet inhibitor (ICD-9-CM procedure code 99.20). This commenter's
concern that increasing payment for one application of platelet
inhibitors but not for others could actually create an inappropriate
incentive in favor of a more invasive treatment, illustrates the
importance of proceeding cautiously in the process of DRG
reclassification and recalibration. We have a responsibility not to
inadvertently create financial incentives that adversely affect
clinical decisionmaking.
Comment: During the comment period, we received a revised set of
data from the manufacturer seeking to have platelet inhibitor therapy
cases receiving angioplasty reclassified from DRG 112 to DRG 116. The
data contain 27,673 cases from 164 hospitals in which Medicare patients
underwent an angioplasty. The commenter describes the data as Athe
public MedPAR file with an additional field that identifies the MedPAR
case as involving an angioplasty with or without platelet inhibitor
therapy. Thus, HCFA can identify the patient and the hospital from
these data such that they are reliable and verifiable. It also is a
representative sample of claims and, therefore, it is feasible for the
agency (HCFA) to use the data set. In light of the significant number
of angioplasty cases contained in the data, HCFA should be able to
utilize accepted statistical methods to extrapolate the results of
these data and recalibrate the DRG weights.@ The manufacturer indicated
that HCFA should reclassify angioplasty cases with platelet inhibitor
therapy on the basis of these data.
Included with the comment are tables summarizing the results of the
commenter's analysis of the data, showing that angioplasty cases
receiving platelet inhibitor therapy are more expensive than those not
receiving platelet inhibitors. According to the commenter, the
approximate average standardized charges for the different classes of
patients are as follows:
<bullet> No drug, no stent: $19,877.
<bullet> No drug, with stent: $22,968.
<bullet> Drug, no stent: $26,389.
<bullet> Drug, stent: $30,139.
Response: The submission of these data illustrates the problems of
attempting to ensure that non-MedPAR data are reliable, validated, and
feasible to use. Our greatest concern with respect to the data
submitted by the commenter is that we must validate the data to assess
whether they are reliable, and (as explained further below) this
validation process would take significant time and resources because
the data are not readily verifiable.
The data file submitted by the commenter is a MedPAR file with an
additional field. The commenter has "marked" certain cases in the
MedPAR file. The file contains variables named REO-FLAG and STENT-FLAG,
which purportedly indicate the case received the platelet inhibitor or
a coronary stent, respectively. However, the variables were placed in
the file by the commenter, based on information that was not made
available to HCFA; we did not receive any information to verify that
the cases flagged by the commenter involved platelet inhibitors.
Although we can use the FY 1998 MedPAR data to validate whether a case
received a coronary stent (because the FY 1998 MedPAR data include the
corresponding procedure code (36.06)), we cannot use the FY 1998 MedPAR
file by itself to validate whether a case involved platelet inhibitors
because the procedure code for the use of platelet inhibitors
(procedure code 99.20) was not effective until October 1, 1998.
Therefore, we cannot validate the data submitted to us without further
investigation.
In order to do so, we believe it is necessary to review the medical
records associated with the cases. Unless the entity submitting the
non-MedPAR data includes medical records (or other information that
would enable us to validate the data), the only method HCFA has to
review medical records is through Peer Review Organization (PRO)
review. Thus, we would need to request assistance in the PRO in each of
the States represented in the submitted data. The PROs would then
contact the hospitals involved to request copies of the medical
records. Finally, based on reviewing those records, the PROs would
notify HCFA whether the data can be validated.
Conducting a PRO independent validation would require a minimum of
2 to 3 months, and possibly much longer. Thus, there is not sufficient
time available to conduct a review of the data submitted by the drug
manufacturer. Since we cannot validate the data, it would compromise
the integrity of the DRG recalibration process to use these data in the
DRG reclassification and recalibration for FY 2000.
We note that the process used by the manufacturer to collect these
data is not specified. Based upon our prior discussions with the
manufacturer and its contractor that prepared the data, we believe the
164 hospitals represented in the sample have a contract for data
analysis and review with the consultant. Although we would not rule out
the possibility that this sample is statistically sufficient, we note
that in general, random sampling is necessary for generalization beyond
the sample itself.
The analysis submitted by the commenter is similar to that
presented in last year's final rule. As we indicated at that time, our
general process of waiting until we have identifiable MedPAR data
applies to changes that would enhance payment as well as those that
would decrease payment. Absent alternative data meeting the criteria
otherwise described in the proposed rule and in this final rule, we
cannot reclassify the administration of platelet inhibitors with
angioplasty (procedure code 99.20) from DRG 112 to DRG 116.
