Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Final Policy Changes and Fiscal Year 2021 Rates; Quality Reporting and Medicare and Medicaid Promoting Interoperability Programs Requirements for Eligible Hospitals and Critical Access Hospitals

AGENCY:

Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION:

Final rule.

SUMMARY:

We are revising the Medicare hospital inpatient prospective payment systems (IPPS) for operating and capital-related costs of acute care hospitals to implement changes arising from our continuing experience with these systems for FY 2021 and to implement certain recent legislation. We are also making changes relating to Medicare graduate medical education (GME) for teaching hospitals. In addition, we are providing the market basket update that will apply to the rate-of-increase limits for certain hospitals excluded from the IPPS that are paid on a reasonable cost basis, subject to these limits for FY 2021. We are updating the payment policies and the annual payment rates for the Medicare prospective payment system (PPS) for inpatient hospital services provided by long-term care hospitals (LTCHs) for FY 2021. In this FY 2021 IPPS/LTCH PPS final rule, we are finalizing changes to the new technology add-on payment pathway for certain antimicrobial products and other changes to new technology add-on payment policies, and the collection of market-based rate information on the Medicare cost report for cost reporting periods ending on or after January 1, 2021 and finalizing the adoption of a market-based MS-DRG relative weight methodology beginning in FY 2024. We are establishing new requirements or revising existing requirements for quality reporting by acute care hospitals and PPS-exempt cancer hospitals. We also established new requirements and revised existing requirements for eligible hospitals and critical access hospitals (CAHs) participating in the Medicare and Medicaid Promoting Interoperability Programs. We are also establishing performance standards for the Hospital Value-Based Purchasing (VBP) Program, and updating policies for the Hospital Readmissions Reduction Program and the Hospital-Acquired Condition (HAC) Reduction Program.

DATES:

Effective date: This final rule is effective October 1, 2020.

Applicability dates: The amendments at § 413.89(b)(1)(i), (c)(1), (e)(2)(i)(A)(2) are applicable to cost reporting periods before October 1, 2020. The amendments at § 413.89(e)(2)(i)(A)(1), (4) through (6), (i)(B), (iii), and (f) are applicable to cost reporting periods before, on, and after October 1, 2020. The amendments at § 413.89(b)(1)(ii), (c)(2), (e)(2)(i)(A)(3) and (e)(2)(ii) are applicable to cost reporting periods beginning on or after October 1, 2020.

FOR FURTHER INFORMATION CONTACT:

Donald Thompson, (410) 786-4487, and Michele Hudson, (410) 786-4487, Operating Prospective Payment, MS-DRGs, Wage Index, New Medical Service and Technology Add-On Payments, Hospital Geographic Reclassifications, Graduate Medical Education, Capital Prospective Payment, Excluded Hospitals, Medicare Disproportionate Share Hospital (DSH) Payment Adjustment, Medicare-Dependent Small Rural Hospital (MDH) Program, Low-Volume Hospital Payment Adjustment, and Critical Access Hospital (CAH) Issues. Michele Hudson, (410) 786-4487 and Emily Lipkin, (410) 786-3633, Long-Term Care Hospital Prospective Payment System and MS-LTC-DRG Relative Weights Issues. Emily Forrest, (202) 205-1922, Market-Based Data Collection and Market-Based MS-DRG Relative Weight Methodology Issues.

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

Jeris Smith, (410) 786-0110, Frontier Community Health Integration Project Demonstration Issues.

Erin Patton, (410) 786-2437, Hospital Readmissions Reduction Program—Administration Issues.

Vinitha Meyyur, (410) 786-8819, Hospital Readmissions Reduction Program—Readmissions—Measures Issues.

Lang Le, (410) 786-5693, Hospital-Acquired Condition Reduction Program—Administration Issues.

Annese Abdullah-Mclaughlin, (410) 786-2995, Hospital-Acquired Condition Reduction Program—Measures Issues.

Julia Venanzi, (410) 786-1471, Hospital Inpatient Quality Reporting Program—Administration Issues Mihir Patel, (410) 786-2815 and Grace Snyder, (410) 786-0700, Hospital Quality Reporting Program Validation and Reconsideration Issues.

Julia Venanzi, (410) 786-1471and Pamela Brown (410) 786-3940, Hospital Value-Based Purchasing Program—Administration Issues

Katrina Hoadley, (410) 786-8490, Hospital Inpatient Quality Reporting and Hospital Value-Based Purchasing—Measures Issues Except Hospital Consumer Assessment of Healthcare Providers and Systems Issues.

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

Erin Patton, (410) 786-2437 and Katrina Hoadley, (410) 786-8490, PPS-Exempt Cancer Hospital Quality Reporting Issues.

Mary Pratt, (410) 786-6867, Long-Term Care Hospital Quality Data Reporting Issues.

Dylan Podson (410) 786-5031, Jessica Warren (410) 786-7519, and Elizabeth Holland, (410) 786-1309, Promoting Interoperability Programs.

Steve Rubio, (410) 786-1782, Reimbursement for Submission of Patient Records to Beneficiary and Family Centered Care Quality Improvement Organizations (BFCC-QIOs) in Electronic Format.

Maude Shepard, (410) 786-5598, Provider Reimbursement Review Board Electronic Filing.

Kellie Shannon, (410) 786-0416 and Bob Kuhl, (443) 896-8410, Medicare Bad Debt.

SUPPLEMENTARY INFORMATION:

Electronic Access

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

Tables Available Through the Internet on the CMS Website

The IPPS tables for this FY 2021 final rule are available through the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. Click on the link on the left side of the screen titled, “FY 2021 IPPS Final rule Home Page” or “Acute Inpatient—Files for Download.” The LTCH PPS tables for this FY 2021 final rule are available through the internet on the CMS website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/index.html under the list item for Regulation Number CMS-1735-F. For further details on the contents of the tables referenced in this final rule, we refer readers to section VI. of the Addendum to this FY 2021 IPPS/LTCH PPS final rule. Readers who experience any problems accessing any of the tables that are posted on the CMS websites, as previously identified, should contact Michael Treitel at (410) 786-4552.

Table of Contents

I. Executive Summary and Background

A. Executive Summary

B. Background Summary

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

D. Issuance of Notice of Proposed Rulemaking

E. Advancing Health Information Exchange

II. Changes to Medicare Severity Diagnosis-Related Group (MS-DRG) Classifications and Relative Weights

A. Background

B. Adoption of the MS-DRGs and MS-DRG Reclassifications

C. FY 2021 MS-DRG Documentation and Coding Adjustment

D. Changes to Specific MS-DRG Classifications

E. Recalibration of the FY 2021 MS-DRG Relative Weights

F. Add-On Payments for New Services and Technologies for FY 2021

III. Changes to the Hospital Wage Index for Acute Care Hospitals

A. Background

B. Worksheet S-3 Wage Data for the FY 2021 Wage Index

C. Verification of Worksheet S-3 Wage Data

D. Method for Computing the FY 2021 Unadjusted Wage Index

E. Occupational Mix Adjustment to the FY 2021 Wage Index

F. Analysis and Implementation of the Occupational Mix Adjustment and the FY 2021 Occupational Mix Adjusted Wage Index

G. Application of the Rural Floor, Application of the State Frontier Floor, and Continuation of the Low Wage Index Hospital Policy

H. FY 2021 Wage Index Tables

I. Revisions to the Wage Index Based on Hospital Redesignations and Reclassifications

J. Out-Migration Adjustment Based on Commuting Patterns of Hospital Employees

K. Reclassification From Urban to Rural Under Section 1886(d)(8)(E) of the Act Implemented at 42 CFR 412.103

L. Process for Requests for Wage Index Data Corrections

M. Labor-Related Share for the FY 2021 Wage Index

IV. Other Decisions and Changes to the IPPS for Operating System

A. Changes to MS-DRGs Subject to Postacute Care Transfer Policy and MS-DRG Special Payments Policies (§ 412.4)

B. Changes in the Inpatient Hospital Updates for FY 2021 (§ 412.64(d))

C. Amendment To Address Short Cost Reporting Periods During Applicable Timeframe for Establishment of Service Area for Sole Community Hospitals Under § 412.92(c)(3)

D. Rural Referral Centers (RRCs)—Annual Updates to Case-Mix Index and Discharge Criteria (§ 412.96)

E. Payment Adjustment for Low-Volume Hospitals (§ 412.101)

F. Indirect Medical Education (IME) Payment Adjustment Factor (§ 412.105)

G. Payment Adjustment for Medicare Disproportionate Share Hospitals (DSHs) for FY 2021 (§ 412.106)

H. Payment for Allogeneic Hematopoietic Stem Cell Acquisition Costs (§ 412.113)

I. Payment Adjustment for CAR T-cell Clinical Trial Cases (§§ 412.85 and 412.312)

J. Changes for Hospitals With High Percentage of End Stage Renal Disease (ESRD) Discharges (§ 412.104)

K. Hospital Readmissions Reduction Program: Updates and Changes (§§ 412.150 Through 412.154)

L. Hospital Value-Based Purchasing (VBP) Program: Updates

M. Hospital-Acquired Conditions (HAC) Reduction Program: Updates and Changes (§ 412.170)

N. Payments for Indirect and Direct Graduate Medical Education Costs (§§ 412.105 and 413.75 Through 413.83)

O. Rural Commuity Hospital Demonstration Program

P. Market-Based MS-DRG Relative Weight Data Collection and Potential Change in Methodology for Calculating MS-DRG Relative Weights

V. Changes to the IPPS for Capital-Related Costs

A. Overview

B. Additional Provisions

C. Annual Update for FY 2021

VI. Changes for Hospitals Excluded From the IPPS

A. Rate-of-Increase in Payments to Excluded Hospitals for FY 2021

B. Report on Adjustment (Exception) Payment

C. Critical Access Hospitals (CAHs)

VII. Changes to the Long-Term Care Hospital Prospective Payment System (LTCH PPS) for FY 2021

A. Background of the LTCH PPS

B. Medicare Severity Long-Term Care Diagnosis-Related Group (MS-LTC-DRG) Classifications and Relative Weights for FY 2021

C. Changes to the LTCH PPS Payment Rates and Other Changes to the LTCH PPS for FY 2021

D. Rebasing and Revising of the LTCH Market Basket

VIII. Quality Data Reporting Requirements for Specific Providers and Suppliers

A. Hospital Inpatient Quality Reporting (IQR) Program

B. Changes to the PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program

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

D. Changes to the Medicare and Medicaid Promoting Interoperability Programs

IX. Changes for Hospitals and Other Providers

A. Changes in the Submission of Electronic Patient Records to Beneficiary and Family Centered Care Quality Improvement Organizations (BFCC-QIOs)

B. Revised Regulations To Prepare for Implementation of Mandatory PRRB Electronic Filing (42 CFR Part 405, Subpart R)

C. Revisions of Medicare Bad Debt Policy

X. MedPAC Recommendations

XI. Other Required Information

A. Publicly Available Data

B. Collection of Information Requirements

C. Waiver of the 60-day Delay in Effective Date for the Final Rule

Regulation Text

Addendum—Schedule of Standardized Amounts, Update Factors, and Rate-of-Increase Percentages Effective With Cost Reporting Periods Beginning on or after October 1, 2020 and Payment Rates for LTCHs Effective for Discharges Occurring on or after October 1, 2020

I. Summary and Background

II. Changes to Prospective Payment Rates for Hospital Inpatient Operating Costs for Acute Care Hospitals for FY 2021

A. Calculation of the Adjusted Standardized Amount

B. Adjustments for Area Wage Levels and Cost-of-Living

C. Calculation of the Prospective Payment Rates

III. Changes to Payment Rates for Acute Care Hospital Inpatient Capital-Related Costs for FY 2021

A. Determination of the Federal Hospital Inpatient Capital-Related Prospective Payment Rate Update for FY 2021

B. Calculation of the Inpatient Capital-Related Prospective Payments for FY 2021

C. Capital Input Price Index

IV. Changes to Payment Rates for Excluded Hospitals: Rate-of-Increase Percentages for FY 2021

V. Changes to the Payment Rates for the LTCH PPS for FY 2021

A. LTCH PPS Standard Federal Payment Rate for FY 2021

B. Adjustment for Area Wage Levels Under the LTCH PPS for FY 2021

C. LTCH PPS Cost-of-Living Adjustment (COLA) for LTCHs Located in Alaska and Hawaii

D. Adjustment for LTCH PPS High-Cost Outlier (HCO) Cases

E. Update to the IPPS Comparable/Equivalent Amounts To Reflect the Statutory Changes to the IPPS DSH Payment Adjustment Methodology

F. Computing the Adjusted LTCH PPS Federal Prospective Payments for FY 2021

VI. Tables Referenced in This Final Rule Generally Available Through the Internet on the CMS Website

Appendix A—Economic Analyses

I. Regulatory Impact Analysis

A. Statement of Need

B. Overall Impact

C. Objectives of the IPPS and the LTCH PPS

D. Limitations of Our Analysis

E. Hospitals Included in and Excluded From the IPPS

F. Effects on Hospitals and Hospital Units Excluded From the IPPS

G. Quantitative Effects of the Policy Changes Under the IPPS for Operating Costs

H. Effects of Other Policy Changes

I. Effects of Changes in the Capital IPPS

J. Effects of Payment Rate Changes and Policy Changes Under the LTCH PPS

K. Effects of Requirements for Hospital Inpatient Quality Reporting (IQR) Program

L. Effects of Requirements for the PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program

M. Effects of Requirements for the Long-Term Care Hospital Quality Reporting Program (LTCH QRP)

N. Effects of Requirements Regarding the Promoting Interoperability Program

O. Alternatives Considered

P. Reducing Regulation and Controlling Regulatory Costs

Q. Overall Conclusion

R. Regulatory Review Costs

II. Accounting Statements and Tables

A. Acute Care Hospitals

B. LTCHs

III. Regulatory Flexibility Act (RFA) Analysis

IV. Impact on Small Rural Hospitals

V. Unfunded Mandate Reform Act (UMRA) Analysis

VI. Executive Order 13175

VII. Executive Order 12866

Appendix B: Recommendation of Update Factors for Operating Cost Rates of Payment for Inpatient Hospital Services

I. Background

II. Inpatient Hospital Update for FY 2021

A. FY 2021 Inpatient Hospital Update

B. Update for SCHs and MDHs for FY 2021

C. FY 2021 Puerto Rico Hospital Update

D. Update for Hospitals Excluded From the IPPS for FY 2021

E. Update for LTCHs for FY 2021

III. Secretary's Recommendation

IV. MedPAC Recommendation for Assessing Payment Adequacy and Updating Payments in Traditional Medicare

I. Executive Summary and Background

A. Executive Summary

1. Purpose and Legal Authority

This FY 2021 IPPS/LTCH PPS final rule makes payment and policy changes under the Medicare inpatient prospective payment systems (IPPS) for operating and capital-related costs of acute care hospitals as well as for certain hospitals and hospital units excluded from the IPPS. In addition, it makes payment and policy changes for inpatient hospital services provided by long-term care hospitals (LTCHs) under the long-term care hospital prospective payment system (LTCH PPS). This final rule also makes policy changes to programs associated with Medicare IPPS hospitals, IPPS-excluded hospitals, and LTCHs. In this FY 2021 final rule, we are continuing policies to address wage index disparities impacting low wage index hospitals; and including policies related to new technology add-on payments for certain antimicrobial products, other policies related to new technology add-on payments, collecting market-based rate information on the Medicare cost report for cost reporting periods ending on or after January 1, 2021, and finalizing the adoption of a market-based MS-DRG relative weight methodology beginning in FY 2024.

We are establishing new requirements and revising existing requirements for quality reporting by acute care hospitals and PPS-exempt cancer hospitals that participate in Medicare. We are also establishing new requirements and revising existing requirements for eligible hospitals and CAHs participating in the Medicare and Medicaid Promoting Interoperability Programs.

We are establishing performance standards for the Hospital Value-Based Purchasing (VBP) Program and updating policies for the Hospital Readmissions Reduction Program and the Hospital-Acquired Condition (HAC) Reduction Program.

Under various statutory authorities, we either discuss continued program implementation or are making changes to the Medicare IPPS, to the LTCH PPS, and to other related payment methodologies and programs for FY 2021 and subsequent fiscal years. These statutory authorities include, but are not limited to, the following:

• Section 1886(d) of the Social Security Act (the Act), which sets forth a system of payment for the operating costs of acute care hospital inpatient stays under Medicare Part A (Hospital Insurance) based on prospectively set rates. Section 1886(g) of the Act requires that, instead of paying for capital-related costs of inpatient hospital services on a reasonable cost basis, the Secretary use a prospective payment system (PPS).
• Section 1886(d)(1)(B) of the Act, which specifies that certain hospitals and hospital units are excluded from the IPPS. These hospitals and units are: Rehabilitation hospitals and units; LTCHs; psychiatric hospitals and units; children's hospitals; cancer hospitals; extended neoplastic disease care hospitals, and hospitals located outside the 50 States, the District of Columbia, and Puerto Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa). Religious nonmedical health care institutions (RNHCIs) are also excluded from the IPPS.
• Sections 123(a) and (c) of the BBRA (Public Law (Pub. L.) 106-113) and section 307(b)(1) of the BIPA (Pub. L. 106-554) (as codified under section 1886(m)(1) of the Act), which provide for the development and implementation of a prospective payment system for payment for inpatient hospital services of LTCHs described in section 1886(d)(1)(B)(iv) of the Act.
• Sections 1814(l), 1820, and 1834(g) of the Act, which specify that payments are made to critical access hospitals (CAHs) (that is, rural hospitals or facilities that meet certain statutory requirements) for inpatient and outpatient services and that these payments are generally based on 101 percent of reasonable cost.
• Section 1866(k) of the Act, which provides for the establishment of a quality reporting program for hospitals described in section 1886(d)(1)(B)(v) of the Act, referred to as “PPS-exempt cancer hospitals.”
• Section 1886(a)(4) of the Act, which specifies that costs of approved educational activities are excluded from the operating costs of inpatient hospital services. Hospitals with approved graduate medical education (GME) programs are paid for the direct costs of GME in accordance with section 1886(h) of the Act.
• Section 1886(b)(3)(B)(viii) of the Act, which requires the Secretary to reduce the applicable percentage increase that would otherwise apply to the standardized amount applicable to a subsection (d) hospital for discharges occurring in a fiscal year if the hospital does not submit data on measures in a form and manner, and at a time, specified by the Secretary.
• Section 1886(o) of the Act, which requires the Secretary to establish a Hospital Value-Based Purchasing (VBP) Program, under which value-based incentive payments are made in a fiscal year to hospitals meeting performance standards established for a performance period for such fiscal year.
• Section 1886(p) of the Act, which establishes a Hospital-Acquired Condition (HAC) Reduction Program, under which payments to applicable hospitals are adjusted to provide an incentive to reduce hospital-acquired conditions.
• Section 1886(q) of the Act, as amended by section 15002 of the 21st Century Cures Act, which establishes the Hospital Readmissions Reduction Program. Under the program, payments for discharges from an applicable hospital as defined under section 1886(d) of the Act will be reduced to account for certain excess readmissions. Section 15002 of the 21st Century Cures Act directs the Secretary to compare hospitals with respect to the number of their Medicare-Medicaid dual-eligible beneficiaries (dual-eligibles) in determining the extent of excess readmissions.
• Section 1886(r) of the Act, as added by section 3133 of the Affordable Care Act, which provides for a reduction to disproportionate share hospital (DSH) payments under section 1886(d)(5)(F) of the Act and for a new uncompensated care payment to eligible hospitals. Specifically, section 1886(r) of the Act requires that, for fiscal year 2014 and each subsequent fiscal year, subsection (d) hospitals that would otherwise receive a DSH payment made under section 1886(d)(5)(F) of the Act will receive two separate payments: (1) 25 percent of the amount they previously would have received under section 1886(d)(5)(F) of the Act for DSH (“the empirically justified amount”), and (2) an additional payment for the DSH hospital's proportion of uncompensated care, determined as the product of three factors. These three factors are: (1) 75 percent of the payments that would otherwise be made under section 1886(d)(5)(F) of the Act; (2) 1 minus the percent change in the percent of individuals who are uninsured; and (3) a hospital's uncompensated care amount relative to the uncompensated care amount of all DSH hospitals expressed as a percentage.
• Section 1886(m)(6) of the Act, as added by section 1206(a)(1) of the Pathway for Sustainable Growth Rate (SGR) Reform Act of 2013 (Pub. L. 113-67) and amended by section 51005(a) of the Bipartisan Budget Act of 2018 (Pub. L. 115-123), which provided for the establishment of site neutral payment rate criteria under the LTCH PPS, with implementation beginning in FY 2016. Section 51005(b) of the Bipartisan Budget Act of 2018 amended section 1886(m)(6)(B) by adding new clause (iv), which specifies that the IPPS comparable amount defined in clause (ii)(I) shall be reduced by 4.6 percent for FYs 2018 through 2026.
• Section 1899B of the Act, as added by section 2(a) of the Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act) (Pub. L. 113-185), which provides for the establishment of standardized data reporting for certain post-acute care providers, including LTCHs.

2. Waiver of the 60-day Delayed Effective Date for the Final Rule

The United States is responding to an outbreak of respiratory disease caused by a novel (new) coronavirus that has now been detected in more than 190 locations internationally, including in all 50 States and the District of Columbia. The virus has been named “SARS-CoV-2” and the disease it causes has been named “coronavirus disease 2019” (abbreviated “COVID-19”).

Due to the significant devotion of resources to the COVID-19 response, for the reasons discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32889 through 32890) and as also discussed in section XI.D. of the preamble of this final rule, we are hereby waiving the 60-day delay in the effective date of the final rule.

3. Summary of the Major Provisions

The following is a summary of the major provisions in this final rule. In general, these major provisions are part of the annual update to the payment policies and payment rates, consistent with the applicable statutory provisions. A general summary of the proposed changes that were included in the FY 2021 IPPS/LTCH PPS proposed rule is presented in section I.D. of the preamble of this final rule.

a. MS-DRG Documentation and Coding Adjustment

Section 631 of the American Taxpayer Relief Act of 2012 (ATRA, Pub. L. 112-240) amended section 7(b)(1)(B) of Public Law 110-90 to require the Secretary to make a recoupment adjustment to the standardized amount of Medicare payments to acute care hospitals to account for changes in MS- DRG documentation and coding that do not reflect real changes in case-mix, totaling $11 billion over a 4-year period of FYs 2014, 2015, 2016, and 2017. The FY 2014 through FY 2017 adjustments represented the amount of the increase in aggregate payments as a result of not completing the prospective adjustment authorized under section 7(b)(1)(A) of Public Law 110-90 until FY 2013. Prior to the ATRA, this amount could not have been recovered under Public Law 110 90. Section 414 of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (Pub. L. 114-10) replaced the single positive adjustment we intended to make in FY 2018 with a 0.5 percent positive adjustment to the standardized amount of Medicare payments to acute care hospitals for FYs 2018 through 2023. (The FY 2018 adjustment was subsequently adjusted to 0.4588 percent by section 15005 of the 21st Century Cures Act.) Therefore, for FY 2021, we are making an adjustment of + 0.5 percent to the standardized amount.

b. Changes to the New Technology Add-On Payment Policy for Certain Antimicrobial Products

In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42292 through 42297), we established an alternative inpatient new technology add-on payment pathway for certain antimicrobial products in light of the significant concerns related to the ongoing public health crisis represented by antimicrobial resistance. Under this alternative pathway, if a medical product receives the FDA's Qualified Infectious Disease Product (QIDP) designation and received FDA marketing authorization, such a product will be considered new and not substantially similar to an existing technology for purposes of new technology add-on payment under the IPPS and will not need to meet the requirement that it represent an advance that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries.

In the proposed rule, in light of recent information that continues to highlight the significant concerns and impacts related to antimicrobial resistance and emphasizes the continued importance of this issue both with respect to Medicare beneficiaries and public health overall, we proposed changes to the new technology add-on payment policy for certain antimicrobials for FY 2021.

As discussed in section II.G.9.b. of the preamble of this final rule, after consideration of public comments, we are finalizing our proposal to expand our alternative new technology add-on payment pathway for QIDPs to include products approved through FDA's Limited Population Pathway for Antibacterial and Antifungal Drugs (LPAD pathway). Under this policy, for applications received for new technology add-on payments for FY 2022 and subsequent fiscal years, if an antimicrobial product is approved through FDA's LPAD pathway, it will be considered new and not substantially similar to an existing technology for purposes of the new technology add-on payment under the IPPS, and will not need to meet the requirement that it represent an advance that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries.

Under current policy, a new technology must receive FDA marketing authorization (for example, approval or clearance) by July 1 to be considered in the final rule in order to allow complete review and consideration of all the information to determine if the technology meets the new technology add-on payment criteria. For the reasons discussed in section II.G.9.c. of the preamble of this final rule, after consideration of public comments, we are finalizing our proposal to provide for conditional new technology add-on payment approval for products designated as QIDPs that do not receive FDA approval by July 1 and products that do not receive approval through FDA's LPAD pathway by July 1 but otherwise meet the applicable add-on payment criteria. Under this policy, cases involving eligible antimicrobial products would begin receiving the new technology add-on payment sooner, effective for discharges the quarter after the date of FDA marketing authorization provided that the technology receives FDA marketing authorization by July 1 of the particular fiscal year for which the applicant applied for new technology add-on payments.

c. Continuation of the Low Wage Index Hospital Policy

To help mitigate wage index disparities between high wage and low hospitals, in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42326 through 42332), we adopted a policy to provide an opportunity for certain low wage index hospitals to increase employee compensation by increasing the wage index values for certain hospitals with low wage index values (the low wage index hospital policy). This policy was adopted in a budget neutral manner through an adjustment applied to the standardized amounts for all hospitals. We also indicated that this policy would be effective for at least 4 years, beginning in FY 2020, in order to allow employee compensation increases implemented by these hospitals sufficient time to be reflected in the wage index calculation. Therefore, for FY 2021, we are continuing the low wage index hospital policy, and also applying this policy in a budget neutral manner by applying an adjustment to the standardized amounts.

d. DSH Payment Adjustment and Additional Payment for Uncompensated Care

Section 3133 of the Affordable Care Act modified the Medicare disproportionate share hospital (DSH) payment methodology beginning in FY 2014. Under section 1886(r) of the Act, which was added by section 3133 of the Affordable Care Act, starting in FY 2014, DSHs receive 25 percent of the amount they previously would have received under the statutory formula for Medicare DSH payments in section 1886(d)(5)(F) of the Act. The remaining amount, equal to 75 percent of the amount that otherwise would have been paid as Medicare DSH payments, is paid as additional payments after the amount is reduced for changes in the percentage of individuals that are uninsured. Each Medicare DSH will receive an additional payment based on its share of the total amount of uncompensated care for all Medicare DSHs for a given time period.

In this final rule, we have updated our estimates of the three factors used to determine uncompensated care payments for FY 2021. We continue to use uninsured estimates produced by CMS' Office of the Actuary (OACT) as part of the development of the National Health Expenditure Accounts (NHEA) in the calculation of Factor 2; however, given the unprecedented effects on health insurance enrollment as a result of the public health emergency for the COVID-19 pandemic, OACT has updated the NHEA-based projection of the FY 2021 rate of uninsurance using more recently available unemployment data. In addition, we are using a single year of data on uncompensated care costs from Worksheet S-10 of the FY 2017 cost reports to calculate Factor 3 in the FY 2021 methodology for all eligible hospitals with the exception of Indian Health Service (IHS) and Tribal hospitals and Puerto Rico hospitals. For IHS and Tribal hospitals and Puerto Rico hospitals we are continuing to use the low-income insured days proxy to calculate Factor 3 for these hospitals. Furthermore, we are establishing that to calculate Factor 3 for FY 2022 and all subsequent fiscal years for all eligible hospitals, except IHS and Tribal hospitals and Puerto Rico hospitals, we will use the most recent available single year of audited Worksheet S-10 data. We are also making other methodological changes for purposes of calculating Factor 3.

e. Reduction of Hospital Payments for Excess Readmissions

We are finalizing our proposal to make changes to policies for the Hospital Readmissions Reduction Program, which was established under section 1886(q) of the Act, as amended by section 15002 of the 21st Century Cures Act. The Hospital Readmissions Reduction Program requires a reduction to a hospital's base operating DRG payment to account for excess readmissions of selected applicable conditions. For FY 2017 and subsequent years, the reduction is based on a hospital's risk-adjusted readmission rate during a 3-year period for acute myocardial infarction (AMI), heart failure (HF), pneumonia, chronic obstructive pulmonary disease (COPD), elective primary total hip arthroplasty/total knee arthroplasty (THA/TKA), and coronary artery bypass graft (CABG) surgery. In this FY 2021 IPPS/LTCH PPS final rule, we are finalizing the following policies: (1) To automatically adopt applicable periods beginning with the FY 2023 program year and all subsequent program years, unless otherwise specified by the Secretary; and (2) to update the definition of applicable period at 42 CFR 412.152 to align with this policy.

f. Hospital Value-Based Purchasing (VBP) Program

Section 1886(o) of the Act requires the Secretary to establish a Hospital VBP Program under which value-based incentive payments are made in a fiscal year to hospitals based on their performance on measures established for a performance period for such fiscal year. In this FY 2021 IPPS/LTCH PPS final rule, we are providing newly established performance standards for certain measures for the FY 2023 program year, the FY 2024 program year, the FY 2025 program year, and the FY 2026 program year.

h. Hospital-Acquired Condition (HAC) Reduction Program

Section 1886(p) of the Act establishes an incentive to hospitals to reduce the incidence of hospital-acquired conditions by requiring the Secretary to make an adjustment to payments to applicable hospitals, effective for discharges beginning on October 1, 2014. This 1-percent payment reduction applies to hospitals that rank in the worst-performing quartile (25 percent) of all applicable hospitals, relative to the national average, of conditions acquired during the applicable period and on all of the hospital's discharges for the specified fiscal year. In this FY 2021 IPPS/LTCH PPS final rule, we are finalizing the following policies: (1) To automatically adopt applicable periods beginning with the FY 2023 program year and all subsequent program years, unless otherwise specified by the secretary, (2) to make refinements to the process for validation of HAC Reduction Program measure data in alignment with the Hospital IQR Program measure validation policies finalized in this rule; and (3) to update the definition of applicable period at 42 CFR 412.170 to align with the policy to automatically adopt applicable periods.

g. Hospital Inpatient Quality Reporting (IQR) Program

Under section 1886(b)(3)(B)(viii) of the Act, subsection (d) hospitals are required to report data on measures selected by the Secretary for a fiscal year in order to receive the full annual percentage increase that would otherwise apply to the standardized amount applicable to discharges occurring in that fiscal year.

In this FY 2021 IPPS/LTCH PPS final rule, we are finalizing proposals related to the reporting, submission, and public display requirements for eCQMs. These policies are: (1) Progressively increasing the numbers of quarters of eCQM data reported, from one self-selected quarter of data to four quarters of data over a three-year period, by requiring hospitals to report: (a) Two quarters of data for the CY 2021 reporting period/FY 2023 payment determination; (b) three quarters of data for the CY 2022 reporting period/FY 2024 payment determination; and (c) four quarters of data beginning with the CY 2023 reporting period/FY 2025 payment determination and for subsequent years, while continuing to allow hospitals to report: (i) Three self-selected eCQMs, and (ii) the Safe Use of Opioids eCQM; and (2) beginning public display of eCQM data starting with data reported by hospitals for the CY 2021 reporting period/FY 2023 payment determination and for subsequent years. The eCQM-related policies are in alignment with proposals under the Promoting Interoperability Program. We also are finalizing our proposal to expand the requirement to use EHR technology certified to the 2015 Edition for submitting data on not only the previously finalized Hybrid Hospital-Wide Readmission measure, but all hybrid measures in the Hospital IQR Program.

We also are finalizing proposals to streamline the validation processes under the Hospital IQR Program. We are finalizing proposals to: (1) Update the quarters of data required for validation for both chart-abstracted measures and eCQMs; (2) expand targeting criteria to include hospital selection for eCQMs; (3) change the validation pool from 800 hospitals to 400 hospitals; (4) remove the current exclusions for eCQM validation selection, (5) require electronic file submissions for chart-abstracted measure data; (6) align the eCQM and chart-abstracted measure scoring processes; and (7) update the educational review process to address eCQM validation results.

h. PPS-Exempt Cancer Hospital Quality Reporting Program

Section 1866(k)(1) of the Act requires, for purposes of FY 2014 and each subsequent fiscal year, that a hospital described in section 1886(d)(1)(B)(v) of the Act (a PPS-exempt cancer hospital, or a PCH) submit data in accordance with section 1866(k)(2) of the Act with respect to such fiscal year. There is no financial impact to PCH Medicare payment if a PCH does not participate.

In this FY 2021 IPPS/LTCH PPS final rule, we are finalizing our proposal to refine two existing program measures, Catheter-associated Urinary Tract Infection (CAUTI) (NQF #0138) and Central Line-associated Bloodstream Infection (CLABSI) (NQF #0139), to adopt the updated SIR calculation methodology developed by the Center for Disease Control and Prevention's (CDC) that calculates rates using updated HAI baseline data that are further stratified by patient location.

i. Medicare and Medicaid Promoting Interoperability Programs

For purposes of an increased level of stability, reducing the burden on eligible hospitals and CAHs, and clarifying certain existing policies, we are finalizing several changes to the Medicare Promoting Interoperability Program. Specifically, these policies include: (1) An EHR reporting period of a minimum of any continuous 90-day period in CY 2022 for new and returning participants (eligible hospitals and CAHs); (2) to maintain the Electronic Prescribing Objective's Query of PDMP measure as optional and worth 5 bonus points in CY 2021; (3) to modify the name of the Support Electronic Referral Loops by Receiving and Incorporating Health Information measure; (4) to progressively increase the number of quarters for which hospitals are required to report eCQM data, from the current requirement of one self-selected calendar quarter of data, to four calendar quarters of data, over a three year period. Specifically, we finalized proposals to require: (a) Two self-selected calendar quarters of data for the CY 2021 reporting period; (b) three self-selected calendar quarters of data for the CY 2022 reporting period; and (c) four calendar quarters of data beginning with the CY 2023 reporting period, where the submission period for the Medicare Promoting Interoperability Program will be the 2 months following the close of the respective calendar year; (5) to begin publicly reporting eCQM performance data beginning with the eCQM data reported by eligible hospitals and CAHs for the reporting period in CY 2021 on the Hospital Compare and/or data.medicare.gov websites or successor websites; (6) to correct errors and amend regulation text under § 495.104(c)(5)(viii)(B) through (D) regarding transition factors under section 1886(n)(2)(E)(i) for the incentive payments for Puerto Rico eligible hospitals; and (7) to correct errors and amend regulation text under §§ 495.20(e)(5)(iii) and (l)(11)(ii)(C)(1) for regulatory citations for the Office of the National Coordinator for Health Information Technology (ONC) certification criteria. We are amending our regulation texts as necessary to incorporate these finalized changes.

j. Market-Based MS-DRG Relative Weight Data Collection and Change in Methodology for Calculating MS-DRG Relative Weights

As discussed in section IV.P. of the preamble of this final rule, in order to reduce the Medicare program's reliance on the hospital chargemaster and to support the development of a market-based approach to payment under the Medicare FFS system, we are finalizing our proposal, with modification, to require that hospitals report certain market-based payment rate information on their Medicare cost report for cost reporting periods ending on or after January 1, 2021.

Specifically, we are finalizing that hospitals would report on the Medicare cost report the median payer-specific negotiated charge that the hospital has negotiated with all of its Medicare Advantage (MA) organizations (also referred to as MA organizations) payers, by MS-DRG. The market-based rate information we are finalizing for collection on the Medicare cost report would be the median of the payer-specific negotiated charges by MS-DRG, as described previously, for a hospital's MA organization payers. The payer-specific negotiated charges used by hospitals to calculate these medians would be the payer-specific negotiated charges for service packages that hospitals are required to make public under the requirements we finalized in the Hospital Price Transparency Final Rule (84 FR 65524) that can be cross-walked to an MS-DRG. We believe that because hospitals are already required to publically report payer-specific negotiated charges, in accordance with the Hospital Price Transparency Final Rule, that the additional calculation and reporting of the median payer-specific negotiated charge will be less burdensome for hospitals.

We are also finalizing the market-based MS-DRG relative weight methodology as described in the FY 2021 IPPS/LTCH PPS proposed rule, which would incorporate this market-based rate information, beginning in FY 2024.

4. Summary of Costs and Benefits

• Adjustment for MS-DRG Documentation and Coding Changes. Section 414 of the MACRA replaced the single positive adjustment we intended to make in FY 2018 once the recoupment required by section 631 of the ATRA was complete with a 0.5 percentage point positive adjustment to the standardized amount of Medicare payments to acute care hospitals for FYs 2018 through 2023. (The FY 2018 adjustment was subsequently adjusted to 0.4588 percentage point by section 15005 of the 21st Century Cures Act.) For FY 2021, we are making an adjustment of +0.5 percentage point to the standardized amount consistent with the MACRA.
• Changes to the New Technology Add-On Payment Policy for Certain Antimicrobial Products. In light of recent information that continues to highlight the significant concerns and impacts related to antimicrobial resistance and emphasizes the continued importance of this issue both with respect to Medicare beneficiaries and public health overall, in this final rule we are making changes to the new technology add-on payment policy for certain antimicrobials for FY 2021. We are expanding our alternative new technology add-on payment pathway for QIDPs to include products approved through FDA's Limited Population Pathway for Antibacterial and Antifungal Drugs (LPAD pathway). Under this policy, for applications received for new technology add-on payments for FY 2022 and subsequent fiscal years, if an antimicrobial product is approved through FDA's LPAD pathway, it will be considered new and not substantially similar to an existing technology for purposes of the new technology add-on payment under the IPPS, and will not need to meet the requirement that it represent an advance that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries.

We are also providing for conditional new technology add-on payment approval for products designated as QIDPs that do not receive FDA approval by July 1 and products that do not receive approval through FDA's LPAD pathway by July 1 (the current deadline for consideration in the final rule) but otherwise meet the applicable add-on payment criteria. Under this policy, cases involving eligible antimicrobial products would begin receiving the new technology add-on payment sooner, effective for discharges the quarter after the date of FDA marketing authorization provided that the technology receives FDA marketing authorization by July 1 of the particular fiscal year for which the applicant applied for new technology add-on payments.

Given the relatively recent introduction of the FDA's LPAD pathway there have not been any drugs that were approved under the FDA's LPAD pathway that applied for a new technology add-on payment under the IPPS. If all of the future LPADs that would have applied for new technology add-on payments would have been approved under existing criteria, this finalized policy has no impact relative to current policy. To the extent that there are future LPADs that are the subject of applications for new technology add-on payments, and those applications would have been denied under the current new technology add-on payment criteria, this final policy is a cost, but that cost is not estimable. Therefore, it is not possible to quantify the impact of these policies.

• Wage Index Disparities Between High and Low Wage Index Hospitals. As discussed in section III.G.3. of the preamble of this final rule, we are continuing to reduce the disparity between high and low wage index hospitals by increasing the wage index values for certain hospitals with low wage index values and applying a budget neutrality adjustment to the standardized amount so that increase is implemented in a budget neutral manner.
• Medicare DSH Payment Adjustment and Additional Payment for Uncompensated Care. For FY 2021, we are updating our estimates of the three factors used to determine uncompensated care payments. To calculate Factor 2, we are using uninsured estimates produced by OACT as part of the development of the NHEA in conjunction with more recently available data that take into consideration the effects of COVID-19. We are using a single year of data on uncompensated care costs from Worksheet S-10 for FY 2017 to determine Factor 3 for FY 2021 for all hospitals with the exception of Puerto Rico hospitals and Indian Health Service and Tribal hospitals. To determine the amount of uncompensated care for purposes of calculating Factor 3 for Puerto Rico hospitals and Indian Health Service and Tribal hospitals, we are continuing to use only data regarding low-income insured days for FY 2013. We project that the amount available to distribute as payments for uncompensated care for FY 2021 will decrease by approximately $60 million, as compared to our estimate of the uncompensated care payments that will be distributed in FY 2020. The uncompensated care payments have redistributive effects, based on a hospital's uncompensated care amount relative to the uncompensated care amount for all hospitals that are projected to be eligible to receive Medicare DSH payments, and the calculated payment amount is not directly tied to a hospital's number of discharges.
• Update to the LTCH PPS Payment Rates and Other Payment Policies. Based on the best available data for the 363 LTCHs in our database, we estimate that the changes to the payment rates and factors that we present in the preamble of and Addendum to this final rule, which reflect the end of the transition of the statutory application of the site neutral payment rate and the update to the LTCH PPS standard Federal payment rate for FY 2021, would result in an estimated decrease in payments in FY 2021 of approximately $40 million.
• Changes to the Hospital Readmissions Reduction Program. For FY 2021 and subsequent years, the reduction is based on a hospital's risk-adjusted readmission rate during a 3-year period for acute myocardial infarction (AMI), heart failure (HF), pneumonia, chronic obstructive pulmonary disease (COPD), elective primary total hip arthroplasty/total knee arthroplasty (THA/TKA), and coronary artery bypass graft (CABG) surgery. We estimate that 2,545 hospitals will have their base operating DRG payments reduced by their FY 2021 hospital-specific payment adjustment factors. As a result, we estimate that the Hospital Readmissions Reduction Program will save approximately $553 million in FY 2021.
• Value-Based Incentive Payments under the Hospital VBP Program. We estimate that there will be no net financial impact to participating hospitals under the Hospital VBP Program for the FY 2021 program year in the aggregate because, by law, the amount available for value-based incentive payments under the program in a given year must be equal to the total amount of base operating MS-DRG payment amount reductions for that year, as estimated by the Secretary. The estimated amount of base operating MS-DRG payment amount reductions for the FY 2021 program year and, therefore, the estimated amount available for value-based incentive payments for FY 2021 discharges is approximately $1.9 billion.
• Changes to the HAC Reduction Program. A hospital's Total HAC Score and its ranking in comparison to other hospitals in any given year depend on several different factors. We are making no changes to the scoring methodology, which will continue to use the Winsorized z-score and equal measure weights approaches to determine the worst-performing quartile of hospitals. Any significant impact due to the HAC Reduction Program changes for FY 2021, including which hospitals will receive the adjustment, will depend on the actual experience of hospitals in the Program.
• Changes to the Hospital Inpatient Quality Reporting (IQR) Program. Across 3,300 IPPS hospitals, we estimate that our changes for the Hospital IQR Program in this final rule would result in a total information collection burden increase of 6,533 hours associated with our policies and updated burden estimates and a total cost increase of approximately $253,480, across a four-year period from the CY 2021 reporting period/FY 2023 payment determination through the CY 2024 reporting period/FY 2026 payment determination, compared to our previously approved information collection burden estimates.
• Changes to the Medicare and Medicaid Promoting Interoperability Programs. With these finalized proposals, we do not estimate any net change in burden hours or total cost for the Medicare Promoting Interoperability Program for CY 2021, given that there are no substantive change in current measures or data requirements for eligible hospitals and CAHs that would affect previously-approved burden. Unrelated to any of this rule's Promoting Interoperability changes, an alteration to the annual information collection's total cost is due to utilizing an updated hourly wage rate for the necessary hospital staff involved in attesting to the objectives and measures under 42 CFR 495.24(e). The Bureau of Labor Statistics (BLS) recently released a 2018 wage rate which, compared to the 2017 rates used in FY 2020 IPPS/LTCH PPS final rule, result in an estimated increase of $24,073 for the annual information collection burden (total cost) in FY 2021. Therefore, multiplying the total annual burden of 21,4950 hours by the 2018 BLS labor cost of $69.34, we estimate the Promoting Interoperability Program's total cost to be $1,487,343 for the CY 2021 EHR reporting period (21,450 hours × $69.34).
• Market-Based MS-DRG Relative Weight Data Collection and Change in Methodology for Calculating MS-DRG Relative Weights. In section IV.P.4. of the preamble of this final rule, we are finalizing a methodology for estimating the MS-DRG relative weights beginning in FY 2024 which utilizes the median payer-specific negotiated charge information we are finalizing to collect on the Medicare cost report. We estimate total annual burden hours for this data collection are as follows: 3,189 hospitals times 20 hours per hospital equals 63,780 annual burden hours and $4,315,993. We refer readers to section XI.B.11. of the preamble of this final rule for further analysis of this assessment.

B. Background Summary

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

Section 1886(d) of the Act sets forth a system of payment for the operating costs of acute care hospital inpatient stays under Medicare Part A (Hospital Insurance) based on prospectively set rates. Section 1886(g) of the Act requires the Secretary to use a prospective payment system (PPS) to pay for the capital-related costs of inpatient hospital services for these “subsection (d) hospitals.” Under these PPSs, Medicare payment for hospital inpatient operating and capital-related costs is made at predetermined, specific rates for each hospital discharge. Discharges are classified according to a list of diagnosis-related groups (DRGs).

