[Federal Register: March 22, 2002 (Volume 67, Number 56)]
[Proposed Rules]
[Page 13415-13494]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22mr02-26]
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Part II
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Part 412 et al.
Medicare Program; Prospective Payment System for Long-Term Care
Hospitals: Proposed Implementation and FY 2003 Rates; Proposed Rule
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 412, 413, and 476
[CMS-1177-P]
RIN 0938-AK69
Medicare Program; Prospective Payment System for Long-Term Care
Hospitals: Proposed Implementation and FY 2003 Rates
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Proposed rule.
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SUMMARY: This proposed rule would establish a prospective payment
system for Medicare payment of inpatient hospital services furnished by
long-term care hospitals (LTCHs) described in section 1886(d)(1)(B)(iv)
of the Social Security Act (the Act). This proposed rule would
implement section 123 of the Medicare, Medicaid, and SCHIP [State
Children's Health Insurance Program] Balanced Budget Refinement Act
(BBRA) of 1999 and section 307(b) of the Medicare, Medicaid, and SCHIP
Benefits Improvement and Protection Act (BIPA) of 2000. Section 123 of
the BBRA directs the Secretary to develop and implement a prospective
payment system for LTCHs. The prospective payment system described in
this proposed rule would replace the reasonable cost-based payment
system under which the LTCHs are currently paid.
DATES: Comments will be considered if received at the appropriate
address, as provided below, no later than 5 p.m. on May 21, 2002.
ADDRESSES: Mail written comments (an original and three copies) to the
following address only: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: CMS-1177-P, P.O.
Box 8013, Baltimore, MD 21244-8013.
To ensure that mailed comments are received in time for us to
consider them, please allow for possible delays in delivering them. If
you prefer, you may deliver (by hand or 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 C5-16-03, Central Building, 7500 Security
Boulevard, Baltimore, MD 21244-1850.
(Because access to the interior building is not readily available to
persons without Federal Government identification, commenters are
encouraged to leave their comments in the CMS drop slots located in the
main lobby of the building. A stamp-in clock is available for
commenters wishing to retain proof of filing by stamping in and
retaining an extra copy of the comments being filed.)
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and could be considered late.
Because of staff and resource limitations, we cannot accept
comments by facsimile (FAX) transmission. In commenting, please refer
to file code CMS-1177-P. For information on viewing public comments,
see the beginning of the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT:
Tzvi Hefter, (410) 786-4487, or Judy Richter, (410) 786-2590 (General
information, transition payments, payment adjustments)
Michele Hudson, (410) 786-5490 (Calculation of the payment rates,
relative weights/case-mix index, update factors, payment adjustments)
Ann Fagan, (410) 786-5662 (Patient classification system)
SUPPLEMENTARY INFORMATION:
Inspection of Public Comment
Comments received timely will be available for public inspection as
they are received, generally beginning approximately 3 weeks after
publication of a document, at 7500 Security Boulevard, Baltimore, MD
21244, Monday through Friday of each week from 8:30 to 5 p.m. Please
call (phone: (410) 786-7197) to make an appointment to view the public
comments.
Availability of Copies and Electronic Access
Copies: To order copies of the Federal Register containing this
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This Federal Register document is also available from the Federal
Register online database through GPO Access, a service of the U.S.
Government Printing Office. The Web site address is: http://
www.access.gpo.gov/nara/index.html.
To assist readers in referencing sections contained in this
preamble, we are providing the following table of contents.
Table of Contents
I. Background
A. Overview of Current Payment System for LTCHs
1. Exclusion of Certain Facilities from the Acute Care Hospital
Inpatient Prospective Payment System
2. Requirements for LTCHs to be Excluded from the Acute Care
Hospital Inpatient Prospective Payment System
3. Payment System Requirements Prior to the BBA
4. Effect of the Current Payment System
5. Research and Discussion of a Prospective Payment System for
LTCHs Prior to the BBA
B. Requirements of the BBA, BBRA, and BIPA for LTCHs
1. Provisions of the Current Payment System
2. Provisions for a LTCH Prospective Payment System
C. Research Supporting the Establishment of the LTCH Prospective
Payment System: Legislative Requirements
D. Description of Sources of Research Data
E. The Universe of LTCHs
1. Background Issues
2. General Medicare Policies
3. Exclusion from the Acute Care Hospital Inpatient Prospective
Payment System
4. Geographic Distribution
5. Characteristics by Date of Medicare Participation
6. Hospitals-Within-Hospitals and Satellite Facilities
7. Specialty Groups of LTCHs by Patient Mix
8. Sources and Destinations of LTCH Patients
9. LTCHs and Patterns Among Post-Acute Care Facilities
F. Overview of System Analysis for the Proposed LTCH Prospective
Payment System
G. Evaluation of DRG-Based Patient Classification Systems
H. Recommendations by MedPAC for a LTCH Prospective Payment
System
I. Evaluated Options for the Proposed Prospective Payment System
for LTCHs
II. General Discussion of the Proposed LTCH Prospective Payment
System
A. Goals of the Proposed LTCH Prospective Payment System
B. Applicability of the Proposed LTCH Prospective Payment System
C. LTCHs Not Subject to the Proposed LTCH Prospective Payment
System
D. Summary Description of the Proposed LTCH Prospective Payment
System
1. Procedures
[[Page 13417]]
2. Patient Classification Provisions
3. Payment Rates
4. Limitation on Charges to Beneficiaries
5. Medical Review Requirements
6. Furnishing of Inpatient Hospital Services Directly or Under
Arrangements
7. Reporting and Recordkeeping Requirements
8. Implementation of the Proposed Prospective Payment System
III. Long-Term Care Diagnosis-Related Group (LTC-DRG)
Classifications
A. Background
B. Historical Exclusion of LTCHs
C. Patient Classifications by DRGs
1. Objectives of the Classification System
2. DRGs and Medicare Payments
D. Proposed LTC-DRG Classification System for LTCHs
E. ICD-9-CM Coding System
1. Historical Use of ICD-9-CM Codes
2. Uniform Hospital Discharge Data Set (UHDDS) Definitions
3. Maintenance of ICD-9-CM System
4. Coding Rules and Use of ICD-9-CM in LTCHs
IV. Proposed Payment System for LTCHs
A. Development of the Proposed LTC-DRG Relative Weights
1. Overview of Development of the Proposed LTC-DRG Relative
Weights
2. Steps for Calculating the Proposed Relative Weights
B. Special Cases
1. Very Short-Stay Discharges
2. Short-Stay Outliers
3. Interrupted Stay
4. Other Special Cases
5. Onsite Discharges and Readmittances
6. Additional Issues for Onsite Facilities
7. Monitoring System
C. Payment Adjustments
1. Area Wage Adjustment
2. Adjustment for Geographic Reclassification
3. Adjustment for Disproportionate Share of Low-Income Patients
4. Adjustment for Indirect Teaching Costs
5. Cost-of-Living Adjustment (COLA) for Alaska and Hawaii
6. Adjustment for High-Cost Outliers
D. Calculation of the Proposed Standard Federal Payment Rate
1. Overview of the Development of the Proposed Standard Payment
Rate
2. Development of the Proposed Standard Federal Payment Rate
E. Development of the Proposed Federal Prospective Payments
F. Computing the Proposed Adjusted Federal Prospective Payments
G. Transition Period
H. Payments to New LTCHs
I. Method of Payment
V. Provisions of the Proposed Rule
VI. Regulatory Impact Analysis
A. Introduction
1. Executive Order 12866
2. Regulatory Flexibility Act (RFA)
3. Impact on Rural Hospitals
4. Unfunded Mandate
5. Federalism
B. Anticipated Effects
1. Budgetary Impact
2. Impact on Providers
3. Calculation of Current Payments
4. Calculation of Proposed Prospective Payments
5. Results
6. Effect on the Medicare Program
7. Effect on Medicare Beneficiaries
8. Computer Hardware and Software
C. Alternatives Considered
D. Executive Order 12866
VII. Collection of Information Requirements
VIII. Response to Comments
Regulations Text
Appendix A--Proposed Market Basket for LTCHs
Appendix B--Proposed Update Framework
Acronyms
Because of the many terms to which we refer by acronym in this
proposed rule, we are listing the acronyms used and their corresponding
terms in alphabetical order below:
APR-DRGs All patient-defined, diagnosis-related groups.
BBA Balanced Budget Act of 1997, Public Law 105-33.
BBRA Medicare, Medicaid and SCHIP [State Children's Health Insurance
Program] Balanced Budget Refinement Act of 1999, Public Law 106-113.
BIPA Medicare, Medicaid, and SCHIP [State Children's Health Insurance
Program] Benefits Improvement and Protection Act of 2000, Public Law
106-554.
CMGs Case-mix groups.
CMI Case-mix index.
CMS Centers for Medicare & Medicaid Services.
DRGs Diagnosis-related groups.
FY Federal fiscal year.
HCRIS Hospital Cost Report Information System.
HHA Home health agency.
HIPAA Health Insurance Portability and Accountability Act, Public Law
104-191.
IRF Inpatient rehabilitation facility.
LTC-DRG Long-term care diagnosis-related group.
LTCH Long-term care hospital.
MDCN Medicare Data Collection Network.
MedPAC Medicare Payment Advisory Commission.
MedPAR Medicare provider analysis and review file.
ProPAC Prospective Payment Assessment Commission.
SNF Skilled nursing facility.
TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Public Law 97-
248.
I. Background
When the Medicare statute was originally enacted in 1965, Medicare
payment for hospital inpatient services was based on the reasonable
costs incurred in furnishing services to Medicare beneficiaries.
Section 223 of the Social Security Act Amendments of 1972 (Pub. L. 92-
603) amended section 1861(v)(1) of the Social Security Act (the Act) to
set forth limits on reasonable costs for hospital inpatient services.
Section 101(a) of the Tax Equity and Fiscal Responsibility Act of 1982
(TEFRA) (Pub. L. 97-248) amended the Medicare statute to limit payment
by placing a cap on allowable costs per discharge. Section 601 of the
Social Security Amendments of 1983 (Pub. L. 98-21) added section
1886(d) to the Act that replaced the reasonable cost-based payment
system for most hospital inpatient services. Section 1886(d) of the Act
provides for a prospective payment system for the operating costs of
acute care hospital inpatient stays, effective with hospital cost
reporting periods beginning on or after October 1, 1983.
Although most hospital inpatient services became subject to the
prospective payment system, certain specialty hospitals are excluded
from that system and continue to be paid their reasonable costs subject
to the cap established under TEFRA. These hospitals included long-term
care hospitals (LTCHs), rehabilitation and psychiatric hospitals,
rehabilitation and psychiatric units of acute care hospitals, and
children's hospitals. Cancer hospitals were added to the list of
excluded hospitals by section 6004(a) of the Omnibus Budget
Reconciliation Act of 1989 (Pub. L. 101-239).
Subsequent to the implementation of the acute care hospital
inpatient prospective payment system, both the number of excluded
hospitals and Medicare payments to these hospitals grew rapidly.
Congress enacted various provisions in the Balanced Budget Act
(BBA) (Pub. L. 105-33), the Medicare, Medicaid, and SCHIP [State
Children's Health Insurance Program] Balanced Budget Refinement Act
(BBRA) (Pub. L. 106-113), and the Medicare, Medicaid, and SCHIP
Benefits Improvement and Protection Act (BIPA) (Pub. L. 106-554) to
provide for the development and implementation of a prospective payment
system for the following excluded hospitals:
Rehabilitation hospitals (including units in acute care
hospitals).
Psychiatric hospitals (including units in acute care
hospitals).
LTCHs.
Section 4422 of the BBA mandated that the Secretary develop a
legislative proposal, for presentation to Congress by October 1, 1999,
for a case-mix adjusted LTCH prospective payment
[[Page 13418]]
system under the Medicare program. This system was to include an
adequate patient classification system that reflects the differences in
patient resource use and costs among LTCHs. Furthermore, in developing
the legislative proposal for the prospective payment system, the
Secretary was to consider several payment methodologies, including the
feasibility of an expansion of the acute care inpatient hospital
prospective payment system (diagnosis-related group (DRG) based system)
established under section 1886(d) of the Act.
In the interim, section 4414 of the BBA imposed national limits (or
caps) on hospital-specific target amounts (that is, annual per
discharge limit) for these hospitals until cost reporting periods
beginning on or after October 1, 2002. At the same time that Congress
modified the payment system based on limits on target amounts, it also
included in the BBA a provision to require the Secretary to develop a
legislative proposal for establishing a prospective payment system for
LTCHs.
With the passage of the BBRA in November 1999, in section 122,
Congress refined some policies of the BBA prior to the implementation
of prospective payment systems for LTCHs and psychiatric hospitals and
units. Section 123 of the BBRA further requires that the Secretary
develop a per discharge, DRG-based system for LTCHs and requires that
this system be described in a report to the Congress by October 1,
2001, and be in place by October 1, 2002. Section 307(b)(1) of BIPA
modified the BBRA's requirements for the prospective payment system for
LTCHs by mandating that the Secretary ``* * * shall examine the
feasibility and the impact of basing payment under such a system on the
use of existing (or refined) hospital diagnosis-related groups (DRGs)
that have been modified to account for different resource use of long-
term care hospital patients as well as the use of the most recently
available hospital discharge data.'' Furthermore, section 307(b)(1) of
BIPA provided that the Secretary ``* * * shall examine and may provide
for appropriate adjustments to the long-term hospital prospective
payment system, including adjustments to DRG weights, area wage
adjustments, geographic reclassification, outliers, updates, and a
disproportionate share adjustment * * *.'' In the event that the
Secretary is unable to implement the LTCH prospective payment system by
October 1, 2002, section 307(b)(2) of BIPA requires the Secretary to
implement a prospective payment system using the existing hospital
DRGs, modified where feasible to account for resource use by LTCHs.
In this proposed rule, we set forth the proposed Medicare
prospective payment system for LTCHs as authorized under the BBRA and
BIPA. Below, we discuss the development, proposed policies, and
proposed implementation of the proposed LTCH prospective payment
system. These discussions include the following:
An overview of the current payment system for LTCHs.
A discussion of the statutory requirements for developing
and implementing a LTCH prospective payment system.
A discussion of research findings on LTCHs.
A detailed discussion of the proposed LTCH prospective
payment system, including the patient classification system, relative
weights, payment rates, additional payments, and the budget neutrality
requirements mandated by section 123 of Public Law 106-113.
An analysis of the estimated impact of the proposed LTCH
prospective payment system on the Federal budget and LTCHs.
Proposed changes to existing regulations and the
establishment of proposed regulations in 42 CFR Chapter IV to implement
the proposed LTCH prospective payment system.
A. Overview of Current Payment System for LTCHs
1. Exclusion of Certain Facilities From the Acute Care Hospital
Inpatient Prospective Payment System
Although payment for operating costs of most hospital inpatient
services became subject to a prospective payment system under the
Social Security Amendments of 1983 (Pub. L. 98-21) which added section
1886(d) to the Act, certain types of hospitals and units were excluded
from that payment system. Section 1886(d)(1)(B) of the Act lists the
following classes of excluded hospitals:
Psychiatric hospitals and units.
Rehabilitation hospitals and units.
LTCHs.
Children's hospitals.
Effective with cost reporting periods beginning on or after October
1, 1989, cancer hospitals were added to this list by section 6004(a) of
the Omnibus Budget Reconciliation Act of 1989 (Pub. L. 101-239).
The hospital inpatient prospective payment system is a system of
average-based payments that assumes that some patient stays will
consume more resources than the typical stay, while others will demand
fewer resources. Therefore, an efficiently operated hospital should be
able to deliver care to its Medicare patients for an overall cost that
is at or below the amount paid under the hospital inpatient prospective
payment system. In a report to the Congress, Hospital Prospective
Payment for Medicare (1982), the Department of Health and Human
Services stated that the ``467 DRGs were not designed to account for
these types of treatment'' found in the four classes of excluded
hospitals, and noted that ``including these hospitals will result in
criticism and their application to these hospitals would be inaccurate
and unfair.''
The Congress excluded these hospitals from the hospital inpatient
prospective payment system because they typically treated cases that
involved stays that were, on average, longer or more costly than would
be predicted by the DRG system. The legislative history of the 1983
Social Security Amendments stated that the ``DRG system was developed
for short-term acute care general hospitals and as currently
constructed does not adequately take into account special circumstances
of diagnoses requiring long stays.'' (Report of the Committee on Ways
and Means, U.S. House of Representatives, to Accompany HR 1900, H.R.
Rept. No. 98-25, at 141 (1983)). Therefore, these hospitals could be
systemically underpaid if the same DRG system were applied to them.
Following enactment in April 1983 of the Social Security Amendments
of 1983, we implemented the hospital inpatient prospective payment
system on October 1, 1983, including the initial publication in the
Federal Register of the rules and regulations for the hospital
inpatient prospective payment system--the September 1, 1983 interim
final rule (48 FR 39752) and the January 3, 1984 final rule (49 FR
234). Updates and modifications of the regulations have been published
annually in the Federal Register. We also developed payment policy for
hospitals that were seeking to be excluded from the hospital inpatient
prospective payment system. The regulations concerning exclusion of
LTCHs from the hospital inpatient prospective payment system are found
in 42 CFR part 412, subpart B.
2. Requirements for LTCHs To Be Excluded From the Acute Care Hospital
Inpatient Prospective Payment System
Under section 1886(d)(1)(B) of the Act, the prospective payment
system for hospital inpatient operating costs set forth in section
1886(d) of the Act does not apply to several specified types of
hospitals, including LTCHs defined in section 1886(d)(1)(B)(iv)(I) of
the Act as ``* * * a hospital which has an average
[[Page 13419]]
inpatient length of stay (as determined by the Secretary) of greater
than 25 days.'' Public Law 105-33 added section 1886(d)(1)(B)(iv)(II)
to the Act, which also provides another definition of LTCHs,
specifically, a hospital that was first excluded in 1986 which has an
average inpatient length of stay (as determined by the Secretary) of
greater than 20 days and has 80 percent or more of its annual Medicare
inpatient discharges with a principal diagnosis of neoplastic disease
in the 12-month cost reporting period ending in FY 1997.
Implementing regulations at Sec. 405.471(c)(5) (now Sec. 412.23(e))
require the facility to have a provider agreement with Medicare to
participate as a hospital, and an average inpatient length of stay
greater than 25 days as calculated under the following formula: The
average length of stay is calculated by dividing the total number of
inpatient days (excluding leave of absence or pass days) for all
patients by the total number of discharges for the hospital's most
recent complete cost reporting period. The determination of whether or
not a hospital qualifies as an LTCH is based on the hospital's most
recently filed cost report, or if a change in the hospital's average
length of stay is indicated, by the same method for the immediately
preceding 6-month period (Sec. 412.23(e)(3)). (Requirements for
hospitals seeking classification as LTCHs that have undergone a change
in ownership, as described in Sec. 489.18, are set forth in
Sec. 412.23(e)(3)(iii).)
3. Payment System Requirements Prior to the BBA
Hospitals that are excluded from the hospital inpatient prospective
payment system under section 1886(d)(1)(B) of the Act are paid for
inpatient operating costs under the provisions of Public Law 97-248
(TEFRA) that are found in section 1886(b) of the Act and implemented in
regulations at 42 CFR part 413. Public Law 97-248 established payments
based on hospital-specific limits for inpatient operating costs. A
ceiling on payments to hospitals excluded from the acute care hospital
inpatient prospective payment system is determined by calculating the
product of a facility's base year costs (the year on which its target
reimbursement limit is based) per discharge, updated to the current
year by a rate-of-increase percentage, and multiplied by the number of
total current year discharges. (A detailed discussion of target amount
payment limits under Public Law 97-248 can be found in the September 1,
1983 final rule published in the Federal Register (48 FR 39746).)
The base year for a facility varied, depending on when the facility
was initially determined to be a prospective payment system-excluded
provider. The base year for facilities that were established prior to
the implementation of Public Law 97-248 was 1982, when Public Law 97-
248 was enacted. For facilities established after implementation of
Public Law 97-248 (section 1886(b) of the Act), we originally provided
in the regulations for payment to these facilities for their full
``reasonable'' costs for their first 3 cost reporting years, and
allowed the facilities to choose which of those years would be used in
the future to determine their target limit. This ``new provider''
period was later shortened to 2 cost reporting years (Sec. 413.40(f)(1)
(1992)), and we designated the second cost reporting year as the cost
reporting year used to determine the hospital's per discharge target
amount.
Excluded facilities whose costs were below their target amounts
received bonus payments equal to the lesser of half of the difference
between costs and the target amount, up to a maximum of 5 percent of
the target amount, or the hospital's costs. For excluded facilities
whose costs exceeded their target amounts, Medicare provided relief
payments equal to half of the amount by which the hospital's costs
exceeded the target amount up to 10 percent of the target amount.
Excluded facilities that experienced a more significant increase in
patient acuity could also apply for an additional amount under the
regulations for Medicare exception payments (Sec. 413.40(d)).
4. Effect of the Current Payment System
Utilization of post-acute care services has grown rapidly in recent
years since the implementation of the acute care hospital inpatient
prospective payment system. Average length of stay in acute care
hospitals has decreased, and patients are increasingly being discharged
to post-acute care settings such as LTCHs, skilled nursing facilities
(SNFs), home health agencies (HHAs), and inpatient rehabilitation
facilities (IRFs) to complete their course of treatment. The increased
utilization of post-acute care providers, including hospitals excluded
from the prospective payment system, has resulted in the rapid growth
in Medicare payments to these hospitals in recent years. In addition,
there has been a significant increase in the number of LTCHs. In 1991,
there were 91 LTCHs; in 1994, 155 LTCHs; in 1999, 225 LTCHs; in
December 2000, 252 LTCHs; and in November 2001, 270 LTCHs. Payments to
post-acute care providers were among the fastest growing providers
under the Medicare program throughout the 1990s. (Prospective Payment
Assessment Commission (ProPAC) June 1996 Report to Congress, p. 91.)
LTCHs have experienced faster growth in the number of facilities
and Medicare program payments than any other category of prospective
payment system-excluded provider. In its June 1996 Report to Congress,
ProPAC found that, from 1990 to 1993, payment to rehabilitation
facilities rose about 25 percent per year, while payments to LTCHs
increased 33 percent annually (p. 92). ProPAC also found that, from
1991 to 1995, the number of rehabilitation facilities increased 21
percent (from 852 in 1991 to 1,029 in 1995), while the number of LTCHs
increased 93 percent (from 91 in 1991 to 176 in 1995) (p. 93).
Furthermore, the best available Hospital Cost Report Information System
(HCRIS) data indicate $398 million in payments for inpatient operating
services to 105 LTCHs in FY 1993 and $1.05 billion in payments for
inpatient operating services to 206 LTCHs in FY 1998. This is more than
a 96 percent increase in the number of LTCHs and a 164 percent increase
in payments to LTCHs in 5 years.
In its March 1999 report to the Congress, the Medicare Payment
Advisory Commission (MedPAC) (formerly ProPAC) stated that: ``[The]
TEFRA system has remained in effect longer than expected partly because
of difficulties in accounting for the variation in resource use across
patients in exempted facilities. The unintended consequences of
sustaining that system have been a steady growth in the number of
prospective payment system-exempt facilities and a substantial payment
inequity between older and newer facilities. In particular, the payment
system encouraged new exempt facilities to maximize their costs in the
base year to establish high cost limits. Once subject to its relatively
high limit, a recent entrant could reduce its costs below its limit,
resulting in reimbursement of its full costs plus bonus payment. By
contrast, facilities that existed before they became subject to TEFRA
could not influence their cost limits. Given the relatively low limits
of older facilities, they are more likely to incur costs above their
limits and thus receive payments less than their costs.'' (p. 72)
To address concerns regarding the historical growth in payments and
the disparity in payments to existing and newly excluded hospitals and
units, the BBA mandated several changes to the existing payment system.
These changes
[[Page 13420]]
are outlined in section I.B.1. of this preamble.
5. Research and Discussion of a Prospective Payment System for LTCHs
Prior to the BBA
Section 603(a)(2)(C)(ii) of Public Law 98-21 required the Secretary
to include the results of research studies on whether and how excluded
hospitals and units can be paid on a prospective basis, in the 1985
Report to the Congress on the Impact of Prospective Payment
Methodology. HCFA (now CMS) undertook and funded a wide range of
research projects that resulted in 1987 in a report to the Congress
entitled ``Developing a Prospective Payment System for Excluded
Hospitals.'' In that report, the Secretary presented an examination of
the then current state of the four classes of excluded hospitals and
units and offered recommendations for the development of a prospective
payment system. ``Long-term'' or ``chronic disease'' hospitals, the
report noted, ``are the least understood of the excluded hospital
types'' (p. 3-51).
The following information was clear--there were a relatively small
number of facilities (94 at that time); LTCHs were not dispersed
throughout the country and, therefore, potential long-term care
patients were receiving necessary care elsewhere; LTCHs, as defined by
the greater than 25-day average length of stay, constituted a diverse
set that closely resembled other hospitals, both included (acute care)
and excluded (psychiatric, rehabilitation, and children's) under the
prospective payment system (pp. 3-51 through 3-63). The Report
concluded with the following discussion: ``Because this class of
hospitals treats a very heterogeneous patient population and does not
share a common set of facility characteristics, the development of a
separate classification system for prospective payment purposes would
appear to be both infeasible and undesirable. At the same time, as part
of HCFA's [now CMS's] impact analysis, we were investigating the
feasibility of including LTCHs under the current prospective payment
system, where their cases would be expected to be paid predominantly
under the prospective payment system outlier policy.'' (pp. 3-63
through 3-64)
The 1987 report further noted that present and future research on
LTCHs would focus on acquiring a broader understanding of LTCHs, long-
term care patients, and other treatment settings and on the preliminary
financial impact of a prospective payment system on both LTCHs and the
Medicare system. An initial inquiry was also planned ``into the role of
those hospitals as a component of the continuum of care between acute
care hospitals and skilled nursing facilities, as a general first step
in developing a classification system for patients in these facilities.
* * *''
(p. 3-54)
ProPAC's March 1996 Report to Congress endorsed the concept of
prospective payment systems for all post-acute services, emphasizing
consistent payment methods across all classes of facilities in order to
encourage provider efficiency (p. 75). ProPAC's extensive analysis of
``patients using post-acute care providers and in these providers'
treatment patterns'' based on FY 1994 data discussed in the June 1996
Report to Congress, concluded that ``[a]lthough there was significant
overlap in the hospital assigned DRGs across settings, other patient
characteristics, such as medical complexity or functional status, may
influence which patients use a particular site.'' (p. 110)
In ProPAC's March 1, 1997 report, ProPAC's Recommendation 33,
entitled ``Coordinating Post-Acute Care Provider Payment Methods''
stated that ``the Commission urges the Congress and the Secretary to
consider the overlap in services and beneficiaries across post-acute
care providers as they modify Medicare payment policies.'' (p. 60)
The passage of Public Law 105-33 (the BBA) provided for the
establishment of separate and distinct prospective payment systems for
post-acute care providers: SNFs (section 4432(a)), IRFs (section 4421),
and HHAs (section 4603(b)). In addition, Congress directed the
Secretary to develop a legislative proposal to pay LTCHs prospectively
as well (section 4422).
B. Requirements of the BBA, BBRA, and BIPA for LTCHs
1. Provisions of the Current Payment System
a. BBA. The BBA amendments to section 1886(b) of the Act
significantly altered the payment provisions for excluded hospitals and
units and also added other qualifying criteria for certain hospitals
excluded from the hospital inpatient prospective payment system
(sections 4411, 4412, 4413, 4414, 4415, 4416, 4417, 4418, and 4419).
Provisions of these amendments that related to the current payment
system were explained in detail and implemented in our final rule
published in the Federal Register on August 29, 1997 (62 FR 45966).
Section 4411 of the BBA amended section 1886(b)(3)(B) of the Act
and restricted the rate-of-increase percentages that are applied to
each provider's target amount so that excluded hospitals and units
experiencing lower inpatient operating costs relative to their target
amounts receive lower rates of increase.
Section 4412 amended section 1886(g) of the Act to establish a 15-
percent reduction in capital payments for excluded psychiatric and
rehabilitation hospitals and units and LTCHs, for portions of cost
reporting periods occurring during the period of October 1, 1997,
through September 30, 2002.
Section 4413(b) of Public Law 105-33 amended section 1886(b)(3) of
the Act to permit certain LTCHs to elect a rebasing of the target
amount for the 12-month cost reporting period beginning during FY 1996.
Section 4414 of the BBA amended section 1886(b)(3) of the Act to
establish caps on the target amounts for excluded hospitals and units
at the 75th percentile of target amounts for similar facilities for
cost reporting periods beginning on or after October 1, 1997, through
September 30, 2002. These caps on the target amounts apply only to
psychiatric and rehabilitation hospitals and units and LTCHs. Payments
for these excluded hospitals and units are based on the lesser of a
provider's cost per discharge or its hospital-specific cost per
discharge, subject to this cap.
Section 4415 of the BBA amended section 1886(b)(1) of the Act by
revising the percentage factors used to determine the amount of bonus
and relief payments, and establishing continuous improvement bonus
payments for cost reporting periods beginning on or after October 1,
1997 for hospitals and units excluded from the prospective payment
system that meet specified criteria. If a hospital is eligible for the
continuous improvement bonus, the bonus payment is equal to the lesser
of: (1) 50 percent of the amount by which operating cost are less than
expected costs; or (2) 1 percent of the target amount.
Sections 4416 and 4419 of the BBA amended section 1886(b) of the
Act to establish a new framework for payments for new excluded
providers. Section 4416 added a new section 1886(b)(7) to the Act that
established a new statutory methodology for new psychiatric and
rehabilitation hospitals and units and LTCHs. Prior to this change, new
hospitals excluded from the acute care hospital inpatient prospective
payment system were exempted from the target amount per discharge
ceiling until the end of the first cost reporting period ending at
least 2 years after they accepted their first patient. This new
provider ``exemption'' was eliminated from all classes of excluded
providers
[[Page 13421]]
except children's hospitals for cost reporting periods beginning on or
after October 1, 1997, by section 4419(a) of the BBA. Under section
4416, payment to these new excluded providers for their first two cost
reporting periods is limited to the lesser of the operating costs per
case, or 110 percent of the national median of target amounts, as
adjusted for differences in wage levels, for the same class of hospital
for cost reporting periods ending during FY 1996, updated to the
applicable period.
It is important to note that prior to enactment of the BBA, the
payment provisions for excluded hospitals and units applied
consistently to all classes of excluded providers (that is,
psychiatric, rehabilitation, long-term care, children's, and cancer).
However, effective for cost reporting periods beginning on or after
October 1, 1997, there are specific payment provisions for certain
classes of excluded providers, as well as modifications for all
excluded providers.
b. BBRA. With the enactment of the BBRA of 1999, Congress refined
some of the policies mandated by the BBA for hospitals excluded from
the acute care hospital inpatient prospective payment system. The
provisions of the BBRA, which amended section 1886(b)(3)(H) of the Act
relating to the current payment system for excluded hospitals, were
explained in detail and implemented in our interim final rule published
in the Federal Register on August 1, 2000 (65 FR 47026) and in our
final rule also published on August 1, 2000 (65 FR 47054).
Section 4414 of the BBA had provided for caps on target amounts for
excluded hospitals and units for cost reporting periods beginning on or
after October 1, 1997. Section 121 of the BBRA amended section
1886(b)(3)(H) of the Act to provide for an appropriate wage adjustment
to these caps on the target amounts for existing psychiatric and
rehabilitation hospitals and units and LTCHs, effective for cost
reporting periods beginning on or after October 1, 1999 through
September 30, 2002.
Section 122 of BBRA provided for an increase in the continuous
improvement bonus for eligible LTCHs and psychiatric hospitals and
units for cost reporting periods beginning on or after October 1, 2000
and before September 30, 2002.
c. BIPA. Two provisions of BIPA that amended section 1886(b)(3) of
the Act were directed at LTCHs. Section 307(a) of BIPA provided for a
2-percent increase to the wage-adjusted 75th percentile cap on the
target amount for existing LTCHs, effective for cost reporting periods
beginning during FY 2001. Section 307(a) also provided a 25-percent
increase to the hospital-specific target amounts for existing LTCHs for
cost reporting periods beginning in FY 2001, subject to the wage-
adjusted national cap.
2. Provisions for a LTCH Prospective Payment System
a. BBA. In section 4422 of the BBA, the Congress mandated that the
Secretary develop a legislative proposal for a case-mix adjusted
prospective payment system under the Medicare program, for submission
by October 1999 based on consideration of several payment
methodologies, including the feasibility of expanding the current DRGs
and the prospective payment system currently in place for acute care
hospitals.
b. BBRA. Section 123 of the BBRA specifically requires that the
prospective payment system for LTCHs be designed as a per discharge
system with a DRG-based patient classification system that reflects the
differences in patient resources and costs in LTCHs while maintaining
budget neutrality. Section 123 also requires that a report be submitted
to the Congress describing the system design of the mandated LTCH
prospective payment system no later than October 1, 2001, and that the
system be implemented for cost reporting periods beginning on or after
October 1, 2002.
c. BIPA. The BIPA reiterated the dates of implementation of the
LTCH prospective payment system set forth in the BBRA. This statute
also directs the Secretary to examine the following specific payment
adjustments: adjustments to DRG weights, area wage adjustments,
geographic reclassification, outliers, updates, and a disproportionate
share adjustment. Furthermore, if the Secretary is unable to implement
the prospective payment system by October 1, 2002, the BIPA mandates
that a default LTCH prospective payment system be implemented, based on
existing DRGs, modified where feasible to account for the specific
resource use of long-term care patients.
C. Research Supporting the Establishment of the LTCH Prospective
Payment System: Legislative Requirements
Section 4422 of the BBA required us to formulate a legislative
proposal on the development of a prospective payment system for LTCHs
for submission to the Congress by October 1, 1999. To prepare for this
proposal, we awarded a contract to The Urban Institute (Urban)
following the enactment of the BBA for a multifaceted analysis of
LTCHs, including a description of facilities and patients, as well as
exploration of a variety of classification and payment system options.
In section 123(a) of the BBRA, Congress mandated a per-discharge,
DRG-based model for the prospective payment system for LTCHs. Our basic
objective remained unchanged--to arrive at a clearer understanding of
the universe of LTCHs in relation to facility characteristics;
beneficiary utilization; and beneficiary characteristics such as
diagnoses, treatment, and discharge patterns.
Under the terms of our original contract with Urban, 3M Health
Information Systems (3M) was subcontracted to provide an analysis and
assessment of alternative classification systems for use in LTCHs in
keeping with variables such as treatment patterns, patient
demographics, and diagnoses and procedure codes for patients at LTCHs
and acute care hospitals.
After the enactment of section 123 of the BBRA, we instructed 3M to
limit its analyses to several DRG-driven classification systems, using
the database constructed by Urban describing LTCHs, patients at LTCHs,
and patients with the same diagnoses as LTCH patients treated in other
facilities. We also contracted with 3M to develop and analyze the data
necessary for us to design and develop the proposed Medicare LTCH
prospective payment system based on DRGs.
D. Description of Sources of Research Data
The records for all Medicare hospital inpatient discharges
(including discharges for LTCHs) are contained in the Medicare provider
analysis and review file (MedPAR), which includes patient demographics
(age, gender, race, and residence zip code), clinical characteristics
(diagnoses and procedures), and hospitalization characteristics.
(Beneficiary data were encrypted to prevent the identification of
specific Medicare beneficiaries.) The Medicare cost report data
constitute the HCRIS, and includes information on facility
characteristics, utilization data, and cost and charge data by cost
center.
The description of the universe of LTCHs in section I.E. of this
proposed rule is based on calendar year (CY) 1997 MedPAR, the HCRIS
file containing the best available cost data for cost reporting periods
that began during FYs 1996 and 1997, and 1997 data from the Online
Survey Certification and Reporting System (OSCAR).
[[Page 13422]]
The 1997 OSCAR data provided information from the State survey and
certification process to identify and characterize providers that
participate in Medicare and Medicaid and includes a list of all
hospitals that were designated as LTCHs by Medicare. OSCAR data
included the number of employees of various types and the number of
different types of beds and care units, as well as variables on
certification date, type of control, geographic region, and hospital
size.
E. The Universe of LTCHs
1. Background Issues
LTCHs typically furnish extended medical and rehabilitative care
for patients who are clinically complex and have multiple acute or
chronic conditions. Generally, Medicare patients in LTCHs have been
transferred from acute care hospitals and receive a range of ``post-
acute care'' services at LTCHs, including comprehensive rehabilitation,
cancer treatment, head trauma treatment, and pain management. (MedPAC
March 1999 Report to Congress, p. 95.) A LTCH must be certified as an
acute care hospital that meets criteria set forth in section 1861(e) of
the Act in order to participate as a hospital in the Medicare program.
Generally, under Medicare, hospitals are paid as LTCHs if they have an
inpatient average length of stay greater than 25 days.
LTCHs are a heterogeneous group of facilities ranging from old
tuberculosis and chronic disease hospitals to newer facilities designed
primarily to care for ventilator-dependent patients. They are unevenly
distributed across the United States, with one-third (72 of 203 in
1997) located in Massachusetts, Texas, and Louisiana. As of 1997, 203
facilities were determined by Medicare to be LTCHs; by early 2000, 239
facilities were determined by Medicare to be LTCHs; and as of November
2001, OSCAR had data on 270 LTCHs.
LTCHs constitute a relatively small provider group in the Medicare
program and have not been widely studied. Only limited information has
been published about their characteristics in terms of types of
patients served and resources used. As stated earlier in section I.C.
of this preamble, the primary goal of the initial research contract
with Urban was to increase our knowledge about LTCHs and their
patients. In addition to describing the providers and patients, the
study was expected to provide insight into the ways in which LTCHs
differ from other Medicare post-acute care providers. In the following
summary and tables, we provide a description of Urban's findings that
formed the basis for the design of the proposed prospective payment
system for LTCHs presented in this proposed rule.
2. General Medicare Policies
Inpatient stays at LTCHs are covered under the Part A hospital
benefit and include room and board, medical and nursing services,
laboratory tests, X-rays, pharmaceuticals, supplies, and other
diagnostic or therapeutic services (Secs. 409.10 and 412.50). LTCHs can
offer specialized services (for example, physical rehabilitation or
ventilator-dependent care) or can provide more generalized services
(for example, chronic disease care).
Hospital services are covered for up to 90 days during a Medicare-
defined ``benefit period,'' which is a period that begins with
admission as an inpatient to an acute care or other hospital and ends
when the beneficiary has spent 60 consecutive days outside of an
inpatient facility (Sec. 409.60). There are 60 additional covered
lifetime reserve days that may be used over a beneficiary's lifetime.
One inpatient deductible payment ($792 in 2002) is required for each
benefit period, so a beneficiary generally does not have to make a new
deductible payment for a LTCH stay unless the LTCH stay is not preceded
by another hospital stay. A patient with a long LTCH stay, however, is
subject to a coinsurance payment ($198 in 2002) for days 61 through 90
of hospital use during a benefit period. For the lifetime reserve days,
the Medicare beneficiary is subject to a daily coinsurance amount ($396
in 2002) (Sec. 409.61). LTCHs must meet State licensure requirements
for acute care hospitals and must have a provider agreement with
Medicare in order to receive Medicare payment. Intermediaries verify
that LTCHs meet the required average length of stay of greater than 25
days.
3. Exclusion From the Acute Care Hospital Inpatient Prospective Payment
System
As discussed more fully in section I.A.2 of this preamble, LTCHs
were excluded from the FY 1984 implementation of the acute care
hospital inpatient prospective payment system and continued to be paid
based on their cost per discharge, subject to per discharge limits.
4. Geographic Distribution
Overall, 203 LTCHs filed Medicare claims in 1997. This number
translates into an average of approximately one facility per 200,000
Medicare enrollees. As can be seen in Table 1, LTCHs are not
distributed across all States in proportion to the number of Medicare
enrollees in those States. They are unevenly distributed across the
United States, with one-third (72 of 203) located in Massachusetts,
Texas, and Louisiana. These three States together account for 36
percent of the LTCHs, but only fewer than 10 percent of Medicare
enrollees. Furthermore, 13 small States have no LTCHs, although they
account for approximately 7 percent of Medicare enrollees. In contrast,
the three largest Medicare States (California, Florida, and New York)
account for 24.1 percent of Medicare enrollees together, but only 13.8
percent of LTCHs.
Table 1.--Percentage Distribution of Number of Long-Term Care Hospitals (LTCHs), Medicare Enrollees, and
Certified Beds, by State, 1997
----------------------------------------------------------------------------------------------------------------
Number of Percent of Number of Percent of
State Number of Percent of medicare medicare certified certified
LTCHs LTCHs enrollees enrollees beds beds
----------------------------------------------------------------------------------------------------------------
Alabama........................ 1 0.5 696,586 1.8 191 1.0
Alaska......................... 0 0.0 38,570 0.1 0 0.0
Arizona........................ 4 2.0 667,226 1.7 187 1.0
Arkansas....................... 0 0.0 453,195 1.1 0 0.0
California..................... 12 5.9 3,920,674 9.9 1,304 7.1
Colorado....................... 4 2.0 464,299 1.2 277 1.5
Connecticut.................... 4 2.0 531,805 1.3 716 3.9
Delaware....................... 0 0.0 111,171 0.3 0 0.0
District of Columbia........... 1 0.5 80,028 0.2 23 0.1
Florida........................ 11 5.4 2,853,420 7.2 805 4.4
[[Page 13423]]
Georgia........................ 6 3.0 915,577 2.3 557 3.0
Hawaii......................... 1 0.5 163,217 0.4 13 0.1
Idaho.......................... 0 0.0 163,303 0.4 0 0.0
Illinois....................... 5 2.5 1,701,123 4.3 703 3.8
Indiana........................ 11 5.4 877,656 2.2 434 2.4
Iowa........................... 0 0.0 498,288 1.3 0 0.0
Kansas......................... 3 1.5 406,752 1.0 74 0.4
Kentucky....................... 1 0.5 633,802 1.6 337 1.8
Louisiana...................... 19 9.4 622,805 1.6 1,288 7.0
Maine.......................... 0 0.0 218,265 0.6 0 0.0
Maryland....................... 4 2.0 651,710 1.7 465 2.5
Massachusetts.................. 17 8.4 991,641 2.5 3,077 16.8
Michigan....................... 3 1.5 1,435,420 3.6 280 1.5
Minnesota...................... 2 1.0 669,708 1.7 313 1.7
Mississippi.................... 2 1.0 428,729 1.1 65 0.4
Missouri....................... 3 1.5 888,959 2.3 317 1.7
Montana........................ 0 0.0 139,392 0.4 0 0.0
Nebraska....................... 1 0.5 263,287 0.7 25 0.1
Nevada......................... 3 1.5 225,152 0.6 106 0.6
New Hampshire.................. 0 0.0 170,031 0.4 0 0.0
New Jersey..................... 3 1.5 1,239,890 3.1 212 1.2
New Mexico..................... 2 1.0 231,517 0.6 86 0.5
New York....................... 5 2.5 2,780,994 7.0 1,262 6.9
North Carolina................. 1 0.5 1,129,329 2.9 59 0.3
North Dakota................... 0 0.0 107,628 0.3 0 0.0
Ohio........................... 7 3.4 1,766,266 4.5 653 3.6
Oklahoma....................... 8 3.9 523,358 1.3 294 1.6
Oregon......................... 0 0.0 500,035 1.3 0 0.0
Pennsylvania................... 6 3.0 2,183,850 5.5 412 2.3
Rhode Island................... 1 0.5 177,247 0.4 700 3.8
South Carolina................. 2 1.0 562,732 1.4 0 0.0
South Dakota................... 0 0.0 123,401 0.3 211 1.2
Tennessee...................... 6 3.0 838,357 2.1 210 1.1
Texas.......................... 36 17.7 2,275,673 5.8 1,818 9.9
Utah........................... 1 0.5 204,525 0.5 39 0.2
Vermont........................ 0 0.0 89,821 0.2 0 0.0
Virginia....................... 3 1.5 893,602 2.3 664 3.6
Washington..................... 2 1.0 742,589 1.9 97 0.5
West Virginia.................. 0 0.0 349,684 0.9 0 0.0
Wisconsin...................... 1 0.5 806,951 2.0 34 0.2
Wyoming........................ 1 0.5 65,699 0.2 3 0.0
--------------------------------------------------------------------------------
Total...................... 195 100.00 36,322,068 100.00 18,311 100.00
----------------------------------------------------------------------------------------------------------------
Source: 1997 Online Survey and Certification Reporting System (OSCAR).
Although the distribution of certified beds generally tracks the
distribution of LTCHs across States, there is not always a direct
relationship between the number of LTCHs and the bed capacity in a
given State. For instance, Massachusetts has only 8.4 percent of LTCHs,
but 16.8 percent of Medicare-certified beds. In contrast, Texas has
17.7 percent of LTCHs, but only 9.9 percent of the certified beds.
5. Characteristics by Date of Medicare Participation
The OSCAR program provided data captured by the State survey and
certification process that can be used to identify and characterize
providers participating in Medicare and Medicaid. The following
analyses were based on LTCHs for which data were available. Eight
facilities, which account for only 1 percent of all LTCH stays and 1.3
percent of certified beds, were excluded from the analysis since 1997
OSCAR records were not available for these facilities.
Given the known payment variations for old and new facilities that
were excluded facilities paid under the target amount methodology, we
divided the LTCHs by age (the date of the LTCH's first Medicare
participation, as reported by OSCAR) to gain a sense of the variation
among the existing LTCHs in 1997. A strong correlation is found between
the age of a LTCH and other key characteristics, such as location and
ownership control, as well as operating costs and Medicare payments.
For analytical purposes, therefore, the total sample of LTCHs was
stratified based on age (``old,'' ``middle,'' or ``new''). Of the 195
LTCHs in OSCAR in 1997, 20 percent were in existence before the
hospital inpatient prospective payment system and hospital inpatient
prospective payment system exclusions went into effect in October 1983
(old LTCHs); 30 percent were determined to be LTCHs between October
1983 and September 1993 (middle LTCHs); and 50 percent were determined
to be LTCHs between October 1993 and September 1997 (new LTCHs). This
pattern is consistent with reports of the large growth in the number of
LTCHs in recent years. (As of November 2001, OSCAR had data on 270
LTCHs, which indicate that the growth has continued.)
