[Federal Register: May 5, 2000 (Volume 65, Number 88)]
[Proposed Rules]
[Page 26281-26330]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05my00-31]
Table of Contents
Supplementary Information
Addendum
Appendix A--Regulatory Impact Analysis
Appendix B: Technical Appendix on the Capital Cost Model and Required
Adjustments
APPENDIX C--REPORT TO CONGRESS
Appendix D: Recommendation of Update Factors for Operating Cost Rates
of Payment for Inpatient Hospital Services
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Part II
Department of Health and Human Services
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Health Care Financing Administration
42 CFR Parts 412, 413, and 485
Medicare Program; Changes to the Hospital Inpatient Prospective Payment
Systems and Fiscal Year 2001 Rates; Proposed Rule
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
42 CFR Parts 412, 413, and 485
[HCFA-1118-P]
RIN 0938-AK09
Medicare Program; Changes to the Hospital Inpatient Prospective
Payment Systems and Fiscal Year 2001 Rates
AGENCY: Health Care Financing Administration (HCFA), HHS.
ACTION: Proposed rule.
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SUMMARY: We are proposing to revise the Medicare hospital inpatient
prospective payment system for operating costs to: implement applicable
statutory requirements, including a number of provisions of the
Medicare, Medicaid, and State Children's Health Insurance Program
Balanced Budget Refinement Act of 1999 (Public Law 106-113); and
implement changes arising from our continuing experience with the
system. In addition, in the Addendum to this proposed rule, we are
describing proposed changes to the amounts and factors used to
determine the rates for Medicare hospital inpatient services for
operating costs and capital-related costs. These changes would be
applicable to discharges occurring on or after October 1, 2000. We also
are setting forth proposed rate-of-increase limits as well as proposed
policy changes for hospitals and hospital units excluded from the
prospective payment systems.
We are proposing changes to the policies governing payments to
hospitals for the direct costs of graduate medical education and
payments to disproportionate share hospitals, sole community hospitals,
and critical access hospitals to implement changes made by Public Law
106-113.
Finally, we are proposing a new condition of participation on
organ, tissue, and eye procurement for critical access hospitals that
parallels the condition of participation that we previously published
for all other Medicare-participating hospitals.
DATES: Comments will be considered if received at the appropriate
address, as provided below, no later than 5 p.m. on July 5, 2000.
ADDRESSES: Mail written comments (an original and three copies) to the
following address only: Health Care Financing Administration,
Department of Health and Human Services, Attention: HCFA-1118-P, P.O.
Box 8010, Baltimore, MD 21244-1850.
If you prefer, you may deliver by courier your written comments (an
original and three copies) to one of the following addresses:
Room 443-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW,
Washington, DC 20201, or
Room C5-14-03, Central Building, 7500 Security Boulevard, Baltimore, MD
21244-1850.
Comments mailed to those addresses may be delayed and could be
considered late.
Because of staffing and resource limitations, we cannot accept
comments by facsimile (FAX) transmission. In commenting, please refer
to file code HCFA-1118-P.
Comments received timely will be available for public inspection as
they are received, generally beginning approximately 3 weeks after
publication of a document, in Room 443-G of the Department's offices at
200 Independence Avenue, SW, Washington, DC, on Monday through Friday
of each week from 8:30 a.m. to 5 p.m. (phone: (202) 690-7890).
For comments that relate to information collection requirements,
mail a copy of comments to the following addresses:
Health Care Financing Administration, Office of Information Services,
Security and Standards Group, Division of HCFA Enterprise Standards,
Room N2-14-26, 7500 Security Boulevard, Baltimore, Maryland 21244-1850.
Attn: John Burke HCFA-1118-P; and
Office of Information and Regulatory Affairs, Office of Management and
Budget, Room 3001, New Executive Office Building, Washington, DC 20503,
Attn: Allison Herron Eydt, HCFA Desk Officer.
FOR FURTHER INFORMATION CONTACT:
Steve Phillips, (410) 786-4531, Operating Prospective Payment, DRG,
Wage Index, Reclassifications, and Sole Community Hospital Issues.
Tzvi Hefter, (410) 786-4487, Capital Prospective Payment, Excluded
Hospitals, Graduate Medical Education and Critical Access Hospital
Issues.
SUPPLEMENTARY INFORMATION:
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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 and units, rehabilitation hospitals and
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 sections 1820 and 1834(g) of the Act, payments are made to
critical
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access hospitals (CAHs) (that is, rural nonprofit hospitals or
facilities that meet certain statutory requirements) for outpatient
services on a reasonable cost basis. Reasonable cost is determined
under the provisions of section 1861(v)(1)(A) of the Act and existing
regulations under parts 413 and 415.
Under section 1886(a)(4) of the Act, costs of approved educational
activities are excluded from the operating costs of inpatient hospital
services. Hospitals with approved graduate medical education (GME)
programs are paid for the direct costs of GME in accordance with
section 1886(h) of the Act; the amount of payment for direct GME costs
for a cost reporting period is based on the hospital's number of
residents in that period and the hospital's costs per resident in a
base year.
The regulations governing the hospital inpatient prospective
payment system 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.
On July 30, 1999, we published a final rule in the Federal Register
(64 FR 41490) that implemented both statutory requirements and other
changes to the Medicare hospital inpatient prospective payment systems
for both operating costs and capital-related costs, as well as changes
addressing payment for excluded hospitals and payments for GME costs.
Generally, these changes were effective for discharges occurring on or
after October 1, 1999. Correction notices for the July 30, 1999 final
rule relating to the wage index and geographic adjustment factor were
issued in the Federal Register on January 12, 2000 (65 FR 1817) and
February 7, 2000 (65 FR 5933).
On November 29, 1999, the Medicare, Medicaid, and State Children's
Health Insurance Program (SCHIP) Balanced Budget Refinement Act of
1999, Public Law 106-113, was enacted. Public Law 106-113 made a number
of changes to the Act relating to prospective payments to hospitals for
inpatient services and payments to excluded hospitals. This proposed
rule would implement amendments enacted by Public Law 106-113 relating
to FY 2001 payments for GME costs and FY 2001 payments to
disproportionate share hospitals (DSHs), sole community hospitals
(SCHs), and CAHs. These changes are addressed in sections IV. and VI.
of this preamble.
Other provisions of Public Law 106-113 that relate to Medicare
payments to hospitals effective prior to October 1, 2000, will be
addressed in a separate interim final rule with comment period. The
provisions that will be included in the interim final rule are
summarized in section I.C. of this preamble.
Public Law 106-113 also amended section 1886(j) of the Act, which
was added by section 4421 of the Balanced Budget Act of 1997 (Public
Law 105-33). Section 1886(j) of the Act provides for a fully
implemented prospective payment system for inpatient rehabilitation
hospitals and rehabilitation units, effective for cost reporting
periods beginning on or after October 1, 2002, with provisions for
payments during a transitional period of October 1, 2000 to October 1,
2002, based on target amounts specified in section 1886(b) of the Act.
In section VI of this preamble, we describe the impact of this
provision on the proposed changes applicable to excluded hospitals and
units in this proposed rule. We are issuing a separate notice of
proposed rulemaking to implement the prospective payment system for
inpatient rehabilitation hospitals and units.
B. Major Contents of This Proposed Rule
In this proposed rule, we are setting forth proposed changes to the
Medicare hospital inpatient prospective payment system for operating
costs. We are not proposing any policy changes relating to payments for
capital-related costs under the hospital inpatient prospective payment
system in FY 2001. Our proposed changes relating to capital-related
costs include only changes to the amounts and factors for determining
the rates for capital-related costs for FY 2001. We also are proposing
changes relating to payments for GME costs and payments to excluded
hospitals and units, DSHs, SCHs, and CAHs. This proposed rule would be
effective for discharges occurring on or after October 1, 2000.
The following is a summary of the major changes that we are
proposing to make:
1. Proposed Changes to the DRG Reclassifications and Recalibrations of
Relative Weights
As required by section 1886(d)(4)(C) of the Act, we adjust the DRG
classifications and relative weights annually. Our proposed changes for
FY 2001 are set forth in section II. of this preamble.
2. Proposed Changes to the Hospital Wage Index
In section III. of this preamble, we discuss proposed revisions to
the wage index and the annual update of the wage data. Specific issues
addressed in this section include the following:
The FY 2001 wage index update, using FY 1997 wage data.
The transition to 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.
Revisions to the wage index based on hospital
redesignations and reclassifications.
3. Other Decisions and Proposed Changes to the Prospective Payment
System for Inpatient Operating and Graduate Medical Education Costs
In section IV. of this preamble, we discuss several provisions of
the regulations in 42 CFR Parts 412 and 413 and set forth certain
proposed changes concerning the following:
Postacute care transfers.
Sole community hospitals.
Rural referral centers.
Changes relating to the indirect medical education
adjustment.
Changes relating to the DSH adjustment and collection of
data on uncompensated costs for services furnished in hospitals under
the prospective payment system.
Medicare Geographic Classification Review Board (MGCRB)
classifications.
Payment for the direct costs of GME.
4. Last Year of Transition Period for the Prospective Payment System
for Capital-Related Costs
In section V. of this preamble, we discuss FY 2001 as the last year
of a 10-year transition period established to phase-in the prospective
payment system for capital-related costs for inpatient hospital
services.
5. Proposed Changes for Hospitals and Hospital Units Excluded from the
Prospective Payment Systems
In section VI. of this preamble, we discuss the following proposals
concerning excluded hospital and hospital units and CAHs:
Limits on and adjustments to the proposed target amounts
for FY 2001.
Development of prospective payment system for inpatient
rehabilitation hospitals and units.
Continuous improvement bonus payments.
Clarification that the 5-percent threshold used in
calculating an excluded hospital's cost per discharge is based only on
Medicare inpatients discharged from the hospital-within-a-hospital.
All-inclusive payment rate option for CAHs.
Condition of participation for CAHs relating to organ,
tissue, and eye procurement.
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6. Determining Prospective Payment Operating and Capital Rates and
Rate-of-Increase Limits
In the Addendum to this proposed rule, we set forth proposed
changes to the amounts and factors for determining the FY 2001
prospective payment rates for operating costs and capital-related
costs. We also address update factors for determining the rate-of-
increase limits for cost reporting periods beginning in FY 2001 for
hospitals and hospital units excluded from the prospective payment
system.
7. Impact Analysis
In Appendix A, we set forth an analysis of the impact that the
proposed changes described in this proposed rule would have on affected
entities.
