[Federal Register: May 4, 2001 (Volume 66, Number 87)]
[Proposed Rules]
[Page 22645-22694]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04my01-34]
Table of Contents
Medicare Program; Changes to the Hospital Inpatient Prospective 
Payment Systems and Fiscal Year 2002 Rates; Proposed Rule  

  
I. Background

  
 II. Proposed Changes to DRG Classifications and Relative Weights
  
 III. Proposed Changes to the Hospital Wage Index
  
IV. Other Decisions and Proposed Changes to the Prospective Payment
System for Inpatient Operating Costs and Graduate Medical Education
Costs
  
V. Proposed Changes to the Prospective Payment System for Capital-
Related Costs
  
VI. Proposed Changes for Hospitals and Hospital Units Excluded From
the Prospective Payment System

  
VII. MedPAC Recommendations
  
VIII. Other Required Information

 Tables

  Note: For purposes of
this proposed rule, and to avoid confusion, we have retained the
designations of Tables 1 through 5 that were first used in the
September 1, 1983 initial prospective payment final rule (48 FR 39844).
Tables 1A, 1C, 1D, 2, 3A, 3B, 4A, 4B, 4C, 4F, 4G, 4H, 5, 6A, 6B, 6C,
6D, 6E, 6F, 6G, 6H, 7A, 7B, 8A, and 8B are presented below. The tables
presented below are as follows: 
 

  
Table 1A--National Adjusted Operating Standardized 
    Amounts, Labor/ Nonlabor

  
Table 1C--Adjusted Operating Standardized 
    Amounts for Puerto Rico, Labor/Nonlabor
  
Table 1D--Capital Standard Federal Payment 
    Rate
  
Table 2--Hospital Average Hourly Wage for Federal Fiscal Years 2000 (1996 Wage Data), 2001 (1997 Wage Data) and
             2002 (1998 Wage Data) Wage Indexes and 3-Year Average of Hospital Average Hourly Wages
  
Table 3A--3-Year Average Hourly Wage for Urban Areas
  
Table 3A--3-Year Average Hourly Wage for Rural Areas
  
Table 4A--Wage Index and Capital Geographic Adjustment Factor (GAF) for Urban Areas

  
Table 4B--Wage Index and Capital Geographic Adjustment Factor (GAF) for Rural Areas
  
Table 4C--Wage Index and Capital Geographic 
    Adjustment Factor (GAF) for Hospitals That Are Reclassified
  
Table 4F--Puerto Rico Wage Index and Capital 
    Geographic Adjustment Factor (GAF)
  
Table 4G--Pre-Reclassified Wage Index for Urban Areas
  
Table 4H--Pre-Reclassified Wage Index for Urban Areas
  
Table 5--List of Diagnosis Related Groups 
    (DRGs), Relative Weighting Factors, Geometric and Arithmetic Mean Length of 
    Stay 

  
Table 6A--New Diagnosis Codes
  
Table 6B--New Procedure Codes
  
Table 6C--Invalid Diagnosis Codes
  
Table 6D--Invalid Procedure Codes
  
Table 6E--Revised Diagnosis Code Titles
  
Table 6F--Revised Procedure Codes
  
Table 6H--Deletions to the CC Exclusions List
  
Table 7A--Medicare Prospective Payment System, Selected Percentile Lengths of Stay [FY2000 MEDPAR update 12/00 Grouper V18.0]
  
Table 7B--Medicare Prospective Payment System, Selected Percentile Lengths of Stay [FY2000 MEDPAR update 12/00 Grouper V19.0]
  
Table 8A--Statewide Average Operating Cost-to-Charge Ratios for Urban and Rural Hospitals (Case Weighted) March 2001
  
Table 8b.--Statewide Average Capital Cost-to-Charge 
    Ratios (Case Weighted) March 2001

Appendices 


  
Appendix A: Regulatory Impact Analysis
  
Appendix B: Technical Appendix on the Capital 
    Cost Model and Required Adjustments
  
Appendix D: Recommendation of Update Factors 
    for Operating Cost Rates of Payment for Inpatient Hospital Services


[[Page 22645]]

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Part II

Department of Health and Human Services

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Health Care Financing Administration

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42 CFR Parts 405, 412, 413, etc.

Medicare Program; Changes to the Hospital Inpatient Prospective Payment
Systems and Fiscal Year 2002 Rates; Proposed Rule

[[Page 22646]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Parts 405, 412, 413, 485, and 486

[HCFA-1158-P]
RIN 0938-AK73


Medicare Program; Changes to the Hospital Inpatient Prospective
Payment Systems and Fiscal Year 2002 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 systems for operating and capital costs to:
Implement applicable statutory requirements, including a number of
provisions of the Medicare, Medicaid, and SCHIP Benefits Improvement
and Protection Act of 2000 (Public Law 106-554); and implement changes
arising from our continuing experience with these systems. 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, 2001. 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 also are proposing changes to the policies governing payments to
hospitals for the direct costs of graduate medical education and
critical access hospitals.

DATES: Comments will be considered if received at the appropriate
address, as provided below, no later than 5 p.m. on July 3, 2001.

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-1158-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 specified as appropriate for
courier delivery 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-1158-P.
    For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
    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-1158-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) 786-4548, Operating Prospective Payment,
Diagnosis-Related Groups (DRGs), Wage Index, Hospital Geographic
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:

Inspection of Public Comments

    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 C5-12-08 of the Health Care
Financing Administration, 7500 Security Blvd., Baltimore, MD, on Monday
through Friday of each week from 8:30 a.m. to 5 p.m. Please call (410)
786-7197 to arrange to view these comments.

Availability of Copies and Electronic Access

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I. Background

A. Summary

    Section 1886(d) of the Social Security Act (the Act) sets forth a
system of payment for the operating costs of acute care hospital
inpatient stays under Medicare Part A (Hospital Insurance) based on
prospectively set rates. Section 1886(g) of the Act requires the
Secretary to pay for the capital-related costs of hospital inpatient
stays under a prospective payment system. Under these prospective
payment systems, Medicare payment for hospital inpatient operating and
capital-related costs is made at predetermined, specific rates for each
hospital discharge. Discharges are classified according to a list of
diagnosis-related groups (DRGs).
    Under section 1886(d)(1)(B) of the Act in effect without
consideration of the amendments made by the Balanced Budget Act of 1997
(Public Law 105-33), the Balanced Budget Refinement Act of 1999 (Public
Law 106-113, and the recent Medicare, Medicaid, and SCHIP Benefits
Improvement and Protection Act of 2000 (Public Law 106-554, enacted on
December 21, 2000), certain specialty hospitals are excluded from the
hospital inpatient prospective payment system: Psychiatric hospitals
and units, rehabilitation hospitals and

[[Page 22647]]

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, until the payment provisions of Public Laws 105-
33, 106-113, and 106-554 that are applicable to three classes of these
hospitals are implemented, as discussed below.
    Various sections of Public Laws 105-33, 106-113, and 106-554
provide for the transition of rehabilitation hospitals and units,
psychiatric hospitals and units, and long-term care hospitals from
being paid on an excluded hospital basis to being paid on an individual
prospective payment system basis. These provisions are as follows:
     Rehabilitation Hospitals and Units. Section 1886(j) of the
Act, as added by section 4421 of Public Law 105-33 and amended by
section 125 of Public Law 106-113 and section 305 of Public Law 106-
554, authorizes the implementation of a prospective payment system for
inpatient hospital services furnished by rehabilitation hospitals and
units. Section 4421 of Public Law 105-33 amended the Act by adding
section 1886(j). 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 2002, with payment provisions
during a transitional period of October 1, 2000 to October 1, 2002
based on target amounts specified in section 1886(b) of the Act.
Section 125 of Public Law 106-113 amended section 1886(j) of the Act to
require the Secretary to use a discharge as the payment unit for
inpatient rehabilitation services under the prospective payment system
and to establish classes of patient discharges by functional-related
groups. Section 305 of Public Law 106-554 further amended section
1886(j) of the Act to allow hospitals to elect to be paid the full
Federal prospective payment rather than the transitional period
payments specified in the Act. A brief discussion of the November 3,
2000 proposed rule (65 FR 66304) that we issued to propose
implementation of the prospective payment system for inpatient
rehabilitation hospitals and rehabilitation units is included under
section VI.A.4. of this preamble.
     Psychiatric Hospitals and Units. Sections 124(a) and (c)
of Public Law 106-113 provide for the development of a per diem
prospective payment system for payment for inpatient hospital services
of psychiatric hospitals and units under the Medicare program,
effective for cost reporting periods beginning on or after October 1,
2002. This system must include an adequate patient classification
system that reflects the differences in patient resource use and costs
among these hospitals and must maintain budget neutrality. We are in
the process of developing a proposed rule, to be followed by a final
rule, to implement the prospective payment system for psychiatric
hospitals and units, effective for October 1, 2002.
     Long-Term Care Hospitals. Sections 123(a) and (c) of
Public Law 106-113 provide for the development of a per discharge
prospective payment system for payment for inpatient hospital services
furnished by long-term care hospitals under the Medicare program,
effective for cost reporting periods beginning on or after October 1,
2002. Section 307(b)(1) of Public Law 106-554 provides that payments
under the long-term care prospective payment system will be made on a
prospective payment basis rather than a cost basis. The long-term care
hospital prospective payment system must include a patient
classification system that reflects the differences in patient resource
use and costs, and must maintain budget neutrality. We are planning to
develop a proposed rule, to be followed by a final rule, to implement
the prospective payment system for long-term care hospitals, effective
for October 1, 2002. Section 307 of Public Law 106-554 provides that if
the Secretary is unable to develop a prospective payment system for
long-term care hospitals that can be implemented by October 1, 2002,
the Secretary must implement a prospective payment system that bases
payment under the system using the existing acute hospital DRGs,
modified where feasible to account for resource use of long-term care
hospital patients using the most recently available hospital discharge
data for long-term care services.
    Under sections 1820 and 1834(g) of the Act, payments are made to
critical access hospitals (CAHs) (that is, rural hospitals or
facilities that meet certain statutory requirements) for inpatient and
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. The regulations governing GME payments and payments to
CAHs are located in Part 413.
    On August 1, 2000, we published a final rule in the Federal
Register (65 FR 47054) 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, 2000. On March 2, 2001, we published correction
notices in the Federal Register (66 FR 13020) relating to the
calculation of certain wage indexes and the labeling of certain DRGs.
    Public Law 106-554 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 106-554 relating to FY 2002 payments for hospital
inpatient services, new medical services and technology, GME costs, the
payment adjustment for disproportionate share hospitals (DSHs), the
indirect medical education (IME) adjustment for teaching hospitals,
sole community hospitals (SCHs), and CAHs. It would also implement
changes affecting hospitals' geographic reclassifications and wage
index. These changes are addressed in sections II., III., IV., and VI.
of this preamble.
    Other provisions of Public Law 106-554 that relate to Medicare
payments to hospitals effective prior to October 1, 2001 (that is, for
FY 2001 or for the period between April 1, 2001 and September 30,
2001), are addressed in a separate interim final rule with comment
period (HCFA-1178-IFC).