[[Page 13424]]
Old LTCHs are generally located in the northeast region of the
United States, while newer LTCHs are typically located in the southern
region. Most notably, the ownership of the LTCHs that began Medicare
participation before and after the implementation of the acute care
hospital inpatient prospective payment system is quite different. Old
LTCHs are either government controlled (about 63 percent) or nonprofit
(about 37 percent). In contrast, one-half of the LTCHs that began
participation in Medicare between 1983 and 1993, and two-thirds of
those that began participation in Medicare in FY 1994 or later, are
proprietary facilities. Virtually no new LTCHs are government
controlled.
6. Hospitals-Within-Hospitals and Satellite Facilities
The Medicare statute does not contemplate the recognition of ``LTCH
units'' of prospective payment system acute care hospitals; the statute
does reference rehabilitation and psychiatric units. Long-term care
units of prospective payment system hospitals are not allowed in part
because of the concern that transfers of acute care patients into the
LTCH units could inappropriately maximize prospective payments under
the hospital inpatient prospective payment system. The presence of a
long-term care ``unit'', excluded from the hospital inpatient
prospective payment system and co-located in an acute care hospital,
could enable the acute care hospital to shift patients to the long-term
care ``unit'' without completing the full course of treatment. These
patient transfers could result in inappropriate payments under Medicare
since the acute care hospital would make money in those cases where it
received a full DRG payment without providing the full course of
treatment to the beneficiary and could avoid losing any money for other
more costly patients by prematurely discharging them to the LTCH. Since
payments to hospitals under the hospital inpatient prospective payment
system were based on hospital costs that included the costs of patients
with longer lengths of stay, such a patient shift would result in an
``overpayment'' to the acute care hospital and the LTCH would receive
an additional payment for that same patient.
Nonetheless, in the mid-1990s, of the roughly 150 LTCHs in
existence at the time, about 12 recently established LTCHs were, in
fact, LTCHs located in the buildings or on the campuses of acute care
hospitals. In order to prevent the gaming of the Medicare system that
would result from inappropriate transfers between the inpatient acute
care hospital and the LTCH located within the acute care hospital, we
have implemented additional qualifying criteria at Sec. 412.22(e) for
these entities. These criteria require that in order to be excluded
from the prospective payment system, a hospital located in or on the
campus of an acute care hospital (referred to as a ``hospital-within-a-
hospital'') must have a separate governing body, chief executive
officer, chief medical officer, and medical staff. In addition, the
hospital must perform basic functions independently from the host
hospital, incur no more than 15 percent of its total inpatient
operating costs for items and services supplied by the hospital in
which it is located, and have an inpatient load of which at least 75
percent of patients are admitted from sources other than the host
hospital. Originally, these regulations were effective as of October
1994. However, section 4417(a) of the BBA amended section 1886(d)(1)(B)
of the Act to provide that a hospital that was excluded from the
prospective payment system on or before September 30, 1995, as an LTCH,
shall continue to be so classified, notwithstanding that it is located
in the same building or in one or more buildings located on the same
campus as another hospital. (See Sec. 412.22(f).)
In the late 1990s, we became aware of a newly developing entity
that was physically similar, but legally unrelated, to a hospital-
within-a-hospital. These entities were hospital-within-hospital type
facilities (in the buildings or on the campuses of acute care
hospitals) owned by a separate existing LTCH. We identified these
facilities as ``long-term care hospital satellites.''
In the July 30, 1999 Federal Register (64 FR 41540), we revised
Sec. 412.22(h) to require that in order to be excluded from the
hospital inpatient prospective payment system, a satellite of a
hospital: (1) Must maintain admission and discharge records that are
separately identified from those of the hospital in which it is
located; (2) cannot commingle beds with beds of the hospital in which
it is located; (3) must be serviced by the same fiscal intermediary as
the hospital of which it is a part; (4) Must be treated as a separate
cost center of the hospital of which it is a part; (5) for cost
reporting purposes, must use an accounting system that properly
allocates costs and maintains adequate data to support the basis of
allocation; and (6) must report costs in the cost report of the
hospital of which it is a part, covering the same fiscal period and
using the same method of apportionment as that hospital. In addition,
the satellite facility must independently comply with the qualifying
criteria for exclusion from the hospital inpatient prospective payment
system. The total number of State-licensed and Medicare-certified beds
(including those of the satellite facility) for a hospital that was
excluded from the prospective payment system for the most recent cost
reporting period beginning before October 1, 1997, may not exceed the
hospital's number of beds on the last day of that cost reporting
period.
7. Specialty Groups of LTCHs by Patient Mix
There is a widely held view that the population of LTCHs is
heterogeneous. We believe that understanding the composition of this
population and identifying and classifying subgroups within it are
fundamental to designing a prospective payment system for LTCHs.
Broad categories of conditions as defined by major diagnostic
categories (MDCs), the principal diagnostic categorization tool used
under the hospital inpatient prospective payment system, were used to
classify LTCHs according to the medical conditions of their patient
caseloads. (MDCs were formed by dividing all possible principal
diagnoses into 25 mutually exclusive categories. Most MDCs correspond
to a major organ system, though a few correspond to etiology.)
We also explored the possibility of grouping patients by DRGs or by
selected individual diagnoses. These attempts resulted in creating
groups too small for any effective characterization. However, the
analysis did reveal that while some LTCHs treat a wide range of
conditions, others specialize in one or two types of conditions. In
order to analyze a grouping based on patient mix, under its contract
with us, Urban first examined the proportion of facilities' caseloads
in specific MDCs. There are five MDCs in which at least one LTCH has a
majority (that is, more than 50 percent) of its cases. Patients with
respiratory system problems are the most common caseload
concentration--in 1997, 13 percent of LTCHs have a caseload
concentration of 50 percent to 75 percent, and another 7 percent of
LTCHs have more than 75 percent of their cases in this MDC.
The other three MDCs that make up a majority of at least one LTCH's
patient caseload (nervous system MDC, musculoskeletal and connective
tissue disorders MDC, and factors influencing health status MDC) are
all related to rehabilitation needs. (Because rehabilitation-related
DRGs are common
[[Page 13425]]
to LTCHs and fall into the ``Factors Influencing Status'' MDC, we are
proposing to classify all cases in this MDC as rehabilitation services
for the purpose of this analysis.) Seven percent of LTCHs have a
majority of their caseload in an MDC related to rehabilitation-related
services. A significantly less common concentration is seen in the 2
percent of LTCHs that have a majority of their patients in the mental
diseases and disorders MDC. All but two LTCHs in our analysis have some
share of patients with respiratory system problems. Similarly, all but
five LTCHs have some patients with circulatory problems.
Based on these findings, we developed a grouping that consists of
four broad categories of LTCHs based on patient caseload. Facilities
with greater than 50 percent of their cases in the respiratory MDC were
assigned to a ``respiratory specialty'' group for the purpose of this
analysis. Similarly, all facilities with over 50 percent of their
caseload in the mental MDC were designated as ``mental specialty''
facilities. The three rehabilitation-related MDCs were combined into
one ``rehabilitation-related MDC'' category and grouped into a
``rehabilitation specialty'' group. All remaining facilities (that did
not have high concentrations of patients in the respiratory MDC, the
mental MDC, or the rehabilitation-related MDCs category) were placed
into a ``multispecialty'' facility group. LTCHs in this category
provide care to a wider range of patient types than LTCHs in the first
three categories.
To better understand the relatively large number of multispecialty
LTCHs, we explored their MDC composition. Not unexpectedly, most of
these facilities have high proportions of cases in the respiratory MDC
and the rehabilitation-related MDCs category, although some LTCHs do
not serve either of these populations in great numbers. Few LTCHs do
not have a significant share of their caseload in either the
respiratory MDC or the rehabilitation-related MDCs category. Only 2
percent of multispecialty LTCHs have less than 25 percent of their
caseload in either specialty group. Similarly, only 7 percent of
multispecialty facilities have less than 35 percent of their caseload
in either of the two groups. In contrast, about 60 percent of LTCHs
have at least half of their caseload in either the respiratory MDC or
the rehabilitation-related MDCs category. This high share demonstrates
that, despite their assignment to the multispecialty category, most
LTCHs serve a high percentage of patients with respiratory or
rehabilitation problems, or both.
Although respiratory and rehabilitation specialty facilities are
prevalent in the LTCH population, there are also some ``niche'' LTCHs
that have unique patient populations or provide uncommon services.
These hospitals include, for example, a large hospital where most
admitted individuals (90 percent) die in the facility.
Several LTCHs provide services for special populations. One
facility provides services for a prison population. A large share of
this facility's funding is through Medicaid; cost report data show
Medicaid covers two-thirds of its patient stays.
Some other facilities work with similarly specialized populations
and have very small Medicare caseloads. In particular, two facilities
that focus on developmentally disabled children and younger adults had
fewer than 10 Medicare stays in 1997. Cost reports show that one of
these facilities, which provides rehabilitation for its Medicare
patients, has few discharges (under 100) regardless of payer source.
The other, which provides mostly psychiatric services, relies on public
funding for only a small share of its discharge payments.
Although there are a few niche facilities in the LTCH population,
our analysis indicates that a preponderance of the LTCHs can be
classified in distinct specialty groups that focus on adult
rehabilitation and respiratory system care.
8. Sources and Destinations of LTCH Patients
Another useful perspective on LTCHs is the pattern of sources from
which patients are admitted to LTCHs and destinations to which LTCH
patients are discharged. This information shows how such transition
patterns differ among the specialty groups. In general, the findings
are consistent with the notion that LTCHs as a group are heterogeneous
in terms of the patients they serve.
The vast majority (70 percent) of LTCH patients are admitted from
acute care hospitals. Within this group, acute care patients whose
stays are designated as ``outlier'' stays, as defined by section
1886(d)(5)(A)(i) of the Act and implemented in Sec. 412.80, were
identified separately. Sixteen percent of LTCH admissions were acute
care hospital outlier patients, while 54 percent were admitted from
acute care hospitals but did not have extraordinarily long acute care
stays. After acute care hospitals, direct admission from the community
is the next most common source of admissions (14 percent) to LTCHs.
The admission patterns vary somewhat by LTCH specialty type.
Notably, 85 percent of admissions to respiratory specialty LTCHs are
from acute care hospitals, including 22 percent that are acute care
hospital outlier cases. A very small percentage (7 percent) of
admissions to respiratory specialty LTCHs are from the community. In
contrast, the admission sources for the rehabilitation specialty LTCHs
are more similar to that of the multispecialty LTCHs. Notably, a higher
than average share of patients come from SNFs (8 percent) and HHAs (6
percent) and a lower percentage of patients transition from acute care
hospital outlier stays (12 percent). A relatively large share (11
percent) of patients at rehabilitation specialty LTCHs are admitted
directly from the community compared to patients at respiratory
specialty LTCHs (7 percent). These findings suggest that patients
admitted to rehabilitation specialty LTCHs might present a less
medically intensive clinical picture than patients admitted to
respiratory specialty LTCHs.
The admission pattern of patients admitted to the mental specialty
LTCHs is quite different from those of the other specialties. A
relatively small percentage (31 percent) of patients are admitted from
acute care hospitals and only 2 percent are admitted after being acute
care hospital outliers. In contrast, large proportions are admitted
directly from the community (40 percent) or from some other type of
Medicare provider (27 percent).
An analysis of the pattern of discharge destinations for LTCHs
shows that, overall, 38 percent of LTCH stays are discharged to the
community without additional Medicare services. Equal percentages (18
percent) are discharged to SNFs and acute care hospitals, and 21
percent of patients are discharged to HHAs.
Some variations in discharge destination patterns exist among LTCHs
by specialty. Relative to the overall sample, the respiratory specialty
LTCHs have higher than average percentages of patients discharged to
SNFs (24 percent versus 18 percent), and lower percentages discharged
to HHAs (14 percent versus 21 percent). Rehabilitation specialty
facilities, however, have a relatively high proportion of cases (34
percent) discharged to HHAs, and a lower than average proportion
discharged to the community without additional Medicare services (28
percent versus 38 percent). Finally, mental specialty hospitals have an
unusually high
[[Page 13426]]
percent of cases (71 percent) discharged to the community without
additional Medicare services. These findings suggest that patients
served by respiratory specialty LTCHs are more likely to require
extended care in institutional settings (for example, SNFs), while
patients discharged from rehabilitation specialty facilities also
require extended care, but not necessarily in institutional settings.
9. LTCHs and Patterns Among Post-Acute Care Facilities
Urban's research also produced data regarding a comparison of LTCHs
with other post-acute care settings in order to provide us with the
broadest possible understanding of the universe of LTCHs. The findings
were only preliminary comparisons of patients among and across post-
acute settings because of the nature of each category of post-acute
care providers. Even though data suggest substantial clinical
differences among the providers with some areas of overlap, because of
some similarities we found it useful to draw parallels and distinctions
among post-acute care providers. Moreover, findings from this research
supported conclusions published in several reports to the Congress
produced by ProPAC and MedPAC over the past decade.
Most patients in LTCHs have several diagnosis codes on their
Medicare claims, indicating that they have multiple comorbidities and
are probably less stable upon admission than patients admitted to other
post-acute care settings. Relative to IRFs, LTCHs have a higher
proportion of patient costs attributable to ancillary services (for
example, pharmacy, laboratory, and radiology charges) (MedPAC March
1999 Report to Congress, p. 95). LTCHs also provide care to a
disproportionately large number of Medicare beneficiaries who are
eligible because of disability. While individuals with disabilities
make up about 10 percent of the Medicare population, they make up 17
percent of LTCH patients.
Urban's analysis also explored the demographic characteristics of
LTCH patients compared to IRF patients. The proportion of LTCH patients
who are under 65 years of age (18 percent) is twice that of IRF
patients (9 percent). The share of LTCH patients over 85 years old is
slightly higher (18 percent) compared to IRF patients (14 percent).
LTCHs also have a higher proportion of male patients and a lower
proportion of white patients than IRFs. LTCHs have long median lengths
of stay: 21 days versus 16 days for IRFs. About one-third of the LTCH
Medicare stays are by beneficiaries who are also eligible for Medicaid,
compared to fewer Medicaid-eligible beneficiary stays at IRFs (17
percent). It has been widely documented that dually eligible
beneficiaries are generally much sicker than non-Medicaid eligible
Medicare beneficiaries.
Urban's analysis also included a description of the demographic
characteristics of LTCH patient stays by admission sources--outlier
acute care hospital, nonoutlier acute care hospital, and other. Those
with prior outlier acute care hospital stays seem to be the most
distinctive group in terms of length of stay, gender, race, and
poverty: they have the highest mean and median length of stay in the
LTCH, the highest proportion male, the highest proportion white, and
the lowest proportion of Medicaid-eligible patients. However, in terms
of age, those with prior hospital stays (whether outlier or nonoutlier)
are quite different from those with other admission sources. Those
without a prior acute care hospital stay are younger and about twice as
many are under age 65, whose mean age is about 5 and 3 years lower than
those with a prior outlier stay and those with a prior nonoutlier stay,
respectively. Among those with an acute care hospital stay, the
nonoutliers are slightly older on average, with higher percentages in
the oldest groups (75 to 84 and 85 plus) and the highest median age of
all three groups.
The policies that we are proposing in this proposed rule were
determined in part based on analysis of the above data and information
gathered on LTCHs and their Medicare patients.
F. Overview of System Analysis for the Proposed LTCH Prospective
Payment System
For the systems analysis, 3M used the MedPAR (FY 1999 through FY
2000), OSCAR (FY 2000), and HCRIS (FYs 1998 and early 1999) files.
Specifically, for this proposed rule, 3M performed the following tasks:
Construction of an updated data file, using the most
recent data available from CMS.
Analysis of issues, factors, or variables and presentation
of options for possible use in the design and implementation of the
proposed prospective payment system.
Data simulation of various system features to analyze
their impact on the design of the proposed prospective payment system.
A data file was constructed to serve as the basis of our proposed
patient classification system and the development of proposed payment
weight rates and proposed payment adjustments. The analysis of this
data file helped us regarding the structure of the proposed prospective
payment system in this proposed rule. We relied upon patient charge
data from FY 2000 MedPAR for setting proposed LTC-DRG weights and upon
costs data from FY 1998 and FY 1999 cost reports for proposed payment
rates. We expect that the availability of updated FY 2000 MedPAR data
and updated FY 1999 HCRIS data, further analysis of the data file, and
review of the comments that we receive in response to this proposed
rule may result in refinements to our proposed policies, particularly
in the areas of weights and rates.
G. Evaluation of DRG-Based Patient Classification Systems
Section 307(b) of Public Law 106-554 modified the requirements of
section 123 of Public Law 106-113 by specifically requiring that the
Secretary examine ``the feasibility and the impact of basing payment
under such a system [the LTCH prospective payment system] on the use of
existing (or refined) hospital diagnosis-related groups (DRGs) that
have been modified to account for different resource use of long-term
care hospital patients as well as the use of the most recently
available hospital discharge data.''
In order to comply with statutory mandates, our evaluation of DRG-
based patient classification systems focused on two models--the LTC-all
patient-refined DRGs (LTC-APR-DRGs Version, 1.0), a severity-based
case-mix classification system developed specifically for LTCHs; and
the LTC-CMS-DRGs, a modification of the DRG system used in the acute
care hospital inpatient prospective payment system.
The LTC-APR-DRGs, a condensed version of 3M's all-patient refined
DRGs (APR-DRGs) for acute care hospitals, was developed by Dr. Norbert
Goldfield, Clinical Director of 3M Health Information Systems for
exclusive use in LTCHs. The LTC-APR-DRG system was designed to reflect
the clinical characteristics of LTCH patients. This case-mix
classification model contains 26 base LTC-APR-DRGs, subdivided by 4
severity of illness levels to yield 104 classification levels. In this
system, the patient's secondary diagnoses, their interaction, and their
clinical impact on the primary diagnosis determine the severity level
assigned to each of the 26 LTC-APR-DRGs.
The LTC-CMS-DRGs are based on research done by The Lewin Group
(Developing a Long-Term Hospital Prospective Payment System Using
Currently Available Administrative Data for the National Association of
Long-
[[Page 13427]]
Term Hospitals (NALTH), July 1999.) This model uses our existing
hospital inpatient DRGs with weights that accounted for the difference
in resource use by patients exhibiting the case complexity and multiple
medical problems characteristic of LTCHs. In order to deal with the
large number of low volume DRGs (all DRGs with fewer than 25 cases),
the LTC-CMS-DRG model groups low volume DRGs into 5 quintiles based on
average charge per discharge. The result was 184 classification groups
(179 DRG-based and 5 charge-based payment groups) based on patient data
from FYs 1994 and 1995. (CMS updated this analysis using patient data
from FYs 1999 and 2000 for purposes of system evaluations.)
Under either classification system, DRG weights would be based on
data for the population of LTCH discharges, reflecting the fact that
LTCH patients represent a different patient mix than patients in short-
term acute care hospitals. GROUPER software programs enabled us to
examine the most recent LTCH and acute care hospital inpatient
prospective payment system patient discharge data in light of the
features of each system. Using regression analyses and simulations, the
impact of each patient classification system on potential adjustment
features for the prospective payment system was assessed. (Data files
used in these analyses are specified in section I.C.2.) Our medical
staff as well as physicians involved in treatment of patients at LTCHs
provided additional input from the standpoint of clinical coherence and
practical applicability.
The system that we are proposing for the LTCH prospective payment
system is the LTC-CMS-DRG GROUPER that is based on the Lewin model
because we believe it accurately predicts costs without the problems
that we believe could be inherent with the APR-DRG system. (In section
III. of this proposed rule, which describes the functioning of the
classification system as a component of the proposed LTCH prospective
payment system, the LTC-CMS-DRGs are referred to as the proposed LTC-
DRGs.)
It is important to note that we have analyzed both systems based on
MedPAR files generated by LTCH patient data, using the best available
data. Since the TEFRA payment system, under which LTCHs are currently
paid, is not tied to patient diagnoses, the coding data from LTCHs have
not been used for payment. Nevertheless, data analyses indicated that
there was a minimal difference in both systems' abilities to predict
costs. (The difference in the R2, a statistical measure of
how much variation in resource use among cases is explained by the
models, was only 0.0313.)
We believe that either classification system would result in more
equitable payments for LTCHs compared to current payment methods. The
proposed LTCH prospective payment system would generally improve the
accuracy of payments for more clinically complex patients. (See our
discussion of the TEFRA payment system in section I.A. of this proposed
rule.) As the Congress intended, the DRG weights under the proposed
LTCH prospective payment system would reflect the ``* * * different
resource use of long-term care hospital patients.'' Patients requiring
more intensive complex services would be classified in LTC-DRGs with
higher relative weights and hospitals would receive appropriately
higher payments for these patients. We solicit comments on the impact
one system may have over another as it applies to different kinds of
LTCHs.
Although either system would result in more equitable payments to
LTCHs, we have several interrelated concerns about adopting the LTC-
APR-DRG system based upon its complexity, its clinical subjectivity,
and its utility as it relates to other Medicare prospective payment
systems. The LTC-APR-DRG model provides a clinical description of the
population of LTCHs, patients exhibiting a range of severity of illness
with multiple comorbidities as indicated by secondary diagnoses. The
clinical interaction of the primary diagnosis with these comorbidities
determines the severity level of the primary diagnoses, resulting in
the final assignment to a LTC-APR-DRG by the GROUPER software designed
for this system.
One aspect of our examination of the LTC-APR-DRG system included
clinical review of actual case studies provided by physicians at
several LTCHs and evaluations of the LTC-APR-DRG assignments that would
have resulted based on the clinical logic of the APR-DRG GROUPER. A
review of a number of those cases by different medical professionals
resulted in different possible classifications for the GROUPER program.
Looking at the same case, different views were held as to which APR-DRG
category or to which level of severity the case should be grouped.
Given the array of specialization at different LTCHs reflecting a range
of services and patient types, as described in section I.E.7. of this
preamble, we believe that we lack sufficient data, at this point in
time, to definitely determine the effect of particular comorbidities on
patient resource needs in LTCHs. Furthermore, it appears that depending
on how many of the diagnoses are coded, medical judgement suggests that
it could be possible to classify the same patient in more than one
group or level of severity. Because of these concerns, we believe that
payments under such a policy could be insufficiently well-defined,
given currently available data, to ensure consistently appropriate
Medicare payments.
We are aware that the forthcoming prospective payment system for
IRFs is based on a patient classification system that includes a
measure of comorbidities, the combination of the case-mix group (CMG)
and comorbidity tier. In general, most IRF patients are treated for one
primary rehabilitation condition (for example, a hip replacement) that
is associated with functional measures and sometimes age. The CMGs
constructed for IRF patients account for diagnostic, functional, and
age variables. These variables are used to explain the variability in
the cost among the various CMGs. Some of the remaining variability in
cost could then be further explained by selected comorbidities which
the inpatient rehabilitation data showed were statistically
significant.
In contrast, determining whether particular comorbidities increase
the cost of a case for a LTCH patient is complicated by the nature of
the clinical characteristics of these patients. More specifically, many
LTCH patients have numerous conditions that may not all be relevant to
the cost of care for a particular discharge. Although the patient
actually has a specific condition, including this condition among
secondary diagnoses coded under the LTC-APR-DRG system, may assign an
inaccurate severity level to the primary diagnosis and result in
inappropriate LTC-APR-DRG payment. We also believe that reliance on
existing comorbidity information submitted on LTCH bills could result
in significant variation in the assignment of the specific LTC-APR-
DRGs.
The LTC-CMS-DRG system is a system that is familiar to hospitals
because it is based on the current DRG system under the acute care
hospital inpatient prospective payment system. We believe that the
familiarity of the LTC-CMS-DRG model may best facilitate the transition
from the cost-based system to the prospective payment system as well as
providing continuity in payment methodology across related sites of
care (for example,
[[Page 13428]]
an acute care hospitalization for a patient with a chronic condition.).
We further wish to note that the adoption of severity-adjusted DRGs
will be explored by CMS for use under the hospital inpatient
prospective payment system. In its June 2000 Report to Congress, MedPAC
recommended that the Secretary ``* * * improve the hospital inpatient
prospective payment system by adopting, as soon as practicable,
diagnosis related group refinements that more fully capture differences
in severity of illness among patients.'' (Recommendation 3A, p. 63.)
Although we are not proposing LTC-APR-DRGs in this proposed rule, we
are interested in receiving comments on this issue. We also wish to
note that in the event the LTCH prospective payment system is
implemented using LTC-DRGs, we could have the opportunity to propose a
severity-adjusted patient classification for LTCHs in the future,
particularly if the acute care hospital inpatient prospective payment
system moves in this direction.
H. Recommendations by MedPAC for a LTCH Prospective Payment System
As we noted in the section I.A.5. of this proposed rule, since the
establishment of the acute care hospital inpatient prospective payment
system in 1983, the topic of post-acute care payments under Medicare
has been addressed in reports to the Congress prepared by ProPAC and
its successor, MedPAC. Recommendations in these reports encouraged
modifications to Medicare payment policies, examined the differences
among post-acute care providers and within each category of providers,
and reiterated the goal of eventually implementing prospective payment
systems for providers being paid under the target amount payment
methodology.
In its March 1, 1996 Report and Recommendations to the Congress,
ProPAC recommended that ``prospective payment systems should be
implemented for all post-acute services. The payment method for each
service should be consistent across delivery sites. The Secretary
should explore methods to control the volume of post-acute service use,
such as bundling services for a single payment.'' (Recommendation 20,
p. 75)
The following year, in its March 1, 1997 Report and Recommendations
to the Congress, ProPAC recommended ``* * * the Congress and the
Secretary to consider the overlap in services and beneficiaries across
post-acute care providers as they modify Medicare payment policies.
Changes to one provider's payment method could shift utilization to
other sites and thus fail to curb overall spending. To this end, ProPAC
commends HCFA's (now CMS's) efforts to identify elements common to the
various facility-specific patient classification systems to use in
comparing beneficiaries across settings.'' Ultimately, Medicare should
move towards more uniform payment policies across sites, the Report
continued, and ``payment amounts should vary depending on the intensity
and nature of the services beneficiaries require, rather than on the
setting. Further, providers should have incentives to coordinate
services or an episode * * *'' (p. 60)
However, with enactment of the BBA, the Congress enacted
legislation to provide for distinct prospective payment systems for
HHAs (section 4603(b)), SNFs (section 4432(a)), and IRFs (section
4421). The BBA further required the development of a legislative
proposal for the case-mix adjusted LTCH prospective payment system.
Section 123 of the BBRA requires the Secretary to develop a per
discharge DRG-based system for LTCHs, and section 307(a) of BIPA
mandates that the Secretary examine the feasibility and impact of
basing payments to LTCHs using the existing DRGs, modified to account
for the resource use of LTCH patients. Thus, Congress mandated systems
that would result in different payments, depending on the site of
service, and not a system that is uniform across sites.
Notwithstanding the mandate to establish post-acute care
prospective payment systems, MedPAC continued to articulate concern
regarding the overlap of services among post-acute providers. In its
June 1998 Report to Congress, MedPAC stated that ``all of these policy
changes, in combination with the fact that similar services can be
provided in multiple post-acute settings, indicate the need for
continued monitoring and analysis of post-acute providers, policies,
and service utilization.'' (p. 90)
In its March 1999 Report to Congress, MedPAC encouraged the
Secretary to ``* * * collect a core set of patient assessment
information across all post-acute care settings.'' (Recommendation 5A,
p. 82)
Section 123 of BBRA specifically mandated a per discharge, DRG-
based prospective payment system for LTCHs and established a timetable
for the presentation of the proposed system in a report to the Congress
by October 1, 2001 and for implementation of the actual prospective
payment system by October 1, 2002. Further direction for a distinct
prospective payment system for LTCHs was indicated in section 307(b) of
BIPA, which directed the Secretary to examine a number of payment
adjustment factors and establishes a default system if the Secretary is
unable to meet the implementation timetable.
As we develop the prospective payment system for LTCHs described in
this proposed rule, however, we wish to state that we do not believe
that the establishment of distinct prospective payment systems for each
post-acute care provider group eliminates the need to monitor payments
and services across all service settings. We endorse MedPAC's
Recommendation 3G, in its March 2000 Report to Congress, that
encourages the Secretary to ``assess important aspects of the care
uniquely provided in a particular setting, compare certain processes
and outcomes of care provided in alternative settings, and evaluate the
quality of care furnished in multiple-provider episodes of post-acute
care.'' (p. 65). We intend to monitor the appropriateness of LTCH stays
by tracking the number of LTCH patients and SNF patients and the
frequency of subsequent admissions to an acute care hospital. We
believe this data will be valuable in assessing the outcome of care
provided in these settings.
Furthermore, we strongly support the additional research that will
be required to choose or to develop an assessment instrument that will
evaluate the quality of services delivered to beneficiaries in post-
acute settings.
I. Evaluated Options for the Proposed Prospective Payment System for
LTCHs
Section 123 of BBRA and section 307(b) of BIPA establish the
statutory authority for the development of the proposed prospective
payment system for LTCHs that is discussed in this proposed rule. Under
the BBRA, we are required to:
Develop a per discharge prospective payment system for
inpatient hospital services furnished by LTCHs described in section
1886(d)(1)(B)(iv) of the Act.
Include an adequate patient classification system that is
based on DRGs that reflect the differences in patient resource use and
costs.
Maintain budget neutrality.
Submit a report to the Congress describing this system by
October 1, 2001.
Implement this system for cost reporting periods beginning
on or after October 1, 2002.
Section 307(b) of BIPA modified the requirements of section 123 of
the BBRA by requiring the Secretary to--
Examine the feasibility and the impact of basing payment
under the prospective payment system on the use
[[Page 13429]]
of existing (or refined) DRGs that have been modified to account for
different resource use of LTCH patients, as well as the use of the most
recently available hospital data.
Examine appropriate adjustments to LTCH prospective
payments, including adjustments to DRG weights, area wage adjustments,
geographic reclassification, outliers, updates, and a disproportionate
share adjustment.
In the event that we are unable to meet the implementation deadline
of October 1, 2002, a default system will be implemented in which the
payment is based on existing hospital DRGs, modified where feasible to
account for resource use of LTCH patients. This default system would be
based on the most recently available hospital discharge data for such
services furnished on or after that date.
Although the statutory mandate for development of the LTCH
prospective payment system established in the BBRA and the BIPA
requires a per discharge, DRG-based system, generally the statute gives
the Secretary broad discretion in designing the prospective payment
system. The design of any prospective payment system requires decisions
on the following issues:
The categories used to classify services such as DRGs.
The methodology for calculating the relative weights that
are assigned to each patient category to reflect the relative
difference in resource use across DRGs (these are relative values in
economic terminology).
The methodology for calculating the base rate, which is
the basis for determining the DRG-based Federal payment rates. It is a
standardized payment amount that is based on average costs from a base
period and also reflects the combined aggregate effects of the payment
weights and various facility and case level adjustments. Operating and
capital-related costs may be combined in this base rate or may be
treated separately.
Adjustments to the base rate to reflect cost differences
across providers, such as disproportionate share adjustments, indirect
graduate medical education programs, and outliers.
Finally, a procedure for the transition from the current
system to the DRG-based prospective payment system must be established.
We pursued a two-pronged strategy as we developed the proposed
prospective payment system for LTCHs. First, we analyzed the data and
empirical facts about LTCH patients and providers summarized in section
I.E. of this proposed rule. Secondly, in light of this information, we
analyzed each option based on regressions and simulations, using the
data sets described in section I.D. of this preamble.
Both technical and proposed policy considerations were important in
these design proposals. We reviewed features of other recent
prospective payment systems designed or implemented by CMS for other
post-acute care providers to determine the feasibility of including
features in the LTCH prospective payment system and to identify
modifications that might enhance their application for this system. In
addition, we considered factors that were important to the development
of Medicare's acute care hospital inpatient prospective payment system,
such as urban and rural location, and whether the hospital served a
disproportionate share of low-income patients. We also analyzed
clinical significance, administrative simplicity, availability of data,
and consistency with other Medicare payment policies.
In addition to satisfying statutory requirements, the design of the
proposed prospective payment system for LTCHs presented in this
proposed rule is the result of the following factors:
Our empirical understanding of the ``universe'' of LTCHs
and long-term care patients, as set forth in section I.E. of this
preamble.
Our experience with the acute care hospital inpatient
prospective payment system.
Consideration of recommendations in MedPAC's reports to
Congress on post-acute care.
Our monitoring of the establishment and continuing
development and refinement of prospective payment systems for IRFs,
SNFs, and HHAs.
Additionally, as we deliberated on the choice of the specific model
of DRG-based system we are proposing to use for the LTCH prospective
payment system, we consulted with LTCH physicians and LTCH
representatives.
II. General Discussion of the Proposed LTCH Prospective Payment
System
A. Goals of the Proposed LTCH Prospective Payment System
We have designed the proposed prospective payment system for LTCHs
in this proposed rule with the following objectives:
To base the prospective payment system on an analysis of
the best information and data available.
To establish a payment model using our experience in
implementing other prospective payment systems.
To provide incentives to control costs and to furnish
services as efficiently as possible.
To base payment on clinically coherent categories and to
appropriately reflect average resource needs across different
categories.
To minimize opportunities and incentives for
inappropriately maximizing Medicare payments.
To establish a system that is beneficiary centered by
formulating procedures for quality monitoring.
To develop a system that is administratively feasible.
B. Applicability of the Proposed LTCH Prospective Payment System
Our existing regulations at 42 CFR Part 482, Subparts A through D
set forth the general conditions that hospitals must meet to qualify to
participate in Medicare. There are no additional conditions for LTCHs
as there are for psychiatric facilities.
Criteria for classification as a LTCH for purposes of payment are
set forth in existing Sec. 412.23(e), which provides that a LTCH must--
Have a provider agreement to participate as a hospital and
an average inpatient length of stay greater than 25 days or for cost
reporting periods beginning on or after August 5, 1997, for a hospital
that was first excluded from the prospective payment system in 1986,
have an average inpatient length of stay of greater than 20 days and
demonstrate that at least 80 percent of its annual Medicare inpatient
discharges in the 12-month cost reporting period ending in FY 1997 have
a principal diagnosis that reflects a finding of neoplastic disease, as
defined in regulations. The calculation of the average inpatient length
of stay is calculated by dividing the number of total inpatient days
(less leave or pass days) by the number of total discharges for the
hospital's most recent complete cost reporting period.
Meet the additional criteria specified in Sec. 412.22(e)
if it is to be classified as a hospital-within-a-hospital and to be
excluded from the acute care hospital inpatient prospective payment
system.
Meet the additional criteria specified in Sec. 412.22(h)
if it is to be classified as a satellite facility and to be excluded
from the acute care hospital inpatient prospective payment system.
Results of our research on LTCHs, as set forth in section I.D. of
this preamble, have suggested the following particular issue that we
have evaluated and are proposing to address concurrent with the
proposed implementation of the proposed LTCH prospective payment
system:
[[Page 13430]]
Proposed Change in the Average 25-Day Total Inpatient Stay Requirement.
Section 1886(d)(1)(B)(iv)(I) of the Act describes a LTCH generally as
``a hospital which has an average inpatient length of stay (as
determined by the Secretary) of greater than 25 days.'' Thus, the
statute gives the Secretary extremely broad discretion in determining
the average inpatient length of stay for hospitals for purposes of
determining whether a hospital warrants exclusion from the prospective
payment system in section 1886(d) of the Act. Existing Medicare
regulations at Sec. 412.23(e)(1) and (e)(2) include all hospital
inpatients in this calculation of the average inpatient length of stay.
Our data have revealed that approximately 52 percent of Medicare
patients at LTCHs have lengths of stay of less than \2/3\ of the
average length of stay for the proposed LTC-DRGs in this proposed rule,
and 20 percent have a length of stay of even less than 8 days. This
means that some hospitals, while currently qualifying as LTCH by
averaging non-Medicare long stay patients to maintain a length of stay
of over 25 days, do not furnish ``long-term care'' on average to their
Medicare patients. In these situations, many of the hospitals' short
stay Medicare patients could be receiving appropriate services as
patients at acute care hospitals. Under the proposed LTCH prospective
payment system, the proposed LTC-DRG weights and proposed standard
Federal payment rate are based on the charges and costs of LTCH
patients, which are typically more medically complex and more costly
than acute care hospital patients.
Since the proposed LTCH prospective payment system would result in
higher per discharge payments for LTCHs than payments under the acute
care hospital inpatient prospective payment system for patients that
would group into identical DRGs under each system, we believe that
under current policy, which factors in non-Medicare patients' lengths
of stay in determining LTCH status, could result in inappropriately
higher payments for those Medicare short-stay patients who happen to be
treated in a LTCH instead of an acute care hospital. This is the case
since if the average length of stay of patients at a hospital would not
reach the mandatory 25-days threshold for designation as a LTCH unless
non-Medicare patients are included in the calculation, the hospital
would be paid for its Medicare patients under the acute care hospital
inpatient prospective payment system. Therefore, if a hospital is not
treating Medicare patients that, on average, require the more costly
services offered at LTCHs that differentiate these hospitals from acute
care hospitals, we believe that Medicare payments should be determined
under the acute care hospital inpatient prospective payment system.
Such payments would be lower for each DRG than would be paid for under
the LTC-DRG system, reflecting the lower costs of acute care hospitals.
Under the current TEFRA reasonable cost-based reimbursement system,
Medicare payments to LTCHs are commensurate with the actual reasonable
costs incurred by the hospital. Therefore, under that system, Medicare
payments for shorter lengths of stay patients reflect the lower costs
of those patients. However, under the proposed LTCH prospective payment
system, which is based on average costs of treatment for particular
diagnosis, the hospital would receive prospective payments based on
such average costs for these much shorter length of stay patients. Even
under our proposed short-stay outlier policy, as described in section
IV.B.2. of this proposed rule, the hospital would have the opportunity
to be paid 150 percent of its costs.
Therefore, under our broad authority in the statute to determine
the average inpatient length of stay, we are proposing to specify that
we would include the hospital's Medicare patients, but not non-Medicare
patients, in determining the average inpatient length of stay (proposed
Sec. 412.23(e)(2)) for purposes of section 1886(d)(1)(B)(iv)(I) of the
Act. In proposing this change in policy, we believe there would be a
strong incentive for LTCHs not to admit many short-stay Medicare
patients since doing so could jeopardize their status as a LTCH.
Instead, those patients could receive appropriate care at an acute care
hospital and the care would be paid under the hospital inpatient
prospective payment system. Furthermore, changing the methodology for
determining the average inpatient length of stay to be based only on
Medicare patients is consistent with the intent of our proposed very
short-stay discharge policy (described in section IV.B.1. of this
proposed rule) and our proposed short-stay outlier policy (described in
section IV.B.2. of this proposed rule), which are also intended to
discourage LTCHs under the proposed prospective payment system from
treating Medicare patients that do not require the more costly
resources of LTCHs and who could reasonably be treated in acute care
hospitals.
We would monitor the types of hospitals that would qualify as LTCHs
based on this proposed definition. It is possible that hospitals that
currently qualify as either rehabilitation hospitals or psychiatric
hospitals would also qualify as LTCHs under this proposed revised
criteria, and could be paid as LTCHs in order to maximize Medicare
payments. We also would monitor whether the proposed change in
methodology for measuring the average length of stay in LTCHs would
result in unanticipated shifts of patients to those settings. If a
pattern of these behaviors is observed, we believe it may be
appropriate that Congress address the issues raised through a
legislative change.
As indicated above, pursuant to our broad authority in the statute,
we are proposing to change the methodology for determining the average
inpatient length of stay for purposes of section 1886(d)(1)(B)(iv)(I)
of the Act, but we are not proposing to change the methodology for
purposes of section 1886(d)(1)(B)(iv)(II) of the Act (proposed
Sec. 412.23(e)). For purposes of the latter provision (subclause (II)),
we are proposing to retain the current methodology (which includes non-
Medicare as well as Medicare patients) because we believe that the
considerations underlying the proposed change in methodology for
subclause (I) are not present under subclause (II). As discussed above,
we are proposing to revise the methodology for purposes of the general
definition of LTCH under subclause (I) because it has come to our
attention that some hospitals that might not warrant exclusion from the
prospective payment system have nevertheless obtained status as
excluded hospitals under the current methodology. We believe that
excluding non-Medicare patients in determining the average inpatient
length of stay for purposes of subclause (I) would be more appropriate
in identifying the hospitals that warrant exclusion under the general
definition of LTCH in subclause (I). However, in enacting subclause
(II), Congress provided an exception to the general definition of LTCH
under subclause (I), and we have no reason to believe that the proposed
change in methodology for determining the average inpatient length of
stay would better identify the hospitals that Congress intended to
exclude under subclause (II). Therefore, at this time, we are proposing
to retain the current methodology for purposes of subclause (II).
C. LTCHs Not Subject to the Proposed LTCH Prospective Payment System
We are proposing that only hospitals qualifying as LTCHs under the
proposed revised criteria described in section II.B.
[[Page 13431]]
of this proposed rule and in proposed revised Sec. 412.23(e) by October
1, 2002, would be subject to the proposed LTCH prospective payment
system. (This proposed system is summarized below in section II.D. and
described in detail in section IV. of this proposed rule.) Our proposed
treatment of hospitals first qualifying as LTCHs after October 1, 2002,
is addressed in section IV.H. of this proposed rule.
The following hospitals are paid under special payment provisions,
as described in existing Sec. 412.22(c) and, therefore, would not be
subject to the proposed LTCH prospective payment system rules:
Veterans Administration hospitals.
Hospitals that are reimbursed under State cost control
systems approved under 42 CFR part 403.
Hospitals that are reimbursed in accordance with
demonstration projects authorized under section 402(a) of Public Law
90-248 (42 U.S.C. 1395b-1) or section 222(a) of Public Law 92-603 (42
U.S.C. 1395b-1 (note)).
Nonparticipating hospitals furnishing emergency services
to Medicare beneficiaries.
D. Summary Description of the Proposed LTCH Prospective Payment System
In accordance with the requirements of section 123 of Public Law
106-113, as modified by section 307(b) of Public Law 106-554, we are
proposing to implement a prospective payment system for LTCHs that
would replace the current reasonable cost-based payment system under
TEFRA. The proposed prospective payment system would utilize
information from LTCH patient records to classify patients into
distinct DRGs based on clinical characteristics and expected resource
needs. Separate payments would be calculated for each DRG with
additional adjustments applied, as described below.
1. Procedures
We are proposing that, upon the discharge of the patient from a
LTCH, the LTCH would assign appropriate diagnosis and procedure codes
from the International Classification of Diseases, Ninth Revision,
Clinical Modification (ICD-9-CM). The LTCH would then enter these codes
on the current Medicare claims form and submit the completed claims
form to its Medicare fiscal intermediary. At present, the standard
Medicare claims form is the UB-92. Under a requirement of the Health
Insurance Portability and Accountability Act of 1996 (HIPAA), Public
Law 104-191, electronic health care claims, including Medicare claims,
will be required to be in the new national standard claims format and
medical data code sets in accordance with regulations at 45 CFR Parts
160 and 162. The Medicare fiscal intermediary would enter the
information into its claims processing systems and subject it to a
series of edits called the Medicare Code Editor (MCE). This editor is
designed to identify cases that would require further review before
classification into a proposed LTC-DRG (described in sections II.D.2.
and III. of this proposed rule).
After screening through the MCE, each claim would be classified
into the appropriate LTC-DRG by the Medicare LTCH GROUPER. The LTCH
GROUPER is specialized computer software based on the GROUPER utilized
by the acute care hospital inpatient prospective payment system, which
was developed as a means of classifying each case into a DRG on the
basis of diagnosis and procedure codes and other demographic
information (age, sex, and discharge status). Following the LTC-DRG
assignment, the Medicare fiscal intermediary would determine the
prospective payment by using the Medicare PRICER program, which
accounts for hospital-specific adjustments.
As provided for under the acute care hospital inpatient prospective
payment system, we are proposing to provide opportunity for the LTCH to
review the LTC-DRG assignments made by the fiscal intermediary
(proposed Sec. 412.513(c)). A hospital would have 60 days after the
date of the notice of the initial assignment of a discharge to a LTC-
DRG to request a review of that assignment. The hospital would be
allowed to submit additional information as part of its request. The
fiscal intermediary would review that hospital's request and any
additional information and would decide whether a change in the LTC-DRG
assignment is appropriate. If the intermediary decides that a different
LTC-DRG should be assigned, the case would be reviewed by the
appropriate Peer Review Organization (PRO) as specified in
Sec. 476.71(c)(2). Following this 60-day period, the hospital would not
be able to submit additional information with respect to the LTC-DRG
assignment or otherwise revise its claim.
The operational aspects and instructions for completing and
submitting Medicare claims under the LTCH prospective payment system
will be addressed in a Medicare Program Memorandum once the final
system requirements are developed and implemented.
2. Patient Classification Provisions
We are proposing a patient classification system called long-term
care diagnosis-related groups (LTC-DRGs). The LTC-DRGs would classify
patient discharges 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. We
began the development of the proposed LTC-DRGs by using the CMS DRGs
under the acute care hospital inpatient prospective payment system with
the most recent data available. We address the issue of the use of
proposed low volume LTC-DRGs (less than 25 LTCH cases) in determining
the LTC-DRG weights. Further details of the proposed LTC-DRG
classification system are discussed in section III. of this proposed
rule.
3. Payment Rates
In accordance with section 123(a)(1) of Public Law 106-113, we are
proposing to use a discharge as the payment unit for the proposed LTCH
prospective payment system for Medicare patients. We would update these
per discharge payment amounts annually. The proposed payment rates
would encompass both inpatient operating and capital-related costs of
furnishing covered inpatient LTCH services, including routine and
ancillary costs, but not the costs of bad debts, approved educational
activities, blood clotting factors, anesthesia services furnished by
hospital-employed nonphysician anesthetists or obtained under
arrangement, or the costs of photocopying and mailing medical records
requested by a PRO, which are costs paid outside the prospective
payment system. Consistent with current policy, beneficiaries may be
charged only for deductibles, coinsurance, and noncovered services (for
example, telephone and television). They may not be charged for the
differences between the hospital's cost of providing covered care and
the proposed Medicare LTCH prospective payment amount.