Comment: Some commenters believed that the proposed weights for
DRGs 112 and 116 are dramatically lower than they should be and the
result will be a disincentive to use these technologies.
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Another commenter stated that by not reclassifying cases receiving
platelet inhibitors with angioplasty to DRG 116, we actually promote
the inaccuracy of the DRG weights, by grouping these higher-cost cases
with other lower-cost cases in DRG 112.
Response: With regard to the comment concerning the weights of DRGs
112 and 116, we refer the commenters to the discussion above in section
II.C of this preamble concerning the steps we take in recalibrating the
weights. Every year when the relative weights are recalibrated, we use
charge information from the most recent Medicare data available. That
is, we use the charges reported by hospitals for the cases under each
DRG to establish the relative weights. 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. We
have not identified any problems or anomalies related to the cases in
DRGs 112 and 116 and are confident that the relative weights are
accurate.
With respect to the comment about our promoting the inaccuracy of
the DRG weights by failing to reclassify platelet inhibitor cases, the
commenter does not appear to understand the difference between
reclassification and recalibration. That is, the commenter argues that
the DRG relative weights are inaccurate because high-cost cases are not
reclassified to a higher-weighted DRG. However, our point regarding the
accuracy of the relative weights pertains to the necessity that, in the
process of recalibration, cases are grouped in the DRG to be used for
payment for similar cases during the upcoming year. Thus, the relative
weights are accurate in the sense that they are calculated by grouping
cases according to the DRG under which they would be paid.
Comment: One of the manufacturers of platelet inhibitor therapy
disagreed with our statement in the proposed rule that the prospective
payment system outlier policy would address the rationing of new
technology to Medicare beneficiaries. The commenter argues that cases
of platelet inhibitor therapy would not receive outlier payments
because the cost of the drug, while it is several thousand dollars over
the DRG payment, is not in excess of the fixed loss threshold ($14,575
over the DRG payment in the proposed rule for FY 2000).
Response: Section 1886(d)(5)(A) of the Act provides for payments in
addition to the basic prospective payments for outlier cases, cases
involving extraordinarily high costs. Our statement in the proposed
rule was meant to apply to all new technologies, and not specifically
to platelet inhibitor therapy. As stated previously, the prospective
payment system reflects "averaging principles," which means, among
other things, that a hospital might lose money on some cases but will
gain money on other cases; sometimes new technologies lead to lower
costs and we might Aoverpay@ hospitals for those cases. If a case does
not qualify for an outlier payment, then presumably the case falls
within the "typical" range of costs for cases in the DRG. We believe
that, as a whole, the prospective payment system does ensure access to
new technologies, including platelet inhibitor therapy.
III. Changes to the Hospital Wage Index
A. Background
Section 1886(d)(3)(E) of the Act requires that, as part of the
methodology for determining prospective payments to hospitals, the
Secretary must adjust the standardized amounts "for area differences
in hospital wage levels by a factor (established by the Secretary)
reflecting the relative hospital wage level in the geographic area of
the hospital compared to the national average hospital wage level." In
accordance with the broad discretion conferred under the Act, we
currently define hospital labor market areas based on the definitions
of Metropolitan Statistical Areas (MSAs), Primary MSAs (PMSAs), and New
England County Metropolitan Areas (NECMAs) issued by the Office of
Management and Budget (OMB). OMB also designates Consolidated MSAs
(CMSAs). A CMSA is a metropolitan area with a population of one million
or more, comprised of two or more PMSAs (identified by their separate
economic and social character). For purposes of the hospital wage
index, we use the PMSAs rather than CMSAs since they allow a more
precise breakdown of labor costs. If a metropolitan area is not
designated as part of a PMSA, we use the applicable MSA. Rural areas
are areas outside a designated MSA, PMSA, or NECMA.
We note that effective April 1, 1990, the term Metropolitan Area
(MA) replaced the term Metropolitan Statistical Area (MSA) (which had
been used since June 30, 1983) to describe the set of metropolitan
areas comprised of MSAs, PMSAs, and CMSAs. The terminology was changed
by OMB in the March 30, 1990 Federal Register to distinguish between
the individual metropolitan areas known as MSAs and the set of all
metropolitan areas (MSAs, PMSAs, and CMSAs) (55 FR 12154). For purposes
of the prospective payment system, we will continue to refer to these
areas as MSAs.