B. Major Contents of This Proposed Rule

    In this proposed rule, we are setting forth proposed changes to the
Medicare hospital inpatient prospective payment systems for operating
costs and for capital-related costs in FY 2002. We also are proposing
changes relating to payments for GME costs and payments to excluded
hospitals and units and CAHs. The proposed changes would be

[[Page 22648]]

effective for discharges occurring on or after October 1, 2001.
    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. Based on analyses of
Medicare claims data, we are proposing to establish a number of new
DRGs and make changes to the designation of diagnosis and procedure
codes under other existing DRGs. Our proposed changes for FY 2002 are
set forth in section II. of this preamble.
    We also address the provisions of section 533 of Public Law 106-544
regarding development of a mechanism for adequate payment for new
medical services and technologies and the required report to Congress
on expeditiously introducing new medical services and technology into
the DRGs.
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 2002 wage index update, using FY 1998 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.
     The costs of contracted pharmacy and laboratory services.
     The collection of occupational mix data, as required by
section 304(c) of Public Law 106-554.
     Revisions to the wage index based on hospital
redesignations and reclassifications, including changes to reflect the
provisions of sections 304(a) and (b) of Public Law 106-554 relating to
3-year wage index reclassifications by the MGCRB, the use of 3 years of
wage data for evaluating reclassification requests for FYs 2003 and
later, and the application of a statewide wage index for
reclassifications beginning in FY 2003.
     Requests for wage data corrections and modification of the
process and timetable for updating the wage index, and a proposed
revision of that timetable.
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:
     Sole community hospitals.
     Rural referral centers.
     Changes relating to the IME adjustment as a result of
section 302 of Public Law 106-554.
     Changes relating to the DSH adjustment as a result of
section 303 of Public Law 106-554.
     The establishment of policies relating to the 3-year
application of wage index reclassifications by the MGCRB, the use of 3
years of wage data in evaluating reclassification requests to the MGCRB
for FYs 2003 and later, and the use of a statewide wage index for
reclassifications beginning in FY 2003, as required by sections 304(a)
and (b) of Public Law 106-554.
     Proposed requirements for additional payments for new
medical services and technology, as required by section 533(b) of
Public Law 106-554.
     Changes relating to payment for the direct costs of GME,
including changes as a result of section 511 of Public Law 106-554.
4. Prospective Payment System for Capital-Related Costs
    In section V. of this preamble, we specify the proposed payment
requirements for capital-related costs, including the special
exceptions payment, beginning October 1, 2002.
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 2002.
     Revision of the methodology for wage neutralizing the
hospital-specific target amounts using preclassified wage data.
     Updated caps for new excluded hospitals and units as well
as changes in the effective date of classifications of excluded
hospitals and units.
     The prospective payment system for inpatient
rehabilitation hospitals and units.
     Payments to CAHs, including exclusion from the payment
window requirements; the availability of CRNA pass-through payments;
payment for emergency room on-call physicians; treatment of ambulance
services; the use of certain qualified practitioners for preanesthesia
and postanesthesia evaluations; and clarification of location
requirements for CAHs.
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 2002
prospective payment rates for operating costs and capital-related
costs. We also establish the proposed threshold amounts for outlier
cases. In addition, we address update factors for determining the rate-
of-increase limits for cost reporting periods beginning in FY 2002 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 2002
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
2002 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 2002 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

[[Page 22649]]

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 or visit MedPAC's website at: www.medpac.gov.

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, 2001, 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 503 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 because they
involve multiple organ systems (for example, MDC 22 (Burns)).
    In general, cases are assigned to an MDC based on the principal
diagnosis, before assignment to a DRG. However, there are five DRGs to
which cases are directly assigned on the basis of procedure codes.
These are the DRGs for liver, bone marrow, and lung transplants (DRGs
480, 481, and 495, respectively) and the two DRGs for tracheostomies
(DRGs 482 and 483). Cases are assigned to these DRGs before
classification to an MDC.
    Within most MDCs, cases are then divided into surgical DRGs (based
on a surgical hierarchy that orders individual procedures or groups of
procedures by resource intensity) and medical DRGs. Medical DRGs
generally are differentiated on the basis of diagnosis and age. Some
surgical and medical DRGs are further differentiated based on the
presence or absence of complications or comorbidities (CC).
    Generally, 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 major changes we are proposing to make to the DRG
classification system for FY 2002 are summarized in Charts 1, 2, and 3
below, followed by detailed discussions in individual sections
according to MDC assignment. Other issues concerning DRGs are also set
forth below. Unless otherwise noted, our DRG analysis is based on data
from 100 percent of the FY 2000 MedPAR file containing hospital bills
received through May 31, 2000 for discharges in FY 2000.

[[Page 22650]]

        Chart 1.--Summary of Proposed Changes in DRG Assignments
------------------------------------------------------------------------
                                                Added  as
       Diagnosis related groups (DRGs)             new         Removed
------------------------------------------------------------------------
Pre-MDC:
    DRG 512 (Simultaneous Pancreas/Kidney               X
     Transplant)............................
    DRG 513 (Pancreas Transplants)..........            X
MDC 5 (Diseases and Disorders of the
 Circulatory System):
    DRG 112 (Percutaneous Cardiovascular                              X
     Procedures)............................
    DRG 514 (Cardiac Defibrillator Implant              X
     with Cardiac Catheterization)..........
    DRG 515 (Cardiac Defibrillator Implant              X
     without Cardiac Catheterization).......
    DRG 516 (Percutaneous Cardiovascular                X
     Procedures with Acute Myocardial
     Infarction (AMI))......................
    DRG 517 (Percutaneous Cardiovascular                X
     Procedures without AMI, with Coronary
     Artery Stent Implant...................
    DRG 518 (Percutaneous Cardiovascular                X
     Procedures without AMI, without
     Coronary Artery Stent Implant..........
MDC 8 (Diseases and Disorders of the
 Musculoskeletal System and Connective
 Tissue):
    DRG 519 (Cervical Spinal Fusion with CC)            X
    DRG 520 (Cervical Spinal Fusion without             X
     CC)....................................
MDC 20 (Alcohol/Drug Use and Alcohol/Drug-
 Induced Organic Mental Disorders):
    DRG 434 Alcohol/Drug Abuse or                                     X
     Dependency, Detoxification or Other
     Symptomatic Treatment with CC).........
    DRG 435 (Alcohol/Drug Abuse or                                    X
     Dependency, Detoxification or Other
     Symptomatic Treatment without CC)......
    DRG 436 (Alcohol/Drug Dependence with                             X
     Rehabilitation Therapy)................
    DRG 437 (Alcohol/Drug Dependence,                                 X
     Combined Rehabilitation and
     Detoxification Therapy)................
    DRG 521 (Alcohol/Drug Abuse or                      X
     Dependence with CC)....................
    DRG 522 (Alcohol/Drug Abuse or                      X
     Dependence without CC, with
     Rehabilitation Therapy)................
    DRG 523 (Alcohol/Drug Abuse or                      X
     Dependence without CC, without
     Rehabilitation Therapy)................
------------------------------------------------------------------------