8. Capital Acquisition Model
Appendix B contains the technical appendix on the proposed FY 2001
capital cost model.
9. Report to Congress on the Update Factor for Hospitals under the
Prospective Payment System and Hospitals and Units Excluded from the
Prospective Payment System
Section 1886(e)(3) of the Act requires the Secretary to report to
Congress on our initial estimate of a recommended update factor for FY
2001 for payments to hospitals included in the prospective payment
systems, and hospitals excluded from the prospective payment systems.
This report is included as Appendix C to this proposed rule.
10. Proposed Recommendation of Update Factor for Hospital Inpatient
Operating Costs
As required by sections 1886(e)(4) and (e)(5) of the Act, Appendix
D provides our recommendation of the appropriate percentage change for
FY 2001 for the following:
Large urban area and other area average standardized
amounts (and hospital-specific rates applicable to sole community and
Medicare-dependent, small rural hospitals) for hospital inpatient
services paid for under the prospective payment system for operating
costs.
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.
11. Discussion of Medicare Payment Advisory Commission Recommendations
Under section 1805(b) of the Act, the Medicare Payment Advisory
Commission (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. This annual report makes recommendations
concerning hospital inpatient payment policies. In section VII. of this
preamble, we discuss the MedPAC recommendations and any actions we are
proposing to take with regard to them (when an action is recommended).
For further information relating specifically to the MedPAC March 1
report or to obtain a copy of the report, contact MedPAC at (202) 653-
7220.
C. Provisions of Public Law 106-113 To Be Included in Interim Final
Rule With Comment Period
As we have indicated under section I.A. of this preamble, we are
planning to publish an interim final rule with comment period to
address provisions of Public Law 106-113 that are effective prior to
October 1, 2000. This interim final rule with comment period will be
issued prior to the publication of the hospital inpatient prospective
payment system final rule by August 1. A summary of the provisions of
Public Law 106-113 that will be addressed in the interim final rule
with comment period follows:
Section 111(b), which provides for an additional payment
to teaching hospitals equal to the additional amount the hospital would
have been paid for FY 2000 if the IME adjustment formula under section
1886(d)(5)(B) of the Act (which reflects the higher indirect operating
costs associated with GME) for FY 2000 had remained the same as for FY
1999. (Section 111(a) also changed the IME adjustment formula for
discharges occurring during FY 2001 and for discharges occurring on or
after October 1, 2001, which is addressed in section IV.D. of this
preamble.)
Section 121, which amended section 1886(b)(3)(H) of the
Act to provide for an appropriate wage adjustment to the cap on the
target amounts for psychiatric hospitals and units, rehabilitation
hospitals and units, and long-term care hospitals, effective for cost
reporting periods beginning on or after October 1, 1999, through
September 30, 2002. We will address the wage adjustment to the FY 2000
caps in the interim final rule. (The wage adjustment to the FY 2001
caps is discussed in section VI. of this preamble.)
Section 312, which amended section 1886(h)(5) of the Act
to provide that, effective July 1, 2000, in determining the cap on the
number of residents for GME and IME costs, the period of board
eligibility and the initial residency period for child neurology is the
period of board eligibility for pediatrics plus 2 years. This provision
applies on and after July 1, 2000, to residency programs that began
before, on, or after November 29, 1999.
Section 401(a), which amended section 1886(d)(8) of the
Act to direct the Secretary to treat certain hospitals located in urban
areas as being located in rural areas of their State if the hospital
meets statutory criteria and files an application with HCFA. This
provision is effective on January 1, 2000.
Section 401(b), which contains conforming changes to
incorporate the reclassifications under the amendments made by section
401(a) of Public Law 106-113 to outpatient hospital services (section
1833(t) of the Act) and the CAH statute (section 1820(c)(2)(B)(i) of
the Act). This provision is effective on January 1, 2000.
Section 403(a), which amended section 1820(c)(2)(B)(iii)
of the Act to delete the 96-hour length of stay restriction on
inpatient care in a CAH and to authorize a period of stay that does not
exceed, on an annual basis, 96 hours per patient. This provision is
effective on November 29, 1999.
Section 403(b), which amended section 1820(c)(2)(B)(i) of
the Act to allow for-profit hospitals to qualify for CAH status. This
provision is effective on November 29, 1999.
Section 403(c), which amended section 1820(c) of the Act
to allow hospitals that have closed within 10 years prior to November
29, 1999, or hospitals that downsized to a health clinic or health
center, to be designated as CAHs if they meet the established criteria
for designation.
Section 403(e), which amended sections 1833(a)(1)(D)(i)
and 1833(a)(2)(D)(i) the Act to eliminate the Medicare Part B
deductible and coinsurance for clinical diagnostic laboratory tests
furnished by a CAH on an outpatient basis. This provision is effective
with respect to services furnished on or after November 29, 1999.
Section 403(f), which amended section 1883 of the Act to
reinstate the right of CAHs that meet applicable requirements to enter
into "swing-bed" agreements.
Section 404, which amended section 1886(d)(5)(G) of the
Act to extend the Medicare-dependent, small rural hospital program for
5 years, from FY 2001 through FY 2005. Section 404 also amended section
1886(b)(3)(D) of the Act as a conforming change to make the 5-year
extension applicable to the
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target amounts for Medicare-dependent, small rural hospitals.
Section 407(a)(1), which amended section 1886(h)(4)(F) of
the Act to direct the Secretary, for purposes of determining a
hospital's FTE cap for direct GME payments, to count an individual to
the extent that the individual would have been counted as a primary
care resident for purposes of the FTE cap but for the fact that the
individual was on maternity or disability leave or a similar approved
leave of absence. Section 407(a)(2) made a corresponding amendment to
section 1886(d)(5)(B)(v) of the Act relating to the IME adjustment. The
provision relating to direct GME is effective with cost reporting
periods beginning on or after November 29, 1999. The provision relating
to the IME adjustment applies to discharges occurring in cost reporting
periods beginning on or after November 29, 1999.
Section 407(b)(1), which amended section 1886(h)(4)(F)(i)
of the Act to provide that a rural hospital's direct FTE count for
direct GME may not exceed 130 percent of the number of unweighted
residents that the rural hospital counted in its most recent cost
reporting period ending on or before December 31, 1996. Section
407(b)(2) made a similar change to section 1886(d)(5)(B)(v) of the Act
relating to the IME adjustment. The provision relating to direct GME
applies to cost reporting periods beginning on or after April 1, 2000.
The provision relating to the IME adjustment applies to discharges
occurring on or after April 1, 2000.
Section 407(c), which amended sections 1886(h)(4)(H) and
1886(d)(5)(B)(v) of the Act to allow a non-rural hospital that
establishes separately accredited approved medical residency training
programs (or rural training tracks) in a rural area or has an
accredited training program with an integrated rural track, to receive
an FTE cap adjustment for purposes of direct GME and IME. The provision
is effective with cost reporting periods beginning on or after April 1,
2000 for direct GME, and with discharges occurring on or after April 1,
2000 for IME.
Section 407(d) addresses the situation where residents
were training in a residency training program at a Veterans Affairs
hospital and then were transferred on or after January 1, 1997 and on
or before July 30, 1998, to a non-Veterans Affairs hospital because the
program in which the residents were training would lose its
accreditation by the Accreditation Council on Graduate Medical
Education (ACGME) if the residents continued to train at the facility.
In this scenario, the non-Veterans Affairs hospital may receive a
temporary adjustment to its 1996 FTE cap to include in its FTE count
those residents who were transferred from the Veterans Affairs
hospital. This provision applies as if it was included in the enactment
of Public Law 105-33, that is, for GME with cost reporting periods
beginning on or after October 1, 1997, and for IME, discharges
occurring on or after October 1, 1997. If a hospital is owed payments
as a result of this provision, payments must be made immediately.
Section 541, which amended section 1886 of the Act to
provide an additional payment to hospitals that receive payments under
section 1861(v) of the Act for approved nursing and allied health
education programs to reflect utilization of Medicare+Choice enrollees.
This provision is effective for portions of cost reporting periods in a
year beginning with calendar year 2000.
II. Proposed Changes to DRG Classifications and Relative Weights
A. Background
Under the prospective payment system, we pay for inpatient hospital
services on a rate per discharge basis that varies according to the DRG
to which a beneficiary's stay is assigned. The formula used to
calculate payment for a specific case 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. The proposed changes to the DRG
classification system, and the proposed recalibration of the DRG
weights for discharges occurring on or after October 1, 2000, 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 codes from the
International Classification of Diseases, Ninth Revision, Clinical
Modification (ICD-9-CM). Medicare fiscal intermediaries enter the
information into their claims processing systems and subject it to a
series of automated screens called the Medicare Code Editor (MCE).
These screens are designed to identify cases that require further
review before classification into a DRG.
After screening through the MCE and any further development of the
claims, cases are classified into the appropriate DRG by the Medicare
GROUPER software program. 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.
In the July 30, 1999 final rule (64 FR 41500), we discussed a
process for considering non-MedPAR data in the recalibration process.
In order for the use of particular 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 using the data.
Subsequently, a complete database should be submitted no later than
December 1 for consideration in conjunction with the next year's
proposed rule.
Currently, cases are assigned to one of 501 DRGs (including one DRG
for a diagnosis that is invalid as a discharge diagnosis and one DRG
for ungroupable diagnoses) 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
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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, the 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.
The changes we are proposing to make to the DRG classification
system for FY 2001 and other issues concerning DRGs are set forth
below. Unless otherwise noted, our DRG analysis is based on the full
(100 percent) FY 1999 MedPAR file (bills received through December 31,
1999 for discharges in FY 1999).
2. MDC 5 (Diseases and Disorders of the Circulatory System)
In the August 29, 1997 final rule with comment period (62 FR
45974), we noted that, because of the many recent changes in heart
surgery, we were considering conducting a comprehensive review of the
MDC 5 surgical DRGs. In the July 31, 1998 final rule with comment
period (63 FR 40956), we did adopt some changes to the MDC 5 surgical
DRGs. Since that time, we have received inquiries on a continuing basis
regarding these DRGs. We have continued to review Medicare claims data
and, based on our analysis, we are proposing the following DRG changes
in MDC 5:
a. Heart Transplant (DRG 103)
As previously stated, cases are generally assigned to an MDC based
on principal diagnosis and subsequently assigned to surgical or medical
DRGs included in that MDC. However, cases involving liver, bone marrow,
and lung transplants (DRGs 480, 481, and 495, respectively) and the two
DRGs for tracheostomies (DRGs 482 and 483) are directly assigned on the
basis of procedure codes. Cases assigned to these DRGs before
classification to an MDC are referred to as pre-MDC. However, cases
involving heart transplants are currently assigned first to MDC 5 and
then to DRG 103.