Beginning October 1, 1993, section 1886(d)(3)(E) of the Act
requires that we update the wage index annually. Furthermore, this
section provides that the Secretary base the update on a survey of
wages and wage-related costs of short-term, acute care hospitals. The
survey should measure, to the extent feasible, the earnings and paid
hours of employment by occupational category, and must exclude the
wages and wage-related costs incurred in furnishing skilled nursing
services. As discussed below in section III.F of this preamble, we also
take into account the geographic reclassification of hospitals in
accordance with sections 1886(d)(8)(B) and 1886(d)(10) of the Act when
calculating the wage index.
B. FY 2000 Wage Index Update
The final FY 2000 wage index values in section VI of the Addendum
to this rule (effective for hospital discharges occurring on or after
October 1, 1999 and before October 1, 2000) are based on the data
collected from the Medicare cost reports submitted by hospitals for
cost reporting periods beginning in FY 1996 (the FY 1999 wage index was
based on FY 1995 wage data).
The final FY 2000 wage index includes the following categories of
data associated with costs paid under the hospital inpatient
prospective payment system (as well as outpatient costs), which were
also included in the FY 1999 wage index:
<bullet> Salaries and hours from short-term, acute care hospitals.
<bullet> Home office costs and hours.
<bullet> Certain contract labor costs and hours.
<bullet> Wage-related costs.
Consistent with the wage index methodology for FY 1999, the final
wage index for FY 2000 also continues to exclude the direct and
overhead salaries and hours for services not paid through the inpatient
prospective payment system, such as skilled nursing facility services,
home health services, or other subprovider components that are not
subject to the prospective payment system. (As discussed in section
III.C of this preamble, we are refining the methodology for calculating
the wage index for FY 2000.)
We calculate a separate Puerto Rico-specific wage index and apply
it to the Puerto Rico standardized amount. (See 62 FR 45984 and 46041.)
This wage index is based solely on Puerto Rico's data. Finally, section
4410 of the BBA provides that, for discharges on or after October 1,
1997, the area wage index
[[Page 41505]]
applicable to any hospital that is not located in a rural area may not
be less than the area wage index applicable to hospitals located in
rural areas in that State.
Comment: In a general comment on the wage index, MedPac noted that
new measures are needed to implement each new prospective payment
system as well as for Medicare+Choice plans and suggested that we
explore alternative strategies for obtaining labor prices that could be
applied to each type of provider affected. MedPAC offers to assist us
in examining this issue.
Response: We agree with MedPAC that this is an area warranting
further attention to determine whether it is appropriate to continue to
adjust payments for these other provider types based on the relative
average hourly wages of hospital employees, and whether the collection
of wage data for every type of Medicare provider is feasible or
necessary. Currently, the data used to calculate the hospital wage
index is used broadly in payment systems for other types of Medicare
providers. New prospective systems for skilled nursing facilities,
hospital outpatient services, and home health agencies will continue to
use the hospital wage index data for the foreseeable future. We have
collected data separately for skilled nursing facilities, but, pending
further development and auditing of these data, we continue to use the
hospital wage data (before reclassifications by the Medicare Geographic
Classification Review Board) for adjusting skilled nursing facility
payments at this time.
C. FY 2000 Wage Index Methodology Changes
In the July 31, 1998 final rule, we reiterated our position that,
to the greatest degree possible, the hospital wage index should reflect
the wage costs associated with the areas of the hospital included under
the hospital inpatient prospective payment system (63 FR 40970). That
final rule contained a detailed discussion concerning the costs related
to teaching physicians, residents, and CRNAs, all of which are paid by
Medicare separately from the prospective payment system. For reasons
outlined in detail in that final rule, we decided not to remove those
costs from the calculation of the FY 1999 wage index, but to review
updated data and consider removing them in developing the FY 2000 wage
index.
In response to concerns within the hospital industry related to the
removal of these costs from the wage index calculation, the American
Hospital Association (AHA) convened a workgroup to develop a consensus
recommendation. The workgroup, which consisted of representatives from
national and State hospital associations, recommended that costs
related to teaching physicians, residents, and CRNAs should be phased-
out of the wage index calculation over a 5-year period. Based upon our
analysis of hospitals' FY 1996 wage data, and consistent with the AHA
workgroup's recommendation, we proposed to phase-out these costs from
the calculation of the wage index over a 5-year period. The proposed FY
2000 wage index was based on a blend of 80 percent of an average hourly
wage including these costs, and 20 percent of an average hourly wage
excluding these costs.