    Chart 2.--Summary of Proposed Assignment or Reassignment of Diagnosis or Procedure Codes in Existing DRGs
----------------------------------------------------------------------------------------------------------------
    Diagnosis/procedure codes                 Removed from DRG                       Reassigned to DRG
----------------------------------------------------------------------------------------------------------------
MDC 5 (Diseases and Disorders of
 the Circulatory System):
    Principal Diagnosis Code:
      410.01  Acute myocardial     116...................................  516
       infarction of
       anterolateral wall,
       initial episode of care.
      410.11  Acute myocardial     116...................................  516
       infarction of other
       anterior wall, initial
       episode of care.
      410.21  Acute myocardial     116...................................  516
       infarction of
       inferolateral wall,
       initial episode of care.
      410.31  Acute myocardial     116...................................  516
       infarction of
       inferoposterior wall,
       initial episode of care.
      410.41  Acute myocardial     116...................................  516
       infarction of other
       inferior wall, initial
       episode of care.
      410.51  Acute myocardial     116...................................  516
       infarction of other
       lateral wall, initial
       episode of care.
      410.61  True posterior wall  116...................................  516
       infarction, initial
       episode of care.
      410.71  Subendocardial       116...................................  516
       infarction, initial
       episode of care.
      410.81  Acute myocardial     116...................................  516
       infarction of other
       specified sites, initial
       episode of care.
      410.91  Acute myocardial     116...................................  516
       infarction of unspecified
       site, initial episode of
       care.
    Procedure Codes:
      37.94  Implantation or       104, 105..............................  514, 515
       replacement of automatic
       cardioverter/
       defibrillation, total
       system (AICD).
      37.95  Implantation of       104, 105..............................  514, 515
       automatic cardioverter/
       defibrillator lead(s) only.
      37.96  Implantation of       104, 105..............................  514, 515
       automatic cardioverter/
       defibrillator pulse
       generator only.
      37.97  Replacement of        104, 105..............................  514, 515
       automatic cardioverter/
       defibrillator lead(s) only.
      37.98  Replacement of        104, 105..............................  514, 515
       automatic cardioverter/
       defibrillator pulse
       generator only.
    Operating Room Procedures:
      35.96  Percutaneous          116...................................  516, 517, 518
       valvuloplasty.
      36.01  Single vessel         116...................................  516, 517, 518
       percutaneous transluminal
       coronary angioplasty
       (PTCA) or coronary
       atherectomy without
       mention of thrombolytic
       agent.
      36.02  Single vessel         116...................................  516, 517, 518
       percutaneous transluminal
       coronary angioplasty
       (PTCA) or coronary
       atherectomy with mention
       of thrombolytic agent.
      36.05  Multiple vessel       116...................................  516, 517, 518
       percutaneous transluminal
       coronary angioplasty
       (PTCA) or coronary
       atherectomy performed
       during the same operation,
       with or without mention of
       thrombolytic agent.
      36.09  Other removal of      116...................................  516, 517, 518
       coronary artery
       obstruction.
      37.34  Catheter ablation of  116...................................  516, 517, 518
       lesion or tissues of heart.
      92.27  Implantation or       Non-OR in MDC-5.......................  517
       insertion of radioactive
       elements.
    Nonoperating Room Procedures:
      36.06  Insertion of          116...................................  517
       coronary artery stent(s).
      37.21  Right heart cardiac   104...................................  514
       catheterization.

[[Page 22651]]

      37.22  Left heart cardiac    104...................................  514
       catheterization.
      37.23  Right and left heart  104...................................  514
       cardiac catheterization.
      37.26  Cardiac               104, 112..............................  514, 516, 517, 518
       electrophysiologic
       stimulation and recording
       studies.
      37.27  Cardiac mapping.....  112...................................  516, 517, 518
      88.52  Angiocardiography of  104...................................  514
       right heart structures.
      88.53  Angiocardiography of  104...................................  514
       left heart structures.
      88.54  Combined right and    104...................................  514
       left heart
       angiocardiography.
      88.55  Coronary              104...................................  514
       arteriography using a
       single catheter.
      88.56  Coronary              104...................................  514
       arteriography using two
       catheters.
      88.57  Other and             104...................................  514
       unspecified coronary
       arteriography.
      88.58  Negative-contrast     104...................................  514
       cardiac roentgenography.
MDC 8 (Diseases and Disorders of
 the Musculoskeletal System and
 Connective Tissue):
    Procedure Codes:
      81.02  Other cervical        497, 498..............................  519, 520
       fusion, anterior technique.
      81.03  Other cervical        497, 498..............................  519, 520
       fusion, posterior
       technique.
MDC 15 (Newborns and Other
 Neonates with Conditions
 Originating in the Perinatal
 Period)
    Diagnosis Codes:
      773.0  Hemolytic disease     389...................................  390
       due to RH isoimmunization.
      773.1  Hemolytic disease     389...................................  390
       due to ABO isoimmunization.
    Secondary Diagnosis Codes:
      478.1  Other diseases of     390...................................  391
       nasal cavity and sinuses.
      520.6  Disturbances in       390...................................  391
       tooth eruption.
      623.8  Other specified       390...................................  391
       noninflammatory disorders
       of vagina.
      709.00  Dyschroma,           390...................................  391
       unspecified.
      709.01  Vitiglio...........  390...................................  391
      709.09  Dyschromia, Other..  390...................................  391
      744.1  Accessory Auricle...  390...................................  391
      754.61  Congenital pes       390...................................  391
       planus.
      757.33  Congenital           390...................................  391
       pigmentary anomalies of
       skin.
      757.39  Other specified      390...................................  391
       anomaly of skin.
      764.08  "Light for dates"  390...................................  391
       without mention of fetal
       malnutrition, 2,000-2,499
       grams.
      764.98  Fetal growth         390...................................  391
       retardation, unspecified,
       2,000-2,499 grams.
      772.6  Cutaneous hemorrhage  390...................................  391
      794.15  Abnormal and         390...................................  391
       auditory function studies.
      796.4  Other abnormal        390...................................  391
       clinical findings.
      V20.2  Routine infant or     390...................................  391
       child health check.
      V72.1  Examination of ears   390...................................  391
       and hearing.
----------------------------------------------------------------------------------------------------------------

               Chart 3.--Summary of Proposed Retitled DRGs
------------------------------------------------------------------------
       MDC            DRG  No.         Current name      Proposed name
------------------------------------------------------------------------
MDC 5...........  DRG 116           Other Permanent    Other Cardiac
                                     Cardiac            Pacemaker
                                     Pacemaker          Implantation.
                                     Implantation, or
                                     PTCA, with
                                     Coronary Artery
                                     Stent Implant.
MDC 8...........  DRG 497           Spinal Fusion      Spinal Fusion
                                     with CC.           except Cervical
                                                        with CC.
MDC 8...........  DRG 498           Spinal Fusion      Spinal Fusion
                                     without CC.        except Cervical
                                                        without CC.
------------------------------------------------------------------------

2. MDC 5 (Diseases and Disorders of the Circulatory System)
a. Removal of Defibrillator Cases From DRGs 104 and 105
    DRGs 104 (Cardiac Valve & Other Major Cardiothoracic Procedures
with Cardiac Catheterization) and 105 (Cardiac Valve & Other Major
Cardiothoracic Procedures without Cardiac Catheterization) include the
replacement or open repair of one or more of the four heart valves.
These valves may be diseased or damaged, resulting in either leakage or
restriction of blood flow to the heart, compromising the ability of the
heart to pump blood. This procedure requires the use of a heart-lung
bypass machine, as the heart must be stilled and opened to repair or
replace the valve.
    Cardiac defibrillators are implanted to correct episodes of
fibrillation (very fast heart rate) caused by malfunction of the
conduction mechanism of the heart. Through implanted cardiac leads, the
defibrillator mechanism senses changes in heart rhythm. When very fast
heart rates occur, the defibrillator produces a burst of electric
current through the leads to restore the normal heart rate. An
implanted defibrillator constantly monitors heart rhythm. The
implantation of this device does not require the use of a heart-lung
bypass machine, and would be expected to be very different in terms of
resource usage, although both procedures currently group to DRGs 104
and 105.
    As part of our ongoing review of DRGs, we examined Medicare claims
data on DRG 104 and DRG 105. We reviewed 100 percent of the FY 2000
MedPAR file containing hospital bills received through May 31, 2000,
for

[[Page 22652]]

discharges in FY 2000, and found that the average charges across all
cases in DRG 104 were $84,060, while the average charges across all
cases in DRG 105 were $66,348. Carving out code 37.94 (Implantation or
replacement of automatic cardioverter/defibrillator, total system
[AICD]) from DRGs 104 and 105 increased those average charges to
$91,366 for DRG 104 and $67,323 for DRG 105. We identified 11,021
defibrillator cases in DRG 104 (out of 25,112 total cases), with
average charges of $74,719, and 2,434 defibrillator cases in DRG 105
(out of 20,094 total cases), with average charges of $59,267.
    We performed additional review on cases containing code 37.95
(Implantation of automatic cardioverter/ defibrillator lead(s) only)
with code 37.96 (Implantation of automatic cardioverter/defibrillator
pulse generator only) and on cases containing code 37.97 (Replacement
of automatic cardioverter/defibrillator lead(s) only) with code 37.98
(Replacement of automatic cardioverter/defibrillator pulse generator
only). This subgrouping contained only 56 patients. The average charges
for the 18 patients in DRG 104 were $58,847. The average charges for
the 38 patients in DRG 105 were $54,891.
    Because we believe the defibrillator cases are significantly
different from other cases in DRGs 104 and 105, we are proposing to
create two new DRGs: DRG 514 (Cardiac Defibrillator Implant with
Cardiac Catheterization) and DRG 515 (Cardiac Defibrillator Implant
without Cardiac Catheterization).
    We are proposing to remove procedure codes 37.94, 37.95 and 37.96,
and 37.97 and 37.98 from DRGs 104 and 105 to form the new DRGs 514 and
515. The proposed new DRGs 514 and 515 would include principal
diagnosis codes and procedure codes as reflected in Chart 4 below:

     Chart 4.--Composition of Proposed New DRGs 514 and 515 in MDC 5
------------------------------------------------------------------------
                                               Included in   Included in
        Diagnosis and procedure codes         proposed DRG  proposed DRG
                                                   514           515
------------------------------------------------------------------------
Principal Diagnosis Codes:
    All of the principal diagnosis codes                X             X
     assigned to MDC-5......................
Principal or Secondary Procedure Code:
    37.94  Implantation or replacement of               X             X
     automatic cardioverter/defibrillation,
     total system (AICD)....................
Combination Operating Procedure Codes:
    37.95  Implantation of automatic
     cardioverter/defibrillator lead(s)
     only; plus
    37.96  Implantation of automatic                    X             X
     cardioverter/defibrillator pulse
     generator only;........................
Or
    37.97  Replacement of automatic
     cardioverter/defibrillator lead(s)
     only; plus
    37.98  Replacement of automatic                     X             X
     cardioverter/defibrillator pulse
     generator only.........................
Plus: One of the Following Nonoperating Room
 Procedure Codes:
    37.21  Right heart cardiac                          X
     catheterization........................
    37.22  Left heart cardiac                           X
     catheterization........................
    37.23  Combined right and left heart                X
     cardiac catheterization................
    37.26  Cardiac electrophysiologic                   X
     stimulation and recording studies......
    88.52  Angiocardiography of right heart             X
     structures.............................
    88.53  Angiocardiography of left heart              X
     structures.............................
    88.54  Combined right and left heart                X
     angiocardiography......................
    88.55  Coronary arteriography using a               X
     single catheter........................
    88.56  Coronary arteriography using two             X
     catheters..............................
    88.57  Other and unspecified coronary               X
     arteriography..........................
    88.58  Negative-contrast cardiac                    X
     roentgenography........................
------------------------------------------------------------------------

b. Percutaneous Cardiovascular Procedures
    We reviewed other DRGs within MDC 5 in order to determine if there
were also logic changes that could be made to these DRGs. The data was
arrayed in a variety of ways displaying myriad permutations, resulting
in the following proposed changes. A percutaneous transluminal coronary
angioplasty (PTCA) is an acute intervention intended to minimize
cardiac damage by restarting circulation to the heart. Some patients
with an acute myocardial infarction (AMI) are now treated by performing
a PTCA during the hospitalization for the AMI. Currently, PTCAs with a
coronary stent implant are assigned to DRG 116 (Other Permanent Cardiac
Pacemaker Implantation, or PTCA with Coronary Artery Stent Implant),
along with pacemaker implants. The remaining percutaneous
cardiovascular procedures are assigned to DRG 112 (Percutaneous
Cardiovascular Procedures).
    The volume of percutaneous cardiovascular procedures has grown
dramatically, with 186,669 cases identified in the FY 2000 MedPAR file
containing hospital bills submitted through May 31, 2000. Because of
the high volume, we decided to review the DRG for percutaneous
cardiovascular procedures. As a first step in the evaluation, we
combined the percutaneous cardiovascular procedures from DRGs 112 and
116. We then subdivided the combined percutaneous cardiovascular
procedure group into two groups based on the principal diagnosis (Pdx)
of AMI.

------------------------------------------------------------------------
                                                               Average
                     Group                         Count        charge
------------------------------------------------------------------------
With Pdx of AMI...............................       50,442      $31,722
Without Pdx of AMI............................      136,227       23,989
------------------------------------------------------------------------

    Each of these groups was further evaluated by subdividing them
based on whether a coronary stent was implanted. The vast majority of
patients with an AMI had a coronary stent implanted. Patients without
an AMI were subdivided into two groups based on whether a coronary
stent was implanted.

------------------------------------------------------------------------
                                                               Average
                     Group                         Count        charge
------------------------------------------------------------------------
Without Pdx of AMI with stent.................      111,441      $24,745

[[Page 22653]]

Without Pdx of AMI without stent..............       24,786       20,589
------------------------------------------------------------------------

    Based on this analysis, we are proposing to remove the PTCAs with
coronary artery stent from DRG 116, thus limiting DRG 116 to permanent
cardiac pacemaker implantation. This removal will leave approximately
68,000 non-PTCA cases in DRG 116.
    In conjunction with this evaluation, we considered a new
technology, intravascular brachytherapy, that is being used to treat
coronary in-stent stenosis. A gamma-radiation-impregnated tape is
threaded through the affected vessel for a specified amount of dwell
time, and then the tape is removed. Intravascular brachytherapy was
approved by the Food and Drug Administration in November 2000.
    Intravascular brachytherapy is assigned to procedure code 92.27
(Implantation or insert of radioactive elements). With the use of
angioplasty, these cases are currently assigned to DRG 112
(Percutaneous Cardiovascular Procedures). Therefore, cases involving
this new technology will be implicated by these proposed changes.
    We are proposing to retitle DRG 116 "Other Cardiac Pacemaker
Implantation," remove DRG 112, and create three new DRGs: DRG 516
(Percutaneous Cardiovascular Procedures with Acute Myocardial
Infarction (AMI)); DRG 517 (Percutaneous Cardiovascular Procedures
without AMI, with Coronary Artery Stent Implant; and DRG 518
(Percutaneous Cardiovascular Procedures without AMI, without Coronary
Artery Stent Implant). The principal diagnosis codes and operating room
and nonoperating room procedure codes that are proposed to be included
in the new DRGs 516, 517, and 518 are reflected in Chart 5.
    In order to be assigned to new DRG 516, cases must contain one of
the principal diagnoses plus the operating room procedures listed in
Chart 5. Because DRG 516 contains acute myocardial infarction, which is
hierarchically ordered before DRGs 517 and 518, any AMI cases also
containing codes 92.27 or 36.06 would automatically be assigned to DRG
516. We are proposing to assign patients with a percutaneous
cardiovascular procedure and intravascular radiation treatment to new
DRG 517. As more data become available, we will reassess the assignment
of intravascular radiation treatment to DRG 517. Proposed new DRG 518
would contain the same operating room and nonoperating room procedures
as new proposed DRG 517, with the exception of codes 92.27 and 36.06.

   Chart 5.--Composition of Proposed New DRGs 516, 517, and 518 in MDC 5
------------------------------------------------------------------------
                                 Included in   Included in   Included in
 Diagnosis and procedure codes  Proposed DRG  Proposed DRG  Proposed DRG
                                     516           517           518
------------------------------------------------------------------------
Principal Diagnosis Codes:
    410.01  Acute myocardial              X
     infarction of
     anterolateral wall,
     initial episode of care..
    410.11  Acute myocardial              X
     infarction of other
     anterior wall, initial
     episode of care..........
    410.21  Acute myocardial              X
     infarction of
     inferolateral wall,
     initial episode of care..
    410.31  Acute myocardial              X
     infarction of
     inferoposterior wall,
     initial episode of care..
    410.41  Acute myocardial              X
     infarction of other
     inferior wall, initial
     episode of care..........
    410.51  Acute myocardial              X
     infarction of other
     lateral wall, initial
     episode of care..........
    410.61  True posterior                X
     wall infarction, initial
     episode of care..........
    410.71  Subendocardial                X
     infarction, initial
     episode of care..........
    410.81  Acute myocardial              X
     infarction of other
     specified sites, initial
     episode of care..........
    410.91  Acute myocardial              X
     infarction of unspecified
     site, initial episode of
     care.....................
plus: Operating Room
 Procedures:
    35.96  Percutaneous                   X             X             X
     valvuloplasty............
      and
    36.01  Single vessel                  X             X             X
     percutaneous transluminal
     coronary angioplasty
     (PTCA) or coronary
     atherectomy without
     mention of thromolytic
     agent....................
      or
    36.02  Single vessel                  X             X             X
     percutaneous transluminal
     coronary angioplasty
     (PTCA) or coronary
     atherectomy with mention
     of thrombolytic agent....
      or
    36.05  Multiple vessel                X             X             X
     percutaneous transluminal
     coronary angioplasty
     (PTCA) or coronary
     atherectomy performed
     during the same
     operation, with or
     without mention of
     thrombolytic agent.......
      and
    36.09  Other removal of               X             X             X
     coronary artery
     obstruction..............
      and
    37.34  Catheter ablation              X             X             X
     of lesion or tissues of
     heart....................
    92.27  Implantation or                              X
     insertion of radioactive
     elements.................
OR: Nonoperating Room
 Procedures:
    36.06  Insertion of                                 X
     coronary artery stent(s).
    37.26  Cardiac                        X             X             X
     electrophysiologic
     stimulation and recording
     studies..................
    37.27  Cardiac mapping....            X             X             X
------------------------------------------------------------------------

    DRG 121 (Circulatory Disorders with AMI and Major Complication,
Discharged Alive), DRG 122 (Circulatory Disorders with AMI without
Major Complication, Discharged Alive), and DRG 123 (Circulatory
Disorders with AMI, Expired) are not affected by these changes.
c. Removal of Heart Assist Systems
    The ICD-9-CM Coordination and Maintenance Committee considered the
nonoperative removal of heart assist systems at its November 17, 2000
meeting. A device called the intra-aortic balloon pump (IABP) is one of
the most common types of ventricular assist systems. A balloon catheter
is placed