The base payment rate is comprised of a standardized amount that is divided into a labor-related share and a nonlabor-related share. The labor-related share is adjusted by the wage index applicable to the area where the hospital is located. If the hospital is located in Alaska or Hawaii, the nonlabor-related share is adjusted by a cost-of-living adjustment factor. This base payment rate is multiplied by the DRG relative weight.

If the hospital treats a high percentage of certain low-income patients, it receives a percentage add-on payment applied to the DRG-adjusted base payment rate. This add-on payment, known as the disproportionate share hospital (DSH) adjustment, provides for a percentage increase in Medicare payments to hospitals that qualify under either of two statutory formulas designed to identify hospitals that serve a disproportionate share of low-income patients. For qualifying hospitals, the amount of this adjustment varies based on the outcome of the statutory calculations. The Affordable Care Act revised the Medicare DSH payment methodology and provides for a new additional Medicare payment for fiscal years beginning on or after October 1, 2013, that considers the amount of uncompensated care furnished by the hospital relative to all other qualifying hospitals.

If the hospital is training residents in an approved residency program(s), it receives a percentage add-on payment for each case paid under the IPPS, known as the indirect medical education (IME) adjustment. This percentage varies, depending on the ratio of residents to beds.

Additional payments may be made for cases that involve new technologies or medical services that have been approved for special add-on payments. In general, to qualify, a new technology or medical service must demonstrate that it is a substantial clinical improvement over technologies or services otherwise available, and that, absent an add-on payment, it would be inadequately paid under the regular DRG payment. In addition, certain transformative new devices and certain antimicrobial products may qualify under an alternative inpatient new technology add-on payment pathway by demonstrating that, absent an add-on payment, they would be inadequately paid under the regular DRG payment.

The costs incurred by the hospital for a case are evaluated to determine whether the hospital is eligible for an additional payment as an outlier case. This additional payment is designed to protect the hospital from large financial losses due to unusually expensive cases. Any eligible outlier payment is added to the DRG-adjusted base payment rate, plus any DSH, IME, and new technology or medical service add-on adjustments.

Although payments to most hospitals under the IPPS are made on the basis of the standardized amounts, some categories of hospitals are paid in whole or in part based on their hospital-specific rate, which is determined from their costs in a base year. For example, sole community hospitals (SCHs) receive the higher of a hospital-specific rate based on their costs in a base year (the highest of FY 1982, FY 1987, FY 1996, or FY 2006) or the IPPS Federal rate based on the standardized amount. SCHs are the sole source of care in their areas. Specifically, section 1886(d)(5)(D)(iii) of the Act defines an SCH as a hospital that is located more than 35 road miles from another hospital or that, by reason of factors such as an isolated location, weather conditions, travel conditions, or absence of other like hospitals (as determined by the Secretary), is the sole source of hospital inpatient services reasonably available to Medicare beneficiaries. In addition, certain rural hospitals previously designated by the Secretary as essential access community hospitals are considered SCHs.

Under current law, the Medicare-dependent, small rural hospital (MDH) program is effective through FY 2022. For discharges occurring on or after October 1, 2007, but before October 1, 2022, an MDH receives the higher of the Federal rate or the Federal rate plus 75 percent of the amount by which the Federal rate is exceeded by the highest of its FY 1982, FY 1987, or FY 2002 hospital-specific rate. MDHs are a major source of care for Medicare beneficiaries in their areas. Section 1886(d)(5)(G)(iv) of the Act defines an MDH as a hospital that is located in a rural area (or, as amended by the Bipartisan Budget Act of 2018, a hospital located in a State with no rural area that meets certain statutory criteria), has not more than 100 beds, is not an SCH, and has a high percentage of Medicare discharges (not less than 60 percent of its inpatient days or discharges in its cost reporting year beginning in FY 1987 or in two of its three most recently settled Medicare cost reporting years).

Section 1886(g) of the Act requires the Secretary to pay for the capital-related costs of inpatient hospital services in accordance with a prospective payment system established by the Secretary. The basic methodology for determining capital prospective payments is set forth in our regulations at 42 CFR 412.308 and 412.312. Under the capital IPPS, payments are adjusted by the same DRG for the case as they are under the operating IPPS. Capital IPPS payments are also adjusted for IME and DSH, similar to the adjustments made under the operating IPPS. In addition, hospitals may receive outlier payments for those cases that have unusually high costs.

The existing regulations governing payments to hospitals under the IPPS are located in 42 CFR part 412, subparts A through M.

2. Hospitals and Hospital Units Excluded From the IPPS

Under section 1886(d)(1)(B) of the Act, as amended, certain hospitals and hospital units are excluded from the IPPS. These hospitals and units are: Inpatient rehabilitation facility (IRF) hospitals and units; long-term care hospitals (LTCHs); psychiatric hospitals and units; children's hospitals; cancer hospitals; extended neoplastic disease care hospitals, and hospitals located outside the 50 States, the District of Columbia, and Puerto Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa). Religious nonmedical health care institutions (RNHCIs) are also excluded from the IPPS. Various sections of the Balanced Budget Act of 1997 (BBA, Pub. L. 105-33), the Medicare, Medicaid and SCHIP [State Children's Health Insurance Program] Balanced Budget Refinement Act of 1999 (BBRA, Pub. L. 106-113), and the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA, Pub. L. 106-554) provide for the implementation of PPSs for IRF hospitals and units, LTCHs, and psychiatric hospitals and units (referred to as inpatient psychiatric facilities (IPFs)). (We note that the annual updates to the LTCH PPS are included along with the IPPS annual update in this document. Updates to the IRF PPS and IPF PPS are issued as separate documents.) Children's hospitals, cancer hospitals, hospitals located outside the 50 States, the District of Columbia, and Puerto Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa), and RNHCIs continue to be paid solely under a reasonable cost-based system, subject to a rate-of-increase ceiling on inpatient operating costs. Similarly, extended neoplastic disease care hospitals are paid on a reasonable cost basis, subject to a rate-of-increase ceiling on inpatient operating costs.

The existing regulations governing payments to excluded hospitals and hospital units are located in 42 CFR parts 412 and 413.

3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)

The Medicare prospective payment system (PPS) for LTCHs applies to hospitals described in section 1886(d)(1)(B)(iv) of the Act, effective for cost reporting periods beginning on or after October 1, 2002. The LTCH PPS was established under the authority of sections 123 of the BBRA and section 307(b) of the BIPA (as codified under section 1886(m)(1) of the Act). Section 1206(a) of the Pathway for SGR Reform Act of 2013 (Pub. L. 113-67) established the site neutral payment rate under the LTCH PPS, which made the LTCH PPS a dual rate payment system beginning in FY 2016. Under this statute, effective for LTCH's cost reporting periods beginning in FY 2016 cost reporting period, LTCHs are generally paid for discharges at the site neutral payment rate unless the discharge meets the patient criteria for payment at the LTCH PPS standard Federal payment rate. The existing regulations governing payment under the LTCH PPS are located in 42 CFR part 412, subpart O. Beginning October 1, 2009, we issue the annual updates to the LTCH PPS in the same documents that update the IPPS.

4. Critical Access Hospitals (CAHs)

Under sections 1814(l), 1820, and 1834(g) of the Act, payments made to critical access hospitals (CAHs) (that is, rural hospitals or facilities that meet certain statutory requirements) for inpatient and outpatient services are generally based on 101 percent of reasonable cost. Reasonable cost is determined under the provisions of section 1861(v) of the Act and existing regulations under 42 CFR part 413.

5. Payments for Graduate Medical Education (GME)

Under section 1886(a)(4) of the Act, costs of approved educational activities are excluded from the operating costs of inpatient hospital services. Hospitals with approved graduate medical education (GME) programs are paid for the direct costs of GME in accordance with section 1886(h) of the Act. The amount of payment for direct GME costs for a cost reporting period is based on the hospital's number of residents in that period and the hospital's costs per resident in a base year. The existing regulations governing payments to the various types of hospitals are located in 42 CFR part 413.

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

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

The Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act) (Pub. L. 113-185), enacted on October 6, 2014, made a number of changes that affect the Long-Term Care Hospital Quality Reporting Program (LTCH QRP). We did not make proposals or updates to the LTCH Quality Reporting Program. We are continuing to maintain portions of section 1899B of the Act, as added by section 2(a) of the IMPACT Act, which, in part, requires LTCHs, among other post-acute care providers, to report standardized patient assessment data, data on quality measures, and data on resource use and other measures.

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

Section 414 of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA, Pub. L. 114-10) specifies a 0.5 percent positive adjustment to the standardized amount of Medicare payments to acute care hospitals for FYs 2018 through 2023. These adjustments follow the recoupment adjustment to the standardized amounts under section 1886(d) of the Act based upon the Secretary's estimates for discharges occurring from FYs 2014 through 2017 to fully offset $11 billion, in accordance with section 631 of the ATRA. The FY 2018 adjustment was subsequently adjusted to 0.4588 percent by section 15005 of the 21st Century Cures Act.

3. Further Consolidated Appropriations Act, 2020 (Pub. L. 116-94)

Section 108 of the Further Consolidated Appropriations Act, 2020 (Pub. L. 116-94) provides that, effective for cost reporting periods beginning on or after October 1, 2020, payment to a subsection (d) hospital that furnishes an allogeneic hematopoietic stem cell transplant for hematopoietic stem cell acquisition shall be made on a reasonable cost basis, and that the Secretary shall specify the items included in such hematopoietic stem cell acquisition in rulemaking. This statutory provision also requires that, beginning in FY 2021, the payments made based on reasonable cost for the acquisition costs of allogeneic hematopoietic stem cells be made in a budget neutral manner.

D. Issuance of Notice of Proposed Rulemaking

In the FY 2021 IPPS/LTCH PPS proposed rule that appeared in the May 29, 2020 Federal Register (84 FR 32460), we set forth proposed payment and policy changes to the Medicare IPPS for FY 2021 operating costs and capital-related costs of acute care hospitals and certain hospitals and hospital units that are excluded from IPPS. In addition, we set forth proposed changes to the payment rates, factors, and other payment and policy-related changes to programs associated with payment rate policies under the LTCH PPS for FY 2021.

The following is a general summary of the changes that we proposed to make.

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

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

• Proposed changes to MS-DRG classifications based on our yearly review for FY 2021.
• Proposed adjustment to the standardized amounts under section 1886(d) of the Act for FY 2021 in accordance with the amendments made to section 7(b)(1)(B) of Public Law 110- 90 by section 414 of the MACRA.
• Proposed recalibration of the MS-DRG relative weights.
• A discussion of the proposed FY 2021 status of new technologies approved for add-on payments for FY 2020, a presentation of our evaluation and analysis of the FY 2021 applicants for add-on payments for high-cost new medical services and technologies (including public input, as directed by Pub. L. 108-173, obtained in a town hall meeting) for applications not submitted under an alternative pathway, and a discussion of the proposed status of FY 2021 new technology applicants under the alternative pathways for certain medical devices and certain antimicrobial products.
• Proposed revision to the new technology add-on payment policy where the coding associated with an application for new technology add-on payments or a previously approved technology that may continue to receive new technology add-on payments is proposed to be assigned to a proposed new MS-DRG.
• Proposed changes to the timing of the IPPS new technology add-on payment for certain antimicrobial products, and proposed expansion of the alternative pathway for certain antimicrobial products.

2. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals

In section III. of the preamble of the proposed rule we proposed to make revisions to the wage index for acute care hospitals and the annual update of the wage data. Specific issues addressed included, but were not limited to, the following:

• Proposed changes in the labor market area delineations based on revisions to the OMB Core Based Statistical Area (CBSA) delineations and proposed policies related to the proposed changes in CBSAs.
• The proposed FY 2021 wage index update using wage data from cost reporting periods beginning in FY 2017.
• Calculation, analysis, and implementation of the proposed occupational mix adjustment to the wage index for acute care hospitals for FY 2021 based on the 2016 Occupational Mix Survey.
• Proposed application of the rural floor and the frontier State floor, and continuation of the low wage index hospital policy.
• Proposed revisions to the wage index for acute care hospitals, based on hospital redesignations and reclassifications under sections 1886(d)(8)(B), (d)(8)(E), and (d)(10) of the Act.
• Proposed change to Lugar county assignments.
• Proposed adjustment to the wage index for acute care hospitals for FY 2021 based on commuting patterns of hospital employees who reside in a county and work in a different area with a higher wage index.
• Proposed labor-related share for the proposed FY 2021 wage index.

3. Other Decisions and Proposed Changes to the IPPS for Operating Costs

In section IV of the preamble of the proposed rule, we discuss proposed changes or clarifications of a number of the provisions of the regulations in 42 CFR parts 412 and 413, including the following:

• Proposed changes to MS-DRGs subject to the post-acute care transfer policy and special payment policy.
• Proposed inpatient hospital update for FY 2021.
• Proposed amendment to address short cost reporting periods during applicable timeframe for establishment of service area for SCHs.
• Proposed updated national and regional case-mix values and discharges for purposes of determining RRC status, and proposed amendment for hospital cost reporting periods that are longer or shorter than 12 months.
• The statutorily required IME adjustment factor for FY 2021.
• Proposed changes to the methodology for determining Medicare DSH for uncompensated care payments.
• Proposed changes to payment for allogeneic hematopoietic stem cell acquisition costs.
• Proposed payment adjustment for chimeric antigen receptor (CAR) T-cell therapy clinical trial cases.
• Proposed requirements for payment adjustments under the Hospital Readmissions Reduction Program for FY 2021.
• The provision of estimated and newly established performance standards for the calculation of value-based incentive payments under the Hospital Value-Based Purchasing Program.
• Proposed requirements for payment adjustments to hospitals under the HAC Reduction Program for FY 2021.
• Proposed policy changes related to medical residents affected by residency program or teaching hospital closure.
• Discussion of and proposed changes relating to the implementation of the Rural Community Hospital Demonstration Program in FY 2021.
• Proposal to collect market-based rate information on the Medicare cost report for cost reporting periods ending on or after January 1, 2021, and request for comment on a potential market-based MS-DRG relative weight methodology beginning in FY 2024, that we stated we may adopt in this rulemaking.

4. Proposed FY 2021 Policy Governing the IPPS for Capital-Related Costs

In section V. of the preamble to the proposed rule, we discussed the proposed payment policy requirements for capital-related costs and capital payments to hospitals for FY 2021.

5. Proposed Changes to the Payment Rates for Certain Excluded Hospitals: Rate-of-Increase Percentages

In section VI. of the preamble of the proposed rule, we discussed—

• Proposed changes to payments to certain excluded hospitals for FY 2021.
• Proposed continued implementation of the Frontier Community Health Integration Project (FCHIP) Demonstration.

6. Proposed Changes to the LTCH PPS

In section VII. of the preamble of the proposed rule, we set forth—

• Proposed changes to the LTCH PPS Federal payment rates, factors, and other payment rate policies under the LTCH PPS for FY 2021.
• Proposed rebasing and revising of the LTCH PPS market basket.

7. Proposed Changes Relating to Quality Data Reporting for Specific Providers and Suppliers

In section VIII. of the preamble of the proposed rule, we addressed—

• Proposed requirements for the Hospital Inpatient Quality Reporting (IQR) Program.
• Proposed changes to the requirements for the quality reporting program for PPS-exempt cancer hospitals (PCHQR Program).
• Proposed changes to requirements pertaining to eligible hospitals and CAHs participating in the Medicare and Medicaid Promoting Interoperability Programs.

8. Other Proposed Changes

Section IX. of the preamble to the proposed rule included the following:

• Proposed changes pertaining to the submission format requirements and reimbursement rates for patient records sent to the Beneficiary and Family Centered Care Quality Improvement Organizations (BFCC-QIOs).
• Proposed changes pertaining to allowing for mandatory electronic filing of Provider Reimbursement Review Board appeals.
• Proposed changes pertaining to and codification of certain longstanding Medicare Bad Debt policies.

9. Other Provisions of the Proposed Rule

Section X. of the preamble to the proposed rule included our discussion of the MedPAC Recommendations.

Section XI. of the preamble to the proposed rule included the following:

• A descriptive listing of the public use files associated with the proposed rule.
• The collection of information requirements for entities based on our proposals.
• Information regarding our responses to public comments.
• Waiver of the 60-day delay in effective date for the final rule.

10. Determining Prospective Payment Operating and Capital Rates and Rate-of-Increase Limits for Acute Care Hospitals

In sections II. and III. of the Addendum to the proposed rule, we set forth the proposed changes to the amounts and factors for determining the proposed FY 2021 prospective payment rates for operating costs and capital-related costs for acute care hospitals. We proposed to establish the threshold amounts for outlier cases. In addition, in section IV. of the Addendum to the proposed rule, we addressed the update factors for determining the rate-of-increase limits for cost reporting periods beginning in FY 2021 for certain hospitals excluded from the IPPS.

11. Determining Prospective Payment Rates for LTCHs

In section V. of the Addendum to the proposed rule, we set forth proposed changes to the amounts and factors for determining the proposed FY 2021 LTCH PPS standard Federal payment rate and other factors used to determine LTCH PPS payments under both the LTCH PPS standard Federal payment rate and the site neutral payment rate in FY 2021. We proposed to establish the adjustment for wage levels, including the proposed changes in the CBSAs based on revisions to the OMB labor market area delineations and a proposed adjustment to reflect the expected increases in wages under the IPPS low wage index hospital policy. We are proposing to establish the adjustments for the labor-related share, the cost-of-living adjustment, and high-cost outliers, including the applicable fixed-loss amounts and the LTCH cost-to-charge ratios (CCRs) for both payment rates.

12. Impact Analysis

In Appendix A of the proposed rule, we set forth an analysis of the impact the proposed changes would have on affected acute care hospitals, CAHs, LTCHs, PCHs and other entities.

13. Recommendation of Update Factors for Operating Cost Rates of Payment for Hospital Inpatient Services

In Appendix B of the proposed rule, as required by sections 1886(e)(4) and (e)(5) of the Act, we provided our recommendations of the appropriate percentage changes for FY 2021 for the following:

• A single average standardized amount for all areas for hospital inpatient services paid under the IPPS for operating costs of acute care hospitals (and hospital-specific rates applicable to SCHs and MDHs).
• Target rate-of-increase limits to the allowable operating costs of hospital inpatient services furnished by certain hospitals excluded from the IPPS.
• The LTCH PPS standard Federal payment rate and the site neutral payment rate for hospital inpatient services provided for LTCH PPS discharges.

14. Discussion of Medicare Payment Advisory Commission Recommendations

Under section 1805(b) of the Act, MedPAC is required to submit a report to Congress, no later than March 15 of each year, in which MedPAC reviews and makes recommendations on Medicare payment policies. MedPAC's March 2020 recommendations concerning hospital inpatient payment policies address the update factor for hospital inpatient operating costs and capital-related costs for hospitals under the IPPS. We addressed these recommendations in Appendix B of the proposed rule. For further information relating specifically to the MedPAC March 2020 report or to obtain a copy of the report, contact MedPAC at (202) 220-3700 or visit MedPAC's website at: http://www.medpac.gov .

E. Advancing Health Information Exchange

The Department of Health and Human Services (HHS) has a number of initiatives designed to encourage and support the adoption of interoperable health information technology and to promote nationwide health information exchange to improve health care and patient access to their health information. The Office of the National Coordinator for Health Information Technology (ONC) and CMS work collaboratively to advance interoperability across settings of care, including post-acute care.

To further interoperability in across all care settings, CMS continues to explore opportunities to advance electronic exchange of patient information across payers, providers and with patients, including developing systems that use nationally recognized health IT standards such as Logical Observation Identifier Names and Codes (LOINC), Systemized Nomenclature of Medicine-Clinical Terms (SNOMED), and Fast Healthcare Interoperability Recourses (FHIR). In addition, CMS and ONC are collaborating with industry stakeholders via the Post-Acute Care Interoperability Workgroup (PACIO) (to develop FHIR-based standards for post-acute care (PAC) assessment content, which could support the exchange and reuse of patient http://pacioproject.org/ ) assessment data derived from the Minimum Data Set (MDS), Inpatient Rehabilitation Facility-Patient Assessment Instrument (IRF-PAI), Long Term Care Hospital Continuity Assessment Record and Evaluation Data Set (LTCH CARE data set), Outcome Assessment Information Set (OASIS) assessment tools, and other sources. The Data Element Library (DEL) ( https://del.cms.gov/DELWeb/pubHome ) continues to be updated and serves as the authoritative resource for PAC assessment data elements and their associated mappings to health IT standards. These interoperable data elements can reduce provider burden by allowing the use and exchange of healthcare data, support provider exchange of electronic health information for care coordination, person-centered care, and support real-time, data driven, clinical decision-making. Standards in the DEL ( https://del.cms.gov/ ) can be referenced on the CMS website and in the ONC Interoperability Standards Advisory (ISA). The 2020 ISA is available at https://www.healthit.gov/isa .

In the September 30, 2019 Federal Register, we published a final rule titled, “Medicare and Medicaid Programs; Revisions to Requirements for Discharge Planning for Hospitals, Critical Access Hospitals, and Home Health Agencies, and Hospital and Critical Access Hospital Changes to Promote Innovation, Flexibility, and Improvement in Patient Care” (84 FR 51836) (“Discharge Planning final rule”), that revises the discharge planning requirements that hospitals (including psychiatric hospitals, long-term care hospitals, and inpatient rehabilitation facilities), critical access hospitals (CAHs), and home health agencies, must meet to participate in Medicare and Medicaid programs. It also revises one provision regarding patient rights in hospitals. The rule supports our interoperability efforts by promoting the exchange of patient information between health care settings, and by ensuring that a patient's necessary medical information is transferred with the patient after discharge from a hospital, CAH, or post-acute care services provider. For more information on the discharge planning requirements, please visit the final rule at: https://www.federalregister.gov/documents/2019/09/30/2019-20732/medicare-and-medicaid-programs-revisions-to-requirements-for-discharge-planning-for-hospitals .

We invite providers to learn more about these important developments and how they are likely to affect LTCHs and encourage the electronic exchange of health data across care settings and with patients.

II. Changes to Medicare Severity Diagnosis-Related Group (MS-DRG) Classifications and Relative Weights

A. Background

Section 1886(d) of the Act specifies that the Secretary shall establish a classification system (referred to as diagnosis-related groups (DRGs)) for inpatient discharges and adjust payments under the IPPS based on appropriate weighting factors assigned to each DRG. (Beginning in FY 2008, CMS adopted the Medicare-Severity DRGs (MS-DRGs) to better recognize severity of illness and resource use based on case complexity.) Therefore, under the IPPS, Medicare pays for inpatient hospital services on a rate per discharge basis that varies according to the DRG to which a beneficiary's stay is assigned. The formula used to calculate payment for a specific case multiplies an individual hospital's payment rate per case by the weight of the DRG to which the case is assigned. Each DRG weight represents the average resources required to care for cases in that particular DRG, relative to the average resources used to treat cases in all DRGs. Section 1886(d)(4)(C) of the Act requires that the Secretary adjust the DRG classifications and relative weights at least annually to account for changes in resource consumption. These adjustments are made to reflect changes in treatment patterns, technology, and any other factors that may change the relative use of hospital resources.

B. Adoption of the MS-DRGs and MS-DRG Reclassifications

For information on the adoption of the MS-DRGs in FY 2008, we refer readers to the FY 2008 IPPS final rule with comment period (72 FR 47140 through 47189).

For general information about the MS-DRG system, including yearly reviews and changes to the MS-DRGs, we refer readers to the previous discussions in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43764 through 43766) and the FYs 2011 through 2020 IPPS/LTCH PPS final rules (75 FR 50053 through 50055; 76 FR 51485 through 51487; 77 FR 53273; 78 FR 50512; 79 FR 49871; 80 FR 49342; 81 FR 56787 through 56872; 82 FR 38010 through 38085, 83 FR 41158 through 41258, and 84 FR 42058 through 42165, respectively).

C. FY 2021 MS-DRG Documentation and Coding Adjustment

1. Background on the Prospective MS-DRG Documentation and Coding Adjustments for FY 2008 and FY 2009 Authorized by Public Law 110-90 and the Recoupment or Repayment Adjustment Authorized by Section 631 of the American Taxpayer Relief Act of 2012 (ATRA).

In the FY 2008 IPPS final rule with comment period (72 FR 47140 through 47189), we adopted the MS-DRG patient classification system for the IPPS, effective October 1, 2007, to better recognize severity of illness in Medicare payment rates for acute care hospitals. The adoption of the MS-DRG system resulted in the expansion of the number of DRGs from 538 in FY 2007 to 745 in FY 2008. By increasing the number of MS-DRGs and more fully taking into account patient severity of illness in Medicare payment rates for acute care hospitals, MS-DRGs encourage hospitals to improve their documentation and coding of patient diagnoses. In the FY 2008 IPPS final rule with comment period (72 FR 47175 through 47186), we indicated that the adoption of the MS-DRGs had the potential to lead to increases in aggregate payments without a corresponding increase in actual patient severity of illness due to the incentives for additional documentation and coding. In that final rule with comment period, we exercised our authority under section 1886(d)(3)(A)(vi) of the Act, which authorizes us to maintain budget neutrality by adjusting the national standardized amount, to eliminate the estimated effect of changes in coding or classification that do not reflect real changes in case-mix. Our actuaries estimated that maintaining budget neutrality required an adjustment of −4.8 percentage points to the national standardized amount. We provided for phasing in this −4.8 percentage point adjustment over 3 years. Specifically, we established prospective documentation and coding adjustments of −1.2 percentage points for FY 2008, −1.8 percentage points for FY 2009, and −1.8 percentage points for FY 2010.

On September 29, 2007, Congress enacted the TMA [Transitional Medical Assistance], Abstinence Education, and QI [Qualifying Individuals] Programs Extension Act of 2007 (Pub. L. 110-90). Section 7(a) of Public Law 110-90 reduced the documentation and coding adjustment made as a result of the MS-DRG system that we adopted in the FY 2008 IPPS final rule with comment period to −0.6 percentage point for FY 2008 and −0.9 percentage point for FY 2009.

As discussed in prior year rulemakings, and most recently in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56780 through 56782), we implemented a series of adjustments required under sections 7(b)(1)(A) and 7(b)(1)(B) of Public Law 110-90, based on a retrospective review of FY 2008 and FY 2009 claims data. We completed these adjustments in FY 2013 but indicated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53274 through 53275) that delaying full implementation of the adjustment required under section 7(b)(1)(A) of Public Law 110-90 until FY 2013 resulted in payments in FY 2010 through FY 2012 being overstated, and that these overpayments could not be recovered under Public Law 110-90.

In addition, as discussed in prior rulemakings and most recently in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38008 through 38009), section 631 of the American Taxpayer Relief Act of 2012 (ATRA) amended section 7(b)(1)(B) of Public Law 110-90 to require the Secretary to make a recoupment adjustment or adjustments totaling $11 billion by FY 2017. This adjustment represented the amount of the increase in aggregate payments as a result of not completing the prospective adjustment authorized under section 7(b)(1)(A) of Public Law 110-90 until FY 2013.

2. Adjustments Made for FY 2018, FY 2019, and FY 2020 as Required Under Section 414 of Public Law 114-10 (MACRA) and Section 15005 of Public Law 114-255

As stated in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56785), once the recoupment required under section 631 of the ATRA was complete, we had anticipated making a single positive adjustment in FY 2018 to offset the reductions required to recoup the $11 billion under section 631 of the ATRA. However, section 414 of the MACRA (which was enacted on April 16, 2015) replaced the single positive adjustment we intended to make in FY 2018 with a 0.5 percentage point positive adjustment for each of FYs 2018 through 2023. In the FY 2017 rulemaking, we indicated that we would address the adjustments for FY 2018 and later fiscal years in future rulemaking. Section 15005 of the 21st Century Cures Act (Pub. L. 114-255), which was enacted on December 13, 2016, amended section 7(b)(1)(B) of the TMA, as amended by section 631 of the ATRA and section 414 of the MACRA, to reduce the adjustment for FY 2018 from a 0.5 percentage point positive adjustment to a 0.4588 percentage point positive adjustment. As we discussed in the FY 2018 rulemaking, we believe the directive under section 15005 of Public Law 114-255 is clear. Therefore, in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38009) for FY 2018, we implemented the required +0.4588 percentage point adjustment to the standardized amount. In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41157) and in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42057), consistent with the requirements of section 414 of the MACRA, we implemented 0.5 percentage point positive adjustments to the standardized amount for FY 2019 and FY 2020, respectively. We indicated that the FY 2018, FY 2019, and FY 2020 adjustments were permanent adjustments to payment rates. We also stated that we plan to propose future adjustments required under section 414 of the MACRA for FYs 2021 through 2023 in future rulemaking.

3. Adjustment for FY 2021

Consistent with the requirements of section 414 of the MACRA, we proposed to implement a 0.5 percentage point positive adjustment to the standardized amount for FY 2021. We indicated that this would constitute a permanent adjustment to payment rates. We stated in the proposed rule that we plan to propose future adjustments required under section 414 of the MACRA for FYs 2022 through 2023 in future rulemaking.

Comment: Commenters stated that in order to comply with ATRA requirements, CMS anticipated that a cumulative −3.2 percentage point adjustment to the standardized amount would achieve the mandated $11 billion recoupment. A commenter stated that by retaining the −0.7 percentage point adjustment made in FY 2017, CMS has miscalculated the directives issued by Congress, and has contravened Congress' clear instructions and intent. The commenter contends that when Section 15005 of the 21st Century Cures Act (Pub. L. 114-255) altered the positive adjustment for FY 2018 from 0.5 percentage points to 0.4588 percentage points, Congress recognized that this difference would not be restored. According to the commenter, Congress thus assumed that the 0.7 percentage point adjustment would be returned as part of the restoration process; otherwise, it would have updated the “baseline” to reflect CMS' revised total negative adjustment of 3.9%. A commenter asserted that the additional −0.7 percentage point adjustment made in FY 2017 has been improperly continued in FY 2018, FY 2019, and FY 2020, and failure to restore the additional 0.7 percentage point adjustment will cause hospitals to experience a significant cut in their reimbursement for FY 2021 (in addition to the losses already incurred for FYs 2018, 2019, and 2020). Other commenters urged CMS to use its exceptions and adjustments authority under section 1886(d)(5)(I) by FY 2024, to restore an additional 0.7 percentage point payment adjustment to restore payment equity to hospitals and comply with what they asserted was Congressional intent. Another commenter suggested CMS implement an approximate positive adjustment of 1.0 percentage point by FY 2024 to fully and permanently restore the entire −3.9 percentage point recoupment adjustment to IPPS rates.

Response: As we discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32471), and in response to similar comments in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42057), we believe section 414 of the MACRA and section 15005 of the 21st Century Cures Act set forth the levels of positive adjustments for FYs 2018 through 2023. We are not convinced that the adjustments prescribed by MACRA were predicated on a specific adjustment level estimated or implemented by CMS in previous rulemaking. While we had anticipated making a positive adjustment in FY 2018 to offset the reductions required to recoup the $11 billion under section 631 of the ATRA, section 414 of the MACRA required that we implement a 0.5 percentage point positive adjustment for each of FYs 2018 through 2023, and not the single positive adjustment we intended to make in FY 2018. As discussed in the FY 2017 IPPS/LTCH PPS final rule, by phasing in a total positive adjustment of only 3.0 percentage points, section 414 of the MACRA would not fully restore even the 3.2 percentage point adjustment originally estimated by CMS in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50515). Moreover, as discussed in the FY 2018 IPPS/LTCH PPS final rule, Public Law 114-255, which further reduced the positive adjustment required for FY 2018 from 0.5 percentage point to 0.4588 percentage point, was enacted on December 13, 2016, after CMS had proposed and finalized the final negative − 1.5 percentage point adjustment required under section 631 of the ATRA. We see no evidence that Congress enacted these adjustments with the intent that CMS would make an additional +0.7 percentage point adjustment in FY 2018 to compensate for the higher than expected final ATRA adjustment made in FY 2017, nor are we persuaded that it would be appropriate to use the Secretary's exceptions and adjustments authority under section 1886(d)(5)(I) of the Act to adjust payments in FY 2021 to restore any additional amount of the original 3.9 percentage point reduction, given Congress' prescriptive adjustment levels under section 414 of the MACRA and section 15005 of the 21st Century Cures Act. We intend to address adjustments for FY 2022 and later years in future rulemaking.

After consideration of the public comments we received, we are finalizing our proposal to implement a 0.5 percentage point adjustment to the standardized amount for FY 2021.

D. Changes to Specific MS-DRG Classifications

1. Discussion of Changes to Coding System and Basis for FY 2021 MS-DRG Updates

a. Conversion of MS-DRGs to the International Classification of Diseases, 10th Revision (ICD-10)

As of October 1, 2015, providers use the International Classification of Diseases, 10th Revision (ICD-10) coding system to report diagnoses and procedures for Medicare hospital inpatient services under the MS-DRG system instead of the ICD-9-CM coding system, which was used through September 30, 2015. The ICD-10 coding system includes the International Classification of Diseases, 10th Revision, Clinical Modification (ICD-10-CM) for diagnosis coding and the International Classification of Diseases, 10th Revision, Procedure Coding System (ICD-10-PCS) for inpatient hospital procedure coding, as well as the ICD-10-CM and ICD-10-PCS Official Guidelines for Coding and Reporting. For a detailed discussion of the conversion of the MS-DRGs to ICD-10, we refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR 56787 through 56789).

b. Basis for FY 2021 MS-DRG Updates

Given the need for more time to carefully evaluate requests and propose updates, as discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38010), we changed the deadline to request updates to the MS-DRGs to November 1 of each year, which provided an additional 5 weeks for the data analysis and review process. Interested parties had to submit any comments and suggestions for FY 2021 by November 1, 2019, and the comments that were submitted in a timely manner for FY 2021 are discussed in this section of the preamble of this final rule. As we discuss in the sections that follow, we may not be able to fully consider all of the requests that we receive for the upcoming fiscal year. We have found that, with the implementation of ICD-10, some types of requested changes to the MS-DRG classifications require more extensive research to identify and analyze all of the data that are relevant to evaluating the potential change. We note in the discussion that follows those topics for which further research and analysis are required, and which we will continue to consider in connection with future rulemaking.

We stated in the proposed rule that with the continued increase in the number and complexity of the requested changes to the MS-DRG classifications since the adoption of ICD-10 MS-DRGs, and in order to consider as many requests as possible, more time is needed to carefully evaluate the requested changes, analyze claims data, and consider any updates. Therefore, we stated that we are changing the deadline to request changes to the MS-DRGs to October 20th of each year to allow for additional time for the review and consideration of any updates. We stated that interested parties should submit any comments and suggestions for FY 2022 by October 20, 2020 via the CMS MS-DRG Classification Change Request Mailbox located at: MSDRGClassificationChange@cms.hhs.gov.

Comment: A commenter expressed concern that changing the deadline to submit requested changes to the MS-DRGs from November 1st to October 20th will shorten the amount of time that hospitals have to review the final rule each year and determine how changes may impact MS-DRG recommendations for the following year. The commenter opposed the change in date stating hospitals should be given more time to evaluate impacts of the MS-DRG changes. We also received comments urging CMS to consider the impact of the COVID-19 pandemic on the FY 2020 MedPAR data in evaluating potential MS-DRG changes for FY 2022. Commenters noted that the volume for MS-DRGs unrelated to COVID-19 hospitalizations may not be typical as a result of the postponement or cancellation of elective surgeries.

Response: We believe that a change in the deadline from November 1st to October 20th will continue to provide hospitals sufficient time to assess potential impacts and inform future MS-DRG recommendations. As noted later in this section, in response to prior public comments, we provided a test version of the ICD-10 MS-DRG GROUPER Software, Version 38 containing the proposed GROUPER logic for FY 2021 in connection with the proposed rule, allowing providers to build case examples reflecting the proposed MS-DRG changes. Therefore, we believe providers have sufficient time to assess potential impacts. However, because of the unique circumstance for this final rule for which we are waiving the delayed effective date (as discussed in section I.A.2 of this preamble), we are maintaining the deadline of November 1, 2020 for FY 2022 MS-DRG classification change requests, and expect to reconsider a change in the deadline beginning with comments and suggestions submitted for FY 2023. In response to the public comments received expressing concerns about evaluating potential MS-DRG changes for FY 2022 using the FY 2020 MedPAR claims data, which may reflect various impacts as a result of the COVID-19 pandemic, we will consider these concerns in developing FY 2022 proposals. Accordingly, interested parties should submit any comments and suggestions for FY 2022 by November 1, 2020 via the CMS MS-DRG Classification Change Request Mailbox located at: MSDRGClassificationChange@cms.hhs.gov.

Based on public comments received in response to the FY 2020 IPPS/LTCH PPS proposed rule, we provided a test version of the ICD-10 MS-DRG GROUPER Software, Version 38, in connection with the FY 2021 IPPS/LTCH PPS proposed rule so that the public could better analyze and understand the impact of the proposals included in the proposed rule. We noted that this test software reflects the proposed GROUPER logic for FY 2021. Therefore, it includes the new diagnosis and procedure codes that are effective for FY 2021 as reflected in Table 6A.—New Diagnosis Codes—FY 2021 and Table 6B.—New Procedure Codes—FY 2021 that were associated with the proposed rule and does not include the diagnosis codes that are invalid beginning in FY 2021 as reflected in Table 6C.—Invalid Diagnosis Codes—FY 2021 that was associated with the proposed rule. We also noted that there were not any procedure codes that had been designated as invalid for FY 2021 at the time of the development of the proposed rule. Those tables were not published in the Addendum to the proposed rule, but are available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html as described in section VI. of the Addendum to the proposed rule. Because the diagnosis codes no longer valid for FY 2021 are not reflected in the test software, we made available a supplemental file in Table 6P.1a that includes the mapped Version 38 FY 2021 ICD-10-CM codes and the deleted Version 37 FY 2020 ICD-10-CM codes that should be used for testing purposes with users' available claims data. Therefore, users had access to the test software allowing them to build case examples that reflect the proposals that were included in the proposed rule. In addition, users were able to view the draft version of the ICD-10 MS-DRG Definitions Manual, Version 38.

The test version of the ICD-10 MS-DRG GROUPER Software, Version 38, the draft version of the ICD-10 MS-DRG Definitions Manual, Version 38, and the supplemental mapping file in Table 6P.1a of FY 2020 and FY 2021 ICD-10-CM diagnosis codes are available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software .

Following are the changes that we proposed to the MS-DRGs for FY 2021. We invited public comments on each of the MS-DRG classification proposed changes, as well as our proposals to maintain certain existing MS-DRG classifications discussed in the proposed rule. In some cases, we proposed changes to the MS-DRG classifications based on our analysis of claims data and consultation with our clinical advisors. In other cases, we proposed to maintain the existing MS-DRG classifications based on our analysis of claims data and consultation with our clinical advisors. For the FY 2021 IPPS/LTCH PPS proposed rule, our MS-DRG analysis was based on ICD-10 claims data from the September 2019 update of the FY 2019 MedPAR file, which contains hospital bills received through September 30, 2019, for discharges occurring through September 30, 2019. In our discussion of the proposed MS-DRG reclassification changes, we referred to these claims data as the “September 2019 update of the FY 2019 MedPAR file.”

In this FY 2021 IPPS/LTCH PPS final rule, we summarize the public comments we received on our proposals, present our responses, and state our final policies. For this FY 2021 final rule, we generally did not perform any further MS-DRG analysis of claims data. Therefore, our MS-DRG analysis is based on ICD-10 claims data from the September 2019 update of the FY 2019 MedPAR file, which contains hospital bills received through September 30, 2019, for discharges occurring through September 30, 2019, except as otherwise noted.

As explained in previous rulemaking (76 FR 51487), in deciding whether to propose to make further modifications to the MS-DRGs for particular circumstances brought to our attention, we consider whether the resource consumption and clinical characteristics of the patients with a given set of conditions are significantly different than the remaining patients represented in the MS-DRG. We evaluate patient care costs using average costs and lengths of stay and rely on the judgment of our clinical advisors to determine whether patients are clinically distinct or similar to other patients represented in the MS-DRG. In evaluating resource costs, we consider both the absolute and percentage differences in average costs between the cases we select for review and the remainder of cases in the MS-DRG. We also consider variation in costs within these groups; that is, whether observed average differences are consistent across patients or attributable to cases that are extreme in terms of costs or length of stay, or both. Further, we consider the number of patients who will have a given set of characteristics and generally prefer not to create a new MS-DRG unless it would include a substantial number of cases.

In our examination of the claims data, we apply the following criteria established in FY 2008 (72 FR 47169) to determine if the creation of a new complication or comorbidity (CC) or major complication or comorbidity (MCC) subgroup within a base MS-DRG is warranted:

• A reduction in variance of costs of at least 3 percent;
• At least 5 percent of the patients in the MS-DRG fall within the CC or MCC subgroup;
• At least 500 cases are in the CC or MCC subgroup;
• There is at least a 20-percent difference in average costs between subgroups; and
• There is a $2,000 difference in average costs between subgroups.

In order to warrant creation of a CC or MCC subgroup within a base MS-DRG, the subgroup must meet all five of the criteria.

In the FY 2021 IPPS/LTCH PPS proposed rule, we proposed to expand the previously listed criteria to also include the NonCC subgroup. We explained that we believe that applying these criteria to the NonCC subgroup would better reflect resource stratification and also promote stability in the relative weights by avoiding low volume counts for the NonCC level MS-DRGs.

Specifically, in our analysis of the MS-DRG classification requests for FY 2021 that we received by November 1, 2019, as well as any additional analyses that were conducted in connection with those requests, we applied these criteria to each of the MCC, CC and NonCC subgroups, as described in the following table. We provided the following table to better illustrate all five criteria and how they are applied for each CC subgroup, including their application to the NonCC subgroup beginning with the FY 2021 proposed rule. We also stated we had revised the order in which the criteria are presented for illustrative purposes.

In general, once the decision has been made to propose to make further modifications to the MS-DRGs as described previously, such as creating a new base MS-DRG, or in our evaluation of a specific MS-DRG classification request to split (or subdivide) an existing base MS-DRG into severity levels, all five criteria must be met for the base MS-DRG to be split (or subdivided) by a CC subgroup. We note that in our analysis of requests to create a new MS-DRG, we evaluate the most recent year of MedPAR claims data available. For example, we stated earlier that for the FY 2021 IPPS/LTCH PPS proposed rule and this final rule, our MS-DRG analysis is based on ICD-10 claims data from the September 2019 update of the FY 2019 MedPAR file. However, in our evaluation of requests to split an existing base MS-DRG into severity levels, as noted in prior rulemaking (80 FR 49368), we analyze the most recent 2 years of data. This analysis includes 2 years of MedPAR claims data to compare the data results from 1 year to the next to avoid making determinations about whether additional severity levels are warranted based on an isolated year's data fluctuation and also, to validate that the established severity levels within a base MS-DRG are supported. The first step in our process of evaluating if the creation of a new CC subgroup within a base MS-DRG is warranted is to determine if all the criteria are satisfied for a three way split. If the criteria fail, the next step is to determine if the criteria are satisfied for a two way split. If the criteria for both of the two way splits fail, then a split (or CC subgroup) would generally not be warranted for that base MS-DRG. If the three way split fails on any one of the five criteria and all five criteria for both two way splits (1_23 and 12_3) are met, we would apply the two way split with the highest R2 value. We note that if the request to split (or subdivide) an existing base MS-DRG into severity levels specifies the request is for either one of the two way splits (1_23 or 12_3), in response to the specific request, we will evaluate the criteria for both of the two way splits, however we do not also evaluate the criteria for a three way split.

Comment: A commenter acknowledged CMS's proposal to expand the previously listed criteria to create subgroups to also include the NonCC subgroup. This commenter expressed concern that the proposed principles are limited and restrictive and more applicable to MCCs than CCs.

Response: It is not clear to us from the limited discussion in the comment why the commenter believes the principles are limited and restrictive and more applicable to MCCs than CCs, as the commenter did not provide further information or examples of this, nor suggest alternative approaches. We note that the criteria to create subgroups within the MS-DRGs as discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32472 through 32473) are separate from the guiding principles we discussed in the context of the comprehensive CC/MCC analysis of diagnosis codes when reported as a secondary diagnosis (85 FR 32550). However, the commenter did not provide any further information, alternative suggestions or recommendations with respect to either analysis.

Comment: A commenter noted that in CMS's analysis of the MS-DRG classification requests for FY 2021, the proposed expanded criteria were applied to each of the MCC, CC and NonCC subgroups and it questioned the appropriateness of applying the proposed subgroup criteria to include the NonCC subgroup for FY 2021 prior to it being finalized. This commenter also requested that CMS clarify how it will apply the proposed expansion of the subgroup criteria going forward. The commenter stated that if CMS were to apply the NonCC subgroup criteria retroactively in future rulemaking there are concerns with implications on the MS-DRG groupings and relative weights. The commenter conducted its own preliminary analysis using the FY 2018 MedPAR data and noted that some MS-DRGs with three subgroups would have two subgroups under the new framework and it was not clear how this may impact the relative weights of those MS-DRGs.