Currently, when a bone marrow transplant and a heart transplant are
performed during the same admission, the case is assigned to DRG 481
(Bone Marrow Transplant). Because bone marrow transplant cases are
first classified to pre-MDC, while heart transplants are first assigned
to MDC 5, the bone marrow transplant assumes precedence in the
assignment of the case to a DRG. However, payment for DRG 481 is
substantially less than DRG 103. For FY 2000, the relative weight for
DRG 103 is 19.5100, while the relative weight for DRG 481 is 8.7285.
We reviewed the FY 1999 MedPAR file containing bills through
December 31, 1999 and found no cases in which a bone marrow transplant
and a heart transplant were performed in the same admission. However,
to ensure appropriate DRG assignment of these cases, we are proposing
that the heart transplant DRG, which encompasses combined heart-lung
transplantation (ICD-9-CM procedure code 33.6) and heart
transplantation (ICD-9-CM procedure code 37.5) be assigned to pre-MDC.
In this way, cases involving a bone marrow transplant and a heart
transplant would be assigned to DRG 103 (DRG 103 would be reordered
higher in the pre-MDC surgical hierarchy, as discussed in section
II.B.5. of this preamble).
b. Heart Assist Devices
We continue to review data in MDC 5 (Diseases and Disorders of the
Circulatory System) to determine if cases are being assigned to the
most appropriate DRG based on clinical coherence and similar resource
consumption. At the December 1, 1994 ICD-9-CM Coordination and
Maintenance Committee meeting, we recommended creation of new codes to
capture single and bi-ventricular heart assist systems. These codes,
37.65 (Implant of an external, pulsatile heart assist system) and 37.66
(Implant of an implantable, pulsatile heart assist system), were
adopted for use for discharges occurring on or after October 1, 1995.
However, code 37.66 was deemed investigational and was not considered a
covered procedure. Effective May 5, 1997, we revised Medicare coverage
of heart assist devices to allow coverage of a ventricular assist
device (code 37.66) used for support of blood circulation
postcardiotomy if certain conditions were met.
Due to some residual misunderstanding regarding this coverage
policy, we would like to emphasize that this device was and will
continue to be listed as a noncovered procedure in the Medicare Code
Editor (MCE), the front-end software product in the GROUPER program
that detects and reports errors in the coding of claims data. The
reason that this device is listed in the MCE, in spite of the fact that
its implantation is covered, is because of the stringent conditions
that must be met by hospitals in order to receive payment.
In the August 29, 1997 final rule (62 FR 45973), we moved procedure
code 37.66 from DRGs 110 and 111 \1\ (Major Cardiovascular Procedures
with and without CCs, respectively) to DRG 108 (Other Cardiothoracic
Procedures). As stated in the July 31, 1998 final rule (63 FR 40956),
we moved procedure code 37.66 to DRGs 104 and 105 (Cardiac Valve and
Other Major Cardiothoracic Procedures with and without CCs,
respectively) for FY 1999.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
In the July 30, 1999 final rule (64 FR 41498), we responded to a
comment suggesting that heart assist devices be assigned to DRG 103. In
further consideration of this issue, we have reviewed the 100 percent
FY 1999 MedPAR file containing bills through December 31, 1999, and
found that there were a total of 47 implantable heart assist system
procedures performed on Medicare beneficiaries. Of these cases, 13
(approximately 28 percent) were assigned to DRG 103 (Heart Transplant)
and four (approximately 9 percent) were assigned to DRG 483
(Tracheostomy Except for Face, Mouth and Neck Diagnoses), and,
therefore, were paid at significantly higher rates than the remaining
30 cases. All of the procedure code 37.66 cases have extremely high
charges, which is consistent with past
[[Page 26287]]
analysis, and all of these cases are subject to payment as cost
outliers.
Our data analysis indicates that the most cases in any one hospital
is 5, while 17 hospitals performed only one heart assist system implant
each. We reiterate that only heart transplant cases can be properly
assigned to the transplant DRG (August 29, 1997 final rule (62 FR
45974)). Since heart assist devices are used across DRGs, many not
involving a transplant, we are not proposing to assign procedure code
37.66 to DRG 103.
In addition to the review of 37.66, we also looked at procedure
codes 37.62 (Implant of other heart assist system), 37.63 (Replacement
and repair of heart assist system), and 37.65 (Implant of an external,
pulsatile heart assist system). These cases are currently assigned to
DRGs 110 and 111 (Major Cardiovascular Procedures). We believe that
these procedures are similar both clinically and in terms of resource
utilization to procedure code 37.66, which is already assigned to DRGs
104 and 105. Therefore, we propose to move codes 37.62, 37.63, and
37.65 from DRGs 110 and 111 to DRGs 104 and 105.
c. Platelet Inhibitors
Effective October 1, 1998, procedure code 99.20 (Injection or
infusion of platelet inhibitor) was created. The use of platelet
inhibitors have been shown to significantly decrease the rate of acute
vessel closure, as well as the rate of cardiac complications and death.
Platelet inhibitors are frequently administered to patients undergoing
percutaneous transluminal coronary angioplasty (PTCA). In addition,
patients admitted with unstable angina may also benefit from platelet
inhibitors. This procedure code is designated as a non-OR procedure
that does not affect DRG assignment (platelet inhibitors are
administered either through intravenous injection or infusion).
For the past 2 years, a manufacturer of platelet inhibitors has
submitted data to support its position that cases involving platelet
inhibitor therapy receiving angioplasty should be reclassified from DRG
112 (Percutaneous Cardiovascular Procedures) to DRG 116 (Other
Permanent Cardiac Pacemaker Implant or PTCA with Coronary Artery Stent
Implant). In the July 30, 1999 final rule (64 FR 41503), we noted that
we had received a new set of data from the platelet inhibitor
manufacturer containing 27,673 cases from 164 hospitals in which
Medicare patients underwent an angioplasty.
Included with the data were 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:
No drug, no stent: $19,877.
No drug, with stent: $22,968.
Drug, no stent: $26,389.
Drug, stent: $30,139.
Using the 100 percent FY 1999 MedPAR file that contains discharges
through September 30, 1999, we performed analysis of the cases for
which procedure code 99.20 was reported. There were a total of 37,222
cases spread across 123 DRGs.
The majority of the platelet inhibitor cases, 28,022 (75 percent of
all platelet inhibitor cases), are already assigned to DRG 116. The
average standardized charges for these cases are approximately $26,683,
compared to approximately $25,251 for DRG 116 overall. In DRG 112,
there were 4,310 platelet inhibitor cases (12 percent of all platelet
inhibitor cases) assigned. The average standardized charge for these
cases is approximately $22,786, compared to approximately $20,224 for
DRG 112 overall. Although the platelet inhibitor therapy cases that are
classified to DRG 112 do have somewhat higher charges than the average
case assigned to this DRG (11 percent, or $2,563), we found several
procedures in DRG 112 with average standardized charges higher than the
platelet inhibitor cases. For example, there were 1,560 cases in which
a single vessel PTCA or coronary atherectomy with thrombolytic agent
(procedure code 36.02) was performed with an average standardized
charge of approximately $25,181, and there were 4,951 cases in which a
multiple vessel PTCA or coronary atherectomy was performed, with or
without a thrombolytic agent (procedure code 36.05) with an average
standardized charge of approximately $23,608.
We also noted that there are several procedures assigned to DRG 112
that have average standardized charges lower than the average charges
for all cases in the DRG. For example, average charges for cases with
procedure code 37.34 (Catheter ablation of lesion or tissues of heart)
were $18,429. The following chart illustrates the variation among the
average charges for DRG 112. This chart shows that the average charges
for cases with procedure code 99.20 are well within the normal
variation of other procedures.
------------------------------------------------------------------------
Average
DRG 112 Cases standardized
charges
------------------------------------------------------------------------
Catheter ablation of lesion or 6,972 $18,429
tissues of heart (code 37.34)....
All cases within DRG 112.......... 60,842 20,224
Injection or infusion of platelet 4,310 22,786
inhibitor (code 99.20)...........
Multiple vessel PTCA or coronary 4,951 23,608
atherectomy with or without
mention of thrombolytic agent
(code 36.05).....................
Single vessel PTCA or coronary 1,560 25,181
atherectomy with mention of
thrombolytic agent (code 36.02)..
------------------------------------------------------------------------
These examples indicate that there is always some variation in
charges within a DRG. This difference in variations of charges is
within the normal range of charge variations.
Clinical homogeneity within DRGs has always been a fundamental
principle considered when assigning codes to appropriate DRGs.
Currently, DRG 116 includes cases involving the insertion of a
pacemaker as well as the insertion of coronary artery stents with PTCA.
On the other hand, cases assigned to DRG 112 involve less invasive
operating room and, in some cases, nonoperating room procedures.
The basis for DRG assignment has generally been the diagnosis of
the patient or the procedures performed. To the extent the use of a
particular technology becomes prevalent in the treatment of a
particular type of case, the DRG system is designed to account for any
increases or decreases in costs through recalibration. Hospitals
frequently benefit from this process while efficiency-enhancing
technology is being introduced. We believe that the update factors
established in section 1886(b)(3)(B)(i) of the Act, combined with the
potential for continuing improvements in hospital productivity, and
annual recalibration of the DRG
[[Page 26288]]
weights, are adequate to finance appropriate care of Medicare patients.
We also received a comment from another manufacturer of platelet
inhibitors whose therapy is targeted on acute coronary syndrome
patients without coronary intervention. These cases are assigned to DRG
124 (Circulatory Disorders Except Acute Myocardial Infarction with
Cardiac Catheterization and Complex Diagnosis) or DRG 140 (Angina
Pectoris). The manufacturer's concern is that both types of cases,
those performed in conjunction with coronary intervention and those
without, be given an equal focus in this evaluation.
Based on our analysis, we found 410 platelet inhibitor cases (1
percent) assigned to DRG 124. This is a small percentage of cases in
comparison to the overall total of 134,759 cases assigned to this DRG.