[[Page 22654]]

into the patient's descending thoracic aorta, and inflates and deflates
with each heartbeat. This device is timed with the patient's own heart
rhythm, and inflates and circulates blood to the heart and other
organs. This allows the heart to rest and recover. The IABP may be used
preoperatively, intraoperatively, or postoperatively. It supports the
patient from a few hours to several days.
    Code 37.64 (Removal of heart assist system) already exists, and it
is considered by the GROUPER to be an operative procedure. However, the
nonoperative removal of a heart assist system can be done at the
patient's bedside, is noninvasive, and requires no anesthesia.
Therefore, the Committee created code 97.44 (Nonoperative removal of
heart assist system) for use with discharges beginning on or after
October 1, 2001.
    In the past, we have assigned new ICD-9-CM codes to the same DRG to
which the predecessor code was assigned. If this practice were to be
followed, we would have proposed that code 97.44 be assigned to MDC 5,
DRGs 478 (Other Vascular Procedures with CC) and 479 (Other Vascular
Procedures without CC). After hospital charge data became available, we
would have considered moving it to other DRGs. However, in accordance
with section 533(a) of Public Law 106-554, which requires a more
expeditious technique of recognizing new medical services or technology
for the hospital inpatient prospective payment system, we will
reconsider this longstanding practice when possible. Therefore, as code
97.44 was designed to capture heart assist system removal that is
clearly nonoperative, we are not proposing to designate 97.44 as a code
which the GROUPER recognizes as a procedure. This assignment can be
found in Table 6B, New Procedure Codes in the addendum to this proposed
rule. Therefore, these cases will be assigned by the GROUPER to a
medical DRG based on the principal diagnosis, or to a surgical DRG if a
surgical procedure recognized by the GROUPER is performed.
3. MDC 8 (Diseases and Disorders of the Musculoskeletal System and
Connective Tissue)
a. Refusions
    We have received questions from correspondents regarding the
appropriateness of the spinal fusion DRGs: DRG 496 (Combined Anterior/
Posterior Spinal Fusion); DRG 497 (Spinal Fusion with CC); and DRG 498
(Spinal Fusion without CC). Several correspondents expressed concern
about the inclusion of all refusions of the spine into one procedure
code, 81.09 (Refusion of spine, any level or technique). The
correspondents pointed out that because all refusions using any
technique or level are in this one code, all of these cases are
assigned to DRG 497 and DRG 498. They also pointed out that fusion
cases involving both an anterior and posterior technique are assigned
to DRG 496. Although cases with the refusion code that involve anterior
and posterior techniques would appear to be more appropriately assigned
to DRG 496, this is not the case.
    We recognized this limitation in the refusion codes and further
acknowledged that this limitation in the ICD-9-CM coding system creates
DRG problems by preventing the assignment to DRG 496 even when both
anterior and posterior techniques are used for refusion cases.
Therefore, we referred the issue to the ICD-9-CM Coordination and
Maintenance Committee and requested the Committee to consider code
revisions for the refusions of the spine during its year 2000 public
meetings.
    After its deliberations, the Committee approved a series of new
procedure codes for refusion of the spine that could lead to
improvements within DRGs 497 and 498. These new codes, listed below, go
into effect on October 1, 2001.

81.30  Refusion of spine, not otherwise specified
81.31  Refusion of atlas-axis spine
81.32  Refusion of other cervical spine, anterior technique
81.33  Refusion of other cervical spine, posterior technique
81.34  Refusion of dorsal and dorsolumbar spine, anterior technique
81.35  Refusion of dorsal and dorsolumbar spine, posterior technique
81.36  Refusion of lumbar and lumbosacral spine, anterior technique
81.37  Refusion of lumbar and lumbosacral spine, lateral transverse
process technique
81.38  Refusion of lumbar and lumbosacral spine, posterior technique
81.39  Refusion of spine, not elsewhere classified

    As previously stated, all refusions of the spine and corrections of
the pseudarthrosis of the spine are assigned to code 81.09. Code 81.09,
which is always assigned to DRG 497 or DRG 498, includes refusions at
any level of the spine using any technique. With the creation of the
new procedure codes listed above, it will be possible to determine the
level of the spine at which the refusion is performed, as well as the
technique used, and assign the case to a more appropriate DRG.
    These new procedure codes should greatly improve our ability to
determine the level and technique used in the refusion.
    In the past, we have assigned new ICD-9-CM codes to the same DRG to
which the predecessor code was assigned. If this practice were
followed, these new codes would have been assigned to DRG 497 and 498
as they are currently. After data became available, we would have
considered moving them to other DRGs. However, in accordance with
section 533(a) of Public Law 106-554, which requires more expeditious
methods of recognizing new medical services or technology under the
inpatient hospital prospective payment system, we will reconsider this
longstanding practice when possible. Since the new codes clearly allow
us to identify cases where the technique was either anterior or
posterior and these cases are clinically similar and, therefore, should
be handled in the same fashion, we are proposing to immediately assign
these cases on the same basis as the fusion codes (81.00 through
81.09). We would not wait for actual claims data before making this
change. These proposed assignments are reflected in Chart 6 and also
can be found in Table 6B, in section V. of the Addendum to this
proposed rule.
b. Fusion of Cervical Spine
    We have received an additional inquiry concerning the spinal DRGs
that focused on fusions of the cervical spine. The inquirer stated that
there was a significant difference between inpatients who undergo
anterior cervical spinal fusion and other types of spinal fusion in
regard to treatment, recovery time, costs, and risk of complications.
Anterior cervical spinal fusions are assigned to procedure code 81.02,
Other cervical fusion, anterior technique. The inquirer pointed out
that anterior cervical fusions differ significantly from anterior
techniques at other levels since the anatomic approach is far less
invasive. Thoracic anterior techniques require working around the
cardiac and respiratory systems in the chest cavity, while lumbar
anterior working around bowel and digestive system and the abdominal
muscles. The inquirer recommended that code 81.02 be removed from DRGs
497 and 498 and grouped separately.
    We analyzed claims data from 100 percent of the FY 2000 MedPAR file
containing hospital bills received through May 31, 2000, and confirmed

[[Page 22655]]

that charges are lower for fusions of the cervical spine than fusions
of the thoracic and lumbar spine. This was true for both anterior and
posterior cervical fusions of the spine. Our medical consultants agree
that the data and their clinical analysis support the creation of new
DRGs for cervical fusions of the spine. Therefore, we are proposing to
remove procedure codes 81.02 and 81.03 from the spinal fusion DRGs
(currently, DRGs 497 and 498) and assign them to new DRGs for cervical
spinal fusion with and without CC. We are proposing to make four
groupings for fusion DRGs. We believe that the net effect of this
proposal would be an increase in the weights for DRGs 497 and 498,
since the lower charges for the cervical fusions would be removed. The
average standardized charge for all spinal fusions with CCs was
$26,957. For all spinal fusions without CCs, the average charge was
$16,492. The table below also shows average standardized charges for
these types of cases before and after the proposed revisions.

------------------------------------------------------------------------
                                                  Average
                                                   charge      Average
      Proposed revised spinal fusion DRGs          before       charge
                                                  proposed      after
                                                 revisions    revisions
------------------------------------------------------------------------
DRG 497 Spinal Fusion Except Cervical with CC.      $26,957      $36,821
DRG 498 Spinal Fusion Except Cervical without        17,492       26,297
 CC...........................................
DRG 519 Cervical Spinal Fusion with CC........  ...........       26,957
DRG 520 Cervical Spinal Fusion without CC.....  ...........       16,492
------------------------------------------------------------------------

    Based on the proposed groupings, we would create two new DRGs: DRG
519 (Cervical Spinal Fusion with CC); and DRG 520 (Cervical Spinal
Fusion without CC). The procedure codes that would be included in the
proposed DRGs 519 and 520 are reflected in Chart 6 below.
    We are also proposing to add the new ICD-9-CM procedure codes for
refusion of the cervical spine (81.32 and 81.33) to the new cervical
spine fusion DRGs because they are clinically similar.
    We are proposing to retitle DRG 497 "Spinal Fusion Except Cervical
with CC" and DRG 498 "Spinal Fusion Except Cervical without CC." The
retitled DRGs 497 and 498 would retain fusion codes 81.00, 81.01, and
81.04 through 81.08 and include the proposed new refusion codes 81.30,
81.31, and 81.34 through 81.39, as reflected in Chart 6 below.
c. Posterior Spinal Fusion
    We received other correspondence regarding the current DRG
assignment for code 81.07, Lumbar and lumbosacral fusion, lateral
transverse process technique. The correspondent stated that physicians
consider code 81.07 to be a posterior procedure. The patient is placed
prone on the operating table and the spine is exposed through a
vertical midline incision. The correspondent pointed out that code
81.07 is not classified as a posterior procedure within DRG 496
(Combined Anterior/Posterior Spinal Fusion). Therefore, when 81.07 is
reported with one of the anterior techniques fusion codes, it is not
assigned to DRG 496. The correspondent recommended that code 81.07 be
added to the list of posterior spinal fusion codes for use in
determining assignment to DRG 496.
    We have consulted with our clinical advisors and they agree that
this addition should be made. Since we are proposing to handle the new
refusion codes in the same manner as the fusion codes, we also are
proposing to assign DRG 496 when 81.37 is used with one of the anterior
technique fusion or refusion codes. This would be similar to the manner
in which code 81.07 is classified. For assignment to DRG 496, we would
consider codes 81.01, 81.04, 81.06, 81.32, 81.34, and 81.36 to be
anterior techniques and codes 81.03, 81.05, 81.07, 81.08, 81.33, 81.35,
and 81.38 to be posterior techniques.

  Chart 6.--Proposed Revised Composition of DRGS 496, 497, and 498 and Proposed Composition of Proposed DRG 519
                                                and 520 in MDC 8
----------------------------------------------------------------------------------------------------------------
                                   Existing DRG 496
                             ----------------------------  Proposed to   Proposed to
   Diagnosis and procedure     Proposed to   Proposed to   be retained   be retained   Included in   Included in
            codes              be assigned   be assigned   in or added   in or added  proposed DRG  proposed DRG
                               as anterior  as posterior   to existing   to existing       519           520
                               techniques    techniques      DRG 497       DRG 498
----------------------------------------------------------------------------------------------------------------
Principal or Secondary
 Procedure Codes:
    81.00  Spinal fusion,                                           X             X
     not otherwise specified
    81.01  Atlas-axis fusion                                        X             X
    81.02  Other cervical               X                                                       X             X
     fusion, anterior
     technique..............
    81.03  Other cervical                             X                                         X             X
     fusion, posterior
     technique..............
    81.04  Lumbar and                   X                           X             X
     lumbosacral fusion,
     anterior technique.....
    81.05  Lumbar and                                 X             X             X
     lumbosacral fusion,
     posterior technique....
    81.06  Lumbar and                   X                           X             X
     lumbosacral fusion,
     anterior technique.....
    81.07  Lumbar and                                 X             X             X
     lumbosacral fusion,
     lateral transverse
     process technique......
    81.08  Lumbar and                                 X             X             X
     lumbosacral fusion,
     posterior technique....
    81.30  Refusion of                                              X             X
     spine, not otherwise
     specified..............
    81.31  Refusion of atlas-                                       X             X
     axis spine.............
    81.32  Refusion of other            X                                                       X             X
     cervical spine,
     anterior technique.....