Comment: Commenters unanimously supported our proposal to remove
teaching-related and CRNA costs from the wage index. Further, two
commenters recommended that we emphasize that Medicare pays its share
of teaching-related wage costs through direct graduate medical
education (GME) payments and that these costs are being removed from
the wage index only insofar as Medicare continues to pay the costs
outside of the hospital prospective payment system. Additionally,
commenters favored the proposed 5-year phase-out of these costs to
reduce significant redistributive impacts.
MedPAC, however, recommended that, rather than reducing the weights
for the old calculation and increasing the weights for the new
calculation by the proposed 20 percent each year, we should apply
smaller weights to the new wage index calculation for the first 2
years. Its rationale for this is its concern that inaccurate reporting
of teaching physician data, and our methodology for removing costs for
hospitals that fail to report these data, may inappropriately lower the
wage index values for nonteaching hospitals in the same labor market
areas.
Response: We are pleased to receive strong support for our efforts
to remove from the hospital wage index, wage costs that are associated
with areas of the hospital not included under the hospital prospective
payment system. Therefore, beginning with the FY 2000 wage index, and
over a 5-year period, we are phasing-out costs related to teaching
physicians, residents, and CRNAs. As recommended, we emphasize that our
rationale for removing these costs from the wage index calculation is
that Medicare pays for these costs separately, and these costs will be
excluded from the wage index as long as they are paid separately from
the hospital prospective payment system.
With respect to MedPAC's recommendation that the weight given to
the average hourly wage calculated after removing CRNAs, teaching
physicians, and residents, should be less than 20 percent for FY 2000,
we disagree. If we applied a percentage less than 20 percent for FY
2000 (and FY 2001), we then would have to apply a higher percentage
phase-out in a later fiscal year (or years) and thus increase the
redistributive impact for that year. We believe that applying 20
percent increments each year promotes the smoothest transition to total
exclusion of the costs.
1. Teaching Physician Costs
As discussed in the FY 1999 final rule and the FY 2000 proposed
rule, before FY 1999, we included direct physician Part A costs and
excluded contract physician Part A costs from the wage index
calculation. Since some States prohibit hospitals from directly
employing physicians, hospitals in these States were unable to include
physician Part A costs because they were incurred under contract rather
than directly. Therefore, for cost reporting periods beginning in 1995,
we began separately collecting physician Part A costs (both direct and
contract) so we could evaluate how to best handle these costs in the
wage index calculation. Based on our analysis of the 1995 wage data, we
decided to include the contract physician salaries in the wage index
beginning with FY 1999.
In the July 31, 1998 final rule, in response to comments regarding
the inclusion in physician Part A costs of teaching physician costs for
which teaching hospitals are already compensated through the Medicare
GME payment, we stated that we would collect teaching physician data
"as expeditiously as possible in order to analyze whether it is
feasible to separate teaching physician costs from other physician Part
A costs" (63 FR 40968). Excluding teaching physician costs from the
wage index calculation is consistent with our general policy to exclude
from that calculation those costs that are paid separately from the
prospective payment system.
Because the FY 1996 cost reports did not identify teaching
physician salaries and hours separately from physician Part A costs, we
instructed our fiscal intermediaries to collect, through a survey,
teaching physician costs and hours from the teaching hospitals they
service. Specifically, we requested collection of data on the costs and
hours related to teaching physicians that were
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included in Line 4 (salaried), Line 10 (contracted), Line 12 (home
office and related organizations), and Line 18 (wage-related costs) of
the Worksheet S-3, Part II. In our instructions accompanying the
survey, we indicated that these teaching-related costs are those
payable under the per resident amounts (Sec. 413.86) and reported on
Worksheet A, Line 23 of the hospital's cost report.
Survey data were received from approximately 59 percent of teaching
hospitals reporting physician Part A costs on their Worksheet S-3, Part
II (500 out of 845). Our fiscal intermediaries reviewed the survey data
for consistency with the Supplemental Worksheet A-8-2 of the hospitals'
cost reports. Supplemental Worksheet A-8-2 is used to apply the
reasonable compensation equivalency limits to the costs of provider-
based physicians, itemizing these costs by the corresponding line
number on Worksheet A.
Hospitals were given until March 5, 1999 to request changes to the
initial survey data. Fiscal intermediaries had until April 5, 1999 to
submit the revised data to the Health Care Provider Cost Report
Information system (HCRIS) for inclusion in the May 1999 final wage
data file. Due to the extraordinary effort needed to collect these data
and the importance of accurately removing teaching physician costs, we
allowed hospitals to request revisions to their teaching survey data up
until June 5, 1999.
The hospital industry workgroup also recommended that if the
teaching data collected by the intermediaries are not accurate or
reliable, HCFA should include only 20 percent of