The platelet inhibitor cases had an average standardized charge of
approximately $17,378 compared to approximately $14,730 for DRG 124
overall. As we have illustrated above, there is always some variation
in charges within a DRG and this difference is within normal variation.
There were 66 platelet inhibitor cases (0.2 percent) assigned to
DRG 140. The average standardized charge for these cases is higher than
the overall DRG charge, approximately $8,992 and $5,657, respectively.
However, it represents a small percentage of the total (76,913) cases
assigned to DRG 140.
In summary, currently 75 percent of cases where code 99.20 is
present are assigned to DRG 116. The next most common DRG where these
cases are assigned is DRG 112 (12 percent). Cases assigned to DRG 116
generally involve implantation of a pacemaker or artery stent, while
cases assigned to DRG 112 involve percutaneous cardiovascular
procedures. Our analysis found a $3,897 difference between cases
involving platelet inhibitor therapy that were assigned to DRG 116 and
cases assigned to DRG 112, indicating a clinical distinction between
the cases grouping to the two DRGs. Finally, among platelet inhibitor
therapy cases that are assigned to DRG 112, our analysis found that the
average charges are well within the normal variation around the overall
average charges within the DRG. Based on these findings, we do not
believe it would be appropriate to assign all cases where procedure
code 99.20 is present to DRG 116. Therefore, we are not proposing to
change to our current policy which specifies that assignment of cases
to this code does not affect the DRG assignment.
d. Extracorporeal Membrane Oxygenation
Extracorporeal Membrane Oxygenation (ECMO) is a cardiopulmonary
bypass technique that provides long-term cardiopulmonary support to
patients who have reversible cardiopulmonary insufficiency that has not
responded to conventional management. It involves passing a patient's
blood through an extracorporeal membrane oxygenator which adds oxygen
and removes carbon dioxide. The oxygenated blood then is passed through
a heat exchanger to warm it to body temperature prior to returning it
to the patient. The process and equipment are similar to those used in
open heart surgery, but are continued over prolonged periods of time.
ECMO attempts to provide the patient with artificial cardiopulmonary
function while his or her own cardiopulmonary functions are incapable
of sustaining life.
Since ECMO involves the use of a device that sustains
cardiopulmonary function while the underlying condition is being
treated, it is important to identify and treat underlying conditions
leading to cardiopulmonary failure if the patient is to return to
normal cardiopulmonary function.
ECMO is assigned to procedure code 39.65 (Extracorporeal membrane
oxygenation (ECMO)). This code is not recognized as an OR procedure
within the DRG system and, therefore, does not affect payment. To
evaluate the appropriateness of payment under the current DRG
assignment, we have reviewed a 10-percent sample of Medicare claims in
the FY 1999 MedPAR file and found only 4 cases in which ECMO was used.
The charges for these cases ranged from $16,006 to $198,014. Since
medical literature indicates that ECMO is predominately used on
newborns and pediatric cases, this low number of claims is not
surprising. Only in recent years have some hospitals started to use
ECMO on adults. It is reserved for cases facing almost certain
mortality.
Because ECMO is a procedure clinically similar to a heart assist
device, we are proposing that procedure code 39.65 be classified as an
OR procedure and be classified in DRGs 104 and 105 along with the heart
assist system procedures (as discussed in section II.B.2.b. of this
preamble). Those cases in which ECMO was provided, but for which the
principal diagnosis is not classified to MDC 5, would then be assigned
to DRG 468 (Extensive OR Procedure Unrelated to Principal Diagnosis).
This would be appropriate since it is possible that secondary
conditions or complications may arise during hospitalization that would
require the use of ECMO. The relatively high weight of DRG 468 would be
appropriate for these cases.
3. MDC 15 (Newborns and Other Neonates With Conditions Originating in
the Perinatal Period)
a. V05.8 (Vaccination for Disease, NEC)
DRG 390 (Neonate with Other Significant Problems) contains newborn
or neonate cases with other significant problems, not assigned to DRGs
385 through 389, DRG 391, or DRG 469. In order to be classified into
DRG 391 (Normal Newborn), the neonate must have a principal diagnosis
as listed under DRG 391 and either no secondary diagnosis or a
secondary diagnosis as listed under DRG 391. Neonates with a secondary
diagnosis of V05.8 (Vaccination for disease, NEC) are currently
classified to DRG 390. Although it would seem that healthy newborns who
receive vaccinations and have no other problems should be classified to
DRG 391, code V05.8 was not included as one of the secondary diagnoses
under DRG 391, and therefore the case would not be classified as a
normal newborn (DRG 391). Code V05.8 is assigned to DRG 390 as a
default, since it is not included under another complicated neonate DRG
or the normal newborn DRG.
Based on inquiries we have received, we reviewed the
appropriateness of including diagnosis code V05.8 on the list of
acceptable secondary diagnoses under DRG 390. It was pointed out that
by including V05.8 on the acceptable secondary diagnosis list for DRG
390, newborns who receive vaccinations are classified as having
significant health problems. The inquirers believed this incorrectly
labels an otherwise healthy newborn as having a significant medical
condition. Providing a vaccination to a newborn is performed to prevent
the infant from contracting a disease.
We agree with the inquirers that, absent any evidence of disease, a
newborn should not be considered as having a significant problem simply
because a preventative vaccination was provided. Therefore, we are
proposing that V05.8 be removed from the list of acceptable secondary
diagnoses under DRG 390 and assigned as a secondary diagnosis under DRG
39l. In doing so, these cases would no longer be classified to DRG 390.
[[Page 26289]]
b. Diagnosis Code 666.02 (Third-stage Postpartum Hemorrhage, Delivered
With Postpartum Complication)
Diagnosis code 666.02 is assigned to DRG 373 (Vaginal Delivery
without Complicating Diagnosis). This DRG was created for uncomplicated
vaginal deliveries. However, code 666.22 (Delayed and secondary
postpartum hemorrhage, delivered with postpartum complication) is
assigned to DRG 372 (Vaginal Delivery with Complicating Diagnoses).
This means that mothers who had a delayed and secondary postpartum
hemorrhage would be assigned to DRG 372, while mothers who had a third-
stage postpartum hemorrhage would not be considered as a complicated
delivery.
We believe a third-stage postpartum hemorrhage should be considered
a complicating diagnosis and, in order to more appropriately categorize
these cases, we are proposing that diagnosis code 666.02 be removed
from DRG 373 and assigned as a complicating diagnosis under DRG 372.
c. Diagnosis Code 759.89 (Specified Congenital Anomalies, NEC)
(Alport's Syndrome)
Alport's Syndrome (also referred to as hereditary nephritis) is an
inherited disorder involving damage to the kidney, blood in the urine,
and, in some cases, loss of hearing. It may also include loss of
vision. Patients who are not treated early enough or who do not respond
to treatment may progress to renal failure. A kidney transplant is one
treatment option for these cases. As with many of the congenital
anomalies, there is no unique ICD-9-CM code for this condition.
Alport's Syndrome, along with many other rare and diverse congenital
anomalies, is assigned to the rather nonspecific diagnosis code 759.89
(Specific congenital anomalies, NEC). Examples include William
Syndrome, Brachio-Oto-Renal Syndrome, and Costello's Syndrome. Each of
these is a unique hereditary disorder affecting a variety of body
systems.
Patients can be diagnosed and treated for congenital anomalies
throughout their lives; treatment is not restricted to the neonatal
period. In our GROUPER, however, each diagnosis code is assigned to
just one MDC. In this case, diagnosis code 759.89 is assigned to MDC 15
(Newborns and Other Neonates with Conditions Originating in the
Perinatal Period) even though the patient may be an adult.
We have received a request from a physician concerning renal
transplants for patients with Alport's Syndrome. The physician pointed
out that when a patient with Alport's Syndrome is admitted for a kidney
transplant, the case is assigned to DRG 390 (Neonate with Other
Significant Problems). In these instances, when the principal diagnosis
is code 759.89, the case is classified to MDC 15 even though the
patient may no longer be a newborn. The physician believed that these
cases should be assigned to DRG 302 (Kidney Transplant).
The inquirer suggested moving diagnosis code 759.89 to MDC 11
(Diseases and Disorders of the Kidney and Urinary Tract) so that when a
kidney transplant is performed, it will be assigned to DRG 302.
Although this seems quite appropriate for patients with Alport's
Syndrome found in diagnosis code 759.89, it does not work well for the
wide variety of patients also described by this code. Many others would
be inappropriately classified to MDC 11.
Alport's Syndrome cases with code 759.89 as a principal diagnosis
who receive a kidney transplant are assigned to DRG 468 (Extensive OR
Procedure Unrelated to Principal Diagnosis). This DRG has a FY 2000
relative weight of 3.6400. Also for FY 2000, DRG 302 (Kidney
Transplant) has a relative weight of 3.5669. Therefore, the payment
amounts are in fact comparable.
There are several options for resolving this issue:
(1) If the case is assigned a principal diagnosis code of renal
failure with Alport's Syndrome as a secondary diagnosis, the case could
be assigned to DRG 302. As this option would represent a change in the
sequencing of congenital anomaly codes and related complications, it
would have to be evaluated and subsequently approved by the Editorial
Advisory Board for Coding Clinic for ICD-9-CM. This Editorial Advisory
Board contains representatives from the physician, coding, and hospital
industry. Final decisions on coding policy issues are made by the
representatives from the American Hospital Association, the American
Health Information Management Association, the National Center for
Health Statistics, and HCFA.
Since a change in sequencing of congenital anomaly codes and their
manifestations and complications would require a change of coding
policy, this issue was brought to the Editorial Advisory Board, which
is currently evaluating it. A final decision on any proposed policy
change would not be finalized and published in time for either this
proposed rule or the final rule. Therefore, this option would not
assist in immediately addressing the issue at hand.
(2) A unique ICD-9-CM diagnosis code could be created for Alport's
Syndrome that could then be evaluated for possible assignment within
MDC 11. This issue has been referred to the National Center for Health
Statistics for consideration as a future coding modification.
One difficulty with this option is the large number of congenital
anomalies and the limited number of unused codes in this section of
ICD-9-CM. Each new code must be carefully evaluated for
appropriateness.
(3) A third option, which was already addressed, involves moving
diagnosis code 759.89 to MDC 11. The problem with this approach is that
many cases would then be misassigned to MDC 11 because the congenital
anomaly would not involve diseases of the kidney and urinary tract.
(4) A fourth option would be to leave the coding and DRG assignment
as they currently exist. Since few cases exist, the overall impact may
be minimal.