We are proposing to determine the LTCH prospective payment rates
using relative weights to account for the variation in resource use
among LTC-DRGs. During FY 2003, the LTCH prospective payment system
would be ``budget neutral'' in accordance with section 123(a)(1) of
Public Law 106-113. That is, total payments for LTCHs during FY 2003
would be projected to equal payments that would have been paid for
operating and capital-related costs of LTCHs had this proposed new
[[Page 13432]]
payment system not been enacted. Budget neutrality is discussed in
detail in section IV. of this preamble.
Based on our analysis of the data, we are proposing to make
additional payments to LTCHs for discharges meeting specified criteria
as ``outliers.'' For purposes of this proposed rule, outliers are cases
that have unusually high costs, exceeding the LTC-DRG payment plus the
fixed loss amount as discussed in section IV.D. of this proposed rule.
In conjunction with a high cost outlier policy, we are proposing
payment policies regarding very short-stay discharges, short-stay
outliers, and interrupted stays. A detailed description of these
proposed policies appears in section IV.B. of this preamble.
4. Limitation on Charges to Beneficiaries
In accordance with existing regulations and for consistency with
other established hospital prospective payment systems policies, we are
proposing to specify that a LTCH may not charge a beneficiary for any
services for which payment is made by Medicare, even if the hospital's
costs of furnishing services to that beneficiary are greater than the
amount the hospital would be paid under the proposed LTCH prospective
payment system (proposed Sec. 412.507). We also are proposing to
specify under proposed Sec. 412.507 that a LTCH receiving a prospective
payment for a covered hospital stay (that is, a stay that includes at
least one covered day) may charge the Medicare beneficiary or other
person only for the applicable deductible and coinsurance amounts under
Secs. 409.82, 409.83, and 409.87 of the existing regulations, and for
items or services specified under Sec. 489.20(a) of the existing
regulations.
5. Medical Review Requirements
In accordance with existing regulations at Secs. 412.44, 412.46,
and 412.48 and for consistency with other established hospital
prospective payment systems policies, we are proposing to specify that
a LTCH must have an agreement with a PRO to have the PRO review, on an
ongoing basis, the medical necessity, reasonableness, and
appropriateness of hospital admissions and discharges and of inpatient
hospital care for which outlier payments are sought; the validity of
the hospital's diagnostic and procedural information; the completeness,
adequacy, and quality of the services furnished in the hospital; and
other medical or other practices with respect to beneficiaries or
billing for services furnished to beneficiaries (proposed
Sec. 412.508(a)). In addition, we are proposing to require that,
because payment under the proposed prospective payment system is based
in part on each patient's principal and secondary diagnoses and major
procedures performed, as evidenced by the physician's entries in the
patient's medical record, physicians must complete an acknowledgement
statement to that effect. We are proposing to apply the existing
hospital requirements for the contents and filing of the physician
acknowledgment statement (proposed Sec. 412.508(b)).
Also, consistent with existing established hospital prospective
payment system policies, we are proposing that if CMS determines, on
the basis of information supplied by the PRO, that a hospital has
misrepresented admissions, discharges, or billing information or has
taken an action that results in the unnecessary admission or multiple
admission of individuals entitled to Part A benefits or other
inappropriate medical or other practices, CMS may deny payment (in
whole or in part) for inpatient hospital services related to the
unnecessary or subsequent readmission of an individual or require the
hospital to take actions necessary to prevent or correct the
inappropriate practice. Notice and appeal of a denial of payment would
be provided under procedures established to implement section 1155 of
the Act. In addition, a determination of a pattern of inappropriate
admissions and billing practices that has the effect of circumventing
the prospective payment system would be referred to the Department's
Office of Inspector General, for handling in accordance with 42 CFR
1001.301.
6. Furnishing of Inpatient Hospital Services Directly or Under
Arrangements
In accordance with existing regulations at Sec. 414.15(m) and for
consistency with other established hospital prospective payment systems
policies, we are proposing that a LTCH must furnish covered services to
Medicare beneficiaries either directly or under arrangements. Under
proposed Sec. 412.509, we are proposing that the LTCH prospective
payment would be payment in full for all inpatient hospital services,
as defined in Sec. 409.10 of the existing regulations. We also are
proposing that we would not pay any provider or supplier other than the
LTCH for services furnished to a Medicare beneficiary who is an
inpatient of the LTCH, except for those services that are not included
as inpatient hospital services that are listed under existing
Sec. 412.50 (that is, physicians' services that meet the requirements
of Sec. 415.102(a) for payment on a fee schedule basis; physician
assistant services as defined in section 1861(s)(2)(K)(i) of the Act;
nurse practitioners and clinical nurse specialist services, as defined
in section 1861 (s)(2)(K)(ii) of the Act; certified nurse midwife
services, as defined in section 1861(gg) of the Act; qualified
psychologist services, as defined in section 1861(ii) of the Act; and
services of an anesthetist, as defined in Sec. 410.69).
7. Reporting and Recordkeeping Requirements
We are proposing to impose the same recordkeeping and cost
reporting requirements of Secs. 413.20 and 413.24 of the existing
regulations on all LTCHs that would participate in the proposed LTCH
prospective payment system (proposed Sec. 412.511).
8. Implementation of the Proposed Prospective Payment System
We are proposing a 5-year transition period from cost-based
reimbursement to prospective payment for LTCHs as discussed in section
IV.G. of this proposed rule. During this period, two payment
percentages would be used to determine a LTCH's total payment under the
prospective payment system. The proposed blend percentages are as
follows:
------------------------------------------------------------------------
Prospective
payment Cost-based
Cost reporting periods beginning on or after federal reimbursement
rate percentage
percentage
------------------------------------------------------------------------
October 1, 2002............................. 20 80
October 1, 2003............................. 40 60
October 1, 2004............................. 60 40
October 1, 2005............................. 80 20
October 1, 2006............................. 100 0
------------------------------------------------------------------------
Therefore, for a cost reporting period beginning on or after
October 1, 2002, and before October 1, 2003, the total prospective
payment would consist of 80 percent of the amount based on the current
cost-based reimbursement system and 20 percent of the proposed Federal
prospective payment rate. The percentage of payment based on the LTCH
prospective payment Federal rate would increase by 20 percent and the
cost-based reimbursement rate percentage would decrease by 20 percent
for each of the remaining 4 fiscal years in the transition period. For
cost reporting periods beginning on or after October 1, 2006, Medicare
payment to LTCHs would be determined entirely under the proposed
Federal prospective payment system methodology. Furthermore, we are
proposing that
[[Page 13433]]
LTCHs would have the option to elect to be paid 100 percent of the
Federal rate and not be subject to the 5-year transition. (See section
IV.G. of this proposed rule.)
III. Long-Term Care Diagnosis-Related Group (LTC-DRG)
Classifications
Section 307(b) of Public Law 106-554 requires that the Secretary
examine ``the feasibility and the impact of basing payment under such a
system (the LTCH prospective payment system) on the use of existing (or
refined) hospital diagnosis-related groups (DRGs) that have been
modified to account for different resource use of long-term care
hospital patients as well as the use of the most recently available
hospital discharge data.'' The DRG-based patient classification system
described in this section for the proposed LTCH prospective payment
system would be based on the existing CMS DRG system used in the acute
care hospital inpatient prospective payment system, modified where
feasible to reflect the fact that LTCH patients represent a different
patient mix from patients in short-term acute care hospitals, as
required by section 307(b) of Public Law 106-554. Therefore, an
understanding of pertinent facts about the CMS DRG system is essential
to an understanding of the proposed LTC-DRGs that would be employed in
the proposed LTCH prospective payment system.
A. Background
The design and development of DRGs began in the late 1960s at Yale
University. The initial motivation for developing the DRGs was the
creation of an effective framework for monitoring the quality of care
and the utilization of services in a hospital setting. The first large-
scale application of the DRGs as a basis for payments was in the late
1970s in New Jersey. New Jersey's State Department of Health used DRGs
as the basis of a prospective payment system in which hospitals were
reimbursed a fixed DRG-specific amount for each patient treated. In
1972, section 223 of Public Law 92-603 originally authorized the
Secretary to set limits on costs reimbursed under Medicare for
inpatient hospital services. In 1982, section 101(b)(3) of Public Law
97-248 required the Secretary to develop a legislative proposal for
Medicare payments to hospitals, SNFs, and, to the extent feasible,
other providers on a prospective basis. (See the September 1, 1983
Federal Register (48 FR 39754).) In 1983, Title VI of Public Law 98-21
added section 1886(d) to the Act, which established a national DRG-
based hospital prospective payment system for Medicare inpatient acute
care services. (See the January 3, 1984 Federal Register (49 FR 234).)
B. Historical Exclusion of LTCHs
Since the hospital inpatient DRG system had been developed from the
cost and utilization experience of general acute care hospitals, it did
not account for the resource costs for the types of patients treated in
hospitals such as rehabilitation, psychiatric, and children's
hospitals, as well as LTCHs and rehabilitation and psychiatric units of
acute care hospitals. Therefore, the statute (section 1886(d)(1)(B) of
the Act) excluded these classes of hospitals and units from the
prospective payment system for general acute care hospitals. The
excluded hospitals and units continued to receive payments based on
costs subject to a cap on each facility's per discharge costs during a
base year, with a yearly update as set forth in Public Law 97-248.
(Cancer hospitals were added to the list of excluded hospitals by
section 6004(a) of Pub. L. 101-239.)
C. Patient Classifications by DRGs
1. Objectives of the Classification System
The DRGs are a patient classification system that provides a means
of relating the type of patients treated by a hospital (that is, its
case-mix) to the costs incurred by the hospital. In other words, DRGs
relate a hospital's case-mix to the resource demands and associated
costs experienced by the hospital. Therefore, a hospital that has a
more complex case-mix treats patients who require more hospital
resources.
While each patient is unique, groups of patients have demographic,
diagnostic, and therapeutic attributes in common that determine their
level of resource intensity. Given that the purpose of DRGs is to
relate a hospital's case-mix to its resource intensity, it was
necessary to develop a way of determining the types of patients treated
and to relate each patient type to the resources they consumed. In the
development of the existing CMS DRGs, in order to aggregate patients
into meaningful patient classes, it was essential to develop clinically
similar groups of patients with similar resource intensity. The
characteristics of a practical and meaningful DRG system were distilled
into the following objectives:
The patient characteristics should be limited to
information routinely collected on hospital abstract systems.
There should be a manageable number of DRGs encompassing
all patients.
Each DRG should contain patients with a similar pattern of
resource intensity.
DRGs should be clinically coherent, that is, containing
patients who are similar from a clinical perspective.
Under a DRG-based system, patient information routinely collected
include the following six data items: principal diagnosis, secondary or
additional diagnoses, procedures, age, gender, and discharge status.
All hospitals routinely collect this information; therefore, a
classification system based on these elements could be applied
uniformly across hospitals.
Limiting the number of DRGs to a manageable total (that is,
hundreds of patient classes instead of thousands) ensures that, for
most of the DRGs, hospital discharge data would allow for meaningful
comparative analysis to be performed. If a hospital has a sufficient
number of cases in particular DRGs, this will allow for evaluations and
comparisons of resource consumption by patients grouped to those DRGs
as compared to resources consumed by patients grouped to other DRGs. A
large number of DRGs with only a few patients in each group would not
provide useful patterns of case-mix complexity and cost performance.
The resource intensity of the patients in each DRG must be similar
in order to establish a relationship between the case-mix of a hospital
and the resources it consumes. (Similar resource intensity means that
the resources used are relatively consistent across the patients in
each DRG.) In implementing the original DRGs for the acute care
hospital inpatient prospective payment system, we recognized that some
variation in resource intensity would be present among the patients in
each DRG, but the level of variation would be identifiable and
predictable.
The last characteristic for an effective patient classification
system is that the patients in a DRG are similar from a clinical
perspective; that is, the definition of a DRG has to be clinically
coherent. This objective requires that the patient characteristics
included in the definition of each DRG be related to a common organ
system or etiology, and that a specific medical specialty should
typically provide care to the patients in a particular DRG.
2. DRGs and Medicare Payments
The LTC-DRGs that we are proposing as the patient classification
component of the proposed LTCH prospective payment system would
correspond to
[[Page 13434]]
the DRGs in the acute care hospital inpatient prospective payment
system. As discussed in section IV.A.2. of this proposed rule, we are
proposing to modify the CMS DRGs for the proposed LTCH prospective
payment system by developing LTCH-specific relative weights to account
for the fact that LTCHs generally treat patients with multiple medical
problems. Therefore, we are presenting a brief review of the DRG
patient classification system in the acute care hospital inpatient
prospective payment system.
Generally, under the prospective payment system for short-term
acute care hospital inpatient services, Medicare payment is made at a
predetermined, specific rate for each discharge; that payment varies by
the DRG to which a beneficiary's stay is assigned. Cases are classified
into DRGs for payment based on the following six data elements:
(1) Principal diagnosis.
(2) Up to eight additional diagnoses.
(3) Up to six procedures performed.
(4) Age.
(5) Sex.
(6) Discharge status of the patient.
The diagnostic and procedure information from the patient's
hospital record is reported by the hospital using ICD-9-CM codes on the
uniform billing form currently in use.
Medicare fiscal intermediaries enter the clinical and demographic
information into their claims processing systems and subject it to a
front-end automated screening process called the Medicare Code Editor
(MCE). These screens are designed to identify cases that require
further review before assignment into a DRG can be made. During this
process, cases such as the following are selected for further
development:
Cases that are improperly coded (for example, diagnoses
are shown that are inappropriate, given the sex of the patient. Code
68.6, Radical abdominal hysterectomy, would be an inappropriate code
for a male.).
Cases including surgical procedures not covered under
Medicare (for example, organ transplant in a nonapproved transplant
center).
Cases requiring more information. (For example, ICD-9-CM
codes are required to be entered at their highest level of specificity.
There are valid 3-digit, 4-digit, and 5-digit codes. That is, code
136.3, Pneumocystosis, contains all appropriate digits, but if it is
reported with either fewer or more than 4 digits, it will be rejected
by the MCE as invalid.)
Cases with principal diagnoses that do not usually justify
admission to the hospital. (For example, 437.9, Unspecified
cerebrovascular disease. While this code is valid according to the ICD-
9-CM coding scheme, a more precise code should be used for the
principal diagnosis.)
After screening through the MCE and any further development of the
claims, cases are classified into the appropriate DRG by a software
program called the GROUPER using the six data elements noted above.
The GROUPER 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 MedPAR file. The data in this file are used to evaluate possible
DRG classification changes and to recalibrate the DRG weights during
our annual update.
The DRGs are organized into 25 Major Diagnostic Categories (MDCs),
most of which are based on a particular organ system of the body; the
remainder involve multiple organ systems (such as MDC 22, Burns).
Accordingly, the principal diagnosis determines MDC assignment. Within
most MDCs, cases are then divided into surgical DRGs and medical DRGs.
While we do not anticipate large numbers of surgical cases in LTCHs,
surgical DRGs are assigned based on a surgical hierarchy that orders
individual procedures or groups of procedures by resource intensity.
Generally, the GROUPER does not recognize certain other procedures;
that is, those procedures not surgical (for example, EKG), or minor
surgical procedures generally not performed in an operating room and,
therefore, not considered as surgical by the GROUPER (for example,
86.11, Biopsy of skin and subcutaneous tissue).
The medical DRGs are generally differentiated on the basis of
diagnosis. Both medical and surgical DRGs may be further differentiated
based on age, discharge status, and presence or absence of
complications or comorbidities (CC). It should be noted that CCs are
defined by certain secondary diagnoses not related to or inherently a
part of the disease process identified by the principal diagnosis (for
example, the GROUPER would not recognize a code from the 800.0x series,
Skull fracture, as a comorbidity or complication when combined with
principal diagnosis 850.4, Concussion with prolonged loss of
consciousness, without return to pre-existing conscious level).
Additionally, we would note that the presence of additional diagnoses
does not automatically generate a CC, as not all DRGs recognize a
comorbid or complicating condition in their definition. (For example,
DRG 466, Aftercare without History of Malignancy as Secondary
Diagnosis, is based solely on the principal diagnosis, without
consideration of additional diagnoses for DRG determination.)
D. Proposed LTC-DRG Classification System for LTCHs
Unless otherwise noted, our analysis of a per discharge DRG-based
patient classification system is based on LTCH data from the FY 2000
MedPAR file which contains hospital bills received through May 31,
2001, for discharges in FY 2000.
The proposed patient classification system for the proposed LTCH
prospective payment system would be based on the hospital inpatient
prospective payment system currently used for Medicare beneficiaries,
as described in section III.C. of this proposed rule. Within the LTCH
data set, as identified by provider number, we would classify all cases
to the CMS DRGs. We identified individual LTCH cases with a length of
stay equal to or less than 7 days (see section IV.B.1. of this preamble
for a discussion of the proposed very short-stay discharge policy under
Sec. 412.527) and grouped them into two proposed very short-stay LTC-
DRGs; one for psychiatric cases and one for all other cases. Therefore,
the proposed patient classification system would consist of 501 DRGs
that would form the basis of the proposed FY 2003 LTCH prospective
payment system GROUPER. The 501 proposed LTC-DRGs include two DRGs for
very short-stay discharges (see section IV.B.1.) and two error DRGs.
The other 497 proposed LTC-DRGs are the same DRGs used in the hospital
inpatient prospective payment system GROUPER for FY 2002 (version 18).
Cases submitted to the fiscal intermediaries would be processed using
the data elements, MCE, and the GROUPER system already in place for the
acute care hospital inpatient prospective payment system as described
above.
There is one significant difference in this proposed system that
sets it apart from the concept of DRG definition based on clinical
coherence. As noted above, cases with a length of stay equal to or less
than 7 days (referred to hereafter as ``very short-stay'') were
identified and grouped together in two separate LTC-DRGs.
We are proposing to group cases that stayed 7 days or fewer that
would otherwise be grouped into DRGs 424 through 432 in MDC 19 (Mental
[[Page 13435]]
Diseases and Disorders) or DRGs 433 through 437 in MDC 20 (Alcohol/Drug
Use and Alcohol/Drug-Induced Organic Mental Disorders) into a new
proposed psychiatric very short-stay group. We are proposing to
classify all other cases that stayed 7 days or fewer, that is, very
short-stay cases not classified into MDC 19 or 20, into the second new
proposed very short-stay, nonpsychiatric group. Additionally, as in the
acute care hospital inpatient prospective payment system, we are
proposing to include two ``error DRGs'' in the LTC-DRG system where
cases that cannot be assigned to valid DRGs will be grouped. These are
DRG 469 (Principal diagnosis invalid as a discharge diagnosis) and DRG
470 (Ungroupable). (See 66 FR 40062, August 1, 2001.) Therefore, the
LTC-DRG system that we are proposing would include 4 nonclinical
categories into which LTCH patients can be grouped.
E. ICD-9-CM Coding System
1. Historical Use of ICD-9-CM Codes
The Ninth Revision of the International Classification of Diseases,
Clinical Modification, was adapted for use in the United States in
1979. This coding system is the basis for the CMS DRGs, upon which the
proposed LTC-DRGs would be based. Additionally, the Standards for
Electronic Transactions (65 FR 50312) designates the ICD-9-CM volumes 1
and 2 (including the official ICD-9-CM Guidelines for Coding and
Reporting) as the standard medical data code set for capturing
diseases, injuries, impairments, other health-related problems and
their manifestations and causes. The ICD-9-CM volume 3 procedures
(including the Official ICD-9-CM Guidelines for Coding and Reporting)
have been adopted as the HIPAA standard code set for prevention,
diagnosis, treatment, and management of actions taken for diseases,
injuries, and impairments on hospital inpatients. These guidelines are
available through a number of sources, including the following Web
site: http://www.cdc.gov/nchs/data/icdguide.pdf.
(We note that should the Secretary, in the future, adopt a
different medical data code set for capturing diseases, injuries, or
impairments, hospitals participating in the Medicare program would be
required to use those codes.)
2. Uniform Hospital Discharge Data Set (UHDDS) Definitions
Because the assignment of a case to a particular proposed LTC-DRG
would determine the amount that would be paid for the case, it is
important that the coding is accurate. We are proposing that
classifications and terminology used in the proposed LTCH prospective
payment system would be consistent with the ICD-9-CM and the UHDDS, as
recommended to the Secretary by the National Committee on Vital and
Health Statistics (Uniform Hospital Discharge Data: Minimum Data Set,
National Center for Health Statistics, April 1980) and as revised in
1984 by the Health Information Policy Council (HIPC) of the U.S.
Department of Health and Human Services.
We wish to point out that the ICD-9-CM coding terminology and the
definitions of principal and other diagnoses of the UHDDS are
consistent with the requirements of the HIPPA Administrative
Simplification Act of 1996 (see 45 CFR part 162). Furthermore, the
UHDDS has been used as a standard for the development of policies and
programs related to hospital discharge statistics by both governmental
and nongovernmental sectors for over 30 years. Additionally, the
following definitions (as described in the 1984 Revision of the Uniform
Hospital Discharge Data Set, approved by the Secretary of Health and
Human Services for use starting January 1986) are requirements of the
ICD-9-CM coding system, and have been used as a standard for the
development of the CMS DRGs:
Diagnoses include all diagnoses that affect the current
hospital stay.
Principal diagnosis is defined as the condition
established after study to be chiefly responsible for occasioning the
admission of the patient to the hospital for care.
Other diagnoses (also called secondary diagnoses or
additional diagnoses) are defined as all conditions that coexist at the
time of admission, that develop subsequently, or that affect the
treatment received or the length of stay or both. Diagnoses that relate
to an earlier episode of care that have no bearing on the current
hospital stay are excluded.
All procedures performed would be reported. This includes those
that are surgical in nature, carry a procedural risk, carry an
anesthetic risk, or require specialized training.
As discussed in section II.D.l. of this proposed rule and
consistent with the procedures for review of CMS DRGs under the acute
care hospital inpatient prospective payment system, we are proposing to
provide LTCHs with a 60-day window after the date of the notice of the
initial LTC-DRG assignment to request review of that assignment.
Additional information may be provided by the LTCH to the fiscal
intermediary as part of that review.
3. Maintenance of ICD-9-CM System
In September 1985, the ICD-9-CM Coordination and Maintenance
Committee was formed. This is a Federal interdepartmental committee,
co-chaired by the National Center for Health Statistics (NCHS) and CMS,
charged with maintaining and updating the ICD-9-CM system. The
committee is jointly responsible for approving coding changes, and
developing errata, addenda, and other modifications to the ICD-9-CM to
reflect newly developed procedures and technologies and newly
identified diseases. The committee is also responsible for promoting
the use of Federal and non-Federal educational programs and other
communication techniques with a view toward standardizing coding
applications and upgrading the quality of the classification system.
The NCHS has lead responsibility for the ICD-9-CM diagnosis codes
included in the Tabular List and Alphabetic Index for Diseases, while
CMS has lead responsibility for the ICD-9-CM procedure codes included
in the Tabular List and Alphabetic Index for Procedures.
The committee encourages participation in the above process by
health-related organizations. In this regard, the committee holds
public meetings for discussion of educational issues and proposed
coding changes. These meetings provide an opportunity for
representatives of recognized organizations in the coding field, such
as the American Health Information Management Association (AHIMA)
(formerly American Medical Record Association (AMRA)), the American
Hospital Association (AHA), and various physician specialty groups, as
well as physicians, medical record administrators, health information
management professionals, and other members of the public to contribute
ideas on coding matters. After considering the opinions expressed at
the public meetings and in writing, the committee formulates
recommendations, which then must be approved by the agencies.
The committee presents proposals for coding changes at two public
meetings per year held at the CMS Central Office located in Baltimore,
Maryland. The agenda and date of the meeting can be accessed on the CMS
Web site at:
http://www.cms.gov/medicare/icd9cm.htm.
After consideration of public comments received at both meetings,
as well as in writing, coding changes are published by CMS in the
annual proposed and final rules in the Federal
[[Page 13436]]
Register on Medicare program changes to the short-term acute care
hospital inpatient prospective payment systems. For example, new codes
effective for discharges on or after October 1, 2001, can be found in
Tables 6A through 6F of the August 1, 2001 hospital inpatient
prospective payment system and rates for FY 2002 final rule (66 FR
40063 through 40066).
All changes to the ICD-9-CM coding system that affect DRG
assignment are addressed annually in the acute care hospital inpatient
prospective payment system proposed and final rules. Since the proposed
DRG-based patient classification system for the proposed LTCH
prospective payments system is based on the acute care hospital
inpatient prospective payment system DRGs, these changes would also
affect the proposed LTCH prospective payment system DRG patient
classification system. As coding changes may have an impact on DRG
assignment, LTCHs would be encouraged to obtain and correctly use the
most current edition of the ICD-9-CM codes. The official version of the
ICD-9-CM is available on CD-ROM from the U.S. Government Printing
Office. The FY 2002 version can be ordered by contacting the
Superintendent of Documents, U.S. Government Printing Office, Dept. 50,
Washington, DC 20402-9329, telephone: (202) 512-1800. The stock number
is 017-022-01510-2, and the price is $22.00. In addition, private
vendors also publish the ICD-9-CM.
Copies of the Coordination and Maintenance Committee minutes can be
obtained from the CMS Web site at: http://www.cms.gov/medicare/
icd9cm.htm. We encourage commenters to address suggestions on coding
issues involving diagnosis codes to: Donna Pickett, Co-Chairperson,
ICD-9-CM Coordination and Maintenance Committee, NCHS Room 1100, 6525
Belcrest Road, Hyattsville, MD 20782. Comments may be sent by e-mail
to: dfp4@cdc.gov.
Questions and comments concerning the procedure codes should be
addressed to: Patricia E. Brooks, Co-Chairperson, ICD-9-CM Coordination
and Maintenance Committee, CMS, Center for Medicare Management,
Purchasing Policy Group, Division of Acute Care, Mail Stop C4-08-06,
7500 Security Boulevard, Baltimore, MD 21244-1850. Comments may be sent
by e-mail to: pbrooks@cms.hhs.gov.
As noted above, the ICD-9-CM code changes that have been approved
would become effective at the beginning of the Federal fiscal year,
October 1. Of particular note to LTCHs would be the invalid diagnosis
codes (Table 6C) and the invalid procedure codes (Table 6D). Use of
invalid codes would cause claims to fail the MCE screens.
4. Coding Rules and Use of ICD-9-CM in LTCHs
The emphasis on the need for proper coding cannot be overstated.
Inappropriate coding of cases can adversely affect the uniformity of
cases in each LTC-DRG and produce inappropriate weighting factors at
recalibration.
Because of our concern with correct coding practice, we have been
working with the AHA editorial advisory board for its publication
``Coding Clinic for ICD-9-CM'' since 1984. Coding Clinic was developed
to improve the accuracy and uniformity of medical record coding and is
recognized in the industry as the definitive source of coding
instruction. In 1987, the AHA created the cooperating parties, who have
final approval of the coding advice provided in Coding Clinic. The
cooperating parties consist of the AHA, the AHIMA (formerly the AMRA),
CMS (formerly HCFA), and NCHS. As we participate on the editorial
advisory board and are one of the cooperating parties, we support the
use of Coding Clinic for coding advice for LTCHs. Information about
Coding Clinic can be obtained from the American Hospital Association,
Central Office on ICD-9-CM, One North Franklin, Chicago, IL 60606, or
at its Web site at http://www.ahacentraloffice.org.
Even though we recognize that the Federal Register may not be the
most efficient vehicle for coding instruction, we believe it is
important to briefly review some of the basic instructions for coding.
Our compelling need is based on the review of the data submitted by
LTCHs. We note that the logic of the care patterns or place of
treatment should not be considered in reviewing the following
scenarios. Rather, we are attempting to present simplistic examples to
illustrate correct coding practice.
Principal diagnosis--As noted above, the specific
definition for principal diagnosis established by the 1984 Revision of
the Uniform Hospital Discharge Data Set is ``the condition established
after study to be chiefly responsible for occasioning the admission of
the patient to the hospital for care.'' When a patient is discharged
from an acute care facility and admitted to a LTCH, the appropriate
principal diagnosis at the LTCH is not necessarily the same diagnosis
for which the patient received care at the acute care hospital. For
example, a patient who suffers a stroke (code 436, Acute, but ill-
defined, cerebrovascular disease) is admitted to an acute hospital for
diagnosis and treatment. The patient is then transferred to a LTCH for
further treatment of left-sided hemiparesis and dysphasia. The
appropriate principal diagnosis at the LTCH would be a code from
section 438 (Late effects of cerebrovascular disease), such as 438.20
(Late effects of cerebrovascular disease, Hemiplegia affecting
unspecified side) or 438.12 (Late effects of cerebrovascular disease,
Dysphasia).
Coding guidelines state that the residual condition is sequenced
first followed by the cause of the late effect. In the case of
cerebrovascular disease, the combination code describes both the
residual of the stroke (for example, speech or language deficits or
paralysis), and the cause of the residual (the stroke)). Code 436 would
only be used for the first (initial) episode of care for the stroke
that was in the acute care setting.
Other diagnoses--Secondary diagnoses that have no bearing
on the LTCH stay would not be coded. For example, a patient who has
recovered from pneumonia during a previous episode of care would not
have a diagnosis code for pneumonia included in his or her list of
discharge diagnoses. The pneumonia was not treated during this LTCH
admission and, therefore, has no bearing on this case.
Procedures--Codes reflecting procedures provided during a
previous acute care hospital stay would not be included because the
procedure was not performed during this LTCH admission. For example, a
patient with several chronic illnesses is admitted to an acute care
hospital with a diagnosis of appendicitis for which he or she receives
an appendectomy. The patient subsequently is transferred to a LTCH for
medical treatment following surgery, and as a result of the multiple
secondary conditions, the patient needs a higher level of care than he
or she could receive at a SNF or at home with an HHA. In this
situation, appendicitis would not be coded because this condition was
resolved with the removal of the appendix. The procedure code for
appendectomy would not be used on the LTCH record, as the procedure was
performed in the acute care setting, not during the LTCH admission.
We would train fiscal intermediaries and providers on the new
system prior to its implementation. We also would issue manuals
containing procedures as well as coding instructions to LTCHs and
fiscal intermediaries following the publication of the final rule.
[[Page 13437]]
IV. Proposed Payment System for LTCHs
The LTCH prospective payment system proposed in this rule would use
Federal prospective payment rates across 501 proposed distinct LTC-
DRGs. We are proposing to establish a standard Federal payment rate
based on the best available LTCH cost data. LTC-DRG relative weights
would be applied to the standard Federal rate to account for the
relative differences in resource use across the LTC-DRGs. The proposed
system would also include an adjustment for very short-stay discharges,
short-stay outliers, and high-cost outlier cases, as described in
section IV.B. of this preamble.
The proposed standard Federal prospective payment rate, which is
the basis for determining proposed Federal payment rates for each
proposed LTC-DRG, would be determined based on average costs from a
base period, and also would reflect the combined aggregate effects of
the proposed payment weights and other proposed policies discussed in
this section. In discussing the proposed methodology, we begin by
describing the various adjustments and factors that would serve as the
input used in establishing the proposed standard Federal prospective
payment rate. Accordingly, we are proposing to develop prospective
payments for LTCHs using the following major steps:
Develop the LTC-DRG relative weights.
Determine appropriate payment system adjustments.
Calculate the budget neutral standard Federal prospective
payment rate.
Calculate the Federal LTC-DRG prospective payments.
A detailed description of each step and a discussion of our
proposed policies for special cases, phase-in implementation, and other
policies follows.
A. Development of the Proposed LTC-DRG Relative Weights
1. Overview of Development of the Proposed LTC-DRG Relative Weights
As previously stated, one of the primary goals for the
implementation of the proposed LTCH prospective payment system would be
to pay each LTCH an appropriate amount for the efficient delivery of
care to Medicare patients. The system must be able to account
adequately for each LTCH's case-mix in order to ensure both fair
distribution of Medicare payments and access to adequate care for
beneficiaries whose care is more costly. To accomplish these goals, we
are proposing to adjust the standard Federal prospective payment system
rate by the LTC-DRG relative weights in determining payment to LTCHs
for each case.
In this proposed payment system, relative weights for each LTC-DRG
would be a primary element used to account for the variations in cost
per discharge and resource utilization among the payment groups
(proposed Sec. 412.515). To ensure that Medicare patients classified to
each proposed LTC-DRG would have access to an appropriate level of
services and to encourage efficiency, we are proposing to calculate a
relative weight for each LTC-DRG that represents the resources needed
by an average inpatient LTCH case in that LTC-DRG. For example, cases
in a LTC-DRG with a relative weight of 2 would, on average, cost twice
as much as cases in a LTC-DRG with a weight of 1.
To calculate the proposed relative weights, we obtained charges
from FY 2000 Medicare bill data in the June 2001 update of the MedPAR
and we used version 18.0 of the CMS GROUPER (used under the hospital
inpatient prospective payment system for FY 2001). In the final rule,
we would recalculate the relative weights based on the most recent
MedPAR data and version 19.0 of the CMS GROUPER (used under the
hospital inpatient prospective payment system for FY 2002). By nature
LTCHs often specialize in certain areas, such as ventilator-dependent
patients and rehabilitation and wound care. Some case types (DRGs) may
be treated, to a large extent, in hospitals that have, from a
perspective of charges, relatively high (or low) charges. Such
nonarbitrary distribution of cases with relatively high (or low)
charges in specific LTC-DRGs has the potential to inappropriately
distort the measure of average charges. To account for the fact that
cases may not be randomly distributed across LTCHs, we are proposing to
use a hospital-specific relative value method to calculate relative
weights. We believe this method would remove this hospital-specific
source of bias in measuring average charges. Specifically, we would
reduce the impact of the variation in charges across providers on any
particular LTC-DRG relative weight by converting each LTCH's charge for
a case to a relative value based on that LTCH's average charge. As
MedPAC noted in its June 2000 Report to Congress, the hospital-specific
relative value method eliminates distortion in the weights due to
systematic differences among hospitals in the level of charge markups
or costs (p. 58). The case-mix index is the average case weight
(adjusted to eliminate the effect of short-stay outliers that are
described in section IV.B.2. of this preamble) for cases at each LTCH.
Under the hospital-specific relative value method, we would
standardize charges for each LTCH by converting its charges for each
case to hospital-specific relative charge values and then adjusting
those values for the LTCH's case-mix. The adjustment for case-mix is
needed to rescale the hospital-specific relative charge values (which
average 1.0 for each LTCH by definition). The average relative weight
for a LTCH is its case-mix, so it is reasonable to scale each LTCH's
average relative charge value by its case-mix. In this way, each LTCH's
relative charge values will be adjusted by its case-mix to an average
that reflects the complexity of the cases it treats relative to the
complexity of the cases treated by all other LTCHs (the average case-
mix of all LTCHs).
We would standardize charges for each case by first dividing the
adjusted charge for the case (adjusted for short-stay outliers as
described in section IV.B.2. of this proposed rule) by the average
adjusted charge for all cases at the LTCH in which the case was
treated. The average adjusted charge would reflect the average
intensity of the health care services delivered by a particular LTCH
and the average cost level of that LTCH. The resulting ratio would be
multiplied by that LTCH's case-mix index to determine the standardized
charge for the case.
Multiplying by the LTCH's case-mix index accounts for the fact that
the same relative charges are given greater weight in a hospital with
higher average costs than they would at a LTCH with low average costs
in order to adjust each LTCH's relative charge value to reflect its
case-mix relative to the average case-mix for all LTCHs. Because we are
proposing to standardize charges in this manner, we would count charges
for a Medicare patient at a LTCH with high average charges as less
resource intensive than they would be at a LTCH with low average
charges. For example, a $10,000 charge for a case in a LTCH with an
average adjusted charge of $17,500 reflects a higher level of relative
resource use than a $10,000 charge for a case in a LTCH with the same
case-mix, but an average adjusted charge of $35,000. We believe that
the adjusted charge of an individual case would more accurately reflect
actual resource use for an individual LTCH because the variation in
charges due to systematic differences in the markup of charges among
LTCHs is taken into account.
[[Page 13438]]
As explained in section III. of this proposed rule, we would group
cases with a 7-day or fewer length of stay (very short-stay discharges
under proposed Sec. 412.527 described in section IV.B.1. of this
preamble) into one of two proposed groups. We are proposing that
discharges with a 7-day or fewer length of stay that would otherwise be
grouped into DRGs 424 through 432 in MDC 19 (Mental Diseases and
Disorders) or DRGs 433 through 437 in MDC 20 (Alcohol/Drug Use and
Alcohol/Drug Induced Organic Mental Disorders) would be grouped into a
proposed psychiatric very short-stay discharge group. All other very
short-stay discharges would be grouped into the second very short-stay
discharge, nonpsychiatric group. Each of these very short-stay
discharge groups would have its own relative weight and an average
length of stay computed using the same methodology used to determine
the relative weights for the ``regular'' (length of stay greater than 7
days) LTC-DRGs.
In addition, in order to account for LTC-DRGs with low volume (that
is, with fewer than 25 LTCH cases), we would group those low volume
LTC-DRGs into one of five categories (quintiles) based on average
charges, for the purposes of determining relative weights. Using LTCH
cases from the June 2001 update of the FY 2000 MedPAR, we identified
188 LTC-DRGs that contained between 1 and 24 cases. This list of LTC-
DRGs was then divided into one of the five low volume quintiles, each
containing a minimum of 37 LTC-DRGs (188/5 = 37 with 3 LTC-DRGs as a
remainder). We made an assignment to a specific quintile by sorting the
188 low volume DRGs in ascending order by average charge. Since the
number of LTC-DRGs with less than 25 LTCH cases is not evenly divisible
by five, the average charge of the low volume LTC-DRG was used to
determine which quintiles received an additional LTC-DRG. After sorting
the 188 volume LTC-DRGs in ascending order, the first fifth of low
volume (37) LTC-DRGs with the lowest average charge are grouped into
Quintile 1. Since the average charge of the next LTC-DRG (38th in the
sorted list) is closer to the previous LTC-DRG's average charge
(assigned to Quintile 1) than to the average charge of the 39th LTC-DRG
on the sorted list (to be assigned to Quintile 2), it is placed into
Quintile 1. This process was repeated through the remaining low volume
LTC-DRGs so that 3 quintiles contained 38 LTC-DRGs and 2 quintiles
contained 37 LTC-DRGs. The highest average charge cases would be
grouped into Quintile 5. In order to determine the proposed relative
weights for the 188 LTC-DRGs with low volume, we used the five low
volume quintiles described above. The composition of each of the five
low volume quintiles shown below in Table 2 would be used in
determining the proposed LTC-DRG relative weights. We would determine a
proposed relative weight and average length of stay for each of the
proposed five low volume quintiles using the formula applied to the
regular LTC-DRGs (25 or more cases), as described in section IV.A.2 of
this proposed rule. We would assign the same relative weight and
average length of stay to each of the proposed LTC-DRGs that make up
that proposed low volume quintile. We note that as this proposed system
is dynamic, it is entirely possible that the number and specific type
of LTC-DRGs with a low volume of LTCH cases would vary in the future.
We would use the best available claims data in the MedPAR to identify
low volume LTC-DRGs and to calculate the relative weights based on our
proposed methodology.
Table 2.--Composition of Proposed Low Volume Quintiles
------------------------------------------------------------------------
LTC-DRG Description
------------------------------------------------------------------------
Proposed Quintile 1
------------------------------------------------------------------------
45.................................. NEUROLOGICAL EYE DISORDERS
47.................................. OTHER DISORDERS OF THE EYE AGE >17
W/O CC
53.................................. SINUS & MASTOID PROCEDURES AGE >17
55.................................. MISCELLANEOUS EAR, NOSE, MOUTH &
THROAT PROCEDURES
69.................................. OTITIS MEDIA & URI AGE >17 W/O CC
149................................. MAJOR SMALL & LARGE BOWEL
PROCEDURES W/O CC
158................................. ANAL & STOMAL PROCEDURES W/O CC
160................................. HERNIA PROCEDURES EXCEPT INGUINAL
& FEMORAL AGE >17 W/O CC
161................................. INGUINAL & FEMORAL HERNIA
PROCEDURES AGE >17 W CC
171................................. OTHER DIGESTIVE SYSTEM O.R.