Response: In the FY 2021 IPPS/LTCH PPS proposed rule, we proposed to expand the existing criteria to create subgroups within a base MS-DRG to include the NonCC subgroup (85 FR 32472 through 32473). We noted that in our analysis of the MS-DRG classification requests for FY 2021, we applied the proposed criteria to each of the MCC, CC and NonCC subgroups. In response to the commenter's concern about the appropriateness of applying the proposed subgroup criteria for MS-DRG classification requests in FY 2021 prior to it being finalized, we note that we proposed and requested comments on the expansion of these criteria to the NonCC subgroup as part of this rulemaking and before finalization of this approach for FY 2021 MS-DRG changes. We also note that in the absence of applying the proposed criteria to include the NonCC subgroup, the MS-DRG related proposals for FY 2021 involving such requests to create subgroups would have similar results. However, to better illustrate for the reader the criteria that were established in FY 2008 (72 FR 47169) to determine if the creation of a new CC or MCC subgroup within a base MS-DRG is warranted, we have provided this table.

As shown in the table, under column number two (Three-Way Split), the first criterion requires “500+ cases for MCC group; and 500+ cases for CC group” and the second criterion requires “5%+ cases for MCC group; and 5%+ cases for CC group”. We note that there is no volume or percentage of cases requirement for the NonCC group under the first and second criterion for this type of severity level split under the existing criteria. We further note that the proposed expansion of the criteria to include the NonCC subgroup, as discussed in the proposed rule, is only applicable for a three-way split because as previously illustrated in the table, the criteria for the NonCC subgroup already exists in each of the options for a two-way split.

As stated previously, in the absence of applying the proposed criteria to include the NonCC subgroup, the MS-DRG related proposals for FY 2021 involving such requests to create subgroups would have similar results. For example, in response to the request under the Pre-MDC category to split MS-DRG 014 (Allogeneic Bone Marrow Transplant) into two severity levels, based on the presence of a MCC, we discussed our application of the criteria to create subgroups for each of the two-way severity level splits. We noted that the criterion that there be at least 500 cases for each subgroup (with MCC and without MCC) failed due to low volume, for both years analyzed. The analysis did not specifically rely on application of the proposed expansion of the criteria for the NonCC subgroup since the request was not for a three-way severity split and we noted there was already an insufficient volume of cases (less than 500) in the CC subgroup (CC+NonCC group). Another example under the Pre-MDC category is for the proposed new MS-DRG 018 (Chimeric Antigen Receptor (CAR) T-cell Immunotherapy), for which we received public comments regarding CC subgroups and is discussed in further detail in section II.E.2.b. of the preamble of this final rule.

We take this opportunity to clarify that there are no plans to apply the proposed expansion of the criteria to the NonCC subgroup retroactively in future rulemaking. The commenter is correct that application of the proposed NonCC subgroup criteria going forward may result in modifications to certain MS-DRGs that are currently split into three severity levels and result in MS-DRGs that are split into two severity levels under the proposed new framework. Any proposed modifications to the MS-DRGs would be addressed in future rulemaking consistent with our annual process and reflected in the Table 5—Proposed List of Medicare Severity Diagnosis Related Groups (MS-DRGs), Relative Weighting Factors, and Geometric and Arithmetic Mean Length of Stay for the applicable fiscal year.

After consideration of the public comments we received, we are finalizing our proposal to expand the previously listed criteria to also include the NonCC subgroup.

We are making the FY 2021 ICD-10 MS-DRG GROUPER and Medicare Code Editor (MCE) Software Version 38, the ICD-10 MS-DRG Definitions Manual files Version 38 and the Definitions of Medicare Code Edits Manual Version 38 available to the public on our CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software .

2. Pre-MDC

a. Bone Marrow Transplants

As discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32473 through 32475), we received two separate requests that involve the MS-DRGs where bone marrow transplant procedures are assigned. The first request was to redesignate MS-DRG 014 (Allogeneic Bone Marrow Transplant), MS-DRG 016 (Autologous Bone Marrow Transplant with CC/MCC or T-Cell Immunotherapy), and MS-DRG 017 (Autologous Bone Marrow Transplant without CC/MCC) from surgical MS-DRGs to medical MS-DRGs. According to the requestor, bone marrow transplant procedures involve a transfusion of donor cells and do not involve a surgical procedure or require the resources of an operating room (O.R.). The second request involving bone marrow transplant procedures was to split MS-DRG 014 (Allogeneic Bone Marrow Transplant) into two severity levels, based on the presence of a MCC. In this section of this rule, we discuss each request in more detail.

With regard to the first request, the requestor noted that the logic for MS-DRG 014 consists of ICD-10-PCS procedure codes describing allogeneic bone marrow transplants that are designated as non-operating room (non-O.R.) procedures. The requestor also noted that the logic for MS-DRGs 016 and 017 includes ICD-10-PCS procedure codes describing autologous bone marrow transplants where certain procedure codes are designated as O.R. and other procedure codes are designated as non-O.R. procedures. The requestor stated that redesignating the bone marrow transplant MS-DRGs from surgical to medical would clinically align with the resources utilized in the performance of these procedures.

The requestor is correct that bone marrow transplant procedures are currently assigned to MS-DRGs 014, 016, and 017 which are classified as surgical MS-DRGs under the Pre-MDC category for the ICD-10 MS-DRGs. The requestor is also correct that the logic for MS-DRG 014 consists of ICD-10-PCS procedure codes describing allogeneic bone marrow transplants that are designated as non-operating room (non-O.R.) procedures and that the logic for MS-DRGs 016 and 017 includes ICD-10-PCS procedure codes describing autologous bone marrow transplants where certain procedure codes are designated as O.R. procedures and other procedure codes are designated as non-O.R. procedures. We refer the reader to the ICD-10 MS-DRG Definitions Manual Version 37 which is available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software for complete documentation of the GROUPER logic for MS-DRGs 014, 016, and 017.

As noted in the proposed rule, we consulted with our clinical advisors and they agreed that bone marrow transplant procedures are similar to a blood transfusion procedure, do not utilize the resources of an operating room, and are not surgical procedures. Our clinical advisors concurred that bone marrow transplants are medical procedures and it is more accurate to designate the MS-DRGs to which these procedures are assigned as medical MS-DRGs versus surgical MS-DRGs. Therefore, we proposed to redesignate MS-DRGs 014, 016, and 017 as medical MS-DRGs effective October 1, 2020 for FY 2021.

As noted previously, the logic for MS-DRGs 016 and 017 includes ICD-10-PCS procedure codes describing autologous bone marrow transplants and related procedures where certain procedure codes are designated as O.R. and other procedure codes are designated as non-O.R. procedures. We stated in the proposed rule that during our review of the bone marrow transplant procedures assigned to these MS-DRGs, we identified the following 8 procedure codes that are currently designated as O.R procedures.

In connection with our proposal to designate the MS-DRGs to which these procedures are assigned as medical, as well as for clinical consistency with the other procedure codes describing bone marrow transplant procedures, we proposed to redesignate the listed ICD-10-PCS procedure codes from O.R. to non-O.R. procedures, affecting their current MS-DRG assignment for MS-DRGs 016 and 017, effective October 1, 2020 for FY 2021.

As discussed in the proposed rule and noted earlier in this section, we also received a request to split MS-DRG 014 (Allogeneic Bone Marrow Transplant) into two severity levels, based on the presence of a MCC. For FY 2020, the requestor had requested that MS-DRG 014 be split into two new MS-DRGs according to donor source. For the reasons discussed in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19176 through 19180) and the FY 2020 IPPS/LTCH PPS final rule (84 FR 42067 through 42072), we did not propose to split MS-DRG 014 into two new MS-DRGs according to donor source. However, according to the requestor, a single (base) MS-DRG for allogeneic bone marrow and stem cell transplants continues to not be as clinically or resource homogeneous as it could be. The requestor conducted its own analysis and stated the results revealed it was appropriate to split MS-DRG 014 based on the presence of a MCC.

We noted in the proposed rule that we examined claims data from the September 2019 update of the FY 2019 MedPAR file for MS-DRG 014. There were 962 cases found in MS-DRG 014 with an average length of stay of 26.7 days and average costs of $89,586.

As stated in the proposed rule, consistent with our established process, we conducted an analysis of MS-DRG 014 to determine if the criteria to create subgroups were met. The process for conducting this type of analysis includes examining 2 years of MedPAR claims data to compare the data results from 1 year to the next to avoid making determinations about whether additional severity levels are warranted based on an isolated year's data fluctuation and also, to validate that the established severity levels within a base MS-DRG are supported. Therefore, we reviewed the claims data for base MS-DRG 014 using the September 2018 update of the FY 2018 MedPAR file and the September 2019 update of the FY 2019 MedPAR file, which were used in our analysis of claims data for MS-DRG reclassification requests for FY 2020 and FY 2021. Our findings are shown in the table.

We applied the criteria to create subgroups for each of the two-way severity level splits. As discussed in section II.D.1.b., in the FY 2021 IPPS/LTCH PPS proposed rule, we proposed to expand the previously listed criteria to also include the NonCC group. The criterion that there be at least 500 cases for each subgroup failed due to low volume, as shown in the table for both years. Specifically, for the “with MCC” and “without MCC” (CC+NonCC) split, there were only 183 (141+42) cases in the “without MCC” subgroup based on the data in the FY 2019 MedPAR file and only 175 (140+35) cases in the “without MCC” subgroup based on the data in the FY 2018 MedPAR file. For the “with CC/MCC” and “without CC/MCC” (NonCC) split, there were only 42 cases in the NonCC subgroup based on the data in the FY 2019 MedPAR file and only 35 cases in the NonCC subgroup based on the data in the FY 2018 MedPAR file. The claims data do not support a two-way severity level split for MS-DRG 014, therefore, we proposed to maintain the current structure of MS-DRG 014 for FY 2021.

Comment: Commenters supported the proposal to redesignate MS-DRGs 014, 016, and 017 as medical MS-DRGs and stated they agreed that bone marrow transplant procedures are medical procedures that do not utilize the resources of an operating room. However, the commenters also noted that bone marrow transplants remain resource intensive procedures and the patients are medically complex, often requiring additional monitoring and increased lengths of stay. Commenters also agreed that the ICD-10-PCS procedure codes describing bone marrow transplants should have the same designation and supported the proposal to redesignate the eight ICD-10-PCS procedure codes listed in the previous table from O.R. to non-O.R. procedures, affecting their current MS-DRG assignment for MS-DRGs 016 and 017. However, a single commenter disagreed with the proposal to redesignate the eight ICD-10-PCS procedure codes listed in the previous table from O.R. to non-O.R. procedures stating that the proposal did not provide any detail as to how the codes would be reassigned and recommended not finalizing the proposal until more information was provided in future rulemaking. Another commenter noted that the bone marrow transplant procedure codes represent an example of why the current process of determining whether a procedure qualifies for designation as an O.R. procedure may be outdated. This commenter acknowledged CMS' discussion from section II.D.11. in the proposed rule that stated while procedures have typically been evaluated on the basis of whether they would be performed in an operating room, there may be other factors to consider with regard to resource consumption (85 FR 32542 through 32549). Another commenter reported that in review of the eight procedure codes CMS proposed to redesignate from O.R. to non-O.R., they queried the FY 2019 MedPAR claims data and discovered a limited number of claims reflecting these procedure codes. This commenter consulted with its clinical advisors to determine if a bone marrow transplant with an “open approach” (as described by the procedure codes and the ICD-10-PCS classification), would generally occur. According to the clinical advisors, it is illogical to maintain these procedure codes describing an open approach for allogeneic and autologous bone marrow transplant procedures. The commenter recommended that CMS remove the procedure codes identified with an open approach from the classification.

Commenters also supported retaining the structure of MS-DRG 014 and not creating a two-way severity level split based on the data and information provided. A commenter stated they understood and did not dispute CMS' logic based on the criteria to create subgroups, however, they suggested that when proposals from the comprehensive CC/MCC analysis are finalized that this MS-DRG be reevaluated given the variation in the “with CC/MCC” and “without CC/MCC” subgroups ($90,924 versus $60,277, respectively) displayed in the CMS data analysis. In addition, this commenter noted that the FY 2020 proposals related to the CC/MCC analysis involved redesignating the neoplasm codes from CC to NonCC and stated their belief that facilities addressing the costly and unavoidable consequences of allogeneic bone marrow transplants should be compensated for providing the care.

Response: We appreciate the commenters' support for our proposals related to MS-DRGs 014, 016 and 017 for bone marrow transplant procedures. We agree with the commenters that bone marrow transplants are resource intensive procedures and the patients are medically complex, often requiring additional monitoring and increased lengths of stay. In response to the commenter who disagreed with the proposal to redesignate the eight ICD-10-PCS procedure codes listed in the previous table from O.R. to non-O.R. procedures because the proposal did not provide any detail as to how the codes would be reassigned and recommended not finalizing the proposal until more information was provided in future rulemaking, we note that the proposed rule specifically stated “we are proposing to redesignate the listed ICD-10-PCS procedure codes from O.R. to non-O.R. procedures, affecting their current MS-DRG assignment for MS-DRGs 016 and 017, effective October 1, 2020 for FY 2021”. As we also discussed in section II.D.11.a. of the proposed rule, each procedure that is designated as a non-O.R. procedure is further classified as either affecting the MS-DRG assignment or not affecting the MS-DRG assignment. We noted that the non-O.R. designations that do affect the MS-DRG are referred to as “non-O.R. affecting the MS-DRG.” Accordingly, redesignating these eight procedure codes as non-O.R. procedures affecting their MS-DRG assignment means that they are non-O.R. and will continue to be assigned to MS-DRGs 016 and 017 for FY 2021.

In response to the commenter who recommended that CMS remove the procedure codes describing an allogeneic or autologous bone marrow transplant with an open approach from the classification, we thank the commenter for their suggestion and note that proposed changes to these procedure codes can be considered at an ICD-10 Coordination and Maintenance Committee meeting. As discussed in section II.E.16. of the preamble of this final rule, we encourage commenters to submit proposals for procedure coding changes via Email to: ICDProcedureCodeRequest@cms.hhs.gov.

With regard to the commenter who suggested that MS-DRG 014 be reevaluated when proposals from the comprehensive CC/MCC analysis are finalized due to the variation in the “with CC/MCC” and “without CC/MCC” subgroups as displayed in the CMS data analysis, we note that we will evaluate and analyze data for all the MS-DRGs consistent with our annual process.

After consideration of the public comments that we received, we are finalizing our proposal to redesignate MS-DRGs 014, 016, and 017 from surgical to medical MS-DRGs under the Pre-MDC category and finalizing our proposal to redesignate the eight ICD-10-PCS procedure codes listed in the previous table from O.R. to non-O.R. procedures, affecting their current MS-DRG assignment for MS-DRGs 016 and 017 for FY 2021. We are also finalizing our proposal to maintain the current structure of MS-DRG 014 for FY 2021.

b. Chimeric Antigen Receptor (CAR) T-Cell Therapies

In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32475 through 32476), we discussed several requests we received to create a new MS-DRG for procedures involving CAR T-cell therapies. The requestors stated that creation of a new MS-DRG would improve payment for CAR T-cell therapies in the inpatient setting. Some requestors noted that cases involving CAR T-cell therapies will no longer be eligible for new technology add-on payments in FY 2021 and that this would significantly reduce the overall payment for cases involving CAR T-cell therapies. Some requestors also noted that in the absence of the creation of a new MS-DRG for procedures involving CAR T-cell therapies, outlier payments for these cases would increase significantly, which would increase the share of total outlier payments that are attributable to CAR T-cell therapies.

The requestors stated that the new MS-DRG for CAR T-cell therapies should include cases that report ICD-10-PCS procedure codes XW033C3 (Introduction of engineered autologous chimeric antigen receptor t-cell immunotherapy into peripheral vein, percutaneous approach, new technology group 3) or XW043C3 (Introduction of engineered autologous chimeric antigen receptor t-cell immunotherapy into central vein, percutaneous approach, new technology group 3).

Given the high cost of the CAR T-cell product, some requestors provided recommendations related to the differential treatment of cases where the CAR T-cell product was provided without cost as part of a clinical trial to ensure that the payment amount for the newly created MS-DRG for CAR T-cell therapy cases would appropriately reflect the average cost hospitals incur for providing CAR T-cell therapy outside of a clinical trial. For example, some requestors suggested that CMS make minor adjustments to its usual ratesetting methodology to exclude clinical trial claims from the calculation of the relative weight for any MS-DRG for CAR T-cell therapies. One requestor noted that these adjustments are consistent with CMS' general authority under sections 1886(d)(4)(B) and (C) of the Act. Some requestors also suggested that CMS apply an offset to the MS-DRG payment in cases where the provider does not incur the cost of the CAR T-cell therapy.

Currently, procedures involving CAR T-cell therapies are identified with ICD-10-PCS procedure codes XW033C3 and XW043C3, which became effective October 1, 2017. In the FY 2019 IPPS/LTCH PPS final rule, we finalized our proposal to assign cases reporting these ICD-10-PCS procedure codes to Pre-MDC MS-DRG 016 for FY 2019 and to revise the title of this MS-DRG to “Autologous Bone Marrow Transplant with CC/MCC or T-cell Immunotherapy”. We refer readers to section II.F.2.d. of the preamble of the FY 2019 IPPS/LTCH PPS final rule for a complete discussion of these final policies (83 FR 41172 through 41174).

As noted, the current procedure codes for CAR T-cell therapies both became effective October 1, 2017. In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41172 through 41174), we indicated that we believed we should collect more comprehensive clinical and cost data before considering assignment of a new MS-DRG to these therapies. We stated in the FY 2020 IPPS/LTCH PPS proposed rule that, while the September 2018 update of the FY 2018 MedPAR data file does contain some claims that include those procedure codes that identify CAR T-cell therapies, the number of cases is limited, and the submitted costs vary widely due to differences in provider billing and charging practices for this therapy. Therefore, while those claims could potentially be used to create relative weights for a new MS-DRG, we stated that we did not have the comprehensive clinical and cost data that we generally believe are needed to do so. Furthermore, we stated in the FY 2020 IPPS/LTCH PPS proposed rule that given the relative newness of CAR T-cell therapy and our proposal to continue new technology add-on payments for FY 2020 for the two CAR T-cell therapies that currently have FDA approval (KYMRIAH^TM and YESCARTA^TM), at the time we believed it was premature to consider creation of a new MS-DRG specifically for cases involving CAR T-cell therapy for FY 2020. We stated that in future years we would have additional data that could be used to evaluate the potential creation of a new MS-DRG specifically for cases involving CAR T-cell therapies.

We stated in the FY 2021 IPPS/LTCH PPS proposed rule that we now have more data upon which to evaluate a new MS-DRG specifically for cases involving CAR T-cell therapies. We stated that we agree with the requestors it is appropriate to consider the development of a new MS-DRG using the data that is now available. We examined the claims data from the September 2019 update of the FY 2019 MedPAR data file for cases that reported ICD-10-PCS procedure codes XW033C3 or XW043C3. For purposes of this analysis, we identified clinical trial cases as claims with ICD-10-CM diagnosis code Z00.6 (Encounter for examination for normal comparison and control in clinical research program) which is reported only for clinical trial cases, or with standardized drug charges of less than $373,000, which is the average sales price of KYMRIAH and YESCARTA, which are the two CAR T-cell medicines approved to treat relapsed/refractory diffuse large B-cell lymphoma as of the time of the development of the proposed rule and this final rule. We stated that we distinguished between clinical trial and non-clinical trial cases in this analysis because we agree with the requestors who indicated that given the high cost of the CAR T-cell product, it is appropriate to distinguish cases where the CAR T-cell product was provided without cost as part of a clinical trial so that the analysis appropriately reflects the resources required to provide CAR T-cell therapy outside of a clinical trial. We also noted that we included cases that would have been identified as statistical outliers under our usual process when examined as part of MS-DRG 016 due to the extreme cost differences between the CAR T-cell therapy claims and other claims in MS-DRG 016, but would not be identified as statistical outliers when examining CAR T-cell therapy claims only. Our findings are shown in the table.

*We note that we included 18 cases that were flagged as statistical outliers in our trim methodology due to the mix of CAR T- cell therapy and non-CAR T—cell therapy cases in the current MS-DRG.

As shown in the table, we found 2,212 cases in MS-DRG 016, with an average length of stay of 18.2 days and average costs of $55,001. Of these 2,212 cases, 262 cases reported ICD-10-PCS procedure codes XW033C3 or XW043C3; these cases had an average length of stay of 16.3 days and average costs of $127,408. Of these 262 cases, 94 were identified as non-clinical trial cases; these cases had an average length of stay of 17.2 days and average costs of $274,952. The remaining 168 cases were identified as clinical trial cases; these cases had an average length of stay of 15.8 days and average costs of $44,853.

The data indicate that the average costs for the non-clinical trial cases that reported ICD-10-PCS procedure codes XW033C3 or XW043C3 are almost five times higher than the average costs for all cases in MS-DRG 016. We stated that our clinical advisors also believe that the cases reporting ICD-10-PCS procedure codes XW033C3 or XW043C3 can be clinically differentiated from other cases that group to MS-DRG 016, which includes procedures involving autologous bone marrow transplants, once the CAR T-cell therapy itself is taken into account in the comparison.

As described earlier in this section, in deciding whether to propose to make modifications to the MS-DRGs for particular circumstances brought to our attention, we consider a variety of factors pertaining to resource consumption and clinical characteristics. We stated in the proposed rule that while we generally prefer not to create a new MS-DRG unless it would include a substantial number of cases, our clinical advisors believe that the vast discrepancy in resource consumption as reflected in the claims data analysis and the clinical differences warrant the creation of a new MS-DRG. We therefore proposed to assign cases reporting ICD-10-PCS procedure codes XW033C3 or XW043C3 to a new MS-DRG 018 (Chimeric Antigen Receptor (CAR) T-cell Immunotherapy).

We stated in the proposed rule that if additional procedure codes describing CART- cell therapies are approved and finalized, we would use our established process to assign these procedure codes to the most appropriate MS-DRG. Because these cases would no longer group to MS-DRG 016, we proposed to revise the title for MS-DRG 016 from “Autologous Bone Marrow Transplant with CC/MCC or T-cell Immunotherapy” to “Autologous Bone Marrow Transplant with CC/MCC”.

Comments: The vast majority of commenters supported CMS' proposal to create new MS-DRG 018 (Chimeric Antigen Receptor (CAR) T-cell Immunotherapy), stating that it will better reflect the resource use involved in providing the CAR T-cell therapy. Commenters acknowledged that CMS had considered many factors previously raised by stakeholders in developing this new MS-DRG. A small number of commenters did not support the creation of a new MS-DRG and recommended that CMS maintain the new technology add-on payment for CAR T-cell therapies, delay creating a new MS-DRG, and consider public-private partnerships for data collection.

Response: We appreciate commenters' support. With respect to commenters that requested that we instead maintain the new technology add-on payments, we refer the reader to the section of this rule where we address these comments. We believe that the data we currently have available is sufficient to establish a relative weight at this time, and therefore do not believe it is appropriate to delay the creation of a new MS-DRG. We also note that the weights are recalibrated yearly to reflect additional data as it becomes available. We note that the commenter did not provide additional detail regarding potential public/private partnerships with respect to data collection.

Comments: Some commenters requested that CMS clarify that all CAR T-cell therapy products, or more broadly, all T-cell immunotherapy products, would be assigned to MS-DRG 018 regardless of cost. One commenter expressed concern that MS-DRG 018 is specific to one mechanistic approach to cellular therapy and has not provided for the array of cellular therapies in development.

Response: As we stated in the proposed rule, if additional procedure codes describing CART-cell therapies are approved and finalized, we would use our established process to assign these procedure codes to the most appropriate MS-DRG. As described in the FY 2020 final rule (84 FR 42061), assigning new procedure codes involves review of the predecessor procedure code's MS-DRG assignment. However, this process does not automatically result in the new procedure code being assigned (or proposed for assignment) to the same MS-DRG as the predecessor code. There are several factors to consider during this process that our clinical advisors take into account. For example, in the absence of volume, length of stay, and cost data, they may consider the specific service, procedure, or treatment being described by the new procedure code, the indications, treatment difficulty, and the resources utilized. Similarly, should additional cellular therapies become available, we would use our established process to determine whether there is a need to reconsider the MS-DRG assignment that would otherwise result from the principal diagnosis and other factors that go into MS-DRG assignment.

Comments: Some commenters requested that CMS consider subdividing MS-DRG 018 into separate MS-DRGs for MCCs, CCs, and non-CCs in order to account for the higher costs involved in caring for patients who develop Cytokine Release Syndrome (CRS). Some commenters requested that payments consider factors such as patients' burden of illness, comorbid conditions and complications associated with receiving CAR T-cell therapy treatment and consider complications and/or comorbidity or major complications or comorbidity codes when evaluating reimbursement for CAR T-cell therapies as more clinical data become available.

Response: As discussed in the proposed rule (85 FR 32472 through 32473), one of the criteria for the creation of a new complication or comorbidity or major complication or comorbidity subgroup within a base MS-DRG is at least 500 cases are in the CC or MCC subgroup which, as discussed previously in this section, we are finalizing to also expand to the NonCC subgroup beginning with FY 2021. As noted previously, we identified 262 total cases reporting ICD-10-PCS procedure codes XW033C3 or XW043C3 in MS-DRG 016 based on the data from the September 2019 update of the FY MedPAR file. We may consider the creation of subgroups within MS-DRG 018 in future rulemaking once additional data is available.

Comments: Some commenters requested that CMS create two new cost centers; one for cell therapy products, tied to revenue code 891, and one for gene therapy products, tied to revenue code 892. A commenter suggested that the use of a dedicated cost center would improve the accuracy of cost estimates since it would allow the creation of a separate CCR for CAR T-cell therapy products, and would not rely on hospitals setting their charges for CAR T-cell therapy products at very high levels. Commenters acknowledged that this would also require that CMS modify the cost report to break out these revenue centers. Other commenters requested that CMS issue a Medicare Learning Network (MLN) article instructing hospitals regarding adjustment of charges for CAR T-cell therapy products, while another commenter suggested that CMS could create a standardized charging protocol for CAR T-cell therapy products.

Response: We appreciate the commenters' request regarding the creation of new cost centers for revenue codes 891 and 892 and may consider this request in future rulemaking. With respect to the commenters who expressed concerns about hospital charging practices, we note that there is nothing that precludes hospitals from setting their drug charges consistent with their CCRs.

Comments: A commenter stated that the indefinite use of MS-DRG 018 under the IPPS is not sustainable. Some commenters requested that CMS consider value-based care or other alternative payment models, add-on payments, or paying on a pass-through basis, as more appropriate payment mechanisms for CAR T-cell therapies. A commenter urged CMS to continue to engage all stakeholders to develop long-term sustainable solutions that can be adapted over time and account for innovations that transform how we treat disease. Another commenter stated that the question of how to best pay for CAR T-cell therapies can best be answered by Congress, but that CMS should continue pursuing policies that enable hospitals to recoup all of their costs for providing CAR T-cell therapies. Another commenter requested that CMS create an add-on payment or otherwise modify the IPPS for pharmacy resources associated with CAR T-cell therapies.

Response: We believe that is premature to make structural changes to the IPPS at this time to pay for CAR T-cell therapies. As we gain more experience with these therapies, including the use of a separate MS-DRG for CAR T-cell therapies, we may consider these comments in future rulemaking.

We note that commenters also raised some concerns about outpatient billing instructions with respect to billing for outpatient cell collection and cell processing charges on the inpatient claim, payment issues for TEFRA hospitals, and questions regarding the MedPAR data dictionary. While we consider these comments about outpatient billing instructions and TEFRA hospitals outside of the scope of the proposals in the proposed rule, we will take these comments into consideration when developing policies and program requirements for future years. With respect to comments about the MedPAR data dictionary, we anticipate that the issues will be addressed in future MedPAR releases.

After consideration of public comments received, we are finalizing our proposal to assign cases reporting ICD-10-PCS procedure codes XW033C3 or XW043C3 to a new MS-DRG 018 (Chimeric Antigen Receptor (CAR) T-cell Immunotherapy) and to revise the title for MS-DRG 016 from “Autologous Bone Marrow Transplant with CC/MCC or T-cell Immunotherapy” to “Autologous Bone Marrow Transplant with CC/MCC”. We refer readers to section II.E.2.b. of the preamble of this final rule for a discussion of the relative weight calculation for the new MS-DRG 018 for CAR T-cell therapy, and to section IV.I. of the preamble of this final rule for a discussion of the payment adjustment for CAR T-cell clinical trial and expanded access use immunotherapy cases.

3. MDC 1 (Diseases and Disorders of the Nervous System)

a. Carotid Artery Stent Procedures

In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42078), we finalized our proposal to reassign 96 ICD-10-PCS procedure codes describing dilation of carotid artery with an intraluminal device(s) from MS-DRGs 037, 038, and 039 (Extracranial Procedures with MCC, with CC, and without CC/MCC, respectively) to MS-DRGs 034, 035, and 036 (Carotid Artery Stent Procedures with MCC, with CC, and without CC/MCC, respectively). As discussed in the FY 2021 IPPS/LTCH proposed rule (85 FR 32476), we received a request to review six ICD-10-PCS procedure codes describing dilation of a carotid artery (common, internal or external) with drug eluting intraluminal devices(s) using an open approach that were still assigned to the logic for case assignment to MS-DRGs 037, 038, and 039 that were not included in the list of codes finalized for reassignment to MS-DRGs 034, 035 and 036 in the FY 2020 IPPS/LTCH PPS final rule. The six codes are identified in the following table.

The logic for case assignment to MS-DRGs 034, 035, and 036 as displayed in the ICD-10 MS-DRG Version 37 Definitions Manual, available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.html is comprised of a list of logic which includes procedure codes for operating room procedures involving dilation of a carotid artery (common, internal or external) with intraluminal device(s). All of the ICD-10-PCS procedure codes in the logic list assigned to MS-DRGs 034, 035, and 036 describe dilation of a carotid artery with an intraluminal device.

In response to the request, we first examined claims data from the September 2019 update of the FY 2019 MedPAR file for MS-DRGs 034, 035, and 036 which only include those procedure codes that describe procedures that involve dilation of a carotid artery with an intraluminal device. Our findings are reported in the following table.

As shown in the table, we found a total of 1,259 cases in MS-DRG 034 with an average length of stay of 6.9 days and average costs of $28,668. We found a total of 3,367 cases in MS-DRG 035 with an average length of stay of 3.0 days and average costs of $17,114. We found a total of 4,769 cases in MS-DRG 036 with an average length of stay of 1.4 days and average costs of $13,501.

We then examined claims data from the September 2019 update of the FY 2019 MedPAR file for MS-DRGs 037, 038, and 039 and identified cases reporting any one of the 6 procedure codes listed in the table previously to determine the volume of cases impacted and if the average length of stay and average costs are consistent with the average length of stay and average costs for MS-DRGs 034, 035 and 036. Our findings are shown in the following table.

As shown in the table, we found a total of 3,331 cases with an average length of stay of 7.3 days and average costs of $24,155 in MS-DRG 037. There were 6 cases reporting at least one of the 6 procedure codes that describe dilation of the carotid artery with an intraluminal device using an open approach in MS-DRG 037 with an average length of stay of 7 days and average costs of $22,272. For MS-DRG 038, we found a total of 11,021 cases with an average length of stay of 3 days and average costs of $12,306. There were 33 cases reporting at least one of the 6 procedure codes that describe dilation of the carotid artery with an intraluminal device in MS-DRG 038 with an average length of stay of 2.3 days and average costs of $16,777. For MS-DRG 039, we found a total of 20,854 cases with an average length of stay of 1.4 days and average costs of $8,463. There were 26 cases reporting at least one of the 6 procedure codes that describe dilation of the carotid artery with an intraluminal device in MS-DRG 039 with an average length of stay of 1.2 days and average costs of $14,981.

The data analysis shows that for the cases in MS-DRGs 037, 038, and 039 reporting ICD-10-PCS codes 037H04Z, 037J04Z, 037K04Z, 037L04Z, 037M04Z, or 037N04Z, the average length of stay is shorter and the average costs are higher than the average length of stay and average costs (with the exception of the average costs for the 6 cases in MS-DRG 037 which are slightly less) in the FY 2019 MedPAR file for MS-DRGs 037, 038, and 039 respectively. The data analysis also shows for the cases in MS-DRGs 037, 038, and 039 reporting ICD-10-PCS codes 037H04Z, 037J04Z, 037K04Z, 037L04Z, 037M04Z, and 037N04Z the average length of stay and the average costs are in-line with the average length of stay and average costs in the FY 2019 MedPAR file for MS-DRGs 034, 035, and 036 respectively.

As noted in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19184) and final rule (84 FR 42077), our clinical advisors stated that MS-DRGs 034, 035 and 036 are defined to include only those procedure codes that describe procedures that involve dilation of a carotid artery with an intraluminal device.

Therefore, we proposed to reassign the procedure codes listed in the table from MS-DRGs 037, 038, and 039 that describe procedures that involve dilation of the carotid artery with an intraluminal device to MS-DRGs 034, 035, and 036.

In addition to our analysis of the claims data from the September 2019 MedPAR file for MS-DRGs 037, 038 and 039, we conducted an examination of all the MS-DRGs where any one of the 6 procedure codes listed previously were also reported to determine if any one of the 6 procedure codes were included in any other MS-DRG outside of MDC 01, to further assess the current MS-DRG assignments. Our findings are shown in the following table.

As shown in the table, we found one case reporting any one of these 6 procedure codes in each of MS-DRGs 023, 027, 035, 219, 233, 235 and 252. We noted that all of the listed MS-DRGs were assigned to MDC 01 with one exception: MS-DRG 252 (Other Vascular Procedures with MCC) in MDC05 (Diseases and Disorders of the Circulatory System). As a result, we reviewed the logic list for MS-DRGs 252, 253, and 254 (Other Vascular Procedures with MCC, with CC, and without CC/MCC, respectively) in MDC 05 and found 36 ICD-10-PCS codes for procedures that describe dilation of the carotid artery with an intraluminal device with an open approach that were not currently assigned in MDC 01. The 36 ICD-10-PCS codes are listed in the following table.

We then examined the claims data to determine if there were other MS-DRGs in which one of the 36 procedure codes listed in the table were reported. We found 8 cases that grouped to MS-DRGs 981, 982, and 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively) when a principal diagnosis from MDC 01 was reported with one of the procedure codes in the table that describes dilation of a carotid artery with an intraluminal device, open approach.

As noted previously, in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19184) and final rule (84 FR 42077), our clinical advisors stated that MS-DRGs 034, 035, and 036 are defined to include those procedure codes that describe procedures that involve dilation of a carotid artery with an intraluminal device. As a result, our clinical advisors supported adding the 36 ICD-10-PCS codes identified in the table to MS-DRGs 034, 035, and 036 in MDC 01 for consistency to align with the definition of MS-DRGs 034, 035, and 036 and also to permit proper case assignment when a principal diagnosis from MDC 01 is reported with one of the procedure codes in the table that describes dilation of a carotid artery with an intraluminal device, open approach.

Therefore, for FY 2021, we also proposed to add the 36 ICD-10-PCS codes identified in the table that are currently assigned in MDC 05 to MS-DRGs 252, 253, and 254 to the GROUPER logic for MS-DRGs 034, 035, and 036 in MDC 01.

Comment: Commenters expressed support for CMS' proposal to reassign the identified ICD-10-PCS codes describing dilation of a carotid artery with an intraluminal device from MS-DRGs 037, 038 and 039 to MS-DRGs 034, 035 and 036. Commenters also supported CMS' proposal to add the ICD-10-PCS codes describing dilation of a carotid artery with an intraluminal device currently assigned in MDC 05 to MDC 01. One commenter stated that these were positive reassignments and another stated that these reassignments will help to ensure consistency among the MS-DRG classifications for procedures involving dilation of a carotid artery with an intraluminal device.

Response: We thank the commenters for their support.

Comment: One commenter suggested that given the clinical congruence with the procedures involved with dilation of a carotid artery with an intraluminal device, procedure codes that describe vertebral and intracranial artery dilation and device placement should also be classified in MS-DRGs 034, 035 and 036, and that MS-DRG 034, 035 and 036 be renamed as Carotid, Vertebral and Intracranial Stent Procedures and requested that this recommendation be assessed and analyzed for inclusion in next year's proposed rule.

Response: We appreciate the commenter's suggestion. As stated in section II.E.1.b. of the preamble of this final rule, we encourage individuals with recommendations regarding changes to MS-DRG classification to submit these comments no later than November 1, 2020 so that they can be considered for possible inclusion in the annual proposed rule. We will consider these public comments for possible proposals in future rulemaking as part of our annual review process.

After consideration of the public comments we received, we are finalizing our proposal to reassign the 6 procedure codes discussed above from MS-DRGs 037, 038, and 039 to MS-DRGs 034, 035, and 036 because the 6 procedure codes are consistent with the other procedures describing dilation of a carotid artery with an intraluminal device that are currently assigned to

MS-DRGs 034, 035, and 036. Additionally, we are finalizing our proposal to add the 36 ICD-10-PCS codes identified in the table that are currently assigned in MDC 05 to MS-DRGs 252, 253, and 254 to the GROUPER logic for MS-DRGs 034, 035, and 036 in MDC 01.

b. Epilepsy With Neurostimulator

As discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32481), we received a request to reassign cases describing the insertion of a neurostimulator generator into the skull in combination with the insertion of a neurostimulator lead into the brain from MS-DRG 023 (Craniotomy with Major Device Implant or Acute Complex Central Nervous System (CNS) Principal Diagnosis (PDX) with MCC or Chemotherapy Implant or Epilepsy with Neurostimulator) to MS-DRG 021 (Intracranial Vascular Procedures with PDX Hemorrhage with CC) or to reassign these cases to another MS-DRG for more appropriate payment. The Responsive Neurostimulator (RNS^©) System, a cranially implanted neurostimulator that is a treatment option for persons diagnosed with medically intractable epilepsy, is identified by the reporting of an ICD-10-PCS code combination capturing a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain and cases are assigned to MS-DRG 023 when reported with a principal diagnosis of epilepsy.

We stated that as discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38015 through 38019), we finalized our proposal to reassign all cases with a principal diagnosis of epilepsy and one of the following ICD-10-PCS code combinations capturing cases with a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS^© neurostimulator) to MS-DRG 023 even if there is no MCC reported:

• 0NH00NZ (Insertion of neurostimulator generator into skull, open approach), in combination with 00H00MZ (Insertion of neurostimulator lead into brain, open approach).
• 0NH00NZ (Insertion of neurostimulator generator into skull, open approach), in combination with 00H03MZ (Insertion of neurostimulator lead into brain, percutaneous approach).
• 0NH00NZ (Insertion of neurostimulator generator into skull, open approach), in combination with 00H04MZ (Insertion of neurostimulator lead into brain, percutaneous endoscopic approach).

We also finalized our change to the title of MS-DRG 023 from “Craniotomy with Major Device Implant or Acute Complex Central Nervous System (CNS) Principal Diagnosis (PDX) with MCC or Chemo Implant” to “Craniotomy with Major Device Implant or Acute Complex Central Nervous System (CNS) Principal Diagnosis (PDX) with MCC or Chemotherapy Implant or Epilepsy with Neurostimulator” to reflect the modifications to the MS-DRG structure.

As noted in the proposed rule, the requestor acknowledged the refinements made to MS-DRG 023 effective for FY 2018, but stated that despite the previously-stated changes, cases describing the insertion of a neurostimulator generator into the skull in combination with the insertion of a neurostimulator lead into the brain continue to be underpaid. The requestor performed its own analysis and stated that it found that the average costs of cases describing the insertion of the RNS^© neurostimulator were significantly higher than the average costs of all cases in their current assignment to MS-DRG 023, and as a result, cases describing the insertion of the RNS^© neurostimulator are not being adequately reimbursed. The requestor suggested the following two options for MS-DRG assignment updates: (1) Reassign cases describing the insertion of a neurostimulator generator into the skull in combination with the insertion of a neurostimulator lead into the brain from MS-DRG 023 to MS-DRG 021 with a change in title to “lntracranial Vascular Procedures with PDX Hemorrhage with CC or Epilepsy with Neurostimulator;” or (2) reassign cases describing the insertion of a neurostimulator generator into the skull in combination with the insertion of a neurostimulator lead into the brain to another higher paying MS-DRG that would provide adequate reimbursement. The requestor stated its belief that MS-DRG 021 is a better fit in terms of average costs and clinical coherence for reassignment of RNS^© System cases and recognized that there is likely still not enough volume to warrant the creation of new MS-DRGs for cases describing the insertion of the RNS^© neurostimulator.

We first examined claims data from the September 2019 update of the FY 2019 MedPAR file for all cases in MS-DRG 023 and compared the results to cases representing a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS^© neurostimulator) that had a principal diagnosis of epilepsy in MS-DRG 023. The following table shows our findings:

As shown in the table, for MS-DRG 023, we identified a total of 11,938 cases, with an average length of stay of 9.8 days and average costs of $40,264. Of the 11,938 cases in MS-DRG 023, there were 81 cases describing a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS^© neurostimulator) that had a principal diagnosis of epilepsy with an average length of stay of 3.3 days and average costs of $52,362. Our clinical advisors reviewed these data, and agreed with the requestor that the number of cases is too small to warrant the creation of a new MS-DRG for these cases, for the reasons discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38015 through 38019).

We also examined the reassignment of cases describing a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS^© neurostimulator) to MS-DRGs 020, 021, and 022 (Intracranial Vascular Procedures with PDX Hemorrhage with MCC, with CC, and without CC/MCC, respectively). While the request was to reassign these cases to MS-DRG 021, MS-DRG 021 is specifically differentiated according to the presence of a secondary diagnosis with a severity level designation of a complication or comorbidity (CC). Cases with a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS^© neurostimulator) do not always involve the presence of a secondary diagnosis with a severity level designation of a complication or comorbidity (CC), and therefore we reviewed data for all three MS-DRGs. The following table shows our findings:

As shown in the table, for MS-DRG 020, there were a total of 1,623 cases with an average length of stay of 16.1 days and average costs of $75,668. For MS-DRG 021, there were a total of 409 cases with an average length of stay of 12.3 days and average costs of $55,123. For MS-DRG 022, there were a total of 131 cases with an average length of stay of 6.3 days and average costs of $35,599.

We stated in the proposed rule that while the cases in MS-DRG 023 describing a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS^© neurostimulator) and a principal diagnosis of epilepsy have average costs that are similar to the average costs of cases in MS-DRG 021 ($52,362 compared to $55,123), they have an average length of stay that is 9 days shorter (3.3 days compared to 12.3 days), similar to our findings as summarized in the FY 2018 IPPS/LTCH PPS final rule. We stated that our clinical advisors reviewed the clinical issues and the claims data, and did not support reassigning the cases describing a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS^© neurostimulator) and a principal diagnosis of epilepsy from MS-DRG 023 to MS-DRGs 020, 021 or 022. As discussed in the FY 2018 IPPS/LTCH PPS final rule, the cases in MS-DRGs 020, 021 and 022 have a principal diagnosis of a hemorrhage. The RNS^© neurostimulator generators are not used to treat patients with diagnosis of a hemorrhage. We stated our clinical advisors continue to believe that it is inappropriate to reassign cases representing a principal diagnosis of epilepsy to a MS-DRG that contains cases that represent the treatment of intracranial hemorrhage, as discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38015 through 38019). They also stated that the differences in average length of stay and average costs based on the more recent data continue to support this recommendation.

We then explored alternative options, as was requested. We noted that the 81 cases describing a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS^© neurostimulator) and a principal diagnosis of epilepsy had an average length of stay of 3.3 days and average costs of $52,362, as compared to the 11,938 cases in MS-DRG 023 that had an average length of stay of 9.8 days and average costs of $40,264. While these neurostimulator cases had average costs that were $12,098 higher than the average costs of all cases in MS-DRG 023, there were only a total of 81 cases. There may have been other factors contributing to the higher costs.

We further analyzed the data to identify those cases describing a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS^© neurostimulator), with at least one other procedure designated as an O.R. procedure, and a principal diagnosis of epilepsy. This approach can be useful in determining whether resource use is truly associated with a particular procedure or whether the procedure frequently occurs in cases with other procedures with higher than average resource use. Our data findings for MS-DRG 023 demonstrate that of the 81 cases describing a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS^© neurostimulator) and a principal diagnosis of epilepsy, 19 reported at least one other procedure designated as an O.R. procedure, and had higher average costs ($72,995 versus $52,362) compared to the average costs of all cases in this subset of MS-DRG 023.