To evaluate the impact of leaving the DRG assignment as it
currently exists, we examined data from a 10-percent sample of Medicare
cases in the FY 1999 MedPAR file. There were 95 cases assigned to a
wide range of DRGs with code 759.89 as a secondary diagnosis. There was
only one case assigned to MDC 15 with a principal diagnosis of code
759.89.
We are recommending that diagnosis code 759.89 remain in MDC 15,
since it encompasses such a wide variety of conditions. In addition, we
are not proposing a change in the DRG assignment because the payment
impact would be minimal and the cases few. We will continue to pursue
the possibility of modifying the ICD-9-CM code as well as evaluating
the coding rules.
4. MDC 17 (Myeloproliferative Diseases and Disorders and Poorly
Differentiated Neoplasm)
Diagnosis code 273.8 (Disorders of plasma protein metabolism, NEC)
is assigned to DRG 403 (Lymphoma and Nonacute Leukemia with CC) and DRG
404 (Lymphoma and Nonacute Leukemia without CC). A disorder of plasma
protein metabolism does not mean one has a lymphoma with nonacute
leukemia. An individual can have a disorder of plasma protein
metabolism without having a lymphoma or leukemia.
We have received an inquiry on the appropriateness of including
diagnosis code 273.8 in DRGs 403 and 404. The inquirer pointed out that
disorders of
[[Page 26290]]
plasma protein metabolism are not lymphomas or leukemia. We agree that
diagnosis code 273.8 is not a lymphoma or leukemia and is more closely
related to DRG 413 (Other Myeloproliferative Disorders or Poorly
Differentiated Neoplasm Diagnoses with CC) and DRG 414 (Other
Myeloproliferative Disorders or Poorly Differentiated Neoplasm
Diagnoses without CC).
We examined charge data drawn from cases assigned to diagnosis code
273.8 in a 10-percent sample of Medicare cases in the FY 1999 MedPAR
file and found that the average charges for these cases were also more
closely related to DRGs 413 and 414 than to DRGs 403 and 404, as
demonstrated in the following chart.
----------------------------------------------------------------------------------------------------------------
DRGs 403/404 all cases in 10-percent sample DRGs 413/414 all cases in 10-percent sample
----------------------------------------------------------------------------------------------------------------
Average Average
DRG Count charge DRG Count charge
----------------------------------------------------------------------------------------------------------------
403................................ 2,107 $17,617 413................... 387 $12,278
404................................ 296 8,063 414................... 47 5,906
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Average Average
Code DRG Count charge Code DRG Count charge
----------------------------------------------------------------------------------------------------------------
273.8 403............. 17 $8,573 273.8 404............ 3 $6,644
----------------------------------------------------------------------------------------------------------------
Therefore, we are proposing to move diagnosis code 273.8 from DRGs
403 and 404 to DRGs 413 and 414.
Diagnosis code 273.8 is also included in the following surgical
DRGs that are performed on patients with lymphoma or leukemia:
DRG 400 (Lymphoma and Leukemia with Major OR Procedure).
DRG 401 (Lymphoma and Nonacute Leukemia with Other OR
Procedure with CC).
DRG 402 (Lymphoma and Nonacute Leukemia with Other OR
Procedure without CC).
The same clinical issue would apply to these surgical DRGS
performed on patients with lymphoma and leukemia. Code 273.8 should be
assigned to the surgical DRGs for myeloproliferative disorders since
the cases are clinically similar and, as stated before, code 273.8 is
not clinically similar to lymphomas and leukemias. Therefore, we are
also proposing that code 273.8 be removed from the surgical DRGs
related to lymphoma and leukemia (DRGS 400, 401, and 402) and assigned
to the following myeloproliferative surgical DRGS, based on the
procedure performed:
DRG 406 (Myeloproliferative Disorders or Poorly
Differentiated Neoplasms with Major OR Procedures with CC).
DRG 407 (Myeloproliferative Disorders Or Poorly
Differentiated Neoplasms with Major OR Procedures without CC).
DRG 408 (Myeloproliferative Disorders or Poorly
Differentiated Neoplasms with Other OR Procedures).
5. Surgical Hierarchies
Some inpatient stays entail multiple surgical procedures, each one
of which, occurring by itself, could result in assignment of the case
to a different DRG within the MDC to which the principal diagnosis is
assigned. Therefore, it is 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 11, the surgical class "kidney transplant" consists of a
single DRG (DRG 302) and the class "kidney, ureter and major bladder
procedures" consists of three DRGs (DRGs 303, 304, and 305).
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 only be considered
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.
[[Page 26291]]
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 are
proposing to modify the surgical hierarchy as set forth below. As we
stated in the September 1, 1989 final rule (54 FR 36457), we are 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 the revised GROUPER software at the time the proposed
rule is prepared. Rather, we simulate most major classification changes
to approximate the placement of cases under the proposed
reclassification and then determine the average charge for each DRG.
These average charges then serve as our best estimate of relative
resource use for each surgical class. We test the proposed surgical
hierarchy changes after the revised GROUPER is received and reflect the
final changes in the DRG relative weights in the final rule. Further,
as discussed in section II.C of this preamble, we anticipate that the
final recalibrated weights will be somewhat different from those
proposed, since they will be based on more complete data. Consequently,
further revision of the hierarchy, using the above principles, may be
necessary in the final rule.
At this time, we are proposing to revise the surgical hierarchy for
the pre-MDC DRGs, MDC 8 (Diseases and Disorders of the Musculoskeletal
System and Connective Tissue), and MDC 10 (Endocrine, Nutritional, and
Metabolic Diseases and Disorders) as follows:
In the pre-MDC DRGs, as we stated previously, we are
proposing to move DRG 103 (Heart Transplant) from MDC 5 to pre-MDC. We
are proposing to reorder DRG 103 (Heart Transplant) above DRG 483
(Tracheostomy Except for Face, Mouth, and Neck Diagnoses).
In the pre-MDC DRGs, we are proposing to reorder DRG 481
(Bone Marrow Transplant) above DRG 495 (Lung Transplant).
In MDC 8, we are proposing to reorder DRG 230 (Local
Excision and Removal of Internal Fixation Devices of Hip and Femur)
above DRG 226 (Soft Tissue Procedures with CC) and DRG 227 (Soft Tissue
Procedures without CC).
In MDC 10, we are proposing to reorder DRG 288 (OR
Procedures for Obesity) above DRG 285 (Amputation of Lower Limb for
Endocrine, Nutritional, and Metabolic Disorders).
6. Refinement of Complications and Comorbidities (CC) List
In the September 1, 1987 final notice (52 FR 33143) concerning
changes to the DRG classification system, 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 for the following reasons: (1) To preclude coding of CCs for
closely related conditions; (2) to preclude duplicative coding or
inconsistent coding from being treated as CCs; and (3) to ensure that
cases are appropriately classified between the complicated and
uncomplicated DRGs in a pair. We developed this standard list of
diagnoses 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 deleting CCs
already on the list. At this time, we do not propose to delete any of
the diagnosis codes on the CC list.
In the May 19, 1987 proposed notice (52 FR 18877) concerning
changes to the DRG classification system, we explained that the
excluded secondary diagnoses were established using the following five
principles:
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)).
Specific and nonspecific (that is, not otherwise specified
(NOS)) diagnosis codes for a condition should not be considered CCs for
one another.
Conditions that may not coexist, such as partial/total,
unilateral/bilateral, obstructed/unobstructed, and benign/malignant,
should not be considered CCs for one another.
The same condition in anatomically proximal sites should
not be considered CCs for one another.
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 only
as 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 (53 FR 38485) for the revision made for the discharges
occurring in FY 1989; the September 1, 1989 final rule (54 FR 36552)
for the FY 1990 revision; the September 4, 1990 final rule (55 FR
36126) for the FY 1991 revision; the August 30, 1991 final rule (56 FR
43209) for the FY 1992 revision; the September 1, 1992 final rule (57
FR 39753) for the FY 1993 revision; the September 1, 1993 final rule
(58 FR 46278) for the FY 1994 revisions; the September 1, 1994 final
rule (59 FR 45334) for the FY 1995 revisions; the September 1, 1995
final rule (60 FR 45782) for the FY 1996 revisions; the August 30, 1996
final rule (61 FR 46171) for the FY 1997 revisions; the August 29, 1997
final rule (62 FR 45966) for the FY 1998 revisions; and the July 31,
1998 final rule (63 FR 40954) for the FY 1999 revisions. In the July
30, 1999 final rule (64 FR 41490) we did not modify the CC Exclusions
List for FY 2000 because we did not make any changes to the ICD-9-CM
codes for FY 2000.
We are proposing a limited revision of the CC Exclusions List to
take into account the changes that will be made in the ICD-9-CM
diagnosis coding system effective October 1, 2000. (See section II.B.8.
below, for a discussion of ICD-9-CM changes.) These proposed changes
are being made in accordance with the principles established when we
created the CC Exclusions List in 1987.
Tables 6F and 6G in section V. of the Addendum to this proposed
rule contain the proposed revisions to the CC Exclusions List that
would be effective for discharges occurring on or after October 1,
2000. Each table shows the principal diagnoses with proposed changes to
the excluded CCs. Each of these principal diagnoses is shown with an
asterisk and the additions or deletions to the CC Exclusions List are
provided in an indented column immediately following the affected
principal diagnosis.
CCs that are added to the list are in Table 6F--Additions to the CC
Exclusions List. Beginning with discharges on or after October 1, 2000,
the indented diagnoses will not be recognized by the GROUPER as valid
CCs for the asterisked principal diagnosis.
CCs that are deleted from the list are in Table 6G--Deletions from
the CC
[[Page 26292]]
Exclusions List. Beginning with discharges on or after October 1, 2000,
the indented diagnoses will be recognized by the GROUPER as valid CCs
for the asterisked principal diagnosis.
Copies of the original CC Exclusions List applicable to FY 1988 can
be obtained from the National Technical Information Service (NTIS) of
the Department of Commerce. It is available in hard copy for $92.00
plus $6.00 shipping and handling and on microfiche for $20.50, plus
$4.00 for shipping and handling. A request for the FY 1988 CC
Exclusions List (which should include the identification accession
number (PB) 88-133970) should be made to the following address:
National Technical Information Service, United States Department of
Commerce, 5285 Port Royal Road, Springfield, Virginia 22161; or by
calling (703) 487-4650.