PROCEDURES W/O CC
178................................. UNCOMPLICATED PEPTIC ULCER W/O CC
219................................. LOWER EXTREM & HUMER PROC EXCEPT
HIP, FOOT, FEMUR AGE >17 W/O CC
252................................. FX, SPRN, STRN & DISL OF FOREARM,
HAND, FOOT AGE 0-17
257................................. TOTAL MASTECTOMY FOR MALIGNANCY W
CC
258................................. TOTAL MASTECTOMY FOR MALIGNANCY W/
O CC
282................................. TRAUMA TO THE SKIN, SUBCUT TISS &
BREAST AGE 0-17
290................................. THYROID PROCEDURES
295................................. DIABETES AGE 0-35
299................................. INBORN ERRORS OF METABOLISM
305................................. KIDNEY, URETER & MAJOR BLADDER
PROC FOR NON-NEOPL W/O CC
307................................. PROSTATECTOMY W/O CC
326................................. KIDNEY & URINARY TRACT SIGNS &
SYMPTOMS AGE >17 W/O CC
336................................. TRANSURETHRAL PROSTATECTOMY W CC
337................................. TRANSURETHRAL PROSTATECTOMY W/O CC
344................................. OTHER MALE REPRODUCTIVE SYSTEM
O.R. PROCEDURES FOR MALIGNANCY
353................................. PELVIC EVISCERATION, RADICAL
HYSTERECTOMY & RADICAL VULVECTOMY
355................................. UTERINE, ADNEXA PROC FOR NON-
OVARIAN/ADNEXAL MALIG W/O CC
356................................. FEMALE REPRODUCTIVE SYSTEM
RECONSTRUCTIVE PROCEDURES
358................................. UTERINE & ADNEXA PROC FOR NON-
MALIGNANCY W CC
359................................. UTERINE & ADNEXA PROC FOR NON-
MALIGNANCY W/O CC
396................................. RED BLOOD CELL DISORDERS AGE 0-17
419**............................... FEVER OF UNKNOWN ORIGIN AGE >17 W
CC
436................................. ALC/DRUG DEPENDENCE W
REHABILITATION THERAPY
[[Page 13439]]
437................................. ALC/DRUG DEPENDENCE, COMBINED
REHAB & DETOX THERAPY
447................................. ALLERGIC REACTIONS AGE >17
450................................. POISONING & TOXIC EFFECTS OF DRUGS
AGE >17 W/O CC
467................................. OTHER FACTORS INFLUENCING HEALTH
STATUS
494................................. LAPAROSCOPIC CHOLECYSTECTOMY W/O
C.D.E. W/O CC
------------------------------------------------------------------------
Proposed Quintile 2
------------------------------------------------------------------------
21.................................. VIRAL MENINGITIS
46.................................. OTHER DISORDERS OF THE EYE AGE >17
W CC
74.................................. OTHER EAR, NOSE, MOUTH & THROAT
DIAGNOSES AGE 0-17
95.................................. PNEUMOTHORAX W/O CC
117................................. CARDIAC PACEMAKER REVISION EXCEPT
DEVICE REPLACEMENT
124**............................... CIRCULATORY DISORDERS EXCEPT AMI,
W CARD CATH & COMPLEX DIAG
128................................. DEEP VEIN THROMBOPHLEBITIS
129................................. CARDIAC ARREST, UNEXPLAINED
206................................. DISORDERS OF LIVER EXCEPT MALIG,
CIRR, ALC HEPA W/O CC
208................................. DISORDERS OF THE BILIARY TRACT W/O
CC
211................................. HIP & FEMUR PROCEDURES EXCEPT
MAJOR JOINT AGE >17 W/O CC
224................................. SHOULDER, ELBOW OR FOREARM PROC,
EXC MAJOR JOINT PROC, W/O CC
232................................. ARTHROSCOPY
273................................. MAJOR SKIN DISORDERS W/O CC
276................................. NON-MALIGANT BREAST DISORDERS
284................................. MINOR SKIN DISORDERS W/O CC
288................................. O.R. PROCEDURES FOR OBESITY
301................................. ENDOCRINE DISORDERS W/O CC
306................................. PROSTATECTOMY W CC
309................................. MINOR BLADDER PROCEDURES W/O CC
311................................. TRANSURETHRAL PROCEDURES W/O CC
324................................. URINARY STONES W/O CC
328................................. URETHRAL STRICTURE AGE >17 W CC
338................................. TESTES PROCEDURES, FOR MALIGNANCY
347................................. MALIGNANCY, MALE REPRODUCTIVE
SYSTEM, W/O CC
348................................. BENIGN PROSTATIC HYPERTROPHY W CC
349*................................ BENIGN PROSTATIC HYPERTROPHY W/O
CC
360................................. VAGINA, CERVIX & VULVA PROCEDURES
369................................. MENSTRUAL & OTHER FEMALE
REPRODUCTIVE SYSTEM DISORDERS
399................................. RETICULOENDOTHELIAL & IMMUNITY
DISORDERS W/O CC
408................................. MYELOPROLIF DISORD OR POORLY DIFF
NEOPL W OTHER O.R. PROC
419*................................ FEVER OF UNKNOWN ORIGIN AGE >17 W
CC
420................................. FEVER OF UNKNOWN ORIGIN AGE >17 W/
O CC
449................................. POISONING & TOXIC EFFECTS OF DRUGS
AGE >17 W CC
454................................. OTHER INJURY, POISONING & TOXIC
EFFECT DIAG W CC
455................................. OTHER INJURY, POISONING & TOXIC
EFFECT DIAG W/O CC
465................................. AFTERCARE W HISTORY OF MALIGNANCY
AS SECONDARY DIAGNOSIS
507................................. FULL THICKNESS BURN W SKIN GRFT OR
INHAL INJ W/O CC OR SIG TRAUMA
509................................. FULL THICKNESS BURN W/O SKIN GRFT
OR INH INJ W/O CC OR SIG TRAUMA
511................................. NON-EXTENSIVE BURNS W/O CC OR
SIGNIFICANT TRAUMA
------------------------------------------------------------------------
Proposed Quintile 3
------------------------------------------------------------------------
4................................... SPINAL PROCEDURES
8................................... PERIPH & CRANIAL NERVE & OTHER
NERV SYST PROC W/O CC
22.................................. HYPERTENSIVE ENCEPHALOPATHY
32.................................. CONCUSSION AGE >17 W/O CC
66.................................. EPISTAXIS
81.................................. RESPIRATORY INFECTIONS &
INFLAMMATIONS AGE 0-17
84.................................. MAJOR CHEST TRAUMA W/O CC
157................................. ANAL & STOMAL PROCEDURES W CC
177................................. UNCOMPLICATED PEPTIC ULCER W CC
197................................. CHOLECYSTECTOMY EXCEPT BY
LAPAROSCOPE W/O C.D.E. W CC
216................................. BIOPSIES OF MUSCULOSKELETAL SYSTEM
& CONNECTIVE TISSUE
225................................. FOOT PROCEDURES
228................................. MAJOR THUMB OR JOINT PROC, OR OTH
HAND OR WRIST PROC W CC
229................................. HAND OR WRIST PROC, EXCEPT MAJOR
JOINT PROC, W/O CC
255................................. FX, SPRN, STRN & DISL OF UPARM,
LOWLEG EX FOOT AGE 0-17
261................................. BREAST PROC FOR NON-MALIGNANCY
EXCEPT BIOPSY & LOCAL EXCISION
279................................. CELLULITIS AGE 0-17
298................................. NUTRITIONAL & MISC METABOLIC
DISORDERS AGE 0-17
304................................. KIDNEY, URETER & MAJOR BLADDER
PROC FOR NON-NEOPL W CC
308................................. MINOR BLADDER PROCEDURES W CC
319................................. KIDNEY & URINARY TRACT NEOPLASMS W/
O CC
[[Page 13440]]
322................................. KIDNEY & URINARY TRACT INFECTIONS
AGE 0-17
323................................. URINARY STONES W CC, &/OR ESW
LITHOTRIPSY
341................................. PENIS PROCEDURES
349**............................... BENIGN PROSTATIC HYPERTROPHY W/O
CC
368................................. INFECTIONS, FEMALE REPRODUCTIVE
SYSTEM
385................................. NEONATES, DIED OR TRANSFERRED TO
ANOTHER ACUTE CARE FACILITY
390................................. NEONATE W OTHER SIGNIFICANT
PROBLEMS
401................................. LYMPHOMA & NON-ACUTE LEUKEMIA W
OTHER O.R. PROC W CC
409................................. RADIOTHERAPY
421................................. VIRAL ILLNESS AGE >17
427................................. NEUROSES EXCEPT DEPRESSIVE
432................................. OTHER MENTAL DISORDER DIAGNOSES
493................................. LAPAROSCOPIC CHOLECYSTECTOMY W/O
C.D.E. W CC
497................................. SPINAL FUSION W CC
508................................. FULL THICKNESS BURN W/O SKIN GRFT
OR INHAL INJ W CC OR SIG TRAUMA
510................................. NON-EXTENSIVE BURNS W CC OR
SIGNIFICANT TRAUMA
------------------------------------------------------------------------
Proposed Quintile 4
------------------------------------------------------------------------
1................................... CRANIOTOMY AGE >17 EXCEPT FOR
TRAUMA
5................................... EXTRACRANIAL VASCULAR PROCEDURES
91.................................. SIMPLE PNEUMONIA & PLEURISY AGE 0-
17
104................................. CARDIAC VALVE & OTHER MAJOR
CARDIOTHORACIC PROC W CARDIAC
CATH
105................................. CARDIAC VALVE & OTHER MAJOR
CARDIOTHORACIC PROC W/O CARDIAC
CATH
110................................. MAJOR CARDIOVASCULAR PROCEDURES W
CC
115................................. PRM CARD PACEM IMPL W AMI, HRT
FAIL OR SHK, OR AICD LEAD OR
GNRTR P
118................................. CARDIAC PACEMAKER DEVICE
REPLACEMENT
124*................................ CIRCULATORY DISORDERS EXCEPT AMI,
W CARD CATH & COMPLEX DIAG
125*................................ CIRCULATORY DISORDERS EXCEPT AMI,
W CARD CATH W/O COMPLEX DIAG
148................................. MAJOR SMALL & LARGE BOWEL
PROCEDURES W CC
150................................. PERITONEAL ADHESIOLYSIS W CC
159................................. HERNIA PROCEDURES EXCEPT INGUINAL
& FEMORAL AGE >17 W CC
184................................. ESOPHAGITIS, GASTROENT & MISC
DIGEST DISORDERS AGE 0-17
185................................. DENTAL & ORAL DIS EXCEPT
EXTRACTIONS & RESTORATIONS, AGE
>17
191................................. PANCREAS, LIVER & SHUNT PROCEDURES
W CC
210................................. HIP & FEMUR PROCEDURES EXCEPT
MAJOR JOINT AGE >17 W CC
218................................. LOWER EXTREM & HUMER PROC EXCEPT
HIP, FOOT, FEMUR AGE >17 W CC
223................................. MAJOR SHOULDER/ELBOW PROC, OR
OTHER UPPER EXTREMITY PROC W CC
231................................. LOCAL EXCISION & REMOVAL OF INT
FIX DEVICES EXCEPT HIP & FEMUR
285................................. AMPUTAT OF LOWER LIMB FOR
ENDOCRINE, NUTRIT, & METABOL
DISORDERS
292................................. OTHER ENDOCRINE, NUTRIT & METAB
O.R. PROC W CC
293*................................ OTHER ENDOCRINE, NUTRIT & METAB
O.R. PROC W/O CC
310................................. TRANSURETHRAL PROCEDURES W CC
312................................. URETHRAL PROCEDURES, AGE >17 W CC
350................................. INFLAMMATION OF THE MALE
REPRODUCTIVE SYSTEM
352................................. OTHER MALE REPRODUCTIVE SYSTEM
DIAGNOSES
363................................. D&C, CONIZATION & RADIO-IMPLANT,
FOR MALIGNANCY
400................................. LYMPHOMA & LEUKEMIA W MAJOR O.R.
PROCEDURE
410................................. CHEMOTHERAPY W/O ACUTE LEUKEMIA AS
SECONDARY DIAGNOSIS
424................................. O.R. PROCEDURE W PRINCIPAL
DIAGNOSES OF MENTAL ILLNESS
439................................. SKIN GRAFTS FOR INJURIES
443................................. OTHER O.R. PROCEDURES FOR INJURIES
W/O CC
482................................. TRACHEOSTOMY FOR FACE, MOUTH &
NECK DIAGNOSES
492................................. CHEMOTHERAPY W ACUTE LEUKEMIA AS
SECONDARY DIAGNOSIS
500................................. BACK & NECK PROCEDURES EXCEPT
SPINAL FUSION W/O CC
503................................. KNEE PROCEDURES W/O PDX OF
INFECTION
504................................. EXTENSIVE 3RD DEGREE BURNS W SKIN
GRAFT
505................................. EXTENSIVE 3RD DEGREE BURNS W/O
SKIN GRAFT
506................................. FULL THICKNESS BURN W SKIN GRAFT
OR INHAL INJ W CC OR SIG TRAUMA
------------------------------------------------------------------------
Proposed Quintile 5
------------------------------------------------------------------------
2................................... CRANIOTOMY FOR TRAUMA AGE >17
31.................................. CONCUSSION AGE >17 W CC
44.................................. ACUTE MAJOR EYE INFECTIONS
63.................................. OTHER EAR, NOSE, MOUTH & THROAT
O.R. PROCEDURES
75.................................. MAJOR CHEST PROCEDURES
77.................................. OTHER RESP SYSTEM O.R. PROCEDURES
W/O CC
112................................. PERCUTANEOUS CARDIOVASCULAR
PROCEDURES
116................................. OTH PERM CARD PACEMAK IMPL OR PTCA
W CORONARY ARTERY STENT IMPLNT
125**............................... CIRCULATORY DISORDERS EXCEPT AMI,
W CARD CATH W/O COMPLEX DIAG
152................................. MINOR SMALL & LARGE BOWEL
PROCEDURES W CC
[[Page 13441]]
154................................. STOMACH, ESOPHAGEAL & DUODENAL
PROCEDURES AGE >17 W CC
155................................. STOMACH, ESOPHAGEAL & DUODENAL
PROCEDURES AGE >17 W/O CC
193................................. BILIARY TRACT PROC EXCEPT ONLY
CHOLECYST W OR W/O C.D.E. W CC
199................................. HEPATOBILIARY DIAGNOSTIC PROCEDURE
FOR MALIGNANCY
201................................. OTHER HEPATOBILIARY OR PANCREAS
O.R. PROCEDURES
209................................. MAJOR JOINT & LIMB REATTACHMENT
PROCEDURES OF LOWER EXTREMITY
226................................. SOFT TISSUE PROCEDURES W CC
227................................. SOFT TISSUE PROCEDURES W/O CC
230................................. LOCAL EXCISION & REMOVAL OF INT
FIX DEVICES OF HIP & FEMUR
233................................. OTHER MUSCULOSKELET SYS & CONN
TISS O.R. PROC W CC
265................................. SKIN GRAFT &/OR DEBRID EXCEPT FOR
SKIN ULCER OR CELLULITIS W CC
266................................. SKIN GRAFT &/OR DEBRID EXCEPT FOR
SKIN ULCER OR CELLULITIS W/O CC
267................................. PERIANAL & PILONIDAL PROCEDURES
268................................. SKIN, SUBCUTANEOUS TISSUE & BREAST
PLASTIC PROCEDURES
293**............................... OTHER ENDOCRINE, NUTRIT & METAB
O.R. PROC W/O CC
303................................. KIDNEY, URETER & MAJOR BLADDER
PROCEDURES FOR NEOPLASM
333................................. OTHER KIDNEY & URINARY TRACT
DIAGNOSES AGE 0-17
339................................. TESTES PROCEDURES, NON-MALIGNANCY
AGE >17
345................................. OTHER MALE REPRODUCTIVE SYSTEM
O.R. PROC EXCEPT FOR MALIGNANCY
365................................. OTHER FEMALE REPRODUCTIVE SYSTEM
O.R. PROCEDURES
394................................. OTHER O.R. PROCEDURES OF THE BLOOD
AND BLOOD FORMING ORGANS
406................................. MYELOPROLIF DISORD OR POORLY DIFF
NEOPL W MAJ O.R. PROC W CC
417................................. SEPTICEMIA AGE 0-17
479***.............................. OTHER VASCULAR PROCEDURES W/O CC
486................................. OTHER O.R. PROCEDURES FOR MULTIPLE
SIGNIFICANT TRAUMA
488................................. HIV W EXTENSIVE O.R. PROCEDURE
499................................. BACK & NECK PROCEDURES EXCEPT
SPINAL FUSION W CC
501................................. KNEE PROCEDURES W PDX OF INFECTION
W CC
------------------------------------------------------------------------
*One of the original 188 low volume LTC-DRGs initially assigned to a
different low volume quintile; reassigned to this low volume quintile
in addressing nonmonotonicity (see step 4 below).
**One of the original 188 low volume LTC-DRGs initially assigned to this
low volume quintile; reassigned to a different low volume quintile in
addressing nonmonotonicity (see step 4 below).
***One of the original 188 low volume LTC-DRGs initially assigned to
this low volume quintile; removed from the low volume quintiles in
addressing nonmonotonicity (see step 4 below).
After grouping the cases in the appropriate proposed LTC-DRG, we
calculate the proposed relative weights in this proposed rule by first
adjusting the number of cases in each LTC-DRG for the effect of short-
stay outlier cases under proposed Sec. 412.529. The short-stay adjusted
discharges and corresponding charges would be used to calculate
proposed ``relative adjusted weights'' in each LTC-DRG using the
hospital-specific relative value method described above. We describe
each of these steps in greater detail below.
2. Steps for Calculating the Proposed Relative Weights
Step 1--Adjust charges for the effects of short-stay outliers. The
first step in the calculation of the relative weights is to adjust each
LTCH's charges per discharge for short-stay outlier cases (that is, a
patient with a length of stay in excess of 7 days, but below two-thirds
the average length of stay of the LTC-DRG as described in section
IV.B.2. of this proposed rule).
We would make this adjustment by counting a short-stay outlier as a
fraction of a discharge based on the ratio of the length of stay of the
case to the average length of stay for the LTC-DRG for nonshort-stay
outlier cases. This would have the effect of proportionately reducing
the impact of the lower charges for the short-stay outlier cases in
calculating the average charge for the LTC-DRG. This process produces
the same result as if the actual charges per discharge of a short-stay
outlier case would be adjusted to what they would have been had the
patient's length of stay been equal to the average length of stay of
the LTC-DRG.
Counting short-stay outlier cases as full discharges with no
adjustment in determining the relative weights would lower the relative
weight for affected LTC-DRGs because the relatively lower charges of
the short-stay outlier cases bring down the average charge for all
cases within a LTC-DRG. This would result in an ``underpayment'' to
nonshort-stay outlier cases and an ``overpayment'' to short-stay
outlier cases. Therefore, adjusting for short-stay outlier cases in
this manner would result in more appropriate payments for all LTCH
cases. The result of step 1 is that each LTCH's average cost per
discharge is adjusted for short-stay outliers (as described above)
before removing statistical outliers (step 2) and calculating the LTC-
DRG relative weights on an iterative basis (step 3) using the hospital-
specific relative value method.
Step 2--Remove statistical outliers. We are proposing to define
statistical outliers as cases that are outside of 3.0 standard
deviations from the mean of the log distribution of both charges per
case and the charges per day for each proposed LTC-DRG. After adjusting
each LTCH's discharges for short-stay outlier cases (see step 1), these
statistical outliers would be removed prior to calculating the proposed
relative weights. We believe that they may represent aberrations in the
data that would distort the measure of average resource use. Including
those cases in the calculation of the relative weights could result in
an inaccurate weight that does not truly reflect relative resource use
among the proposed LTC-DRGs. Thus, removing statistical outliers would
result in more appropriate payments. These adjusted charges per
discharge for each proposed LTC-DRG are then used to calculate the
average adjusted charge of all cases at the LTCH in determining the
proposed relative weight for the proposed LTC-DRGs.
[[Page 13442]]
Step 3--Calculate the LTC-DRG relative weights on an iterative
basis. The process of calculating the LTC-DRG relative weights would be
iterative. First, for each case, we would calculate a hospital-specific
relative charge value by dividing the short-stay outlier adjusted
charge per discharge (see step 1) of the case (after removing the
statistical outlier (see step 2)) by the average charge per discharge
for the LTCH in which the case occurred. The resulting ratio is then
multiplied by the LTCH's case-mix index to produce an adjusted
hospital-specific relative charge value for the case. An initial case-
mix index value of 1.0 is used for each LTCH.
For each LTC-DRG, the proposed LTC-DRG relative weight would then
be calculated by dividing the average of the adjusted hospital-specific
relative charge values (from above) for the LTC-DRG by the overall
average hospital-specific relative charge value across all cases for
all LTCHs. Using these recalculated LTC-DRG relative weights, each
LTCH's average relative weight for all of its cases (case-mix) would be
calculated by dividing the sum of all the LTCH's LTC-DRG relative
weights by its total number of cases. The LTCHs' hospital-specific
relative charge values above would be multiplied by these hospital
specific case-mix indexes. These hospital-specific case-mix adjusted
relative charge values are then used to calculate a new set of LTC-DRG
relative weights across all LTCHs. This iterative process would be
continued until there is convergence between the weights produced at
adjacent steps, for example, when the maximum difference is less than
0.0001.
Step 4--Adjust the LTC-DRG relative weights to account for
nonmonotonically increasing relative weights. As explained in section
III.C. of this proposed rule, the proposed LTC-DRGs would contain
``pairs'' that are differentiated based on the presence or absence of
CCs. Proposed LTC-DRGs with CCs are defined by certain secondary
diagnoses not related to or inherently a part of the disease process
identified by the principal diagnosis, but the presence of additional
diagnoses does not automatically generate a CC. The value of
monotonically increasing relative weights rises as the resource use
increases (for example, from uncomplicated to more complicated). The
presence of CCs in a LTC-DRG means that cases classified into a
``without CC'' LTC-DRG are expected to have lower resource use (and
lower costs). In other words, resource use (and costs) are expected to
decrease across ``with CC''/``without CC'' pairs of LTC-DRGs. For a
case to be assigned to a proposed LTC-DRG with CCs, more coded
information is called for (that is, at least one relevant secondary
diagnosis), than for a case to be assigned to a proposed LTC-DRG
without CCs (which is based on only one primary diagnosis and no
relevant secondary diagnoses). Currently, the database includes both
accurately coded cases without complications and cases that have
complications (and cost more) but were not coded completely. Both types
of cases would be grouped to a proposed LTC-DRG ``without CCs'' since
only one primary diagnosis was coded. Since LTCHs are currently paid
under cost-based reimbursement, which is not based on patient
diagnoses, LTCHs' coding for these cases may not have been as detailed
as possible.
Thus, in developing the proposed relative weights for the LTCH
prospective payment system, we found on occasion that the data
suggested that cases classified to the proposed LTC-DRG ``with CCs'' of
a ``with CC''/``without CC'' pair had a lower average charge than the
corresponding proposed LTC-DRG ``without CCs.'' We believe this anomaly
may be due to coding that may not have fully reflected all
comorbidities that were present. Specifically, LTCHs may have failed to
code relevant secondary diagnoses, which resulted in cases that
actually had complications and comorbidities being classified into a
``without CC'' LTC-DRG. It would not make sense to pay a lower amount
for the ``with CC'' LTC-DRG, so we are proposing to group both the
cases ``with CCs'' and ``without CCs'' together for the purpose of
calculating the proposed relative weights for the proposed LTC-DRGs
until we have adequate data to calculate appropriate separate weights
for these anomalous DRG pairs. We expect that, as was the case when we
first implemented the acute care hospital inpatient prospective payment
system, this problem will be self-correcting, as LTCHs submit more
completely coded data in the future.
Using the LTCH cases in the June 2001 update of the FY 2000 MedPAR,
we identified three types of ``with CC'' and ``without CC'' pairs of
proposed LTC-DRGs that are nonmonotonic, that is, where the ``without
CC'' LTC-DRG would have a higher average charge than the ``with CC''
LTC-DRG.
The first category of nonmonotonically increasing relative weights
for LTC-DRG pairs ``with and without CCs'' contains 5 pairs of LTC-DRGs
in which both the LTC-DRG ``with CCs'' and the LTC-DRG ``without CCs''
had 25 or more LTCH cases and, therefore, did not fall into one of the
5 quintiles. For each pair of LTC-DRGs, we would combine the cases and
compute a new relative weight based on the case-weighted average of the
combined cases of the LTC-DRGs. The case-weighted average charge would
be determined by dividing the total charges for all cases by the total
number of cases for the combined LTC-DRG. This new relative weight
would be assigned to both of the LTC-DRGs in the pair. For the proposed
FY 2003 implementation of the LTCH prospective payment system, the
following proposed LTC-DRGs would be in this category: LTC-DRGs 10 and
11, 89 and 90, 138 and 139, 141 and 142, and 274 and 275.
The second category of nonmonotonically increasing relative weights
for proposed LTC-DRG pairs with and without CCs consists of 4 pairs of
LTC-DRGs that have fewer than 25 cases and are both grouped to
different quintiles in which the ``without CC'' LTC-DRG would be in a
higher-weighted quintile than the ``with CC'' LTC-DRG. For each pair,
we would combine the cases and determine the case-weighted average
charge for all cases. The case-weighted average charge would be
determined by dividing the total charges for all cases by the total
number of cases for the combined LTC-DRG. Based on the case-weighted
average charge, we determined which quintile the ``combined LTC-DRG''
would be grouped. Both LTC-DRGs in the pair would then be grouped into
the same quintile, and thus have the same proposed relative weight. For
the proposed FY 2003 implementation of the LTCH prospective payment
system, the following proposed LTC-DRGs would be in this category: 124
and 125 (low volume quintile 4), 292 and 293 (low volume quintile 4),
348 and 349 (low volume quintile 2), and 419 and 420 (low volume
quintile 2).
The third category of nonmonotonically increasing relative weights
for proposed LTC-DRG pairs with and without CCs has one pair of LTC-
DRGs where one of the LTC-DRGs has fewer than 25 LTCH cases and is
grouped to a quintile and the other LTC-DRG has 25 or more LTCH cases
and would have its own LTC-DRG weight, and the LTC-DRG ``without CCs''
would have the higher weight. We would remove the low volume pair LTC-
DRG from the quintile and combine it with the other pair LTC-DRG for
the computation of a new relative weight for each of these LTC-DRGs.
This proposed new relative weight would be assigned to both LTC-DRGs,
so they would each have the same relative weight. For the proposed FY
[[Page 13443]]
2003 implementation of the LTCH prospective payment system, proposed
LTC-DRGs 478 and 479 would be in this category.
In addition, for the FY 2003 implementation of the LTCH prospective
payment system, we are proposing to determine the relative weight for
each LTC-DRG using charges reported on the June 2001 update of the FY
2000 MedPAR. Of the proposed 501 LTC-DRGs in the proposed CMS LTCH
prospective payment system, we identified 111 LTC-DRGs for which there
were no LTCH cases in the database. That is, based on the FY 2000
MedPAR, no patients who would have been classified to those DRGs were
treated in LTCHs during FY 2000 and, therefore, no charge data were
reported for those DRGs. Thus, in the process of determining the
relative weights of proposed LTC-DRGs, we were unable to determine
weights for these 111 LTC-DRGs using the method described above.
However, since patients with a number of the diagnoses under these LTC-
DRGs may be treated at LTCHs beginning in FY 2003 when the LTCH
prospective payment system would be implemented, we are proposing to
assign relative weights to each of the 111 ``no volume'' LTC-DRGs based
on clinical similarity and relative costliness to one of the remaining
390 (501 - 111 = 390) LTC-DRGs for which we are able to determine
relative weights, based on FY 2000 charge data.
As there are currently no LTCH cases in these ``no volume'' LTC-
DRGs, we are proposing to establish relative weights for the 111 LTC-
DRGs with no LTCH cases in the FY 2000 MedPAR by grouping them to the
appropriate low volume quintile. This methodology would be consistent
with our methodology used in determining relative weights to account
for low volume LTC-DRGs described above.
Our proposed methodology for determining relative weights for the
``no volume'' LTC-DRGs is as follows: First, we would cross-walk the no
volume LTC-DRGs by matching them to other similar LTC-DRGs for which
there were LTCH cases in the FY 2000 MedPAR based on clinical
similarity and intensity of use of resources as determined by care
provided during the period of time surrounding surgery, surgical
approach (if applicable), length of time of surgical procedure, post-
operative care, and length of stay. We would assign the weight for the
applicable quintile to the no volume LTC-DRG if the LTC-DRG to which it
would be cross-walked was grouped to one of the low volume quintiles.
If the LTC-DRG to which the no volume LTC-DRG would be cross-walked was
not one of the LTC-DRGs grouped to one of the low volume quintiles, we
would compare the weight of the LTC-DRG to which the no volume LTC-DRG
would be cross-walked to the weights of each of the five quintiles and
assign the no volume LTC-DRG the relative weight of the quintile with
the closest weight. A list of the proposed no volume LTC-DRGs and the
LTC-DRG to which it would be crosswalked in order to determine the
appropriate low volume quintile for the assignment of a relative weight
is shown below in Table 3.
Table 3.--Proposed No Volume LTC-DRG Crosswalk and Proposed Quintile
Assignment \1\
------------------------------------------------------------------------
Cross-
LTC-DRG Description walked LTC- Low volume
DRG quintile assigned
------------------------------------------------------------------------
3.................. CRANIOTOMY AGE 0- 1 Quintile 4.
17.
6.................. CARPAL TUNNEL 8 Quintile 3.
RELEASE.
26................. SEIZURE & HEADACHE 25 Quintile 2.
AGE 0-17.
30................. TRAUMATIC STUPOR & 29 Quintile 3.
COMA, COMA 1 HR
AGE 0-17.
33................. CONCUSSION AGE 0- 32 Quintile 3.
17.
36................. RETINAL PROCEDURES 47 Quintile 1.
37................. ORBITAL PROCEDURES 47 Quintile 1.
38................. PRIMARY IRIS 47 Quintile 1.
PROCEDURES.
39................. LENS PROCEDURES 47 Quintile 1.
WITH OR WITHOUT
VITRECTOMY.
40................. EXTRAOCULAR 47 Quintile 1.
PROCEDURES EXCEPT
ORBIT AGE >17.
41................. EXTRAOCULAR 47 Quintile 1.
PROCEDURES EXCEPT
ORBIT AGE 0-17.
42................. INTRAOCULAR 47 Quintile 1.
PROCEDURES EXCEPT
RETINA, IRIS &
LENS.
43................. HYPHEMA........... 47 Quintile 1.
48................. OTHER DISORDERS OF 47 Quintile 1.
THE EYE AGE 0-17.
49................. MAJOR HEAD & NECK 73 Quintile 3.
PROCEDURES.
50................. SIALOADENECTOMY... 73 Quintile 3.
51................. SALIVARY GLAND 73 Quintile 3.
PROCEDURES EXCEPT
SIALOADENECTOMY.
52................. CLEFT LIP & PALATE 53 Quintile 1.
REPAIR.
56................. RHINOPLASTY....... 55 Quintile 1.
57................. T&A PROC, EXCEPT 55 Quintile 1.
TONSILLECTOMY &/
OR ADENOIDECTOMY
ONLY, AGE >17.
58................. T&A PROC, EXCEPT 55 Quintile 1.
TONSILLECTOMY &/
OR ADENOIDECTOMY
ONLY, AGE 0-17.
59................. TONSILLECTOMY &/OR 55 Quintile 1.
ADENOIDECTOMY
ONLY, AGE >17.
60................. TONSILLECTOMY &/OR 55 Quintile 1.
ADENOIDECTOMY
ONLY, AGE 0-17.
61................. MYRINGOTOMY W TUBE 55 Quintile 1.
INSERTION AGE >17.
62................. MYRINGOTOMY W TUBE 55 Quintile 1.
INSERTION AGE 0-
17.
67................. EPIGLOTTITIS...... 73 Quintile 3.
70................. OTITIS MEDIA & URI 69 Quintile 1.
AGE 0-17.
71................. LARYNGOTRACHEITIS. 69 Quintile 1.
72................. NASAL TRAUMA & 69 Quintile 1.
DEFORMITY.
98................. BRONCHITIS & 97 Quintile 1.
ASTHMA AGE 0-17.
106................ CORONARY BYPASS W 104 Quintile 4.
PTCA.
107................ CORONARY BYPASS W 104 Quintile 4.
CARDIAC CATH.
108................ OTHER 104 Quintile 4.
CARDIOTHORACIC
PROCEDURES.
109................ CORONARY BYPASS W/ 104 Quintile 4.
O PTCA OR CARDIAC
CATH.
119................ VEIN LIGATION & 131 Quintile 2.
STRIPPING.
137................ CARDIAC CONGENITAL 136 Quintile 2.
& VALVULAR
DISORDERS AGE 0-
17.
146................ RECTAL RESECTION W 148 Quintile 4.
CC.
147................ RECTAL RESECTION W/ 148 Quintile 4.
O CC.
[[Page 13444]]
156................ STOMACH, 155 Quintile 5.
ESOPHAGEAL &
DUODENAL
PROCEDURES AGE 0-
17.
163................ HERNIA PROCEDURES 160 Quintile 1.
AGE 0-17.
164................ APPENDECTOMY W 157 Quintile 3.
COMPLICATED
PRINCIPAL DIAG W
CC.
165................ APPENDECTOMY W 158 Quintile 1.
COMPLICATED
PRINCIPAL DIAG W/
O CC.
166................ APPENDECTOMY W/O 158 Quintile 1.
COMPLICATED
PRINCIPAL DIAG W
CC.
167................ APPENDECTOMY W/O 158 Quintile 1.
COMPLICATED
PRINCIPAL DIAG W/
O CC.
168................ MOUTH PROCEDURES W 185 Quintile 4.
CC.
169................ MOUTH PROCEDURES W/ 185 Quintile 4.
O CC.
187................ DENTAL EXTRACTIONS 185 Quintile 4.
& RESTORATIONS.
190................ OTHER DIGESTIVE 189 Quintile 3.
SYSTEM DIAGNOSES
AGE 0-17.
195................ CHOLECYSTECTOMY W 191 Quintile 4.
C.D.E. W CC.
196................ CHOLECYSTECTOMY W 197 Quintile 3.
C.D.E. W/O CC.
200................ HEPATOBILIARY 199 Quintile 5.
DIAGNOSTIC
PROCEDURE FOR NON-
MALIGNANCY.
212................ HIP & FEMUR 211 Quintile 2.
PROCEDURES EXCEPT
MAJOR JOINT AGE 0-
17.
220................ LOWER EXTREM & 219 Quintile 1.
HUMER PROC EXCEPT
HIP, FOOT, FEMUR
AGE 0-17.
259................ SUBTOTAL 257 Quintile 1.
MASTECTOMY FOR
MALIGNANCY W CC.
260................ SUBTOTAL 258 Quintile 1.
MASTECTOMY FOR
MALIGNANCY W/O CC.
262................ BREAST BIOPSY & 258 Quintile 1.
LOCAL EXCISION
FOR NON-
MALIGNANCY.
286................ ADRENAL & 292 Quintile 4.
PITUITARY
PROCEDURES.
289................ PARATHYROID 290 Quintile 1.
PROCEDURES.
291................ THYROGLOSSAL 290 Quintile 1.
PROCEDURES.
317................ ADMIT FOR RENAL 316 Quintile 3.
DIALYSIS.
327................ KIDNEY & URINARY 326 Quintile 1.
TRACT SIGNS &
SYMPTOMS AGE 0-17.
334................ MAJOR MALE PELVIC 354 Quintile 5.
PROCEDURES W CC.
335................ MAJOR MALE PELVIC 354 Quintile 5.
PROCEDURES W/O CC.
340................ TESTES PROCEDURES, 347 Quintile 2.
NON-MALIGNANCY
AGE 0-17.
342................ CIRCUMCISION AGE 344 Quintile 1.
>17.
343................ CIRCUMCISION AGE 0- 344 Quintile 1.
17.
351................ STERILIZATION, 344 Quintile 1.
MALE.
357................ UTERINE & ADNEXA 346 Quintile 3.
PROC FOR OVARIAN
OR ADNEXAL
MALIGNANCY.
361................ LAPAROSCOPY & 367 Quintile 3.
INCISIONAL TUBAL
INTERRUPTION.
362................ ENDOSCOPIC TUBAL 367 Quintile 3.
INTERRUPTION.
364................ D&C, CONIZATION 360 Quintile 2.
EXCEPT FOR
MALIGNANCY.
370................ CESAREAN SECTION W 365 Quintile 5.
CC.
371................ CESAREAN SECTION W/ 365 Quintile 5.
O CC.
372................ VAGINAL DELIVERY W 359 Quintile 1.
COMPLICATING
DIAGNOSES.
373................ VAGINAL DELIVERY W/ 359 Quintile 1.
O COMPLICATING
DIAGNOSES.
374................ VAGINAL DELIVERY W 359 Quintile 1.
STERILIZATION &/
OR D&C.
375................ VAGINAL DELIVERY W 359 Quintile 1.
O.R. PROC EXCEPT
STERIL &/OR D&C.
376................ POSTPARTUM & POST 359 Quintile 1.
ABORTION
DIAGNOSES W/O
O.R. PROCEDURE.
377................ POSTPARTUM & POST 359 Quintile 1.
ABORTION
DIAGNOSES W O.R.
PROCEDURE.
378................ ECTOPIC PREGNANCY. 359 Quintile 1.
379................ THREATENED 359 Quintile 1.
ABORTION.
380................ ABORTION W/O D&C.. 359 Quintile 1.
381................ ABORTION W D&C, 359 Quintile 1.
ASPIRATION
CURETTAGE OR
HYSTEROTOMY.
382................ FALSE LABOR....... 359 Quintile 1.
383................ OTHER ANTEPARTUM 359 Quintile 1.
DIAGNOSES W
MEDICAL
COMPLICATIONS.
384................ OTHER ANTEPARTUM 359 Quintile 1.
DIAGNOSES W/O
MEDICAL
COMPLICATIONS.
386................ EXTREME IMMATURITY 385 Quintile 3.
OR RESPIRATORY
DISTRESS
SYNDROME, NEONATE.
387................ PREMATURITY W 385 Quintile 3.
MAJOR PROBLEMS.
388................ PREMATURITY W/O 385 Quintile 3.
MAJOR PROBLEMS.
389................ FULL TERM NEONATE 385 Quintile 3.
W MAJOR PROBLEMS.
391................ NORMAL NEWBORN.... 390 Quintile 3.
392................ SPLENECTOMY AGE 197 Quintile 3.
>17.
393................ SPLENECTOMY AGE 0- 197 Quintile 3.
17.
405................ ACUTE LEUKEMIA W/O 416 Quintile 3.
MAJOR O.R.
PROCEDURE AGE 0-
17.
411................ HISTORY OF 171 Quintile 1.
MALIGNANCY W/O
ENDOSCOPY.
412................ HISTORY OF 171 Quintile 1.
MALIGNANCY W
ENDOSCOPY.
422................ VIRAL ILLNESS & 421 Quintile 3.
FEVER OF UNKNOWN
ORIGIN AGE 0-17.
441................ HAND PROCEDURES 229 Quintile 3.
FOR INJURIES.
446................ TRAUMATIC INJURY 445 Quintile 3.
AGE 0-17.
448................ ALLERGIC REACTIONS 447 Quintile 1.
AGE 0-17.
451................ POISONING & TOXIC 450 Quintile 1.
EFFECTS OF DRUGS
AGE 0-17.
471................ BILATERAL OR 209 Quintile 5.
MULTIPLE MAJOR
JOINT PROCS OF
LOWER EXTREMITY.
481................ BONE MARROW 394 Quintile 5.
TRANSPLANT.
484................ CRANIOTOMY FOR 2 Quintile 5.
MULTIPLE
SIGNIFICANT
TRAUMA.
485................ LIMB REATTACHMENT, 486 Quintile 5.
HIP AND FEMUR
PROC FOR MULTIPLE
SIGNIFICANT TR.
491................ MAJOR JOINT & LIMB 486 Quintile 5.
REATTACHMENT
PROCEDURES OF
UPPER EXTREMITY.
496................ COMBINED ANTERIOR/ 497 Quintile 3.
POSTERIOR SPINAL
FUSION.
------------------------------------------------------------------------
\1\ This table does not reflect the four transplant LTC-DRGs, for which
we propose to assign a relative weight of 0.0000.
[[Page 13445]]
To illustrate the methodology we are proposing for determining
relative weights for the 111 LTC-DRGs with no LTCH cases, we are
providing the following examples, which refer to the no volume LTC-DRGs
crosswalk information provided above in Table 3:
Example 1: There were no cases in the FY 2000 MedPAR file for
LTC-DRG 3 (Craniotomy Age 0-17). Since the period of time
surrounding the surgery and the post-operative care are similar in
resource use and the length and complexity of the surgical
procedures and the length of stay are similar, we determined that
LTC-DRG 1 (Craniotomy Age > 17 Except for Trauma), which is assigned
to low volume quintile 4 for the purpose of determining the proposed
relative weights, displayed similar clinical and resource use.
Therefore, we are proposing to assign the same relative weight of
LTC-DRG 1 of 1.3735 (quintile 4) (see Table 4 below) to LTC-DRG 3.
Example 2: There were no LTCH cases in the FY 2000 MedPAR file
for LTC-DRG 98 (Bronchitis & Asthma Age 0-17). Since the severity of
illness in patients with bronchitis and asthma are similar in
patients regardless of age, we determined that LTC-DRG 97
(Bronchitis & Asthma Age>17 W/O CC) displayed similar clinical and
resource use characteristics and have a similar length of stay to
LTC-DRG 98. There were over 25 cases in LTC-DRG 97. Therefore, it is
not assigned to a low volume quintile for the purpose of determining
the relative weights. However, under our proposed methodology, LTC-
DRG 98, with no LTCH cases, needs to be grouped to a low volume
quintile. We identified that the quintile with the closest weight to
LTC-DRG 97 (0.5239; see Table 4 below) was quintile 3 (0.5268; see
Table 4 below). Therefore, we are proposing to assign LTC-DRG 98 a
relative weight of 0.5268.
Furthermore, we are proposing to establish LTC-DRG relative weights
of 0.0000 for heart, kidney, liver, and lung transplants (proposed LTC-
DRGs 103, 302, 480, and 495, respectively) because Medicare will only
cover these procedures if they are performed at a hospital that has
been certified for the specific procedures by Medicare. We are only
proposing to include these four transplant LTC-DRGs in the GROUPER
program for administrative purposes. Since we are proposing to use the
same GROUPER program for LTCHs as is used under the acute care hospital
inpatient prospective payment system, removing these DRGs would be
administratively burdensome. For further discussion of the Medicare
coverage of heart, kidney, liver, and lung transplants, see the
following Federal Register documents: February 2, 1995 final rule (60
FR 6537); April 12, 1991 final rule (56 FR 15006); and April 6, 1987
final rule (52 FR 10935). Based on our research, we found that most
LTCHs only perform minor surgeries, such as minor small and large bowel
procedures, if any surgeries at all. Given the extensive criteria that
must be met to become certified as a transplant center for Medicare, we
do not believe that any LTCHs would become certified as a transplant
center. In fact, in the nearly 20 years since the implementation of the
hospital inpatient prospective payment system, there has never been a
LTCH that even expressed an interest in becoming a transplant center.
We specifically solicit comments on whether there is a need for CMS to
address determining relative weights (other than zero) for transplant
LTC-DRGs. We are proposing to assign proposed LTC-DRGs 103, 302, 480,
and 495 a relative weight of zero, as shown in Table 4 below.
Again, we note that as this proposed system is dynamic, it is
entirely possible that the number of LTC-DRGs with a zero volume of
LTCH cases based on the system we are proposing would vary in the
future. We would use the best available claims data in the MedPAR to
identify zero volume LTC-DRGs and to determine the relative weights in
the final rule.
Table 4 lists the proposed LTC-DRGs and their proposed respective
relative weights and arithmetic mean length of stay.
Table 4.--Proposed LTC-DRG Relative Weights and Arithmetic Mean Length
of Stay
------------------------------------------------------------------------
Proposed Arithmetic
LTC-DRG Description relative mean length FY 2000
weight of stay LTCH cases
------------------------------------------------------------------------
1............... CRANIOTOMY AGE 1.3735 36.5 13
>17 EXCEPT FOR
TRAUMA \4\.
2............... CRANIOTOMY FOR 2.1422 48.3 1
TRAUMA AGE >17
\5\.
3............... CRANIOTOMY AGE 1.3735 36.5 0
0-17 \4\*.
4............... SPINAL 0.9568 30.0 10
PROCEDURES \3\.
5............... EXTRACRANIAL 1.3735 36.5 2
VASCULAR
PROCEDURES \4\.
6............... CARPAL TUNNEL 0.9568 30.0 0
RELEASE \3\*.
7............... PERIPH & 1.8690 46.3 60
CRANIAL NERVE
& OTHER NERV
SYST PROC W CC.
8............... PERIPH & 0.9568 30.0 2
CRANIAL NERVE
& OTHER NERV
SYST PROC W/O
CC \3\.
9............... SPINAL 1.5321 41.1 180
DISORDERS &
INJURIES.
10.............. NERVOUS SYSTEM 1.0668 31.8 162
NEOPLASMS W CC.
11.............. NERVOUS SYSTEM 1.0668 31.8 69
NEOPLASMS W/O
CC.
12.............. DEGENERATIVE 0.9289 32.6 1,955
NERVOUS SYSTEM
DISORDERS.
13.............. MULTIPLE 0.7511 25.4 126
SCLEROSIS &
CEREBELLAR
ATAXIA.
14.............. SPECIFIC 1.0143 30.9 2,678
CEREBROVASCULA
R DISORDERS
EXCEPT TIA.
15.............. TRANSIENT 0.8800 27.6 182
ISCHEMIC
ATTACK &
PRECEREBRAL
OCCLUSIONS.
16.............. NONSPECIFIC 1.1461 29.8 114
CEREBROVASCULA
R DISORDERS W
CC.
17.............. NONSPECIFIC 0.8295 25.9 28
CEREBROVASCULA
R DISORDERS W/
O CC.
18.............. CRANIAL & 0.9063 28.9 138
PERIPHERAL
NERVE
DISORDERS W CC.
19.............. CRANIAL & 0.8609 30.5 72
PERIPHERAL
NERVE
DISORDERS W/O
CC.
20.............. NERVOUS SYSTEM 1.5115 36.4 189
INFECTION
EXCEPT VIRAL
MENINGITIS.
21.............. VIRAL 0.7107 24.5 2
MENINGITIS \2\.
22.............. HYPERTENSIVE 0.9568 30.0 8
ENCEPHALOPATHY
\3\.
23.............. NONTRAUMATIC 1.2866 36.1 71
STUPOR & COMA.
24.............. SEIZURE & 0.9144 29.2 141
HEADACHE AGE
>17 W CC.
25.............. SEIZURE & 0.6727 25.1 74
HEADACHE AGE
>17 W/O CC.
26.............. SEIZURE & 0.7107 24.5 0
HEADACHE AGE 0-
17 \2\.
27.............. TRAUMATIC 1.5525 38.6 54
STUPOR & COMA,
COMA >1 HR.
28.............. TRAUMATIC 1.0679 29.7 134
STUPOR & COMA,
COMA 1 HR AGE
>17 W CC.
29.............. TRAUMATIC 0.8326 27.2 95
STUPOR & COMA,
COMA 1 HR AGE
>17 W/O CC.
30.............. TRAUMATIC 0.9568 30.0 0
STUPOR & COMA,
COMA 1 HR AGE
0-17 \3\.
31.............. CONCUSSION AGE 2.1422 48.3 2
>17 W CC \5\.
32.............. CONCUSSION AGE 0.9568 30.0 2
>17 W/O CC \3\.
[[Page 13446]]
33.............. CONCUSSION AGE 0.9568 30.0 0
0-17 \3\.
34.............. OTHER DISORDERS 1.1042 30.8 518
OF NERVOUS
SYSTEM W CC.
35.............. OTHER DISORDERS 0.9505 30.3 190
OF NERVOUS
SYSTEM W/O CC.
36.............. RETINAL 0.5239 18.2 0
PROCEDURES \1\
*.
37.............. ORBITAL 0.5239 18.2 0
PROCEDURES \1\
*.
38.............. PRIMARY IRIS 0.5239 18.2 0
PROCEDURES \1\
*.
39.............. LENS PROCEDURES 0.5239 18.2 0
WITH OR
WITHOUT
VITRECTOMY \1\
*.
40.............. EXTRAOCULAR 0.5239 18.2 0
PROCEDURES
EXCEPT ORBIT
AGE >17 \1\*.
41.............. EXTRAOCULAR 0.5239 18.2 0
PROCEDURES
EXCEPT ORBIT
AGE 0-17 \1\*.
42.............. INTRAOCULAR 0.5239 18.2 0
PROCEDURES
EXCEPT RETINA,
IRIS & LENS
\1\*.
43.............. HYPHEMA \1\*... 0.5239 18.2 0
44.............. ACUTE MAJOR EYE 2.1422 48.3 3
INFECTIONS \5\.
45.............. NEUROLOGICAL 0.5239 18.2 6
EYE DISORDERS
\1\.
46.............. OTHER DISORDERS 0.7107 24.5 9
OF THE EYE AGE
>17 W CC \2\.
47.............. OTHER DISORDERS 0.5239 18.2 3
OF THE EYE AGE
>17 W/O CC \1\.
48.............. OTHER DISORDERS 0.5239 18.2 0
OF THE EYE AGE
0-17 \1\*.
49.............. MAJOR HEAD & 0.9568 30.0 0
NECK
PROCEDURES \3\
*.
50.............. SIALOADENECTOMY 0.9568 30.0 0
\3\*.
51.............. SALIVARY GLAND 0.9568 30.0 0
PROCEDURES
EXCEPT
SIALOADENECTOM
Y \3\*.
52.............. CLEFT LIP & 0.5239 18.2 0
PALATE REPAIR
\1\*.
53.............. SINUS & MASTOID 0.5239 18.2 1
PROCEDURES AGE
>17 \1\.
54.............. SINUS & MASTOID 0.5239 18.2 0
PROCEDURES AGE
0-17 \1\.
55.............. MISCELLANEOUS 0.5239 18.2 1
EAR, NOSE,
MOUTH & THROAT
PROCEDURES \1\.
56.............. RHINOPLASTY \1\ 0.5239 18.2 0
*.
57.............. T&A PROC, 0.5239 18.2 0
EXCEPT
TONSILLECTOMY
&/OR
ADENOIDECTOMY
ONLY, AGE >17
\1\*.
58.............. T&A PROC, 0.5239 18.2 0
EXCEPT
TONSILLECTOMY
&/OR
ADENOIDECTOMY
ONLY, AGE 0-17
\1\*.
59.............. TONSILLECTOMY &/ 0.5239 18.2 0
OR
ADENOIDECTOMY
ONLY, AGE >17
\1\*.
60.............. TONSILLECTOMY &/ 0.5239 18.2 0
OR
ADENOIDECTOMY
ONLY, AGE 0-17
\1\*.
61.............. MYRINGOTOMY W 0.5239 18.2 0
TUBE INSERTION
AGE >17 \1\*.
62.............. MYRINGOTOMY W 0.5239 18.2 0
TUBE INSERTION
AGE 0-17 \1\*.
63.............. OTHER EAR, 2.1422 48.3 5
NOSE, MOUTH &
THROAT O.R.
PROCEDURES \5\.
64.............. EAR, NOSE, 1.4108 35.1 144
MOUTH & THROAT
MALIGNANCY.
65.............. DYSEQUILIBRIUM. 0.7130 27.0 25
66.............. EPISTAXIS \3\.. 0.9568 30.0 3
67.............. EPIGLOTTITIS \3 0.9568 30.0 0
\.