We also reviewed the cases reporting procedures describing a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS^© neurostimulator), and a principal diagnosis of epilepsy to identify the secondary diagnosis CC and/or MCC conditions reported in conjunction with these procedures that also may be contributing to the higher average costs for these cases. We reviewed the claims data to identify the number (frequency) and types of principal and secondary diagnosis CC and/or MCC conditions that were reported. Our findings for the cases reporting secondary diagnosis MCC and CC conditions, followed by the top 10 secondary diagnosis MCC and secondary diagnosis CC conditions that were reported within the claims data for this subset of cases are shown in the following tables:

While the results of the claims analysis as previously summarized indicate that the average costs of cases reporting a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS^© neurostimulator), and a principal diagnosis of epilepsy are higher compared to the average costs for all cases in their assigned MS-DRG, we stated in the proposed rule we could not ascertain from the claims data the resource use specifically attributable to the procedure during a hospital stay. These data show cases reporting a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS^© neurostimulator), and a principal diagnosis of epilepsy, can present greater treatment difficulty, and have a need for additional intervention with other O.R. procedures. When reviewing consumption of hospital resources for this subset of cases, the claims data also clearly shows that the patients typically have multiple MCC and CC conditions, and the increased costs appear to be attributable to the severity of illness of the patient.

In summary, we stated that we believe that further analysis of cases reporting a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS^© neurostimulator), and a principal diagnosis of epilepsy is needed prior to proposing any further reassignment of these cases to ensure clinical coherence between these cases and the other cases with which they may potentially be grouped. We stated that we expected in future years, that we would have additional data that exhibit an increased number of cases that could be used to evaluate the potential reassignment of cases reporting a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS^© neurostimulator), and a principal diagnosis of epilepsy. Therefore, we did not propose to reassign cases describing a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS^© neurostimulator) from MS-DRG 023 to MS-DRG 021. We also did not propose to reassign Responsive Neurostimulator (RNS^©) System cases to another MS-DRG at this time.

Comment: Commenters agreed with CMS' proposal not to reassign cases describing a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS^© neurostimulator) from MS-DRG 023 to MS-DRG 021 or to any another MS-DRG at this time. A commenter specifically thanked CMS for its consideration of addressing the costs and reimbursements associated with the insertion of the Responsive Neurostimulator (RNS^©) System. Another commenter stated they appreciate CMS' willingness to continue to analyze the data, recognizing the discrepancy in average costs and the potential need for a MS-DRG assignment that provides adequate reimbursement.

Although supporting the decision to not reassign cases reporting the use of an RNS^© System neurostimulator for epilepsy, a few commenters expressed concern that the average costs of these cases are higher than the average costs for all cases in the assigned MS-DRG 023 and stated their belief that the costs for the insertion of this device in traditional Medicare patients is not recouped. These same commenters acknowledged the issue is complex and beyond merely separating and reassigning neurostimulators for epilepsy. One commenter stated neurostimulator insertion for the treatment of epilepsy is not clinically similar to treatment of intracranial hemorrhage. Another commenter noted that complex neurostimulator implants may involve chronic disease states other than epilepsy, including Parkinson's disease and essential tremor and stated they agreed with CMS's decision to conduct further analyses, which would provide an opportunity to obtain additional stakeholder input related to improving MS-DRG assignments for neurostimulator procedures. Commenters noted that MS-DRGs 023 and 024 combine a wide range of principal diagnoses, procedures, and procedure approaches that could be contributing to the wide variation of costs of cases assigned to these MS-DRGs. Commenters proposed a number of ways CMS could attempt to create more homogenous groups and improve clinical cohesion such as (1) creating a new set of DRGs focused solely on the cost of the implantation of CNS devices that could be modeled after currently established MS-DRGs for the implantation of stents in carotid artery, stents in the coronary arteries or pacemakers, AICDs or other high-cost technologies in the heart, and/or (2) moving procedures assigned to MS-DRGs 023 and 024 that describe extirpation, drainage and removal to MS-DRGs 025, 026 and 027 (Craniotomy and Endovascular Intracranial Procedures with MCC, with CC, and without CC/MCC, respectively).

Response: We appreciate the commenters' feedback and support.

We also appreciate the commenters' suggestions regarding other potential changes to the current MS-DRG assignments for CMS's consideration. We continue to be attuned to the requestors' and commenters' concerns about reimbursement for cases describing the insertion of the RNS^© neurostimulator. As part of our ongoing, comprehensive analysis of the MS-DRGs under ICD-10, we will continue to explore mechanisms to ensure clinical coherence between these cases and the other cases with which they may potentially be grouped. Therefore, after consideration of the public comments we received, and for the reasons stated above, we are finalizing our proposal to maintain the assignment of cases describing a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS^© neurostimulator) in MS-DRG 023 in MDC 01.

4. MDC 3 (Diseases and Disorders of Ear, Nose and Throat): Temporomandibular Joint Replacements

In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32484 through 32490), we discussed a request we received to consider reassignment of ICD-10-PCS procedure codes 0RRC0JZ (Replacement of right temporomandibular joint with synthetic substitute, open approach) and 0RRD0JZ (Replacement of left temporomandibular joint with synthetic substitute, open approach) from MS-DRGs 133 and 134 (Other Ear, Nose, Mouth and Throat O.R. Procedures with and without CC/MCC, respectively) to MS-DRGs 131 and 132 (Cranial and Facial Procedures with and without CC/MCC, respectively) in MDC 03.

The requestor stated that it is inaccurate for procedure codes 0RRC0JZ and 0RRD0JZ that identify and describe replacement of the temporomandibular joint (TMJ), which involves excision of the TMJ followed by replacement with a prosthesis, to group to MS-DRGs 133 and 134 while excision of the TMJ alone, identified by procedure codes 0RBC0ZZ (Excision of right temporomandibular joint, open approach) and 0RBD0ZZ (Excision of left temporomandibular joint, open approach), groups to the higher weighted MS-DRGs 131 and 132. According to the requestor, reassignment of procedure codes 0RRC0JZ and 0RRD0JZ to the higher weighted MS-DRGs 131 and 132 is reasonable and the MS-DRG title of “Cranial and Facial Procedures” is more appropriate. However, the requestor also stated that the cost of the prosthesis would continue to be underpaid, despite that recommended reassignment. As an alternative option, the requestor suggested CMS analyze if there may be other higher weighted MS-DRGs that could more appropriately compensate providers for a TMJ replacement with prosthesis procedure.

In addition, the requestor recommended that we analyze all procedures involving the mandible and maxilla and consider reassignment of those procedure codes from MS-DRGs 129 (Major Head and Neck Procedures with CC/MCC or Major Device) and 130 (Major Head and Neck Procedures without CC/MCC) to MS-DRGs 131 and 132 because the codes describe procedures that are performed on facial and cranial structures. Finally, the requestor also suggested another option that included modifying the surgical hierarchy for MDC 03 by sequencing MS-DRGs 131 and 132 above MS-DRGs 129 and 130, which the requestor asserted would provide for more appropriate payment to providers for the performance of multiple facial procedures.

In the proposed rule, we discussed these separate but related requests that involve procedures currently assigned to MS-DRGs 129, 130, 131, 132, 133 and 134 in MDC 03.

As discussed in the proposed rule, in our analysis of the request involving temporomandibular joint replacements, we first identified the ICD-10-PCS procedure codes that describe the excision or replacement of a temporomandibular joint as shown in the following table.

In the proposed rule we noted that the requestor is correct that procedure codes 0RRC0JZ and 0RRD0JZ that describe replacement of the right and left TMJ with a prosthesis (synthetic substitute) by an open approach group to MS-DRGs 133 and 134 and procedure codes 0RBC0ZZ and 0RBD0ZZ that describe excision of the right and left TMJ alone by an open approach group to the higher weighted MS-DRGs 131 and 132. We also noted that the corresponding related codes as previously listed in the table that describe different approaches (excision procedures) or different types of tissue substitute (replacement procedures) are also assigned to the same respective MS-DRGs.

We stated in the proposed rule that we examined claims data from the September 2019 update of the FY 2019 MedPAR file for MS-DRGs 133 and 134 to identify cases reporting ICD-10-PCS codes 0RRC0JZ or 0RRD0JZ. Our findings are shown in the following table.

In MS-DRG 133, we found a total of 1,757 cases with an average length of stay of 5.6 days and average costs of $15,337. Of those 1,757 cases, there were 13 cases reporting ICD-10-PCS code 0RRC0JZ or 0RRD0JZ, with an average length of stay of 3.1 days and average costs of $21,677. In MS-DRG 134, we found a total of 849 cases with an average length of stay of 2.5 days and average costs of $9,512. Of those 849 cases, there were 23 cases reporting ICD-10-PCS code 0RRC0JZ or 0RRD0JZ, with an average length of stay of 2.1 days and average costs of $20,430. The analysis shows that cases reporting ICD-10-PCS procedure codes 0RRC0JZ or 0RRD0JZ in MS-DRGs 133 and 134 have higher average costs ($21,677 versus $15,337 and $20,430 versus $9,512, respectively) and shorter lengths of stay (3.1 days versus 5.6 days and 2.1 days versus 2.5 days, respectively) compared to all the cases in their assigned MS-DRG.

We also examined claims data from the September 2019 update of the FY 2019 MedPAR file for MS-DRGs 131 and 132. Our findings are shown in the following table.

In MS-DRG 131, we found a total of 1,181 cases with an average length of stay of 5.4 days and average costs of $18,875. In MS-DRG 132, we found a total of 464 cases with an average length of stay of 2.5 days and average costs of $11,558.

We stated in the proposed rule that overall, the data analysis shows that the average costs for the cases reporting procedure codes 0RRC0JZ and 0RRD0JZ in MS-DRGs 133 and 134 are more aligned with the average costs for all the cases in MS-DRG 131 ($21,677 and $20,430, respectively versus $18,875) compared to MS-DRG 132 where the average costs are not significantly different than the average costs of all the cases in MS-DRG 134 ($11,558 versus $9,512). We stated that our clinical advisors agreed that the replacement of a TMJ with prosthesis procedures (codes 0RRC0JZ or 0RRD0JZ) are more resource intensive and are clinically distinct from the cases reporting procedure codes 0RBC0ZZ and 0RBD0ZZ that involve excision of the TMJ alone. They also agreed that procedure codes 0RRC0JZ and 0RRD0JZ should be reassigned to a higher weighted MS-DRG. However, they recommended we conduct further claims analysis to identify if there are other MS-DRGs in MDC 03 where cases reporting these procedure codes may also be found and to compare that data.

As previously noted, the requestor had also recommended that we analyze all procedures involving the mandible and maxilla and consider reassignment of those procedure codes from MS-DRGs 129 and 130 to MS-DRGs 131 and 132. The requestor did not provide a specific list of the procedure codes involving the mandible and maxilla, therefore, we reviewed the list of procedure codes in MS-DRGs 129 and 130 and identified the following 26 procedure codes describing procedures performed on the mandible. There were no procedure codes describing procedures performed on the maxilla in MS-DRGs 129 and 130.

As noted in the proposed rule, based on the advice of our clinical advisors as previously discussed, we conducted additional analyses for MDC 03 using the same FY 2019 MedPAR data file and found cases reporting procedure code 0RRC0JZ or 0RRD0JZ for the replacement of a TMJ with prosthesis procedure in MS-DRGs 129, 130, 131, and 132. As discussed in section II.D.15. of the proposed rule and section II.E.15. of this final rule, cases with multiple procedures are assigned to the highest surgical class in the hierarchy to which one of the procedures is assigned. For example, if procedure code 0RRC0JZ which is assigned to the logic for MS-DRGs 133 and 134 is reported on a claim with procedure code 0NSR04Z (Reposition maxilla with internal fixation device, open approach), which is assigned to the logic for MS-DRGs 131 and 132, the case will group to MS-DRG 131 or 132 (depending on the presence of a CC or MCC) when reported with a principal diagnosis from MDC 03 because MS-DRGs 131 and 132 are sequenced higher in the surgical hierarchy than MS-DRGs 133 and 134. Therefore, since MS-DRGs 129, 130, 131, and 132 are sequenced higher in the surgical hierarchy than MS-DRGs 133 and 134 in MDC 03, cases reporting procedure code 0RRC0JZ or 0RRD0JZ along with another O.R. procedure that is currently assigned to one of those MS-DRGs in the GROUPER logic results in case assignment to one of those higher surgical class MS-DRGs. We also identified cases reporting procedures performed on the mandible from the previously discussed list of procedure codes in MS-DRGs 129 and 130. Our findings are shown in the following table.

As shown in the table, for MS-DRG 129, there was a total of 2,080 cases with average length of stay of 5.2 days and average costs of $18,091. Of these 2,080 cases, there were 3 cases reporting a TMJ replacement with prosthesis procedure (code 0RRC0JZ or 0RRD0JZ) with an average length of stay of 3 days and average costs of $33,581 and 592 cases reporting a mandible procedure with average length of stay of 6.9 days and average costs of $21,258. For MS-DRG 130, there was a total of 948 cases with average length of stay of 2.7 days and average costs of $11,092. Of these 948 cases, there were there were 5 cases reporting a TMJ replacement with prosthesis procedure (code 0RRC0JZ or 0RRD0JZ) with an average length of stay of 3.4 days and average costs of $27,396 and 202 cases reporting a mandible procedure with average length of stay of 3.5 days and average costs of $14,712. For MS-DRG 131, there was a total of 1,181 cases with average length of stay of 5.4 days and average costs of $18,875. Of these 1,181 cases there were 4 cases reporting a TMJ replacement with prosthesis procedure (code 0RRC0JZ or 0RRD0JZ) with an average length of stay of 7.3 days and average costs of $31,151. For MS-DRG 132, there was a total of 464 cases with average length of stay of 2.5 days and average costs of $11,558. Of these 464 cases, there were 10 cases reporting a TMJ replacement with prosthesis procedure (code 0RRC0JZ or 0RRD0JZ) with an average length of stay of 3.1 days and average costs of $24,099.

The data analysis demonstrates that the average costs of cases reporting procedure code 0RRC0JZ or 0RRD0JZ for the replacement of a TMJ with prosthesis procedure in MS-DRGs 129, 130, 131, and 132 and the cases reporting procedures performed on the mandible in MS-DRGs 129 and 130 have higher average costs compared to all the cases in their assigned MS-DRGs. While the volume of the cases reporting procedure code 0RRC0JZ or 0RRD0JZ was low with a total of 22 cases across MS-DRGs 129, 130, 131, and 132, similar to the analysis results for MS-DRGs 133 and 134 described earlier, the average costs for the cases are higher ($33,581 versus $18,091; $27,396 versus $11,092; $31,151 versus $18,875; and $24,099 versus $11,558) affirming that replacement of a TMJ with prosthesis procedures are more costly. The analysis also demonstrates that the average length of stay for cases reporting procedure code 0RRC0JZ or 0RRD0JZ across MS-DRGs 130, 131, and 132 is longer (3.4 days versus 2.7 days; 7.3 days versus 5.4 days; and 3.1 days versus 2.5 days) compared to all the cases in their assigned MS-DRGs. For MS-DRG 129, we found that the average length of stay was shorter (3 days versus 5.2 days) for cases reporting procedure code 0RRC0JZ or 0RRD0JZ. The data demonstrated similar results for the cases reporting procedures performed on the mandible in MS-DRGs 129 and 130, where the average costs for the cases are higher ($21,258 versus $18,091 and $14,712 versus $11,092, respectively) and the average length of stay was longer (6.9 days versus 5.2 days and 3.5 days versus 2.7 days, respectively) compared to all the cases in their assigned MS-DRG.

The analysis of MS-DRGs 129, 130, 131, and 132 further demonstrated that the average length of stay and average costs for all cases were almost identical for each of the subgroups. For example, MS-DRG 129 is defined as “with CC/MCC or major device” and MS-DRG 131 is defined as “with CC/MCC” while MS-DRGs 130 and 132 are both defined as “without CC/MCC”. For all of the cases in MS-DRG 129, we found that the average length of stay was 5.2 days with an average cost of $18,091, and for all of the cases in MS-DRG 131, the average length of stay was 5.4 days with an average cost of $18,875. Similarly, for all of the cases in MS-DRG 130, we found that the average length of stay was 2.7 days with an average cost of $11,092, and for MS-DRG 132, we found the average length of stay was 2.5 days with an average cost of $11,558.

We noted in the proposed rule that as a result of the data analysis performed for MS-DRGs 129, 130, 131, and 132, including the analysis of the procedures describing replacement of a TMJ with prosthesis in MS-DRGs 133 and 134, as well as considering the requestor's suggestion that we examine the appropriateness of modifying the surgical hierarchy for MDC 03 by sequencing MS-DRGs 131 and 132 above MS-DRGs 129 and 130 to enable more appropriate payment for the performance of multiple facial procedures, our clinical advisors recommended evaluating all the procedures currently assigned to MS-DRGs 129, 130, 131, 132, 133, and 134 to compare costs, complexity of service and clinical coherence to assess any potential reassignment of these procedures. We refer the reader to the ICD-10 MS-DRG Definitions Manual Version 37, which is available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software,, for complete documentation of the GROUPER logic for MS-DRGs 129, 130, 131, 132, 133, and 134.

As noted in the proposed rule, we examined claims data from the September 2019 update of the FY 2019 MedPAR file for cases reporting any of the procedure codes that are currently assigned to MS-DRGs 129, 130, 131, 132, 133, or 134. We refer the reader to Table 6P.2d associated with the proposed rule (which is available via the internet on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index/ for the detailed analysis. We note that if a procedure code that is currently assigned to MS-DRGs 129, 130, 131, 132, 133, or 134 is not displayed it is because there were no cases found reporting that code in the assigned MS-DRG.

The data analysis shows that there is wide variation in the volume, length of stay, and average costs of cases reporting procedures currently assigned to MS-DRGs 129, 130, 131, 132, 133, and 134. There were several instances in which only one case was found to report a procedure code from MS-DRG 129, 130, 131, 132, 133, or 134, and the average length of stay for these specific cases ranged from 1 day to 31 days. For example, in MS-DRG 131, we found one case reporting procedure code 0NB70ZZ (Excision of occipital bone, open approach) with an average length of stay of 31 days which we consider to be an outlier in comparison to all the other cases reported in that MS-DRG with an average length of stay of 5.4 days. Overall, the average costs of cases in MS-DRGs 129 and 130 range from $4,970 to $38,217, the average costs of cases in MS-DRGs 131 and 132 range from $4,022 to $69,558 and the average costs of cases in MS-DRGs 133 and 134 range from $1,089 to $87,569. As noted previously, the data demonstrate there appear to be similar utilization of hospital resources specifically for cases reported in MS-DRGs 129, 130, 131 and 132.

The highest volume of cases was reported in MS-DRGs 129 and 130 for the procedure codes describing resection of the right and left neck lymphatic. For MS-DRG 129, there was a total of 750 cases reporting procedure code 07T10ZZ (Resection of right neck lymphatic, open approach) with an average length of stay of 4.7 days and average costs of $17,155 and there was a total of 679 cases reporting procedure code 07T20ZZ (Resection of left neck lymphatic, open approach) with an average length of stay of 4.8 days and average costs of $17,857. For MS-DRG 130, there was a total of 358 cases reporting procedure code 07T10ZZ with an average length of stay of 2.6 days and average costs of $10,432 and there was a total of 331 cases reporting procedure code 07T20ZZ with an average length of stay of 2.5 days and average costs of $10,467. For MS-DRGs 131 and 132, the highest volume of cases was reported for the procedure codes describing repositioning of the maxilla with internal fixation and repositioning of the right and left mandible with internal fixation. For MS-DRG 131, there was a total of 186 cases reporting procedure code 0NSR04Z (Reposition maxilla with internal fixation device, open approach) with an average length of stay of 5.1 days and average costs of $20,500; a total of 114 cases reporting procedure code 0NST04Z (Reposition right mandible with internal fixation device, open approach) with an average length of stay of 5.7 days and average costs of $18,710, and a total of 219 cases reporting procedure code 0NSV04Z (Reposition left mandible with internal fixation device, open approach) with an average length of stay of 6.0 days and average costs of $20,202. For MS-DRG 132, there was a total of 84 cases reporting procedure code 0NSR04Z with an average length of stay of 2.1 days and average costs of $12,991 and a total of 101 cases reporting procedure code 0NSV04Z with an average length of stay of 2.8 days and average costs of $11,386. For MS-DRGs 133 and 134, the highest volume of cases was reported for the procedure codes describing excision of the facial nerve or nasal turbinate. For MS-DRG 133, there was a total of 60 cases reporting procedure code 09BL8ZZ (Excision of nasal turbinate, via natural or artificial opening endoscopic) with an average length of stay of 6.6 days and average costs of $21,253 and for MS-DRG 134, there was a total of 50 cases reporting procedure code 00BM0ZZ (Excision of facial nerve, open approach) with an average length of stay of 1.4 days and average costs of $8,048.

Our clinical advisors reviewed the procedures currently assigned to MS-DRGs 129, 130, 131, 132, 133, and 134 to identify the patient attributes that currently define each of these procedures and to group them with respect to complexity of service and resource intensity. For example, procedures that we believe represent greater treatment difficulty and reflect a class of patients who are similar clinically with regard to consumption of hospital resources were grouped separately from procedures that we believe to be less complex but still reflect patients who are similar clinically with regard to consumption of hospital resources. This approach differentiated the more complex and invasive procedures, such as resection of cervical lymph nodes, repositioning of facial bones, and excision of mandible procedures from the less complex and less invasive procedures such as excisions (biopsies) of lymph nodes and facial nerves, drainage procedures of the upper respiratory system, and tonsillectomies.

We stated in the proposed rule that after this comprehensive review of all the procedures currently assigned to MS-DRGs 129, 130, 131, 132, 133, and 134, in combination with the results of the data analysis discussed previously, our clinical advisors support distinguishing the procedures currently assigned to those MS-DRGs by clinical intensity, complexity of service and resource utilization and also support restructuring of these MS-DRGs accordingly. We noted that during the analysis of the procedures currently assigned to MS-DRGs 129 and 130, we recognized the special logic defined as “Major Device Implant” for MS-DRG 129 that identifies procedures describing the insertion of a cochlear implant or other hearing device. We stated that our clinical advisors supported the removal of this special logic from the definition for assignment to any modifications to the MS-DRGs, noting the costs of the device have stabilized over time and the procedures can be appropriately grouped along with other procedures involving devices in any restructured MS-DRGs. We also identified 2 procedure codes currently assigned to MS-DRGs 131 and 132, 00J00ZZ (Inspection of brain, open approach) and 0WJ10ZZ (Inspection of cranial cavity, open approach), that our clinical advisors agreed should not be included in any modifications to the MS-DRGs in MDC 03, stating that they are appropriately assigned to MS-DRGs in MDC 01 (Diseases and Disorders of the Nervous System). We further noted that during our analysis of the procedures currently assigned to MS-DRGs 133 and 134, we found 338 procedure codes that were inadvertently included as a result of replication during our transition from the ICD-9 to ICD-10 based MS-DRGs. We referred the reader to Table 6P.2c associated with the proposed rule for a detailed list of these procedure codes that describe procedures performed on various sites, such as the esophagus, stomach, intestine, skin, and thumb that we stated our clinical advisors agree should be removed from the definition for assignment to any modifications to the MS-DRGs under MDC 03.

As a result of our review, we proposed the deletion of MS-DRGs 129, 130, 131, 132, 133, and 134, and the creation of six new MS-DRGs. Currently, MS-DRGs 129, 131, and 133 are defined as base MS-DRGs, each of which is split by a two-way severity level subgroup. Our proposal includes the creation of two new base MS-DRGs with a three-way severity level split. As discussed in the proposed rule, our clinical advisors suggested that based on the analysis of procedures currently assigned to MS-DRGs 129, 130, 131, 132, 133, and 134 as described previously, only 2 base MS-DRGs were needed, each divided into 3 levels according to the presence of a CC or MCC. The MS-DRGs were developed consistent with the analysis to differentiate the more complex and invasive procedures from the less complex and less invasive procedures. As noted previously, our analysis of MS-DRGs 129, 130, 131, and 132 demonstrated that the average length of stay and average costs for all cases were almost identical for each of the severity level subgroups and therefore, the procedures assigned to these MS-DRGs were initially reviewed together as one clinical group and then evaluated further in comparison to the procedures currently assigned to MS-DRGs 133 and 134. The objective was to better differentiate procedures by treatment difficulty, clinical similarity, and resource use, and to propose a more appropriate restructuring. For example, based on this analysis, in some instances, we proposed to reassign procedures described by procedure codes that are currently assigned to MS-DRGs 129 and 130 or MS-DRGs 131 and 132 to what is being defined as the less complex MS-DRGs. We stated that we believe the resulting MS-DRG assignments are more clinically homogeneous, coherent and better reflect hospital resource use.

We applied the criteria to create subgroups for the three-way severity level split for the proposed new MS-DRGs and found that all five criteria were met. We stated that for the proposed new MS-DRGs, there is at least (1) 500 cases in the MCC group, the CC group and the NonCC group; (2) 5 percent of the cases in the MCC group, the CC group and the NonCC group; (3) a 20 percent difference in average costs between the MCC group, the CC group and the NonCC group; (4) a $2,000 difference in average costs between the MCC group, the CC group and the NonCC group; and (5) a 3-percent reduction in cost variance, indicating that the severity level splits increase the explanatory power of the base MS-DRG in capturing differences in expected cost between the MS-DRG severity level splits by at least 3 percent and thus improve the overall accuracy of the IPPS payment system. The following table reflects our simulation for the proposed new MS-DRGs with a three-way severity level split. We stated that our findings represent what we would expect under the proposed modifications and proposed new MS-DRGs, based on claims data in the FY 2019 MedPAR file.

We proposed to create two new base MS-DRGs, 140 and 143, with a three-way severity level split for proposed new MS-DRGs 140, 141, and 142 (Major Head and Neck Procedures with MCC, with CC, and without CC/MCC, respectively) and proposed new MS-DRGs 143, 144, and 145 (Other Ear, Nose, Mouth And Throat O.R. Procedures with MCC, with CC, and without CC/MCC, respectively).

We referred the reader to Table 6P. 2a and Table 6P.2b associated with the proposed rule for the list of procedure codes we proposed for reassignment from MS-DRGs 129, 130, 131, 132, 133, and 134 to each of the new MS-DRGs. As noted, we also proposed the removal of procedure codes 00J00ZZ and 0WJ10ZZ, and the 338 procedure codes listed in Table 6P. 2c associated with the proposed rule from the logic for MDC 03.

Comment: Commenters generally agreed with the proposal to delete MS-DRGs 129, 130, 131, 132, 133, and 134, and to create proposed new MS-DRGs 140, 141, and 142 under proposed new base MS-DRG 140, and to create proposed new MS-DRGs 143, 144, and 145 under proposed new base MS-DRG 143, however, the commenters recommended CMS review the list of proposed procedure codes for assignment to the proposed new MS-DRGs. A commenter noted that procedure codes describing reposition of the left temporal bone were included in Table 6P.2a and proposed for assignment to MS-DRGs 140,141, and 142 while procedure codes describing reposition of the right temporal bone were included in Table 6P.2b and proposed for assignment to MS-DRGs 143, 144, and 145. The commenter also stated their belief that CMS should classify all repositions of occipital, temporal, frontal and other bones of the skull as major surgery and assign them to proposed new MS-DRGs 140, 141, and 142. The commenter provided the following ICD-10-PCS procedure codes for CMS' consideration.

Another commenter stated there is not a clear understanding of the scope of the proposed changes because the MedPAR data included in the proposed rule referred to temporomandibular joint replacements; however, the procedure listing for the MS-DRGs extended beyond those procedures. The commenter stated that tables 6P.2a and 6P.2b associated with the proposed rule include procedures on vessels, lymphatic and other organs in the head and neck. The commenter stated the procedures noted in the tables cross multiple MS-DRGs such as 853, 857, 856, 571, 264, 570, 463, and 902 which were not discussed in the proposed rule. The commenter requested that CMS provide clarity on this topic.

A commenter acknowledged that CMS proposed removing a number of ICD-10-PCS procedure codes from the MDC 03 logic that had been inadvertently included as a result of replication during the transition from ICD-9- to ICD-10-based MS-DRGs. However, according to the commenter there are additional procedure codes not included on CMS' list shown in table 6P.2c that should also be removed from the MDC 03 logic. The commenter noted an example of where some codes for procedures on the esophagus have been proposed for removal from the MDC 03 logic, while other procedures performed on the esophagus are still proposed for inclusion in the GROUPER logic. The commenter also noted that procedures performed on the heart, carotid artery, chest, back abdomen, buttock, liver, and leg are not ear, nose, mouth, or throat procedures, but they are included in the proposed GROUPER logic for proposed new MS-DRGs 143, 144, and 145 (Other Ear, Nose, Mouth and Throat O.R. Procedures with MCC, with CC, and without CC/MCC, respectively). The commenter stated that procedures on the chest, back, and abdomen are not head or neck procedures, but they are included in the proposed GROUPER logic for proposed new MS-DRGs 140, 141, and 142 (Major Head and Neck Procedures with MCC, with CC, and without CC/MCC, respectively). In addition, the commenter stated that while CMS proposed reassigning procedure code 0WJ10ZZ (Inspection of cranial cavity, open approach) from MDC 03 (Diseases and Disorders of Ear, Nose and Throat) to MDC 01 (Diseases and Disorders of the Nervous System), codes for other procedures performed on the cranial cavity are proposed to be included in the GROUPER logic for proposed new MS-DRGs 140, 141, and 142. The commenter recommended that CMS review the procedure codes listed in tables 6P.2a and 6P.2b to identify all of the procedure codes that should be removed from the GROUPER logic for proposed new MS-DRGs 140, 141, 142, 143, 144, and 145. Lastly, the commenter suggested that CMS consider whether proposed new MS-DRGs 140, 141, and 142 (Major Head and Neck Procedures with MCC, with CC, and without CC/MCC, respectively) belong in MDC 03 or whether the title of the MDC should be changed since, according to the commenter, the MDC 03 description “Diseases and Disorders of Ear, Nose and Throat” covers a more limited set of anatomic sites than the “major head and neck procedures” included in proposed new MS-DRGs 140, 141, and 142.

Response: We thank the commenters for their support of the proposal to create two new base MS-DRGs, 140 and 143, with a three-way severity level split for new MS-DRGs 140, 141, and 142 and new MS-DRGs 143, 144, and 145. We appreciate the commenter noting that some procedure codes describing reposition of the left temporal bone were included in Table 6P.2a and proposed for assignment to proposed new MS-DRGs 140, 141, and 142, while procedure codes describing reposition of the right temporal bone were included in Table 6P.2b and proposed for assignment to proposed new MS-DRGs 143, 144, and 145. We note that this was an inadvertent error, and the procedure codes describing reposition of the left temporal bone that were included in Table 6P.2a were intended to be included in Table 6P.2b with the codes describing reposition of the right temporal bone, as both sets of codes were intended to be proposed for reassignment to proposed new MS-DRGs 143, 144, and 145 because they describe procedures that are considered to be less complex and less invasive compared to the procedures proposed for reassignment to proposed new MS-DRGs 140, 141, and 142 that describe more complex and more invasive procedures. In response to the commenter's recommendation to classify all repositions of occipital, temporal, frontal and other bones of the skull as major surgery and assign them to proposed new MS-DRGs 140, 141, and 142, our clinical advisors do not agree. In the comprehensive review of all the procedures currently assigned to MS-DRGs 129, 130, 131, 132, 133, and 134, which involved an analysis of claims data and clinical judgment, they identified and separated out the procedures they believed to be more clinically complex and resource intensive and those are the procedures that were proposed to be reassigned to proposed new MS-DRGs 140, 141, and 142 so that payment rates are better aligned. Therefore, with respect to the procedure codes describing reposition of temporal, frontal and other bones of the skull identified by the commenter, our clinical advisors do not believe these procedures reflect the complexity or resource utilization consistent with the other procedure codes proposed for reassignment to proposed new MS-DRGs 140, 141, and 142 because they are considered to be less complex and less resource intensive. We note that while the commenter suggested CMS review the procedure codes describing reposition of the occipital bone, it did not include any of those procedure codes for CMS' consideration in its list. We further note that procedure codes describing reposition of the occipital bone were already proposed to be reassigned to proposed new MS-DRGs 140, 141, and 142 as displayed in table 6P.2a associated with the proposed rule, therefore we are unclear as to which procedure codes involving the occipital bone the commenter is specifically referring to.

In response to the commenter who stated there is not a clear understanding of the scope of the proposed changes because the MedPAR data included in the proposed rule referred to other procedure codes in addition to the procedure code for temporomandibular joint replacements, we note that as discussed in the proposed rule (85 FR 32484 through 32490), this was a multi-part request involving the reassignment of ICD-10-PCS procedure codes 0RRC0JZ and 0RRD0JZ that describe replacement of the right and left temporomandibular joint from MS-DRGs 133 and 134 to MS-DRGs 131 and 132, the reassignment of the procedures involving the mandible and maxilla identified with procedure codes from MS-DRGs 129 and 130 to MS-DRGs 131 and 132, and modifying the surgical hierarchy for MS-DRGs 131, 132, 133, and 134. We stated that we examined claims data for all the procedures identified by procedure codes currently assigned to MS-DRGs 129, 130, 131, 132, 133, and 134 and we provided our claims analysis in Table 6P.2d associated with the proposed rule as well as discussion of our analysis and the basis for our proposals. In response to the comments regarding Tables 6P.2a and 6P.2b that included proposals for procedure codes describing procedures on vessels, lymphatic and other organs in the head and neck across multiple MS-DRGs such as 853, 857, 856, 571, 264, 570, 463, and 902 we note that this is because certain procedure codes are currently assigned to multiple MDCs and MS-DRGs as shown in Appendix E-Operating Room Procedures and Procedure Code/MS-DRG Index of the ICD-10 MS-DRGs Definitions Manual. For example, procedure code 07B00ZZ (Excision of head lymphatic, open approach) which is listed in Table 6P.2b, is currently assigned to the following MDCs and MS-DRGs.

We encourage the commenter to review Appendix E of the ICD-10 MS-DRG Definitions Manual for further clarification and understanding of how each procedure code may be assigned to multiple MDCs and MS-DRGs under the IPPS.

In response to the commenter who stated their belief that there are additional codes that should also be removed from the MDC 03 logic, such as other procedures performed on the esophagus that were proposed to be included in the GROUPER logic, and procedures performed on the heart, carotid artery, chest, back abdomen, buttock, liver, and leg that are not ear, nose, mouth, or throat procedures, but were included in the proposed GROUPER logic for MS-DRGs 143, 144, and 145 (Other Ear, Nose, Mouth And Throat O.R. Procedures with MCC, with CC, and without CC/MCC, respectively), we note that, as stated in the ICD-10 MS-DRG Definitions Manual, “In each MDC there is usually a medical and a surgical class referred to as “other medical diseases” and “other surgical procedures,” respectively. The “other” medical and surgical classes are not as precisely defined from a clinical perspective. The other classes would include diagnoses or procedures which were infrequently encountered or not well defined clinically. For example, the “other” medical class for the Respiratory System MDC would contain the diagnoses “other somatoform disorders” and “congenital malformation of the respiratory system,” while the “other” surgical class for the female reproductive MDC would contain the surgical procedures “excision of liver” (liver biopsy in ICD-9-CM) and “inspection of peritoneal cavity” (exploratory laparotomy in ICD-9-CM). The “other” surgical category contains surgical procedures which, while infrequent, could still reasonably be expected to be performed for a patient in the particular MDC. There are, however, also patients who receive surgical procedures which are completely unrelated to the MDC to which the patient was assigned. An example of such a patient would be a patient with a principal diagnosis of pneumonia whose only surgical procedure is a destruction of prostate (transurethral prostatectomy in ICD-9-CM). Such patients are assigned to a surgical class referred to as “unrelated operating room procedures.” These patients are ultimately never assigned to a well-defined DRG.” With regard to the comment that procedures on the chest, back, and abdomen were included in the proposed GROUPER logic for proposed new MS-DRGs 140, 141, and 142 (Major Head and Neck Procedures with MCC, with CC, and without CC/MCC, respectively), we note that the commenter did not provide the specific procedure codes for CMS to review and therefore we were unable to evaluate the commenter's concerns for FY 2021, however, we will take these comments under consideration for future rulemaking. In response to the commenter's statement that codes for other procedures performed on the cranial cavity were proposed to be included in the GROUPER logic for proposed new MS-DRGs 140, 141, and 142, we note that the logic for proposed new MS-DRGs 140, 141, and 142 is comprised of a subset of procedure codes describing procedures performed on the cranial cavity that are currently assigned to MS-DRGs 131 and 132 (Cranial and Facial Procedures with and without CC/MCC, respectively). Our clinical advisors reviewed the list of procedures currently assigned to those MS-DRGs and believed that procedure codes 00J00ZZ and 0WJ10ZZ could be removed from the logic based on the analysis of all the procedure codes and because these codes are currently assigned to MS-DRGs in MDC 01 which they stated is clinically more appropriate. With respect to the commenter's suggestion that CMS consider whether proposed new MS-DRGs 140, 141, and 142 (Major Head and Neck Procedures with MCC, with CC, and without CC/MCC, respectively) belong in MDC 03 or whether the title of the MDC should be changed since, according to the commenter, the MDC 03 description “Diseases and Disorders of Ear, Nose and Throat” covers a more limited set of anatomic sites than the “major head and neck procedures” included in proposed new MS-DRGs 140, 141, and 142, we will take this under consideration for future rulemaking.

After consideration of the comments we received, we are finalizing our proposal to create two new base MS-DRGs, 140 and 143, with a three-way severity level split for new MS-DRGs 140, 141, and 142 and new MS-DRGs 143, 144, and 145 and we are also finalizing our proposal to delete MS-DRGs 129, 130, 131, 132, 133, and 134 for FY 2021. We refer the reader to Tables 6P.2a, 6P.2b, and 6P.2c associated with this final rule and available via the internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS for the finalized list of procedure codes that define the logic for the finalized MS-DRGs. We note that discussion of the surgical hierarchy for the modifications is discussed in section II.E.15. of this final rule.

5. MDC 5 (Diseases and Disorders of the Circulatory System)

a. Left Atrial Appendage Closure (LAAC)

In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49363 through 49367), we finalized our proposal to create two new MS-DRGs to classify percutaneous intracardiac procedures. Specifically, we created MS-DRGs 273 and 274 (Percutaneous Intracardiac Procedures with and without MCC, respectfully) for cases reporting procedure codes describing cardiac ablation and other percutaneous intracardiac procedures. In that discussion, as FY 2016 was the first year of our transition from the ICD-9 based MS-DRGs to the ICD-10 based MS-DRGs, we provided a list of the ICD-9-CM procedure codes that identify and describe the cardiac ablation procedures and other percutaneous intracardiac procedures that were the subject of that MS-DRG classification change request, one of which was ICD-9-CM procedure code 37.90 (Insertion of left atrial appendage device).

Separately, we also discussed a request that we received for new technology add-on payments for the WATCHMAN^TM Left Atrial Appendage Closure (LAAC) device (80 FR 49480 through 49488). In that discussion, we noted that effective October 1, 2004 (FY 2005), ICD-9-CM procedure code 37.90 (Insertion of left atrial appendage device) was created to identify and describe procedures using the WATCHMAN^TM Left Atrial Appendage (LAA) Closure Technology and that under ICD-10-PCS, procedure code 02L73DK (Occlusion of left atrial appendage with intraluminal device, percutaneous approach) is the comparable translation. We also noted that at the time of the new technology request, under the ICD-9 based MS-DRGs, procedure code 37.90 was assigned to MS-DRGs 250 and 251 (Percutaneous Cardiovascular Procedures without Coronary Artery Stent with MCC and without MCC, respectively). We further noted that, as stated previously, we finalized our proposal to assign procedures performed within the heart chambers using intracardiac techniques, including those identified by ICD-9-CM procedure code 37.90, and its comparable ICD-10-PCS code translations (that specifically identify a percutaneous or percutaneous endoscopic approach), including 02L73DK, to new MS-DRGs 273 and 274.

As discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32490 through 324950), we received two separate, but related requests involving the procedure codes that describe the technology that is utilized in the performance of LAAC procedures. The first request was to reassign ICD-10-PCS procedure code 02L73DK (Occlusion of left atrial appendage with intraluminal device, percutaneous approach) that identifies the WATCHMAN^TM Left Atrial Appendage Closure (LAAC) device, from MS-DRG 274 (Percutaneous Intracardiac Procedures without MCC) to MS-DRG 273 (Percutaneous Intracardiac Procedures with MCC) and revise the title for MS-DRG 273 to “Percutaneous Intracardiac Procedures with MCC or Major Device Implant for Left Atrial Appendage Closure Procedures”. As stated in the proposed rule, cases involving LAAC procedures with a percutaneous or percutaneous endoscopic approach, including cases reporting ICD-10-PCS procedure code 02L73DK, are currently assigned to MS-DRGs 273 and 274.

We stated in the proposed rule that according to the requestor's analysis, the average cost for LAAC procedures reporting ICD-10-PCS procedure code 02L73DK is $3,405 higher than the average cost for all cases in MS-DRG 274. The requestor stated that based on its analysis, this requested reassignment would have minimal impact on MS-DRGs 273 and 274 and would ensure adequate payments and better resource coherency. The requestor stated that cases reporting procedure codes describing a LAAC procedure with procedure code 02L73DK within MS-DRG 274 are more clinically similar and costs are more closely aligned to cases within MS-DRG 273.

As indicated in the proposed rule, in response to the first request, we examined claims data from the September 2019 update of the FY 2019 MedPAR file for MS-DRGs 273 and 274 to identify cases reporting ICD-10-PCS procedure code 02L73DK. Our findings are shown in the following table.

In MS-DRG 273, we found a total of 7,048 cases with an average length of stay of 6.1 days and average costs of $28,100. Of those 7,048 cases, there were 1,126 cases reporting ICD-10-PCS procedure code 02L73DK, with an average length of stay of 2.7 days and average costs of $29,504. In MS-DRG 274, we found a total of 24,319 cases with an average length of stay of 2.0 days and average costs of $24,048. Of those 24,319 cases, there were 13,423 cases reporting ICD-10-PCS procedure code 02L73DK, with an average length of stay of 1.2 days and average costs of $25,846.

The data analysis demonstrates that the average costs of the cases reporting procedure code 02L73DK in MS-DRG 274 are slightly higher than the average costs of all the cases in MS-DRG 274 ($25,846 versus $24,048), with a difference of approximately $1,798, however, the average length of stay for cases reporting procedure code 02L73DK in MS-DRG 274 is shorter compared to all the cases in MS-DRG 274 (1.2 days versus 2 days). We stated in the proposed rule that if we were to reassign cases reporting procedure code 02L73DK from MS-DRG 274 to MS-DRG 273, we would be assigning cases with an average length of stay of 1.2 days to a MS-DRG with an average length of stay of 6.1 days, which our clinical advisors did not support. As indicated in the proposed rule, the average costs of the cases reporting procedure code 02L73DK in MS-DRG 274 ($25,846) compared to the average costs of all the cases in MS-DRG 273 ($28,100) show a difference of $2,254. We stated in the proposed rule that our clinical advisors did not support reassigning the 13,423 cases reporting procedure code 02L73DK without an MCC from MS-DRG 274 to MS-DRG 273, which includes cases reporting a MCC, noting that it would impact the average costs for all cases in this MS-DRG. Lastly, as stated in the proposed rule, our clinical advisors expressed concern regarding making MS-DRG changes based on a specific, single technology (WATCHMAN^TM Left Atrial Appendage Closure (LAAC) device), identified by only one unique procedure code versus considering changes based on a group of related procedure codes that can be reported to describe that same type or class of technology, which is more consistent with the intent of the MS-DRGs. Therefore, for these reasons, we did not propose to reassign cases reporting ICD-10-PCS procedure code 02L73DK (Occlusion of left atrial appendage with intraluminal device, percutaneous approach) from MS-DRG 274 to MS-DRG 273.

In the proposed rule we also discussed a second request that we received to create a new MS-DRG specific to all left atrial appendage closure (LAAC) procedures or to map all LAAC procedures to a different cardiovascular MS-DRG that has payment rates aligned with procedural costs. The requestor stated that by creating a new MS-DRG specific to all LAAC procedures or mapping all LAAC procedures to a different cardiovascular MS-DRG, the MS-DRG would more appropriately recognize the clinical characteristics and cost differences in LAAC cases.

The 9 ICD-10-PCS procedure codes that describe LAAC procedures and their corresponding MS-DRG assignment are listed in the following table.