Users should be aware of the fact that all revisions to the CC
Exclusions List (FYs 1989, 1990, 1991, 1992, 1993, 1994, 1995, 1996,
1997, 1998, and 1999) and those in Tables 6F and 6G of this document
must be incorporated into the list purchased from NTIS in order to
obtain the CC Exclusions List applicable for discharges occurring on or
after October 1, 2000. (Note: There was no CC Exclusions List in FY
2000 because we did not make changes to the ICD-9-CM codes for FY
2000.)
Alternatively, the complete documentation of the GROUPER logic,
including the current CC Exclusions List, is available from 3M/Health
Information Systems (HIS), which, under contract with HCFA, is
responsible for updating and maintaining the GROUPER program. The
current DRG Definitions Manual, Version 17.0, is available for $225.00,
which includes $15.00 for shipping and handling. Version 18.0 of this
manual, which includes the final FY 2001 DRG changes, will be available
in October 2000 for $225.00. These manuals may be obtained by writing
3M/HIS at the following address: 100 Barnes Road, Wallingford,
Connecticut 06492; or by calling (203) 949-0303. Please specify the
revision or revisions requested.
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) 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
not occurring 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 (55
FR 36135), August 30, 1991 (56 FR 43212), September 1, 1992 (57 FR
23625), September 1, 1993 (58 FR 46279), September 1, 1994 (59 FR
45336), September 1, 1995 (60 FR 45783), August 30, 1996 (61 FR 46173),
and August 29, 1997 (62 FR 45981), we moved several other procedures
from DRG 468 to 477, and some procedures from DRG 477 to 468. No
procedures were moved in FY 1999, as noted in the July 31, 1998 final
rule (63 FR 40962), or in FY 2000, as noted in the July 30, 1999 final
rule (64 FR 41496).
a. Moving Procedure Codes From DRGs 468 or 477 to MDCs
We annually conduct a review of procedures producing assignment to
DRG 468 or DRG 477 on the basis of volume, by procedure, to see if it
would be appropriate to move procedure codes out of these DRGs into one
of the surgical DRGs for the MDC into which the principal diagnosis
falls. The data are arrayed two ways for comparison purposes. We look
at a frequency count of each major operative procedure code. We also
compare procedures across MDCs by volume of procedure codes within each
MDC. That is, using procedure code 57.49 (Other transurethral excision
or destruction of lesion or tissue of bladder) as an example, we
determined that this particular code accounted for the highest number
of major operative procedures (162 cases, or 9.8 percent of all cases)
reported in the sample of DRG 477. In addition, we determined that
procedure code 57.49 appeared in MDC 4 (Diseases and Disorders of the
Respiratory System) 28 times as well as in 9 other MDCs.
Using a 10-percent sample of the FY 1999 MedPAR file, we determined
that the quantity of cases in DRG 477 totaled 1,650. There were 106
instances where the major operative procedure appeared only once (6.4
percent of the time), resulting in assignment to DRG 477.
Using the same 10-percent sample of the FY 1999 MedPAR file, we
reviewed DRG 468. There were a total of 3,858 cases, with one major
operative code causing the DRG assignment 311 times (or 8 percent) and
230 instances where the major operative procedure appeared only once
(or 6 percent of the time).
Our medical consultants then identified 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 did
not identify any necessary changes in procedures under either DRG 468
or 477 and, therefore, are not proposing to move any procedures from
either DRG 468 or DRG 477 to one of the surgical DRGs.
b. Reassignment of Procedures Among DRGs 468, 476, and 477
We also annually review the list of ICD-9-CM procedures that, when
in combination with their principal diagnosis code, result in
assignment to DRGs 468, 476, and 477, to ascertain if any of those
procedures should be moved from one of these DRGs to another of these
DRGs based on average charges and length of stay. We look at the data
for trends such as shifts in treatment practice or reporting practice
that would make the resulting DRG assignment illogical. If our medical
consultants were to find these shifts, we
[[Page 26293]]
would propose moving cases to keep the DRGs clinically similar or to
provide payment for the cases in a similar manner. 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 are
not proposing 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.
c. Adding Diagnosis Codes to MDCs
It has been brought to our attention that an ICD-9-CM diagnosis
code should be added to DRG 482 (Tracheostomy for Face, Mouth and Neck
Diagnoses) to preserve clinical coherence and homogeneity of the
system. In the case of a patient who has a facial infection (diagnosis
code 682.0 (Other cellulitis and abscess, Face)), the face may become
extremely swollen and the patient's ability to breathe might be
impaired. It might be deemed medically necessary to perform a temporary
tracheostomy (procedure code 31.1) on the patient until the swelling
subsides enough for the patient to once again breathe on his or her
own.
The combination of diagnosis code 682.0 and procedure code 31.1
results in assignment to DRG 483 (Tracheostomy Except for Face, Mouth
and Neck Diagnoses). The absence of diagnosis code 682.0 in DRG 483
forces the GROUPER algorithm to assign the case based solely on the
procedure code, without taking this diagnosis into account. Clearly
this was not the intent, as diagnosis code 682.0 should be included
with other face, mouth and neck diagnosis. We believe that cases such
as these would appropriately be assigned to DRG 482. Therefore, we are
proposing to add diagnosis code 682.0 to the list of other face, mouth
and neck diagnoses already in the principal diagnosis list in DRG 482.
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, charged with maintaining and
updating the ICD-9-CM system. The Committee is jointly responsible for
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, 1998 and November 2, 1998. Even though
the Committee conducted public meetings and considered approval of
coding changes for FY 2000 implementation, we did not implement any
changes to ICD-9-CM codes for FY 2000 because of our major efforts to
ensure that all of the Medicare computer systems were compliant with
the year 2000. Therefore, the code proposals presented at the public
meetings held on June 4, 1998 and November 2, 1998, that (if approved)
ordinarily would have been included as new codes for October 1, 1999,
were held for consideration for inclusion in this proposed annual
update for FY 2001.
The Committee also presented proposals for coding changes for
implementation in FY 2001 at public meetings held on May 13, 1999 and
November 12, 1999, and finalized the coding changes after consideration
of comments received at the meetings and in writing by January 7, 2000.
Copies of the Coordination and Maintenance Committee minutes of the
1999 meetings can be obtained from the HCFA Home Page by typing http://
www.hcfa.gov/medicare/icd9cm.htm. 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,
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.
The ICD-9-CM code changes that have been approved will become
effective October 1, 2000. The new ICD-9-CM codes are listed, along
with their proposed DRG classifications, in Tables 6A and 6B (New
Diagnosis Codes and New Procedure Codes, respectively) in section VI.
of the Addendum to this proposed rule. As we stated above, the code
numbers and their titles were presented for public comment at the ICD-
9-CM Coordination and Maintenance Committee meetings. Both oral and
written comments were considered before the codes were approved.
Therefore, we are soliciting comments only on the proposed DRG
classification of these new codes.
Further, the Committee has approved the expansion of certain ICD-9-
CM codes to require an additional digit for valid code assignment.
Diagnosis codes that have been replaced by expanded codes or other
codes, or have been deleted are in Table 6C (Invalid Diagnosis Codes).
These invalid diagnosis codes will not be recognized by the GROUPER
beginning with discharges occurring on or after October 1, 2000. For
codes that have been replaced by new or expanded codes, the
corresponding new or expanded diagnosis codes are included in Table 6A
(New Diagnosis Codes). There were no procedure codes that were replaced
by expanded codes or other codes, or were deleted. Revisions to
diagnosis code titles are in Table 6D (Revised Diagnosis Code Titles),
which also include the proposed DRG assignments
[[Page 26294]]
for these revised codes. Revisions to procedure code titles are in
Table 6E (Revised Procedure Codes Titles).
9. Other Issues
a. Immunotherapy
Effective October 1, 1994, procedure code 99.28 (Injection or
infusion of biologic response modifier (BRM) as an antineoplastic
agent) was created and designated as a non-OR procedure that does not
affect DRG assignment. This cancer treatment involving biological
response modifiers is also known as BRM therapy or immunotherapy.
In response to a comment on the May 7, 1999 proposed rule, for the
FY 2000 final rule we performed analysis of cases for which procedure
code 99.28 was reported using the 100 percent FY 1998 MedPAR file. The
commenter 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
Nonacute Leukemia with CC) would be an appropriate DRG.
Based on the commenter's request, we examined cases only for
hospitals that use the particular drug manufactured by the commenter.
We concluded that due to the variation of charges across the cases and
the limited number of cases distributed across 19 different DRGs, it
would be inappropriate to classify these cases to a single DRG. For
example, it would be inappropriate 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 Neoplasm), the MDC that includes DRG 403. We stated in
the July 30, 1999 final rule (64 FR 41497) that we would perform a full
analysis of immunotherapy cases using the FY 1999 MedPAR data to
determine if changes are needed.
Using 100 percent of the data in the FY 1999 MedPAR file, we
performed an analysis of all cases for which procedure code 99.28 was
reported. We identified 1,179 cases in 136 DRGs in 22 MDCs. No more
than 141 cases were assigned to any one particular DRG.
Of the 1,179 cases, 141 cases (approximately 12 percent) were
assigned to DRG 403 in MDC 17. We found approximately one-half of these
cases had other procedures performed in addition to receiving
immunotherapy, such as chemotherapy, bone marrow biopsy, insertion of
totally implantable vascular access device, thoracentesis, or
percutaneous abdominal drainage, which may account for the increased
charges. There were 123 immunotherapy cases assigned to DRG 82
(Respiratory Neoplasms) in MDC 4 (Diseases and Disorders of the
Respiratory System). We noted that, in some cases, in addition to
immunotherapy, other procedures were performed, such as insertion of an
intercostal catheter for drainage, thoracentesis, or chemotherapy.
There were 84 cases assigned to DRG 416 (Septicemia, Age >17) in
MDC 18 (Infectious and Parasitic Diseases (Systemic or Unspecified
Sites)). The principal diagnosis for this DRG is septicemia and, in
addition to receiving treatment for septicemia, immunotherapy was also
given. There were 79 cases assigned to DRG 410 (Chemotherapy without
Acute Leukemia as Secondary Diagnosis) in MDC 17.
The cost of immunotherapy is averaged into the weight for these
DRGS and, based on our analysis, we do not believe a reclassification
of these cases is warranted. Due to the limited number of cases that
were distributed throughout 136 DRGs in 22 MDCs and the variation of
charges, we concluded that it would be inappropriate to classify these
cases into a single DRG.