[[Page 22656]]

    81.33  Refusion of other                          X                                         X             X
     cervical spine,
     posterior technique....
    81.34  Refusion of                  X                           X             X
     dorsal and dorsolumbar
     spine, anterior
     technique..............
    81.35  Refusion of                                X             X             X
     dorsal and dorsolumbar
     spine, posterior
     technique..............
    81.36  Refusion of                  X                           X             X
     lumbar and lumbosacral
     spine, anterior
     technique..............
    81.37  Refusion of                                X             X             X
     lumbar and lumbosacral
     spine, posterior
     technique..............
    81.38  Refusion of                                X             X             X
     lumbar and lumbosacral
     spine, posterior
     technique..............
    81.39  Refusion of                                              X             X
     spine, not elsewhere
     classified.............
----------------------------------------------------------------------------------------------------------------

d. Spinal Surgery
    The California Division of Workers' Compensation notified us of a
possible problem with the following spinal DRGs:

DRG 496  (Combined Anterior/Posterior Spinal Fusion)
DRG 497  (Spinal Fusion with CC)
DRG 498  (Spinal Fusion without CC)
DRG 499  (Back & Neck Procedures except Spinal Fusion with CC)
DRG 500  (Back & Neck Procedures except Spinal Fusion without CC)

    The Division of Workers' Compensation uses the DRG categories
developed by HCFA to classify types of hospital care. However, instead
of using HCFA's weights for determining reimbursement for inpatient
services, the Division sets a global fee for all inpatient medical
services not otherwise exempted. This fee is established by multiplying
the product of the DRG weight (or revised DRG weight for a small number
of categories) and the health facility's composite factor by 1.20 to
get the maximum amount for worker compensation admissions.
    The Division of Workers' Compensation has received reports that the
formula it uses for reimbursing cases may be providing inadequate
reimbursement. California hospitals and orthopedists have reported that
certain spinal surgery DRGs (DRGs 496 through 500) may involve
different types of care and/or technologies than those in use at the
time these groups were formulated. Health care providers in California
report "recent increased use of the new implantation devices,
hardware, and instrumentation, coupled with requirements for intensive
hospital services accompanying use of new procedures, has led to
inadequate reimbursement in these DRGs." As a short-term response to
these concerns, the California Division of Workers' Compensation is
exempting the costs of hardware and instrumentation from the global fee
of the fee schedule for DRGS 496 through 500. The Division also
requested that HCFA examine these DRGs for any potential problem under
the Medicare reimbursement system.
    The ICD-9-CM coding system does not capture specific types of
implantation devices, hardware, and instrumentation. Therefore, we were
not able to verify the claim that these new devices have led to
increased costs in specific cases. As discussed in section II.D. of
this preamble, we believe that the adoption of a more detailed coding
system, such as ICD-10-PCS, would supply greater amounts of detail on
these items. However, in the short term, it is not possible to identify
a specific problem that involves implantation devices, hardware, and
instrumentation.
4. MDC 12 (Diseases and Disorders of the Male Reproductive System)
    At its May 11, 2000 public meeting, the ICD-9-CM Coordination and
Maintenance Committee considered a request from a manufacturer to
create a unique code for the procedure, Penile plethysmography with
nerve stimulation, in DRG 334 (Major Male Pelvic Procedures with CC).
The penile plethysmography is a test that can be performed during a
radical prostatectomy procedure. During the course of the procedure,
the physician places a probe within an area where the prostatic nerves
are thought to be located and is able to detect minor changes in penile
tumescence or detumescence. This reaction tells the physician that the
nerve bundles have been located, which may aid the physician in
performing a nerve-sparing radical prostatectomy procedure with
precision. The nerve bundles can also be restimulated at the conclusion
of the procedure, providing immediate feedback as to whether erectile
function will be restored after surgery.
    After a presentation on the nerve identifying procedure and review
of existing ICD-9-CM codes, the ICD-9-CM Coordination and Maintenance
Committee determined that the existing code 89.58 (Plethysmogram)
adequately describes this test.
    Radical prostatectomies for patients with cancer of the prostate
are grouped in either DRG 334 (Major Male Pelvic Procedures with CC) or
DRG 335 (Major Male Pelvic Procedures without CC). We have received a
request from a manufacturer of a nerve-identifying device to assign
cases containing code 89.58 into DRG 334 only, not into DRG 335,
resulting in higher payments to hospitals. During FY 2001, DRG 334 had
a relative weight of 1.5591, and DRG 335 had a relative weight of
1.1697. The manufacturer requested that we designate code 89.58 as an
operating room procedure code that would be recognized by the GROUPER
software, and make that code applicable only to DRG 334. The
manufacturer believed that this would serve to take any cases of nerve
sparing out of the lower paying DRG 335, and would make the technology
more attractive to hospitals. As paired DRGs 334 and 335 are currently
structured, they differ only in whether or not a secondary diagnosis
identified as a CC is recorded.
    Using 100 percent of the FY 2000 MedPAR file which contains
hospital

[[Page 22657]]

bills for FY 2000 through May 31, 2000, we examined those cases in DRG
334 to which the procedure code for prostatectomy was assigned. Of the
total 7,241 cases in DRG 334 identified, 5,611 of these cases contained
procedure code 60.5 (Radical prostatectomy). Only three of the
prostatectomy cases included code 89.58. There is not a sufficient
number of cases on which to base an assessment of the payment for this
procedure. Therefore, we are not proposing to modify the assignment of
code 89.58.
5. MDC 15 (Newborns and Other Neonates With Conditions Originating in
the Perinatal Period)
    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. To be assigned to DRG 389 (Full
Term Neonate with Major Problems), the neonate must have one of the
principal or secondary diagnosis listed under this DRG. A neonate is
assigned to DRG 390 when the neonate has a principal or secondary
diagnosis of newborn or neonate with other significant problems that
are not assigned to DRG 385 through 389, 391, or 469.
    We have received correspondence suggesting a number of changes to
be made to DRGs 398 and 391. These changes involve removing two codes
from DRG 389 and adding 17 codes to DRG 391, as described below.
a. DRG 389 (Full Term Neonate With Major Problems)
    The correspondent suggested removing the following codes from DRG
389 and assigning them to DRG 390:

773.0  Hemolytic disease due to RH isoimmunization
773.1  Hemolytic disease due to ABO isoimmunization

    The correspondent stated that hemolytic disease due to RH
isoimmunization or due to ABO isoimmunization should not be considered
a major problem. The correspondent recommended that these two
conditions be classified as significant problems instead and thus
assigned to DRG 390.
    Our medical consultants sought additional advice from the National
Association of Children's Hospitals and Related Institutions (NACHRI).
(HCFA contracts with the 3M Health Information Systems to maintain the
DRG system. The medical experts at 3M evaluate proposed DRG changes
from a clinical perspective. These medical consultants assist HCFA in
evaluating alternative proposals.) NACHRI and our medical consultants
agree that it is appropriate to remove codes 773.0 and 773.1 from DRG
389. Therefore, we are proposing to remove 773.0 and 773.1 from DRG 389
so that neonates with these conditions are assigned to DRG 390.
b. DRG 391 (Normal Newborn)
    We also have received correspondence with recommendations for
changes to DRG 391. The correspondent pointed out that the following
secondary codes currently lead to the assignment of the neonate to DRG
390 (Neonate with Other Significant Problems). The correspondent
believed that the conditions described by these codes should not cause
the neonate to be classified under DRG 390 when reported as a secondary
diagnosis. The correspondent recommended that these conditions be
listed under DRG 391 (Normal Newborn).

478.1  Other diseases of nasal cavity and sinuses
520.6  Disturbances in tooth eruption
623.8  Other specified noninflammatory disorders of vagina
709.00  Dyschroma, unspecified
709.01  Vitiglio
709.09  Dyschromia, Other
744.1  Accesory auricle
754.61  Congenital pes planus
757.33  Congenital pigmentary anomalies of skin
757.39  Other specified anomaly of skin, Other
764.08  "Light for dates" without mention of fetal malnutrition,
2,000-2,499 grams
764.98  Fetal growth retardation, unspecified, 2,000-2,499 grams
772.6  Cutaneous hemorrhage
794.15  Abnormal and auditory function studies
796.4  Other abnormal clinical findings
V20.2  Routine infant or child health check
V72.1  Examination of ears and hearing