Currently, the MS-DRG assignments for these procedure codes are based on the surgical approach: open approach, percutaneous approach, or percutaneous endoscopic approach. Procedures describing an open approach are assigned to MS-DRGs 250 and 251 (Percutaneous Cardiovascular Procedures without Coronary Artery Stent with and without MCC, respectively); while procedures describing a percutaneous or percutaneous endoscopic approach are assigned to MS-DRGs 273 and 274 (Percutaneous Intracardiac Procedures with and without MCC, respectfully). Of the nine listed ICD-10-PCS procedure codes, three (02L70CK, 02L70DK, and 02l70ZK) describe an open approach and are currently assigned to MS-DRG 250 and 251, and six (02L73CK, 02L73DK, 02L73ZK, 02L74CK, 02L74DK, 02L74ZK) describe a percutaneous or percutaneous endoscopic approach and are currently assigned to MS-DRG 273 and 274.

As indicated in the proposed rule, we examined claims data from the September 2019 update of the FY 2019 MedPAR file for cases reporting LAAC procedures with an open approach in MS-DRGs 250 and 251. Our findings are shown in the following table.

In MS-DRG 250, we found a total of 4,192 cases with an average length of stay of 5.0 days and average costs of $18,807. Of those 4,192 cases, there were 21 cases reporting a LAAC procedure with an open approach, with an average length of stay of 7.0 days and average costs of $44,012. In MS-DRG 251, we found a total of 4,941 cases with an average length of stay of 2.6 days and average costs of $12,535. Of those 4,941 cases, there were 74 cases reporting a LAAC procedure with an open approach, with an average length of stay of 3.4 days and average costs of $22,711. The analysis shows that the cases reporting a LAAC procedure with an open approach in MS-DRGs 250 and 251 have higher average costs compared to all cases in MS-DRGs 250 and 251 ($44,012 versus $18,807 and $22,711 versus $12,535, respectively). The analysis also shows that the average length of stay for cases reporting a LAAC procedure with an open approach in MS-DRGs 250 and 251 is longer compared to all cases in MS-DRGs 250 and 251 (7.0 days versus 5.0 days and 3.4 days versus 2.6 days, respectively). Overall, there were a total of 95 (21+74) cases reporting a LAAC procedure with an open approach in MS-DRGs 250 and 251 with an average length of stay of 4.2 days and average costs of $27,420. Based on the results of the claims data described previously, we conducted further analysis for the 95 cases reporting a LAAC procedure with an open approach in MS-DRGs 250 and 251 to determine if there were additional factors that may be contributing to the higher average costs and longer length of stay. Of those 95 cases, we found a total of 20 cases in which there was another O.R. procedure reported on the claim that is also currently assigned to MS-DRGs 250 and MS-DRG 251 and believed to be influencing the average costs and average length of stay, as shown in the following tables.

As shown in the table, for MS-DRG 250, there were a total of 8 cases reporting another O.R. procedure with a LAAC procedure with an open approach with an average length of stay of 8.9 days and average costs of $63,653. The data shows that the average length of stay for these 8 cases range from 4.0 days to 15.0 days and the average costs range from $20,650 to $235,720.

As indicated in the proposed rule, overall, the data demonstrates that the 8 cases reporting another O.R. procedure with a LAAC procedure with an open approach in MS-DRG 250 have a longer length of stay (8.9 days versus 7 days) and higher average costs ($63,653 versus $44,012) compared to all 21 cases reporting a LAAC procedure with an open approach in MS-DRG 250.

As shown in the table, for MS-DRG 251, there were a total of 12 cases reporting another O.R. procedure with a LAAC procedure with an open approach with an average length of stay of 6.5 days and average costs of $31,560. The data shows that the average length of stay for these 12 cases range from 1.0 day to 18.0 days and the average costs range from $11,052 to $89,682.

As indicated in the proposed rule, the data demonstrates that the 12 cases reporting another O.R. procedure with a LAAC procedure with an open approach in MS-DRG 251 have a longer average length of stay (6.5 days versus 3.4 days) and higher average costs ($31,560 versus $22,711) compared to all 74 cases reporting a LAAC procedure with an open approach in MS-DRG 251. The results of our claims analysis for the 20 cases reporting a LAAC procedure with an open approach and another O.R. procedure in MS-DRGs 250 and 251 indicate that the longer average length of stay and higher average costs of the 95 cases reporting a LAAC procedure with an open approach in MS-DRGs 250 and 251 may be attributed to the resource consumption of the additional O.R. procedures reported in the subset of 20 cases. The claims analysis also shows that the majority of the cases reporting a LAAC procedure with an open approach in MS-DRGs 250 and 251 (75 cases out of 95 cases) were without another O.R. procedure.

As noted previously, with respect to the first LAAC MS-DRG request, our analysis of MS-DRG 273 found a total of 7,048 cases with an average length of stay of 6.1 days and average costs of $28,100 and our analysis of MS-DRG 274 found a total of 24,319 cases with an average length of stay of 2.0 days and average costs of $24,048. The average costs and average length of stay for cases reporting a LAAC procedure with an open approach in MS-DRGs 250 and 251 ($44,012 and $22,711, respectively) and (7.0 days and 3.4 days, respectively) appear to be generally more aligned with the average costs and average length of stay for all cases in MS-DRGs 273 and 274 ($28,100 and $24,048, respectively) and (6.1 days and 2.0 days, respectively) as compared to all cases in MS-DRGs 250 and 251 with average costs of $18,807 and $12,535, respectively and an average length of stay of 5.0 days and 2.6 days, respectively. In addition, as also noted previously, the second LAAC MS-DRG request was to create a new MS-DRG specific to all left atrial appendage closure (LAAC) procedures or to map all LAAC procedures to a different cardiovascular MS-DRG that has payment rates aligned with procedural costs. We stated in the proposed rule that our clinical advisors suggested that because our review of the cases reporting a LAAC procedure with an open approach in MS-DRGs 250 and 251 demonstrated that these procedures are primarily performed in the absence of another O.R. procedure and generally are not performed with a more intensive open chest procedure, that we should evaluate cases reporting LAAC procedures with the other approaches in their assigned MS-DRGs.

As indicated in the proposed rule, we then examined claims data from the September 2019 update of the FY 2019 MedPAR file for cases reporting LAAC procedures with a percutaneous or percutaneous endoscopic approach in MS-DRGs 273 and 274. Our findings are shown in the following table.

In MS-DRG 273, we found a total of 7,048 cases with an average length of stay of 6.1 days and average costs of $28,100. Of those 7,048 cases, there were 1,180 cases reporting a LAAC procedure with a percutaneous or percutaneous endoscopic approach, with an average length of stay of 2.9 days and average costs of $29,591. In MS-DRG 274, we found a total of 24,319 cases with an average length of stay of 2.0 days and average costs of $24,048. Of those 24,319 cases, there were 13,774 cases reporting a LAAC procedure with a percutaneous or percutaneous endoscopic approach, with an average length of stay of 1.2 days and average costs of $25,765.

The analysis shows that the cases reporting a LAAC procedure with a percutaneous or percutaneous endoscopic approach in MS-DRGs 273 and 274 have very similar average costs compared to all the cases in MS-DRGs 273 and 274 ($29,591 versus $28,100 and $25,765 versus $24,048, respectively). The analysis also shows that the average length of stay for cases reporting a LAAC procedure with a percutaneous or percutaneous endoscopic approach in MS-DRGs 273 and 274 is shorter compared to all cases in MS-DRGs 273 and 274 (2.9 days versus 6.1 days and 1.2 days versus 2.0 days, respectively). Overall, there were a total of 14,954 (1,180 + 13,774) cases reporting a LAAC procedure with a percutaneous or percutaneous endoscopic approach in MS-DRGs 273 and 274 with an average length of stay of 1.3 days and average costs of $26,067.

We stated in the proposed rule that our clinical advisors did not support creating a new MS-DRG for all LAAC procedures for FY 2021. Rather, our clinical advisors believe that ICD-10-PCS codes 02L70CK, 02L70DK, and 02L70ZK that describe a LAAC procedure with an open approach are more suitably grouped to MS-DRGs 273 and 274. As indicated in the proposed rule our clinical advisors stated that this reassignment would allow all LAAC procedures to be grouped together under the same MS-DRGs and would improve clinical coherence. We noted that all the procedure codes describing LAAC procedures are designated as non-O.R. procedures that affect the MS-DRG to which they are assigned. Therefore, in the proposed rule, we proposed to reassign ICD-10-PCS codes 02L70CK, 02L70DK, and 02L70ZK from MS-DRGs 250 and 251 (Percutaneous Cardiovascular Procedures without Coronary Artery Stent with and without MCC, respectively) to MS-DRGs 273 and 274 (Percutaneous Intracardiac Procedures with and without MCC, respectively).

Comment: Several commenters supported CMS' proposal to not reassign cases reporting ICD-10-PCS procedure code 02L73DK from MS-DRG 274 to MS-DRG 273 and to not revise the title for MS-DRG 273 to “Percutaneous Intracardiac Procedures with MCC or Major Device Implant for Left Atrial Appendage Closure Procedures”. A commenter concurred that MS-DRG categories should not be based on a specific medical technology or unique procedure code. The commenter noted that the MS-DRGs are intended to group procedures with both similar resource intensity and clinical characteristics. This commenter further noted that the MS-DRG categories are not intended to benefit a single technology or be narrowly constituted such as by singling out a device implant in a field with multiple other techniques and technologies that address a similar disease that do not require an implant. The commenter stated that if CMS were to change its methodology of comparing the procedure requested for reassignment to all cases, as was requested for the WATCHMAN^TM LAAC device, then in fairness, CMS should do so for all the other procedure code MS-DRG reassignment requests it receives and that this kind of methodological change should be outlined in the proposed rule for comments so stakeholders can discuss the implications. This commenter also stated its belief that it is premature to modify the Percutaneous Intracardiac Procedures MS-DRGs at this time, because there are a number of technologies in this field using different techniques, including non-implanted devices, and are being studied in CMS Investigational Device Exemption (IDE) approved clinical trials. According to the commenter, it is anticipated that some of these technologies will receive marketing authorization in the near future and therefore, they should also be considered in any MS-DRGs reclassification. In addition, the commenter stated that volume, costs, and length of stay data for the procedures utilizing these technologies may not be fully incorporated in current hospital cost data, and current clinical trial pricing for these devices, which is lower than commercialized pricing, will not fully reflect true hospital costs. The commenter noted it is critical to ensure that as these alternative technologies are adopted by hospitals that they are not disadvantaged in their MS-DRG assignments, particularly relative to existing implant technologies. The commenter agreed that MS-DRGs 273 and MS-DRG 274 should continue to be broadly constituted to include the full range of procedures performed within the heart chambers using intracardiac techniques. The commenter also agreed with CMS that the title of MS-DRG 273 should remain “Percutaneous Intracardiac Procedures” and not reference device implants or be limited to a particular device approach when numerous other options exist and or are in clinical trials. The commenter stated that to the extent CMS implements MS-DRG changes impacting the assignment for WATCHMAN^TM LAAC procedures, they request that such policies apply to all LAA procedures, regardless of specific technique, including whether they involve an implant.

Response: We appreciate the commenters' support of our proposal to maintain cases reporting procedure code 02L73DK in MS-DRG 274 and to retain the current titles for MS-DRGs 273 and 274 by not revising to include terminology referencing an implant. As discussed in the proposed rule, we agree that the MS-DRGs are intended to group procedures with both similar resource intensity and clinical characteristics, rather than to identify a specific, single technology, identified by only one unique procedure code. We further note that we would expect to discuss any changes to CMS' current methodology for evaluating MS-DRG requests involving reassignment of a procedure code in future rulemaking. We appreciate the information provided by the commenter regarding additional technologies and techniques for this clinical area that are under study in CMS Investigational Device Exemption (IDE) approved clinical trials and agree they should also be considered in any potential future MS-DRG reclassification.

Comment: We received a comment (from the requestor) expressing concern that in the proposed rule, CMS' summary of the requestor's analysis for the average costs of LAAC procedures reporting ICD-10-PCS procedure code 02L73DK (Occlusion of left atrial appendage with intraluminal device, percutaneous approach), which identifies the WATCHMAN^TM device, may have been misunderstood. The commenter clarified that the $3,405 it referenced in its analysis represented the difference between the average costs of the cases identified by procedure code 02L73DK in MS-DRGs 273 and 274 versus all other procedure codes that do not identify the WATCHMAN^TM device in MS-DRGs 273 and 274. The commenter stated its belief that a comparison of the cases reporting procedure code 02L73DK “WATCHMAN^TM cases” versus “non-WATCHMAN^TM” cases is more appropriate to evaluate cost alignment, opposed to the comparison of procedure code 02L73DK to all cases in MS-DRG 273 and 274. The commenter noted that comparing the cases reporting procedure code 02L73DK (“WATCHMAN^TM cases”) against all cases includes cases reporting procedure code 02L73DK (“WATCHMAN^TM cases”) and effectively compares “WATCHMAN cases” to a pool of procedures in which “WATCHMAN cases” are a significant subgroup, and therefore influences the MS-DRGs cost. The commenter stated their belief that an accurate cost comparison requires an evaluation of two distinct groups (that is, WATCHMAN^TM procedures vs. non-WATCHMAN^TM procedures), as opposed to comparing one group against another of which it is a part (that is, Watchman^TM procedures vs. all procedures in the MS-DRG category). The commenter also stated that if CMS intends to use a methodology in which clinical/economic coherence is based upon a comparison against the group in which that procedure is already represented, this should be clarified for consistency in future rulemaking. The commenter provided an updated data analysis using FY 2019 MedPAR and concluded that there is greater cost coherence between WATCHMAN^TM cases currently assigned to DRG 274 and Non-WATCHMAN^TM cases currently assigned to DRG 273 (a difference of $2,019), as opposed to Non-WATCHMAN^TM cases currently assigned to DRG 274 (a difference of $4,059). The commenter reiterated its request for CMS to reassign all cases with procedure code 02L73DK from MS-DRG 274 to MS-DRG 273 and rename MS-DRG 273 “Percutaneous Intracardiac Procedures with MCC or Major Device Implant for LAAC”.

Response: We thank the commenter for the additional information and analysis provided. In response to the commenter's concern that CMS' summary of the requestor's analysis was misunderstood, we note that we inadvertently omitted the reference to MS-DRG 273 in our statement that read, “According to the requestor's analysis, the average cost for LAAC procedures reporting ICD-10-PCS procedure code 02L73DK is $3,405 higher than the average cost for all cases in MS-DRG 274.” For clarification, the statement should have read, “According to the requestor's analysis, the average cost for LAAC procedures reporting ICD-10-PCS procedure code 02L73DK is $3,405 higher than the average cost for all cases in MS-DRG 273 and 274.” With regard to the commenter's remarks that an accurate cost comparison requires an evaluation of two distinct groups, as opposed to comparing one group against another of which it is a part, we note that we consider this information and the data in this way to understand the impact of the selected cases, however, we have generally not included this specific information in our discussions or summaries of our analysis. The claims data that is evaluated as part of the overall analysis includes the “with” and “without” cases related to the specific request where applicable, therefore, CMS can consider including this additional data analysis information in future rulemaking. With respect to the commenter's statement that CMS should clarify in future rulemaking if it intends to use a methodology in which clinical/economic coherence is based upon a comparison against the group in which that procedure is already represented, we note that due to the structure of the MS-DRGs and the CC/MCC subgroups that exist, it is not entirely feasible to expect that a comparison would not include other MS-DRGs in which that procedure is already assigned. For the reasons previously discussed in the FY 2021 IPPS/LTCH PPS proposed rule, our clinical advisors continue to support the current structure of MS-DRGs 273 and 274 where all LAAC procedures, with or without an implant, are grouped together. Therefore, after consideration of the public comments that we received, we are finalizing our proposal to not reassign cases reporting ICD-10-PCS procedure code 02L73DK (Occlusion of left atrial appendage with intraluminal device, percutaneous approach) from MS-DRG 274 (Percutaneous Intracardiac Procedures without MCC) to MS-DRG 273 (Percutaneous Intracardiac Procedures with MCC).

Comment: Several commenters supported CMS' proposal to reassign ICD-10-PCS procedure codes 02L70CK, 02L70DK, and 02L70ZK from MS-DRGs 250 and 251 to MS-DRGs 273 and 274. A commenter stated that reassignment of these procedure codes is more representative of the average costs and average length of stay associated with procedures in the logic for MS-DRGs 273 and 274 compared to the procedures that are included in the logic for MS-DRGs 250 and 251. A commenter also suggested that CMS revise the titles for MS-DRGs 273 and 274 to “Percutaneous and Other Intracardiac Procedures with and without MCC, respectively”, since the current MS-DRG titles suggest that only percutaneous procedures apply to these MS-DRGs. However, a commenter did not support CMS' proposal to reassign ICD-10-PCS procedure codes 02L70CK, 02L70DK, and 02L70ZK from MS-DRGs 250 and 251 to MS-DRGs 273 and 274 because according to the commenter, it would result in an inappropriate grouping of open procedures under the title of “percutaneous” procedures. The commenter asserted that although open atrial appendage closures are rarely performed as standalone procedures and are normally performed in conjunction with open coronary bypass and open valve procedures, if an open atrial appendage closure is actually performed standalone, MS-DRGs 228 and 229 (Other Cardiothoracic Procedures with and without MCC, respectively), would more appropriately compensate for the resources and longer length of stays expected with open heart procedures.

Another commenter stated they understood CMS' rationale for not proposing to create a separate MS-DRG for the insertion of WATCHMAN^TM devices since the cost reductions involved in their shorter length of stay balances out the costs of the device.

Response: We appreciate the commenters' support of the proposal to reassign ICD-10-PCS procedure codes 02L70CK, 02L70DK, and 02L70ZK from MS-DRGs 250 and 251 to MS-DRGs 273 and 274. We also agree with the commenter who suggested that the titles for MS-DRGs 273 and 274 should be revised to “Percutaneous and Other Intracardiac Procedures with and without MCC, respectively”, to reflect this reassignment, as the current MS-DRG titles refer only to percutaneous procedures. In response to the commenter who did not agree with the proposal to reassign procedure codes 02L70CK, 02L70DK, and 02L70ZK from MS-DRGs 250 and 251 to MS-DRGs 273 and 274 based on the current titles of the MS-DRGs, as we have done in prior rulemaking and as another commenter suggested, we may revise the title of a MS-DRG to better reflect the procedures assigned to it. With regard to the commenter's statement that open LAAC procedures are normally performed in conjunction with open coronary bypass and open valve procedures, therefore, if an open atrial appendage closure is actually performed standalone, it would more appropriately compensate for the resources and longer length of stays expected with open heart procedures if assigned to MS-DRGs 228 and 229, we consider this comment to be outside the scope of the proposal discussed. We can consider additional claims data analysis for these procedures in future rulemaking. With respect to the commenter who stated they understood CMS' rationale for not proposing to create a separate MS-DRG for the insertion of WATCHMAN^TM devices since the cost reductions involved in their shorter length of stay balances out the costs of the device, we are unclear as to what this comment is in reference to as there was no discussion in the FY 2021 IPPS/LTCH PPS proposed rule about proposing to create a separate MS-DRG for procedures involving the insertion of a WATCHMAN^TM device, rather the discussion concerned reassigning cases reporting the procedure code describing the insertion of a WATCHMAN^TM device.

After consideration of the public comments that we received, we are finalizing our proposal to reassign ICD-10-PCS procedure codes 02L70CK, 02L70DK, and 02L70ZK from MS-DRGs 250 and 251 to MS-DRGs 273 and 274, and are finalizing a revision to the titles for MS-DRG 273 and 274 to Percutaneous and Other Intracardiac Procedures with and without MCC, respectively to reflect this reassignment for FY 2021.

b. Endovascular Cardiac Valve Replacement and Supplement Procedures

In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32495 through 32496), we discussed a request we received to revise MS-DRGs 266 and 267 (Endovascular Cardiac Valve Replacement and Supplement Procedures with and without MCC, respectively) by removing the current two-way severity level split and creating a base MS-DRG without any severity level splits. According to the requestor, patients treated with an endovascular cardiac valve replacement procedure have severe heart failure due to a valvular disorder, which may be documented as either an exacerbation of heart failure or as chronic severe heart failure.

The requestor noted that in the cases reporting an endovascular cardiac valve replacement procedure, a secondary diagnosis code describing the specific type of heart failure may be the only MCC reported on the claim and in instances where the heart failure diagnosis code is reported as the principal diagnosis on a claim, it is disregarded from acting as a MCC. In both scenarios, the requestor reported that the heart failure is treated with the endovascular cardiac valve replacement procedure, fluid balance, and medication.

The requestor also stated that providers are challenged in reaching a consensus regarding this subset of patients' symptoms that may be helpful in establishing a diagnosis for exacerbation of heart failure versus chronic severe heart failure and stated that a single, base MS-DRG would assist in the calculation of costs and charges more reliably, regardless of the diagnosis reported in combination with the endovascular cardiac valve replacement procedure.

We noted in the proposed rule that we examined claims data from the September 2019 update of the FY 2019 MedPAR file for MS-DRGs 266 and 267. Our findings are shown in the following table.

As shown in the table, there was a total of 19,012 cases with an average length of stay of 5.3 days and average costs of $50,879 in MS-DRG 266. For MS-DRG 267, there was a total of 27,084 cases with an average length of stay of 2.1 days and average costs of $40,471.

As indicated in the proposed rule, to evaluate the request to create a single MS-DRG for cases reporting endovascular cardiac valve procedures, we conducted an analysis of base MS-DRG 266. This analysis includes 2 years of MedPAR claims data to compare the data results from 1 year to the next to avoid making determinations about whether additional severity levels are warranted based on an isolated year's data fluctuation and also, to validate that the established severity levels within a base MS-DRG are supported. Therefore, we reviewed the claims data for base MS-DRG 266 using the September 2018 update of the FY 2018 MedPAR file and the September 2019 update of the FY 2019 MedPAR file, which were used in our analysis of claims data for MS-DRG reclassification requests for FY 2020 and FY 2021. Our findings are shown in the table.

As shown in the table, the data reflect that the criteria for a two-way split (“with MCC” and “without MCC”) are satisfied using both the data from the September 2018 update of the FY 2018 MedPAR file and the data from the September 2019 update of the FY 2019 MedPAR file: (1) At least 500 cases are in the MCC group and in the without MCC subgroup; (2) at least 5 percent of the cases in the MS-DRG are in the MCC group and in the without MCC subgroup; (3) at least a 20 percent difference in average costs between the MCC group and the without MCC group; (4) at least a $2,000 difference in average costs between the MCC group and the without MCC group; and (5) at least a 3-percent reduction in cost variance, indicating that the current severity level splits increase the explanatory power of the base MS-DRG in capturing differences in expected cost between the current MS-DRG severity level splits by at least 3 percent and thus improve the overall accuracy of the IPPS payment system. We stated in the proposed rule that our clinical advisors also did not agree with the requestor's assertion that a single, base MS-DRG would assist in calculating costs more reliably. As shown in the claims data and stated previously, the criteria are satisfied for the current two-way split. We further noted that the basis for the MS-DRGs is to better recognize severity and complexity of services, which is accomplished through the CC subgroups.

Based on the results of our analysis, for FY 2021, we proposed to maintain the current structure of MS-DRGs 266 and 267 with a two-way severity level split and not create a single, base MS-DRG.

Comment: Commenters supported CMS' proposal to retain the structure of MS-DRGs 266 and 267 with the current two-way severity level split based on the information and data analysis provided. A commenter also acknowledged the requestor's sentiments regarding situations where a secondary diagnosis code describing the specific type of heart failure may be the only MCC reported on the claim and in instances where the heart failure diagnosis code is reported as the principal diagnosis on a claim, it is disregarded from acting as a MCC. This commenter stated that inconsistencies in the MS-DRG CC Exclusion List for heart failure also confound the issues involving heart failure. The commenter suggested that CMS consider the following:

• Allow all acute heart failure codes to be sequenced as a principal diagnosis to serve as its own MCC in the same manner that acute cor pulmonale serves as an MCC when sequenced as a principal diagnosis with acute pulmonary embolism.
• Amend the CC Exclusion List as to eliminate list 682 for all the ICD-10-CM codes listed in this section of this rule and place all of them in list 2025. The commenter stated that if CMS chooses not to do this, it recommends that CMS transition the I50.23, I50.33, I50.41 and I50.43 diagnosis codes into the 2025 category so that all acute AND acute on chronic heart failure (I50.21, I50.23, I50.31, I50.33, I50.41, I50.43) codes are treated equally.

I50.21 MCC 2025:29 codes, Acute systolic (congestive) heart failure

I50.22 CC 0682:30 codes, Chronic systolic (congestive) heart failure

I50.23 MCC 0682:30 codes, Acute on chronic systolic (congestive) heart failure

I50.30 CC 0682:30 codes, Unspecified diastolic (congestive) heart failure

I50.31 MCC 2025:29 codes, Acute diastolic (congestive) heart failure

I50.32 CC 0682:30 codes, Chronic diastolic (congestive) heart failure

I50.33 MCC 0682:30 codes, Acute on chronic diastolic (congestive) heart failure

I50.40 CC 0682:30 codes, Unspecified combined systolic (congestive) and diastolic (congestive) heart failure

I50.41 MCC 0682:30 codes, Acute combined systolic (congestive) and diastolic (congestive) heart failure

I50.42 CC 0682:30 codes, Chronic combined systolic (congestive) and diastolic (congestive) heart failure

I50.43 MCC 0682:30 codes, Acute on chronic combined systolic (congestive) and diastolic (congestive) heart failure

The commenter also suggested that CMS, as a member of the ICD-10 Coordination and Maintenance Committee, advocate to expand ICD-10-CM diagnosis code I50.9 Heart failure, unspecified, and assign CC and MCC status to these suggested expanded codes, consistent with how the I50.2-, I50.3- and I50.4- series are assigned.

I50.90—Heart failure, unspecified

I50.91—Acute heart failure—should serve as an MCC

I50.92—Chronic heart failure—should serve as a CC

I50.93—Acute on chronic heart failure—should serve as an MCC

According to the commenter, this action would sufficiently eliminate the administrative burden to providers regarding querying the physician for the specific type of heart failure.

Response: We appreciate the commenters' support. In response to the commenter who suggested modifying the logic of all the acute heart failure codes to allow them to act as their own MCC or to amend the CC Exclusion list, we appreciate the commenter's suggestions. However, because we consider these public comments to be outside the scope of the proposed rule, we are not addressing them in this final rule. With regard to the commenter's suggestion to expand diagnosis code I50.9 Heart failure, unspecified, as discussed in section II.E.16. of the preamble of this final rule, the CDC/NCHS has lead responsibility for the diagnosis code classification and proposals for code updates should be directed to nchsicd10CM@cdc.gov for consideration at a future ICD-10 Coordination and Maintenance Committee meeting. In addition, as discussed in section II.E.1.b. of the preamble of this final rule, we are maintaining the November 1 deadline for the submission of MS-DRG classification requests for FY 2022, therefore, with regard to the additional suggestions to modify the logic of all the acute heart failure codes to allow them to act as their own MCC or amend the CC Exclusion list, we encourage individuals with comments about MS-DRG classifications to submit these comments no later than November 1, 2020 so that they can be considered for possible inclusion in the annual proposed rule. We will consider these public comments for possible proposals in future rulemaking as part of our annual review process.

After consideration of the public comments that we received, we are finalizing our proposal to maintain the structure of MS-DRGs 266 and 277 for FY 2021.

c. Insertion of Cardiac Contractility Modulation Device

As discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32496), we received a request to review the MS-DRG assignment for cases that identify patients who receive a cardiac contractility modulation (CCM) device system for congestive heart failure. CCM is indicated for patients with moderate to severe heart failure resulting from either ischemic or non-ischemic cardiomyopathy. CCM utilizes electrical signals which are intended to enhance the strength of the heart and overall cardiac performance. CCM delivery device systems consist of a programmable implantable pulse generator (IPG) and three leads which are implanted in the heart. One lead is implanted into the right atrium and the other two leads are inserted into the right ventricle. The lead in the right atrium detects atrial electric signals and transmits them to the IPG. The IPG, which is usually implanted into the subcutaneous pocket of the pectoral region and secured to the fascia with a non-absorbable suture, processes the atrial signal and generates the CCM signals which are transmitted to the right ventricle via the two ventricular leads. According to the requestor, MS-DRGs 222, 223, 224, 225, 226, and 227 (Cardiac Defibrillator Implant with and without Cardiac Catheterization with and without AMI/HF/Shock with and without MCC, respectively) include code combinations or “code pairs” describing the insertion of contractility modulation devices. Currently however, the MS-DRG GROUPER logic requires the combination of the CCM device codes and a left ventricular lead to map to MS-DRGs 222, 223, 224, 225, 226 and 227. The requestor stated the CCM device is contraindicated in patients with a left ventricular lead. Therefore, using the current V37 MS-DRG GROUPER logic, no case involving insertion of the CCM system can be appropriately mapped to MS-DRGs 222, 223, 224, 225, 226 and 227. Instead, the cases map to MS-DRG 245 (AICD Generator Procedures). According to the requestor, to date, the procedure has been performed on an outpatient basis, but it is expected that some Medicare patients will receive CCM devices on an inpatient basis. The requestor asked that CMS revise the MS-DRG GROUPER logic to group cases reporting the use of the CCM device appropriately.

As noted in the proposed rule, the ICD-10-PCS procedure code pairs currently assigned to MS-DRGs 222, 223, 224, 225, 226 and 227 that identify the insertion of contractility modulation devices are shown in the following table:

We stated in the proposed rule that based on our analysis of cases reporting ICD-10-PCS procedure codes for CCM device systems, we agreed with the requestor that a procedure code pair for the insertion of a CCM device and right ventricular and/or right atrial lead does not exist in the logic for MS-DRGs 222, 223, 224, 225, 226 and 227. We also noted that our analysis indicated that the ICD-10-PCS procedure code combinations for right ventricular and/or right atrial lead insertion with insertion of contractility modulation devices were inadvertently excluded from MS-DRGs 222, 223, 224, 225, 226 and 227 as a result of replicating the ICD-9 based MS-DRGs.

We then examined claims data from the September 2019 update of the FY 2019 MedPAR file for MS-DRG 245 and identified the subset of cases within MS-DRG 245 reporting procedure codes for the insertion of a rechargeable CCM device and the insertion of right ventricular and/or right atrium lead. We found zero cases in MS-DRG 245 reporting a procedure code combination that identifies the insertion of contractility modulation device and the insertion of a cardiac lead into the right ventricle and/or right atrium lead.

We stated that our clinical advisors agreed that the insertion of a rechargeable CCM system always involves placement of a right-sided lead, and that the code combinations that currently exist in the MS-DRG GROUPER logic are considered clinically invalid. We examined claims data from the September 2019 update of the FY 2019 MedPAR file for MS-DRGs 222, 223, 224, 225, 226 and 227 for this subset of cases to determine if there were any cases that reported one of the 12 clinically invalid code combinations that exist in the GROUPER logic. Because the combinations of codes that describe the insertion of a rechargeable CCM device and the insertion of left ventricular lead are considered clinically invalid procedures, we stated we would not expect these code combinations to be reported in any claims data. We found zero cases across MS-DRGs 222, 223, 224, 225, 226 and 227 reporting the clinically invalid procedure code combination that identifies the insertion of contractility modulation device and the insertion of a cardiac lead into the left ventricle.

We noted that while our analysis did not identify any cases reporting a procedure code combination for the insertion of contractility modulation device and the insertion of a cardiac lead into right ventricle or right atrium, recognizing that it is expected that some Medicare patients will receive CCM devices on an inpatient basis, we proposed to add the following 24 ICD-10-PCS code combinations to MS-DRGs 222, 223, 224, 225, 226 and 227.

We also proposed to delete the 12 clinically invalid code combinations from the GROUPER logic of MS-DRGs 222, 223, 224, 225, 226 and 227 that describe the insertion of contractility modulation device and the insertion of a cardiac lead into the left ventricle.

Comments: Commenters supported the proposal to modify the GROUPER logic of MS-DRGs 222, 223, 224, 225, 226 and 227 by (1) adding the 24 ICD-10-PCS code combinations describing the insertion of contractility modulation device and the insertion of a cardiac lead into right ventricle or right atrium to MS-DRGs 222, 223, 224, 225, 226 and 227; and (2) deleting the 12 clinically invalid procedure code combinations that describe the insertion of contractility modulation device and the insertion of a cardiac lead into the left ventricle. A commenter specifically thanked CMS for consulting with their clinical advisors, conducting a thorough analysis regarding these codes, and for determining the most appropriate MS-DRG assignments for cardiac contractility modulation devices. While indicating its support, one commenter questioned why cardiac contractility modulation devices qualify for MS-DRGs 222, 223, 224, 225, 226 and 227 and cardiac resynchronization therapy pacemakers (CRT-P) without defibrillators do not and requested that this be investigated in future rulemaking. This commenter also suggested that CMS change the name of MS- DRGs 222, 223, 224, 225, 226 and 227 since a cardiac modulation device is not used in all circumstances. Another commenter noted its intention to monitor the deletion of the 12 clinically invalid code combinations from the GROUPER logic in hopes that no unintended consequences come from this change.

Response: We appreciate the commenters' feedback and support.

In response to the commenter that questioned why cardiac contractility modulation devices qualify for MS-DRGs 222, 223, 224, 225, 226 and 227 and cardiac resynchronization therapy pacemakers do not, procedures involving CRT-P are assigned to a number of MS-DRGs. Specifically, in MDC 05 (Diseases and Disorders of the Circulatory System), procedures involving these pacemakers are assigned to MS-DRGs 242, 243, and 244 (Permanent Cardiac Pacemaker Implant with MCC, with CC, and without CC/MCC, respectively), MS-DRGs 258 and 259 (Cardiac Pacemaker Device Replacement with MCC and without MCC, respectively), and MS-DRGs 260, 261 and 262 (Cardiac Pacemaker Revision Except Device Replacement with MCC, with CC, and without CC/MCC, respectively).

Procedures codes describing the insertion of total contractility modulation device systems have been assigned to MS-DRGs 222, 223, 224, 225, 226 and 227 since the initial implementation of these procedure codes in FY 2010 under ICD-9-CM, recognizing that insertion of the CCM device might occur alone, in the presence of a pre-existing automatic implantable cardioverter-defibrillator (AICD), or in a combined implantation with an AICD. As stated in the proposed rule, the ICD-10-PCS procedure code combinations for right ventricular and/or right atrial lead insertion with insertion of contractility modulation devices were inadvertently excluded from MS-DRGs 222, 223, 224, 225, 226 and 227 as a result of replicating the ICD-9 based MS-DRGs. Recognizing that clinical practice might have changed since the creation of codes for CCM devices, our clinical advisors believe additional analyses are needed in MDC 05, specifically for cases reporting both contractility modulation device systems and pacemakers, as part of our efforts toward a broader approach to refining MS-DRGs and to address the commenters' request. As such, we also do not believe conforming changes to the titles of MS-DRGs 222, 223, 224, 225, 226 and 227 are warranted at this time until further review is complete.

CMS also will monitor claims data for unintended consequences as a result of the deletion of the 12 clinically invalid code combinations from the GROUPER logic as we continue our comprehensive analysis in future rulemaking. Therefore, after consideration of the public comments we received, we are finalizing our proposal to add the 24 ICD-10-PCS code combinations as previously listed to MS-DRGs 222, 223, 224, 225, 226 and 227. We are also finalizing our proposal to delete the 12 clinically invalid code combinations from the GROUPER logic of MS-DRGs 222, 223, 224, 225, 226 and 227 that describe the insertion of contractility modulation device and the insertion of a cardiac lead into the left ventricle under the ICD-10 MS-DRGs Version 38, effective October 1, 2020.

6. MDC 6 (Diseases and Disorders of the Digestive System): Acute Appendicitis

In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32500 through 32503), we discussed a request that we received to add ICD-10-CM diagnosis code K35.20 (Acute appendicitis with generalized peritonitis, without abscess) to the list of complicated principal diagnoses that group to MS-DRGs 338, 339 and 340 (Appendectomy with Complicated Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively) so that all ruptured/perforated appendicitis codes in MDC 06 (Diseases and Disorders of the Digestive System) group to MS-DRGs 338, 339, and 340. ICD-10-CM diagnosis code K35.20 currently groups to MS-DRGs 341, 342, and 343 (Appendectomy without Complicated Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively). Under current coding conventions, the following inclusion term for subcategory K35.2 (Acute appendicitis with generalized peritonitis) is: Appendicitis (acute) with generalized (diffuse) peritonitis following rupture or perforation of the appendix. The requestor also noted that diagnosis code K35.32 (Acute appendicitis with perforation and localized peritonitis, without abscess) currently groups to MS-DRGs 338, 339, and 340, however, diagnosis code K35.20 which describes a generalized, more extensive form of peritonitis does not. The requestor stated that ICD-10-CM diagnosis code K35.20 is the only ruptured appendicitis code not included in the list of complicated principal diagnosis codes for MS-DRGs 338, 339 and 340 and stated that it is clinically appropriate for all ruptured/perforated appendicitis diagnosis codes to group to MS-DRGs 338, 339 and 340.

As indicated in the FY 2021 IPPS/LTCH PPS proposed rule, we analyzed claims data from the September 2019 update of the FY 2019 MedPAR file for cases in MS-DRGs 341, 342, and 343 and claims reporting ICD-10-CM diagnosis code K35.20 as a principal diagnosis. Our findings are shown in the following table.

As shown in the table, we found a total of 718 cases with an average length of stay of 5.9 days and average costs of $17,270 in MS-DRG 341. Of those 718 cases, there were 62 cases reporting a principal diagnosis code of K35.20 with an average length of stay of 7.8 days, and average costs of $20,244. We found a total of 2,184 cases with an average length of stay of 3.4 days and average costs of $10,611 in MS-DRG 342. Of those 2,184 cases there were 183 cases reporting a principal diagnosis code of K35.20 with an average length of stay of 4.2 days, and average costs of $10,952. We found a total of 2,329 cases with an average length of stay of 2.0 days and average costs of $8,298 in MS-DRG 343. Of those 2,329 cases, there were 137 cases reporting a principal diagnosis code of K35.20 with an average length of stay of 2.6 days, and average costs of $8,088.

As indicated in the proposed rule, we also analyzed claims data from the September 2019 update of the FY 2019 MedPAR file for MS-DRGs 338, 339, and 340. Our findings are shown in the following table.

As shown in the table, we found a total of 685 cases with an average length of stay of 8.1 days and average costs of $20,930 in MS-DRG 338. We found a total of 2,245 cases with an average length of stay of 5.0 days and average costs of $12,705 in MS-DRG 339. We found a total of 1,840 cases, average length of stay 2.9 days, and average costs of $9,101 in MS-DRG 340.

We stated in the proposed rule that our clinical advisors agreed that the presence of an abscess would clinically determine whether a diagnosis of acute appendicitis would be considered a complicated principal diagnosis. As diagnosis code K35.20 is described as “without” an abscess, we stated our clinical advisors recommended that it not be added to the list of principal diagnoses for MS-DRGS 338, 339, and 340 (Appendectomy with Complicated Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively). We stated in the proposed rule, that we believe that while the average costs for cases reporting diagnosis code K35.20 are similar to the cases in MS-DRGs 338, 339, and 340, diagnosis codes describing acute appendicitis that do not indicate the presence of an abscess should remain in MS-DRGs 341, 342, and 343 (Appendectomy without Complicated Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively). Therefore, we did not propose to reassign diagnosis code K35.20 from MS-DRGs 341, 342, and 343 to MS-DRGs 338, 339, and 340.

As noted previously, the requestor pointed out that diagnosis K35.32 (Acute appendicitis with perforation and localized peritonitis, without abscess) currently groups to MS-DRGs 338, 339, and 340 (Appendectomy with Complicated Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively). Therefore, in the proposed rule, we identified all the diagnosis codes describing acute appendicitis within the ICD-10-CM classification under subcategory K35.2 (Acute appendicitis with generalized peritonitis) and subcategory K35.3 (Acute appendicitis with localized peritonitis) and reviewed their respective MS-DRG assignments for clinical coherence. The diagnosis codes in these subcategories are shown in the following table.

As indicated in the proposed rule, we analyzed claims data from the September 2019 update of the FY 2019 MedPAR file for cases reporting any one of the ICD-10-CM diagnosis codes as previously listed as a principal diagnosis in MS-DRGs 338, 339, 340, 341, 342, and 343. Our findings are shown in the following table.

As shown in the table, the diagnosis codes describing “with abscess” (K35.21 and K35.33) are currently assigned to MS-DRGs 338, 339, and 340. In addition, the diagnosis codes describing “without abscess” (K35.20, K35.30, and K35.31) are currently assigned to MS-DRGs 341, 342, and 343. We stated in the proposed rule, that our clinical advisors believe that cases reporting ICD-10-CM diagnosis codes describing “with abscess” are associated with higher severity of illness and resource consumption because of extended lengths of stay and treatment with intravenous antibiotics. Therefore, in the proposed rule, we noted that our clinical advisors determined that diagnosis code K35.32 should also be assigned to MS-DRGs 341, 342, and 343 for clinical consistency.

Accordingly, in the proposed rule, we proposed to reassign diagnosis code K35.32 to MS-DRGs 341, 342, and 343 (Appendectomy without Complicated Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively).

As also noted in the proposed rule, the ICD-10 MS-DRG Version 37 Definitions Manual currently lists the following ICD-10-CM diagnosis codes as Complicated Principal Diagnoses in MS-DRGs 338, 339, 340, 341, 342, and 343: C18.1 (Malignant neoplasm of appendix); C7A.020 (Malignant carcinoid tumor of the appendix); K35.21 (Acute appendicitis with generalized peritonitis, with abscess); K35.32 (Acute appendicitis with perforation and localized peritonitis, without abscess) and K35.33 (Acute appendicitis with perforation and localized peritonitis, with abscess). For the same reasons discussed previously, we proposed to remove diagnosis code K35.32 from the complicated principal diagnosis list to be clinically consistent.

Therefore, for the reasons discussed, in the proposed rule, we proposed to (1) maintain the current assignment of diagnosis code K35.20 (Acute appendicitis with generalized peritonitis, without abscess) in MS-DRGs 341, 342, and 343 (Appendectomy without Complicated Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively); (2) reassign diagnosis code K35.32 from MS-DRGs 338, 339 and 340 to MS-DRGs 341, 342, and 343; and (3) remove diagnosis code K35.32 from the complicated principal diagnosis list in MS-DRGs 338, 339, and 340 as listed in the ICD-10 MS-DRG Version 37 Definitions Manual.

Comment: Commenters' supported CMS' proposal to reassign diagnosis code K35.32 from MS-DRGs 338, 339 and 340 to MS-DRGs 341, 342, and 343 and to remove K35.32 from the complicated principal diagnosis list in MS-DRGs 338, 339, and 340. One commenter stated that the “peritonitis” described by the diagnoses code may be just reactive peritonitis from the appendicitis and therefore would not be associated with an abscess or an increased length of stay. Another commenter supported CMS' proposal not to reassign ICD-10-CM diagnosis code K35.20 (Acute appendicitis with generalized peritonitis, without abscess) from MS-DRGs 341, 342, and 343 (Appendectomy without Complicated Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively) to MS-DRGs 338, 339, and 340 (Appendectomy with Complicated Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively). The commenter stated their agreement with CMS clinical advisors that the presence of an abscess should clinically determine whether a diagnosis of acute appendicitis would be considered a complicated principal diagnosis, therefore all diagnosis codes for acute appendicitis “without” abscess should be assigned to MS-DRGs 341, 342, and 343 for clinical consistency.

Response: We appreciate the commenters' support.

Comment: One commenter stated that they disagreed with CMS on clinical grounds that ICD-10-CM code K35.20 is not a complicating diagnosis, and that all ICD-10-CM codes in subcategory K35.2 (Acute appendicitis with generalized peritonitis) should serve as an MCC in the same manner that unspecified peritonitis serves as an MCC. This commenter also stated that given that acute appendicitis is more commonly encountered in non-Medicare patients and that MS-DRGs are a common payment methodology for private insurance and Medicaid claims, CMS should additionally analyze Medicaid claims.

Response: We thank the commenter for their feedback. We note diagnosis codes for acute appendicitis described as “without abscess” or “without perforation” were assigned the CC severity level designation in FY 2019 when diagnosis code K35.2 was subdivided into diagnosis codes K35.20 (Acute appendicitis with generalized peritonitis, without abscess) and K35.21 (Acute appendicitis with generalized peritonitis, with abscess) because our clinical advisors stated cases “without abscess” or “without perforation” are not as severe clinical conditions compared to cases “with abscess” or “with perforation” as discussed in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41230). However, as noted in section II.E.12.b. of the preamble of this final rule, we plan to continue a comprehensive CC/MCC analysis, using a combination of mathematical analysis of claims data and the application of nine guiding principles. We continue to solicit comments regarding these guiding principles, as well as other possible ways we can incorporate meaningful indicators of clinical severity. We encourage the commenter to provide a detailed explanation of how applying a suggested concept or principle would ensure that the severity designation appropriately reflects resource use for diagnosis code K35.20. Commenters should submit their recommendations to the following email address: MSDRGClassificationChange@cms.hhs.gov by November 1, 2020.