Although there were 141 cases assigned to DRG 403, it would be
inappropriate to place all immunotherapy cases, regardless of
diagnosis, into a DRG that is designated for lymphoma and nonacute
leukemia. We establish DRGs based on clinical coherence and resource
utilization. Each DRG 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. To the
extent 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. We have not received any comments
from hospitals regarding payment for immunotherapy cases.
b. Pancreas Transplant
Effective July 1, 1999, Medicare covers whole organ pancreas
transplantation if the transplantation is performed simultaneously with
or after a kidney transplant (procedure codes 55.69, Other kidney
transplantation, and V42.0, Organ or tissue replaced by transplant,
Kidney) (Transmittal No. 115, April 1999). We note that when we
published the notification of this coverage in the July 30, 1999 final
rule (64 FR 41497), we inadvertently made an error in announcing the
covered codes. We cited the incorrect codes for pancreas
transplantation as procedure code 52.80 (Pancreatic transplant, not
otherwise specified) and 52.83 (Heterotransplant of pancreas). The
correct procedure codes for pancreas transplantation are 52.80
(Pancreatic transplant, not otherwise specified) and 52.82
(Homotransplant of pancreas). We will revise the Coverage Issues Manual
to reflect this correction.
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 is excluded from coverage.
Medicare also excludes coverage of transplantation of partial
pancreatic tissue or islet cells.
In the July 30, 1999 final rule (64 FR 41497), we indicated that we
planned to review discharge data to determine whether a new DRG should
be created, or existing DRGs modified, to further classify pancreas
transplantation in combination with kidney transplantation.
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 (Diseases and Disorders of the Kidney
and Urinary Tract). If a pancreas transplant is performed following a
kidney transplant (that is, during a different hospital admission) on a
patient with chronic renal failure secondary to diabetes with renal
manifestations, the case is assigned to DRG 468 (Extensive OR Procedure
Unrelated to Principal Diagnosis). This is 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.
Using 100 percent of the data in the FY 1999 MedPAR file (which
contains hospital bills through December 31, 1999), we performed an
analysis of the cases for which procedure codes 52.80 and 52.83 were
reported. We identified a total of 79 cases in 8 DRGs, in 3 MDCs, and
in 1 pre-MDC. Of the 79 cases identified, 49 cases were assigned to DRG
302, 14 cases were assigned to DRG 468, and 8 cases were assigned to
DRG 191 (Pancreas, Liver and Shunt
[[Page 26295]]
Procedures with CC). The additional 8 cases were distributed over 5
other assorted DRGs, and due to their disparity, were not considered in
our evaluation.
We examined our data to determine whether we should propose a new
kidney and pancreas transplant DRG at this time. We identified 49 such
dual transplant cases in the FY 1999 MedPAR file. We do not believe
this is a sufficient sample size to warrant the creation of a new DRG.
Furthermore, we would note that nearly half of these cases occurred at
a hospital in Maryland, which is not paid under the prospective payment
system. The rest of the cases are spread across multiple hospitals,
with no single hospital having more than 5 cases in the FY 1999 MedPAR.
C. Recalibration of DRG Weights.
We are proposing to use the same basic methodology for the FY 2001
recalibration as we did for FY 2000 (July 30, 1999 final rule (64 FR
41498)). That is, we would recalibrate the weights based on charge data
for Medicare discharges. However, we propose to use the most current
charge information available, the FY 1999 MedPAR file. (For the FY 2000
recalibration, we used the FY 1998 MedPAR file.) The MedPAR file is
based on fully coded diagnostic and procedure data for all Medicare
inpatient hospital bills.
The proposed recalibrated DRG relative weights are constructed from
FY 1999 MedPAR data (discharges occurring between October 1, 1998 and
September 30, 1999), based on bills received by HCFA through December
31, 1999, from all hospitals subject to the prospective payment system
and short-term acute care hospitals in waiver States. The FY 1999
MedPAR file includes data for approximately 11,059,625 Medicare
discharges.
The methodology used to calculate the proposed DRG relative weights
from the FY 1999 MedPAR file is as follows:
To the extent possible, all the claims were regrouped
using the proposed DRG classification revisions discussed in section
II.B of this preamble. As noted in section II.B.5, due to the
unavailability of the revised GROUPER software, we simulated most major
classification changes to approximate the placement of cases under the
proposed reclassification. However, there are some changes that cannot
be modeled.
Charges were standardized to remove the effects of
differences in area wage levels, indirect medical education and
disproportionate share payments, and, for hospitals in Alaska and
Hawaii, the applicable cost-of-living adjustment.
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.
We then eliminated statistical outliers, using the same
criteria 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 are eliminated.
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 transfer payment under the per diem payment methodology to the
full DRG payment for nontransfer cases. That is, transfer cases paid
under the transfer methodology equal to half of what the case would
receive as a nontransfer would be counted as 0.5 of a total case.
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 1999 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.)
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);
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 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 propose to use that same case threshold
in recalibrating the DRG weights for FY 2001. Using the FY 1999 MedPAR
data set, there are 40 DRGs that contain fewer than 10 cases. We
computed the weights for these 40 low-volume DRGs by adjusting the FY
2000 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 proposed DRG classification changes, result in an average
case weight that is different from the average case weight before
recalibration. Therefore, the new weights are normalized by an
adjustment factor (1.45431) 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 assures 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 proposed rule, we are
proposing to make a budget neutrality adjustment to assure that the
requirement of section 1886(d)(4)(C)(iii) of the Act is met.
III. Proposed 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
[[Page 26296]]
Statistical Areas (MSAs), Primary MSAs (PMSAs), and New England County
Metropolitan Areas (NECMAs) issued by the Office of Management and
Budget (OMB). The OMB also designates Consolidated MSAs (CMSAs). A CMSA
is a metropolitan area with a population of one million or more,
comprising 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. For purposes of the wage index, we
combine all of the rural counties in a State to calculate a rural wage
index for that State.
We note that effective April 1, 1990, the term Metropolitan Area
(MA) replaced the term MSA (which had been used since June 30, 1983) to
describe the set of metropolitan areas consisting 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 2001 Wage Index Update
The proposed FY 2001 wage index values in section VI of the
Addendum to this proposed rule (effective for hospital discharges
occurring on or after October 1, 2000 and before October 1, 2001) are
based on the data collected from the Medicare cost reports submitted by
hospitals for cost reporting periods beginning in FY 1997 (the FY 2000
wage index was based on FY 1996 wage data).
The proposed FY 2001 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 2000 wage index:
Salaries and hours from short-term, acute care hospitals.
Home office costs and hours.
Certain contract labor costs and hours.
Wage-related costs.
Consistent with the wage index methodology for FY 2000, the
proposed wage index for FY 2001 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.
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 Public Law 105-33 provides that, for discharges on or after
October 1, 1997, the area wage index 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.
C. FY 2001 Wage Index Proposal
Because it is used to adjust payments to hospitals under the
prospective payment system, the hospital wage index should, to the
extent possible, reflect the wage costs associated with the areas of
the hospital included under the hospital inpatient prospective payment
system. In response to concerns within the hospital community related
to the removal from the wage index calculation costs related to
graduate medical education (GME) (teaching physicians and residents),
and certified registered nurse anesthetists (CRNAs), which are paid by
Medicare separately from the prospective payment system, the American
Hospital Association (AHA) convened a workgroup to develop a consensus
recommendation on this issue. The workgroup recommended that costs
related to GME and CRNAs 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
specified in the July 30, 1999 final rule (64 FR 41505) that we would
phase-out these costs from the calculation of the wage index over a 5-
year period, beginning in FY 2000. In keeping with the decision to
phase-out costs related to GME and CRNAs, the proposed FY 2001 wage
index is based on a blend of 60 percent of an average hourly wage
including these costs, and 40 percent of an average hourly wage
excluding these costs.
1. Teaching Physician Costs and Hours Survey
As discussed in the July 30, 1999 final rule, because the FY 1996
cost reporting data did not separate teaching physician costs from
other physician Part A costs, we instructed our fiscal intermediaries
to survey teaching hospitals to collect data on teaching physician
costs and hours payable under the per resident amounts (Sec. 413.86)
and reported on Worksheet A, Line 23 of the hospitals' cost report.
The FY 1997 cost reports also do not separately report teaching
physician costs. Therefore, we once again conducted a special survey to
collect data on these costs. (For the FY 1998 cost reports, we have
revised the Worksheet S-3, Part II so that hospitals can separately
report teaching physician Part A costs. Therefore, after this year, it
will no longer be necessary for us to conduct this special survey.)
The survey data collected as of mid-January 2000 were included in
the preliminary public use data file made available on the Internet in
February 2000 at HCFA's home page (http://www.hcfa.gov). At that time,
we had received teaching physician data for 459 out of 770 teaching
hospitals reporting physician Part A costs on their Worksheet S-3, Part
II. Also, in some cases, intermediaries reported that teaching
hospitals did not incur teaching physician costs. In early January
2000, we instructed intermediaries to review 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.
When we notified the hospitals, through our fiscal intermediaries,
that they could review the survey data on the Internet, we also
notified hospitals that requests for changes to the teaching survey
data must be submitted by March 6, 2000. We instructed fiscal
intermediaries to review the requests for changes received from
hospitals and submit necessary data revisions to HCFA by April 3, 2000.
[[Page 26297]]
We removed from the wage data the physician Part A teaching costs
and hours reported on the survey form for every hospital that completed
the survey. These data had been verified by the fiscal intermediary
before submission to HCFA. We have identified 42 teaching hospitals in
our database that reported physician Part A costs on Line 4 of their
Worksheet S-3 and teaching-related costs on Line 23 of Worksheet A,
Column 1, but for which we do not have teaching physician costs from
the survey because the hospitals failed to complete the survey. As we
did in the case of such hospitals in calculating the FY 2000 wage
index, for purposes of calculating the FY 2001 wage index, we propose
to subtract the costs reported on Line 23 of the Worksheet A, Column 1
(GME Other Program Costs) from Line 1 of the Worksheet S-3. These costs
(from Line 23, Column 1 of Worksheet A) are included in Line 1 of the
Worksheet
S-3, which is the sum of Column 1, Worksheet A. They also represent
costs for which the hospital is paid through the per resident amount
under the direct GME payment. To determine the hours to be removed, the
costs reported on Line 23 of the Worksheet A, Column 1 would be divided
by the national average hourly wage for teaching physicians based upon
the survey of $65.62.