68.............. OTITIS MEDIA & 0.8959 23.7 25
URI AGE >17 W
CC.
69.............. OTITIS MEDIA & 0.5239 18.2 7
URI AGE >17 W/
O CC \1\.
70.............. OTITIS MEDIA & 0.5239 18.2 0
URI AGE 0-17
\1\*.
71.............. LARYNGOTRACHEIT 0.5239 18.2 0
IS \1\*.
72.............. NASAL TRAUMA & 0.5239 18.2 0
DEFORMITY \1\*.
73.............. OTHER EAR, 1.0917 33.3 31
NOSE, MOUTH &
THROAT
DIAGNOSES AGE
>17.
74.............. OTHER EAR, 0.7107 24.5 1
NOSE, MOUTH &
THROAT
DIAGNOSES AGE
0-17 \2\.
75.............. MAJOR CHEST 2.1422 48.3 19
PROCEDURES \5\.
76.............. OTHER RESP 2.7153 50.7 327
SYSTEM O.R.
PROCEDURES W
CC.
77.............. OTHER RESP 2.1422 48.3 13
SYSTEM O.R.
PROCEDURES W/O
CC \5\.
78.............. PULMONARY 0.8294 24.8 122
EMBOLISM.
79.............. RESPIRATORY 1.2588 31.5 2,047
INFECTIONS &
INFLAMMATIONS
AGE >17 W CC.
80.............. RESPIRATORY 1.0733 30.0 204
INFECTIONS &
INFLAMMATIONS
AGE >17 W/O CC.
81.............. RESPIRATORY 0.9568 30.0 10
INFECTIONS &
INFLAMMATIONS
AGE 0-17 \3\.
82.............. RESPIRATORY 0.9690 26.9 755
NEOPLASMS.
83.............. MAJOR CHEST 0.9797 24.8 33
TRAUMA W CC.
84.............. MAJOR CHEST 0.9568 30.0 10
TRAUMA W/O CC
\3\.
85.............. PLEURAL 1.2406 30.1 132
EFFUSION W CC.
86.............. PLEURAL 0.7529 25.0 30
EFFUSION W/O
CC.
87.............. PULMONARY EDEMA 2.4202 44.1 5,741
& RESPIRATORY
FAILURE.
88.............. CHRONIC 0.9390 25.3 4,229
OBSTRUCTIVE
PULMONARY
DISEASE.
89.............. SIMPLE 0.9740 27.2 2,387
PNEUMONIA &
PLEURISY AGE
>17 W CC.
90.............. SIMPLE 0.9740 27.2 554
PNEUMONIA &
PLEURISY AGE
>17 W/O CC.
91.............. SIMPLE 1.3735 36.5 21
PNEUMONIA &
PLEURISY AGE 0-
17 \4\.
92.............. INTERSTITIAL 0.8885 24.8 181
LUNG DISEASE W
CC.
93.............. INTERSTITIAL 0.7284 23.8 38
LUNG DISEASE W/
O CC.
94.............. PNEUMOTHORAX W 0.9341 28.3 43
CC.
95.............. PNEUMOTHORAX W/ 0.7107 24.5 5
O CC \2\.
96.............. BRONCHITIS & 0.8855 24.4 139
ASTHMA AGE >17
W CC.
97.............. BRONCHITIS & 0.5268 17.8 67
ASTHMA AGE >17
W/O CC.
98.............. BRONCHITIS & 0.5239 18.2 0
ASTHMA AGE 0-
17 \1\*.
99.............. RESPIRATORY 1.4609 32.1 384
SIGNS &
SYMPTOMS W CC.
100............. RESPIRATORY 1.0387 27.9 156
SIGNS &
SYMPTOMS W/O
CC.
[[Page 13447]]
101............. OTHER 1.3776 30.9 164
RESPIRATORY
SYSTEM
DIAGNOSES W CC.
102............. OTHER 0.6568 22.0 34
RESPIRATORY
SYSTEM
DIAGNOSES W/O
CC.
103............. HEART 0.0000 0.0 0
TRANSPLANT \6\.
104............. CARDIAC VALVE & 1.3735 36.5 2
OTHER MAJOR
CARDIOTHORACIC
PROC W CARDIAC
CATH \4\.
105............. CARDIAC VALVE & 1.3735 36.5 2
OTHER MAJOR
CARDIOTHORACIC
PROC W/O
CARDIAC CATH
\4\.
106............. CORONARY BYPASS 1.3735 36.5 0
W PTCA \4\*.
107............. CORONARY BYPASS 1.3735 36.5 0
W CARDIAC CATH
\4\*.
108............. OTHER 1.3735 36.5 0
CARDIOTHORACIC
PROCEDURES \4\
*.
109............. CORONARY BYPASS 1.3735 36.5 0
W/O PTCA OR
CARDIAC CATH
\4\*.
110............. MAJOR 1.3735 36.5 1
CARDIOVASCULAR
PROCEDURES W
CC \4\.
111............. MAJOR 1.3735 36.5 0
CARDIOVASCULAR
PROCEDURES W/O
CC.
112............. PERCUTANEOUS 2.1422 48.3 3
CARDIOVASCULAR
PROCEDURES \5\.
113............. AMPUTATION FOR 1.5915 43.7 109
CIRC SYSTEM
DISORDERS
EXCEPT UPPER
LIMB & TOE.
114............. UPPER LIMB & 1.7160 46.5 31
TOE AMPUTATION
FOR CIRC
SYSTEM
DISORDERS.
115............. PRM CARD PACEM 1.3735 36.5 3
IMPL W AMI,
HRT FAIL OR
SHK, OR AICD
LEAD OR GNRTR
P \4\.
116............. OTH PERM CARD 2.1422 48.3 4
PACEMAK IMPL
OR PTCA W
CORONARY
ARTERY STENT
IMPLNT \5\.
117............. CARDIAC 0.7107 24.5 1
PACEMAKER
REVISION
EXCEPT DEVICE
REPLACEMENT \2
\.
118............. CARDIAC 1.3735 36.5 11
PACEMAKER
DEVICE
REPLACEMENT \4
\.
119............. VEIN LIGATION & 0.7107 24.5 0
STRIPPING \2\*.
120............. OTHER 1.3748 41.6 167
CIRCULATORY
SYSTEM O.R.
PROCEDURES.
121............. CIRCULATORY 0.8843 24.1 191
DISORDERS W
AMI & MAJOR
COMP,
DISCHARGED
ALIVE.
122............. CIRCULATORY 0.6762 22.4 64
DISORDERS W
AMI W/O MAJOR
COMP,
DISCHARGED
ALIVE.
123............. CIRCULATORY 1.1855 23.7 58
DISORDERS W
AMI, EXPIRED.
124............. CIRCULATORY 1.3735 36.5 7
DISORDERS
EXCEPT AMI, W
CARD CATH &
COMPLEX DIAG
\4\.
125............. CIRCULATORY 1.3735 36.5 4
DISORDERS
EXCEPT AMI, W
CARD CATH W/O
COMPLEX DIAG
\4\.
126............. ACUTE & 1.0442 31.2 193
SUBACUTE
ENDOCARDITIS.
127............. HEART FAILURE & 0.8658 25.8 2,434
SHOCK.
128............. DEEP VEIN 0.7107 24.5 16
THROMBOPHLEBIT
IS \2\.
129............. CARDIAC ARREST, 0.7107 24.5 22
UNEXPLAINED \2
\.
130............. PERIPHERAL 0.9391 29.3 1,139
VASCULAR
DISORDERS W CC.
131............. PERIPHERAL 0.7878 27.4 279
VASCULAR
DISORDERS W/O
CC.
132............. ATHEROSCLEROSIS 0.8672 23.6 641
W CC.
133............. ATHEROSCLEROSIS 0.8388 25.3 195
W/O CC.
134............. HYPERTENSION... 0.8482 28.8 136
135............. CARDIAC 0.9344 24.7 152
CONGENITAL &
VALVULAR
DISORDERS AGE
>17 W CC.
136............. CARDIAC 0.7211 24.2 42
CONGENITAL &
VALVULAR
DISORDERS AGE
>17 W/O CC.
137............. CARDIAC 0.7107 24.5 0
CONGENITAL &
VALVULAR
DISORDERS AGE
0-17 \2\*.
138............. CARDIAC 0.8712 28.1 273
ARRHYTHMIA &
CONDUCTION
DISORDERS W CC.
139............. CARDIAC 0.8712 28.1 104
ARRHYTHMIA &
CONDUCTION
DISORDERS W/O
CC.
140............. ANGINA PECTORIS 0.6919 23.5 85
141............. SYNCOPE & 0.6732 24.4 84
COLLAPSE W CC.
142............. SYNCOPE & 0.6732 24.4 71
COLLAPSE W/O
CC.
143............. CHEST PAIN..... 0.6017 20.4 50
144............. OTHER 0.9035 25.2 579
CIRCULATORY
SYSTEM
DIAGNOSES W CC.
145............. OTHER 0.6545 20.6 97
CIRCULATORY
SYSTEM
DIAGNOSES W/O
CC.
146............. RECTAL 1.3735 36.5 0
RESECTION W CC
\4\*.
147............. RECTAL 1.3735 36.5 0
RESECTION W/O
CC \4\*.
148............. MAJOR SMALL & 1.3735 36.5 12
LARGE BOWEL
PROCEDURES W
CC \4\.
149............. MAJOR SMALL & 0.5239 18.2 3
LARGE BOWEL
PROCEDURES W/O
CC \1\.
150............. PERITONEAL 1.3735 36.5 2
ADHESIOLYSIS W
CC \4\.
151............. PERITONEAL 1.3735 36.5 0
ADHESIOLYSIS W/
O CC \4\.
152............. MINOR SMALL & 2.1422 48.3 4
LARGE BOWEL
PROCEDURES W
CC \5\.
153............. MINOR SMALL & 2.1422 48.3 0
LARGE BOWEL
PROCEDURES W/O
CC \5\.
154............. STOMACH, 2.1422 48.3 1
ESOPHAGEAL &
DUODENAL
PROCEDURES AGE
>17 W CC \5\.
155............. STOMACH, 2.1422 48.3 1
ESOPHAGEAL &
DUODENAL
PROCEDURES AGE
>17 W/O CC \5\.
156............. STOMACH, 2.1422 48.3 0
ESOPHAGEAL &
DUODENAL
PROCEDURES AGE
0-17 \5\*.
157............. ANAL & STOMAL 0.9568 30.0 3
PROCEDURES W
CC \3\.
158............. ANAL & STOMAL 0.5239 18.2 1
PROCEDURES W/O
CC \1\.
159............. HERNIA 1.3735 36.5 1
PROCEDURES
EXCEPT
INGUINAL &
FEMORAL AGE
>17 W CC \4\.
160............. HERNIA 0.5239 18.2 1
PROCEDURES
EXCEPT
INGUINAL &
FEMORAL AGE
>17 W/O CC \1\.
161............. INGUINAL & 0.5239 18.2 2
FEMORAL HERNIA
PROCEDURES AGE
>17 W CC \1\.
162............. INGUINAL & 0.5239 18.2 0
FEMORAL HERNIA
PROCEDURES AGE
>17 W/O CC \1\.
163............. HERNIA 0.5239 18.2 0
PROCEDURES AGE
0-17 \1\*.
164............. APPENDECTOMY W 0.9568 30.0 0
COMPLICATED
PRINCIPAL DIAG
W CC \3\*.
165............. APPENDECTOMY W 0.5239 18.2 0
COMPLICATED
PRINCIPAL DIAG
W/O CC \1\*.
[[Page 13448]]
166............. APPENDECTOMY W/ 0.5239 18.2 0
O COMPLICATED
PRINCIPAL DIAG
W CC \1\*.
167............. APPENDECTOMY W/ 0.5239 18.2 0
O COMPLICATED
PRINCIPAL DIAG
W/O CC \1\*.
168............. MOUTH 1.3735 36.5 0
PROCEDURES W
CC \4\*.
169............. MOUTH 1.3735 36.5 0
PROCEDURES W/O
CC.
170............. OTHER DIGESTIVE 1.8984 42.4 25
SYSTEM O.R.
PROCEDURES W
CC.
171............. OTHER DIGESTIVE 0.5239 18.2 1
SYSTEM O.R.
PROCEDURES W/O
CC \1\.
172............. DIGESTIVE 1.0289 27.9 520
MALIGNANCY W
CC.
173............. DIGESTIVE 1.0177 28.9 140
MALIGNANCY W/O
CC.
174............. G.I. HEMORRHAGE 0.9592 26.9 270
W CC.
175............. G.I. HEMORRHAGE 0.9181 28.3 62
W/O CC.
176............. COMPLICATED 0.9934 24.3 48
PEPTIC ULCER.
177............. UNCOMPLICATED 0.9568 30.0 16
PEPTIC ULCER W
CC \3\.
178............. UNCOMPLICATED 0.5239 18.2 7
PEPTIC ULCER W/
O CC \1\.
179............. INFLAMMATORY 1.0571 24.0 40
BOWEL DISEASE.
180............. G.I. 1.0191 27.8 212
OBSTRUCTION W
CC.
181............. G.I. 0.9831 24.8 49
OBSTRUCTION W/
O CC.
182............. ESOPHAGITIS, 0.9781 28.3 375
GASTROENT &
MISC DIGEST
DISORDERS AGE
> 17 W CC.
183............. ESOPHAGITIS, 0.7925 24.4 149
GASTROENT &
MISC DIGEST
DISORDERS AGE
> 17 W/O CC.
184............. ESOPHAGITIS, 1.3735 36.5 2
GASTROENT &
MISC DIGEST
DISORDERS AGE
0-17 \4\.
185............. DENTAL & ORAL 1.3735 36.5 16
DIS EXCEPT
EXTRACTIONS &
RESTORATIONS,
AGE > 17 \4\.
186............. DENTAL & ORAL 1.3735 36.5 0
DIS EXCEPT
EXTRACTIONS &
RESTORATIONS,
AGE 0-17 \4\.
187............. DENTAL 1.3735 36.5 0
EXTRACTIONS &
RESTORATIONS \
4\*.
188............. OTHER DIGESTIVE 1.1863 29.5 476
SYSTEM
DIAGNOSES AGE
> 17 W CC.
189............. OTHER DIGESTIVE 1.0223 25.1 74
SYSTEM
DIAGNOSES AGE
> 17 W/O CC.
190............. OTHER DIGESTIVE 0.9568 30.0 0
SYSTEM
DIAGNOSES AGE
0-17 \3\*.
191............. PANCREAS, LIVER 1.3735 36.5 1
& SHUNT
PROCEDURES W
CC \4\.
192............. PANCREAS, LIVER 1.3735 36.5 0
& SHUNT
PROCEDURES W/O
CC \4\.
193............. BILIARY TRACT 2.1422 48.3 2
PROC EXCEPT
ONLY CHOLECYST
W OR W/O
C.D.E. W CC
\5\.
194............. BILIARY TRACT 2.1422 48.3 0
PROC EXCEPT
ONLY CHOLECYST
W OR W/O
C.D.E. W/O CC
\5\.
195............. CHOLECYSTECTOMY 1.3735 36.5 0
W C.D.E. W CC
\4\*.
196............. CHOLECYSTECTOMY 0.9568 30.0 0
W C.D.E. W/O
CC \3\*.
197............. CHOLECYSTECTOMY 0.9568 30.0 2
EXCEPT BY
LAPAROSCOPE W/
O C.D.E. W CC
\3\.
198............. CHOLECYSTECTOMY 0.9568 30.0 0
EXCEPT BY
LAPAROSCOPE W/
O C.D.E. W/O
CC \3\.
199............. HEPATOBILIARY 2.1422 48.3 1
DIAGNOSTIC
PROCEDURE FOR
MALIGNANCY \5\.
200............. HEPATOBILIARY 2.1422 48.3 0
DIAGNOSTIC
PROCEDURE FOR
NON-MALIGNANCY
\5\*.
201............. OTHER 2.1422 48.3 4
HEPATOBILIARY
OR PANCREAS
O.R.
PROCEDURES \5\.
202............. CIRRHOSIS & 0.8110 26.6 128
ALCOHOLIC
HEPATITIS.
203............. MALIGNANCY OF 0.8782 25.5 247
HEPATOBILIARY
SYSTEM OR
PANCREAS.
204............. DISORDERS OF 1.0512 26.0 205
PANCREAS
EXCEPT
MALIGNANCY.
205............. DISORDERS OF 0.9764 26.5 99
LIVER EXCEPT
MALIG,CIRR,ALC
HEPA W CC.
206............. DISORDERS OF 0.7107 24.5 24
LIVER EXCEPT
MALIG, CIRR,
ALC HEPA W/O
CC \2\.
207............. DISORDERS OF 0.7691 25.8 62
THE BILIARY
TRACT W CC.
208............. DISORDERS OF 0.7107 24.5 16
THE BILIARY
TRACT W/O CC
\2\.
209............. MAJOR JOINT & 2.1422 48.3 10
LIMB
REATTACHMENT
PROCEDURES OF
LOWER
EXTREMITY \5\.
210............. HIP & FEMUR 1.3735 36.5 9
PROCEDURES
EXCEPT MAJOR
JOINT AGE >17
W CC \4\.
211............. HIP & FEMUR 0.7107 24.5 2
PROCEDURES
EXCEPT MAJOR
JOINT AGE >17
W/O CC \2\.
212............. HIP & FEMUR 0.7107 24.5 0
PROCEDURES
EXCEPT MAJOR
JOINT AGE 0-
17\2\*.
213............. AMPUTATION FOR 1.4379 41.5 35
MUSCULOSKELETA
L SYSTEM &
CONN TISSUE
DISORDERS.
216............. BIOPSIES OF 0.9568 30.0 9
MUSCULOSKELETA
L SYSTEM &
CONNECTIVE
TISSUE \3\.
217............. WND DEBRID & 1.5497 43.6 185
SKN GRFT
EXCEPT HAND,
FOR MUSCSKELET
& CONN TISS
DIS.
218............. LOWER EXTREM & 1.3735 36.5 1
HUMER PROC
EXCEPT HIP,
FOOT, FEMUR
AGE >17 W CC
\4\.
219............. LOWER EXTREM & 0.5239 18.2 1
HUMER PROC
EXCEPT HIP,
FOOT, FEMUR
AGE >17 W/O CC
\1\.
220............. LOWER EXTREM & 0.5239 18.2 0
HUMER PROC
EXCEPT HIP,
FOOT, FEMUR
AGE 0-17\1\*.
223............. MAJOR SHOULDER/ 1.3735 36.5 1
ELBOW PROC, OR
OTHER UPPER
EXTREMITY PROC
W CC \4\.
224............. SHOULDER, ELBOW 0.7107 24.5 1
OR FOREARM
PROC, EXC
MAJOR JOINT
PROC, W/O CC
\2\.
225............. FOOT PROCEDURES 0.9568 30.0 17
\3\.
226............. SOFT TISSUE 2.1422 48.3 7
PROCEDURES W
CC \5\.
227............. SOFT TISSUE 2.1422 48.3 1
PROCEDURES W/O
CC \5\.
228............. MAJOR THUMB OR 0.9568 30.0 2
JOINT PROC, OR
OTH HAND OR
WRIST PROC W
CC \3\.
229............. HAND OR WRIST 0.9568 30.0 1
PROC, EXCEPT
MAJOR JOINT
PROC, W/O CC
\3\.
230............. LOCAL EXCISION 2.1422 48.3 1
& REMOVAL OF
INT FIX
DEVICES OF HIP
& FEMUR \5\.
231............. LOCAL EXCISION 1.3735 36.5 13
& REMOVAL OF
INT FIX
DEVICES EXCEPT
HIP & FEMUR
\4\.
232............. ARTHROSCOPY \2\ 0.7107 24.5 1
[[Page 13449]]
233............. OTHER 2.1422 48.3 10
MUSCULOSKELET
SYS & CONN
TISS O.R. PROC
W CC \5\.
234............. OTHER 2.1422 48.3 0
MUSCULOSKELET
SYS & CONN
TISS O.R. PROC
W/O CC \5\.
235............. FRACTURES OF 0.9608 34.9 157
FEMUR.
236............. FRACTURES OF 0.8221 28.8 1,638
HIP & PELVIS.
237............. SPRAINS, 0.6749 24.3 26
STRAINS, &
DISLOCATIONS
OF HIP, PELVIS
& THIGH.
238............. OSTEOMYELITIS.. 1.0920 34.5 962
239............. PATHOLOGICAL 0.8876 29.2 259
FRACTURES &
MUSCULOSKELETA
L & CONN TISS
MALIGNANCY.
240............. CONNECTIVE 1.0327 28.8 93
TISSUE
DISORDERS W CC.
241............. CONNECTIVE 0.8174 28.3 39
TISSUE
DISORDERS W/O
CC.
242............. SEPTIC 0.8899 30.8 140
ARTHRITIS.
243............. MEDICAL BACK 0.7222 25.4 860
PROBLEMS.
244............. BONE DISEASES & 0.6953 25.5 232
SPECIFIC
ARTHROPATHIES
W CC.
245............. BONE DISEASES & 0.4845 19.3 396
SPECIFIC
ARTHROPATHIES
W/O CC.
246............. NON-SPECIFIC 0.7693 27.5 35
ARTHROPATHIES.
247............. SIGNS & 0.7016 24.9 343
SYMPTOMS OF
MUSCULOSKELETA
L SYSTEM &
CONN TISSUE.
248............. TENDONITIS, 0.7110 24.6 449
MYOSITIS &
BURSITIS.
249............. AFTERCARE, 0.9154 30.4 333
MUSCULOSKELETA
L SYSTEM &
CONNECTIVE
TISSUE.
250............. FX, SPRN, STRN 0.8878 30.6 34
& DISL OF
FOREARM, HAND,
FOOT AGE >17 W
CC.
251............. FX, SPRN, STRN 0.8341 29.2 41
& DISL OF
FOREARM, HAND,
FOOT AGE >17 W/
O CC.
252............. FX, SPRN, STRN 0.5239 18.2 1
& DISL OF
FOREARM, HAND,
FOOT AGE 0-17
\1\.
253............. FX, SPRN, STRN 0.9364 31.9 245
& DISL OF
UPARM, LOWLEG
EX FOOT AGE
>17 W CC.
254............. FX, SPRN, STRN 0.7816 28.7 160
& DISL OF
UPARM, LOWLEG
EX FOOT AGE
>17 W/O CC.
255............. FX, SPRN, STRN 0.9568 30.0 2
& DISL OF
UPARM, LOWLEG
EX FOOT AGE 0-
17 \3\.
256............. OTHER 0.9541 30.3 310
MUSCULOSKELETA
L SYSTEM &
CONNECTIVE
TISSUE
DIAGNOSES.
257............. TOTAL 0.5239 18.2 1
MASTECTOMY FOR
MALIGNANCY W
CC \1\.
258............. TOTAL 0.5239 18.2 1
MASTECTOMY FOR
MALIGNANCY W/O
CC \1\.
259............. SUBTOTAL 0.5239 18.2 0
MASTECTOMY FOR
MALIGNANCY W
CC \1\*.
260............. SUBTOTAL 0.5239 18.2 0
MASTECTOMY FOR
MALIGNANCY W/O
CC \1\*.
261............. BREAST PROC FOR 0.9568 30.0 1
NON-MALIGNANCY
EXCEPT BIOPSY
& LOCAL
EXCISION \3\.
262............. BREAST BIOPSY & 0.5239 18.2 0
LOCAL EXCISION
FOR NON-
MALIGNANCY \1\
*.
263............. SKIN GRAFT &/OR 1.6894 51.6 657
DEBRID FOR SKN
ULCER OR
CELLULITIS W
CC.
264............. SKIN GRAFT &/OR 1.4650 49.2 110
DEBRID FOR SKN
ULCER OR
CELLULITIS W/O
CC.
265............. SKIN GRAFT &/OR 2.1422 48.3 11
DEBRID EXCEPT
FOR SKIN ULCER
OR CELLULITIS
W CC \5\.
266............. SKIN GRAFT &/OR 2.1422 48.3 1
DEBRID EXCEPT
FOR SKIN ULCER
OR CELLULITIS
W/O CC \5\.
267............. PERIANAL & 2.1422 48.3 3
PILONIDAL
PROCEDURES \5\.
268............. SKIN, 2.1422 48.3 4
SUBCUTANEOUS
TISSUE &
BREAST PLASTIC
PROCEDURES \5\.
269............. OTHER SKIN, 1.5586 45.1 143
SUBCUT TISS &
BREAST PROC W
CC.
270............. OTHER SKIN, 1.2594 40.1 26
SUBCUT TISS &
BREAST PROC W/
O CC.
271............. SKIN ULCERS.... 1.2354 39.1 4,021
272............. MAJOR SKIN 0.9667 29.9 50
DISORDERS W CC.
273............. MAJOR SKIN 0.7107 24.5 11
DISORDERS W/O
CC \2\.
274............. MALIGNANT 1.2025 32.9 118
BREAST
DISORDERS W CC.
275............. MALIGNANT 1.2025 32.9 32
BREAST
DISORDERS W/O
CC.
276............. NON-MALIGANT 0.7107 24.5 7
BREAST
DISORDERS \2\.
277............. CELLULITIS AGE 0.8857 28.3 816
>17 W CC.
278............. CELLULITIS AGE 0.7680 26.0 359
>17 W/O CC.
279............. CELLULITIS AGE 0.9568 30.0 8
0-17 \3\.
280............. TRAUMA TO THE 0.9550 30.7 132
SKIN, SUBCUT
TISS & BREAST
AGE >17 W CC.
281............. TRAUMA TO THE 0.7586 25.2 74
SKIN, SUBCUT
TISS & BREAST
AGE >17 W/O CC.
282............. TRAUMA TO THE 0.5239 18.2 0
SKIN, SUBCUT
TISS & BREAST
AGE 0-17 \1\.
283............. MINOR SKIN 0.9649 29.9 53
DISORDERS W CC.
284............. MINOR SKIN 0.7107 24.5 17
DISORDERS W/O
CC \2\.
285............. AMPUTAT OF 1.3735 36.5 18
LOWER LIMB FOR
ENDOCRINE,
NUTRIT, &
METABOL
DISORDERS \4\.
286............. ADRENAL & 1.3735 36.5 0
PITUITARY
PROCEDURES \4\
*.
287............. SKIN GRAFTS & 1.5168 42.1 32
WOUND DEBRID
FOR ENDOC,
NUTRIT & METAB
DISORDERS.
288............. O.R. PROCEDURES 0.7107 24.5 1
FOR OBESITY
\2\.
289............. PARATHYROID 0.5239 18.2 0
PROCEDURES \1\
*.
290............. THYROID 0.5239 18.2 1
PROCEDURES \1\.
291............. THYROGLOSSAL 0.5239 18.2 0
PROCEDURES \1\
*.
292............. OTHER 1.3735 36.5 14
ENDOCRINE,
NUTRIT & METAB
O.R. PROC W CC
\4\.
293............. OTHER 1.3735 36.5 1
ENDOCRINE,
NUTRIT & METAB
O.R. PROC W/O
CC \4\.
294............. DIABETES AGE 0.8786 28.2 443
>35.
295............. DIABETES AGE 0- 0.5239 18.2 4
35 \1\.
296............. NUTRITIONAL & 0.9448 28.2 665
MISC METABOLIC
DISORDERS AGE
>17 W CC.
297............. NUTRITIONAL & 0.7716 24.5 206
MISC METABOLIC
DISORDERS AGE
>17 W/O CC.
298............. NUTRITIONAL & 0.9568 30.0 5
MISC METABOLIC
DISORDERS AGE
0-17 \3\.
299............. INBORN ERRORS 0.5239 18.2 4
OF METABOLISM
\1\.
[[Page 13450]]
300............. ENDOCRINE 0.8315 27.4 66
DISORDERS W CC.
301............. ENDOCRINE 0.7107 24.5 12
DISORDERS W/O
CC \2\.
302............. KIDNEY 0.0000 na 0
TRANSPLANT \6\.
303............. KIDNEY, URETER 2.1422 48.3 2
& MAJOR
BLADDER
PROCEDURES FOR
NEOPLASM \5\.
304............. KIDNEY, URETER 0.9568 30.0 2
& MAJOR
BLADDER PROC
FOR NON-NEOPL
W CC \3\.
305............. KIDNEY, URETER 0.5239 18.2 2
& MAJOR
BLADDER PROC
FOR NON-NEOPL
W/O CC \1\.
306............. PROSTATECTOMY W 0.7107 24.5 1
CC \2\.
307............. PROSTATECTOMY W/ 0.5239 18.2 2
O CC \1\.
308............. MINOR BLADDER 0.9568 30.0 4
PROCEDURES W
CC \3\.
309............. MINOR BLADDER 0.7107 24.5 1
PROCEDURES W/O
CC \2\.
310............. TRANSURETHRAL 1.3735 36.5 7
PROCEDURES W
CC \4\.
311............. TRANSURETHRAL 0.7107 24.5 5
PROCEDURES W/O
CC \2\.
312............. URETHRAL 1.3735 36.5 2
PROCEDURES,
AGE >17 W CC
\4\.
313............. URETHRAL 1.3735 36.5 0
PROCEDURES,
AGE >17 W/O CC
\4\.
314............. URETHRAL 1.3735 36.5 0
PROCEDURES,
AGE 0-17.
315............. OTHER KIDNEY & 1.8305 40.6 99
URINARY TRACT
O.R.
PROCEDURES.
316............. RENAL FAILURE.. 1.1553 29.1 1,721
317............. ADMIT FOR RENAL 0.9568 30.0 0
DIALYSIS \3\*.
318............. KIDNEY & 1.1129 33.0 118
URINARY TRACT
NEOPLASMS W CC.
319............. KIDNEY & 0.9568 30.0 24
URINARY TRACT
NEOPLASMS W/O
CC \3\.
320............. KIDNEY & 0.8814 28.7 730
URINARY TRACT
INFECTIONS AGE
>17 W CC.
321............. KIDNEY & 0.7213 25.6 202
URINARY TRACT
INFECTIONS AGE
>17 W/O CC.
322............. KIDNEY & 0.9568 30.0 7
URINARY TRACT
INFECTIONS AGE
0-17 \3\.
323............. URINARY STONES 0.9568 30.0 14
W CC, &/OR ESW
LITHOTRIPSY \3
\.
324............. URINARY STONES 0.7107 24.5 4
W/O CC \2\.
325............. KIDNEY & 0.5862 21.2 25
URINARY TRACT
SIGNS &
SYMPTOMS AGE
>17 W CC.
326............. KIDNEY & 0.5239 18.2 18
URINARY TRACT
SIGNS &
SYMPTOMS AGE
>17 W/O CC \1\.
327............. KIDNEY & 0.5239 18.2 0
URINARY TRACT
SIGNS &
SYMPTOMS AGE 0-
17 \1\*.
328............. URETHRAL 0.7107 24.5 1
STRICTURE AGE
>17 W CC \2\.
329............. URETHRAL 0.7107 24.5 0
STRICTURE AGE
>17 W/O CC \2\.
330............. URETHRAL 0.7107 24.5 0
STRICTURE AGE
0-17 \2\.
331............. OTHER KIDNEY & 0.9193 26.7 293
URINARY TRACT
DIAGNOSES AGE
>17 W CC.
332............. OTHER KIDNEY & 0.8284 24.8 69
URINARY TRACT
DIAGNOSES AGE
>17 W/O CC.
333............. OTHER KIDNEY & 2.1422 48.3 1
URINARY TRACT
DIAGNOSES AGE
0-17 \5\.
334............. MAJOR MALE 2.1422 48.3 0
PELVIC
PROCEDURES W
CC \5\*.
335............. MAJOR MALE 2.1422 48.3 0
PELVIC
PROCEDURES W/O
CC \5\.
336............. TRANSURETHRAL 0.5239 18.2 1
PROSTATECTOMY
W CC \1\.
337............. TRANSURETHRAL 0.5239 18.2 3
PROSTATECTOMY
W/O CC \1\.
338............. TESTES 0.7107 24.5 1
PROCEDURES,
FOR MALIGNANCY
\2\.
339............. TESTES 2.1422 48.3 1
PROCEDURES,
NON-MALIGNANCY
AGE >17 \5\.
340............. TESTES 0.7107 24.5 0
PROCEDURES,
NON-MALIGNANCY
AGE 0-17 \2\*.
341............. PENIS 0.9568 30.0 2
PROCEDURES \3\.
342............. CIRCUMCISION 0.5239 18.2 0
AGE >17 \1\*.
343............. CIRCUMCISION 0.5239 18.2 0
AGE 0-17 \1\*.
344............. OTHER MALE 0.5239 18.2 1
REPRODUCTIVE
SYSTEM O.R.
PROCEDURES FOR
MALIGNANCY \1\
.
345............. OTHER MALE 2.1422 48.3 3
REPRODUCTIVE
SYSTEM O.R.
PROC EXCEPT
FOR MALIGNANCY
\5\.
346............. MALIGNANCY, 0.9607 29.7 154
MALE
REPRODUCTIVE
SYSTEM, W CC.
347............. MALIGNANCY, 0.7107 24.5 21
MALE
REPRODUCTIVE
SYSTEM, W/O CC
\2\.
348............. BENIGN 0.7107 24.5 5
PROSTATIC
HYPERTROPHY W
CC \2\.
349............. BENIGN 0.7107 24.5 1
PROSTATIC
HYPERTROPHY W/
O CC \2\.
350............. INFLAMMATION OF 1.3735 36.5 24
THE MALE
REPRODUCTIVE
SYSTEM \4\.
351............. STERILIZATION, 0.5239 18.2 0
MALE \1\*.
352............. OTHER MALE 1.3735 36.5 15
REPRODUCTIVE
SYSTEM
DIAGNOSES \4\.
353............. PELVIC 0.5239 18.2 1
EVISCERATION,
RADICAL
HYSTERECTOMY &
RADICAL
VULVECTOMY \1\.
354............. UTERINE, ADNEXA 0.5239 18.2 0
PROC FOR NON-
OVARIAN/
ADNEXAL MALIG
W CC \1\.
355............. UTERINE, ADNEXA 0.5239 18.2 1
PROC FOR NON-
OVARIAN/
ADNEXAL MALIG
W/O CC \1\.
356............. FEMALE 0.5239 18.2 5
REPRODUCTIVE
SYSTEM
RECONSTRUCTIVE
PROCEDURES \1\.
357............. UTERINE & 0.9568 30.0 0
ADNEXA PROC
FOR OVARIAN OR
ADNEXAL
MALIGNANCY \3\.
358............. UTERINE & 0.5239 18.2 1
ADNEXA PROC
FOR NON-
MALIGNANCY W
CC \1\.
359............. UTERINE & 0.5239 18.2 4
ADNEXA PROC
FOR NON-
MALIGNANCY W/O
CC \1\.
360............. VAGINA, CERVIX 0.7107 24.5 1
& VULVA
PROCEDURES \2\.
361............. LAPAROSCOPY & 0.9568 30.0 0
INCISIONAL
TUBAL
INTERRUPTION \
3\*.
362............. ENDOSCOPIC 0.9568 30.0 0
TUBAL
INTERRUPTION \
3\*.
363............. D&C, CONIZATION 1.3735 36.5 1
& RADIO-
IMPLANT, FOR
MALIGNANCY \4\.
364............. D&C, CONIZATION 0.7107 24.5 0
EXCEPT FOR
MALIGNANCY \2\
*.
365............. OTHER FEMALE 2.1422 48.3 5
REPRODUCTIVE
SYSTEM O.R.
PROCEDURES \5\.
366............. MALIGNANCY, 0.9694 29.5 134
FEMALE
REPRODUCTIVE
SYSTEM W CC.
[[Page 13451]]
367............. MALIGNANCY, 0.8881 30.4 43
FEMALE
REPRODUCTIVE
SYSTEM W/O CC.
368............. INFECTIONS, 0.9568 30.0 22
FEMALE
REPRODUCTIVE
SYSTEM \3\.
369............. MENSTRUAL & 0.7107 24.5 14
OTHER FEMALE
REPRODUCTIVE
SYSTEM
DISORDERS \2\.
370............. *CESAREAN 2.1422 48.3 0
SECTION W CC
\5\*.
371............. CESAREAN 2.1422 48.3 0
SECTION W/O CC
\5\*.
372............. VAGINAL 0.5239 18.2 0
DELIVERY W
COMPLICATING
DIAGNOSES \1\*.
373............. VAGINAL 0.5239 18.2 0
DELIVERY W/O
COMPLICATING
DIAGNOSES \1\*.
374............. VAGINAL 0.5239 18.2 0
DELIVERY W
STERILIZATION
&/OR D&C \1\*.
375............. VAGINAL 0.5239 18.2 0
DELIVERY W
O.R. PROC
EXCEPT STERIL
&/OR D&C \1\*.
376............. POSTPARTUM & 0.5239 18.2 0
POST ABORTION
DIAGNOSES W/O
O.R. PROCEDURE
\1\*.
377............. POSTPARTUM & 0.5239 18.2 0
POST ABORTION
DIAGNOSES W
O.R. PROCEDURE
\1\*.
378............. ECTOPIC 0.5239 18.2 0
PREGNANCY \1\*.
379............. THREATENED 0.5239 18.2 0
ABORTION \1\*.
380............. ABORTION W/O 0.5239 18.2 0
D&C \1\*.
381............. ABORTION W D&C, 0.5239 18.2 0
ASPIRATION
CURETTAGE OR
HYSTEROTOMY \1
\*.
382............. FALSE LABOR 0.5239 18.2 0
\1\*.
383............. OTHER 0.5239 18.2 0
ANTEPARTUM
DIAGNOSES W
MEDICAL
COMPLICATIONS
\1\*.
384............. OTHER 0.5239 18.2 0
ANTEPARTUM
DIAGNOSES W/O
MEDICAL
COMPLICATIONS
\1\*.
385............. NEONATES, DIED 0.9568 30.0 2
OR TRANSFERRED
TO ANOTHER
ACUTE CARE
FACILITY \3\*.
386............. EXTREME 0.9568 30.0 0
IMMATURITY OR
RESPIRATORY
DISTRESS
SYNDROME,
NEONATE \3\*.
387............. PREMATURITY W 0.9568 30.0 0
MAJOR PROBLEMS
\3\*.
388............. PREMATURITY W/O 0.9568 30.0 0
MAJOR PROBLEMS
\3\*.
389............. FULL TERM 0.9568 30.0 0
NEONATE W
MAJOR PROBLEMS
\3\*.
390............. NEONATE W OTHER 0.9568 30.0 2
SIGNIFICANT
PROBLEMS \3\.
391............. NORMAL NEWBORN 0.9568 30.0 0
\3\*.
392............. SPLENECTOMY AGE 0.9568 30.0 0
>17 \3\*.
393............. SPLENECTOMY AGE 0.9568 30.0 0
0-17 \3\*.
394............. OTHER O.R. 2.1422 48.3 1
PROCEDURES OF
THE BLOOD AND
BLOOD FORMING
ORGANS \5\.
395............. RED BLOOD CELL 0.8709 25.8 144
DISORDERS AGE
>17.
396............. RED BLOOD CELL 0.5239 18.2 2
DISORDERS AGE
0-17 \1\.
397............. COAGULATION 1.3069 29.5 43
DISORDERS.
398............. RETICULOENDOTHE 0.8361 25.4 36
LIAL &
IMMUNITY
DISORDERS W CC.
399............. RETICULOENDOTHE 0.7107 24.5 10
LIAL &
IMMUNITY
DISORDERS W/O
CC \2\.
400............. LYMPHOMA & 1.3735 36.5 2
LEUKEMIA W
MAJOR O.R.
PROCEDURE \4\.
401............. LYMPHOMA & NON- 0.9568 30.0 3
ACUTE LEUKEMIA
W OTHER O.R.
PROC W CC \3\.
402............. LYMPHOMA & NON- 0.9568 30.0 0
ACUTE LEUKEMIA
W OTHER O.R.
PROC W/O CC
\3\.
403............. LYMPHOMA & NON- 1.1242 29.4 280
ACUTE LEUKEMIA
W CC.
404............. LYMPHOMA & NON- 0.8288 24.7 88
ACUTE LEUKEMIA
W/O CC.
405............. ACUTE LEUKEMIA 0.9568 30.0 0
W/O MAJOR O.R.
PROCEDURE AGE
0-17 \3\*.
406............. MYELOPROLIF 2.1422 48.3 1
DISORD OR
POORLY DIFF
NEOPL W MAJ
O.R.PROC W CC
\5\.
407............. MYELOPROLIF 2.1422 48.3 0
DISORD OR
POORLY DIFF
NEOPL W MAJ
O.R.PROC W/O
CC \5\.
408............. MYELOPROLIF 0.7107 24.5 3
DISORD OR
POORLY DIFF
NEOPL W OTHER
O.R.PROC \2\.
409............. RADIOTHERAPY \3 0.9568 30.0 24
\.
410............. CHEMOTHERAPY W/ 1.3735 36.5 14
O ACUTE
LEUKEMIA AS
SECONDARY
DIAGNOSIS \4\.
411............. HISTORY OF 0.5239 18.2 0
MALIGNANCY W/O
ENDOSCOPY \1\*.
412............. HISTORY OF 0.5239 18.2 0
MALIGNANCY W
ENDOSCOPY \1\*.
413............. OTHER 0.9832 26.7 49
MYELOPROLIF
DIS OR POORLY
DIFF NEOPL
DIAG W CC.
414............. OTHER 0.8681 29.7 30
MYELOPROLIF
DIS OR POORLY
DIFF NEOPL
DIAG W/O CC.
415............. O.R. PROCEDURE 1.9075 44.1 227
FOR INFECTIOUS
& PARASITIC
DISEASES.
416............. SEPTICEMIA AGE 1.1222 29.4 1,695
>17.
417............. SEPTICEMIA AGE 2.1422 48.3 5
0-17 \5\.
418............. POSTOPERATIVE & 1.0078 28.4 522
POST-TRAUMATIC
INFECTIONS.
419............. FEVER OF 0.7107 24.5 17
UNKNOWN ORIGIN
AGE >17 W CC
\2\.
420............. FEVER OF 0.7107 24.5 11
UNKNOWN ORIGIN
AGE >17 W/O CC
\2\.
421............. VIRAL ILLNESS 0.9568 30.0 14
AGE >17 \3\.
422............. VIRAL ILLNESS & 0.9568 30.0 0
FEVER OF
UNKNOWN ORIGIN
AGE 0-17 \3\*.
423............. OTHER 1.0906 31.9 272
INFECTIOUS &
PARASITIC
DISEASES
DIAGNOSES.
424............. O.R. PROCEDURE 1.3735 36.5 15
W PRINCIPAL
DIAGNOSES OF
MENTAL ILLNESS
\4\.
425............. ACUTE 0.7912 30.5 63
ADJUSTMENT
REACTION &
PSYCHOLOGICAL
DYSFUNCTION.
426............. DEPRESSIVE 0.6290 25.5 92
NEUROSES.
427............. NEUROSES EXCEPT 0.9568 30.0 20
DEPRESSIVE \3\.
428............. DISORDERS OF 0.7423 31.6 31
PERSONALITY &
IMPULSE
CONTROL.
429............. ORGANIC 0.6401 27.9 957
DISTURBANCES &
MENTAL
RETARDATION.
430............. PSYCHOSES...... 0.5602 26.4 2,396
431............. CHILDHOOD 0.5023 23.0 50
MENTAL
DISORDERS.
432............. OTHER MENTAL 0.9568 30.0 7
DISORDER
DIAGNOSES \3\.
433............. ALCOHOL/DRUG 0.2778 12.6 59
ABUSE OR
DEPENDENCE,
LEFT AMA.
434............. ALC/DRUG ABUSE 0.5051 22.2 145
OR DEPEND,
DETOX OR OTH
SYMPT TREAT W
CC.
435............. ALC/DRUG ABUSE 0.4378 20.2 179
OR DEPEND,
DETOX OR OTH
SYMPT TREAT W/
O CC.
[[Page 13452]]
436............. ALC/DRUG 0.5239 18.2 4
DEPENDENCE W
REHABILITATION
THERAPY \1\.
437............. ALC/DRUG 0.5239 18.2 2
DEPENDENCE,
COMBINED REHAB
& DETOX
THERAPY \1\.
439............. SKIN GRAFTS FOR 1.3735 36.5 13
INJURIES \4\.
440............. WOUND 1.2503 39.8 40
DEBRIDEMENTS
FOR INJURIES.
441............. HAND PROCEDURES 0.9568 30.0 0
FOR INJURIES
\3\*.
442............. OTHER O.R. 1.3777 38.6 28
PROCEDURES FOR
INJURIES W CC.
443............. OTHER O.R. 1.3735 36.5 3
PROCEDURES FOR
INJURIES W/O
CC \4\.
444............. TRAUMATIC 1.2206 34.5 169
INJURY AGE >17
W CC.
445............. TRAUMATIC 0.9130 28.0 86
INJURY AGE >17
W/O CC.
446............. TRAUMATIC 0.9568 30.0 0
INJURY AGE 0-
17 \3\*.
447............. ALLERGIC 0.5239 18.2 2
REACTIONS AGE
>17 \1\.
448............. ALLERGIC 0.5239 18.2 0
REACTIONS AGE
0-17 \1\*.
449............. POISONING & 0.7107 24.5 19
TOXIC EFFECTS
OF DRUGS AGE
>17 W CC \2\.
450............. POISONING & 0.5239 18.2 11
TOXIC EFFECTS
OF DRUGS AGE
>17 W/O CC \1\.
451............. POISONING & 0.5239 18.2 0
TOXIC EFFECTS
OF DRUGS AGE 0-
17 \1\*.
452............. COMPLICATIONS 1.3070 33.1 311
OF TREATMENT W
CC.
453............. COMPLICATIONS 0.7486 23.6 61
OF TREATMENT W/
O CC.
454............. OTHER INJURY, 0.7107 24.5 11
POISONING &
TOXIC EFFECT
DIAG W CC \2\.
455............. OTHER INJURY, 0.7107 24.5 5
POISONING &
TOXIC EFFECT
DIAG W/O CC
\2\.