Comment: Some commenters opposed CMS' proposal to maintain the current MS-DRG assignment for ICD-10-CM diagnosis code K35.20 (Acute appendicitis with generalized peritonitis, without abscess). A commenter stated that the costs for treating acute appendicitis with generalized peritonitis are on the higher end of the scale as CMS's data demonstrated in the proposed rule and requested that CMS reconsider the request to move principal diagnosis code K35.20 from MS-DRGs 341, 342, and 343 to MS-DRGs 338, 339 and 340 based on the severity of illness and the cost of treatment. The commenter stated that when ruptured appendicitis results in generalized peritonitis, resources are greater because the infection is not walled off, not localized, and has spread to two or more compartments within the abdominal cavity. According to the commenter, clinical literature supports the statement that generalized peritonitis is a more morbid (severe) presentation than just perforation or localized abscess. The commenter also stated that close postoperative monitoring is required to identify any signs of sepsis or organ dysfunction indicating persistent abdominal infection requiring intra-abdominal lavage via postoperative drains or relaparotomy. In addition, according to the commenter, antibiotics are given to the patient for 5-7 days until temperature and white blood cell count are within normal limits. Another commenter stated that the condition described by diagnosis code K35.20 (Acute appendicitis with generalized peritonitis, without abscess) can be associated with a risk of post-operative abscess formation and extended length of hospital stay, thereby warranting the classification as a complicated diagnosis. The commenter urged CMS to reassign diagnosis code K35.20 from MS-DRGs 341, 342, and 343 to MS-DRGs 338, 339 and 340. Another commenter stated that diagnosis code K35.20, is a complicated diagnosis on clinical grounds and strongly believes that when sequenced as a principal diagnosis along with an appendectomy should continue to group to MS-DRGs 338, 339 and 340.

Other commenters did not support the proposal to reassign diagnosis code K35.32 from MS-DRGs 338, 339 and 340 to MS-DRGs 341, 342, and 343 and urged CMS to reconsider reassigning diagnosis code K35.32. A commenter stated that the condition described by ICD-10-CM diagnosis code K35.32 (Acute appendicitis with perforation and localized peritonitis, without abscess) represents a complicated diagnosis, and asked CMS to maintain the current complicated diagnosis classification for code K35.32. Another commenter analyzed data from their facility and found claims reporting a principal diagnosis of K35.32 in MS-DRGs 338, 339 and 340 had an average LOS of 4.18 days and average charges of $60,000. This commenter stated when compared to claims at their facility grouped to MS-DRGs 341, 342 and 343, which had an average length of stay of 1.91 days and average charges of $42,000, claims reporting principal diagnosis ICD-10-CM diagnosis code K35.32 were more congruent with MS-DRG's 338-340. This commenter also stated it was the professional opinion of the critical care surgical staff of the facility that the presence of appendiceal perforations resulting in peritonitis (with or without abscess) requires longer hospitalizations and increased resources, such as peritoneal washings, intravenous antibiotics, and intravenous hydration to care for the increased severity of illness.

Response: We appreciate the commenters' feedback.

While our clinical advisors continue to believe that when peritonitis develops in a patient with acute appendicitis, the degree and severity of the peritonitis can vary greatly, we concur that the expansion of diagnosis codes K35.2 and K35.3 to introduce additional clinical concepts effective October 1, 2018 significantly changed the scope and complexity of the diagnosis codes for this subset of patients. As noted in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41236), when we consulted with the staff at the Centers for Disease Control's (CDC's) National Center for Health Statistics (NCHS), because NCHS has the lead responsibility for maintaining the ICD-10-CM diagnosis codes, the NCHS' staff acknowledged the clinical concerns based on the manner in which diagnosis codes K35.2 and K35.3 were expanded and confirmed that they would consider further review of these newly expanded codes with respect to the clinical concepts. As such, we believe it would be appropriate to maintain the current assignments at this time in order to further examine the relevant clinical factors and similarities in resource consumption in order to best represent this subset of patients within the MS-DRG classification. Therefore, after consideration of the public comments we received, and for the reasons discussed, diagnosis code K35.20 (Acute appendicitis with generalized peritonitis, without abscess) will be maintained in MS-DRGs 341, 342, and 343 (Appendectomy without Complicated Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively) for FY 2021. We are not finalizing our proposal to reassign diagnosis code K35.32 (Acute appendicitis with perforation and localized peritonitis, without abscess) to MS-DRGs 341, 342, and 343; and we are not finalizing our proposal to remove diagnosis code K35.32 from the complicated principal diagnosis list in MS-DRGs 338, 339, and 340. Accordingly, the assignment of ICD-10-CM code K35.32 will be maintained in MS-DRGs 338, 339, and 340 (Appendectomy with Complicated Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively) and ICD-10-CM diagnosis code K35.32 will continue to be listed as a Complicated Principal Diagnosis in MS-DRGs 338, 339, and 340, in the ICD-10 MS-DRG Version 38 Definitions Manual. As additional claims data become available, we will continue to analyze the clinical nature of each of the diagnoses and their MS-DRG assignments to further improve the overall accuracy of the IPPS payments in future rulemaking.

7. MDC 8 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue)

a. Cervical Radiculopathy

As discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32503 through 32505), we received a request to reassign ICD-10-CM diagnosis codes M54.11 (Radiculopathy, occipito-atlanto-axial region), M54.12 (Radiculopathy, cervical region) and M54.13 (Radiculopathy, cervicothoracic region) from MDC 01 (Diseases and Disorders of the Nervous System) to MDC 08 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue). The requestor stated that when one of these diagnosis codes describing radiculopathy in the cervical/cervicothoracic area of the spine is reported as a principal diagnosis in combination with a cervical spinal fusion procedure code, the case currently groups to MDC 01 in MS-DRG 028 (Spinal Procedures with MCC), MS-DRG 029 (Spinal Procedures with CC or Spinal Neurostimulators), and MS-DRG 030 (Spinal Procedures without CC/MCC). The requestor acknowledged that radiculopathy results from nerve impingement, however, the requestor noted it typically also results from a musculoskeletal spinal disorder such as spondylosis or stenosis. According to the requestor, the underlying musculoskeletal cause should be reported as the principal diagnosis if documented. The requestor stated that when the medical record documentation to support a musculoskeletal cause is not available, cases reporting a cervical spinal fusion procedure with a principal diagnosis of cervical radiculopathy would be more consistent with other cervical spinal fusion procedures if they grouped to MDC 08 in MS-DRGs 471, 472, and 473 (Cervical Spinal Fusion with MCC, with CC, and without CC/MCC, respectively). The requestor stated that the following diagnosis codes describing radiculopathy of the thoracic and lumbar areas of the spine are currently assigned to MDC 08 and therefore, group appropriately to the spinal fusion MS-DRGs in MDC 08.

We noted that the requestor is correct that when diagnosis codes M54.11, M54.12 or M54.13 are reported as a principal diagnosis in combination with a cervical spinal fusion procedure, the case currently groups to MDC 01 in MS-DRG 028, MS-DRG 029, and MS-DRG 030. This grouping occurs because the diagnosis codes describing radiculopathy in the cervical/cervicothoracic area of the spine are assigned to MDC 01 and the procedure codes describing a cervical spinal fusion procedure are assigned to MDC 01 in MS-DRGs 028, 029 and 030. We further noted that the requestor is also correct that diagnosis codes describing radiculopathy of the thoracic and lumbar areas of the spine (M54.14, M54.15, M54.16 and M54.17) are currently assigned to MDC 08 and therefore, group to the spinal fusion MS-DRGs in MDC 08 consistent with the GROUPER logic definitions. The MS-DRGs that involve spinal fusion procedures of the cervical or lumbar regions that are currently assigned in MDC 01 and MDC 08 are listed in the following table.

We referred the reader to the ICD-10 MS-DRG Version 37 Definitions Manual (which is available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software for complete documentation of the GROUPER logic for the listed MS-DRGs.

As indicated in the FY 2021 IPPS/LTCH PPS proposed rule, we examined claims data from the September 2019 update of the FY 2019 MedPAR file for all cases in MS-DRGs 028, 029, and 030 and for cases reporting any one of the diagnosis codes describing radiculopathy of the cervical/cervicothoracic area of the spine (M54.11, M54.12, or M54.13) in combination with a cervical spinal fusion procedure. We refer the reader to Table 6P.1b associated with the proposed rule and this final rule (which is available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index/ for the list of procedure codes describing a cervical spinal fusion procedure. Our findings are shown in the following table.

As shown in the table, there were a total of 2,105 cases with an average length of stay of 11.9 days and average costs of $40,866 in MS-DRG 028. Of those 2,105 cases, there were 22 cases reporting a principal diagnosis of cervical radiculopathy with a cervical spinal fusion procedure with an average length of stay of 8.2 days and average costs of $44,980. For MS-DRG 029, there were a total of 3,574 cases with an average length of stay of 6 days and average costs of $24,026. Of those 3,574 cases, there were 176 cases reporting a principal diagnosis of cervical radiculopathy with a cervical spinal fusion procedure with an average length of stay of 2.6 days and average costs of $24,852. For MS-DRG 030, there were a total of 1,338 cases with an average length of stay of 3.1 days and average costs of $17,393. Of those 1,338 cases, there were 166 cases reporting a principal diagnosis of cervical radiculopathy with a cervical spinal fusion procedure with an average length of stay of 1.7 days and average costs of $23,003.

We also reviewed the claims data for MS-DRGs 471, 472, and 473. Our findings are shown in the following table.

As shown in the table, there were a total of 3,327 cases with an average length of stay of 9 days and average costs of $36,941 in MS-DRG 471. There were a total of 15,298 cases with an average length of stay of 3.3 days and average costs of $22,539 in MS-DRG 472. There were a total of 11,144 cases with an average length of stay of 2 days and average costs of $18,748 in MS-DRG 473.

Based on the claims data, the average costs of the cases reporting a principal diagnosis of cervical radiculopathy with a cervical spinal fusion procedure are consistent with the average costs of all the cases in MS-DRGs 028, 029, and 030 in MDC 01. We also noted that the average costs of all the cases in MS-DRGs 028, 029, and 030 in MDC 01 are also comparable to the average costs of all the cases in MS-DRGs 471, 472, and 473, respectively; ($40,886 versus $36,941; $24,026 versus $22,539; and $17,393 versus $18,748).

We stated that our clinical advisors do not support reassigning diagnosis codes M54.11, M54.12, and M54.13 that describe radiculopathy in the cervical/cervicothoracic area of the spine from MDC 01 to MDC 08 until further analysis of the appropriate assignment of these and other diagnosis codes describing radiculopathy. As the requestor pointed out, the diagnosis codes describing radiculopathy of the thoracic and lumbar areas of the spine (M54.14, M54.15, M54.16 and M54.17) are currently assigned to MDC 08. We noted that there are also two other codes to identify radiculopathy within the classification, diagnosis code M54.10 (Radiculopathy, site unspecified) and M54.18 (Radiculopathy, sacral and sacrococcygeal region), both of which are currently assigned to MDC 01. We stated that our clinical advisors recommended maintaining the current assignment of diagnosis codes describing cervical radiculopathy in MDC 01 until further analysis of whether all the diagnosis codes describing radiculopathy of a specified or unspecified site should be assigned to the same MDC and if so, whether those codes should be assigned to MDC 01 or MDC 08. As part of this analysis, they also recommended soliciting further input from the public on the appropriate assignment for all of the diagnosis codes describing radiculopathy, including from professional societies and national associations for neurology and orthopedics. For these reasons, we did not propose to reassign diagnosis codes M54.11, M54.12, and M54.13 from MDC 01 to MDC 08 at this time.

Comment: Commenters agreed with the proposal to maintain the current assignment of diagnosis codes describing cervical radiculopathy in MDC 01 until further analysis of whether all the diagnosis codes describing radiculopathy of a specified or unspecified site should be assigned to the same MDC, and if so, whether those codes should be assigned to MDC 1 or MDC 8. Commenters also agreed with CMS' plan to solicit clinical input from medical specialty societies on the appropriate MDC classification for the diagnosis codes describing radiculopathy. A commenter thanked CMS for the consideration of the request and the solicitation for outside support from the industry while continuing to evaluate. Another commenter recommended reclassifying all cervical spinal fusion procedures to the same MS-DRGs, regardless of the diagnosis for which the procedure is performed. The commenter stated that the main driver for resource utilization is the surgical procedure and the ICD-10-CM diagnosis codes describing radiculopathy of the cervical/cervicothoracic spine would need to be classified to MDC 08 in order to group clinically similar cases under MS-DRGs 471, 472, and 473.

Response: We appreciate the commenters' support. In response to the commenter who recommended reclassifying all cervical spinal fusion procedures to the same MS-DRGs, regardless of the diagnosis for which the procedure is performed, as noted above and stated in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32505), our clinical advisors recommended maintaining the current assignment of diagnosis codes describing cervical radiculopathy in MDC 01 until further analysis of whether all the diagnosis codes describing radiculopathy of a specified or unspecified site should be assigned to the same MDC as well as further input from the public, including professional societies, and national associations for neurology and orthopedics. We agree with the commenter that the main driver for resource utilization is the surgical procedure and the ICD-10-CM diagnosis codes describing radiculopathy of the cervical/cervicothoracic spine would need to be classified to MDC 08 in order to group clinically similar cases under MS-DRGs 471, 472, and 473, however, it is the diagnosis codes and the MDC to which they should be clinically classified that requires further evaluation. From a clinical perspective, cervical radiculopathy involves inflammation or damage to the nerve root in the cervical spine which can affect a patient's neurological function. The underlying causes and risk factors vary, and depending on the patient's age, may more likely be attributed to a musculoskeletal condition, an infection, congenital anomaly, injury or a tumor.

After consideration of the public comments that we received, we are maintaining the current assignment of diagnosis codes M54.11, M54.12, and M54.13 describing cervical radiculopathy in MDC 01 for FY 2021, and as discussed intend to further review and analyze all the diagnosis codes describing radiculopathy of a specified or unspecified site to determine if they should be assigned to the same MDC, and if so, whether those codes should be assigned to MDC 1 or MDC 8.

b. Hip and Knee Joint Replacements

In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32505 through 32510), we discussed a request we received to restructure the MS-DRGs for total joint arthroplasty that utilize an oxidized zirconium bearing surface implant in total hip replacement and total knee replacement procedures. According to the requestor, several international joint replacement registries, retrospective claims review, and published clinical studies show compelling short-term, mid-term and long-term clinical outcomes for patients receiving these implants. The requestor stated that without specific MS-DRGs, beneficiary access to these implants is restricted and the benefit to patients and cost savings cannot be recognized.

The requestor noted that effective October 1, 2017, new ICD-10-PCS procedure codes describing hip and knee replacement procedures with an oxidized zirconium bearing surface implant were established, which allow greater specificity and provide the ability to track costs and clinical outcomes for the patients who receive the implant. The requestor provided 3 options for CMS to consider as part of its request which are summarized in this section of this rule.

The first option provided by the requestor was to create a new MS-DRG by reassigning cases reporting a hip or knee replacement procedure with an oxidized zirconium bearing surface implant from MS-DRG 470 (Major Hip and Knee Joint Replacement or Reattachment of Lower Extremity without MCC) to the suggested new MS-DRG. The requestor conducted its own analysis and noted that there were approximately 18,000 cases reporting a hip or knee replacement with an oxidized zirconium bearing surface implant and the average length of stay for these cases was shorter in comparison to the cases reporting hip and knee replacement procedures without an oxidized zirconium bearing surface implant. The requestor suggested that patients receiving an oxidized zirconium bearing surface implant may be walking earlier after surgery and the risk of infection may be reduced as a result of the shorter hospitalization.

The requestor stated that separating out these cases reporting the use of an oxidized zirconium bearing surface implant is clinically justified because the implants are designed for increased longevity. The requestor also stated that oxidized zirconium is an entirely distinct material from traditional ceramic or metal implants, as it is made through a unique thermal oxidation process which creates a ceramicised surface while maintaining the biocompatible zirconium alloy substrate. According to the requestor, this process creates an implant with the unique properties of both metals and ceramics: Durability, strength and friction resistance. Conversely, the requestor stated that cobalt chrome used in metal implants contains up to 143x more nickel (<0.5% vs <0.0035%) than oxidized zirconium and that nickel is the leading cause of negative reactions in patients with metal sensitivities.

The requestor asserted that creating a new MS-DRG for hip and knee replacement procedures with an oxidized zirconium bearing surface implant would be a logical extension of the unique procedure codes that CMS finalized and stated that other countries have established higher government reimbursement for these implants to reflect the increased value of the technology. The requestor also asserted that multiple joint replacement registries have reported excellent hip replacement results, including a statistically significant 33 percent reduced risk of revision (p<0.001) for oxidized zirconium on highly cross-linked polyethylene (XLPE), from three months compared to the most common bearing surface of metal/XLPE.

Lastly, the requestor stated that multiple U.S. data sources, including Medicare claims, show strong short-term outcomes, reduced 30-day readmissions, fewer discharges to skilled nursing facilities (SNFs), shorter LOS, and more frequent discharges to home, resulting in less costly post-acute care.

The second option provided by the requestor was to create a new MS-DRG by reassigning all cases in MS-DRG 470 reporting a hip replacement procedure (excluding those with an oxidized zirconium bearing surface implant) with a principal diagnosis of hip fracture and all hip replacement procedures with an oxidized zirconium bearing surface implant, with or without a principal diagnosis of hip fracture to the suggested new MS-DRG. The requestor stated that based on its own analysis, this new MS-DRG would have approximately 58,000 cases with an estimated relative weight between the current MS-DRGs for total joint arthroplasty (MS-DRGs 469 and 470) to reflect the increased resource consumption of total hip replacement procedures performed due to a hip fracture, while also reflecting a higher resource grouping for oxidized zirconium bearing surface implants used in total hip replacement procedures, and lastly, to reflect statistically significant reductions in revision of total hip replacement procedure rates.

The requestor also indicated that a new MS-DRG for total hip replacement procedures with a hip fracture would correspond to differentials recognized in the Comprehensive Care for Joint Replacement (CJR) model, which established a separate target 90-day episode price for total hip replacement procedures performed due to hip fracture cases, as these are typically higher severity patients with longer lengths of stay than hip replacement procedures absent a hip fracture.

The requestor conducted its own analysis of Medicare claims data (Q4 2017-Q3 2018) for total hip replacement procedures and compared cases with an oxidized zirconium bearing surface implant to cases without an oxidized zirconium bearing surface implant. The requestor reported that it found statistically reduced SNF costs, hospital length of stay, 90-day episode costs, and 55% decreased mortality at 180 days for the oxidized zirconium bearing surface implant cases. The requestor urged CMS to recognize this technology with a differentiated payment in the form of a new MS-DRG, based on its findings of excellent clinical outcomes for total hip replacement procedures that utilize an oxidized zirconium bearing surface implant.

The third option provided by the requestor was to reassign all cases reporting a total hip replacement procedure using an oxidized zirconium bearing surface implant with a principal diagnosis of hip fracture from MS-DRG 470 (Major Hip and Knee Joint Replacement or Reattachment of Lower Extremity without MCC) to MS-DRG 469 (Major Hip and Knee Joint Replacement or Reattachment of Lower Extremity with MCC or Total Ankle Replacement). The requestor stated this option would maintain the two existing MS-DRGs for total joint arthroplasty and would only involve moving a small subset of cases (approximately 300) from MS-DRG 470 to MS-DRG 469.

The requestor acknowledged that the third option was more limited than the first two options, however, the requestor stated that it was the least disruptive since the two MS-DRGs and estimated relative weights would remain essentially the same. The requestor also stated that reassigning cases reporting a total hip replacement procedure using an oxidized zirconium bearing surface implant with a principal diagnosis of hip fracture from MS-DRG 470 to MS-DRG 469 would encourage hospitals to use these high-quality, proven implants.

The requestor also asserted that the third option focuses the suggested payment changes on the population of patients that benefit the most from the technology. According to the requestor, the analysis of Medicare claims data suggests that there is potential to improve care for the older population of patients who receive a total hip replacement by encouraging providers to use an oxidized zirconium bearing surface implant for hip fracture cases. In addition, the requestor stated that long-term Medicare solvency concerns impel consideration of incentives as a means to drive better outcomes at lower cost. Specifically, the requestor asserted that if all of the approximately 150,000 total hip replacement procedures performed annually in the U.S. for hip fracture achieved 90-day episode cost savings observed in Medicare claims for oxidized zirconium bearing surface implants, based on the requestor's analysis, potential annual savings of more than $650 million could be realized, in addition to longer-term savings achieved through reduced revisions.

The requestor also welcomed additional analysis by CMS of the claims data and consideration of alternative configurations that might better align patient severity, clinical value and payment.

As indicated by the requestor, October 1, 2017, new ICD-10-PCS procedure codes describing hip and knee replacement procedures with an oxidized zirconium bearing surface implant were created. The procedure codes are as follows:

We indicated in the FY 2021 IPPS/LTCH PPS proposed rule that we examined claims data from the September 2019 update of the FY 2019 MedPAR file for MS-DRGs 469 and 470 where hip and knee replacement procedures are currently assigned for cases reporting the use of an oxidized zirconium bearing surface implant to address the three options provided by the requestor.

To evaluate the first option provided by the requestor, we analyzed the cases reporting a total hip or total knee replacement procedure with an oxidized zirconium bearing surface implant in MS-DRG 470 to determine if a new MS-DRG is warranted. To evaluate the second option provided by the requestor, we analyzed the cases reporting a total hip replacement procedure without an oxidized zirconium bearing surface implant with a principal diagnosis of hip fracture and cases reporting a total hip replacement procedure with an oxidized zirconium implant with or without a principal diagnosis of hip fracture in MS-DRG 470 to determine if a new MS-DRG is warranted. We referred the reader to Table 6P.1c associated with the proposed rule for a list of the procedure codes that describe a hip replacement without an oxidized zirconium bearing surface implant and to Table 6P.1e associated with the proposed rule for a list of the diagnosis codes describing a hip fracture that were provided by the requestor for consideration of options 2 and 3. To evaluate the third option provided by the requestor, we analyzed the cases reporting a total hip replacement procedure with an oxidized zirconium bearing surface implant and a principal diagnosis of fracture in MS-DRG 470 to determine if the cases warrant reassignment to MS-DRG 469. Our findings are shown in the following table.

As shown in the table, there was a total of 25,701 cases with an average length of stay of 5.9 days and average costs of $22,126 in MS-DRG 469. For MS-DRG 470, there was a total of 386,221 cases with an average length of stay of 2.3 days and average costs of $14,326. Of those 386,221 cases in MS-DRG 470, there was a total of 18,898 cases reporting a total hip replacement or total knee replacement procedure with an oxidized zirconium bearing surface implant with an average length of stay of 2.1 days and average costs of $14,808; a total of 47,316 cases reporting a total hip replacement procedure with a principal diagnosis of hip fracture with an average length of stay of 4.5 days and average costs of $16,077; a total of 7,241 cases reporting a total hip replacement procedure with an oxidized zirconium bearing surface implant with or without a principal diagnosis of hip fracture with an average length of stay of 1.9 days and average costs of $13,875; and a total of 316 cases reporting a total hip replacement procedure with an oxidized zirconium bearing surface implant with a principal diagnosis of hip fracture with an average length of stay of 4 days and average costs of $18,304.

We noted that the data analysis performed to evaluate the first option provided by the requestor indicated that the 18,898 cases reporting a total hip replacement or total knee replacement procedure with an oxidized zirconium bearing surface implant in MS-DRG 470 have a similar average length of stay (2.1 days versus 2.3 days) and similar average costs ($14,808 versus $14,326) compared to all the cases in MS-DRG 470. The results are also consistent with the requestor's findings that there were approximately 18,000 cases reporting a hip or knee replacement with an oxidized zirconium bearing surface implant. Based on the claims analysis, our clinical advisors stated that the data does not support creating a new MS-DRG for these procedures. We stated that our clinical advisors also believed that the characteristics of the patients and resources used for a case that involves a total hip replacement or total knee replacement procedure with an oxidized zirconium bearing surface implant are not clinically distinct from the characteristics of the patients and resources used for the cases reporting a total hip replacement or total knee replacement procedure without an oxidized zirconium bearing surface implant. Therefore, in consideration of the first option provided by the requestor, we proposed to not create a new MS-DRG for cases reporting a total hip or knee replacement procedure with an oxidized zirconium bearing surface implant.

The data analysis performed to evaluate the second option provided by the requestor indicated that the 47,316 cases reporting a total hip replacement procedure without an oxidized zirconium bearing surface implant with a principal diagnosis of hip fracture have an average length of stay that is longer than the average length of stay for all the cases in MS-DRG 470 (4.5 days versus 2.3 days) and the average costs are higher when compared to all the cases in MS-DRG 470 ($16,077 versus $14,326). For the 7,241 cases reporting a total hip replacement procedure with an oxidized zirconium bearing surface implant with or without a principal diagnosis of hip fracture, the average length of stay is shorter than the average length of stay for all the cases (1.9 days versus 2.3 days) and the average costs are slightly lower when compared to all the cases in MS-DRG 470 ($13,875 versus $14,326). Our analysis of the combined total number of cases identified for the second option provided by the requestor indicated that the 54,557 cases (47,316 + 7,241) have a longer average length of stay compared to the average length of stay for all the cases in MS-DRG 470 (4.2 days versus 2.3 days) and the average costs are slightly higher ($15,785 versus $14,326) when compared to all the cases in MS-DRG 470. The results are also consistent with the requestor's findings that there were approximately 58,000 cases reporting a total hip replacement procedure without an oxidized zirconium bearing surface implant with a principal diagnosis of hip fracture or a total hip replacement procedure with an oxidized zirconium bearing surface implant with or without a principal diagnosis of hip fracture. We stated that our clinical advisors believed that the data does not support creating a new MS-DRG for the subset of cases as suggested by the requestor. They noted the variation in the volume (47,316 cases and 7,241 cases), average length of stay (4.5 days and 1.9 days), and the average costs ($16,077 and $13,875) for each subset of option 2 and that the total average cost for the combined cases identified for the second option ($15,785) is very similar to the costs of all the cases in MS-DRG 470 ($14,326). Therefore, in consideration of the second option provided by the requestor, we did not propose to create a new MS-DRG for cases reporting a total hip replacement procedure without an oxidized zirconium bearing surface implant with a principal diagnosis of hip fracture and cases reporting a total hip replacement procedure with an oxidized zirconium implant with or without a principal diagnosis of hip fracture.

The data analysis performed to evaluate the third option provided by the requestor indicated that the 316 cases reporting a total hip replacement procedure with an oxidized zirconium bearing surface implant with a principal diagnosis of hip fracture have a longer average length of stay (4.0 days versus 2.3 days) and higher average costs ($18,304 versus $14,326) compared to all the cases in MS-DRG 470. The results are also consistent with the requestor's findings that there were approximately 300 cases reporting a total hip replacement procedure with an oxidized zirconium bearing surface implant with a principal diagnosis of hip fracture. Our clinical advisors noted that while the data shows a longer length of stay and higher average costs for these cases under option 3, the analysis of the cases reporting a total hip replacement procedure without an oxidized zirconium bearing surface implant with a principal diagnosis of hip fracture under option 2 also demonstrated a longer length of stay and higher average costs. They therefore recommended we conduct further review specifically of those cases reporting a total hip replacement procedure with a principal diagnosis of hip fracture, with or without an oxidized zirconium bearing surface implant.

As indicated in the proposed rule, based on the advice of our clinical advisors and in connection with the request for CMS to examine the claims data and consider alternative configurations, we performed additional analysis of those cases reporting a total hip replacement procedure with a principal diagnosis of hip fracture for both MS-DRGs 469 and 470. We stated that the procedure codes for the hip replacement procedures included in this additional analysis are displayed in Table 6P.1d associated with the proposed rule and the diagnosis codes for hip fracture included in this additional analysis are displayed in Table 6P.1e associated with the proposed rule. Our findings are shown in the following table.

As shown in the table, there was a total of 14,163 cases reporting a total hip replacement procedure with a principal diagnosis of hip fracture with an average length of stay of 7.2 days and average costs of $21,951 in MS-DRG 469. There was a total of 47,632 cases reporting a total hip replacement procedure with a principal diagnosis of hip fracture with an average length of stay of 4.5 days and average costs of $16,092 in MS-DRG 470. The average length of stay for the cases reporting a total hip replacement procedure with a principal diagnosis of hip fracture in MS-DRGs 469 and 470 were longer (7.2 days versus 5.9 days and 4.5 versus 2.3 days, respectively) compared to all the cases in their assigned MS-DRGs. The average costs of the cases reporting a total hip replacement procedure with a principal diagnosis of hip fracture in MS-DRG 469 were approximately $175 less when compared to the average costs of all cases in MS-DRG 469 ($21,951 versus $22,126) and slightly more for MS-DRG 470 ($16,092 versus $14,326). Our clinical advisors supported differentiating the cases reporting a total hip replacement procedure with a principal diagnosis of hip fracture from those cases without a hip fracture by assigning them to a new MS-DRG. They noted that clinically, individuals who undergo hip replacement following hip fracture tend to require greater resources for effective treatment than those without hip fracture. They further noted that the increased complexity associated with hip fracture patients can be attributed to the post traumatic state and the stress of pain, possible peri-articular bleeding, and the fact that this subset of patients, most of whom have fallen as the cause for their fracture, may be on average more frail than those who require hip replacement because of degenerative joint disease.

We applied the criteria to create subgroups in a base MS-DRG as discussed in section II.D.1.b. of the FY 2021 IPPS/LTCH PPS proposed rule and section II.E.1.b. of this final rule. We noted that, as shown in the table that follows, a three-way split of this base MS-DRG failed to meet the criterion that there be at least a 20% difference in average costs between the CC and NonCC subgroup and also failed to meet the criterion that there be at least a $2,000 difference in average costs between the CC and NonCC subgroup. The following table illustrates our findings.

We then applied the criteria for a two-way split for the “with MCC and without MCC” subgroups and found that all five criteria were met. We stated that for the proposed new MS-DRGs, there is at least (1) 500 cases in the MCC subgroup and 500 cases in the without MCC subgroup; (2) 5 percent of the cases in the MCC group and 5 percent in the without MCC subgroup; (3) a 20 percent difference in average costs between the MCC group and the without MCC group; (4) a $2,000 difference in average costs between the MCC group and the without MCC group; and (5) a 3-percent reduction in cost variance, indicating that the severity level splits increase the explanatory power of the base MS-DRG in capturing differences in expected cost between the MS-DRG severity level splits by at least 3 percent and thus improve the overall accuracy of the IPPS payment system. The following table illustrates our findings.

For FY 2021, we proposed to create new MS-DRG 521 (Hip Replacement with Principal Diagnosis of Hip Fracture with MCC) and new MS-DRG 522 (Hip Replacement with Principal Diagnosis of Hip Fracture without MCC). We referred the reader to Table 6P.1d associated with this proposed rule for the list of procedure codes describing hip replacement procedures and to Table 6P.1e associated with the proposed rule for the list of diagnosis codes describing hip fracture diagnoses that we proposed to define in the logic for these new MS-DRGs.

Comment: Several commenters supported the proposal to create proposed new MS-DRGs 521 and 522 for patients undergoing a hip replacement due to a hip fracture. The commenters stated their belief that the proposed new MS-DRGs and payment rates will better match the resource utilization for these clinically distinct patients. Specifically, a commenter noted that it is appropriate to differentiate hip replacement cases based on whether the patient has a hip fracture since, as noted in clinical literature, total hip arthroplasty (THA) for hip fracture cases are subject to longer lengths of stay, and more postoperative complications, readmissions, reoperations, and mortality than THA cases performed for osteoarthritis of the hip. Another commenter stated that combining hip fractures in the current MS-DRGs 469 and 470 with planned hip replacement procedures fails to take into consideration and adequately compensate for the complex nature of and additional care fracture patients require. The commenter noted that hip fracture patients require an increased acute length of stay, often have more post traumatic stressors due to their fall and are on average frailer than those patients who choose to have an elective hip replacement, therefore, creating two new MS-DRGs would help to capture the differences in the care required and the cost between hip fracture patients and elective hip replacement patients. Another commenter expressed appreciation for CMS' effort to review the analysis and provide results of each option and alternative options in detail with the associated diagnosis and procedure codes in the proposed rule to define in the logic for the proposed new MS-DRGs. Based on the results, the commenter stated they agreed that differentiating the cases reporting a total hip replacement procedure with a principal diagnosis of hip fracture from those cases without a hip fracture by assigning them to a new MS-DRG would better align cases by average length of stay and average costs of cases, and lead to a more reasonable MS-DRG classification of these cases. Lastly, a commenter specifically expressed support for the establishment of the proposed new MS-DRGs, regardless of the type of bearing surface implant used in the joint replacement procedure.

However, a couple commenters who supported the concept of the proposal to create proposed new MS-DRGs 521 and 522 recommended that CMS not finalize the proposal until further analysis could be conducted. The commenters expressed concern that the relative weight and the average length of stay for proposed new MS-DRG 521 did not appear to align with clinical experience and underlying data since it is lower than the relative weight and average length of stay for MS-DRG 469. The commenters suggested that CMS re-evaluate and provide clarification on the data analysis.

A commenter expressed appreciation for the consideration CMS provided in response to the request to create MS-DRGs specifically for oxidized zirconium implants utilized in hip and knee replacement procedures. The commenter stated that although CMS' proposal did not explicitly focus on oxidized zirconium implants, an alternative option for the joint replacement procedures was examined and presented, resulting in the proposed new MS-DRGs 521 and 522. The commenter stated that these proposed MS-DRGs would improve distinguishing this subset of patients with a hip fracture who undergo a hip replacement procedure, however, the ability to differentiate meaningful parameters of care quality is not realized since the proposal treats all implants the same, despite what the commenter stated were the important clinical improvements demonstrated in the Medicare claims data for oxidized zirconium implants used for hip fracture patients. As a result, the commenter stated its belief that CMS should revise its proposal and adopt a specific MS-DRG for patients with a principal diagnosis of hip fracture receiving an oxidized zirconium bearing surface implant in a hip replacement procedure. According to the commenter, this would reflect an improvement over the proposed MS-DRGs 521 and 522, and best advance CMS policy and patient care objectives by creating incentives that appropriately encourage the use of a technology that has been shown to have substantial cost-saving and quality of care benefits. In addition, the commenter asserted that CMS stated a separate MS-DRG for oxidized zirconium is not warranted because certain criteria for establishing MS-DRG CC subgroups are not met. The commenter indicated CMS has broad statutory authority in the design of the Medicare inpatient payment system and is not required to limit its MS-DRG subgroups exclusively to be based on severity of co-morbidities or complications. The commenter remarked CMS should also not be limited to its five-step criteria for CC subgroups and by allowing for the creation of MS-DRG subgroups where there is clear evidence of a substantial clinical improvement will give CMS significantly greater flexibility to accomplish its goals of transformative quality improvement and cost-savings. The commenter stated that CMS has the ability and authority to make payment policy decisions that it believes will advance care and the Social Security Act grants CMS broad authority to establish a classification of inpatient hospital discharges by diagnosis-related groups and a methodology for classifying specific hospital discharges within these groups. The commenter maintained that nothing in the statute prohibits CMS from creating MS-DRG groups or sub-groups based partly upon other important policy criteria, such as actual improved patient outcomes. According to the commenter, CMS should use its exceptions and adjustments authority to accomplish this objective. The commenter provided the example that although CMS did not propose to create a new MS-DRG for oxidized zirconium implants, it could still adjust payment rates for inpatient stays involving such implants and accomplish similar results. The commenter expressed appreciation that the IPPS centrally organizes MS-DRGs on the basis of resource usage and clinical coherence, however, urged CMS to incorporate outcomes-based consideration. The commenter also contended that CMS has the opportunity to more fully realize the value of proven technologies by making incremental MS-DRG changes that lend access to the technologies shown to provide the most significant clinical benefits and signal to hospitals, surgeons, private payers, and others that CMS sees the value of these implants and wants to make sure Medicare beneficiaries can access these technologies. The commenter suggested that CMS consider MS-DRG subgroup requests that fall outside of the current five-step criteria for CC sub-groups, provided that requestors can demonstrate a substantial clinical improvement since this would allow the agency additional flexibility to make changes in MS-DRGs for technologies that demonstrate substantial clinical improvement based on lengthy track records of proven performance. The commenter noted how CMS utilizes the substantial clinical improvement criterion as part of assessing whether a new technology is eligible for a New Technology Add-On Payment or Transitional Pass-Through status and urged CMS to expand its use of this standard as an alternative pathway when evaluating certain MS-DRG subgroup requests. The commenter stated that in reviewing certain technologies associated with total joint replacement procedures, CMS should evaluate implants based on their ability to demonstrate significant reductions in long-term revision rates which are critical in studying improved patient outcomes and cost savings within the Medicare program. Additional data for revision rates from international joint replacement registries, reduced mortality rates from both international registries and Medicare claims data, and readmission rates from Medicare claims data was also provided by the commenter who asserted the information compels CMS to determine whether to finalize MS-DRGs that capture the broad category of hip fracture cases, or to create a narrower hip fracture MS-DRG based on strong outcomes differences observed in Medicare claims. The commenter asserted that because the data show strong results for hip fracture patients treated with an oxidized zirconium implant, CMS should also consider an exception and expand on proposed MS-DRGs 521 and 522 by creating a specific MS-DRG for hip fracture patients treated with an oxidized zirconium implant.

Lastly, the commenter expressed its appreciation for the analytical work and extensive consideration CMS provided to the request and acknowledged oxidized zirconium implants are only used in a very small portion of total hip replacement with hip fracture cases. The commenter stated its belief that the proposed MS-DRGs 521 and 522 would improve the ability to clinically distinguish hip fracture cases treated with a hip replacement from elective hip replacement procedures if CMS continues to believe a specific MS-DRG for hip fracture patients treated with an oxidized zirconium implant is not warranted.

Another commenter stated the proposal to create proposed new MS-DRGs 521 and 522 to account for differences in the cost of the THA procedure for a hip fracture appeared to be a neutral act in terms of cost. The commenter recommended that the proposal not be adopted as final policy since the current THA MS-DRGs 469 and 470 already provide similar reimbursement for the procedures through associated diagnostic codes, and the added expense of treating hip fractures is accounted for in the Comprehensive Care for Joint Replacement (CJR) Model. This commenter stated their belief that it would be inappropriate to make such a substantive change to the MS-DRG system without a strong body of evidence to support proposals which directly benefit one device over another. The commenter also stated they are not aware of any high-quality randomized controlled trials which report beneficial effects of the oxidized zirconium bearing surface. According to the commenter, any reported beneficial effect is most likely due to selection bias (that is, choosing younger, healthier patients for the oxidized zirconium bearings), rather than any real difference in performance. The commenter stated that this is true for registry data as well as clinical cohort studies. In addition, the commenter noted that among their society's hip replacement experts, the superiority of oxidized zirconium-alloy bearings is not a generally accepted fact. The commenter stated that they support higher reimbursement for hip replacements with a fracture in the existing MS-DRGs 469 and 470, however, they currently do not support creating the new MS-DRGs as proposed.

Response: We appreciate the commenters' support of the proposal to create proposed new MS-DRGs 521 and 522. We agree with the commenters that the proposed new MS-DRGs and payment rates will better match the resource utilization for these clinically distinct patients.

In response to the commenters who supported the concept of the proposal however recommended that CMS conduct further analysis for proposed new MS-DRG 521 because the proposed relative weight and average length of stay did not appear to align with clinical experience and underlying data in comparison to MS-DRG 469, we note that effective October 1, 2017 (FY 2018) the logic for MS-DRG 469 includes total ankle replacement procedures, therefore, the average length of stay, the average costs, and the relative weight of MS-DRG 469 continue to reflect the resource utilization associated with total ankle replacement procedures. In addition, total knee replacement procedures with a MCC are also included in the logic for MS-DRG 469.

The procedure codes identifying a total ankle replacement or total knee replacement are as follows:

We analyzed data from the September 2019 update of the FY 2019 MedPAR file for cases reporting a total ankle replacement procedure or a total knee replacement procedure in MS-DRG 469 for comparison to proposed MS-DRG 521. Our findings are shown in the following tables.

We found a total of 25,701 cases in MS-DRG 469 with an average length of stay of 5.9 days and average costs of $22,126. Of those 25,701 cases, we found a total of 2,819 cases reporting a total ankle replacement procedure with an average length of stay of 1.7 days and average costs of $22,327 and a total of 4,617 cases reporting a total knee replacement procedure with an average length of stay of 4.9days and average costs of $21,626.

As discussed in the proposed rule and shown in the table above, for proposed MS-DRG 521, the average length of stay is 7.2 days which is longer than the average length of stay of 5.9 days for MS-DRG 469, and the average costs for proposed MS-DRG 521 are slightly lower ($175) compared to the average costs of MS-DRG 469 ($21,951 versus $22,126, respectively).

The data demonstrates that the average costs of the total ankle replacement procedures in MS-DRG 469 are slightly higher than the average costs of all the cases in MS-DRG 469 ($22,327 versus $22,126). The proposal to reassign cases reporting a total hip replacement procedure with a principal diagnosis of a hip fracture from MS-DRG 469 to proposed new MS-DRG 521 includes the reassignment of 14,163 cases out of the 25,701 cases resulting in a total of 11,538 cases proposed to remain in MS-DRG 469. Of those 11,538 cases remaining in MS-DRG 469, a total of 2,819 cases reflect a higher utilization of resources, thereby continuing to impact the relative weight of MS-DRG 469 such that it is slightly higher than the proposed relative weight for proposed MS-DRG 521 (3.0844 versus 3.0634). Therefore, the data appears to reflect that the difference in the relative weights can be attributed to the fact that the total ankle replacement procedures continue to have an impact for MS-DRG 469.

In response to the commenter who stated that CMS should revise its proposal and adopt a specific MS-DRG for patients with a principal diagnosis of hip fracture receiving an oxidized zirconium bearing surface implant in a hip replacement procedure, we note that, our clinical advisors do not support the creation of a separate, specific MS-DRG for oxidized zirconium bearing surface implants for reasons previously discussed in the FY 2021 IPPS/LTCH PPS proposed rule. As the commenter stated in its own comments, CMS organizes MS-DRGs on the basis of resource usage and clinical coherence. Consistent with our annual process of evaluating MS-DRG classification requests, we performed a thorough review of the claims data for oxidized zirconium bearing surface implants utilized in a hip replacement procedure and provided a summary of that analysis, including input from our clinical advisors, as discussed in the proposed rule. Our clinical advisors believe that hip replacement procedures performed for a hip fracture demonstrate similar and predictable resource demands, regardless of the type of bearing surface implant used in the performance of the procedure. Therefore, we proposed to create new MS-DRGs 521 and 522, consistent with our efforts to continually refine the ICD-10 MS-DRGs while maintaining clinically coherent groups that also more accurately stratify Medicare patients with varying levels of severity. Therefore, with respect to the commenter's statement that CMS has broad authority to make policy changes, including the special exceptions and adjustment authority, we do not believe such changes would be appropriate or necessary for this group of hip replacement patients that receive an oxidized zirconium bearing surface implant. We can consider the commenter's suggestions to incorporate additional considerations into our analysis of MS-DRG classification requests in future rulemaking. We also wish to clarify for the commenter that the criteria to create subgroups within a base MS-DRG was not applied in evaluating the request to create a new MS-DRG. In other words, the criteria to create subgroups is only applied after the decision to propose to create a base MS-DRG is made.

Finally, in response to the commenter's statement that CMS should expand its use of the substantial clinical improvement standard as an alternative pathway when evaluating certain MS-DRG subgroup requests similar to the new technology add-on payment policy process, we will take this into future consideration.

In response to the commenter who stated their belief that it would be inappropriate to make a substantive change to the MS-DRG system without a strong body of evidence to support proposals which directly benefit one device over another and that they are not aware of any high-quality randomized controlled trials which report beneficial effects of the oxidized zirconium bearing surface, we wish to clarify that the CMS proposal did not involve proposing to directly benefit the oxidized zirconium bearing surface implant over other bearing surface implants. The CMS proposal presented was an alternative option to what the requestor submitted for CMS' consideration. Specifically, the CMS proposal was to group together all hip replacement procedures performed to treat a hip fracture, regardless of the type of bearing surface implant used, and the resulting MS-DRG assignment would be further differentiated based on the presence of a MCC, hence the proposal to create proposed new MS-DRGs 521 and 522 (Hip Replacement with Principal Diagnosis of Hip Fracture with and without MCC, respectively).

After consideration of the comments we received, for the reasons previously discussed, we are finalizing our proposal to create MS-DRGs 521 and 522 (Hip Replacement with Principal Diagnosis of Hip Fracture with and without MCC, respectively) for FY 2021. We refer readers to table 6P.1d for the list of procedure codes describing hip replacements and table 6P.1e for the list of diagnosis codes describing hip fractures (available via the internet on the CMS web page at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS ) that we are finalizing in the GROUPER logic for MS-DRGs 521 and 522.