    Our medical consultants also sought the advice of NACHRI on this
recommendation. NACHRI reviewed the list of codes and agreed that none
of these conditions should be considered to be a significant problem
for a neonate. NACHRI concurred that neonates with these secondary
diagnoses should be classified as normal newborns. Therefore, we are
proposing to add the codes listed above to DRG 391 and not classify
them to DRG 390 when reported as a secondary diagnosis.
c. Medicare Code Editor Changes
    The Medicare Code Editor (MCE) is a front-end software program that
detects and reports errors in the coding of claims data. The age
conflict edit detects inconsistencies between a patient's age and any
diagnosis on the patient's record. A subset of diagnoses is considered
valid only for patients over the age of 14 years. These diagnoses are
identified as "adult" diagnoses and range in age from 15 through 124
years. Therefore, any codes included on the Newborn Diagnoses edit are
valid only for patients under age 14.
    It has come to our attention that cases including the ICD-9-CM code
770.7, Chronic respiratory disease arising in the perinatal period, are
being rejected. However, a condition such as bronchopulmonary dysplasia
always originates in the perinatal period, so regardless of the
patient's age, this condition is always coded as 770.7. The age at
which the diagnosis was established or the age at continuing treatment
does not affect the assignment of code 770.7.
    Because correct coding is causing these claims to be rejected, we
are proposing to remove code 770.7 from the Newborn Diagnoses edit in
the MCE, as well as remove it from DRG 387 (Prematurity with Major
Problems) and DRG 389 (Full Term Neonate with Major Problems). Clinical
conditions in code 770.7, such as pulmonary fibrosis, would group to
DRG 92 (Interstitial Lung Disease with CC) and DRG 93 (Interstitial
Lung Disease without CC). Therefore, we are proposing the addition of
code 770.7 to DRGs 92 and 93, as they are most similar clinically. We
will monitor these cases in upcoming MedPAR data to ascertain that the
cases consume similar resources.
6. MDC 20 (Alcohol/Drug Use and Alcohol/Drug-Induced Organic Mental
Disorders)
    DRG 434 (Alcohol/Drug Abuse or Dependency, Detoxification or Other
Symptomatic Treatment with CC is assigned when the patient has a
principal diagnosis of alcohol or drug abuse or dependence along with a
secondary diagnosis classified as a CC. If these patients do not have a
CC, they are assigned to DRG 435 (Alcohol/Drug Abuse or Dependency,
detoxification or Other Symptomatic Treatment without CC). When the
patients receive rehabilitation and detoxification therapy during the
stay, they are assigned to DRG 437 (Alcohol/Drug Dependence, Combined
Rehabilitation and Detoxification Therapy). If the patients receive
only rehabilitation therapy, they are assigned to DRG 436 (Alcohol/Drug
Dependence with Rehabilitation Therapy).

[[Page 22658]]

    We have received inquiries as to why the relative weight for DRG
437, which includes both rehabilitation and detoxification (for FY
2001, the relative weight is .6606, with a geometric mean length of
stay of 7.5) is lower than the FY 2001 relative weight for DRG 434,
which includes only detoxification (.7256, with a geometric mean length
of stay of 3.9). Likewise, the FY 2001 relative weight for DRG 436,
which includes only rehabilitation (.7433), is higher than the FY 2001
relative weight for DRG 437, which includes combined rehabilitation and
detoxification therapy (.6606). The inquirers indicated that those
patients receiving the combination therapy would be expected to have a
longer length of stay, require more services, and, therefore, be more
costly to treat.
    We analyzed data from 100 percent of the FY 2000 MedPAR file which
contains hospital bills received through May 31, 2000, and did not find
support for the inquirers' assertion that combination therapy is more
costly to treat. The relative weights indicate that the presence of a
CC in DRG 434 leads to a significantly higher weight than is found in
DRG 435, which does not have a CC. Therefore, we analyzed the alcohol/
drug DRGs and focused on eliminating the distinction between
rehabilitation and rehabilitation with detoxification and assessing the
impact of CCs. We combined data on DRGs 436 and 437 and then subdivided
the data based on the presence or absence of a CC. The following table
contains the results of the analysis.

                                  Average Charges for Cases--With and Without CCs
----------------------------------------------------------------------------------------------------------------
                                                   With CC                               Without CC
                                   -----------------------------------------------------------------------------
               DRGs                                            Length of                              Length of
                                       Count        Charge        stay        Count        Charge        stay
----------------------------------------------------------------------------------------------------------------
Detoxification Cases--DRG 434 and         3,298       $8,548          5.0        9,689       $5,111          4.1
 DRG 435..........................
All Rehabilitation Cases--DRG 436         3,298        8,117         10.1        4,473        7,407          9.6
 and DRG 437......................
----------------------------------------------------------------------------------------------------------------

    We found that, for both the detoxification and rehabilitation DRGs,
the with-CC group has higher charges than the without-CC group.
However, the with-CC groups still contain the anomaly that the
detoxification DRG 434 has a slightly higher average charge than the
combined rehabilitation DRGs 436 and 437. It appears that any
significant medical problems as indicated by the presence of a CC
dominate the cost incurred by hospitals for treating alcohol and drug
abuse patients. For the without-CC groups, the detoxification DRG 435
has substantially lower average charges than the combined
rehabilitation DRGs 436 and 437. Because the average charges of the
with-CC for both the detoxification DRG 434 and combined rehabilitation
DRGs 436 and 437 have similar average charges, we are proposing to
combine these two groups.
    Based on the results of our analysis, we are proposing to
restructure MDC 20 as follows. We first identified those cases with a
principal diagnosis within MDC 20 where the patient left against
medical advice. These cases are found in DRG 433 (Alcohol/Drug Abuse or
Dependence, Left Against Medical Advice (AMA)). We next identified all
remaining cases with a principal diagnosis within MDC 20 where there
was a CC. We assigned these cases to a proposed new DRG, Alcohol/Drug
Abuse or Dependence with CC). The remaining cases (without CC and did
not leave against medical advice) were then divided into two proposed
new DRGs based on whether or not the patient received rehabilitation
(Alcohol/Drug Abuse or Dependence without CC, with Rehabilitation
Therapy; and Alcohol/Drug Abuse or Dependence without CC, without
Rehabilitation Therapy).
    The following table illustrates the number of patients and average
charges for each of the four proposed DRGs.

               Frequencies and Average Charges for New DRGs
------------------------------------------------------------------------
                                                 Number of     Average
          DRG                 Group title          cases       charges
------------------------------------------------------------------------
433....................  Alcohol/Drug Abuse or        3,509       $3,855
                          Dependence, Left
                          Against Medical
                          Advice.
521....................  Alcohol/Drug Abuse or       18,235        8,470
                          Dependence with CC.
522....................  Alcohol/Drug Abuse or        4,473        7,407
                          Dependence without
                          CC, with
                          Rehabilitation
                          Therapy.
523....................  Alcohol/Drug Abuse or        9,689        5,111
                          Dependence without
                          CC, without
                          Rehabilitation
                          Therapy.
------------------------------------------------------------------------

    This table illustrates that groups based first on the presence of
CC and then on whether or not the patient receives rehabilitation
therapy provide a much better explanation of differences in charges.
Therefore, we are proposing to retain DRG 433, make DRGs 434 through
437 invalid, and create new DRGs 521, 522, and 523 to include the
diagnosis and procedure codes reflected in Chart 7 below.

                                     Chart 7.--Proposed Restructure of MDC 20
                      [Alcohol/drug use and alcohol/drug-induced organic mental disorders]
----------------------------------------------------------------------------------------------------------------
                                                           Included in   Included in   Included in   Included in
              Diagnosis and procedure code                existing DRG  proposed DRG  proposed DRG  proposed DRG
                                                               433           521           522           523
----------------------------------------------------------------------------------------------------------------
Principal diagnosis:
    All principal diagnosis within existing MDC 20                  X
     involving cases in which patients left against
     medical advice (AMA)...............................

[[Page 22659]]

    All principal diagnoses within existing MDC 20 where                          X
     there is a CC and where patient did not leave
     against medical advice (AMA).......................
    All principal diagnoses within existing MDC 20                                              X
     without CC and where patient did not leave against
     medical advice (AMA)...............................
    All principal diagnoses in existing MDC 20 involving                                                      X
     cases where patients did not leave against medical
     advice (AMA).......................................
Procedure Codes:
    94.61  Alcohol rehabilitation.......................                                        X
    94.63  Alcohol rehabilitation and detoxification....                                        X
    94.64  Drug rehabilitation..........................                                        X
    94.66  Drug rehabilitation and detoxification.......                                        X
    94.67  Combined alcohol and drug rehabilitation.....                                        X
    94.69  Combined alcohol and drug rehabilitation and                                         X
     detoxification.....................................
----------------------------------------------------------------------------------------------------------------

7. MDC 25 (Human Immunodeficiency Virus Infections)
    Effective October 1, 2000, ICD-9-CM diagnosis codes 783.2 (Abnormal
loss of weight) and 783.4 (Lack of expected normal physiological
development) were made invalid (65 FR 47171). These two old diagnosis
codes were expanded to five digits and the following new diagnosis
codes were created:

783.21  Loss of weight
783.22  Underweight
783.40  Unspecified lack of normal physiological development
783.41  Failure to thrive
783.42  Delayed milestones
783.43  Short stature

    These six revised codes were created in response to an industry
request. Specifically, code 783.2 did not differentiate between whether
the patient had lost weight recently or whether the patient was
underweight. Code 783.4 was expanded to capture concepts such as
failure to thrive, delayed milestones, and short stature. None of these
concepts were captured in the old codes.
    We listed these new codes in the August 1, 2000 final rule on the
hospital inpatient prospective payment system in Table 6A--New
Diagnosis Codes (65 FR 47169). At the time the final rule was
published, all of these codes were assigned to DRGs 296 through 298.
After the final rule was published, we received an inquiry as to why
these new diagnosis codes were not included in MDC 25 as human
immunodeficiency virus (HIV)-related conditions. The inquirer pointed
out that the predecessor codes (783.2 and 783.4) were included in MDC
25 as HIV-related conditions and suggested that the new codes be added
to MDC 25. These cases will be assigned to other MDCs if the patient
does not have HIV.
    We agree that the expanded codes should have been placed in the MDC
25 as HIV-related conditions. The omission was an oversight. Therefore,
we are proposing to add diagnosis codes 783.21, 783.22, 783.40, 783.41,
783.42, and 783.43 as HIV-related conditions within MDC 25. When these
six revised codes are reported with code 042 HIV, the patient will be
classified within MDC 25.
8. 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 resource intensive most least,
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