461............. O.R. PROC W 1.5801 43.2 197
DIAGNOSES OF
OTHER CONTACT
W HEALTH
SERVICES.
462............. REHABILITATION. 0.7802 28.3 7,505
463............. SIGNS & 0.8474 29.7 859
SYMPTOMS W CC.
464............. SIGNS & 0.7091 28.1 478
SYMPTOMS W/O
CC.
465............. AFTERCARE W 0.7107 24.5 20
HISTORY OF
MALIGNANCY AS
SECONDARY
DIAGNOSIS \2\.
466............. AFTERCARE W/O 1.2446 32.0 273
HISTORY OF
MALIGNANCY AS
SECONDARY
DIAGNOSIS.
467............. OTHER FACTORS 0.5239 18.2 7
INFLUENCING
HEALTH STATUS
\1\.
468............. EXTENSIVE O.R. 2.3052 49.6 429
PROCEDURE
UNRELATED TO
PRINCIPAL
DIAGNOSIS.
469............. PRINCIPAL 0.0000 na 0
DIAGNOSIS
INVALID AS
DISCHARGE
DIAGNOSIS.
470............. UNGROUPABLE.... 0.0000 na 0
471............. BILATERAL OR 2.1422 48.3 0
MULTIPLE MAJOR
JOINT PROCS OF
LOWER
EXTREMITY \5\*.
473............. ACUTE LEUKEMIA 1.2549 25.3 39
W/O MAJOR O.R.
PROCEDURE AGE
>17.
475............. RESPIRATORY 2.3043 38.9 4,182
SYSTEM
DIAGNOSIS WITH
VENTILATOR
SUPPORT.
476............. PROSTATIC O.R. 1.5835 41.1 26
PROCEDURE
UNRELATED TO
PRINCIPAL
DIAGNOSIS.
477............. NON-EXTENSIVE 1.9253 46.5 162
O.R. PROCEDURE
UNRELATED TO
PRINCIPAL
DIAGNOSIS.
478............. OTHER VASCULAR 1.8876 42.6 42
PROCEDURES W
CC.
479............. OTHER VASCULAR 1.8876 42.6 4
PROCEDURES W/O
CC.
480............. LIVER 0.0000 na 0
TRANSPLANT \6\.
481............. BONE MARROW 2.1422 48.3 0
TRANSPLANT \5\
*.
482............. TRACHEOSTOMY 1.3735 36.5 2
FOR FACE,
MOUTH & NECK
DIAGNOSES \4\.
483............. TRACHEOSTOMY 3.2118 51.4 326
EXCEPT FOR
FACE, MOUTH &
NECK DIAGNOSES.
484............. CRANIOTOMY FOR 2.1422 48.3 0
MULTIPLE
SIGNIFICANT
TRAUMA \5\*.
485............. LIMB 2.1422 48.3 0
REATTACHMENT,
HIP AND FEMUR
PROC FOR
MULTIPLE
SIGNIFICANT TR
\5\*.
486............. OTHER O.R. 2.1422 48.3 2
PROCEDURES FOR
MULTIPLE
SIGNIFICANT
TRAUMA \5\.
487............. OTHER MULTIPLE 1.3111 35.9 77
SIGNIFICANT
TRAUMA.
488............. HIV W EXTENSIVE 2.1422 48.3 2
O.R. PROCEDURE
\5\.
489............. HIV W MAJOR 1.5141 38.5 106
RELATED
CONDITION.
490............. HIV W OR W/O 1.4702 36.4 48
OTHER RELATED
CONDITION.
491............. MAJOR JOINT & 2.1422 48.3 0
LIMB
REATTACHMENT
PROCEDURES OF
UPPER
EXTREMITY \5\*
.
492............. CHEMOTHERAPY W 1.3735 36.5 1
ACUTE LEUKEMIA
AS SECONDARY
DIAGNOSIS \4\.
493............. LAPAROSCOPIC 0.9568 30.0 6
CHOLECYSTECTOM
Y W/O C.D.E. W
CC \3\.
494............. LAPAROSCOPIC 0.5239 18.2 1
CHOLECYSTECTOM
Y W/O C.D.E. W/
O CC \1\.
495............. LUNG TRANSPLANT 0.0000 na 0
\6\.
496............. COMBINED 0.9568 30.0 0
ANTERIOR/
POSTERIOR
SPINAL FUSION
\3\*.
497............. SPINAL FUSION W 0.9568 30.0 4
CC \3\.
498............. SPINAL FUSION W/ 0.9568 30.0 0
O CC \3\.
499............. BACK & NECK 2.1422 48.3 4
PROCEDURES
EXCEPT SPINAL
FUSION W CC
\5\.
500............. BACK & NECK 1.3735 36.5 1
PROCEDURES
EXCEPT SPINAL
FUSION W/O CC
\4\.
501............. KNEE PROCEDURES 2.1422 48.3 2
W PDX OF
INFECTION W CC
\5\.
502............. KNEE PROCEDURES 2.1422 48.3 0
W PDX OF
INFECTION W/O
CC \5\.
503............. KNEE PROCEDURES 1.3735 36.5 3
W/O PDX OF
INFECTION \4\.
504............. EXTENSIVE 3RD 1.3735 36.5 2
DEGREE BURNS W
SKIN GRAFT \4\.
505............. EXTENSIVE 3RD 1.3735 36.5 4
DEGREE BURNS W/
O SKIN GRAFT
\4\.
506............. FULL THICKNESS 1.3735 36.5 9
BURN W SKIN
GRAFT OR INHAL
INJ W CC OR
SIG TRAUMA
\4\.
507............. FULL THICKNESS 0.7107 24.5 2
BURN W SKIN
GRFT OR INHAL
INJ W/O CC OR
SIG TRAUMA
\2\.
508............. FULL THICKNESS 0.9568 30.0 24
BURN W/O SKIN
GRFT OR INHAL
INJ W CC OR
SIG TRAUMA
\3\.
[[Page 13453]]
509............. FULL THICKNESS 0.7107 24.5 9
BURN W/O SKIN
GRFT OR INH
INJ W/O CC OR
SIG TRAUMA
\2\.
510............. NON-EXTENSIVE 0.9568 30.0 23
BURNS W CC OR
SIGNIFICANT
TRAUMA \3\.
511............. NON-EXTENSIVE 0.7107 24.5 10
BURNS W/O CC
OR SIGNIFICANT
TRAUMA \2\.
601............. VERY SHORT-STAY 0.1546 4.3 543
ADMISSION NON-
PSYCHIATRIC
DIAGNOSES \7\.
602............. VERY SHORT-STAY 0.0827 4.5 10,361
ADMISSION
PSYCHIATRIC
DIAGNOSES \8\.
------------------------------------------------------------------------
* Proposed relative weights for these LTC-DRGs were determined by
assigning these cases to the appropriate low volume quintile because
they had no LTCH cases in the FY 2000 MedPAR.
\1\ Proposed relative weights for these LTC-DRGs were determined by
assigning these cases to low volume quintile 1.
\2\ Proposed relative weights for these LTC-DRGs were determined by
assigning these cases to low volume quintile 2.
\3\ Proposed relative weights for these LTC-DRGs were determined by
assigning these cases to low volume quintile 3.
\4\ Proposed relative weights for these LTC-DRGs were determined by
assigning these cases to low volume quintile 4.
\5\ Proposed relative weights for these LTC-DRGs were determined by
assigning these cases to low volume quintile 5.
\6\ Proposed relative weights for these LTC-DRGs were assigned a value
of 0.0.
\7\ Proposed relative weights for these LTC-DRGs were determined by
combining LTCH cases in MDC 19 or 20 with a length of stay 7 days or
fewer.
\8\ Proposed relative weights for these LTC-DRGs were determined by
combining LTCH cases in MDCs other than 19 or 20 with a length of stay
7 days or fewer.
B. Special Cases
Under section 123 of Public Law 106-113, the Secretary generally
has broad authority in developing the prospective payment system for
LTCHs. Thus, the Secretary generally has broad authority in determining
whether (and how) to make adjustments to prospective payment system
payments. Section 307 of Public Law 106-554 directs the Secretary to
``examine'' appropriate adjustments to the prospective payment system,
including certain specific adjustments, but under that section the
Secretary continues to have discretion as to whether to provide for
adjustments to reflect variations in the necessary costs of treatment
among LTCHs.
Generally, LTCHs, as described in section 1886(d)(1)(B)(iv) of the
Act, are distinguished from other inpatient hospital settings by an
average length of stay greater than 25 days. Certain ``special'' cases
that have stays of considerably less than the average length of stay
and that receive significantly less than the full course of treatment
for a specific LTC-DRG would be paid inappropriately if the hospital
were to receive the full LTC-DRG payment. Further, because of the
budget neutrality requirement of section 123(a)(1) of Public Law 106-
113, ``overpayment'' for these cases would reduce payments for all
other cases that warrant full payment based on the LTCH services
delivered. We discuss the special cases below in terms of proposed
definitions, policy rationale, and proposed payment methodology. The
three proposed subsets are very short-stay discharges, short-stay
outliers, and interrupted stays.
1. Very Short-Stay Discharges
We are proposing, under Sec. 412.527, to define a very short-stay
discharge as a discharge that has a length of stay of 7 days or fewer
(regardless of the LTC-DRG assignment), irrespective of the discharge
designation (including cases where the patient expires). A very short-
stay discharge often occurs when it is determined, following admission
to a LTCH, that the beneficiary would receive more appropriate care in
another setting, such as a patient who experiences an acute episode or
requires more intensive rehabilitation therapy than is available at the
LTCH. These patients may be discharged to another site of care and then
subsequently readmitted to the LTCH following that stay if they require
LTCH treatment (see the interrupted stay policy in section IV.B.3 of
this preamble for further clarification regarding length of stay
criteria), or they may be discharged and not subsequently readmitted
because they no longer require LTCH treatment. Other circumstances that
would warrant classification as a very short-stay discharge would
involve patients who are either discharged to their home or who expire
within the first 7 days of being admitted to a LTCH.
Since LTCHs are defined by statute as generally having an average
length of stay greater than 25 days, we are proposing to make an
adjustment for very short-stay discharges in order to make appropriate
payment to cases that may not necessarily require the type of services
intended to be provided at a LTCH. Further, we believe that providing a
special payment for very short-stay discharges neither encourages
hospitals to admit patients for whom they knowingly are unable to
provide complete treatment in order to maximize payment, nor severely
penalizes providers that, in good faith, admit a patient and provide
some services before realizing that the beneficiary would receive more
appropriate treatment at another site of care.
In considering the appropriate upper day threshold for identifying
very short-stay discharges, we found in our analysis that, from a
clinical perspective, it takes about 3 days to evaluate the
appropriateness of the admission and typically an additional 3 to 4
days for any treatment to begin to have any impact on the patient's
health status. Therefore, we believe that patient cases with 7 days or
less treatment in a LTCH are different than the typical LTCH patient
cases and generally the patients are not in the hospital long enough to
clinically receive full LTCH treatment. We believe that establishing a
special payment for these types of cases addresses the problem of an
extremely short length of stay that is inherent in a discharge-based
prospective payment system. Furthermore, because the rates are set to
be budget neutral, if we did not propose to make this adjustment,
providing a full prospective payment system payment for very short-stay
cases would reduce payments for nonshort-stay LTCH cases.
We are proposing to pay a very short-stay discharge case under a
LTC-DRG-specific per diem methodology. Analysis of payment-to-cost
ratios indicates that the accuracy of the payments could be improved if
we categorize very short-stay discharge cases into two categories based
on the primary diagnosis--one for psychiatric
[[Page 13454]]
cases and one for all other types of cases. We believe it would be
appropriate to separate very short-stay discharge cases into
psychiatric and nonpsychiatric categories because our analysis shows
that the resources used to treat these two types of patients during the
first 7 days differ significantly. In our simulations, combining
psychiatric very short-stay discharge cases with all other very short-
stay discharge cases resulted in a considerable ``overpayment'' of the
very short-stay discharge psychiatric cases and a substantial
``underpayment'' of all other (nonpsychiatric) very short-stay
discharge cases. As shown in Table 4 above, the proposed relative
weight of LTC-DRG 602 for very short-stay discharge psychiatric cases
(0.0827) is almost half the proposed relative weight of LTC-DRG 601
(0.1546) for very short-stay discharge nonpsychiatric cases. This means
that the average charge for cases with a stay of 7 days or less in
nonpsychiatric LTC-DRGs is almost twice the average charge for cases
with a stay of 7 days or less in psychiatric LTC-DRGs. Therefore, for
payment of very short-stay discharge cases, we are proposing under
Sec. 412.527(c)(1), to categorize a discharge into either a very short-
stay discharge psychiatric LTC-DRG or a very short-stay discharge
nonpsychiatric LTC-DRG. Additional analysis of nonpsychiatric cases
with a length of stay of 7 days or fewer indicates that there is not a
significant difference in the resource use across other ``categories''
of LTCH very short-stay discharge cases and the equity of the payment
system would not be improved. Thus, we do not believe further
distinctions among very short-stay discharge nonpsychiatric cases would
be necessary or appropriate.
The relative weight for each of these two very short-stay discharge
LTC-DRGs would be based on the average charge for all very short-stay
discharge psychiatric cases and all nonpsychiatric cases, respectively,
relative to all other LTC-DRGs (excluding all very short-stay discharge
cases). We computed the proposed relative weights for the very short-
stay discharge psychiatric LTC-DRG and very short-stay discharge
nonpsychiatric LTC-DRG by identifying all cases in which the length of
stay is 7 days or fewer and categorizing those cases as either
psychiatric or nonpsychiatric based on the primary diagnosis of the
discharge. Very short-stay discharge psychiatric cases were identified
based on the primary ICD-9-CM diagnosis code that would otherwise be
classified in LTC-DRGs 424 through 432 in MDC 19 (Mental Diseases and
Disorders) or LTC-DRGs 433 through 437 in MDC 20 (Alcohol/Drug Use and
Alcohol/Drug-Induced Organic Mental Disorders) in the absence of a very
short stay discharge policy. The proposed relative weights for these
two very short-stay discharge LTC-DRGs would be calculated in the same
manner discussed previously, using the hospital-specific relative value
methodology. Each very short-stay discharge LTC-DRG per diem amount
would be determined by dividing the applicable Federal payment rate
(Federal payment rate x LTC-DRG weight) by 7 days (proposed
Sec. 412.527(c)(2)).
2. Short-Stay Outliers
We believe that considerations similar to those underlying the
proposed very short-stay discharge policy also apply to short-stay
cases with a length of stay greater than 7 days. More specifically, we
note that some Medicare patients may have slightly longer lengths of
stay, but are still well below the average length of stay of greater
than the 25-day threshold specified in the statute, reflecting the fact
that these beneficiaries may not require the type of care generally
provided in a LTCH or may require urgent treatment at another site of
care. Therefore, we also are proposing a short-stay outlier policy that
would encompass cases with a length of stay beyond the 7 days that are
addressed by the proposed very short-stay discharge policy.
A short-stay outlier case may occur when a beneficiary receives
less than the full course of treatment at the LTCH before being
discharged. These patients may be discharged to another site of care
and be readmitted to the LTCH if they require subsequent LTCH treatment
(see the interrupted stay policy in section IV.B.3. of this preamble
for further clarification regarding length of stay criteria), or they
may be discharged and not readmitted because they no longer require
LTCH treatment.
Furthermore, patients may expire early in their LTCH stay. As noted
above, generally LTCHs are defined by statute as having an average
length of stay of greater than 25 days. Therefore, we believe that a
payment adjustment for short-stay outlier cases would result in more
appropriate payments since these cases most likely would not receive a
full course of treatment in such a short period of time and a full LTC-
DRG payment may not always be appropriate. Payment-to-cost ratios for
the cases described above show that if LTCHs receive a full LTC-DRG
payment for those cases, they would be significantly ``overpaid'' for
the resources they have actually expended.
We also believe that providing a reduced payment for short-stay
outlier cases neither encourages hospitals to admit patients for whom
they knowingly are unable to provide complete treatment in order to
maximize payment, nor severely penalizes providers that, in good faith,
admit a patient and provide some services before realizing that the
beneficiary would receive more appropriate treatment at another site of
care or before the beneficiary is discharged to go home. Establishing a
short-stay outlier payment for these types of cases addresses the
incentives inherent in a discharge-based prospective payment system for
treating patients with a short length of stay. One of the primary
objectives of a prospective payment system is to provide incentives for
hospitals to become more efficient and, in doing so, to ensure that
they can still receive adequate and appropriate payments. Because the
rates are set to be budget neutral, providing a full prospective
payment system payment for those cases that do not actually require the
full course of treatment would reduce payments for cases that warrant
full payment based on the LTCH services furnished. Therefore, we
believe that a short-stay outlier policy would permit more equitable
payment.
In considering possible short-stay outlier policies, we sought to
balance appropriate payments to shorter stay cases, which are generally
less expensive than the average case in each LTC-DRG, and payments to
inlier cases in each LTC-DRG. In the absence of a short-stay outlier
policy, based on analysis of payment-to-cost ratios, the full LTC-DRG
payment would ``overpay'' the short-stay cases and ``underpay'' the
inlier cases. A short-stay outlier policy that results in payment-to-
cost ratios that are at (or close to) 1.0 would ensure appropriate
payments to both short-stay and inlier cases within a LTC-DRG because,
on average, payments would closely match costs for these cases under
this proposed prospective payment system.
With no short-stay outlier policy, we estimate that payment-to-cost
ratios would be greater than 2.0 for cases with lengths of stays below
the average length of stay for the LTC-DRG. We considered three
alternative short-stay outlier policies in which payment would be
based:
The least of 100 percent of the cost of the case, 100
percent of the LTC-DRG specific per diem amount multiplied by the
length of stay, or the full LTC-DRG
[[Page 13455]]
payment for cases with a length of stay between 8 days and the average
length of stay of the LTC-DRG;
The least of 150 percent of the cost of the case, 150
percent of the LTC-DRG specific per diem amount multiplied by the
length of stay, or the full LTC-DRG payment for cases with a length of
stay between 8 days and two-thirds of the average length of stay of the
LTC-DRG; or
The least of 200 percent of the cost of the case, 200
percent of the LTC-DRG specific per diem amount multiplied by the
length of stay, or the full LTC-DRG payment for cases with a length of
stay between 8 days and half of the average length of stay of the LTC-
DRG.
In each of the three alternatives examined, the short-stay outlier
day threshold corresponds to the day where the full LTC-DRG payment
would be reached by paying the specified percentage of the per diem
amount for the LTC-DRG. This would result in a gradual increase in
payment as the length of stay increases without producing a ``payment
cliff'', which would provide an incentive to discharge a patient one
day later because there would be a significant increase in the payment.
For example, in a LTC-DRG with an average length of stay of 24 days and
a full LTC-DRG payment of $24,000, the per diem amount would be $1,000
per day ($24,000/24 days). At 150 percent of the per diem amount (1.5
x $1,000 = $1,500 per day), the full LTC-DRG payment ($24,000) would
be reached on day 16 (16 days x $1,500 per day = $24,000), which is
equal to two-thirds of the average length of stay for the LTC-DRG (2/3
x 24 days = 16 days). Thus, under the second alternative, the upper
day threshold is two-thirds of the average length of stay and a case
with a length of stay between 8 and 16 would be paid as a short-stay
outlier in this example.
Our analysis of the three alternative short-stay outlier policies
described above showed that a short-stay outlier policy that would pay
the least of 100 percent of cost, 100 percent of the LTC-DRG per diem
amount, or the full LTC-DRG payment with a length of stay between 8
days and the average length of stay for the LTC-DRG would result in an
average payment-to-cost ratio of slightly less than 1.0 for cases
identified as short-stay outliers and a payment-to-cost ratio of just
over 1.0 for cases that exceeded the average length of stay. Such a
short-stay outlier policy would slightly ``underpay'' most inlier cases
while ``overpaying'', and thus reducing the incentives for efficiency
in the delivery of care of, longer stay cases.
Our analysis also showed that a short-stay outlier policy that
would pay the least of 200 percent of cost, 200 percent of the LTC-DRG
per diem amount, or the full LTC-DRG payment for cases that stayed
between 8 days and half of the average length of stay for the LTC-DRG
would result in an average payment-to-cost ratio of greater than 1.5
for those cases identified as short-stay outliers. Such a short-stay
outlier policy would result in significant overpayment to those cases
identified as short-stay outliers.
Our analysis of a short-stay outlier policy that would pay the
least of 150 percent of cost, 150 percent of the LTC-DRG per diem
amount, or the full LTC-DRG payment for cases that stayed between 8
days and two-thirds of the average length of stay for the LTC-DRG
showed that payment-to-cost ratios for both cases that would be
identified as short-stay outliers and inlier cases (that are below the
high-cost outlier threshold) would be at or slightly above 1.0. We
believe that this alternative would most appropriately pay cases
identified as short-stay outliers, inlier cases, and longer stay cases
without an incentive to provide inefficient care.
Payment simulations showed that, of the LTCH cases in the FY 2000
MedPAR with a length of stay between 8 days and two-thirds of the
average length of stay of the LTC-DRG under the proposed system,
payment to 60.8 percent of those cases would be capped at 150 percent
of cost. While we acknowledge that under any prospective payment
system, hospitals have the opportunity to make a profit on discharges,
particularly to help cover the expenses of their extraordinarily costly
Medicare patients, we believe that a payment limited to 150 percent of
costs or 150 percent of the LTC-DRG per diem payment amount would allow
LTCHs to make a reasonable, but not excessive, profit for these short-
stay patients.
Based on the analysis described above, we are proposing, under
Sec. 412.529, to define a short-stay outlier as a case that has a
length of stay between 8 days and two-thirds of the arithmetic average
length of stay for each LTC-DRG. We also are proposing to pay a short-
stay outlier case defined in proposed Sec. 412.529(a) the least of--(1)
150 percent of the LTC-DRG specific per diem based payment; (2) 150
percent of the cost of the case; or (3) the full LTC-DRG payment
(proposed Sec. 412.529(c)(1)).
The LTC-DRG specific per diem based payment would be determined
using the proposed standard Federal payment rate (Federal payment rate
x LTC-DRG weight) and the arithmetic mean length of stay of the
specific LTC-DRG (proposed Sec. 412.529(c)(2)). The cost of a case
would be determined using the hospital-specific cost-to-charge ratio
and the Medicare allowable charges for the case (proposed
Sec. 412.529(c)(3)).
3. Interrupted Stay
We are proposing, under Sec. 412.531, to define interrupted stay
cases as those cases in which a LTCH patient is discharged to an
inpatient acute care hospital, an IRF, or a SNF for treatment or
services not available at the LTCH for a period that is within (less
than or equal to) one standard deviation from the arithmetic average
length of stay for the DRG assigned for the inpatient acute care
hospital stay, one standard deviation from the arithmetic average
length of stay for the CMG and the comorbidity tier assigned for the
IRF stay, or within 45 days in a SNF (that is, one standard deviation
from the average length of stay for all Medicare SNF cases), followed
by readmittance to the same LTCH. In considering an appropriate
interrupted stay threshold, we attempted to balance the payment
incentives of both the LTCH and the acute care hospital, IRF, or SNF to
which the LTCH patient is discharged before being readmitted to the
LTCH. In order to assure that discharges from LTCHs are based on
clinical considerations and not financial incentives, we are proposing
that the proposed interrupted stay day threshold would only pay the
LTCH for more than one discharge if the patient's length of stay at the
acute care hospital, IRF, or SNF exceeds one standard deviation from
the average length of stay for the DRG, the combination of the CMG and
the comorbidity tier, or for all Medicare SNF cases, respectively. This
would, therefore, make it more difficult for a LTCH to find a
prospectively paid acute care hospital, IRF, or SNF that would admit a
LTCH patient just to allow the LTCH to receive two separate LTC-DRG
payments.
We believe that an interrupted stay day threshold of one standard
deviation from the average length of stay for either the acute care
hospital DRG, the IRF combination of the CMG and the comorbidity tier,
or for all Medicare SNF cases provides the appropriate disincentive
since cases that stay significantly longer than the average length of
stay are more costly than the average case. Since the SNF prospective
payment system is a per diem system, not a per discharge system, we are
proposing the same threshold for all SNF cases regardless of the
resource utilization group (RUG) classification.
[[Page 13456]]
We believe that the proposed interrupted stay threshold is appropriate
because, in general, the average length of stay plus one standard
deviation would capture the majority of the discharges that are similar
to the average length of stay for the respective DRG, combination CMG
and comorbidity tier, or for all Medicare SNF cases. In addition, this
is consistent with the basis for our payment policy for new
technologies under the hospital inpatient prospective payment system
where the cost of a new technology must exceed one standard deviation
beyond the mean standardized charge for all cases in the DRG to which
the new technology is assigned in order to receive additional payments
(see the September 7, 2001 final rule, 66 FR 46914). The counting of
the days for the interruption of the stay would begin on the day of
discharge from the proposed LTCH and would end on the day the patient
is readmitted to the LTCH. For the purposes of payment under the
proposed LTCH prospective payment system, a case that meets the
proposed definition of an interrupted stay would be considered a single
discharge from the LTCH, and, therefore, would receive only one LTC-DRG
payment. Since the two LTCH stays would be considered as a single case
for the purposes of payment under the LTCH prospective payment system,
the second discharge from the LTCH would be covered under the single
LTC-DRG payment. The acute care hospital, the IRF, or the SNF stay
would be paid in accordance with the applicable payment policies for
those providers.
We are proposing to make one discharge payment under the LTCH
prospective payment system for an interrupted stay case as defined
under proposed Sec. 412.531(a), to reduce the incentives inherent in a
discharged-based prospective payment system of ``shifting'' patients
between Medicare-covered sites of care in order to maximize Medicare
payments. This proposed policy is particularly appropriate for LTCHs
since, as a group, these hospitals are considerably diverse and offer a
broad range of services such that where some LTCHs may be able to
handle certain acute conditions, others would need to transfer their
patients to acute care hospitals. (See section I.E. of this preamble
for a description of the universe of LTCHs.)
For instance, some LTCHs are equipped with operating rooms and
intensive care units and are capable of performing minor surgeries.
However, other LTCHs are unable to provide those services and would
need to transfer the beneficiary to an acute care hospital. Similarly,
a patient who no longer requires hospital-level care, but is not ready
to return to the community, could be transferred to a SNF. This
incentive to ``shift'' patients between Medicare-covered sites of care
in order to maximize Medicare payments is of a particular concern when
the LTCH is physically located within the walls of another hospital.
Often, the LTCH patient may not even be aware of a transfer to the
other hospital or SNF because he or she will have only been moved down
the hall or to another wing of the building. Moreover, our research
reveals that hospitals-within-hospitals are the fastest growing type of
LTCH. We also believe that the same incentives for inappropriate
discharges and readmittance exist for satellite LTCHs that are located
within acute care hospitals, described in Sec. 412.22(h), as well as
for distinct part SNFs located in acute care hospitals or co-located
with LTCHs. (We address the particular issues of onsite discharges and
readmittances in section IV.B.5. (proposed Sec. 412.532(d)) in this
proposed rule.)
Whether or not a LTCH patient who is discharged to an inpatient
acute care hospital, an IRF, or a SNF and then returns to the same LTCH
is treated as an interrupted stay (with one LTC-DRG payment) or as a
new admission (with two separate LTC-DRG payments) would depend on the
patient's length of stay compared to the arithmetic average length of
stay and the standard deviation for the hospital inpatient prospective
payment system DRG, the IRF combination of the CMG and the comorbidity
tier, or 45 days for all Medicare SNF cases. The arithmetic average
length of stay and one standard deviation for each acute care hospital
DRG and each IRF combination of the CMG and the comorbidity tier are
shown below in Tables 5 and 6, respectively.
Table 5.--Arithmetic Average Length of Stay and One Standard Deviation
for Acute Care Hospital DRGs
------------------------------------------------------------------------
Average length of
stay plus one
Hospital inpatient prospective payment system DRG standard
deviation
------------------------------------------------------------------------
1.................................................... 18
2.................................................... 19
3.................................................... 56
4.................................................... 16
5.................................................... 7
6.................................................... 7
7.................................................... 22
8.................................................... 6
9.................................................... 13
10................................................... 14
11................................................... 8
12................................................... 13
13................................................... 11
14................................................... 11
15................................................... 7
16................................................... 12
17................................................... 6
18................................................... 10
19................................................... 7
20................................................... 20
21................................................... 12
22................................................... 10
23................................................... 8
24................................................... 11
25................................................... 6
26................................................... 5
27................................................... 11
28................................................... 12
29................................................... 7
31................................................... 13
32................................................... 5
34................................................... 10
35................................................... 10
36................................................... 3
37................................................... 9
38................................................... 5
39................................................... 4
40................................................... 7
42................................................... 5
43................................................... 5
44................................................... 9
45................................................... 6
46................................................... 9
47................................................... 6
49................................................... 10
50................................................... 4
51................................................... 7
52................................................... 4
53................................................... 8
54................................................... 2
55................................................... 7
56................................................... 6
57................................................... 10
59................................................... 6
60................................................... 6
61................................................... 12
62................................................... 2
63................................................... 10
64................................................... 13
65................................................... 5
66................................................... 6
67................................................... 7
68................................................... 7
69................................................... 6
70................................................... 5
71................................................... 7
72................................................... 7
73................................................... 9
75................................................... 19
76................................................... 24
77................................................... 10
78................................................... 11
79................................................... 16
80................................................... 10
81................................................... 48
82................................................... 13
83................................................... 10
[[Page 13457]]
84................................................... 6
85................................................... 12
86................................................... 7
87................................................... 12
88................................................... 9
89................................................... 10
90................................................... 7
91................................................... 8
92................................................... 12
93................................................... 7
94................................................... 12
95................................................... 7
96................................................... 8
97................................................... 6
98................................................... 9
99................................................... 6
100.................................................. 4
101.................................................. 8
102.................................................. 5
103.................................................. 112
104.................................................. 25
105.................................................. 18
106.................................................. 19
107.................................................. 17
108.................................................. 19
109.................................................. 13
110.................................................. 18
111.................................................. 8
113.................................................. 24
114.................................................. 17
115.................................................. 16
116.................................................. 9
117.................................................. 10
118.................................................. 6
119.................................................. 11
120.................................................. 20
121.................................................. 12
122.................................................. 6
123.................................................. 10
124.................................................. 9
125.................................................. 5
126.................................................. 22
127.................................................. 10
128.................................................. 9
129.................................................. 8
130.................................................. 10
131.................................................. 7
132.................................................. 6
133.................................................. 4
134.................................................. 6
135.................................................. 9
136.................................................. 5
138.................................................. 8
139.................................................. 4
140.................................................. 5
141.................................................. 7
142.................................................. 5
143.................................................. 4
144.................................................. 11
145.................................................. 5
146.................................................. 18
147.................................................. 9
148.................................................. 22
149.................................................. 9
150.................................................. 20
151.................................................. 10
152.................................................. 14
153.................................................. 8
154.................................................. 25
155.................................................. 8
156.................................................. 15
157.................................................. 11
158.................................................. 5
159.................................................. 10
160.................................................. 5
161.................................................. 9
162.................................................. 4
163.................................................. 8
164.................................................. 14
165.................................................. 7
166.................................................. 10
167.................................................. 4
168.................................................. 10
169.................................................. 5
170.................................................. 24
171.................................................. 9
172.................................................. 14
173.................................................. 7
174.................................................. 9
175.................................................. 5
176.................................................. 10
177.................................................. 8
178.................................................. 5
179.................................................. 11
180.................................................. 10
181.................................................. 6
182.................................................. 8
183.................................................. 5
184.................................................. 5
185.................................................. 9
186.................................................. 18
187.................................................. 7
188.................................................. 11
189.................................................. 6
190.................................................. 23
191.................................................. 28
192.................................................. 11
193.................................................. 22
194.................................................. 11
195.................................................. 18
196.................................................. 9
197.................................................. 16
198.................................................. 7
199.................................................. 19
200.................................................. 22
201.................................................. 26
202.................................................. 13
203.................................................. 13
204.................................................. 11
205.................................................. 12
206.................................................. 7
207.................................................. 10
208.................................................. 5
209.................................................. 8
210.................................................. 12
211.................................................. 8
212.................................................. 25
213.................................................. 18
216.................................................. 19
217.................................................. 29
218.................................................. 10
219.................................................. 5
220.................................................. 7
223.................................................. 6
224.................................................. 3
225.................................................. 10
226.................................................. 14
227.................................................. 5
228.................................................. 8
229.................................................. 5
230.................................................. 12
231.................................................. 11
232.................................................. 7
233.................................................. 15
234.................................................. 7
235.................................................. 16
236.................................................. 9
237.................................................. 6
238.................................................. 17
239.................................................. 12
240.................................................. 13
241.................................................. 7
242.................................................. 13
243.................................................. 9
244.................................................. 10
245.................................................. 8
246.................................................. 8
247.................................................. 7
248.................................................. 9
249.................................................. 8
250.................................................. 8
251.................................................. 5
253.................................................. 10
254.................................................. 6
256.................................................. 10
257.................................................. 6
258.................................................. 3
259.................................................. 7
260.................................................. 2
261.................................................. 5
262.................................................. 8
263.................................................. 24
264.................................................. 13
265.................................................. 16
266.................................................. 7
267.................................................. 8
268.................................................. 8
269.................................................. 17
270.................................................. 8
271.................................................. 14
272.................................................. 12
273.................................................. 8
274.................................................. 13
275.................................................. 10
276.................................................. 10
277.................................................. 11
278.................................................. 7
279.................................................. 4
280.................................................. 8
281.................................................. 6
282.................................................. 2
283.................................................. 9
284.................................................. 6
285.................................................. 20
286.................................................. 13
287.................................................. 22
288.................................................. 12
289.................................................. 7
290.................................................. 5
291.................................................. 3
292.................................................. 21
[[Page 13458]]
293.................................................. 12
294.................................................. 9
295.................................................. 7
296.................................................. 10
297.................................................. 6
298.................................................. 6
299.................................................. 11
300.................................................. 12
301.................................................. 7
302.................................................. 16
303.................................................. 15
304.................................................. 18
305.................................................. 6
306.................................................. 12
307.................................................. 4
308.................................................. 14
309.................................................. 4
310.................................................. 10
311.................................................. 3
312.................................................. 10
313.................................................. 5
315.................................................. 19
316.................................................. 13
317.................................................. 6
318.................................................. 12
319.................................................. 5
320.................................................. 10
321.................................................. 7
322.................................................. 7
323.................................................. 6
324.................................................. 3
325.................................................. 7
326.................................................. 5
327.................................................. 5
328.................................................. 7
329.................................................. 4
331.................................................. 11
332.................................................. 6
333.................................................. 10
334.................................................. 9
335.................................................. 5
336.................................................. 7
337.................................................. 3
338.................................................. 11
339.................................................. 10
341.................................................. 8
342.................................................. 7
344.................................................. 6
345.................................................. 8
346.................................................. 12
347.................................................. 6
348.................................................. 8
349.................................................. 5
350.................................................. 8
352.................................................. 9
353.................................................. 13
354.................................................. 11
355.................................................. 5
356.................................................. 4
357.................................................. 16
358.................................................. 9
359.................................................. 4
360.................................................. 6
361.................................................. 7
363.................................................. 8
364.................................................. 9
365.................................................. 15
366.................................................. 14
367.................................................. 6
368.................................................. 12
369.................................................. 7
370.................................................. 13
371.................................................. 7
372.................................................. 7
373.................................................. 4
374.................................................. 6
375.................................................. 3
376.................................................. 6
377.................................................. 10
378.................................................. 4
379.................................................. 8
380.................................................. 4
381.................................................. 6
382.................................................. 2
383.................................................. 8
384.................................................. 4
389.................................................. 34
390.................................................. 7
392.................................................. 19
394.................................................. 18
395.................................................. 9
396.................................................. 9
397.................................................. 10
398.................................................. 12
399.................................................. 6
400.................................................. 20
401.................................................. 22
402.................................................. 8
403.................................................. 16
404.................................................. 9
406.................................................. 20
407.................................................. 8
408.................................................. 19
409.................................................. 12
410.................................................. 8
411.................................................. 4
412.................................................. 4
413.................................................. 14
414.................................................. 8
415.................................................. 30
416.................................................. 14
417.................................................. 8
418.................................................. 12
419.................................................. 9
420.................................................. 6
421.................................................. 7
422.................................................. 5
423.................................................. 17
424.................................................. 36
425.................................................. 8
426.................................................. 9
427.................................................. 10
428.................................................. 19
429.................................................. 15
430.................................................. 17
431.................................................. 15
432.................................................. 12
433.................................................. 7
439.................................................. 18
440.................................................. 20
441.................................................. 7
442.................................................. 19
443.................................................. 7
444.................................................. 8
445.................................................. 5
447.................................................. 5
449.................................................. 8
450.................................................. 4
451.................................................. 2
452.................................................. 10
453.................................................. 5
454.................................................. 11
455.................................................. 6
461.................................................. 12
462.................................................. 20
463.................................................. 8
464.................................................. 6
465.................................................. 6
466.................................................. 9
467.................................................. 7
468.................................................. 26
470.................................................. 88
471.................................................. 10
473.................................................. 28
475.................................................. 22
476.................................................. 20
477.................................................. 18
478.................................................. 15
479.................................................. 7
480.................................................. 44
481.................................................. 37
482.................................................. 26
483.................................................. 69
484.................................................. 25
485.................................................. 19
486.................................................. 24
487.................................................. 14
488.................................................. 34
489.................................................. 18
490.................................................. 11
491.................................................. 6
492.................................................. 32
493.................................................. 11
494.................................................. 4
495.................................................. 28
496.................................................. 18
497.................................................. 12
498.................................................. 6
499.................................................. 9
500.................................................. 5
501.................................................. 20
502.................................................. 12
503.................................................. 8
504.................................................. 56
505.................................................. 9
506.................................................. 33
507.................................................. 16
508.................................................. 16
509.................................................. 9
510.................................................. 15
511.................................................. 11
512.................................................. 24
513.................................................. 18
514.................................................. 16
515.................................................. 14
516.................................................. 9
517.................................................. 6
518.................................................. 8
519.................................................. 11
520.................................................. 4
521.................................................. 12
[[Page 13459]]
522.................................................. 17
523.................................................. 8
------------------------------------------------------------------------
* Arithmetic average length of stay and standard deviation based on data
used to develop the hospital inpatient prospective payment system FY
2002 DRG relative weights (see the August 1, 2001 final rule, 66 FR
40054).
Table 6.--Arithmetic Average Length of Stay and One Standard Deviation
for IRF Combination of CMG and Comorbidity Tiers
------------------------------------------------------------------------
Average length
Comorbidity of stay plus
IRF prospective payment system CMG tier one standard
deviation**
------------------------------------------------------------------------
0101**.................................. 1 11
0101**.................................. 2 10
0101.................................... 3 8
0101.................................... None 13
0102**.................................. 1 17
0102.................................... 2 18
0102.................................... 3 16
0102.................................... 9 15
0103**.................................. 1 19
0103**.................................. 2 18
0103.................................... 3 17
0103.................................... None 18
0104.................................... 1 25
0104.................................... 2 18
0104.................................... 3 18
0104.................................... None 19
0105.................................... 1 24
0105.................................... 2 25
0105.................................... 3 22
0105.................................... None 23
0106.................................... 1 26
0106.................................... 2 26
0106.................................... 3 27
0106.................................... None 27
0107.................................... 1 25
0107.................................... 2 30
0107.................................... 3 30
0107.................................... None 30
0108**.................................. 1 35
0108.................................... 2 44
0108.................................... 3 33
0108.................................... None 33
0109.................................... 1 36
0109.................................... 2 35
0109.................................... 3 31
0109.................................... None 35
0110**.................................. 1 39
0110.................................... 2 35
0110.................................... 3 40
0110.................................... None 39
0111**.................................. 1 40
0111.................................... 2 38
0111.................................... 3 35
0111.................................... None 39
0112.................................... 1 66
0112.................................... 2 52
0112.................................... 3 45
0112.................................... None 44
0113.................................... 1 46
0113.................................... 2 41
0113.................................... 3 38
0113.................................... None 40
0114.................................... 1 56
0114.................................... 2 51
0114.................................... 3 48
0114.................................... None 48
0201**.................................. 1 19
0201.................................... 2 22
0201.................................... 3 21
0201.................................... None 17
0202**.................................. 1 27
0202.................................... 2 24
0202.................................... 3 26
0202.................................... None 25
0203.................................... 1 27
0203.................................... 2 27
0203.................................... 3 30
0203.................................... None 27
0204**.................................. 1 35
0204.................................... 2 34
0204.................................... 3 33
0204.................................... None 33
0205.................................... 1 65
0205.................................... 2 56
0205.................................... 3 52
0205.................................... None 48
0301**.................................. 1 21
0301.................................... 2 22
0301.................................... 3 19
0301.................................... None 20
0302**.................................. 1 27
0302.................................... 2 25
0302.................................... 3 27
0302.................................... None 25
0303.................................... 1 33
0303.................................... 2 35
0303.................................... 3 33
0303.................................... None 32
0304.................................... 1 63
0304.................................... 2 50
0304.................................... 3 53
0304.................................... None 47
0401**.................................. 1 22
0401.................................... 2 22
0401.................................... 3 30
0401.................................... None 30
0402**.................................. 1 30
0402.................................... 2 27
0402.................................... 3 33
0402.................................... None 31
0403**.................................. 1 51
0403.................................... 2 55
0403.................................... 3 50
0403.................................... None 52
0404.................................... 1 87
0404.................................... 2 64
0404.................................... 3 101
0404.................................... None 66
0501**.................................. 1 18
0501.................................... 2 21
0501.................................... 3 15
0501.................................... None 16
0502**.................................. 1 18
0502.................................... 2 26
0502.................................... 3 13
0502.................................... None 18
0503**.................................. 1 25
0503.................................... 2 26
0503.................................... 3 23
0503.................................... None 22
0504**.................................. 1 33
0504.................................... 2 31
0504.................................... 3 37
0504.................................... None 29
0505.................................... 1 46
0505.................................... 2 48
0505.................................... 3 44
0505.................................... None 45
0601**.................................. 1 20
0601.................................... 2 21
0601.................................... 3 17
0601.................................... None 19
0602.................................... 1 19
0602.................................... 2 22
0602.................................... 3 21
0602.................................... None 23
0603.................................... 1 33
0603.................................... 2 27
0603.................................... 3 27
0603.................................... None 27
0604.................................... 1 49
0604.................................... 2 36
0604.................................... 3 40
0604.................................... None 36
0701**.................................. 1 18
0701.................................... 2 18
0701.................................... 3 19
0701.................................... None 17
0702**.................................. 1 22
0702.................................... 2 22
0702.................................... 3 23
0702.................................... None 20
0703**.................................. 1 25
0703.................................... 2 26
0703.................................... 3 25
0703.................................... None 24
0704.................................... 1 19
0704.................................... 2 29
0704.................................... 3 26
0704.................................... None 26
0705.................................... 1 29
0705.................................... 2 32
0705.................................... 3 32
0705.................................... None 31
0801**.................................. 1 13
0801.................................... 2 13
0801.................................... 3 12
0801.................................... None 12
0802**.................................. 1 14
0802.................................... 2 15
0802.................................... 3 13
0802.................................... None 13
0803.................................... 1 13
[[Page 13460]]
0803.................................... 2 16
0803.................................... 3 19
0803.................................... None 15
0804.................................... 1 21
0804.................................... 2 20
0804.................................... 3 21
0804.................................... None 18
0805**.................................. 1 22
0805.................................... 2 24
0805.................................... 3 21
0805.................................... None 20
0806**.................................. 1 30
0806.................................... 2 30
0806.................................... 3 28
0806.................................... None 27
0901**.................................. 1 17
0901.................................... 2 17
0901.................................... 3 17
0901.................................... None 16
0902**.................................. 1 21
0902.................................... 2 22
0902.................................... 3 20
0902.................................... None 20
0903**.................................. 1 26
0903.................................... 2 27
0903.................................... 3 27
0903.................................... None 24
0904**.................................. 1 35
0904.................................... 2 36
0904.................................... 3 35
0904.................................... None 33
1001**.................................. 1 19
1001.................................... 2 23
1001.................................... 3 18
1001.................................... None 21
1002**.................................. 1 22
1002.................................... 2 22
1002.................................... 3 21
1002.................................... None 23
1003**.................................. 1 26
1003.................................... 2 27
1003.................................... 3 25
1003.................................... None 27
1004**.................................. 1 29
1004.................................... 2 30
1004.................................... 3 28
1004.................................... None 28
1005.................................... 1 30
1005.................................... 2 37
1005.................................... 3 38
1005.................................... None 35
1101**.................................. 1 24
1101.................................... 2 17
1101.................................... 3 19
1101.................................... None 18
1102**.................................. 1 33
1102.................................... 2 26
1102.................................... 3 26
1102.................................... None 28
1103**.................................. 1 43
1103.................................... 2 33
1103.................................... 3 33
1103.................................... None 39
1201**.................................. 1 16
1201.................................... 2 14
1201.................................... 3 16
1201.................................... None 14
1202**.................................. 1 22
1202.................................... 2 16
1202.................................... 3 20
1202.................................... None 20
1203**.................................. 1 23
1203.................................... 2 20
1203.................................... 3 20
1203.................................... None 20
1204**.................................. 1 29
1204.................................... 2 26
1204.................................... 3 24
1204.................................... None 25
1205**.................................. 1 36
1205.................................... 2 32
1205.................................... 3 31
1205.................................... None 30
1301**.................................. 1 19
1301.................................... 2 21
1301.................................... 3 21
1301.................................... None 17
1302**.................................. 1 22
1302.................................... 2 21
1302.................................... 3 21
1302.................................... None 20
1303**.................................. 1 27
1303.................................... 2 25
1303.................................... 3 24
1303.................................... None 26
1304**.................................. 1 39
1304.................................... 2 39
1304.................................... 3 46
1304.................................... None 36
1401.................................... 1 25
1401.................................... 2 17
1401.................................... 3 15
1401.................................... None 16
1402.................................... 1 19
1402.................................... 2 21
1402.................................... 3 20
1402.................................... None 20
1403.................................... 1 31
1403.................................... 2 28
1403.................................... 3 23
1403.................................... None 24
1404.................................... 1 44
1404.................................... 2 36
1404.................................... 3 32
1404.................................... None 31
1501**.................................. 1 20
1501.................................... 2 18
1501.................................... 3 20
1501.................................... None 20
1502**.................................. 1 23
1502.................................... 2 26
1502.................................... 3 19
1502.................................... None 23
1503**.................................. 1 28
1503.................................... 2 29
1503.................................... 3 25
1503.................................... None 27
1504**.................................. 1 46
1504.................................... 2 44
1504.................................... 3 49
1504.................................... None 42
1601**.................................. 1 22
1601.................................... 2 21
1601.................................... 3 20
1601.................................... None 20
1602**.................................. 1 31
1602.................................... 2 30
1602.................................... 3 31
1602.................................... None 27
1701**.................................. 1 20
1701.................................... 2 19
1701.................................... 3 15
1701.................................... None 21
1702**.................................. 1 29
1702.................................... 2 29
1702.................................... 3 30
1702.................................... None 26
1703.................................... 1 48
1703.................................... 2 45
1703.................................... 3 41
1703.................................... None 37
1801**.................................. 1 17
1801**.................................. 2 17
1801**.................................. 3 17
1801.................................... None 15
1802**.................................. 1 26
1802**.................................. 2 26
1802**.................................. 3 26
1802.................................... None 26
1803**.................................. 1 33
1803.................................... 2 37
1803.................................... 3 31
1803.................................... None 33
1804**.................................. 1 58
1804.................................... 2 45
1804**.................................. 3 56
1804.................................... None 56
1901**.................................. 1 22
1901**.................................. 2 22
1901.................................... 3 25
1901.................................... None 22
1902**.................................. 1 39
1902.................................... 2 39
1902.................................... 3 39
1902.................................... None 36
1903**.................................. 1 54
1903.................................... 2 47
1903.................................... 3 42
1903.................................... None 59
2001.................................... 1 20
2001.................................... 2 20
2001.................................... 3 18
2001.................................... None 18
2002.................................... 1 21
2002.................................... 2 23
2002.................................... 3 21
2002.................................... None 22
2003.................................... 1 29
2003.................................... 2 27
2003.................................... 3 27
2003.................................... None 27
2004.................................... 1 47
[[Page 13461]]
2004.................................... 2 33
2004.................................... 3 32
2004.................................... None 34
2005.................................... 1 50
2005.................................... 2 39
2005.................................... 3 38
2005.................................... None 37
2101**.................................. 1 26
2101**.................................. 2 25
2101**.................................. 3 22
2101.................................... None 24
2102**.................................. 1 44
2102.................................... 2 41
2102.................................... 3 39
2102.................................... None 48
5001.................................... None 3
5101.................................... None 11
5102.................................... None 31
5103.................................... None 12
5104.................................... None 43
------------------------------------------------------------------------
* Arithmetic average length of stay and standard deviation based on data
used to develop the IRF PPS relative weights for the combination CMG
and comorbidity tiers in the August 7, 2001 final rule (66 FR 41394).