In the FY 2021 IPPS/LTCH PPS proposed rule, we also noted that the Comprehensive Care for Joint Replacement (CJR) model includes episodes triggered by MS-DRG 469 with hip fracture and MS-DRG 470 with hip fracture. Given the proposal to create new MS-DRG 521 and MS-DRG 522, we sought public comment on the effect this proposal would have on the CJR model and whether to incorporate MS-DRG 521 and MS-DRG 522, if finalized, into the CJR model's proposed extension to December 31, 2023. As discussed in the CJR proposed rule “Comprehensive Care for Joint Replacement Model Three-Year Extension and Changes to Episode Definition and Pricing” (85 FR 10516), we proposed to extend the duration of the CJR model. We stated that this extension, if finalized, would revise certain aspects of the CJR model including, but not limited to, the episode of care definition, the target price calculation, the reconciliation process, the beneficiary notice requirements and the appeals process. Additionally, we stated that the CJR proposed rule would allow time to test the changes by extending the length of the CJR model through December 31, 2023, for certain participant hospitals. The comment period for the CJR proposed rule closed on June 23, 2020 (85 FR 22978). We intend to address the comments on the proposed rule and this solicitation in the Comprehensive Care for Joint Replacement Model Three-Year Extension and Changes to Episode Definition and Pricing Final Rule. . In an interim final rule that we published in the April 6, 2020 Federal Register, we extended the duration of the CJR model through March 31, 2021, in light of the COVID-19 pandemic, to ensure continuity of CJR model operations in participant hospitals during the public health emergency so that we did not create any additional disruptions to the standard of care procedures hospitals have in place during this challenging time. Because the model will continue until at least March 31, 2021, we intend to adopt a policy in the CJR final rule that incorporates MS-DRG 521 and MS-DRG 522 into the CJR model as of the effective date of these new MS-DRGs. We believe such an approach would avoid disruption to the model for the remainder of PY5 (as extended) and thereafter, if our proposal to extend the CJR model to December 31, 2023 is finalized.

8. MDC 11 (Diseases and Disorders of the Kidney and Urinary Tract)

a. Kidney Transplants

As discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32510), we received two separate but related requests to review the MS-DRG assignment for procedures describing the transplantation of kidneys. The first request was to designate kidney transplants as a Pre-MDC MS-DRG in the same manner that other organ transplants are. The requestor performed its own analysis and stated that it found that cases with a principal diagnosis from MDC 05 (Diseases and Disorders of the Circulatory System), for example I13.2 (Hypertensive heart and chronic kidney disease with heart failure and with stage 5 chronic kidney disease, or end stage renal disease), reported with a kidney transplant from MDC 11 (Diseases and Disorders of the Kidney and Urinary Tract), grouped to MS-DRG 981(Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC). The requestor stated it did not appear appropriate that a kidney transplant would group to MS-DRG 981 when diagnosis code I13.2 is a legitimate principal diagnosis for this procedure. This requestor also suggested that if there was a proposal for designating the MS-DRG for kidney transplants as a Pre-MDC MS-DRG, that a severity level split should also be considered.

As discussed in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42128 through 42129), during our review of cases that group to MS-DRGS 981 through 983, we noted that when procedures describing transplantation of kidneys (ICD-10-PCS procedure codes 0TY00Z0 (Transplantation of right kidney, allogeneic, open approach) and 0TY10Z0 (Transplantation of left kidney, allogeneic, open approach) are reported in conjunction with ICD-10-CM diagnosis codes in MDC 05 (Diseases and Disorders of the Circulatory System), the cases group to MS-DRGs 981 through 983. For the reasons discussed, we proposed to add ICD-10-PCS procedure codes 0TY00Z0 and 0TY10Z0 to MS-DRG 264 in MDC 05. As summarized in the FY 2020 IPPS/LTCH PPS final rule, commenters opposed our proposal to add ICD-10-PCS procedure codes 0TY00Z0 and 0TY10Z0 to MS-DRG 264 in MDC 05. Commenters suggested that CMS instead assign these cases to MS-DRG 652, noting that the length of stay for the vast majority of kidney transplant cases involving serious cardiac conditions approximates the length of stay for kidney transplants in general. After consideration of public comments, we did not finalize our proposal to add ICD-10-PCS procedure codes 0TY00Z0 and 0TY10Z0 to MS-DRG 264 in MDC 05. We stated that we believed it would be appropriate to take additional time to review the concerns raised by commenters consistent with the President's Executive Order on Advancing American Kidney Health (see https://www.whitehouse.gov/presidential-actions/executive-order-advancing-american-kidney-health/ ). Accordingly, cases reporting a principal diagnosis in MDC 05 with a procedure describing kidney transplantation (that is, procedure code 0TY00Z0 or 0TY10Z0) continue to group to MS-DRGs 981 through 983 under the ICD-10 MS-DRGs Version 37, effective October 1, 2019.

In the proposed rule, we stated in response to these public comments and the request we received on this topic for FY 2021 consideration, we examined claims data from the September 2019 update of the FY 2019 MedPAR file for MS-DRG 652. In MS-DRG 652, there were 11,324 cases reporting one of the procedure codes listed describing a kidney transplant procedure, with an average length of stay of 6 days and average costs of $25,424.

We then analyzed claims data for cases reporting one of the procedure codes listed describing the transplantation of kidney reported in MS-DRGs 981, 982, and 983. We did not find any such cases in MS-DRG 983.

Of the 366 cases reporting procedures describing kidney transplants in MS-DRGs 981 and 982, all of the cases reported a principal diagnosis from MDC 05. The diagnoses reported are reflected in the table.

Our clinical advisors reviewed these data. As indicated previously, in MS-DRG 652, there were 11,324 cases reporting one of the procedure codes listed describing a kidney transplant procedure, with an average length of stay of 6 days and average costs of $25,424. Our clinical advisors noted that the average costs for cases reporting transplantation of kidney with a diagnosis from MDC 05 listed previously are generally similar to the average costs of cases in MS-DRG 652. The diagnoses assigned to MDC 05 reflect conditions associated with the circulatory system. We stated that our clinical advisors agreed that although these diagnoses might also be a reasonable indication for kidney transplant procedures, it would not be appropriate to move these diagnoses into MDC 11 because it could inadvertently cause cases reporting these same MDC 05 diagnoses with a circulatory system procedure to be assigned to an unrelated MS-DRG.

To further examine the impact of moving MDC 05 diagnoses into MDC 11, we analyzed claims data for cases reporting a circulatory system O.R. procedure and MDC 05 ICD-10-CM diagnosis code I13.2 (Hypertensive heart and chronic kidney disease with heart failure and with stage 5 chronic kidney disease, or end stage renal disease). Diagnosis code I13.2 was selected since this diagnosis was the MDC 05 diagnosis most frequently reported with kidney transplant procedures. Our findings are reflected in the following table:

As shown in the table, if we were to move diagnosis code I13.2 to MDC 11, 4,366 cases would be assigned to the surgical class referred to as “unrelated operating room procedures” as an unintended consequence. Therefore, as an alternate option, we proposed to modify the GROUPER logic for MS-DRG 652 by allowing the presence of a procedure code describing transplantation of the kidney to determine the MS-DRG assignment independent of the MDC of the principal diagnosis in most instances. The logic for MDC 24 (Multiple Significant Trauma) and MDC 25 (Human Immunodeficiency Virus Infections) will remain unchanged, meaning there would be two exceptions to the modification of the GROUPER logic for MS-DRG 652. If a principal diagnosis of trauma and at least two significant traumas of different body sites are present, the appropriate MS-DRG in MDC 24 would be assigned based on the principal diagnosis and procedures reported, instead of MS-DRG 652. Also, if either a principal diagnosis of HIV infection or a secondary diagnosis of HIV infection with a principal diagnosis of a significant HIV related condition are present, the appropriate MS-DRG in MDC 25 would be assigned based on the principal diagnosis and procedures reported instead of MS-DRG 652. The diagram found towards the end of this discussion illustrates how the MS-DRG logic for MS-DRG 652 (Kidney Transplant) would function.

We stated we recognized MS-DRG 652 is one of the only transplant MS-DRGs not currently defined as a Pre-MDC. Pre-MDCs were an addition to Version 8 of the Diagnosis Related Groups. This proposal was the first departure from the use of principal diagnosis as the initial variable in DRG and subsequently MS-DRG assignment. For Pre-MDC DRGs, the initial step in DRG assignment is not the principal diagnosis, but instead certain surgical procedures with extremely high costs such as heart transplant, liver transplant, bone marrow transplant, and tracheostomies performed on patients on long-term ventilation. When added in Version 8, these types of services were viewed as being very resource intensive. Our clinical advisors have noted, however, that treatment practices have shifted since the inception of Pre-MDCs. We stated that the current proposed refinements to MS-DRG 652 represent the first step in investigating how we may consider introducing this concept of allowing certain procedures to affect the MS-DRG assignment regardless of the MDC from which the diagnosis is reported in the future, with the possibility of removing the Pre-MDC category entirely. In other words, we would consider having the resource intensive procedures currently assigned to the Pre-MDC MS-DRGs determine assignment to MS-DRGs within the clinically appropriate MDC. We are making concerted efforts to continue refining the ICD-10 MS-DRGs and we believe that it is important to include the Pre-MDC category as part of our comprehensive review.

Comment: Commenters agreed with CMS' proposal to modify the GROUPER logic for MS-DRG 652 (Kidney Transplant) to allow the presence of a procedure code describing transplantation of the kidney to determine the MS-DRG assignment independent of the MDC. A commenter also stated they agreed that CMS should consider having the resource-intensive procedures currently assigned to the Pre-MDC MS-DRGs determine assignment to MS-DRGs with the ultimate goal of perhaps being able to eliminate the Pre-MDC category entirely.

Response: We appreciate the commenters' support of the proposal and CMS' plan to include the Pre-MDC category as part of our comprehensive, systematic review of the ICD-10-PCS procedure codes. After consideration of the public comments we received, we are finalizing the proposal to modify the GROUPER logic for MS-DRG 652 to allow the presence of a procedure code describing transplantation of the kidney to determine the MS-DRG assignment independent of the MDC of the principal diagnosis except in the two instances noted above.

We stated in the proposed rule, in response to the request for a severity level split, since the request to designate kidney transplants as a Pre-MDC MS-DRG did not involve a revision of the existing GROUPER logic for MS-DRG 652, we applied the five criteria as described in section II.E.1.b. of the preamble of this final rule to determine if it would be appropriate to subdivide cases currently assigned to MS-DRG 652 into severity levels. This analysis includes 2 years of MedPAR claims data to compare the data results from 1 year to the next to avoid making determinations about whether additional severity levels are warranted based on an isolated year's data fluctuation and also, to validate that the established severity levels within a base MS-DRG are supported. Therefore, we reviewed the claims data for base MS-DRG 652 using the September 2018 update of the FY 2018 MedPAR file and the September 2019 update of the FY 2019 MedPAR file, which were used in our analysis of claims data for MS-DRG reclassification requests for FY 2020 and FY 2021. Our findings are shown in the table:

We applied the criteria to create subgroups for the three-way severity level split. As discussed in section II.D.1.b. of the proposed rule and section II.E.1.b. of this final rule, we proposed, and are finalizing, the expansion of the previously listed criteria to also include the NonCC group. We found that the criterion that there be at least a 20% difference in average costs between subgroups failed for the average costs between the MCC and CC subgroups based on the data in both the FY 2018 and FY 2019 MedPAR files. The criterion that there be at least 500 cases for each subgroup also was not met, as shown in the table for both years. Specifically, for the “with MCC”, “with CC”, and “without CC/MCC” split, there were only 356 cases in the “without CC/MCC” subgroup based on the data in the FY 2019 MedPAR file and only 464 cases in the “without CC/MCC” subgroup based on the data in the FY 2018 MedPAR file. We then applied the criteria to create subgroups for the two-way severity level splits and found that the criterion that there be at least a 20 percent difference in average costs between the “with MCC” subgroup and the “without MCC” group failed for both years. The criterion that there be at least a 3-percent reduction in cost variance between the “with CC/MCC” and “without CC/MCC” subgroups also failed for both years, indicating that the current base MS-DRG 652 maintains the overall accuracy of the IPPS payment system. The claims data do not support a three-way or a two-way severity level split for MS-DRG 652, therefore for FY 2021, we did not propose to subdivide MS-DRG 652 into severity levels.

Comment: A commenter supported our proposal and expressed appreciation for CMS's examination of the GROUPER logic for DRG 652.

Response: We appreciate the commenters' support.

After consideration of public comments, we are finalizing the proposal to not subdivide MS-DRG 652 into severity levels. We refer the reader to section II.E.1.b. of this final rule for the comments regarding our proposal to expand the previously listed subgroup criteria to also include the NonCC group, as well as our finalization of that proposal.

As discussed in the proposed rule and earlier in this section we received two separate but related requests. The second request was that a new MS-DRG be created for kidney transplant cases where the patient received dialysis during the inpatient stay and after the date of the transplant. According to the requestor, transplant hospitals incur higher costs related to post-transplant care of patients who receive kidneys from “medically complex donors” (defined by the requestor as coming from organ donors over aged 60 and donors after circulatory death). The requestor also stated that their research indicated that studies consistently identified organ donors over the age of 60 and donors after circulatory death as the most significant areas for growth in increasing the number of organ transplantations, but this growth is hampered by the underutilization of these types of organs. The requestor performed its own data analysis and stated that total standardized costs were 32 percent higher for cases where the beneficiary received dialysis during the inpatient stay and after the date of transplant compared to all other kidney transplant cases currently in MS-DRG 652 (Kidney Transplant), with the additional costs serving as a disincentive to the use of viable kidneys for donation. The requestor asserted that this financially disadvantages transplant centers from using such organs, contributing to the kidney discard rate.

The following ICD-10-PCS procedure codes identify the performance of hemodialysis.

We stated that we acknowledged that the request was to review the costs of dialysis performed after kidney transplantation during the same inpatient admission, however our clinical advisors pointed out, that while not routine, it is not uncommon for a patient to require dialysis while admitted for kidney transplantation before the procedure is performed due to factors related to the availability of the organ, nor is it uncommon for a kidney that has been removed from the donor, transported, and then implanted to require dialysis before it returns to optimal function. Therefore, we examined claims data from the September 2019 update of the FY 2019 MedPAR file for all cases in MS-DRG 652 and compared the results to cases representing kidney transplantation with dialysis performed during the same inpatient admission either before or after the date of kidney transplantation. The following table shows our findings:

As shown by the table, for MS-DRG 652, we identified a total of 11,324 cases, with an average length of stay of 6.0 days and average costs of $25,424. Of the 11,324 cases in MS-DRG 652, there were 3,254 cases describing the performance of hemodialysis in an admission where the patient received a kidney transplant with an average length of stay of 7.6 days and average costs of $30,606. Our clinical advisors noted that the average length of stay and average costs of cases in MS-DRG 652 describing the performance of hemodialysis in an admission where the patient received a kidney transplant were higher than the average length of stay and average costs for all cases in the same MS-DRG.

We stated in further analyzing this issue, noting that patients can require a simultaneous pancreas/kidney transplant procedure, we also examined claims data from the September 2019 update of the FY 2019 MedPAR file for all cases in Pre-MDC MS-DRG 008 (Simultaneous Pancreas/Kidney Transplant) and compared the results to cases representing simultaneous pancreas/kidney transplantation with dialysis performed during the same inpatient admission either before or after the date of kidney transplantation. The following table shows our findings:

As shown by the table, for Pre-MDC MS-DRG 008, we identified a total of 374 cases, with an average length of stay of 10.9 days and average costs of $41,926. Of the 374 cases in Pre-MDC MS-DRG 008, there were 84 cases describing the performance of hemodialysis during an admission where the patient received a simultaneous pancreas/kidney transplant with an average length of stay of 13.4 days and average costs of $49,001. We stated our clinical advisors again noted that the average length of stay and average costs of cases in Pre-MDC MS-DRG 008 describing the performance of hemodialysis during an admission where the patient received a simultaneous pancreas/kidney transplant were higher than the average length of stay and average costs for all cases in the same Pre-MDC MS-DRG.

In the proposed rule, we stated our clinical advisors believe that these hemodialysis procedures either performed before or after kidney transplant or before or after simultaneous pancreas/kidney transplant contribute to increased resource consumption for these transplant patients. While there is not a large number of cases describing a simultaneous pancreas/kidney transplant with hemodialysis procedures either performed before or after transplant represented in the Medicare data, and we generally prefer not to create a new MS-DRG unless it would include a substantial number of cases, we stated we believe creating separate MS-DRGs for these cases would appropriately address the differential in resource consumption consistent with the President's Executive Order on Advancing American Kidney Health (see https://www.whitehouse.gov/presidential-actions/executive-order-advancing-american-kidney-health/ ). For these reasons, we proposed to create new MS-DRGs for the performance of hemodialysis during an admission where the patient received a kidney transplant or simultaneous pancreas/kidney transplant.

As stated in the proposed rule, to compare and analyze the impact of our suggested modifications, we ran a simulation using the Version 37 ICD-10 MS-DRG GROUPER and the claims data from the September 2019 update of the FY 2019 MedPAR file. The following table reflects our findings for all 3,254 cases representing kidney transplantation with dialysis performed during the same inpatient admission either before or after the date of kidney transplantation with a two-way severity level split.

As shown in the table, there was a total of 2,195 cases for the kidney transplant with hemodialysis with MCC subgroup, with an average length of stay of 8.0 days and average costs of $32,360. There was a total of 1,059 cases for the kidney transplant with hemodialysis without MCC subgroup, with an average length of stay of 6.8 days and average costs of $26,972. We applied the criteria to create subgroups for the two-way severity level split for the proposed MS-DRGs, including our expansion of the criteria to also include the nonCC group, and found that all five criteria were met. For the proposed MS-DRGs, there is (1) at least 500 cases in the MCC subgroup and in the without MCC subgroup; (2) at least 5 percent of the cases are in the MCC subgroup and in the without MCC subgroup; (3) at least a 20 percent difference in average costs between the MCC subgroup and the without MCC subgroup; (4) at least a $2,000 difference in average costs between the MCC subgroup and the without MCC subgroup; and (5) at least a 3-percent reduction in cost variance, indicating that the proposed severity level splits increase the explanatory power of the base MS-DRG in capturing differences in expected cost between the proposed MS-DRG severity level splits by at least 3 percent and thus improve the overall accuracy of the IPPS payment system.

For the cases describing the performance of hemodialysis during an admission where the patient received a simultaneous pancreas/kidney transplant, we identified a total of 84 cases, so the criterion that there are at least 500 or more cases in any subgroup could not be met. Therefore, for FY 2021, we did not propose to subdivide the proposed new Pre-MDC MS-DRG for the performance of hemodialysis in an admission where the patient received a simultaneous pancreas/kidney transplant into severity levels.

In summary, in the FY 2021 proposed rule, taking into consideration that it clinically requires greater resources to perform hemodialysis during an admission where the patient received a kidney or simultaneous pancreas/kidney transplant, we proposed to create a new Pre-MDC MS-DRG for cases describing the performance of hemodialysis during an admission where the patient received a simultaneous pancreas/kidney transplant. We also proposed to create two new MS-DRGs with a two-way severity level split for cases describing the performance of hemodialysis in an admission where the patient received a kidney transplant in MDC 11. These proposed new MS-DRGs are new Pre-MDC MS-DRG 019 (Simultaneous Pancreas/Kidney Transplant with Hemodialysis), new MS-DRG 650 (Kidney Transplant with Hemodialysis with MCC) and new MS-DRG 651 (Kidney Transplant with Hemodialysis without MCC). We proposed to add the procedure codes from current Pre-MDC MS-DRG 008 to the proposed new Pre-MDC MS-DRG 019 with the procedure codes describing a hemodialysis procedure. Similarly, we also proposed to add the procedure codes from current MS-DRG 652 to the proposed new MS-DRGs 650 and 651 with the procedure codes describing a hemodialysis procedure. In the proposed rule, we noted that the procedure codes describing hemodialysis procedures are designated as non-O.R. procedures, therefore, as part of the logic for these proposed new MS-DRGs, we also proposed to designate these codes as non-O.R. procedures affecting the MS-DRG.

Comment: Many commenters supported CMS' proposal. Commenters stated that the establishment of new MS-DRGs for kidney and simultaneous pancreas/kidney transplants with hemodialysis will increase the number of viable kidneys for transplantation and decrease the kidney discard rate by reducing the financial disincentive for using kidneys from medically complex donors. A few commenters stated they appreciate CMS' recognition of the higher cost involved in these cases and the effort to make kidney transplant services more accessible by aligning payment rates with the relative cost of services for kidney transplants. A commenter stated the proposed creation of two new MS-DRGs for kidney transplant cases with hemodialysis—one for cases with major complications and comorbidities (MCC) and one for cases without MCC, strengthens transplant programs and increases patient access to this vital medical service. Another commenter stated the inclusion of a MCC subgroup for kidney transplant with hemodialysis is vital given the documented increase in the complexity of transplant patients. One commenter specifically stated they strongly support efforts to ensure that kidney transplant MS-DRGs better reflect the cost of all associated care.

Response: We appreciate the commenters' support.

Comment: A few commenters opposed this proposal. One commenter stated they are concerned that the proposal would decrease Medicare payment for all kidney transplants not requiring post-transplant dialysis and were against including components in the proposal that would result in a reduction in inpatient payment for kidney transplant in any category. Another commenter stated they were concerned that CMS will extract money from existing MS-DRG 652 and Pre-MDC MS-DRG 008 to pay for the proposed new MS-DRGs. A different commenter stated their facility has a low volume of admissions with both hemodialysis and kidney transplant performed, with only approximately 21 out of a total of 110 kidney transplants having such a combination, and therefore would be adversely affected should this proposal be finalized.

Response: We appreciate the commenters' concerns, however as we have stated in prior rulemaking, the MS-DRGs are a classification system intended to group together those diagnoses and procedures with similar clinical characteristics and utilization of resources. We continue to believe that consistent with this classification system, the proposed new MS-DRGs would improve clinical coherence while appropriately addressing the differential in resource consumption for cases where hemodialysis is performed during an admission where the patient receives a kidney or simultaneous pancreas/kidney transplant. Each year, we calculate the relative weights by dividing the average cost for cases within each MS-DRG by the average cost for cases across all MS-DRGs. It is to be expected that when MS-DRGs are restructured, resulting in a different case-mix within the new MS-DRGs, the relative weights of the MS-DRGs will change as a result. We refer readers to section II.E.2. of the preamble of this final rule for a discussion of the relative weight calculations.

Therefore, after consideration of the public comments received, and for the reasons stated above, we are finalizing our proposal to create new Pre-MDC MS-DRG 019 (Simultaneous Pancreas/Kidney Transplant with Hemodialysis) for cases describing the performance of hemodialysis during an admission where the patient received a simultaneous pancreas/kidney transplant. We are also finalizing our proposal to create new MS-DRG 650 (Kidney Transplant with Hemodialysis with MCC) and new MS-DRG 651 (Kidney Transplant with Hemodialysis without MCC) for cases describing the performance of hemodialysis in an admission where the patient received a kidney transplant in MDC 11. Accordingly, we are also finalizing our proposal to designate procedure codes 5A1D70Z, 5A1D80Z, and 5A1D90Z that describe hemodialysis as non-O.R. procedures affecting the MS-DRG.

The diagram illustrates how the MS-DRG logic for Kidney Transplants will function. The diagram (Diagram 1.), which is the same Diagram 1 included in the proposed rule, begins by asking if the criteria for a Pre-MDC MS-DRG is met. If yes, the logic asks if the criteria for Pre-MDC MS-DRGs 018, 001-006, 014 or 007 is met. If yes, the logic directs the case to either Pre-MDC MS-DRG 018, 001-006, 014 or 007 based on the principal diagnosis and/or procedures reported. If no, the logic asks if there is a simultaneous pancreas/kidney transplant with a qualifying diagnosis reported on the claim. If no, the logic directs the case to either Pre-MDC MS-DRGs 016, 017, or 010-013 based on the principal diagnosis and/or procedures reported. If yes, the logic asks if there was a hemodialysis procedure reported on the claim. If yes, the logic assigns the case to new Pre-MDC MS-DRG 019 (Simultaneous Pancreas/Kidney Transplant with Hemodialysis). If no, the logic assigns the case to existing Pre-MDC MS-DRG 008 (Simultaneous Pancreas/Kidney Transplant).

If the criteria for a Pre-MDC MS-DRG were not met at the first step, the GROUPER logic asks if there was a principal diagnosis of trauma and at least two significant traumas of different body sites. If yes, the logic directs the case to the appropriate MS-DRG in MDC 24 based on the principal diagnosis and procedures reported. If no, the logic asks if there was either a principal diagnosis of HIV infection or a secondary diagnosis of HIV infection with a principal diagnosis of a significant HIV related condition. If yes, the logic directs the case to the appropriate MS-DRG in MDC 25 based on the principal diagnosis and procedures reported. If no, the logic asks if there is kidney transplant procedure reported on the claim. If no, the logic directs the case to the appropriate MDC and MS-DRG based on the principal diagnosis and procedures reported. If yes, the logic asks if there was a hemodialysis procedure reported on the claim. If yes, the logic assigns the case to new MS-DRGs 650 or 651 (Kidney Transplant with Hemodialysis with MCC or without MCC, respectively). If no, the logic assigns the case to existing MS-DRG 652 (Kidney Transplant).

We also received public comments regarding a number of kidney and hemodialysis related MS-DRG issues that were outside the scope of the proposals included in the FY 2021 IPPS/LTCH PPS proposed rule. These comments were as follows:

• One commenter requested that CMS establish a new MS-DRG for Continuous Renal Replacement Therapy (CRRT).
• One commenter requested that CMS review other transplant cases that end up in MS-DRGs 981 through 983 for reassignment to a more appropriate MS-DRG.
• Two commenters requested that CMS evaluate and make modifications to any MS-DRG related to the delivery of dialysis.

Because we consider these public comments to be outside the scope of the proposed rule, we are not addressing them in this final rule. As stated in section II.E.1.b. of the preamble of this final rule, we encourage individuals with comments about MS-DRG classification to submit these comments no later than November 1, 2020 so that they can be considered for possible inclusion in the annual proposed rule. We will consider these public comments for possible proposals in future rulemaking as part of our annual review process.

b. Addition of Diagnoses to Other Kidney and Urinary Tract Procedures Logic

As discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32519), we received a request to add 29 ICD-10-CM diagnosis codes to the list of principal diagnoses assigned to MS-DRGs 673, 674, and 675 (Other Kidney and Urinary Tract Procedures with MCC, with CC, and without CC/MCC, respectively) in MDC 11 (Diseases and Disorders of the Kidney and Urinary Tract) when reported with procedure codes describing the insertion of totally implantable vascular access devices (TIVADs) and tunneled vascular access devices. The list of 29 ICD-10-CM diagnosis codes submitted by the requestor, as well as their current MDC assignments, are found in the table:

The requestor stated that by adding the codes listed, cases reporting principal diagnosis codes describing complications of dialysis access sites and principal diagnosis codes describing kidney disease in the setting of diabetes or hypertension, would group to MS-DRGs 673, 674, and 675 when a TIVAD or tunneled vascular access device is inserted. The requestor stated that patients who have kidney transplant complications or dialysis catheter complications typically also have chronic kidney disease, end stage renal disease (ESRD) or resolving acute tubular necrosis (ATN) but ICD-10-CM coding guidelines require a complication code to be sequenced first. The requester stated that when reporting a diagnosis code describing ESRD and diabetes, a diabetes code from ICD-10-CM Chapter 4 (Endocrine, Nutritional and Metabolic Diseases) must be sequenced first and when coding ESRD, hypertension, and heart failure, the combination code I13.2 (Hypertensive heart and chronic kidney disease with heart failure and with stage 5 chronic kidney disease or end stage renal disease) must be sequenced first per coding guidelines. The requestor pointed out that code I13.11 (Hypertensive heart and chronic kidney disease without heart failure with stage 5 CKD or ESRD) is currently one of the qualifying principal diagnoses in MS-DRGs 673, 674, and 675 when reported with procedure codes describing the insertion of TIVADs or tunneled vascular access devices; therefore, according to the requestor, diagnosis code I13.2 should reasonably be added.

As discussed in the proposed rule, to begin our analysis, we reviewed the GROUPER logic for MS-DRGs 673, 674, and 675 including the special logic in MS-DRGs 673, 674, and 675 for certain MDC 11 diagnoses reported with procedure codes for the insertion of tunneled or totally implantable vascular access devices. As discussed in the FY 2003 IPPS/LTCH PPS final rule (67 FR 49993 through 49994), the procedure code for the insertion of totally implantable vascular access devices was added to the GROUPER logic of DRG 315 (Other Kidney and Urinary Tract O.R. Procedures), the predecessor DRG of MS-DRGs 673, 674, and 675, when combined with principal diagnoses specifically describing renal failure, recognizing that inserting these devices as an inpatient procedure for the purposes of hemodialysis can lead to higher average charges and longer lengths of stay for those cases.

We next reviewed the 29 ICD-10-CM codes submitted by the requestor. In the proposed rule, we stated our clinical advisors noted that ICD-10-CM diagnosis codes E10.21, E11.21, and E13.21 describing diabetes mellitus with diabetic nephropathy; codes E10.29, E11.29, and E13.29 describing diabetes mellitus with other diabetic kidney complication; T80.211A, T80.212A, and T80.218A describing infection due to central venous catheters; and codes T82.7XXA, T82.818A, T82.828A, T82.838A, T82.848A, T82.858A, T82.868A, and T82.898A describing complications of cardiac and vascular prosthetic devices, implants and grafts, are not necessarily indicative of a patient having renal (kidney) failure requiring the insertion of a TIVAD or a tunneled vascular access device to allow access to the patient's blood for hemodialysis purposes. TIVADs and tunneled vascular access devices are widely used to provide central venous access for the administration of intravenous antibiotics, chemotherapeutic agents, parenteral nutrition and other treatments. They are used in a variety of disease groups, and in both children and adults. We stated in the proposed rule that as such, our clinical advisors do not support adding these diagnoses to the list of principal diagnosis codes in MS-DRG 673, 674, and 675 when reported with procedure codes describing the insertion of TIVADs and tunneled vascular access devices. They noted that TIVADs and tunneled vascular access devices may be inserted for a variety of principal diagnoses, and that adding these 17 diagnoses that are not specific to renal failure would not maintain the clinical coherence with other cases in this subset of cases in MS-DRGs 673, 674, and 675.

We further stated that our clinical advisors also did not support adding ICD-10-CM diagnosis code I13.2 (Hypertensive heart and chronic kidney disease with heart failure and with stage 5 chronic kidney disease, or end stage renal disease) to the special logic in MS-DRGs 673, 674, and 675. As discussed previously, code I13.2 is assigned to MDC 05 (Diseases and Disorders of the Circulatory System). Our clinical advisors agreed it would not be appropriate to move this diagnosis into MDC 11 because it would inadvertently cause cases reporting this same MDC 05 diagnosis with circulatory system procedures to be assigned to an unrelated MS-DRG.

Therefore, for the reasons described previously, we did not propose to add the following 18 ICD-10-CM codes to the list of principal diagnosis codes for MS-DRGs 673, 674, and 675 when reported with a procedures code describing the insertion of a TIVAD or a tunneled vascular access device: E10.21, E10.29, E11.21, E11.29, E13.21, E13.29, I13.2, T80.211A, T80.212A, T80.218A, T82.7XXA, T82.818A, T82.828A, T82.838A, T82.848A, T82.858A, T82.868A, and T82.898A.

Comment: Commenters supported our proposal to not add the 18 ICD-10-CM diagnosis codes listed to the special logic in MS-DRGs 673, 674, and 675. One commenter specifically agreed stating these devices may be inserted for a variety of diagnoses, and adding diagnosis codes that are not specific to renal failure would not maintain clinical coherence with other cases in these MS-DRGs.

Response: We appreciate the commenters' support.

After consideration of the public comments received, we are finalizing our proposal to not add the following 18 ICD-10-CM codes to the list of principal diagnosis codes for MS-DRGs 673, 674, and 675 when reported with a procedures code describing the insertion of a TIVAD or a tunneled vascular access device: E10.21, E10.29, E11.21, E11.29, E13.21, E13.29, I13.2, T80.211A, T80.212A, T80.218A, T82.7XXA, T82.818A, T82.828A, T82.838A, T82.848A, T82.858A, T82.868A, and T82.898A.

We then reviewed the remaining 11 diagnosis codes submitted by the requestor. Codes T82.41XA, T82.42XA, T82.43XA and T82.49XA describe mechanical complications of vascular dialysis catheters. We stated in the proposed rule that our clinical advisors believe the insertion of TIVADs or tunneled vascular access devices for the purposes of hemodialysis is clearly clinically related to diagnosis codes describing a mechanical complication of a vascular dialysis catheter and that for clinical coherence, these cases should be grouped with the subset of cases that report the insertion of totally implantable vascular access devices or tunneled vascular access devices as an inpatient procedure for the purposes of hemodialysis for renal failure.

As discussed in the proposed rule, codes T82.41XA, T82.42XA, T82.43XA and T82.49XA that describe mechanical complications of vascular dialysis catheters are currently assigned to MDC 05 and would require reassignment to MDC 11 in MS-DRGs 673, 674, and 675 to group with the subset of cases that report the insertion of totally implantable vascular access devices or tunneled vascular access devices as an inpatient procedure for the purposes of hemodialysis for renal failure. We examined claims data from the September 2019 update of the FY 2019 MedPAR file for all cases reporting procedures describing the insertion of TIVADs or tunneled vascular access devices with a principal diagnosis from the T82.4- series in MDC 05 and compared this data to cases in MS-DRGs 673, 674 and 675. The following table shows our findings:

As shown in the table, there were 13,068 cases in MS-DRG 673 with an average length of stay of 11 days and average costs of $26,528. There were 1,025 cases reporting a principal diagnosis describing a mechanical complication of vascular dialysis catheter, with a secondary diagnosis of MCC, and a procedure code for the insertion of a TIVAD or tunneled vascular access device with an average length of stay of 4.6 days and average costs of $14,882. There were 6,592 cases in MS-DRG 674 with an average length of stay of 7.6 days and average costs of $17,491. There were two cases reporting a principal diagnosis describing a mechanical complication of vascular dialysis catheter, with a secondary diagnosis of CC, and a procedure code for the insertion of a TIVAD or tunneled vascular access device with an average length of stay of 6 days and average costs of $15,016. There were 437 cases in MS-DRG 675 with an average length of stay of 3.4 days and average costs of $12,506. There was one case reporting a principal diagnosis describing a mechanical complication of vascular dialysis catheter, without a secondary diagnosis of CC or MCC, and a procedure code for the insertion of a TIVAD or tunneled vascular access device with a length of stay of 3 days and costs of $9,317. Our clinical advisors noted that the average length of stay and average costs of cases reporting a diagnosis describing a mechanical complication of a vascular dialysis catheter and the insertion of a TIVAD or a tunneled vascular access device are lower than for all cases in MS-DRGs 673, 674, and 675, respectively.

For the reasons discussed, we stated in the proposed rule that our clinical advisors believe that it is clinically appropriate for the four ICD-10-CM diagnosis codes describing a mechanical complication of a vascular dialysis catheter to group to the subset of GROUPER logic that recognizes the insertion of totally implantable vascular access devices or tunneled vascular access devices as an inpatient procedure for the purposes of hemodialysis. Therefore, we proposed to reassign ICD-10-CM diagnosis codes T82.41XA, T82.42XA, T82.43XA, and T82.49XA from MDC 05 in MS-DRGs 314, 315, and 316 (Other Circulatory System Diagnoses with MCC, with CC, and without CC/MCC, respectively) to MDC 11 (Diseases and Disorders of the Kidney and Urinary Tract) assigned to MS-DRGs 673, 674, and 675 (Other Kidney and Urinary Tract Procedures with MCC, with CC, and without CC/MCC, respectively) and 698, 699, and 700 (Other Kidney and Urinary Tract Diagnoses with MCC, with CC, and without CC/MCC, respectively).

Comment: One commenter questioned the rationale as to the extent totally implantable vascular access devices (TIVADs) are considered “kidney and urinary tract procedures” when placed to address a condition assigned to MDC 05.

Response: We appreciate the commenters' concern.

As discussed in the proposed rule, the procedure code for the insertion of totally implantable vascular access devices was originally added to the GROUPER logic of DRG 315 (Other Kidney and Urinary Tract O.R. Procedures), the predecessor DRG of MS-DRGs 673, 674, and 675, when combined with principal diagnoses specifically describing renal failure, recognizing that these devices are inserted as an inpatient procedure for the purposes of hemodialysis. Our clinical advisors believe the four ICD-10-CM diagnosis codes describing a mechanical complication of a vascular dialysis catheter are clearly clinically related to diagnosis codes that describe renal failure because the complicated vascular dialysis catheter described by these diagnosis codes would not be in place if hemodialysis was not indicated. Therefore, our clinical advisors believe that it is clinically appropriate for the four ICD-10-CM diagnosis codes describing a mechanical complication of a vascular dialysis catheter to group to the subset of GROUPER logic that recognizes the insertion of totally implantable vascular access devices or tunneled vascular access devices as an inpatient procedure for the purposes of hemodialysis.

Comment: Other commenters supported the reassignment of diagnosis codes describing a mechanical complication of a vascular dialysis catheter to MS-DRGs 673, 674, and 675 (Other Kidney and Urinary Tract Procedures with MCC, with CC, and without CC/MCC, respectively) and 698, 699, and 700 (Other Kidney and Urinary Tract Diagnoses with MCC, with CC, and without CC/MCC, respectively) in MDC 11.

Response: We appreciate the commenters' support.

After consideration of the public comments received, we are finalizing our proposal to reassign ICD-10-CM diagnosis codes T82.41XA, T82.42XA, T82.43XA, and T82.49XA from MDC 05 in MS-DRGs 314, 315, and 316 (Other Circulatory System Diagnoses with MCC, with CC, and without CC/MCC, respectively) to MDC 11 (Diseases and Disorders of the Kidney and Urinary Tract) assigned to MS-DRGs 673, 674, and 675 (Other Kidney and Urinary Tract Procedures with MCC, with CC, and without CC/MCC, respectively) and 698, 699, and 700 (Other Kidney and Urinary Tract Diagnoses with MCC, with CC, and without CC/MCC, respectively) under the ICD-10 MS-DRGs Version 38, effective October 1, 2020.

In reviewing ICD-10-CM codes E10.22, E11.22, and E13.22 describing diabetes mellitus with diabetic chronic kidney disease, we noted that related ICD-10-CM diagnosis code E09.22 (Drug or chemical induced diabetes mellitus with diabetic chronic kidney disease) is also not included in the current list of diagnosis codes included in the special logic in MS-DRGs 673, 674, and 675 for certain MDC 11 diagnoses reported with procedure codes for the insertion of tunneled or totally implantable vascular access devices, and therefore we included E09.22 in our review. ICD-10-CM assumes a causal relationship between diabetes mellitus and chronic kidney disease. According to the ICD-10-CM Official Guidelines for Coding and Reporting, the word “with” or “in” should be interpreted to mean “associated with” or “due to” when it appears in a code title, the Alphabetic Index (either under a main term or subterm), or an instructional note in the Tabular List, meaning these conditions should be coded as related even in the absence of provider documentation explicitly linking them, unless the documentation clearly states the conditions are unrelated. To code diabetic chronic kidney disease in ICD-10-CM, instructional notes direct to “code first any associated diabetic chronic kidney disease” (that is, E09.22, E10.22, E11.22, and E13.22) with a second code from subcategory of N18 listed after the diabetes code to specify the stage of chronic kidney disease. Recognizing that coding guidelines instruct to code E09.22, E10.22, E11.22, and E13.22 before codes that specify the stage of chronic kidney disease, our clinical advisors recommended adding diabetic codes E09.22, E10.22, E11.22, and E13.22 when reported with a secondary diagnosis of either N18.5 Chronic kidney disease, stage 5) or N18.6 (End stage renal disease) to the special logic in MS-DRGs 673, 674, and 675 since these diagnosis code combinations describe an indication that could require the insertion of a totally implantable vascular access device or a tunneled vascular access device to allow access to the patient's blood for hemodialysis purposes.

ICD-10-CM codes T86.11, T86.12, T86.13, and T86.19 describe complications of kidney transplant and are currently assigned to MDC 11. We stated our clinical advisors believe these diagnoses are also indications for hemodialysis and these cases represent a distinct, recognizable clinical group similar to those cases in the subset of cases assigned to the special logic in MS-DRGs 673, 674, and 675 when reported with procedure codes describing the insertion of totally implantable vascular access devices or tunneled vascular access devices for hemodialysis.

To summarize, we proposed to add ICD-10-CM codes E09.22, E10.22, E11.22, and E13.22, when reported with a secondary diagnosis of N18.5 or N18.6, to the list of principal diagnosis codes in the subset of GROUPER logic in MS-DRGs 673, 674, and 675 that recognizes the insertion of totally implantable vascular access devices or tunneled vascular access devices as an inpatient procedure for the purposes of hemodialysis. We also proposed to add ICD-10-CM codes T86.11, T86.12, T86.13, and T86.19 to the list of principal diagnosis codes in this subset of GROUPER logic in MS-DRGs 673, 674, and 675.

Comment: Commenters supported our proposal to add ICD-10-CM codes E09.22, E10.22, E11.22, and E13.22, when reported with a secondary diagnosis of N18.5 or N18.6, to the list of principal diagnosis codes in the subset of GROUPER logic in MS-DRGs 673, 674, and 675. The commenters stated they agreed that these diagnosis code combinations describe an indication that could require the insertion of a totally implantable vascular access device or a tunneled vascular access device for hemodialysis purposes. Commenters also supported the addition of ICD-10-CM codes for complications of kidney transplant to the list of principal diagnosis codes in the subset of GROUPER logic in MS-DRGs 673, 674, and 675 that recognizes the insertion of totally implantable vascular access devices or tunneled vascular access devices as an inpatient procedure for the purposes of hemodialysis.

Response: We appreciate the commenters' support.

After consideration of the public comments received, we are finalizing our proposal to add ICD-10-CM codes E09.22, E10.22, E11.22, and E13.22, when reported with a secondary diagnosis of N18.5 or N18.6, to the list of principal diagnosis codes in the subset of GROUPER logic in MS-DRGs 673, 674, and 675. We are also finalizing our proposal to add ICD-10-CM codes T86.11, T86.12, T86.13, and T86.19 to the list of principal diagnosis codes in this subset of GROUPER logic in MS-DRGs 673, 674, and 675.

Lastly, we reviewed the current list of 20 MDC 11 diagnoses assigned to the special logic in MS-DRGs 673, 674, and 675 when reported with procedure codes for the insertion of tunneled or totally implantable vascular access devices. The list of MDC 11 diagnosis codes currently included in the special logic of MS-DRGs 673, 674, and 675 are found in the following table:

As stated in the proposed rule, our clinical advisors pointed out that ICD-10-CM codes I12.9, I13.10, N18.1, N18.2, N18.3, N18.4, and N18.9 do not describe renal failure and they do not describe indications that would generally require the insertion of totally implantable vascular access devices or tunneled vascular access devices for the purposes of hemodialysis. Our advisors noted hemodialysis replicates the function of the kidneys. In cases of acute kidney failure and anuria, hemodialysis is indicated to prevent urea and other waste material from building up in the blood until the kidneys return to normal function. A diagnosis of chronic kidney disease stages 1 through 4, however, means the kidneys still have the ability to filter waste and extra fluid out of the blood. Dialysis is not often initiated in chronic kidney disease until the chronic kidney disease progresses to stage 5 or ESRD, which is defined as when kidney function drops to 15 percent or less. Our clinical advisors stated that these seven codes do not describe indications requiring the insertion of totally implantable vascular access devices or tunneled vascular access devices for hemodialysis and recommended these codes be removed from the special logic in MS-DRGs 673, 674, and 675.