[[Page 22660]]

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. 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, because 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 5 (Diseases and Disorders of the Circulatory
System), MDC 8 (Diseases and Disorders of the Musculoskeletal System &
Connective Tissue) and MDC 20 (Alcohol/Drug Use & Alcohol/Drug Induced
Organic Mental Disorders), as these are proposed to be revised under
sections II.B.2., II.B.3., and II.B.6. of this preamble, as follows:
     In the pre-MDC DRGs, we are proposing to reorder Lung
Transplant (DRG 495) above Bone Marrow Transplant (DRG 481). We are
also proposing to reorder Simultaneous Pancreas/Kidney Transplant (DRG
512) and Pancreas Transplant (DRG 513) above Lung Transplant (DRG 495).
     In MDC 5, we are proposing to reorder Cardiac
Defibrillator Implants (DRGs 514 and 515) above Other Cardiothoracic
Procedures (DRG 108). We are also proposing to reorder Percutaneous
Cardiovascular Procedures (DRGs 516, 517, and 518) above Other Vascular
Procedures (DRGs 478 and 479).
     In MDC 8, we are proposing to reorder Cervical Spinal
Fusion (DRGs 519 and 520) above Back & Neck Procedures Except Spinal
Fusion (DRGs 499 and 500).
     In MDC 20, we are proposing to order as follows: Alcohol/
Drug Abuse or Dependence, Left AMA (DRG 433) above Alcohol/Drug Abuse
or Dependence With CC (DRG 521); Alcohol/Drug Abuse or Dependence With
CC (DRG 521) above Alcohol/Drug Abuse or Dependence With Rehabilitation
Therapy Without CC (DRG 522); and Alcohol/Drug Abuse or Dependence With
Rehabilitation Therapy Without CC (DRG 522) above Alcohol/Drug Abuse or
Dependence Without Rehabilitation Therapy Without CC (DRG 523).
9. 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; the July 31, 1998
final rule (63 FR 40954) for the FY 1999 revisions, and the August 1,
2000 final rule (65 FR 47064) for the FY 2001 revisions. In the July
30, 1999 final rule (64 FR 41490) we did not modify the CC Exclusions
List for FY 2000 because we

[[Page 22661]]

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, 2001. (See section
II.B.11. 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,
2001. 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 6G--Additions to the CC
Exclusions List. Beginning with discharges on or after October 1, 2001,
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 6H--Deletions from
the CC Exclusions List. Beginning with discharges on or after October
1, 2001, 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 $133.00
plus 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, VA 22161; or by calling (800) 553-6847.
    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, 2001. (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 18.0, is available for $225.00,
which includes $15.00 for shipping and handling. Version 19.0 of this
manual, which includes the final FY 2002 DRG changes, will be available
in October 2001 for $225.00. These manuals may be obtained by writing
3M/HIS at the following address: 100 Barnes Road, Wallingford, CT
06492; or by calling (203) 949-0303. Please specify the revision or
revisions requested.
10. 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); in FY 2000, as noted in the July 30, 1999 final
rule (64 FR 41496); or in FY 2001, as noted in the August 1, 2000 final
rule (65 FR 47064).
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.
    Using 100 percent of the FY 2000 MedPAR file containing bills
submitted through May 31, 2000 for discharges in FY 2000, we determined
that the quantity of cases in DRG 477 totaled 17,153. 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 100 percent sample of the FY 2000 MedPAR file, we
reviewed DRG 468. There were a total of 40,429 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

[[Page 22662]]

diagnosis falls. Based on this year's review, we did not identify any
necessary changes in procedures under DRG 477 and, therefore, are not
proposing to move any procedures from DRG 477 to one of the surgical
DRGs. However, our medical consultants have identified a number of
procedure codes that should be removed from DRG 468 and put into more
clinically coherent DRGs. The movement of these codes are specified in
the charts below:

                 Movement of Procedure Codes From DRG 468
------------------------------------------------------------------------
                                       Included in
   Procedure code       Description        DRG           Description
------------------------------------------------------------------------
           MDC 1--Diseases and Disorders of the Nervous System
------------------------------------------------------------------------
5495................  Peritoneal                 7  Peripheral and
                       Incision.                     Cranial Nerve and
                                                     Other Nervous
                                                     System Procedures
                                                     with CC
5495................  Peritoneal                 8  Peripheral and
                       Incision.                     Cranial Nerve and
                                                     Other Incision
                                                     Nervous System
                                                     Procedures without
                                                     CC
------------------------------------------------------------------------
                MDC 3--Diseases and Disorders of the Ear
------------------------------------------------------------------------
3821................  Blood Vessel              63  Other Ear, Nose,
                       Biopsy.                       Mouth and Throat OR
                                                     Procedure
------------------------------------------------------------------------
         MDC 4--Diseases and Disorders of the Respiratory System
------------------------------------------------------------------------
3821................  Blood Vessel              76  Other Respiratory
                       Biopsy.                       System OR
                                                     Procedures with CC
3821................  Blood Vessel              77  Other Respiratory
                       Biopsy.                       System OR
                                                     Procedures without
                                                     CC
3929................  Vascular Shunt            76  Other Respiratory
                       & Bypass NEC.                 System OR
                                                     Procedures with CC
3929................  Vascular Shunt            77  Other Respiratory
                       & Bypass NEC.                 System OR
                                                     Procedures without
                                                     CC
3931................  Suture of                 76  Other Respiratory
                       Artery.                       System OR
                                                     Procedures with CC
3931................  Suture of                 77  Other Respiratory
                       Artery.                       System OR
                                                     Procedures without
                                                     CC
5411................  Exploratory               76  Other Respiratory
                       Laparotomy.                   System OR
                                                     Procedures with CC
5411................  Exploratory               77  Other Respiratory
                       Laparotomy.                   System OR
                                                     Procedures without
                                                     CC
7749................  Bone Biopsy NEC           76  Other Respiratory
                                                     System OR
                                                     Procedures with CC
7749................  Bone Biopsy NEC           77  Other Respiratory
                                                     System OR
                                                     Procedures without
                                                     CC
8669................  Free Skin Graft           76  Other Respiratory
                       NEC.                          System OR
                                                     Procedures with CC
8669................  Free Skin Graft           77  Other Respiratory
                       NEC.                          System OR
                                                     Procedures without
                                                     CC
------------------------------------------------------------------------
         MDC 5--Diseases and Disorders of the Circulatory System
------------------------------------------------------------------------
3402................  Exploratory              120  Other Circulatory
                       Thoracotomy.                  System OR

                                                     Procedures
3403................  Reopen                   120  Other Circulatory
                       Thoracotomy                   System OR
                       Site.                         Procedures
3421................  Transpleura              120  Other Circulatory
                       Thoracoscopy.                 System OR
                                                     Procedures
3422................  Mediastinoscoy           120  Other Circulatory
                       Circulatory.                  System OR
                                                     Procedures
3426................  Open                     120  Other Circulatory
                       Mediastinal                   System OR
                       Biopsy.                       Procedures
436.................  Distal                   120  Other Circulatory
                       Gastrectomy.                  System OR
                                                     Procedures
437.................  Partial                  120  Other Circulatory
                       Gastrectomy                   System OR
                       with Jejunal                  Procedures
                       Anastamosis.
4389................  Partial                  120  Other Circulatory
                       Gastrectomy.                  System OR
                                                     Procedures
4399................  Total                    120  Other Circulatory
                       Gastrectomy.                  System OR
                                                     Procedures
14561...............  Multiple                 120  Other Circulatory
                       Segment Small                 System OR
                       Bowel Excision.               Procedures
4562................  Partial Small            120  Other Circulatory
                       Bowel                         System OR
                       Resectomy NEC.                Procedures
4572................  Cecectomy......          120  Other Circulatory
                                                     System OR
                                                     Procedures
4573................  Right                    120  Other Circulatory
                       Hemicolectomy.                System OR
                                                     Procedures
4574................  Transverse               120  Other Circulatory
                       Colon                         System OR
                       Resectomy.                    Procedures
4575................  Left                     120  Other Circulatory
                       Hemicolectomy.                System OR
                                                     Procedures
4579................  Partial Large            120  Other Circulatory
                       Bowel Excision                System OR
                       NEC.                          Procedures
458.................  Total Intra-             120  Other Circulatory
                       Abdominal                     System OR
                       Colectomy.                    Procedures
4593................  Small-to-Large           120  Other Circulatory
                       Bowel NEC.                    System OR
                                                     Procedures
4603................  Large Bowel              120  Other Circulatory
                       Exteriorizatio                System OR
                       n.                            Procedures
4613................  Permanent                120  Other Circulatory
                       Colostomy.                    System OR
                                                     Procedures
4709................  Other                    120  Other Circulatory
                       Appendectomy.                 System OR
                                                     Procedures
4862................  Anterior Rectal          120  Other Circulatory
                       Resction With                 System OR
                       Colostomy.                    Procedures
4863................  Anterior Rectal          120  Other Circulatory
                       Resection NEC.                System OR
                                                     Procedures
4869................  Rectal                   120  Other Circulatory
                       Resection.                    System OR
                                                     Procedures
5012................  Open Liver               120  Other Circulatory
                       Biopsy.                       System OR
                                                     Procedures
540.................  Abdominal Wall           120  Other Circulatory
                       Incision.                     System OR
                                                     Procedures
------------------------------------------------------------------------
          MDC 6--Diseases and Disorders of the Digestive System
------------------------------------------------------------------------
5122................  C