** Standard deviation for this combination CMG comorbidity tiers is
unavailable; the lowest standard deviation for the CMG was used to
determine the average length of stay plus one standard deviation.
If the LTCH patient who was discharged to an acute care hospital or
an IRF has a length of stay in the acute care hospital or the IRF that
exceeds one standard deviation from the average length of stay of the
hospital inpatient DRG or the combination of the CMG and the
comorbidity tier, respectively, then the subsequent admission to the
same LTCH would be treated as a new LTCH stay rather than being
considered as an interrupted stay, even if the second discharge is
determined to fall into the same LTC-DRG as the original stay in the
LTCH. Similarly, a patient returning to the LTCH following a stay in a
SNF of longer than 45 days (more than one standard deviation from the
average length of stay for all Medicare SNF cases) would be paid as a
new stay for the LTCH. Thus, under this circumstance, the beneficiary
would be deemed to have had two separate stays at the LTCH, resulting
in two separate payments under the LTCH prospective payment system.
An interrupted stay could occur during a regular inlier case
(length of stay greater than two-thirds the average length of stay for
the LTC-DRG). A very short-stay discharge or a short-stay outlier (as
explained in sections IV.B.1 and IV.B.2., respectively, of this
proposed rule) could also become an interrupted stay if the beneficiary
is discharged to an acute care hospital, an IRF, or a SNF. Whether or
not the beneficiary's stay would remain in either of these categories
would depend upon the total length of stay in the LTCH. Upon the
initial discharge to the acute care hospital, the IRF, or the SNF, the
LTCH ``day count'' would stop. For an interrupted stay case, this count
would be resumed upon readmission to the LTCH until the beneficiary's
final discharge (home, another site of care, or death). Thus, the
period of absence (number of days) that the beneficiary is a patient in
the acute care hospital, the IRF, or the SNF during a LTCH interrupted
stay would not be included in determining the length of stay of the
LTCH stay.
If the total number of days at the LTCH, from the initial admission
to the final discharge, still falls into either the very short-stay
discharge or short-stay outlier payment category, the LTCH would
receive payment according to the proposed very short-stay discharge
policy described in section IV.B.1. of this preamble or the proposed
short-stay outlier policy described in section IV.B.2. of this
preamble, respectively. If, on the other hand, the total number of days
in the LTCH exceeds two-thirds of the average length of stay of the
LTC-DRG (the proposed short-stay outlier criteria), one full LTC-DRG
payment would be made for the case. Moreover, all applicable payment
policies, including outliers and transfers for the acute care hospital
inpatient prospective payment system and the IRF prospective payment
system would still apply under this proposed policy.
The following are examples of possible ways in which these proposed
policies would interact:
Example 1: A beneficiary stays in the LTCH for 5 days and is
discharged to an inpatient acute care hospital and the length of
stay at the acute care hospital is more than the sum of the average
length of stay of the DRG under the hospital inpatient prospective
payment system and one standard deviation before being discharged
back to the LTCH. Medicare hospital payments for this beneficiary
would be as follows:
One very short-stay discharge LTCH prospective payment
system payment to the LTCH for the first (5-day length of stay) LTCH
discharge.
Payment to the acute care hospital under the hospital
inpatient prospective payment system for the acute care stay.
A separate LTCH prospective payment system payment
either as a very short-stay discharge (see proposed Sec. 412.527), a
short-stay outlier (see proposed Sec. 412.529) or regular stay,
depending on the second LTCH length of stay. This case would not be
an interrupted stay because the acute care hospital stay was for
more days than one standard deviation from the average length of
stay of the DRG under the acute care hospital inpatient prospective
payment system.
Example 2: A beneficiary stays in the LTCH for 5 days and is
discharged to an inpatient acute care hospital and the length of
stay at the acute care hospital is a number of days that is less
than or equal to the sum of the average length of stay of the acute
care hospital inpatient DRG and one standard deviation before being
discharged back to the LTCH. The beneficiary remains in the LTCH for
an additional 9 days after readmission to the LTCH following the
acute care hospital stay. This case would be treated as an
interrupted stay and Medicare hospital payments for this beneficiary
would be as follows:
Payment to the acute care hospital under the hospital
inpatient prospective payment system for the DRG for the acute care
hospital stay.
The stay was interrupted because the acute care
hospital stay was within one standard deviation from the average
length of stay of the acute care hospital inpatient DRG. Therefore,
a single payment would be made to the LTCH under the proposed LTCH
prospective payment system. This payment would be a short-stay
outlier payment (under proposed Sec. 412.529) if the total LTCH
length of stay (14 days) is less than two-thirds the average length
of stay of the LTC-DRG.
Example 3: A beneficiary stays in the LTCH for 5 days and is
discharged to an IRF and the length of stay at the IRF is less than
or equal to the sum of the average length of stay of the IRF
combination of the CMG and the comorbidity tier and one standard
deviation before being discharged back to the LTCH. The beneficiary
remained in the LTCH for an additional 12 days, so that the combined
17 days is greater than two-thirds of the average length of stay for
the LTC-DRG after readmission to the LTCH following the IRF stay.
This case would be an interrupted stay and Medicare hospital
payments for this beneficiary would be as follows:
Payment to the IRF under the IRF prospective payment
system for the combination of the CMG and the comorbidity tier for
the IRF stay; and
Since the stay was interrupted because the IRF stay was
within one standard deviation from the average length of stay of the
IRF combination of the CMG and the comorbidity tier, a single
payment would be made under LTCH prospective payment system. This
payment would be a full LTC-DRG payment because the total LTCH
length of stay is greater than two-thirds of the average length of
stay of the LTC-DRG.
In Example 2 and Example 3, upon return to the LTCH following the
discharge from the acute care hospital or the IRF, the day count would
be resumed at day 6 of the LTCH stay. If the beneficiary was then
discharged on day 6 or 7, the stay would be paid as a very short-stay
discharge (see
[[Page 13462]]
proposed Sec. 412.527); if the beneficiary was discharged within two-
thirds of the average length of stay for the LTC-DRG, the stay would be
paid as a short-stay outlier (see proposed Sec. 412.529); and if the
beneficiary was discharged beyond the short-stay threshold (two-thirds
of the average length of stay for the LTC-DRG), the case would be paid
for the full LTC-DRG.
While the interrupted stay policy proposed under Sec. 412.531 is
based in part on clinical considerations, we realize that it may be
somewhat administratively burdensome for the LTCH to determine the DRG
for the acute care hospital stay or the combination of the CMG and the
comorbidity tier for the IRF stay in order to determine whether or not
a beneficiary that is discharged to an acute care hospital, an IRF, or
a SNF and then returns to the LTCH would be an interrupted stay (with a
single LTCH prospective payment system payment) or a new admission
(with two separate LTCH prospective payment system payments).
Therefore, we are considering treating all patients who are discharged
to either an acute care hospital or an IRF and admitted back to the
LTCH within a fixed period of time (as we have proposed for SNFs),
regardless of the DRG of the patient in the acute care hospital or the
combination of the CMG and the comorbidity tier of the patient in the
IRF, as an interrupted stay. We believe that 9 days for acute care
hospitals and 27 days for IRFs would be an appropriate threshold to
identify interrupted stay cases because, in both cases, the proposed
thresholds are one standard deviation from the average length of stay
of all patients in those respective settings. We are aware that, under
such a policy, less clinically complex brief acute care hospital and
IRF stays would be included and would become an interrupted stay if the
beneficiary returns to a LTCH. However, those types of cases would be
offset by stays that require more intense and lengthy care. We are in
the process of further analyzing Medicare claims data for LTCH
beneficiaries who are discharged to an acute care hospital or an IRF
and return to the LTCH following that stay to determine if an
interrupted stay threshold of a fixed number of days is the more
appropriate policy. We specifically solicit comments on the appropriate
period of absence for such an interrupted stay threshold. We also are
interested in receiving comments regarding the inclusion of discharges
to psychiatric hospitals or units in our proposed interrupted stay
policy.
4. Other Special Cases
Under other Medicare prospective payment systems, specifically for
inpatient acute care hospitals and for IRFs, there are separate
policies for other types of special cases such as transfer cases and
patients who expire. We believe the proposed very short-stay discharge
policy (under proposed Sec. 412.527), the proposed short-stay outlier
policy (under proposed Sec. 412.529), and the proposed interrupted stay
policy (under proposed Sec. 412.531) would adequately address these
circumstances. For instance, a case with a stay that is less than two-
thirds the average length of stay of the LTC-DRG would be paid under
the proposed short-stay outlier policy (or the very short-stay
discharge policy if the length of stay is 7 days or fewer) regardless
of whether or not the patient is transferred upon discharge to his or
her home or to another setting where Medicare would make additional
payments, or whether the patient expired. Moreover, if a beneficiary's
stay at the LTCH is at least two-thirds the average length of stay of
the LTC-DRG, a full LTC-DRG payment would be made regardless of the
destination following discharge. Therefore, we are not proposing a
separate policy for cases that are transferred (except for those that
are encompassed by the proposed interrupted stay policy) or for
patients who expire.
Currently, under the hospital inpatient prospective payment system,
discharges in 10 DRGs are considered to be transfers if the patients
are discharged to another Medicare post-acute site of care, such as a
LTCH, under section 1886(d)(5)(J)(ii) of the Act, implemented in
regulations at Sec. 412.4. The rationale behind this amendment was
Congressional concern that Medicare may, in some cases, be ``overpaying
hospitals for patients who are transferred to a post-acute care setting
after a very short acute care hospital stay.'' (Conference Agreement,
H.R. Conf. Rept. No. 105-217, 105th Cong., 1st Sess., at 740 (1997).)
In such a scenario, Medicare would also have to pay the post-acute care
provider for care that theoretically could have been provided at the
acute care hospital. Section 1886(d)(5)(J)(iv) of the Act authorizes
the Secretary to expand the post-acute care transfer policy to
additional DRGs. From the standpoint of LTCHs, the impact of expanding
the hospital inpatient prospective payment system post-acute care
transfer policy could be significant for the LTCH prospective payment
system since this policy could affect behavior at acute care hospitals.
If additional discharges would be paid as transfers, these patients may
be kept longer at acute care hospitals in order to avoid a reduced
payment for the transfer and then have a shorter length of stay during
the subsequent stay at the LTCH. Presently, approximately 70 percent of
LTCH Medicare patients are admitted following discharge from an acute
care hospital. We are presently exploring whether to propose an
expansion of the 10-DRG policy in the FY 2003 hospital inpatient
prospective payment system proposed rule.
5. Onsite Discharges and Readmittances
As we explained above, we do not believe that a separate policy
governing transfers of Medicare patients between LTCHs and acute care
hospitals is necessary at this time. However, we are proposing a policy
that would address transfers between LTCHs and distinct-part SNFs,
acute care hospitals, rehabilitation facilities, or psychiatric
facilities when the LTCH and any of these other providers are co-
located because of the potential for inappropriate shifting of patients
among these providers without clinical justification to maximize
Medicare payment. This situation may occur when a distinct-part SNF is
part of a LTCH or when the LTCH is located within an acute care
hospital or an IRF as either a ``hospital-within-a-hospital (as defined
in Sec. 412.22(e)) or a ``satellite facility'' (as defined in
Sec. 412.22(h)) and a distinct-part SNF (as defined in section 1819(a)
of the Act) is also part of the same acute care hospital or IRF.
(Section I.E.9. of this proposed rule describes findings from Urban's
research on the admission and discharge patterns between LTCHs and
SNFs.)
Similarly, a long-term care ``hospital-within-a-hospital'' or
satellite facility may be co-located with a psychiatric or
rehabilitation hospital that is also a hospital within the same acute
care hospital or is a satellite facility situated in the same acute
care hospital (Secs. 412.25 and 412.27), or may be co-located in an
acute care hospital with a psychiatric unit (Sec. 412.27) or a
satellite psychiatric or rehabilitation unit (Sec. 412.25(e)).
We believe that a per discharge system, such as the prospective
payment system for LTCHs, could provide inappropriate incentives to
prematurely discharge patients to one of these other onsite providers
once their lengths of stay at the LTCH exceeded the thresholds
established by the short-stay discharge and outlier policies described
in section IV.B. of this proposed rule. These discharges would
[[Page 13463]]
be based on payment considerations rather than on a clinical basis as
an extension of the normal progression of appropriate patient care. If
the long-term care hospital-within-a-hospital inappropriately
discharges Medicare patients to the distinct-part SNF, or the onsite
IRF, psychiatric facility, or acute care hospital without providing a
complete episode of hospital-level care, Medicare would make
inappropriate payments to the long-term care hospital-within-a-
hospital, since payments under the proposed prospective payment system
would have been calculated based on a complete episode of such care.
This type of a case could then be followed by a readmission to the LTCH
from the onsite provider for an additional LTC-DRG payment. (In the
case of a discharge from a LTCH to an offsite acute care hospital, an
IRF, or a SNF with a subsequent return to the LTCH, payments would also
be considered under the interrupted stay policy set forth at section
IV.B.3. of this proposed rule and at proposed Sec. 412.531.)
In determining an appropriate response to onsite discharges and
readmittances, we are proposing a policy consistent with our policy
described in the July 30, 1999 Federal Register (64 FR 41535) that
addresses inappropriate discharges of patients between an acute care
hospital inpatient prospective payment system excluded hospital-within-
a-hospital (such as a LTCH) to the host acute care hospital, that
culminated in a readmission to the hospital-within-a-hospital. In that
context, we expressed the same concern noted above--that these types of
moves were occurring for financial rather than clinical reasons. In
order to discourage these practices, we implemented regulations at
Sec. 413.40(a)(3) to specify how to calculate the cost per discharge
under the excluded hospital payment provisions. Under those
regulations, during a cost reporting period, if the hospital-within-a-
hospital discharges more than 5 percent of its inpatients to the acute
care hospital where it is located, and those patients are readmitted to
the excluded hospital, Medicare considers each patient's entire stay as
one discharge for purposes of calculating the cost per discharge of the
excluded hospital. In determining whether a patient has previously been
discharged and then readmitted, we consider all prior discharges, even
if the discharge occurs late in one cost reporting period and the
readmission occurs in the next cost reporting period. Only when the
excluded hospital's number of these cases in a particular cost
reporting year exceeds 5 percent of the total number of its discharges
are the first discharges not counted for payment purposes. (If the 5-
percent threshold is not triggered, all discharges are counted
separately.)
With the implementation of the per discharge prospective payment
system for LTCHs, we are proposing to adopt a similar policy to address
inappropriate discharges and readmittances between LTCHs and other
onsite providers by establishing a threshold beyond which the original
patient stay and the readmission would be paid as one discharge
(proposed Sec. 412.532). By paying only one discharge, we would
discourage those transfers that would be based on payment
considerations instead of on a clinical basis. Generally, if a LTCH
readmits more than 5 percent of its Medicare patients who are
discharged to an onsite SNF, IRF, or psychiatric facility, or to an
onsite acute care hospital, only one LTC-DRG payment would be made to
the LTCH for each discharge and readmittance during the LTCH's cost
reporting period. Therefore, payment for the entire stay would be paid
either as one full LTC-DRG payment, a very short-stay discharge, or a
short-stay outlier, depending on the duration of the entire LTCH stay.
In applying the 5-percent threshold, we are proposing to apply one
threshold for discharges and readmittances with a co-located acute care
hospital, consistent with the policy that has been in place under
Sec. 413.40(a)(3) for acute care hospitals and excluded hospitals
described above. We also are proposing a separate 5-percent threshold
for all discharges and readmittances with co-located SNFs, IRFs, and
psychiatric facilities. In the case of a LTCH that is co-located with
an acute care hospital, an IRF, or a SNF, the onsite discharge and
readmittance policies that we are proposing would apply in addition to
the proposed interrupted stay policy that we are proposing in section
IV.B.3 of this proposed rule and at proposed Sec. 412.531. This means
that even if a discharged LTCH patient who was readmitted to the LTCH
following a stay in an acute care hospital of greater than one standard
deviation from the average length of stay of the specific hospital
inpatient prospective payment system DRG, if the facilities share a
common location and the 5-percent threshold were exceeded, the
subsequent discharges from the LTCH would not represent a separate
hospitalization for payment purposes. Similarly, if the LTCH has
exceeded its 5-percent threshold for all discharges to an onsite IRF,
SNF, or psychiatric hospital or unit with readmittances to the LTCH,
the subsequent discharges would not be treated as a separate discharge
for Medicare payment purposes, notwithstanding provisions of the
proposed interrupted stay policy with regard to lengths of stay at an
IRF or a SNF (see proposed Secs. 412.531(b)(5)(ii) and (b)(5)(iii)).
(As under the proposed interrupted stay policy, payment to an acute
care hospital under the hospital inpatient prospective payment system,
to an IRF under the IRF prospective payment system, and to a SNF under
the SNF prospective payment system, would not be affected. Payments to
the psychiatric facility also would not be affected.)
We are aware that situations could arise where, under sound
clinical judgement, a patient who no longer required LTCH-level of care
could be discharged to a SNF and then experience a setback
necessitating rehospitalization. However, it is likely that, in such a
scenario, in most cases the patient would be subsequently admitted to
an acute care hospital rather than readmitted to the LTCH located
within the acute care hospital. In addition, if the patient is being
treated by a LTCH that also specializes in treating psychiatric or
rehabilitation patients, it is unlikely that the patient who, for some
medical reason, needed to be transferred to an onsite psychiatric or
rehabilitation hospital or unit, would need to be readmitted to the
LTCH. We believe that the 5-percent thresholds for discharges to onsite
acute care hospitals and for discharges to onsite IRFs, SNFs, and
psychiatric facilities followed by readmission to the LTCH provide
adequate flexibility for those rare circumstances where such actions
would be clinically preferable.
We believe that the combination of a discharge-based payment system
that inherently contains financial incentives for shifting patients to
another site of care and the close proximity of other sites of care
such as other onsite hospitals-within-hospitals, satellites, and
distinct-part SNFs, necessitates this type of policy. If we implement
this policy in the final rule, we would monitor such discharges and
analyze data and compare practice patterns before and after the
implementation of the prospective payment system and, if warranted, may
consider extending it to offsite providers.
6. Additional Issues for Onsite Facilities
As we prepare to implement a proposed prospective payment system
for LTCHs, we are reevaluating certain existing policies for hospitals-
within-hospitals and satellite facilities that
[[Page 13464]]
were established under the TEFRA payment system for excluded hospitals.
Existing regulations at Sec. 412.22(e) specify exclusion criteria
based on ownership and control for hospitals-within-hospitals and their
host hospitals (59 FR 45330, September 1, 1994). We were concerned
about possible manipulation of Medicare payments by a single entity
that owns or controls an acute care hospital and a co-located LTCH. We
believed that such a situation could lead to premature patient
discharges from the acute care hospital to the co-located LTCH,
resulting in two Medicare payments to the controlling entity for one
episode of care. Under this circumstance, the LTCH would, in fact,
function as an excluded unit of an acute care hospital, a situation
inconsistent with section 1886(d)(1)(B) of the Act, which allows
excluded rehabilitation and psychiatric units in acute care hospitals
but not long-term care units. Through the proposed interrupted stay and
proposed onsite discharge and readmittance policies set forth in
sections IV.B.3. and IV.B.5., respectively, of this proposed rule,
which limit potential inappropriate Medicare payments, we believe that
we have addressed some of the concerns that originally led us to
establish the rules in Sec. 412.22(e). Accordingly, we are soliciting
comments on any possible changes to CMS payment policy regarding
ownership and control for hospitals-within-hospitals.
The second area that we are soliciting comments, in light of the
forthcoming proposed LTCH prospective payment system, is our policy
regarding LTCHs that have established satellite facilities. In
Sec. 412.22(h)(1), we define a satellite as ``a part of a hospital that
provides inpatient services in a building also used by another
hospital, or in one or more entire buildings located on the same campus
as buildings used by another hospital.'' Satellite arrangements exist
when an existing hospital that is excluded from the hospital inpatient
prospective payment system and that is either a freestanding hospital
or a hospital-within-a-hospital under Sec. 412.22(e), shares space in a
building or on a campus occupied by another hospital in order to
establish an additional location for the excluded hospital. The July
30, 1999 Federal Register (64 FR 41532 through 41534) includes a
detailed discussion of our policies regarding Medicare payments for
satellite facilities of hospitals excluded from the hospital inpatient
prospective payment system. We will consider the possibility of
revisiting the policies we established for these satellites. In
accordance with section 1886(b) of the Act, as amended by sections 4414
and 4416 of Public Law 105-33, we established two different target
limits on payments to excluded hospitals, depending upon when the
facilities were established. The target amount limit for excluded
hospitals or units established before October 1, 1997 was set at the
75th percentile of the target amounts of similarly classified
hospitals, as specified in Sec. 413.40(c)(4)(iii), for cost reporting
periods ending during FY 1996 as updated to the applicable cost
reporting period. For excluded hospitals and units established on or
after October 1, 1997, under section 4416 of Public Law 105-33, the
payment amount for the hospital's first two 12-month cost reporting
periods, as specified at Sec. 413.40(f)(2)(ii), may not exceed 110
percent of the national median of target amounts of similarly
classified hospitals for cost reporting periods ending during FY 1996,
updated to the first cost reporting period in which the hospital
receives payment.
Because we were concerned that a number of pre-1997 excluded
hospitals, governed by Sec. 413.40(c)(4)(iii), would seek to create
satellite arrangements in order to avoid the effect of the lower
payment caps that would apply to new hospitals, under
Sec. 413.40(f)(2)(ii), we established rules regarding the exclusion of
and payments to satellites of existing facilities. If the number of
beds in the hospital or unit (including both the base hospital or unit
and the satellite location) exceeds the number of State-licensed and
Medicare-certified beds in the hospital or unit on the last day of the
hospital's or unit's last cost reporting period beginning before
October 1, 1997, then the facility would be paid under the inpatient
DRG system. Therefore, while an excluded hospital or unit could
``transfer'' bed capacity from a base facility to a satellite, if it
increased total bed capacity beyond the level it had in the most recent
cost reporting period before October 1, 1997 (64 FR 41532-4153, July
30, 1999), then the hospital would not be paid as a hospital excluded
from the hospital inpatient prospective payment system. No similar
limitation, however, was imposed with respect to the number of total
beds in excluded hospitals and units and satellites of these facilities
established after October 1, 1997, since these facilities were already
subject to the lower payment limits of section 4416 of Public Law 105-
33, and would, therefore, not benefit from the higher cap by creating a
satellite.
Section 123 of Public Law 106-113 confers broad authority on the
Secretary regarding the implementation of the proposed prospective
payment system for LTCHs, and as described in section IV.G. of this
proposed rule, we are proposing to transition this proposed prospective
payment system over 5 years. During this time, payments to LTCHs would
gradually change from hospital-specific cost-based payments to a per-
discharge LTC-DRG-based prospective payment system. In addition, IRFs
also will be transitioned to 100 percent payment starting with cost
reporting periods beginning during FY 2003. We would consider whether
to propose elimination of the bed-number criteria in
Sec. 412.22(h)(2)(i) for pre-1997 hospitals, once the applicable
prospective payment system is fully phased-in, since all LTCHs would be
paid based on 100 percent of the proposed LTCH prospective payment
system by FY 2007 and the payment provisions under the TEFRA system at
that time would no longer exist for this class of hospitals or for IRFs
for cost reporting periods beginning during FY 2003. (This policy
change, lifting of bed-number criteria for hospitals under prospective
payment systems, that we are considering to propose, would not apply to
hospitals that continue to be paid under the TEFRA system. Accordingly,
during the 5-year phase-in, the policies in Sec. 412.22(h)(2)(i) would
continue to apply to LTCH satellites.
7. Monitoring System
In this proposed rule, we are proposing various policies that we
believe would provide equitable payment for stays that reflect less
than the full course of treatment and reduce the incentives for
inappropriate admissions, transfers, or premature discharges of
patients that are present in a discharge-based prospective payment
system. We also would be collecting and interpreting data on changes in
average lengths of stay under the proposed prospective payment system
for specific LTC-DRGs and the impact of these changes on the Medicare
program.
We propose to develop a monitoring system that would assist us in
evaluating the LTCH prospective payment system. If our data indicate
that changes might be warranted, we may revisit these issues and
consider revising these proposed policies in the future.
C. Payment Adjustments
As indicated earlier, the Secretary generally has broad authority
under section 123 of Public Law 106-113 in developing the prospective
payment system for LTCHs. Thus, the Secretary generally has broad
authority in determining whether (and how) to make
[[Page 13465]]
adjustments to the prospective payments to LTCHs. Section 307 of Public
Law 106-554 directs the Secretary to ``examine'' appropriate
adjustments to the prospective payments to LTCHs, including certain
specific adjustments, but under that section the Secretary continues to
have discretion as to whether to provide for adjustments.
In determining whether to propose specific payment adjustments
under the prospective payment system for LTCHs, we conducted extensive
regression analyses of the relationship between LTCH costs (including
both operating and capital-related costs per case) and several factors
that may affect costs such as the percent of Medicaid patients treated,
the percent of Supplemental Security Income (SSI) patients treated,
geographic location, and medical education programs. The
appropriateness of potential payment adjustments is based on both cost
effects estimated by regression analysis and other factors, including
simulated payments that we discuss in section IV.E. of this proposed
rule.
Our analyses are based on data from 222 LTCHs for which cost and
case-mix data were available. We estimated costs for each case by
multiplying hospital-specific cost-to-charge ratios by the LTCH's
charges for that case. Cost-to-charge ratios were obtained from FY 1998
or FY 1999 cost report data, or both, available in the HCRIS minimum
data set and Medicare claims data (charges) available in the MedPAR
file. Because the universe of LTCHs has grown relatively rapidly over
the last several years, in order to maximize the number of LTCHs in the
database, we used the most recent cost report data available for each
LTCH. If we had both FY 1998 and FY 1999 cost report data, we used the
most complete cost reporting period (that is, the cost reporting period
with the greater number of months). If we used FY 1998 cost report data
because FY 1999 data were either unavailable (due to the time lag in
cost report settlement) or incomplete, we updated the FY 1998 data for
inflation using the FY 1999 excluded hospital market basket increase
(2.4 percent) as published in the July 31, 1998 hospital inpatient
prospective payment system FY 1999 final rule (63 FR 40954). As
indicated in Appendix A of this proposed rule, we are proposing to use
the excluded hospital market basket with a capital component to update
payment rates. The excluded hospital market basket is currently used to
update LTCHs' target amounts for inflation under the TEFRA system. We
believe that proposing to continue use of the excluded hospital market
basket to update LTCHs' costs for inflation is appropriate because the
excluded hospital market basket measures price increases of the
services furnished by excluded hospitals, including LTCHs. We believe
that there is insufficient data to develop a proposed market basket
based only on LTCH costs at this time.
In computing hospital-specific cost-to-charge ratios, we matched
the costs for which we had the most recent and complete cost reporting
period data to the claims in the MedPAR file for each month in that
cost reporting period. For example, for a LTCH with a 12-month FY 1999
cost reporting period beginning on July 1, we used MedPAR data from
July 1999 through June 2000 to compute a FY 1999 cost-to-charge ratio.
The cost per case for each hospital is calculated by summing all costs
and dividing by the number of corresponding cases.
Multivariate regression analysis is the standard statistical
technique for examining cost variation that was used to analyze
potential payment adjustments for LTCHs. We looked at two standard
models--(1) a double log regression explanatory model to examine the
impact of all relevant factors that might potentially affect a LTCH's
cost per case; and (2) a payment model that examines the impacts of
those factors that were determined to affect costs and, therefore, were
used to determine payment rates. In multivariate regression, the
estimated average cost per case (the dependent variable) at the LTCH
can be explained or predicted by several independent variables,
including the case-mix index, the wage index for the LTCH, and a vector
of additional explanatory variables that may affect a LTCH's cost per
case, such as a teaching program or the proportion of low-income
patients. The case-mix index is the average of the LTC-DRG weights,
derived by the hospital-specific relative value method, for each LTCH.
Short-stay outlier cases are weighted based on the ratio of the length
of stay for the short-stay case to the average length of stay for
nonshort-stay cases in that LTC-DRG. We simulated payments using an
estimated budget neutral payment rate and the regression coefficients
as proxies for proposed payment system adjustments. Then we calculated
payment-to-cost ratios for different classes of hospitals for specific
combinations of payment policies.
We examined payment variables applicable to the hospital inpatient
and IRF prospective payment systems, including the disproportionate
share patient percentage, both the resident-to-average daily census
ratio and the resident-to-bed ratio teaching variables, and variables
that account for location in a rural or large urban area. A discussion
of the major payment variables and our findings appears below.
1. Area Wage Adjustment
Section 307(b) of Public Law 106-554 requires that we examine the
appropriateness of an area wage adjustment. Such an adjustment would
account for area differences in hospital wage levels and would be made
by adjusting the LTCH prospective payment system payment rate by a
factor that would reflect the relative hospital wage level in the
geographic area of the hospital as compared to the national average
hospital wage level. At this time, we are not proposing an area wage
adjustment for payments to LTCHs because the regression analysis
indicated that a wage adjustment would not increase accuracy of
payments. While we are not proposing to make an area wage adjustment in
this proposed rule, we are specifically soliciting comments on whether
an area wage adjustment is appropriate.
Under the acute care hospital inpatient prospective payment system,
a wage index is applied to the labor-related share of the operating
standardized amount to adjust for local cost variation. The hospital
inpatient prospective payment system wage index is used also to make an
area wage adjustment under the IRF prospective payment system, the SNF
prospective payment system, the home health prospective payment system,
and the outpatient hospital prospective payment system.
We began our analysis of the appropriateness of an area wage
adjustment for LTCHs by evaluating the labor-related share from the
excluded hospital with capital market basket. (This is the same market
basket that is used in the IRF prospective payment system.) Currently,
under the TEFRA cost-based reimbursement system, the excluded hospital
market basket is used to update LTCHs' target amounts, which are used
to determine payments to LTCHs for inpatient operating costs. Since we
are proposing a single standard Federal rate under the proposed LTCH
prospective payment system (see section IV.D. of this proposed rule),
we are proposing to use a market basket with a capital component. A
further explanation of the excluded hospital with capital market basket
can be found in Appendix A of this proposed rule.
[[Page 13466]]
The labor-related share is the relative importance of wages, fringe
benefits, professional fees, postal services, labor-intensive services,
and a portion of the capital share for FY 2003. We determine a labor-
related share of the excluded hospital with capital market basket by
first estimating the portion related to operating costs. The excluded
hospital with capital market basket is based on available cost data for
facilities excluded from the acute care hospital inpatient prospective
payment system, including long-term care, rehabilitation, psychiatric,
cancer, and children's hospitals.
Using the excluded hospital with capital market basket, we
determined that the labor-related share of operating costs would be
69.428 percent for FY 2003, which is calculated as the sum of the
relative importance for wages and salaries (50.381 percent), employee
benefits (11.525), professional fees (2.059), postal services (0.244),
and all other labor intensive services (5.219).
The labor-related share of capital costs in the market basket needs
to be considered as well. We are proposing to use the portion of
capital attributed to labor, which is estimated to be 46 percent by
CMS' Office of the Actuary. This is the same percentage used for both
the hospital inpatient capital prospective payment system and the IRF
prospective payment system. For FY 2003, we estimate the relative
importance for capital to be 7.552 percent of the excluded hospital
with capital market basket. We multiply 46 percent by 7.552 percent to
determine that the labor-related share for capital costs for FY 2003
would be 3.474 percent.
We then add the 3.474 percent for capital costs to the 69.428
percent for operating costs to determine the total labor-related share
based on the excluded hospital with capital market basket. Thus, when
we examined an adjustment to account for area differences in hospital
wage levels, we used a labor-related share of 72.902 percent for the
proposed LTCH prospective payment system. Specifically, we examined the
appropriateness of accounting for differences in area wage levels by
multiplying the labor-related portion of the unadjusted Federal payment
by the FY 2002 inpatient acute care hospital wage index, without taking
into account geographic reclassification under sections 1886(d)(8) and
(d)(10) of the Act. (This methodology is the methodology used under the
IRF prospective payment system and the SNF prospective payment system.)
Wage data to compute LTCH-specific wage indices are currently not
available. However, LTCHs and other post-acute care facilities (for
example, IRFs, SNFs, and HHAs) generally compete in the same local
labor market for the same types of employees as inpatient acute care
hospitals.
To validate the labor-related share calculated from the market
basket, we analyzed the results of the wage index coefficient derived
from regression analysis. In the regression, we standardized each
LTCH's cost per case by the various factors, such as case-mix, bed
size, number of cases, length of stay, and occupancy. The wage index
coefficient allows us to approximate the labor-related portion of cost
per case. Since the labor-related share derived from the market basket
is the proportion of costs that have been identified as being
influenced by the local labor amount, we would expect this coefficient
to be statistically significant and near our market basket measure. The
double-log regression analysis generated a wage index coefficient,
which approximates the labor-related portion of cost per case, that is
not statistically significant and is not near the market basket measure
(72.902 percent) since it is only 19.91 percent. This suggests that the
wage adjustment we examined would be only a small and unreliable
predictor of LTCHs' costs.
Since the statistical analysis did not show a significant
relationship between LTCHs' costs and their geographic location, we do
not believe that at this point it would be appropriate to include a
proposed adjustment for area wages. Furthermore, without applying the
wage adjustment to the proposed standard Federal rate for LTCHs to
account for the difference in area wage levels, the r-squared value (a
statistical measure of how much variation in resource use among cases
is explained by the system) of the proposed system taken as a whole is
0.82086. However, by applying the wage adjustment to the labor-related
share of the proposed standard Federal rate for LTCHs to account for
area differences in hospital wage levels, the r-squared value is
reduced to 0.8017 for the proposed system as a whole (that is,
including case-mix index and outlier policies). This means that not
making a wage index adjustment would provide a 2.3 percent increase in
the ability of the proposed payment system to predict costs.
Furthermore, our regression analysis indicates that including a wage
index adjustment would inappropriately redistribute payments to LTCHs
by shifting money to LTCHs that are located in an area within a higher
wage index but in fact have lower costs. Therefore, at this time we are
not proposing an adjustment to account for area differences in LTCH
wage levels. However, we will revisit the appropriateness of an
adjustment to account for area differences in LTCH wage levels in
developing the final rule.
2. Adjustment for Geographic Reclassification
In accordance with section 307(b) of Public Law 106-554, we also
examined the appropriateness of applying an adjustment for geographic
reclassification to payments under the LTCH prospective payment system,
where hospitals could request reclassification from one geographic
location to another for the purpose of using the other area's wage
index value, Federal payment rates, or both. Such an adjustment is made
under the acute care hospital inpatient prospective payment system in
accordance with section 1886(d)(10) of the Act. The adjustment would
treat a hospital located in one geographic area as being located in
another geographic area, if certain conditions are met, because its
costs and wages are more similar to those hospitals located in the
other geographic area. As explained below, at this time, we are not
proposing an adjustment for geographic reclassification in the
prospective payment system for LTCHs.
Our data identified 14 rural LTCHs, but our analysis supported
neither a proposed adjustment to account for differences in area wage
levels nor a proposed adjustment for LTCHs located in rural areas or
large urban areas because the regression analysis indicated that a wage
adjustment would not increase the accuracy of payments. Therefore,
under the proposed LTCH prospective payment system, all LTCHs would be
treated the same for the purposes of payment, regardless of location.
Since there would be no purpose for LTCHs to reclassify to another
area, at this time we are not proposing an adjustment for geographic
reclassification in the proposed prospective payment system for LTCHs.
We plan to review the above proposed policy determinations in
developing the final rule based on the most recent available data. At
that time, we also would revisit the appropriateness of an adjustment
for geographic reclassification. It is important to note, however, that
the Medicare Geographic Classification Review Board (MGCRB) currently
has authority only over acute care (section 1886(d) of the Act)
hospitals and there is presently no analogous determination process for
hospitals that have been excluded from the acute care hospital
inpatient prospective payment system. Under the
[[Page 13467]]
TEFRA system, prospective payment system-excluded hospitals and units,
including LTCHs, are not required to fill out information related to
wage-related costs on the Medicare cost report (that is, Worksheet S-
3). Therefore, if a wage adjustment is ultimately implemented as part
of the LTCH prospective payment system and it is determined that it is
appropriate to make geographic reclassification adjustments, we would
need to establish instructions for data collection on LTCH wage-related
costs in order to determine an appropriate geographic reclassification
adjustment for LTCHs. It would also be necessary to develop an
application process and determination procedures.
3. Adjustment for Disproportionate Share of Low-Income Patients
Section 307(b) of Public Law 106-554 requires us to examine the
appropriateness of an adjustment for hospitals serving a
disproportionate share (DSH) of low-income patients, consistent with
section 1886(d)(5)(F) of the Act, which establishes this adjustment for
inpatient acute care hospitals. In assessing the appropriateness of a
similar adjustment for LTCHs serving low-income patients, as specified
in section 1886(d)(5)(F) of the Act, we focused our analysis on the
relationship between serving low-income patients and LTCHs' cost per
case. Based on the results of our analysis described below, at this
time we are not proposing an adjustment for the treatment of a
disproportionate share of low-income patients.
Under section 1886(d)(5)(F) of the Act, in calculating Medicare
payments for inpatient services at acute care hospitals, the
disproportionate share patient percentage takes into account both the
percentage of Medicare patients who receive SSI and the percentage of
Medicaid patients who are not entitled to Medicare. The DSH patient
percentage is defined as:
[GRAPHIC] [TIFF OMITTED] TP22MR02.000
Based on this formula, an inpatient acute care hospital qualifies
for a DSH adjustment under section 1886(d)(5)(F)(v) of the Act (as
amended by section 211(a) of Public Law 106-554) if the hospital has a
DSH patient percentage greater than or equal to 15 percent. The
calculation of the DSH payment adjustments under that section is as
follows:
Hospitals (urban and rural) with fewer than 100 beds and
whose DSH patient percentage is equal to or greater than 15 percent and
less than 19.3 percent receive the DSH payment adjustment determined
using the following formula:
(DSH patient percentage -15) (.65) + 2.5.
Hospitals (urban or rural) with fewer than 100 beds and
whose DSH patient percentage is equal to or greater than 19.3 percent
receive a flat add-on of 5.25 percent.
Rural hospitals with greater than 500 beds and whose DSH
patient percentage is equal to or greater than 15 percent and less than
20.2 percent receive the DSH payment adjustment using the following
formula:
(DSH patient percentage -15) (.65) + 2.5.
Rural hospitals with greater than 500 beds and whose DSH
patient percentage is equal to or greater than 20.2 percent receive the
DSH payment adjustment using the following formula:
(DSH patient percentage -20.2) (.825) + 5.88.
We analyzed the results of applying a DSH adjustment, in accordance
with the criteria at section 1886(d)(5)(F) of the Act described above,
on LTCHs. In modeling payments, because the proposed LTCH prospective
payment system must be budget neutral in accordance with section 123(a)
of Public Law 106-113, the proposed inclusion of such a DSH policy
would result in a 3.31 percent decrease to the base payment rate.
Furthermore, the inclusion of such a DSH policy would result in a 3.79
percent decrease in the r-squared value (a statistical measure of how
much variation in resource use among cases is explained by the system).
Accordingly, we found that including a DSH adjustment that is
consistent with section 1886(d)(5)(F) of the Act would reduce the
explanatory power of the proposed LTCH prospective payment system, or
the ability of the proposed payment system model to predict cost per
case, while lowering the base payment rate. Thus, at this time we are
not proposing a DSH adjustment consistent with section 1886(d)(5)(F) of
the Act.
We also evaluated an alternative adjustment, using regression
analysis, that takes into account both the percentage of Medicare
patients who are receiving SSI (SSI percent) and the percentage of
Medicaid patients who are not entitled to Medicare (Medicare percent)
without the other criteria specified in section 1886(d)(5)(F) of the
Act. This analysis was made to determine if there is any relationship
between these two variables and cost per case. The results of this
analysis showed that the regression coefficients for both the
percentage of Medicare patients who are receiving SSI and the
percentage of Medicaid patients who are not entitled to Medicare would
be statistically significant at the 99-percent level. However, the
positive relationship between cost per case and the percentage of LTCH
Medicare patients who are receiving SSI would be offset by a negative
relationship between cost per case and the percentage of LTCH Medicaid
patients who are not entitled to Medicare. This implies that while
costs per discharge would appear to increase (slightly) as the
percentage of LTCH Medicare SSI patients increases, costs per discharge
would decline (slightly) as the percentage of LTCH Medicaid, non-
Medicare patients increased. Therefore, at this time we are not
proposing an adjustment for the treatment of a disproportionate share
of low-income patients based on a LTCH's combined SSI percentage and
Medicaid percentage.
Finally, we examined an adjustment for the treatment of low-income
patients based solely on a LTCH's SSI ratio (the percentage of Medicare
patients who are receiving SSI). The SSI ratio is calculated by
dividing Medicare SSI days by total patient days. While the regression
coefficient would be positive, it was not very large (0.04), which
means that for every 1-percent increase in the SSI percent, a 0.04-
percent increase in cost per case would be observed. Thus, at best, an
empirically based adjustment based on the SSI percent would be very
small. The positive regression coefficient for the SSI percentage is
significantly influenced by the large SSI percentages of only a few
LTCHs. Accordingly, we do not believe it is appropriate to propose an
adjustment based on a LTCH's SSI percentage. Because section 123(a) of
Public Law 106-113 requires that the LTCH prospective payment
[[Page 13468]]
system be budget neutral, applying such an adjustment would result in a
2.98-percent reduction in the proposed base payment rate for all LTCHs
that is based on a small positive regression coefficient that is due
mostly to a relatively small number of LTCHs with a large SSI
percentage.
Because the analyses above do not indicate an increase in the
accuracy of payments based on the adjustments examined for the
treatment of a disproportionate share of low-income patients, we are
not proposing an adjustment at this time. We will revisit the
appropriateness of a DSH adjustment in developing the final rule based
on the most recent data available.
4. Adjustment for Indirect Teaching Costs
In accordance with the directive of section 307(b) of Public Law
106-554 to examine ``appropriate adjustments'' to payments under the
LTCH prospective payment system, we also examined the appropriateness
of applying an adjustment for indirect teaching costs to payments under
the proposed LTCH prospective payment system. Based on the analysis
described below, at this time we are not proposing an adjustment for
indirect teaching costs.
There are presently 14 LTCHs with teaching programs. LTCHs with
major teaching programs tend to be older, larger (greater than 125
beds) hospitals, located in large urban areas, and have a higher
proportion of low-income patients but with a lower case-mix index.
Based on a double log regression, we found that the indirect teaching
cost variable would be negative and not significant. We looked at
different specifications for the teaching variable. We used a resident-
to-bed ratio as the coefficient for the teaching variable in the
regression that is currently used to measure teaching intensity under
the acute care hospital inpatient prospective payment system for
operating costs. We also used a ratio of resident to average daily
census (defined as total inpatient days divided by the number of days
in the cost reporting period) that is currently used under the acute
care hospital inpatient prospective payment system for capital-related
costs, as a measure of teaching intensity. We based this analysis on
the estimated number of full-time equivalent (FTE) residents assigned
to the inpatient area of the LTCH. In all our payment regressions, we
determined that the teaching variable would not be significant. This
means that there is no empirical evidence to show that LTCHs' cost per
case would vary with teaching costs. Therefore, at this time we are not
proposing an adjustment for indirect teaching costs. We will revisit
the appropriateness of an adjustment for the costs of indirect medical
education in developing the final rule based on the most recent
available data.