For the FY 2000 wage index, the AHA workgroup recommended that, if
reliable teaching physician data were not available for removing
teaching costs from hospitals' total physician Part A costs, HCFA
should remove 80 percent of the costs and hours reported by hospitals
attributable to physicians' Part A services. In calculating the FY 2000
wage index, if we did not receive survey data for a teaching hospital,
we removed 80 percent of the hospital's reported total physician Part A
costs and hours from the calculation. For the FY 2001 wage index, we
are proposing a different approach. In some instances, fiscal
intermediaries have verified that teaching hospitals do not have
teaching physician costs; for these hospitals, it is not necessary to
adjust the hospitals' physician Part A costs. We are actively
conferring with the fiscal intermediaries to distinguish teaching
hospitals that do not have teaching physician costs from teaching
hospitals that have not identified the portion of their physician Part
A costs associated with teaching physicians (that is, hospitals that
did not complete the teaching survey and did not report teaching-
related costs on Worksheet A, Line 23). We propose to remove 100
percent of the physician Part A costs and hours (reported on Worksheet
S-3, Lines 4, 10, 12, and 18) in the FY 2001 wage index calculation for
those hospitals where the fiscal intermediary verifies that the
hospital has otherwise unidentified teaching physician costs included
in physician Part A costs and hours.
It should be noted that Line 23 of Worksheet A, Column 1, flows
directly into hospitals' total salaries on Worksheet S-3, Part II. Line
23 contains GME costs not directly attributable to residents' salaries
or fringe benefits. Therefore, these costs tend to be costs associated
with teaching physicians. To the extent a hospital fails to separately
identify the proportion of its Line 23 Worksheet A costs associated
with teaching physicians, we believe it is reasonable to remove all of
these costs under the presumption that they are all associated with
teaching physicians.
Thus, for the proposed wage index, we are either using the data
submitted on the teaching physician survey or, in the absence of such
data, removing the amount reported on Line 23 of Worksheet A, Column 1
or removing 100 percent of physician Part A costs reported on Worksheet
S-3.
2. Nurse Practitioner and Clinical Nurse Specialist Costs
The current wage index includes salaries and wage-related costs for
nurse practitioners (NPs) and clinical nurse specialists (CNSs) who,
similar to physician assistants and CRNAs (unless at hospitals under
the rural pass-through exception for CRNAs), are paid under the
physician fee schedule. Over the past year, we have received several
inquiries from hospitals and fiscal intermediaries regarding NP costs
and how they should be handled for purposes of the hospital wage index.
Because Medicare generally pays for NP and CNS costs under Part B
outside the hospital prospective payment system, removing NP and CNS
Part B costs from the wage index calculation would be consistent with
our general policy to exclude, to the extent possible, costs that are
not paid through the hospital prospective payment system. Because NP
and CNS costs are not separately reported on the Worksheet S-3 for FYs
1997, 1998, and 1999, the FY 2000 Worksheet S-3 and cost reporting
instructions will be revised to allow for separate reporting of NP and
CNS Part A and Part B costs. We will exclude the Part B costs beginning
with the FY 2004 wage index. These services are pervasive in both rural
and urban settings. As such, we believe there will be no significant
overall impact resulting from the removal of Part B costs for NPs and
CNSs.
3. Severance and Bonus Pay Costs
On October 6, 1999, we issued a memorandum to hospitals and
intermediaries regarding our policy on treatment of severance and bonus
pay costs in developing the wage index, effective beginning with the FY
2001 wage index. (The hospital cost report instructions also will be
amended to reflect our policy on these costs.) We stated that severance
pay costs may be included on Worksheet S-3 as salaries on Part II, Line
1, only if the associated hours are included. If the hospital has no
accounting of the hours, or if the costs are not based on hours, the
severance pay costs may not be included in the wage index. On the other
hand, bonus pay costs may be included in the cost report on Line 1 of
Worksheet S-3 with no corresponding hours. Due to the inquiries we
continue to receive from hospitals regarding the inclusion of severance
pay costs on cost reports, we are clarifying our policy in this
proposed rule.
Hospitals vary in their accounting of severance pay costs. Some
hospitals base the amounts to be paid on hours, for example, 80 hours
worth of pay. Others do not; for example, a 15-year employee may be
offered a $25,000 buyout package. Some hospitals record associated
hours; others do not. The Wage Index Workgroup has suggested that we
not include any severance pay costs in the wage index calculation, that
these costs are for terminated employees, and, therefore, they should
be considered an administrative rather than a salary expense.
Severance pay costs can be substantial amounts, particularly in
periods of downsizing. We believe that, if severance pay costs are
included with no associated hours, the wage index, which is a relative
measure of wage costs across labor market areas, would be distorted.
Severance pay costs are included in the proposed FY 2001 wage index
as a salary cost to the extent that associated hours are also reported.
However, we are soliciting public comments on this issue.
4. Health Insurance and Health-Related Costs
In the September 1, 1994 final rule (59 FR 45356), we stated that
health insurance, purchased or self-insurance, is a core wage-related
cost. Over the past year, we have received several inquiries from
hospitals and hospital associations requesting that we define
"purchased health insurance costs." In response, in
[[Page 26298]]
this proposed rule, we are clarifying that, for wage index purposes, we
define "purchased health insurance costs" as the premiums and
administrative costs a hospital pays on behalf of its employees for
health insurance coverage. "Self-insurance" includes the hospital's
costs (not charges) for covered services delivered to its employees,
less any amounts paid by the employees, and less the personnel costs
for hospital staff who delivered the services (these costs are already
included in the wage index). For purchased health insurance and self-
health insurance, the included costs must be for services covered in a
health insurance plan.
Also, in the September 1, 1994 final rule (59 FR 45357), we
addressed a comment about the inclusion of health-related costs in the
calculation of the wage index. Such health-related costs include
employee physical examinations, flu shots, and clinic visits, and other
services that are not covered by employees' health insurance plans but
are provided at no cost or at discounted rates to employees of the
hospital. We are clarifying that the costs for these services may be
included as an "other" wage-related cost if (among other criteria),
when all such health-related costs are combined, the total of such
costs is greater than 1 percent of the hospital's total salaries (less
excluded area salaries). As discussed in the September 1, 1994 final
rule (59 FR 45357), a cost may be allowable as an "other wage-related
cost" if it meets certain criteria. Under one criterion, the wage-
related cost must be greater than 1 percent of total salaries (less
excluded area salaries). For purposes of applying this 1-percent test
with respect to the health-related costs at issue here, we look at the
combined total of the health-related costs (not charges) for services
delivered to its employees, less any amounts employees paid, and less
the personnel costs for hospital staff who delivered the services (as
these costs are already included in the wage index).
5. Elimination of Wage Costs Associated With Rural Health Clinics and
Federally Qualified Health Centers
The current hospital wage index includes the salaries and wage-
related costs of hospital-based rural health clinics (RHCs) and
federally qualified health centers (FQHCs). However, Medicare pays for
these costs outside the hospital inpatient prospective payment system.
Effective January 1, 1998, under section 1833(f) of the Act, as amended
by section 4205 of Public Law 105-33, Medicare pays both hospital-based
and freestanding RHCs and FQHCs on a cost-per-visit basis. Medicare
cost reporting forms for RHCs and FQHCs were revised to reflect this
legislative change, beginning with cost reporting periods ending on or
after September 30, 1998 (the FY 1998 cost report). Other cost-
reimbursed outpatient departments, such as ambulatory surgical centers,
community mental health centers, and comprehensive outpatient
rehabilitation facilities, are presently excluded from the wage index.
Therefore, consistent with our wage index refinements that exclude, to
the extent possible, costs associated with services not paid under the
hospital inpatient prospective payment system, we believe it would be
appropriate to exclude all salary costs associated with RHCs and FQHCs
from the wage index calculation if we had feasible, reliable data for
such exclusion.
Because RHC and FQHC costs are not separately reported on the
Worksheet S-3 for FYs 1997, 1998, and 1999, we cannot exclude these
costs from the FY 2001, FY 2002, or FY 2003 wage indexes. Therefore, we
will revise the FY 2000 Worksheet S-3 to begin providing for the
separate reporting of RHC and FQHC salaries, wage-related costs, and
hours. We will evaluate the wage data for RHCs and FQHCs in developing
the FY 2004 wage index.
D. Verification of Wage Data From the Medicare Cost Report
The data for the proposed FY 2001 wage index were obtained from
Worksheet S-3, Parts II and III of the FY 1997 Medicare cost reports.
The data file used to construct the proposed wage index includes FY
1997 data submitted to HCFA as of mid-February 2000. As in past years,
we performed an intensive review of the wage data, mostly through the
use of edits designed to identify aberrant data.
We asked our fiscal intermediaries to revise or verify data
elements that resulted in specific edit failures. Some unresolved data
elements are included in the calculation of the proposed FY 2001 wage
index pending their resolution before calculation of the final FY 2001
wage index. We have instructed the intermediaries to complete their
verification of questionable data elements and to transmit any changes
to the wage data (through HCRIS) no later than April 3, 2000. We expect
that all unresolved data elements will be resolved by that date. The
revised data will be reflected in the final rule.
Also, as part of our editing process, we removed data for 19
hospitals that failed edits. For two of these hospitals, we were unable
to obtain sufficient documentation to verify or revise the data because
the hospitals are no longer participating in the Medicare program or
are in bankruptcy status. Four hospitals had negative average hourly
wages after allocating overhead to their excluded areas and, therefore,
were removed from the calculation. The data from the remaining 13
hospitals also failed the edits and were removed. The data for these
hospitals will be included in the final wage index if we receive
corrected data that pass our edits. As a result, the proposed FY 2001
wage index is calculated based on FY 1997 wage data for 4,926
hospitals.
E. Computation of the Proposed FY 2001 Wage Index
The method used to compute the proposed FY 2001 wage index is as
follows:
Step 1--As noted above, we are proposing to base the FY 2001 wage
index on wage data reported on the FY 1997 Medicare cost reports. We
gathered data from each of the non-Federal, short-term, acute care
hospitals for which data were reported on the Worksheet S-3, Parts II
and III of the Medicare cost report for the hospital's cost reporting
period beginning on or after October 1, 1996 and before October 1,
1997. In addition, we included data from a few hospitals that had cost
reporting periods beginning in September 1996 and reported a cost
reporting period exceedi 