5. Cost-of-Living Adjustment (COLA) for Alaska and Hawaii
In accordance with the directive of section 307(b) of Public Law
106-554 to examine ``appropriate adjustments'' to payments under the
LTCH prospective payment system, we also examined the appropriateness
of applying a cost-of-living adjustment (COLA) under the proposed LTCH
prospective payment system for LTCHs located in Alaska and Hawaii.
There is currently one LTCH in Hawaii and no LTCHs in Alaska. In
the absence of a COLA, we performed simulations, which indicate that
the facility in Hawaii might experience a payment to cost ratio of 0.89
percent. Therefore, we are proposing a COLA for LTCHs in Hawaii and
Alaska to account for the higher costs incurred in those states. The
IRF proposed rule (November 3, 2000, 65 FR 66357) indicated that based
on payment simulations, without a COLA, the one IRF located in Alaska
may have a loss and the one IRF for which data were available, would
have a gain. Due to the small number of cases, analysis of the
simulation results were inconclusive regarding whether a cost-of-living
adjustment would improve payment equity for these facilities.
Accordingly, we did not include a COLA adjustment for those hospitals
in the prospective payment system for IRFs. (65 FR 66357, November 3,
2000). We believe it appropriate, however, to propose a COLA for LTCHs
based on the higher costs found in Hawaii. In general, the COLA would
account for the higher costs in the LTCH and would eliminate the
projected loss that the LTCH in Hawaii would experience absent the
COLA. Furthermore this policy is consistent with the COLA made to
account for the higher costs in acute care hospitals in Alaska and
Hawaii under both the operating prospective payment system and the
capital prospective payment system. We are proposing to make a COLA,
under proposed Sec. 412.525(b), to payments for LTCHs located in Alaska
and Hawaii by multiplying the standard Federal payment rate by the
appropriate factor listed in the table below. These factors are
obtained from the U.S. Office of Personnel Management.
Cost-Of-Living Adjustment Factors for Alaska and Hawaii Hospitals
------------------------------------------------------------------------
------------------------------------------------------------------------
Alaska:
All areas........................................... 1.25
Hawaii:
Honolulu County..................................... 1.25
Hawaii County....................................... 1.165
Kauai County........................................ 1.2325
Maui County......................................... 1.2375
Kalawao County...................................... 1.2375
------------------------------------------------------------------------
6. Adjustment for High-Cost Outliers
In accordance with the directive of section 307(b) of Public Law
106-554, we also examined the appropriateness of an adjustment for
additional payments for outlier cases. These are cases that have
extraordinarily high costs relative to the costs of most discharges
classified in the same LTC-DRG. Providing additional payments for
outliers could strongly improve the accuracy of the LTCH prospective
payment system in determining resource costs at the patient and
hospital level. These additional payments would reduce the financial
losses that would otherwise be caused by treating patients who require
more costly care and, therefore, would reduce the incentives to
underserve these patients.
We considered various outlier policy options. Specifically, we
examined outlier policies under which outlier payments would be
projected to be 5 percent, 8 percent, or 10 percent of total
prospective system payments. We examined the impact of setting the
outlier target percentage at 5 percent because that percentage is
consistent with the range of targets provided under section
1886(d)(5)(A)(iv) of the Act for the hospital inpatient prospective
payment system. We also considered an outlier target of 10 percent
because that percentage was recommended in an industry study
commissioned by NALTH. In addition, we considered an outlier target of
8 percent to analyze the impact of setting the outlier target at some
percentage between 5 and 10 percent.
We also examined marginal cost factors, or the change in total cost
with one unit of change in output, of 55 and 80 percent. We examined an
80-percent marginal cost factor for outlier payments because it is the
same as the factor used under both the hospital inpatient prospective
payment system and the IRF prospective payment system. We examined a
55-percent marginal cost factor in order to analyze the impact that a
lower marginal cost factor would have on outlier payments and payments
for all other cases.
[[Page 13469]]
As discussed in further detail in the June 4, 1992 hospital
inpatient prospective payment system proposed rule (57 FR 23640), a
study performed by RAND Corporation indicated that the marginal cost of
care is usually less than the average cost because later days of a stay
have considerably lower costs than the earlier days of the stay.
In order to determine the most appropriate outlier policy, we
analyzed the extent to which the various options would reduce financial
risk, reduce incentives to underserve costly beneficiaries, and improve
the overall fairness of the system. We believe an outlier target of 8
percent would allow us to achieve a balance of the above stated goals.
Our regression analysis showed that additional increments of outlier
payments over 8 percent would reduce financial risk, but by
successively smaller amounts. Since outlier payments are included in
budget neutrality calculations, outlier payments would be funded by
prospectively reducing the nonoutlier prospective payment system
payment rates by the proportion of projected outlier payments to
projected total prospective payment system payments in the absence of
outlier payments; the higher the outlier target, the greater the
(prospective) reduction to the base payment rate. We are proposing to
provide outlier payments and to set outlier numerical criteria
prospectively before the beginning of each Federal fiscal year so that
outlier payments are projected to equal 8 percent of total payments
under the proposed LTCH prospective payment system. Based on regression
analysis and payment simulations, we believe this option optimizes the
extent to which we would be able to protect vulnerable hospitals, while
still providing adequate payment for all other cases that are not
outlier cases.
We are proposing, under proposed Sec. 412.525(a), to make an
outlier payment for any discharges where the estimated cost would
exceed the proposed adjusted LTCH prospective payment system payment
for the proposed LTC-DRG plus a fixed-loss amount. The fixed-loss
amount is the amount used to limit the loss that a hospital would incur
under an outlier policy. This results in Medicare and the LTCH sharing
financial risk in the treatment of extraordinarily costly cases. The
LTCH's loss is limited to the fixed-loss amount and the percentage of
costs above the marginal cost factor. The estimated cost of a case
would be calculated by multiplying the overall hospital cost-to-charge
ratio by the Medicare allowable covered charge.
Our analysis of payment-to-cost ratios for outlier cases showed
that a marginal cost factor of 80 percent appropriately addresses
outlier cases that are significantly more expensive than nonoutlier
cases. This factor would ensure that there is a balance between the
need to protect LTCHs financially while encouraging them to treat
expensive patients and maintaining the incentives of a prospective
payment system to improve the efficient delivery of care. Based on this
analysis and consistent with the marginal cost factor used under the
IRF prospective payment system and under section 1886(d) of the Act for
inpatient acute care hospitals, we are proposing to pay outlier cases
80 percent of the difference between the estimated cost of the case and
the outlier threshold (the sum of the adjusted Federal prospective
payment for the LTC-DRG and the fixed-loss amount). The proposed fixed-
loss amount would be calculated by simulating aggregate payments with
and without an outlier policy, using FY 2000 MedPAR claims data and the
best available cost report data in an iterative process to determine a
fixed-loss threshold that would result in outlier payments being equal
to 8 percent of total payments. As discussed in section IV.D. of this
proposed rule, for FY 2003 we proposing a fixed-loss amount of $29,852.
Therefore, for FY 2003, we are proposing to pay an outlier case 80
percent of the difference between the estimated cost of the case and
the outlier threshold (the sum of the adjusted Federal prospective
payment for the LTC-DRG prospective payment system payment plus
$29,852).
D. Calculation of the Proposed Standard Federal Payment Rate
1. Overview of the Development of the Proposed Standard Payment Rate
Section 123(a)(1) of Public Law 106-113 requires that the
prospective payment system for LTCHs maintain budget neutrality.
Therefore, we are proposing to calculate the standard Federal rate by
setting total estimated prospective payment system payments equal to
estimated payments that would have been made under the TEFRA
methodology if the proposed prospective payment system for LTCH were
not implemented as described in this proposed rule. In accordance with
section 307(a)(2) of the BIPA, the increases to the hospital-specific
target amounts and cap on the target amounts for LTCHs for FY 2002
provided for by section 307(a)(1) of the BIPA and the enhanced bonus
payments for LTCHs for FY 2001 and FY 2002 provided for by section 122
of the BBRA were not taken into account in the development of the
proposed prospective payment system for LTCHs.
The proposed methodology for determining the standard Federal
payment rate under the proposed LTCH prospective payment system is
described in further detail below.
2. Development of the Proposed Standard Federal Payment Rate
a. Data Sources
The data sources that we used to calculate the proposed standard
Federal payment rate include cost report data from FYs 1996 through
1999 and FY 2000 Medicare claims data from the June 2001 update of the
MedPAR since these data were the most recently available complete data
for LTCHs. We used data from 222 LTCHs to calculate the proposed
standard Federal payment rate. We updated the cost report data for each
LTCH to the midpoint of FY 2003 using an inflation factor based on the
historical relationship of each hospital's costs and their target
amounts as described in section IV.D.2.b. of this proposed rule. The FY
1996 cost report data were used to determine each LTCH's update for FY
1999, and the FY 1997 cost report data were used to determine the
update for FY 2000. The FY 1998 cost report data were used to determine
the update for FY 2001, and the FY 1999 cost report data were used to
determine the update for FY 2002. We were unable to calculate a
proposed payment under the current payment system for some LTCHs
because cost report data were unavailable. We will attempt to obtain
the most recent payment amounts for these hospitals through their
Medicare fiscal intermediary and we will consider using these data to
construct the standard Federal payment rates for the final rule. We
will also examine the extent that certain LTCHs (new LTCHs, for
example) are not included in the data used to determine the proposed
standard Federal payment rate and consider the appropriateness of an
adjustment to better reflect total estimated payments for LTCHs.
In determining the proposed prospective payment rates for LTCHs, we
had significant concerns about the integrity of some of the cost report
data in HCRIS. Specifically, we were concerned about data from cost
reports submitted by a hospital chain that is the owner of
approximately 20 percent of LTCHs nationwide that arose from a ``qui
tam'' action filed by the U.S. Department of Justice (DOJ) in July
1999. This action alleged, among other
[[Page 13470]]
claims, that the hospitals inflated both cost and charge data on
Medicare hospital cost reports filed from 1994 through 1999. On March
16, 2001, the hospital chain agreed to pay approximately $339 million
to settle claims arising from 11 separate actions. Based upon audits
and projections performed by Medicare's fiscal intermediary under the
direction of our Office of Financial Management, the Medicare LTCH
action was allocated $178 million of this settlement.
Under the terms of the agreement, Medicare cost reports from the
years in question were not reopened and audited. However, the fiscal
intermediary was able to estimate the effect on the Medicare cost
reports for 1995, 1996, and 1997. Then a random sample of Medicare cost
reports from 1998 and 1999 were reviewed to verify the projected impact
for those years and a settlement figure was determined for FY 1995
through FY 1999. Therefore, in order to avoid the negative impact those
providers' data may otherwise have on the integrity of the data, we are
basing our proposed standard Federal rate on a factor determined by
CMS' Office of the Actuary to adjust the costs reported in those
affected FY 1998 and FY 1999 cost reports. This factor was derived by
determining the ratio of the portion of the settlement amount described
above attributable to each LTCH to the Medicare payments received by
each affected LTCH during the period covered by the settlement.
b. Update the Latest Cost Report Data to the Midpoint of FY 2003
Consistent with the methodology used under the IRF prospective
payment system (at Sec. 412.624(c)), we are proposing, at
Sec. 412.523(c)(2), to update each LTCH's cost per discharge to the
midpoint of FY 2003, using the weighted average of the applicable
percentage increases to the TEFRA target amounts for FYs 1999 through
2002 (in accordance with Sec. 413.40(c)(3)(vii)) and the full market
basket percentage increase for FY 2003. For FYs 1999 through 2002, we
would determine the appropriate update factor for each hospital by
using the methodology described below:
For hospitals with costs that equal or exceed their target
amounts by 10 percent or more for the most recent cost reporting period
for which information is available, the update factor would be the
market basket percentage increase.
For hospitals that exceed their target amounts by less
than 10 percent, the update factor would be equal to the market basket
minus 0.25 percentage points for each percentage point by which
operating costs are less than 10 percent over the target (but in no
case less than 0).
For hospitals that are at or below their target amounts,
but exceed two-thirds of the target amounts, the update factor would be
the market basket minus 2.5 percentage points (but in no case less than
0).
For hospitals that do not exceed two-thirds of their
target amounts, the update factor would be 0 percent.
For FY 2003, we propose to use the most recent estimate of the
percentage increase projected by the excluded hospital market basket
index.
c. Estimate Total Payments Under the Current (TEFRA) Payment System
We would estimate payments for inpatient operating services under
the TEFRA system using the following methodology:
Step 1: Determine each LTCH's hospital-specific target amount. The
hospital-specific target amount for a LTCH is calculated based on the
hospital's allowable inpatient operating cost per discharge for the
hospital's base period, excluding capital-related, nonphysician
anesthetist, and medical education costs. This target amount would then
be updated using a rate-of-increase percentage as described in
Sec. 413.40(b)(3). For FYs 1998 through 2002, there are two national
caps on the payment amounts for LTCHs. Under Sec. 413.40(c)(4)(iii), a
LTCH's hospital-specific target is the lower of its net allowable base
year costs per discharge increased by the applicable update factors or
the cap for the applicable cost reporting period. In determining each
LTCH's hospital-specific target amount, we would use the FY 2002 cap
amounts published in the August 1, 2001 Federal Register (66 FR 39915-
39916), adjusted in accordance with section 307(a)(2) of Public Law
106-554 by removing the 2-percent increase in the cap for existing
LTCHs required by section 307(a)(1) of Public Law 106-554. For existing
hospitals (that is, LTCHs paid as an excluded hospital before October
1, 1997), the applicable cap amount for FY 2002 is $30,783 for the
labor-related share adjusted by the applicable geographic wage index
and added to $12,238 for the nonlabor-related share. For ``new''
hospitals (that is, LTCHs first paid as an excluded hospital on or
after October 1, 1997), the cap amount applicable for FY 2002 is
$16,701 for the labor-related share adjusted by the applicable
geographic wage index and added to $6,640 for the nonlabor-related
share. These capped amounts would then be inflated to the midpoint of
FY 2003 by applying the excluded hospital operating market basket.
As explained above, we note that, in accordance with section
307(a)(2) of the BIPA, in estimating total payments to LTCHs under the
current payment system, the increase to the hospital target amounts and
caps on the target amounts for LTCHs effective from October 1, 2001
through September 30, 2002, provided for under section 307(a)(1) of the
BIPA were not to be taken into account.
Step 2: Determine each LTCH's payment amount for inpatient
operating services. Under the TEFRA system, a LTCH's payment amount for
inpatient operating services is the lower of--
The hospital-specific target amount (subject to the
application of the cap as determined in Step 1) times the number of
Medicare discharges (the ceiling); or
The hospital average inpatient operating cost per case
times the number of Medicare discharges.
In addition, under the TEFRA system, payments may include a bonus
or relief payment, as follows:
For LTCHs whose net inpatient operating costs are lower
than or equal to the ceiling, payment would be determined based on the
lower of either the net inpatient operating costs plus 15 percent of
the difference between the inpatient operating costs and the ceiling or
the net inpatient operating costs plus 2 percent of the ceiling.
For LTCHs whose net inpatient operating costs are greater
than the ceiling but less than 110 percent of the ceiling, payment
would be the ceiling.
For LTCHs whose net inpatient operating costs are greater
than 110 percent of the ceiling, payment would be the ceiling plus the
lower of 50 percent of the difference between the 110 percent of the
ceiling and the net inpatient operating costs or 10 percent of the
ceiling.
Further, under the TEFRA system, excluded hospitals and units,
including LTCHs, may be eligible for continuous improvement bonus
payments as described under Sec. 413.40(d)(4). As explained above, in
accordance with section 307(a)(2) of Public Law 106-554, the
enhancement of continuous improvement bonus payments for LTCHs,
effective for cost reporting periods beginning on or after October 1,
2000 and before September 30, 2002, and provided for under section 122
of Public Law 106-113, were not to be taken into account in estimating
total payments to LTCHs under the current TEFRA system.
Step 3: Determine each LTCH's payment for capital-related costs.
Under the TEFRA system, in accordance with
[[Page 13471]]
section 1886(g) of the Act, Medicare allowable capital costs are paid
on a reasonable cost basis. Thus, each LTCH's payment for capital-
related costs would be taken directly from the cost report and updated
for inflation using the excluded hospital market basket, consistent
with the methodology used under the IRF prospective payment system.
Step 4: Determine each LTCH's average total (operating and capital)
payment per case under the current (TEFRA) payment system. Once
estimated payments for inpatient operating costs are determined
(including bonus and relief payments, as appropriate), we would add the
operating payments and capital payments together to determine each
LTCH's estimated total payments under the current (TEFRA) payment
system. We would then divide each LTCH's estimated total TEFRA payments
by the corresponding number of Medicare discharges from the cost report
to determine what each LTCH's average total payment per case would be
under the current (TEFRA) payment system.
Step 5: Determine a case weighted average payment under the current
(TEFRA) payment system. We would determine each LTCH's average payment
under the current (TEFRA) system weighted for its number of cases in
the June 2001 update of the FY 2000 MedPAR by multiplying its average
total payment per case from step 4 by its number of cases in the FY
2000 MedPAR.
Step 6: Estimate total (MedPAR) weighted payments under the current
(TEFRA) payment system. We would estimate total weighted payments under
the current (TEFRA) payment system by summing each LTCH's (MedPAR)
weighted payments under the current (TEFRA) payment system (from step
5). In addition, we adjusted the estimated total weighted payments to
reflect the estimated portion of additional outlier payments under
proposed Sec. 412.525(a). (This is consistent with not including
outlier payments in estimating payments under the proposed prospective
payment system in Step e. below.) This total would be the numerator in
the calculation of a budget neutrality adjustment.
d. Calculate the Average Weighted Payment per Discharge Amount
Once estimated total payments under the current payment system are
calculated, we would calculate an average per discharge payment amount
weighted by the number of Medicare discharges under the current payment
system. This would be done by first determining the average payment per
discharge amount under the current payment system for each LTCH. Cost
report data would be used to calculate each LTCH's average payment per
discharge by dividing the number of discharges into the total payments.
As explained above in section IV.D.2.a. of this proposed rule, the
LTCH's payment per discharge would be adjusted consistent with the
terms of the DOJ settlement agreement.
Next, we would determine the weighted average per discharge payment
amount by multiplying each LTCH's average payment per discharge amount
from the cost report by the number of discharges from the Medicare
claims data in the FY 2000 MedPAR file. Then we would add the amounts
for all LTCHs and divide by the total number of discharges from the
Medicare claims in MedPAR to derive a weighted average payment per
discharge.
e. Estimate Payments Under the Proposed Prospective Payment System
Without a Budget Neutrality Adjustment
Payments under the proposed payment system would then be estimated
without a budget neutrality adjustment. To do this, we would multiply
each LTCH's case-mix index adjusted for short-stay outliers (see
section IV.B.2. of this proposed rule), the number of discharges from
the Medicare claims in MedPAR adjusted for short-stay outliers (see
section IV.B.2. of this proposed rule) and the weighted average per
discharge payment amount computed above. For purposes of this
calculation, we would estimate payments for each LTCH as if it were
paid based on 100 percent of the proposed standard Federal rate in FY
2003 rather than the proposed transition blend methodology described in
section IV.G. of this proposed rule. Total payments for each LTCH would
then be summed for all LTCHs. This total would be the denominator in
the calculation of the budget neutral adjustment.
f. Determine the Budget Neutrality Adjustment
The budget neutrality adjustment would be calculated by dividing
total adjusted payments under the current payment system (the total
amount calculated in section IV.D.2.c. of this preamble) by estimated
payments under the proposed prospective payment system, without a
budget neutrality adjustment (the total amount calculated in section
IV.D.2.e. of this preamble).
g. Determine the Standard Federal Payment Rate
The resulting budget neutrality adjustment (determined in section
IV.D.2.f. of this preamble) would then be multiplied by the average
weighted per discharge payment amount under the current payment system
and we would adjust the result further to include a behavioral offset.
As previously stated, to calculate the proposed standard Federal
payment rate, we estimated what would have been paid under the current
payment system. However, we expect that as a result of the
implementation of the new prospective payment system, LTCHs may
experience usage patterns that are significantly different from their
current usage patterns. Since there is a fixed payment based on
diagnosis in a per discharge prospective payment system regardless of
the length of stay (except for additional outlier payments), there
would be an incentive to discharge a patient (to home or to another
site of care) as early in the stay as possible in order to minimize
cost and maximize profit). As a result, discharges may occur earlier in
the LTCH stay. This would result in lower payments under the current
payment system for this care which must be taken into account when
computing the budget neutral payment rate. Furthermore, as explained in
sections IV.A.2. and G. of this proposed rule, we expect the LTCH's
coding practice of LTCHs to improve once the proposed prospective
payment system is implemented, which has a significant potential of
resulting in a case-mix that would be higher than what would be used to
determine the budget neutral standard Federal rate.
As was the case when the hospital inpatient prospective payment
system was implemented, improved coding could result in a higher case-
mix because hospitals would code secondary diagnoses more completely
and accurately, now that these diagnoses would factor into the LTC-DRG
assignment and, ultimately, their payment. The inclusion of appropriate
secondary diagnoses could result in the case being grouped into a
higher weighted LTC-DRG. This is especially true for LTCHs since they
generally treat more medically complex patients who are more likely to
have many secondary diagnoses. Thus, if the same cases that were used
to develop the proposed standard Federal rate are grouped into higher
weighted LTC-DRGs as a result of improved coding, this higher case-mix
would result in higher payments under the proposed payment system for
this care. This effect must also be taken
[[Page 13472]]
into account when computing the budget neutral standard Federal rate.
Accounting for these effects through an adjustment is commonly known as
a behavioral offset.
The proposed standard Federal payment rate with a behavioral offset
is $27,649.02. This proposed dollar amount includes a 0.27 percent
(that is, twenty-seven hundredths of one percent) reduction for the
behavioral offset in the proposed standard Federal payment rate
otherwise calculated under the methodology described above. Consistent
with the assumptions made under the IRF prospective payment system, in
determining this proposed behavioral offset adjustment, we assumed that
the LTCHs would regain 15 percent of potential losses and augment
payment increases by 5 percent through transfers occurring at or beyond
the mean length of stay associated with the LTC-DRG at any point.
For FY 2003, we are proposing to establish a fixed-loss outlier
threshold (as described previously in section IV.C.6. of this proposed
rule) equal to the proposed standard Federal prospective payment rate
for the LTC-DRG plus $29,852. In setting this proposed fixed-loss
amount of $29,852, we project that FY 2003 outlier payments would equal
8 percent of LTC-DRG payments under the proposed LTCH prospective
payment system in accordance with proposed Sec. 412.523.
h. Determine a Budget Neutrality Offset To Account for the Proposed
Transition Methodology
Section 123(a)(1) of the BBRA requires that the LTCH prospective
payment system maintain budget neutrality. As discussed in further
detail in section IV.G. of this proposed rule, we are proposing a 5-
year transition period from cost-based TEFRA reimbursement to
prospective payment, during which a LTCH would be paid an increasing
percentage of the proposed LTCH prospective payment system rate and a
decreasing percentage of its TEFRA rate for each discharge.
Furthermore, we are proposing to allow a LTCH to elect to be paid based
on 100 percent of the proposed standard Federal rate in lieu of the
blend methodology. Based on a comparison of the estimated FY 2003
payments to each LTCH based on 100 percent of the proposed standard
Federal rate and the proposed transition blend methodology, we project
that approximately 58 percent of LTCHs would elect to be paid based on
100 percent of the proposed standard Federal rate since they would
receive higher payments than under the proposed transition blend
methodology. We project that the remaining 42 percent of LTCHs will
choose to be paid based on the transition blend methodology (80 percent
of TEFRA; and 20 percent of the prospective payment system) in FY 2003
since they would receive higher payments than if they were paid based
on 100 percent of the Federal rate.
Since the proposed standard Federal rate ($27,649.02) determined
under section IV.D.2.g. of this proposed rule was calculated as if all
LTCHs would be paid based on 100 percent of the proposed standard
Federal rate in FY 2003, in order to maintain budget neutrality, we are
proposing to reduce all LTCH Medicare payments during the transition
period by a factor that is equal to 1 minus the ratio of the estimated
TEFRA reasonable cost-based payments that would have been made if the
LTCH prospective payment system had not been implemented, to the
projected total Medicare program payments that would be made under the
proposed transition methodology and the option to elect payment based
on 100 percent of the Federal rate.
We project that the full effect of the proposed 5-year transition
period and the election option would result in a cost to the Medicare
program of $230 million as follows:
------------------------------------------------------------------------
Estimated
Fiscal year cost (in
millions)
------------------------------------------------------------------------
2003....................................................... $50
2004....................................................... 80
2005....................................................... 60
2006....................................................... 30
2007....................................................... 10
------------------------------------------------------------------------
Thus, in order to maintain budget neutrality, we propose to apply a
5.1 percent reduction (0.949) to all LTCHs payments in FY 2003 to
account for the estimated cost of $50 million for FY 2003. Furthermore,
in order to maintain budget neutrality, we would propose a budget
neutrality offset for each of the remaining years of the transition
period in a notice of proposed rulemaking to account for the estimated
costs for the respective fiscal year.
Based on the data available at this time, we would propose the
following offsets to LTCH payments during the transition period: 3.9
percent (0.961) in FY 2004; 2.6 percent (0.974) in FY 2005; and 1.3
percent (0.987) in FY 2006. No budget neutrality offset would be
necessary in the 5th year of the transition period (FY 2007) because
under the proposed transition methodology, all LTCHs would be paid
based on 100 percent of the standard Federal rate and zero percent of
payments under TEFRA. These estimates are based on the inflation
factors and projected Medicare spending for LTCHs discussed in section
VI.B.6. of this proposed rule, and that an estimated 58 percent of
LTCHs will elect to be paid based on 100 percent of the standard
Federal rate rather than the transition blend.
Consistent with the statutory requirement for budget neutrality, we
intend for estimated aggregate payments under the LTCH prospective
payment system to equal the estimated aggregate payments that would be
made if LTCH prospective payment system were not implemented. Our
methodology for estimating payments for purposes of the budget
neutrality calculations uses the best available data and necessarily
reflects assumptions. When the LTCH prospective payment system is
implemented, we would monitor payment data and evaluate the ultimate
accuracy of the assumptions used to calculate the budget neutrality
calculations (for example, inflation factors, intensity of services
provided, or behavioral response to the implementation of the LTCH
prospective payment system, as discussed in section IV.D of this
proposed rule). To the extent these assumptions significantly differ
from actual experience, the aggregate amount of actual payments may
turn out to be significantly higher or lower than the estimates on
which the budget neutrality calculations are based. Section 123 of
Public Law 106-113 and section 307 of Public Law 106-554 provide the
Secretary extremely broad authority in developing the LTCH prospective
payment system, including the authority for appropriate adjustments.
Pursuant to this broad authority, under Sec. 412.523(d)(3), we are
proposing a possible one-time prospective adjustment to the LTCH
prospective payment system rates by October 1, 2006, so that the effect
of any significant difference between actual payments and estimated
payments for the first year of the LTCH prospective payment system is
not perpetuated in the prospective payment system rates for future
years. (We note that in other contexts (for example, outlier payments
under the hospital inpatient prospective payment system) differences
between estimated payments and actual payments for a given year are not
built into the prospective payment system rates for subsequent years.
Moreover, the statutory ratesetting scheme under the LTCH prospective
payment system is very different than in other contexts.)
[[Page 13473]]
We estimate that total Medicare program payments for LTCH services
over the next 5 years would be:
------------------------------------------------------------------------
Estimated
payments ($
Fiscal year in
billions)
------------------------------------------------------------------------
2003....................................................... $1.80
2004....................................................... 1.91
2005....................................................... 2.02
2006....................................................... 2.14
2007....................................................... 2.26
------------------------------------------------------------------------
These estimates are based on the assumption that the proposed LTCH
inflation factor (the excluded hospital market basket) would be 3.6
percent for FYs 2003 through 2005, 3.5 percent for FY 2006, and 3.4
percent for FY 2007, that 58 percent of LTCHs would elect to be paid
based on 100 percent of the proposed standard Federal rate rather than
the proposed transition blend, and that there would be an increase in
Medicare beneficiary enrollment of 2.2 percent in FY 2003, 2.3 percent
in FYs 2004 and 2005, 2.4 percent in FY 2006, and 2.3 percent in FY
2007.
E. Development of the Proposed Federal Prospective Payments
Once the proposed relative weights for each LTC-DRG and the
proposed standard Federal payment rate are calculated, the proposed
Federal prospective payments can be determined. Under proposed
Sec. 412.523(c)(4), a LTC-DRG payment would be calculated by
multiplying the proposed standard Federal payment rate by the
appropriate proposed LTC-DRG relative weight. The equation would be as
follows:
Federal Prospective Payment = LTC-DRG Relative Weight * Standard
Federal Payment Rate
F. Computing the Proposed Adjusted Federal Prospective Payments
The proposed Federal prospective payments described in section
IV.E. of this preamble would be adjusted to account for the higher
costs of hospitals in Alaska and Hawaii by multiplying the proposed
Federal prospective payment rate by the appropriate proposed adjustment
factor shown in the table in section IV.C.5. of this proposed rule.
G. Transition Period
Under the broad authority conferred to the Secretary by section 123
of Public Law 106-113 for development of a prospective payment system
for LTCHs, we are proposing, under Sec. 412.533, a 5-year transition
period from reasonable cost-based reimbursement under the TEFRA system
to a prospective payment based on industry-wide average operating and
capital-related costs. Under the average pricing system being proposed,
payment would not be based on the experience of an individual hospital.
We believe that a 5-year phase-in would provide LTCHs time to adjust
their operations and capital financing to the new payment system, which
would be based on prospectively determined Federal payment rates.
Moreover, capital renovation and expansion plans of certain LTCHs
may not be amenable to short-term adjustment due to the commitment of
capital funds involved. We believe that a 5-year transition period with
an increasing percentage of prospective payments should afford LTCHs an
opportunity to increase their efficiency in the delivery of operating
services and reserve additional payments to finance their capital
expenditures.
We further believe that the 5-year phase-in of the proposed LTCH
prospective payment system would allow LTCH personnel to develop
proficiency with the LTC-DRG coding system, resulting in improvement in
the quality of the data used for generating our annual determination of
relative weights and payment rates. Our analysis conducted during the
development of the proposed LTCH prospective payment system revealed
that most patients in LTCHs have several diagnosis codes on their
Medicare claims indicating multiple CCs, although further review of
individual case studies indicated that in some instances all of the
diagnoses were not reported. Since payments to LTCHs under the current
TEFRA system are based on reasonable costs, not diagnosis codes, past
coding by LTCHs may not have accurately reflected the patient's
diagnoses. Further evidence of incomplete coding is shown by the pairs
of LTC-DRGs where the ``without CC'' LTC-DRG had a higher average
charge than the corresponding with CC LTC-DRG. As described in more
detail in section III. of this proposed rule, since the LTC-DRGs ``with
CCs'' require more coded information, we believe this phenomenon
indicates incomplete coding and that over the 5-year phase-in of the
LTC-DRG-based LTCH prospective payment system, this problem would be
resolved.
The proposed 5-year transition period would enable us to collect
Medicare claims and cost data that would be produced based on new
program instructions to providers and fiscal intermediaries, and
subject to program integrity monitoring. This gradual phase-in would
provide a stable fiscal base for LTCHs, as we analyze data that may
lead to our revisiting and perhaps revising specific policy decisions
for the proposed LTCH prospective payment system.
We are proposing that the transition period for all hospitals
subject to the proposed LTCH prospective payment system would begin
with the hospital's first cost reporting period beginning on or after
October 1, 2002 and extend through the hospital's last cost reporting
period beginning before October 1, 2007. During the 5-year transition
period, we are proposing that a LTCH's total payment under the
prospective payment system would be based on two payment percentages--
one based on reasonable cost-based (TEFRA) payments, and the other
based on the standard Federal prospective payment rate. The proposed
blend percentages are as follows:
------------------------------------------------------------------------
Federal
Cost reporting periods beginning on or after rate TEFRA rate
percentage percentage
------------------------------------------------------------------------
October 1, 2002............................... 20 80
October 1, 2003............................... 40 60
October 1, 2004............................... 60 40
October 1, 2005............................... 80 20
October 1, 2006............................... 100 0
------------------------------------------------------------------------
For a cost reporting period beginning on or after October 1, 2002,
and before October 1, 2003, the total payment for a LTCH would consist
of 80 percent of the amount calculated under the current (TEFRA)
payment system for that specific LTCH and 20 percent of the proposed
Federal prospective rate. The percentage of payment based on the
proposed LTCH prospective payment system Federal rate would increase by
20 percentage points each year, while the TEFRA rate percentage would
decrease by 20 percentage points each year, for the next 4 fiscal
years. For cost reporting periods beginning on or after October 1,
2006, Medicare payment to LTCHs would be determined entirely under the
proposed Federal prospective payment system methodology. The TEFRA rate
percentage is a LTCH specific amount that is based on the amount that
the LTCH would have been paid (under TEFRA) if the prospective payment
system were not implemented.
Medicare fiscal intermediaries would continue to compute the LTCH
TEFRA payment amount according to Sec. 412.22(b) of the regulations and
sections 1886(d) and (g) of the Act. We note that several TEFRA
provisions that currently are in effect would no longer be effective
for cost reporting periods beginning in FY 2003. For instance, the caps
on the target amounts for ``existing'' LTCHs provided for under
[[Page 13474]]
section 4414 of the BBA (see Sec. 413.40(c)(4)(iii)) for FYs 1998
through 2002 would no longer be applicable for cost reporting periods
beginning in FY 2003. For purposes of the LTCH prospective payment
system, a LTCH's target amount for FY 2003 would be determined by
updating its FY 2002 target amount (subject to the cap). In addition,
the 15-percent reduction to payments to LTCHs for capital-related costs
provided for under section 4412 of the BBA (Sec. 413.40(j)) is
applicable for portions of cost reporting periods occurring in FYs 1998
through FY 2002. This reduction would no longer be applicable for cost
reporting periods beginning in FY 2003. Therefore, the TEFRA portion of
a LTCH's payment for capital-related costs during the LTCH prospective
payment system transition period would be based on 100 percent of its
Medicare allowable capital costs.
In implementing the proposed prospective payment system for LTCHs,
one of our goals is to transition hospitals to full prospective
payments as soon as appropriate. Therefore, we are proposing, under
Sec. 412.533(b), to allow a LTCH to elect payment based on 100 percent
of the Federal rate at the start of any of its cost reporting periods
during the 5-year transition period rather than incrementally shifting
from cost-based payments to prospective payments. However, once a LTCH
elects to be paid based on 100 percent of the Federal rate, it would
not be able to revert to the proposed transition blend.
The purpose of the transition period is to allow for a smooth
transition from cost-based reimbursement to prospective payment. We
believe that it is appropriate not to allow a LTCH to revert back to
the blended transition methodology once it elects payment based on 100
percent of the Federal rate, because allowing LTCHs to switch back to a
payment based on the transition blend from a payment based on 100
percent of the Federal rate would be administratively burdensome to our
fiscal intermediaries.
Consistent with transition methodology policies under the IRF
prospective payment system, we are proposing that, in order to elect
payment based on 100 percent of the Federal rate, a LTCH must notify
the fiscal intermediary of the election no later than 30 days before
the beginning of the cost reporting period in the applicable fiscal
year beginning on or after October 1, 2003 and before October 1, 2007
(proposed Sec. 412.533(b)). The request by the LTCH to make the
election would be made in writing to the Medicare fiscal intermediary.
The intermediary would have to receive the request on or before the
30th day before the applicable cost reporting period begins, regardless
of any postmarks or anticipated delivery dates. Requests received,
postmarked, or delivered by other means after the 30th day before the
cost reporting period begins would not be approved. If the 30th day
before the cost reporting begins falls on a day that the postal service
or other delivery sources are not open for business, the LTCH would be
responsible for allowing sufficient time for the delivery of the
request before the deadline. If a LTCH's request is not received or not
approved, payment would be based on the transition period rates.
H. Payments to New LTCHs
For the purposes of the proposed LTCH prospective payment system,
we are proposing under Sec. 412.23(e)(4) to define a new LTCH as a
provider of inpatient hospital services that (1) meets the proposed
revised qualifying criteria (described in section II.B.1. and in
proposed Sec. 412.23(e)(1) of this proposed rule); and (2) under
present or previous ownership (or both), has not received payment as a
LTCH for discharges prior to October 1, 2002 (the effective date of the
proposed prospective payment system for LTCHs).
We are proposing, under Sec. 412.533(c), that new LTCHs would be
paid based on 100 percent of the Federal rate starting with their first
cost reporting period beginning on or after October 1, 2002. Thus,
these new LTCHs would not participate in the 5-year transition from
cost-based reimbursement to prospective payment (see section IV.G. of
this proposed rule), as would other LTCHs.
The proposed transition period described in section IV.G. of this
proposed rule is intended to provide existing LTCHs time to adjust to
payment under the new proposed system. Since these new LTCHs would not
have received payment for the delivery of LTCH services prior to the
effective date of the LTCH prospective payment system, we do not
believe that new LTCHs require a transition period in order to make
adjustments to their operations and capital financing, as would
existing LTCHs.
These new LTCHs should not be confused with those LTCHs first paid
under the TEFRA payment system for discharges occurring on or after
October 1, 1997, described in section 1886(b)(7)(A) of the Act, added
by section 4416 of Public Law 105-33. In accordance with
Sec. 413.40(f)(2)(ii), for cost reporting periods beginning on or after
October 1, 2001, the payment amount for a ``new'' (post-FY 1998) LTCH
is the lower of the hospital's net inpatient operating cost per case or
110 percent of the national median target amount payment limit for
hospitals in the same class for cost reporting periods ending during FY
1996, updated to the applicable cost reporting period (see 62 FR 46019,
August 29, 1997). A LTCH's second cost reporting period is subject to
the same payment limit as the first cost reporting period. The target
amount for the LTCH beginning with its third 12-month cost reporting
period, as set forth in Sec. 413.40(c)(4)(v), is its payment amount for
the preceding cost reporting period updated to the third cost reporting
period. Under the proposed prospective payment system for LTCHs, those
``new'' LTCHs would be paid under the proposed transition methodology
described in section IV.G. of this proposed rule.
For example, a new LTCH that first began receiving payment as a
LTCH on October 1, 2001, would be subject to the 110 percent of the
median target amount payment limit for LTCHs (in accordance with
Sec. 413.40(f)(2)(ii)) for both its FY 2002 and FY 2003 cost reporting
periods. For its cost reporting period beginning on October 1, 2002
(the first cost reporting period under which the LTCH would be subject
to the proposed prospective payment system), under the proposed
transition methodology the LTCH's TEFRA portion of its payment for
operating costs (80 percent) would be limited by the 110 percent of the
median target amount payment limit for LTCHs under
Sec. 413.40(f)(2)(ii). For its cost reporting period beginning on
October 1, 2003, under the proposed transition methodology that LTCH's
TEFRA portion of its payment for operating costs (60 percent) would be
limited by its target amount as determined under Sec. 413.40(c)(4)(v).
However, where a new LTCH first begins to receive payment as a LTCH on
or after October 1, 2002, the LTCH would not be subject to the 5-year
transition period under proposed Sec. 412.533. The LTCH would be paid
based on 100 percent of the proposed LTCH prospective payment system
Federal rate beginning with its first cost reporting period.
I. Method of Payment
As discussed earlier, we are proposing that a beneficiary would be
classified into a proposed LTC-DRG based on the principal diagnosis, up
to eight additional (secondary) diagnoses, and up to six procedures
performed during the stay, as well as age, sex, and discharge status of
the patient. The LTC-DRG would be used to determine the Federal
prospective payment that
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the LTCH would receive for the Medicare-covered Part A services the
LTCH furnished during the Medicare beneficiary's stay. We are
proposing, under Sec. 412.541(a), that the payment would be based on
the submission of the discharge bill since section 123(a) of Public Law
106-113 requires that the LTCH prospective payment system be a per
discharge based system. The discharge bill would provide data to allow
for reclassifying the stay from payment at the full LTC-DRG rate into
one of the proposed very short-stay discharge LTC-DRGs (under proposed
Sec. 412.527), or to determine the payment for a case as a proposed
short-stay outlier (under proposed Sec. 412.529) or as a proposed
interrupted stay (under proposed Sec. 412.531), or to determine if the
case would qualify for an outlier payment (under proposed
Sec. 412.525(a)).
Accordingly, the ICD-9-CM codes and other information proposed to
be used to determine if an adjustment to the full LTC-DRG payment is
necessary (for example, length of stay or interrupted stay status)
would be recorded by the LTCH on the beneficiary's discharge bill and
submitted to the Medicare fiscal intermediary for processing. The
payment made would represent payment in full, under proposed
Sec. 412.521(b), for inpatient operating and capital-related costs, but
not the costs of an approved medical education program, bad debts,
blood clotting factors, anesthesia services by hospital-employed
nonphysician anesthetists or obtained under arrangement, or the costs
of photocopying and mailing medical records requested by a PRO, which
are costs paid outside the proposed LTCH prospective payment system.
Under the current payment system, a LTCH may elect to be paid using
the periodic interim payment (PIP) method described in Sec. 413.64(h),
and may be eligible to receive accelerated payments as described in
Sec. 413.64(g). With the implementation of a prospective payment system
for LTCHs, at this time (under proposed Sec. 412.541) we are proposing
to continue this existing administrative policy of allowing PIP under
Sec. 413.64(h) and accelerated payments under Sec. 413.64(g) for
qualified LTCHs. For those LTCHs that will be paid during the 5-year
transition based on the blended transition methodology in Sec. 412.533
for cost reporting periods beginning on or after October 1, 2002 and
before October 1, 2006, the PIP amount would be based on the transition
formula. For those LTCHs that are paid based on 100 percent of the
standard Federal rate, the PIP amount would be based on the estimated
prospective payment for the year rather than on the estimated cost
reimbursement. Excluded from the PIP amounts would be outlier payments
that are paid upon submission of a discharge bill. In addition, Part A
costs that are not paid for under the proposed LTCH prospective payment
system, including Medicare costs of an approved medical education
program, bad debts, blood clotting factors, anesthesia services by
hospital-employed nonphysician anesthetists or obtained under
arrangement, and the costs of photocopying and mailing medical records
requested by a PRO would be subject to the interim payment provisions
at Sec. 413.64.
V. Provisions of the Proposed Rule
We are proposing to establish a new subpart O under 42 CFR part
412, to implement the provisions of the proposed prospective payment
system for LTCHs as discussed in detail throughout the preamble to this
proposed rule.
In addition, we are proposing to make additional policy changes and
conforming changes to the following sections of the regulations under
42 CFR parts 412, 413, and 476 as discussed throughout this preamble:
Secs. 412.1, 412.20, 412.22, 412.23, 412.116, 431.1, 413.40, 413.64,
and 476.71.
VI. Regulatory Impact Analysis
A. Introduction
We have examined the impact of this proposed rule as required by
Executive Order 12866. We also have examined the impacts of this rule
under the criteria of the Regulatory Flexibility Act (RFA) (Pub. L. 96-
354), section 1102(b) of the Act, the Unfunded Mandate Reform Act of
1995 (UMRA) (Pub. L. 104-4), and Executive Order 13132 (Federalism).
1. Executive Order 12866
Executive Order 12866 directs agencies to assess all costs and
benefits of available regulatory alternatives and, if regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects, distributive impacts, and equity). A regulatory impact
analysis (RIA) must be prepared for rules that constitute significant
regulatory action, including rules that have an economic effect of $100
million or more annually (major rules). We have determined that this
proposed rule would not be a major rule within the meaning of Executive
Order 12866 because the redistributive effects do not constitute a
shift of $100 million in any one year. Because the proposed LTCH
prospective payment system must be budget neutral in accordance with
section 123(a)(1) of Public Law 106-113, we estimate that there will be
no budgetary impact for the Medicare program.
2. Regulatory Flexibility Act (RFA)
The RFA requires agencies to analyze options for regulatory relief
of small businesses in issuing a proposed rule. For purposes of the
RFA, small entities include small businesses, nonprofit organizations,
and government agencies. Most hospitals and most other providers and
suppliers are small entities, either by nonprofit status or by having
revenues of $25 million or less annually. For purposes of the RFA, all
hospitals are considered small entities. Medicare fiscal intermediaries
are not considered to be small entities. Individuals and States are not
included in the definition of a small entity.
3. Impact on Rural Hospitals
Section 1102(b) of the Act requires us to prepare a regulatory
impact analysis if a proposed rule may have a significant impact on the
operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 604 of the RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of an MSA and has fewer
than 100 beds. Section VI.B. of this proposed rule contains our
estimated impact of this proposed rule on the hospitals classified as
located in rural areas that have fewer than 100 beds for which we had
cost report data available.
4. Unfunded Mandate
Section 202 of the UMRA requires that agencies assess anticipated
costs and benefits before issuing any proposed rule or any final rule
preceded by a proposed rule that may result in expenditures in any one
year by State, local, or tribal governments, in the aggregate, or by
the private sector, of $110 million or more. This proposed rule would
not mandate any requirements for State, local, or tribal governments
nor would it affect private sector costs.
5. Federalism
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule (and subsequent
final rule) that imposes substantial direct requirement costs on State
and local
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governments, preempts State law, or otherwise has Federalism
implications.
We have examined this proposed rule under the criteria set forth in
Executive Order 13132 and have determined that this proposed rule would
not have any negative impact on the rights, rules, and responsibilities
of State, local, or tribal governments.
B. Anticipated Effects
We discuss the impact of this proposed rule below in terms of its
fiscal impact on the Federal Medicare budget and on LTCHs.
1. Budgetary Impact
Section 123(a)(1) of Public Law 106-113 requires us to set the
payment rates contained in this proposed rule such that total payments
under the LTCH prospective payment system are projected to equal the
amount that would have been paid if this prospective payment system had
not been implemented. However 