We examined claims data from the September 2019 update of the FY 2019 MedPAR file for MS-DRGs 673, 674, and 675 for this subset of cases to determine if there were any cases that reported one of the seven ICD-10-CM codes in the special logic of MS-DRGs 673, 674, and 675 that do not necessarily describe indications requiring the insertion of totally implantable vascular access devices or tunneled vascular access devices for hemodialysis, the frequency with which they were reported and the relative resource use as compared with all cases assigned to the special logic in MS-DRGs 673, 674, and 675. The following table shows our findings:

As shown by the table, for MS-DRG 673, we identified a total of 7,391 cases assigned to the special logic within this MS-DRG with an average length of stay of 12.1 days and average costs of $28,273. Of these 7,391 cases in the subset of MS-DRG 673, there were 34 cases describing insertion of a TIVAD or tunneled vascular access device with a principal diagnosis of I12.9, I13.10, N18.1, N18.2, N18.3, N18.4, or N18.9 with an average length of stay of 14.2 days and average costs of $27,844. For MS-DRG 674, we identified a total of 3,055 cases assigned to the special logic within this MS-DRG with an average length of stay of 7.8 days and average costs of $17,107. Of these 3,055 cases in the subset of MS-DRG 674, there were 30 cases describing insertion of a TIVAD or tunneled vascular access device with a principal diagnosis of I12.9, I13.10, N18.1, N18.2, N18.3, N18.4, or N18.9 with an average length of stay of 7.2 days and average costs of $11,227. For MS-DRG 675, we identified a total of 58 cases assigned to the special logic within this MS-DRG with an average length of stay of 6.1 days and average costs of $12,582. Of these 58 cases in the subset of MS-DRG 675, there was one case describing insertion of a TIVAD or tunneled vascular access device with a principal diagnosis of I12.9, I13.10, N18.1, N18.2, N18.3, N18.4, or N18.9 with a length of stay of 4 days and costs of $6,549. Overall, for MS-DRGs 673, 674 and 675, there were a relatively small number of cases reporting a principal diagnosis of I12.9, I13.10, N18.1, N18.2, N18.3, N18.4, or N18.9 and a procedure code describing the insertion of a TIVAD or tunneled vascular access device demonstrating that these conditions are not typically addressed by insertion of these devices.

As stated previously, TIVADs and tunneled vascular access devices may be inserted for a variety of principal diagnoses. We stated in the proposed rule that our clinical advisors believe that continuing to include these seven diagnoses that are not specific to renal failure or that do not otherwise describe indications requiring the insertion of totally implantable vascular access devices or tunneled vascular access devices for hemodialysis would not maintain clinical coherence with other cases in this subset of cases in MS-DRGs 673, 674, and 675. Therefore, for the reasons stated, we proposed to remove ICD-10-CM codes I12.9, I13.10, N18.1, N18.2, N18.3, N18.4, and N18.9 from the subset of GROUPER logic in MS-DRGs 673, 674, and 675 that recognizes the insertion of totally implantable vascular access devices or tunneled vascular access devices as an inpatient procedure for the purposes of hemodialysis.

Comment: One commenter expressed concerns about the proposal and did not fully agree with this change. This commenter described a scenario in which a patient with stage 3 chronic kidney disease develops acute kidney failure and has totally implantable vascular access device inserted for the purpose of hemodialysis during an inpatient hospitalization. The commenter questioned if this scenario would qualify for the subset of GROUPER logic in MS-DRGs 673, 674, and 675 that recognizes the insertion of totally implantable vascular access devices or tunneled vascular access devices as an inpatient procedure for the purposes of hemodialysis.

Response: We appreciate the commenter's concern.

As discussed in the proposed rule, ICD-10-CM diagnosis codes N17.0, N17.1 N17.2, N17.8 and N17.9 which describe acute kidney failure are currently included in the special logic of MS-DRGs 673, 674, and 675. These codes were not listed in the seven codes proposed to be removed. In the hypothetical scenario described by the commenter, the case would qualify for the subset of GROUPER logic in MS-DRGs 673, 674, and 675 that recognizes the insertion of totally implantable vascular access devices or tunneled vascular access devices as long as the diagnosis of acute kidney failure met the definition of principal diagnosis. We encourage the commenter to review the Official ICD-10-CM Coding Guidelines, which can be found on the CDC website at: http://www.cdc.gov/nchs/icd/icd10.htm .

Comment: Other commenters supported our proposal and stated they agreed that the seven ICD-10-CM codes that do not describe renal failure or indications that would generally require the insertion of totally implantable vascular access devices for the purpose of hemodialysis should be removed from the special logic in MS-DRGs 673, 674, and 675.

Response: We appreciate the commenters' support.

After consideration of the public comments received, we are finalizing our proposal to remove ICD-10-CM codes I12.9, I13.10, N18.1, N18.2, N18.3, N18.4, and N18.9 from the subset of GROUPER logic in MS-DRGs 673, 674, and 675 that recognizes the insertion of totally implantable vascular access devices or tunneled vascular access devices as an inpatient procedure for the purposes of hemodialysis under the ICD-10 MS-DRGs Version 38, effective October 1, 2020.

9. MDC 17 (Myeloproliferative Diseases and Disorders, Poorly Differentiated Neoplasms): Inferior Vena Cava Filter Procedures

As discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32524), we received a request to review the GROUPER logic in MDC 17. The requester stated that cases reporting the introduction of a high dose chemotherapy agent, or reporting a chemotherapy principal diagnosis with a secondary diagnosis describing acute leukemia, are assigned to medical MS-DRGs 837 (Chemotherapy with Acute Leukemia as Secondary Diagnosis or with High Dose Chemotherapy Agent with MCC), MS-DRG 838 (Chemotherapy with Acute Leukemia as Secondary Diagnosis with CC or High Dose Chemotherapy Agent), and MS-DRG 839 (Chemotherapy with Acute Leukemia as Secondary Diagnosis without CC/MCC). However, when procedure codes describing the placement of an inferior vena cava (IVC) filter, namely 06H03DZ (Insertion of intraluminal device into inferior vena cava, percutaneous approach), are also reported with the same codes describing the introduction of a high dose chemotherapy agent or report a chemotherapy principal diagnosis with a secondary diagnosis describing acute leukemia, the cases are assigned to surgical MS-DRGs 829 and 830 (Myeloproliferative Disorders or Poorly Differentiated Neoplasms with Other Procedure with and without CC/MCC, respectively). According to the requestor, the additional resources used by the hospital to place an IVC filter should not result in assignment to lower-weighted MS-DRGs.

As stated in the proposed rule, the ICD-10-PCS codes that describe the insertion of an infusion device or the insertion of an intraluminal device into the inferior vena cava are listed in the following table.

We stated our analysis of this grouping issue confirmed that, when procedure code 06H03DZ (Insertion of intraluminal device into inferior vena cava, percutaneous approach) is reported with a procedure code describing the introduction of a high dose chemotherapy agent, or when it is reported with a chemotherapy principal diagnosis code with a secondary diagnosis code describing acute leukemia, these cases group to surgical MS-DRGs 829 and 830. ICD-10-PCS procedure code 06H03DZ identifies the placement of an IVC filter and is designated as an extensive O.R. procedure for purposes of MS-DRG assignment. We then examined the GROUPER logic for medical MS-DRGs 837, 838 and 839. The GROUPER logic for MS-DRGs 837, 838, and 839 is defined by a principal diagnosis of chemotherapy identified with ICD-10-CM diagnosis codes Z08 (Encounter for follow-up examination after completed treatment for malignant neoplasm), Z51.11 (Encounter for antineoplastic chemotherapy) or Z51.112 (Encounter for antineoplastic immunotherapy) along with a secondary diagnosis of acute leukemia or a procedure code for the introduction of a high dose chemotherapy agent as reflected in the logic table:

We refer the reader to the ICD-10 MS-DRG Version 37 Definitions Manual (which is available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software for complete documentation of the GROUPER logic for the listed MS-DRGs.

We examined claims data from the September 2019 update of the FY 2019 MedPAR file for all cases in MS-DRGs 829 and 830 and for cases reporting the insertion of an IVC filter (procedure codes 06H00DZ, 06H03DZ, and 06H04DZ) with a procedure code describing the introduction of a high dose chemotherapy agent, or with a chemotherapy principal diagnosis code with a secondary diagnosis code describing acute leukemia. Our findings are shown in the following table.

As shown in the table, there were a total of 1,697 cases with an average length of stay of 9.2 days and average costs of $24,188 in MS-DRG 829. Of those 1,697 cases, there were 18 cases reporting procedure code 06H03DZ with a procedure code describing the introduction of a high dose chemotherapy agent, or with a chemotherapy principal diagnosis code with a secondary diagnosis code describing acute leukemia with an average length of stay of 25.6 days and average costs of $83,861. We noted that there were no cases reporting procedure codes 06H00DZ or 06H04DZ. For MS-DRG 830, there were a total of 311 cases with an average length of stay of 2.9 days and average costs of $10,885. We found zero cases in MS-DRG 830 reporting a procedure code for the insertion of an IVC filter with a procedure code describing the introduction of a high dose chemotherapy agent, or with a chemotherapy principal diagnosis code with a secondary diagnosis code describing acute leukemia. Based on the claims data, the cases reporting procedure code 06H03DZ with a procedure code describing the introduction of a high dose chemotherapy agent, or with a chemotherapy principal diagnosis code with a secondary diagnosis code describing acute leukemia have higher average costs ($83,861 versus $24,188) and a longer average length of stay (25.6 days versus 9.2 days) than all the cases in MS-DRG 829.

We also reviewed the claims data for MS-DRGs 837, 838, and 839. Our findings are shown in the following table.

As shown in the table, there were a total of 1,776 cases with an average length of stay of 17 days and average costs of $40,667 in MS-DRG 837. There were a total of 1,172 cases with an average length of stay of 7.3 days and average costs of $16,594 in MS-DRG 838. There were a total of 810 cases with an average length of stay of 5 days and average costs of $10,994 in MS-DRG 839. Based on the claims data, the cases reporting procedure code 06H03DZ with a procedure code describing the introduction of a high dose chemotherapy agent, or with a chemotherapy principal diagnosis code with a secondary diagnosis code describing acute leukemia again have higher average costs ($83,861 versus $40,667, $16,594, and $10,994 respectively) and a longer average length of stay (25.6 days versus 17 days, 7.3 days and 5 days, respectively) than all the cases in MS-DRG 837, 838, and 839. We stated our clinical advisors reviewed the claims data and noted there were only a small number of cases reporting procedure code 06H03DZ with a procedure code describing the introduction of a high dose chemotherapy agent, or with a chemotherapy principal diagnosis code with a secondary diagnosis code describing acute leukemia, and believe there may have been other factors contributing to the higher costs for these cases. Our clinical advisors stated the procedure to insert an IVC filter is not surgical in nature and recommended further analysis.

We performed further analysis on the other ICD-10-PCS codes describing the insertion of a device into the inferior vena cava to identify if they have a similar extensive O.R. designations and noted inconsistencies among the O.R. and non-O.R. designations. In Version 37 of the ICD-10 MS-DRGs, ICD-10-PCS procedure codes 06H003T, 06H003Z, 06H033T, 06H033Z, and 06H043Z identify the insertion of an infusion device into the inferior vena cava with various approaches and are classified as Non-O.R. procedures. ICD-10-PCS procedure codes 06H00DZ, 06H03DZ, and 06H04DZ identify the insertion of an intraluminal device into the inferior vena cava (IVC filter procedure) with various approaches and are classified as extensive O.R. procedures. We stated that our clinical advisors indicated that codes 06H00DZ, 06H03DZ, and 06H04DZ describing the insertion of an intraluminal device into the inferior vena cava do not require the resources of an operating room, that the procedure to insert an IVC filter is not surgical in nature and that these procedures are comparable to the related ICD-10-PCS procedure codes that describe the insertion of infusion devices into the inferior vena cava that are currently designated as Non-O.R. procedures. We stated our clinical advisors believe that, given the similarity in factors such as complexity, resource utilization, and lack of a requirement for anesthesia administration between all procedures describing insertion of a device into the inferior vena cava, it would be more appropriate to designate these three ICD-10-PCS codes describing the insertion of an intraluminal device into the inferior vena cava as Non-O.R. procedures. Therefore, we proposed to remove ICD-10-PCS procedure codes 06H00DZ, 06H03DZ, and 06H04DZ from the FY 2021 ICD-10 MS-DRG Version 38 Definitions Manual in Appendix E—Operating Room Procedures and Procedure Code/MS-DRG Index as O.R. procedures. Under this proposal, these procedures would no longer impact MS-DRG assignment.

Comment: A few commenters supported CMS' proposal and agreed ICD-10-PCS procedure codes 06H00DZ, 06H03DZ, and 06H04DZ describing the insertion of an intraluminal device into the inferior vena cava should be designated as non-O.R. procedures since these procedures are not surgical in nature, and related ICD-10-PCS codes are currently designated as non-O.R. procedures.

Response: We appreciate the commenters' support.

Comment: A commenter stated that they recommend that CMS remove code Z08 from the GROUPER logic for MS-DRGs 837, 838, and 839. The commenter stated that ICD-10-CM code Z08 identifies a follow-up visit after completed treatment for a malignant neoplasm which implies that the condition has been fully treated and no longer exists. Therefore, ICD-10-CM code Z08 does not describe an admission for chemotherapy. This commenter also noted that code Z08 is on the Unacceptable Principal diagnosis edit code list.

Response: We appreciate the commenters' concern.

The GROUPER logic assignment for each diagnosis code as a principal diagnosis is for grouping purposes only. As discussed in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41227), because the diagnoses are codes listed under the heading of “Principal Diagnosis” in the ICD-10 MS-DRG Definitions Manual, it may appear to indicate that these codes are to be reported as a principal diagnosis for assignment to these MS-DRGs. However, the Definitions Manual display of the GROUPER logic assignment for each diagnosis code does not correspond to coding guidelines for reporting the principal diagnosis. The MS-DRG logic must specifically require a condition to group based on whether it is reported as a principal diagnosis or a secondary diagnosis, and consider any procedures that are reported, in addition to consideration of the patient's age, sex and discharge status in order to affect the MS-DRG assignment. In other words, cases will group according to the GROUPER logic, regardless of any coding guidelines or coverage policies. It is the Medicare Code Editor (MCE) and other payer-specific edits that identify inconsistencies in the coding guidelines or coverage policies. The MCE is designed to identify cases that require further review before classification into an MS-DRG. These data integrity edits address issues such as data validity, coding rules, and coverage policies. Since the inception of the IPPS, the data editing function has been a separate and independent step in the process of determining a DRG assignment. The separation of the MS-DRG grouping and data editing functions allows the MS-DRG GROUPER to remain stable even though coding rules and coverage policies may change during the fiscal year.

Comment: Other commenters opposed CMS' proposal. A commenter stated the insertion of vena cava filters requires the use of specialized interventional radiology suites and in other hospitals without such specialized suites, the procedure may be performed in a multipurpose operating room. A few commenters stated that that the insertion of an inferior vena cava filter is not comparable to the insertion of an infusion device and that while it may be true that in some hospitals the procedure may be done at bedside similar to the insertion of infusion devices, this is not universally true and facilities incur significant costs beyond those for infusion devices to compensate for the costly implanted devices, specialized procedure rooms, equipment, and skill. A commenter stated that they believe that this proposed change will result in insufficient reimbursement for the resources utilized in delivering care to these patients. One commenter specifically noted that the costs of vena cava filters are higher than infusion catheters because filters can easily add over $4,000 to the cost of the procedure. Another commenter stated all open and laparoscopic vascular procedures should always be designated as O.R. procedures strictly because of the approach.

Response: We appreciate the commenters' feedback and concern.

With regard to the comments about the implications for reimbursement, we note that the goals of changing the designation of procedures from non-O.R. to O.R., or vice versa, are to better clinically represent the resources involved in caring for these patients and to enhance the overall accuracy of the system. Therefore, decisions to change an O.R. designation are based on whether such a change would accomplish those goals and not whether the change in designation would impact the payment in a particular direction.

Our clinical advisors reviewed the commenters' concerns and continue to support changing the O.R. designation of procedures describing insertion of an intraluminal device into the inferior vena cava performed via a percutaneous approach for consistency with the other procedure codes describing the insertion of a device into the inferior vena cava that are currently designated as non-O.R procedures because, as commenters noted in their own comments, inferior vena cava filters are most often placed in Interventional Radiology suites. The resources involved in furnishing these procedures are consistent with non-O.R. procedures and our clinical advisors noted it is not uncommon for anesthesia to be used in the radiology suite. Our clinical advisors also disagree with the assertion that these procedures are dissimilar to procedures describing the insertion of infusion devices into the inferior vena cava and believe that these procedures involve similar technical complexity.

Our clinical advisors do, however, concur with the commenters that while the procedure to insert an IVC filter is not surgical in nature, procedures describing the insertion of an intraluminal device into the inferior vena cava performed via an open or a percutaneous endoscopic approach could require greater resources than a procedure describing insertion of an intraluminal device into the inferior vena cava performed via a percutaneous approach. As such, we believe that at this time it would be appropriate to take additional time to further examine the relevant clinical factors and similarities in resource consumption between procedures describing the insertion of an intraluminal device into the inferior vena cava performed via an open or a percutaneous endoscopic approach. As discussed in section II.E.11. of the preamble of this final rule, we are exploring alternatives on how we may restructure the current O.R. and non-O.R. designations for procedures by leveraging the detail that is now available in the ICD-10 claims data. We continue to develop our process and methodology, and will provide more detail in future rulemaking.

Therefore, after consideration of the public comments we received, and for the reasons stated above, under the ICD-10 MS-DRGs Version 38, effective October 1, 2020, we are (1) finalizing our proposal to change the designation of ICD-10-PCS procedure code 06H03DZ from O.R. procedure to non-O.R. procedure and (2) maintaining the O.R. designation of procedure codes 06H00DZ and 06H04DZ. Accordingly, procedure codes 06H00DZ and 06H04DZ will continue to impact MS-DRG assignment.

10. Review of Procedure Codes in MS-DRGs 981 Through 983 and 987 Through 989

We annually conduct a review of procedures producing assignment to MS-DRGs 981 through 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively) or MS-DRGs 987 through 989 (Non-Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively) on the basis of volume, by procedure, to see if it would be appropriate to move cases reporting these procedure codes out of these MS-DRGs into one of the surgical MS-DRGs for the MDC into which the principal diagnosis falls. The data are arrayed in two ways for comparison purposes. We look at a frequency count of each major operative procedure code. We also compare procedures across MDCs by volume of procedure codes within each MDC. We use this information to determine which procedure codes and diagnosis codes to examine. We identify those procedures occurring in conjunction with certain principal diagnoses with sufficient frequency to justify adding them to one of the surgical MS-DRGs for the MDC in which the diagnosis falls. We also consider whether it would be more appropriate to move the principal diagnosis codes into the MDC to which the procedure is currently assigned.

In addition to this internal review, we also consider requests that we receive to examine cases found to group to MS-DRGs 981 through 983 or MS-DRGs 987 through 989 to determine if it would be appropriate to add procedure codes to one of the surgical MS DRGs for the MDC into which the principal diagnosis falls or to move the principal diagnosis to the surgical MS DRGs to which the procedure codes are assigned.

Based on the results of our review of the claims data from the September 2019 update of the FY 2019 MedPAR file, as well as our review of the requests that we received to examine cases found to group to MS-DRGs 981 through 983 or MS-DRGs 987 through 989, we proposed to move the cases reporting the procedures and/or principal diagnosis codes described in this section of this rule from MS-DRGs 981 through 983 or MS-DRGs 987 through 989 into one of the surgical MS-DRGs for the MDC into which the principal diagnosis or procedure is assigned.

a. Horseshoe Abscess With Drainage

As discussed in the proposed rule, we received a request to reassign cases reporting a principal diagnosis of a horseshoe abscess with a procedure involving open drainage of perineum subcutaneous tissue and fascia from MS-DRGs 987, 988, and 989 (Non-Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively) to MS-DRGs 356, 357, and 358 (Other Digestive System O.R. Procedures with MCC, with CC, and without CC/MCC, respectively) in MDC 06. ICD-10-CM diagnosis code K61.31 (Horseshoe abscess) is used to report a horseshoe abscess and is currently assigned to MDC 06 (Diseases and Disorders of the Digestive System). A horseshoe abscess is a specific type of ischiorectal abscess caused by an abscessed anal gland located in the posterior midline of the anal canal with suppuration found in the ischiorectal fossae. ICD-10-PCS procedure code 0J9B0ZZ (Drainage of perineum subcutaneous tissue and fascia, open approach) may be reported to describe drainage of an abscess in the ischiorectal space and is currently assigned to MDC 08 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue), MDC 09 (Diseases and Disorders of the Skin, Subcutaneous Tissue and Breast), MDC 21 (Injuries, Poisonings and Toxic Effects of Drugs) and MDC 24 (Multiple Significant Trauma).

We stated in the proposed rule that our analysis of this grouping issue confirmed when a horseshoe abscess is reported as a principal diagnosis with ICD-10-PCS procedure code 0J9B0ZZ, these cases group to MS-DRGs 987, 988, and 989. As previously noted, whenever there is a surgical procedure reported on the claim that is unrelated to the MDC to which the case was assigned based on the principal diagnosis, it results in an MS-DRG assignment to a surgical class referred to as “unrelated operating room procedures”.

We first examined the claims data to identify cases reporting procedure code 0J9B0ZZ with a principal diagnosis of K61.31 that are currently grouping to MS-DRGs 987, 988, and 989. Our findings are shown in this table:

As previously noted, the requester asked that we reassign these cases to MS-DRGs 356, 357, and 358. We therefore examined the data for all cases in MS-DRGs 356, 357, and 358. Our findings are shown in this table:

We stated while our clinical advisors noted that the average length of stay and average costs of cases in MS-DRGs 356, 357, and 358 are higher than the average length of stay and average costs for the small subset of cases reporting procedure code 0J9B0ZZ and a principal diagnosis code of K61.31 in MS-DRGs 987, 988, and 989, they believe that the procedure is clearly clinically related to the principal diagnosis and is a logical accompaniment of the diagnosis. Therefore, they believe it is clinically appropriate for the procedure to group to the same MS-DRGs as the principal diagnosis.

Therefore, we proposed to add ICD-10-PCS procedure code 0J9B0ZZ to MDC 06 in MS-DRGs 356, 357, and 358. Under this proposal, cases reporting procedure code 0J9B0ZZ in conjunction with a principal diagnosis from MDC 06, such as diagnosis code K61.31, would group to MS-DRGs 356, 357, and 358.

Comment: Commenters supported our proposal to add ICD-10-PCS procedure code 0J9B0ZZ to MDC 06 in MS-DRGs 356, 357, and 358.

Response: We appreciate the commenters' support.

After consideration of the public comments received, we are finalizing our proposal to add ICD-10-PCS procedure code 0J9B0ZZ to MDC 06 in MS-DRGs 356, 357, and 358.

b. Chest Wall Deformity With Supplementation

We received a request to reassign cases reporting a principal diagnosis of acquired deformity of chest and rib with a procedure involving the placement of a biological or synthetic material that supports or strengthens the body part from MS-DRGs 981, 982, and 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively) to MS-DRGs 515, 516, and 517 (Other Musculoskeletal System and Connective Tissue O.R. Procedures, with MCC, with CC, and without CC/MCC, respectively) in MDC 08.

As discussed in the proposed rule, ICD-10-CM diagnosis code M95.4 (Acquired deformity of chest and rib) is used to report this condition and is currently assigned to MDC 08 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue). ICD-10-PCS procedure codes 0WU807Z (Supplement chest wall with autologous tissue substitute, open approach), 0WU80JZ (Supplement chest wall with synthetic substitute, open approach) and 0WU80KZ (Supplement chest wall with nonautologous tissue substitute, open approach) may be reported to describe procedures to supplement or reinforce the chest wall with biologic or synthetic material. ICD-10-PCS procedure codes 0WU807Z and 0WU80KZ are currently assigned to MDC 04 (Diseases and Disorders of the Respiratory System). We noted that ICD-10-PCS procedure code 0WU80JZ is already assigned to MDC 08 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue) as well as MDC 04 (Diseases and Disorders of the Respiratory System), so these cases already group to MS-DRGs 515, 516, and 517 when reported with a principal diagnosis of ICD-10-CM diagnosis code M95.4.

We stated in the proposed rule that our analysis of this grouping issue confirmed that when diagnosis code M95.4 is reported as a principal diagnosis with ICD-10-PCS procedure codes 0WU807Z or 0WU80KZ, these cases group to MS-DRGs 981, 982, and 983. As noted in the previous discussion, whenever there is a surgical procedure reported on the claim that is unrelated to the MDC to which the case was assigned based on the principal diagnosis, it results in an MS-DRG assignment to a surgical class referred to as “unrelated operating room procedures”.

We examined the claims data to identify cases reporting procedure codes 0WU807Z or 0WU80KZ with principal diagnosis code M95.4 that are currently grouping to MS-DRGs 981, 982, and 983. Our analysis showed one case reporting a principal diagnosis of code M95.4 with procedure code 0WU807Z, with a length of stay of 2.0 days and average costs of $11,594 in MS-DRG 983. We found zero cases in MS-DRGs 981 and 982 reporting procedure codes 0WU807Z or 0WU80KZ and a principal diagnosis of M95.4.

We also examined the data for cases in MS-DRGs 515, 516, and 517, and our findings are shown in this table.

While there was only one case reporting procedure codes 0WU807Z or 0WU80KZ with principal diagnosis M95.4 in MS-DRGs 981, 982, and 983, we stated our clinical advisors reviewed this request and believe that the cases involving procedures of chest wall supplementation with a principal diagnosis of acquired deformity of chest and rib represent a distinct, recognizable clinical group similar to those cases in MS-DRGs 515, 516, and 517, and that procedures reporting 0WU80JZ and 0WU80KZ are clearly related to the principal diagnosis code. They believe that it is clinically appropriate for the three ICD-10-PCS codes describing procedures to supplement or reinforce the chest wall with biologic or synthetic material to group to the same MS-DRGs as the principal diagnoses.

Therefore, we proposed to add ICD-10-PCS procedure codes 0WU807Z and 0WU80KZ to MDC 08 in MS-DRGs 515, 516, and 517. Under this proposal, cases reporting procedure codes 0WU807Z or 0WU80KZ in conjunction with a principal diagnosis code from MDC 08 would group to MS-DRGs 515, 516, and 517.

Comments: Commenters supported the proposal to add ICD-10-PCS procedure codes 0WU807Z and 0WU80KZ to MDC 08 in MS-DRGs 515, 516, and 517. The commenters stated that the proposal was reasonable, given the ICD-10-CM code and the information provided. One commenter specifically stated this reassignment would allow procedures describing chest wall supplementation to be assigned to the appropriate MS-DRG when reported with the principal diagnosis of acquired deformity of chest and rib instead of one of the unrelated operating room procedure MS-DRGs. Another commenter stated this would improve clinical consistency since one of the codes describing these procedures is already assigned to MDC 08.

Response: We appreciate the commenters' support.

After consideration of the public comments we received, we are finalizing our proposal to add ICD-10-PCS procedure codes 0WU807Z and 0WU80KZ to MDC 08 in MS-DRGs 515, 516, and 517.

c. Hepatic Malignancy With Hepatic Artery Embolization

As discussed in the proposed rule, we received a request to reassign cases for hepatic malignancy when reported with procedures involving the embolization of a hepatic artery from MS-DRGs 987, 988, and 989 (Non-Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively) to MS-DRGs 423, 424, and 425 (Other Hepatobiliary or Pancreas Procedures with MCC, with CC, and without CC/MCC, respectively) in MDC 08.

We stated in the proposed rule that ICD-10-PCS procedure code 04V33DZ (Restriction of hepatic artery with intraluminal device, percutaneous approach) may be reported to describe embolization procedures to narrow or partially occlude a hepatic artery with an intraluminal device and is currently assigned to MDC 05 (Diseases and Disorders of the Circulatory System). ICD-10-PCS procedure code 04L33DZ (Occlusion of hepatic artery with intraluminal device, percutaneous approach) may be reported to describe embolization procedures to completely close off a hepatic artery with an intraluminal device and is currently assigned to MDC 05 (Diseases and Disorders of the Circulatory System) and MDC 06 (Diseases and Disorders of the Digestive System).

The requestor did not provide an ICD-10-CM diagnosis code in its request so we reviewed ICD-10-CM diagnosis codes in the C00 through D49 code range to identify conditions that describe hepatic malignancies. We identified the following fourteen ICD-10-CM diagnosis codes, all currently assigned to MDC 07 (Diseases and Disorders of the Hepatobiliary System & Pancreas):

Our analysis of this grouping issue confirmed that, when one of the fourteen hepatic malignancy ICD-10-CM diagnosis codes previously listed is reported as a principal diagnosis with ICD-10-PCS procedure code 04L33DZ, these cases group to MS-DRGs 987, 988, and 989. However, we noted that when one of these fourteen hepatic malignancy ICD-10-CM diagnosis codes is reported as a principal diagnosis with ICD-10-PCS procedure code 04V33DZ, these cases currently group to MS DRGs 981, 982, and 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively). As noted in the previous discussion, whenever there is a surgical procedure reported on the claim that is unrelated to the MDC to which the case was assigned based on the principal diagnosis, it results in an MS-DRG assignment to a surgical class referred to as “unrelated operating room procedures”.

To understand the resource use for the subset of cases reporting procedure code 04V33DZ with a principal diagnosis of hepatic malignancy that are currently grouping to MS-DRGs 981, 982, and 983, we examined claims data for the average length of stay and average costs for these cases. Our findings are shown in the following table:

We then examined the claims data to identify cases reporting procedure code 04L33DZ reported with a principal diagnosis of hepatic malignancy that are currently grouping to MS-DRGs 987, 987, and 989. Our findings are shown in the following table:

We also examined the data for cases in MS-DRGs 423, 424, and 425, and our findings are shown in the following table:

While the average lengths of stay of cases in MS-DRGs 423, 424, and 425 are longer than the average lengths of stay for the subset of cases reporting procedure codes 04V33DZ or 04L33DZ and a principal diagnosis of hepatic malignancy, the average costs of these same cases are generally similar. We stated our clinical advisors also believe that these procedures are clearly related to the principal diagnoses, as they are an appropriate treatment for a number of hepatobiliary diagnoses, including cancer and it is clinically appropriate for the procedures to group to the same MDC as the principal diagnoses.

Therefore, we proposed to add ICD-10-PCS procedure codes 04V33DZ and 04L33DZ to MDC 07 in MS-DRGs 423, 424 and 425. Under this proposal, cases reporting procedure codes 04V33DZ or 04L33DZ in conjunction with a principal diagnosis code for a hepatic malignancy from MDC 07 would group to MS-DRGs 423, 424 and 425.

Comments: Commenters supported our proposal to add ICD-10-PCS procedure codes 04V33DZ and 04L33DZ to MDC 07 in MS-DRGs 423, 424 and 425.

Response: We appreciate the commenters' support.

After consideration of the public comments received, we are finalizing our proposal to add ICD-10-PCS procedure codes 04V33DZ and 04L33DZ to MDC 07 in MS-DRGs 423, 424 and 425.

d. Hemoptysis With Percutaneous Artery Embolization

We received a request to reassign cases for hemoptysis when reported with a procedure describing percutaneous embolization of an upper artery with an intraluminal device from MS-DRGs 981, 982, and 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively) to MS-DRGs 163, 164, and 165 (Major Chest Procedures with MCC, with CC, and without CC/MCC, respectively) in MDC 04. As discussed in the proposed rule, hemoptysis is the expectoration of blood from some part of the respiratory tract. ICD-10-CM diagnosis code R04.2 (Hemoptysis) is used to report this condition and is currently assigned to MDC 04 (Diseases and Disorders of the Respiratory System). ICD-10-PCS procedure code 03LY3DZ (Occlusion of upper artery with intraluminal device, percutaneous approach) may be reported to describe percutaneous embolization of an upper artery with an intraluminal device and is currently assigned to MDC 05 (Diseases and Disorders of the Circulatory System), MDC 21 (Injuries, Poisonings and Toxic Effects of Drugs) and MDC 24 (Multiple Significant Trauma).

Our analysis of this grouping issue confirmed that when a procedure describing percutaneous embolization of an upper artery with an intraluminal device (such as ICD-10-PCS procedure code 03LY3DZ) is reported with a principal diagnosis from MDC 04, such as R04.2, these cases group to MS-DRGs 981, 982, and 983. We stated during our review of this issue, we also examined claims data for similar procedures 03LY0DZ (Occlusion of upper artery with intraluminal device, open approach) and 03LY4DZ (Occlusion of upper artery with intraluminal device, percutaneous endoscopic approach) and noted the same pattern. As noted in the previous discussion, whenever there is a surgical procedure reported on the claim that is unrelated to the MDC to which the case was assigned based on the principal diagnosis, it results in an MS-DRG assignment to a surgical class referred to as “unrelated operating room procedures”.

We examined the claims data to identify cases reporting procedure codes 03LY0DZ, 03LY3DZ or 03LY4DZ with a principal diagnosis from MDC 04 that are currently grouping to MS-DRGs 981, 982, and 983. Our findings are shown in this table:

As indicated earlier, the requestor suggested that we move ICD-10-PCS procedure code 03LY3DZ to MS-DRGs 163, 164, and 165. We stated, however, our clinical advisors believe that, within MDC 04, procedure codes describing percutaneous embolization of an upper artery with an intraluminal device are more clinically aligned with the procedure codes assigned to MS-DRGs 166, 167, and 168 (Other Respiratory System O.R. Procedures with MCC, with CC and without CC/MCC, respectively), as these procedures would not be considered major chest procedures. Therefore, we examined claims data to identify the average length of stay and average costs for cases assigned to MS-DRGs 166, 167 and 168. Our findings are shown in the following table.

While our clinical advisors noted that the average costs of cases in MS-DRGs 166, 167, and 168 are lower than the average costs for the subset of cases reporting procedure codes 03LY0DZ, 03LY3DZ or 03LY4DZ and a principal diagnosis code from MDC 04, they believe that these procedures are clearly related to the principal diagnoses as these procedures are appropriate for certain respiratory tract diagnoses. We stated that therefore, it is clinically appropriate for the procedures to group to the same MDC as the principal diagnoses.

Therefore, we proposed to add ICD-10-PCS procedure codes 03LY0DZ, 03LY3DZ and 03LY4DZ to MDC 04 in MS-DRGs 166, 167, and 168. Under this proposal, cases reporting procedure codes 03LY0DZ, 03LY3DZ or 03LY4DZ in conjunction with a principal diagnosis code from MDC 04 such as hemoptysis (R04.2) would group to MS-DRGs 166, 167, and 168.

Comment: A few commenters supported our proposal.

Response: We appreciate the commenters' support.

Comment: A commenter stated that ICD-10-PCS does not have procedure codes with a root operation of control in association with these upper arteries and there are times when an embolization procedure to control acute bleeding manifested as hemoptysis is necessary. This commenter also stated that the correct ICD-10-PCS root operation involving an intervention to address current acute or postprocedural bleeding or to prevent future bleeding is control involving the organ that is bleeding.

Response: We appreciate the commenter raising its concerns.

While we agree that the ICD-10-PCS Official Guidelines for Coding and Reporting define the root operation “control” as “stopping or attempting to stop, postprocedural or other acute bleeding”, the guidelines also state that if a more definitive root operation is required to stop the bleeding then the more definitive root operation is coded instead of “control”. That is, when embolization is performed to stop acute postprocedural or other acute bleeding of a tubular body part, the more definitive root operations that should be coded in those instances are restriction (if the intent is to partially close) or occlusion (if the intent is to completely occlude) the tubular body part, and not the root operation “control”. We encourage this commenter to review the posted ICD-10-PCS Guidelines on the CMS website at: https://www.cms.gov/medicare/icd-10/2021-icd-10-pcs.html .

Comment: Another commenter disagreed with our proposal and stated hemoptysis could be due to other non-respiratory reasons and believed these procedures should be assigned to a “circulatory” over a “respiratory” DRG if the source of bleeding is not known and a non-respiratory artery or circulatory vessel is occluded to stop the bleeding.

Response: We disagree with the commenter that hemoptysis can be due to other non-respiratory reasons and note that the term “hemoptysis” specifically refers to the expectoration of blood originating from the respiratory tract. The expectoration of blood from a source other than the respiratory tract is not defined as hemoptysis and would not be coded with ICD-10-CM diagnosis code R04.2 (Hemoptysis).

As stated in the proposed rule, ICD-10-CM diagnosis code R04. 2 (Hemoptysis) is currently assigned to MDC 04 (Diseases & Disorders of the Respiratory System), not MDC 05 (Diseases & Disorders of the Circulatory System). We proposed to add these procedures to MDC 04, to address the matter of these procedures producing assignment to MS-DRGs 981 through 983 when coded with this diagnosis.

We note that under this proposal ICD-10-PCS procedure codes 03LY0DZ, 03LY3DZ and 03LY4DZ will continue to also be assigned to several MS-DRGs in three other MDCs (including MDC 05 (Diseases & Disorders of the Circulatory System)) as discussed in the proposed rule. With the exception of the pre-MDC, assignment to MDCs is driven by the principal diagnosis and not by the procedure. We also note that according to the ICD-10-CM Official Guidelines for Coding and Reporting, diagnoses described by codes from Chapter 18 (Symptoms, Signs and Abnormal Clinical and Laboratory Findings) of ICD-10-CM, such as R04.2, are acceptable for reporting when a related definitive diagnosis has not been established (confirmed) by the provider. If the expectoration of blood from the respiratory tract or another source is determined to be due another condition, that condition should be coded as principal diagnosis instead and assignment to a MDC will be driven by that principal diagnosis.

Our clinical advisors continue to believe that these procedures are also clearly related to ICD-10-CM diagnosis code R04.2 (Hemoptysis) assigned to MDC 04 and believe that it is appropriate to add these procedures to MDC 04. Therefore, after consideration of the public comments received, we are finalizing our proposal to add ICD-10-PCS procedure codes 03LY0DZ, 03LY3DZ and 03LY4DZ to MDC 04 in MS-DRGs 166, 167, and 168.

e. Acquired Coagulation Factor Deficiency With Percutaneous Artery Embolization

As discussed in the proposed rule, we received a request to reassign cases for acquired coagulation factor deficiency when reported with a procedure describing the complete occlusion of an artery with an intraluminal device from MS-DRGs 981, 982, and 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively) to MS-DRGs 252, 253 and 254 (Other Vascular Procedures with MCC, with CC, and without CC/MCC, respectively) or 270, 271, and 272 (Other Major Cardiovascular Procedures with MCC, with CC, and without CC/MCC, respectively) in MDC 05 (Diseases and Disorders of the Circulatory System). The requestor asked that we reassign ICD-10-CM diagnosis code D68.4 (Acquired coagulation factor deficiency) from MDC 16 (Diseases and Disorders of Blood, Blood Forming Organs, Immunologic Disorders) in MS-DRG 813 (Coagulation Disorders), to MDC 05. The requestor provided the following list of 59 ICD-10-PCS procedure codes describing the complete occlusion of an artery with an intraluminal device in its request for consideration to reassign the ICD-10-CM diagnosis code for acquired coagulation factor deficiency to MDC 05. The requester noted that the diagnosis of Hemorrhage, not elsewhere classified ( ICD-10-CM diagnosis code R58) groups to MS-DRGs 252, 253 and 254 or 270, 271, and 272 in MDC 05 when reported with one of the 59 ICD-10-PCS procedure codes listed and requested that cases reporting a diagnosis describing acquired coagulation factor deficiency also group to those MS-DRGs when reported with one of the 59 ICD-10-PCS procedure codes listed.

We stated our analysis of this grouping issue confirmed that, when diagnosis code D68.4 is reported as a principal diagnosis with one of the 59 ICD-10-PCS procedure codes provided by the requestor, these cases group to MS-DRGs 981, 982, and 983. As noted in the previous discussion, whenever there is a surgical procedure reported on the claim that is unrelated to the MDC to which the case was assigned based on the principal diagnosis, it results in an MS-DRG assignment to a surgical class referred to as “unrelated operating room procedures”. We examined the claims data to identify cases involving the 59 procedure codes in MDC 05 reported with a principal diagnosis of code D68.4 that are currently grouping to MS-DRGs 981, 982, and 983. Our analysis showed one case reported a principal diagnosis of D68.4 with a procedure code in MDC 05, with a length of stay of 2.0 days and costs of $21,890 in MS-DRG 981. We found zero cases in MS-DRGs 982 and 983 reporting a procedure code from MDC 05 and a principal diagnosis of code D68.4.

Overall, for MS-DRGs 981, 982 and 983, there was a total of one case reporting a principal diagnosis of acquired coagulation factor deficiency with any of the procedures from MDC 05 provided by the requestor, demonstrating that acquired coagulation factor deficiency is not typically corrected surgically by occlusion of an artery with an intraluminal device.

As discussed in the proposed rule, we also examined the data for cases in MS-DRG 813, and our findings are shown in this table:

As shown in this table, there were a total of 16,680 cases in MS-DRG 813, with an average length of stay of 4.7 days and average costs of $11,286. In MS-DRG 813, we found 142 cases reporting a principal diagnosis of an acquired coagulation factor deficiency with an average length of stay of 6.41 days and average costs of $17,822. We note that the average costs for the subset of cases in MS-DRG 813 reporting a principal diagnosis of an acquired coagulation factor deficiency are higher than the average costs of all cases that currently group to MS-DRG 813.

We are clarifying in this final rule that cases reporting a principal diagnosis of acquired coagulation factor deficiency group to MS-DRGs 813, which is the medical MS-DRG that contains coagulation disorders, in the absence of a surgical procedure. We note that every diagnosis code is assigned to a medical MS-DRG to define the logic of the MS-DRG either as a principal or secondary diagnosis. As discussed in section II.E.12.a., certain procedure codes may affect the MS-DRG and result in a surgical MS-DRG assignment. Cases reporting a principal diagnosis of acquired coagulation factor deficiency group to MS-DRGs 799, 800 and 801 (Splenectomy with MCC, with CC, and without CC/MCC, respectively) or MS-DRGs 802, 803, and 804 (Other O.R. Procedures of the Blood and Blood Forming Organs with MCC, with CC, and without CC/MCC, respectively) in the presence of a surgical procedure such as the procedures listed by the requestor. We refer the reader to the ICD-10 MS-DRG Version 37 Definitions Manual for complete documentation of the logic for case assignment to surgical MS-DRGs 799, 800, 801, 802, 803, and 804 and to medical MS-DRG 813 (which is available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.html ).

However, as stated in the proposed rule, our clinical advisors believe that diagnosis code D68.4 describes acquired bleeding disorders in which the affected person lacks the necessary coagulation factors for proper clot formation and wound healing, and therefore, is most clinically aligned with the diagnosis codes assigned to MDC 16 (where it is currently assigned). Our clinical advisors further note that a diagnosis of an acquired bleeding disorder is not comparable to conditions described by the ICD-10-CM code R58 (Hemorrhage, not elsewhere classified) as suggested by the requestor. Diagnoses described by codes from Chapter 18 (Symptoms, Signs and Abnormal Clinical and Laboratory Findings) of ICD-10-CM, such as R58, can be the result of a variety of underlying conditions, or describe conditions of an unexplained etiology. We stated that as an ill-defined condition, our clinical advisors do not believe it is appropriate to equate this diagnosis code with a bleeding disorder. Therefore, we did not propose to reassign ICD-10-CM diagnosis code D68.4 from MDC 16 to MDC 05.

Comments: Commenters agreed with CMS' proposal not to reassign ICD-10-CM diagnosis code D68.4 from MDC 16 to MDC 05. One commenter stated a diagnosis of an acquired bleeding disorder is not comparable to conditions described by the ICD-10-CM code R58, Hemorrhage, not elsewhere classified, and ICD-10-CM code D68.4 is most clinically aligned with the diagnosis codes in MDC 16.

Response: We appreciate the commenters' support.

After consideration of the public comments we received, we are finalizing our proposal to maintain the assignment of ICD-10-CM diagnosis code D68.4 in MDC 16.

f. Epistaxis with Percutaneous Artery Embolization

We received a request to consider adding cases for a hemorrhage of the nose when reported with a procedure describing percutaneous arterial embolization to MDC 03 (Disease and Disorders of the Ear, Nose, Mouth and Throat) in MS-DRGs 133 and 134 (Other Ear, Nose, Mouth and Throat O.R. Procedures with CC/MCC and without CC/MCC, respectively). ICD-10-CM diagnosis code R04.0 (Epistaxis) is used to describe a hemorrhage of the nose or “nosebleed” and is currently assigned to MDC 03. ICD-10-PCS procedure codes describing percutaneous arterial embolization may be reported with procedure codes 03LM3DZ (Occlusion of right external carotid artery with intraluminal device, percutaneous approach), 03LN3DZ (Occlusion of left external carotid artery with intraluminal device, percutaneous approach), or 03LR3DZ (Occlusion of face artery with intraluminal device, percutaneous approach) and are currently assigned to several MS-DRGs in five MDCs as illustrated in the table.

According to the requestor, when diagnosis code R04.0 is reported as a principal diagnosis with any one of the procedure codes describing a percutaneous arterial embolization (03LM3DZ, 03LN3DZ, or 03LR3DZ), these cases are grouping to MS-DRGs 981, 982, and 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively).

As stated in the proposed rule, our analysis of this grouping issue confirmed that, when epistaxis (ICD-10-CM diagnosis code R04.0) is reported as a principal diagnosis with ICD-10-PCS procedure codes 03LM3DZ, 03LN3DZ, or 03LR3DZ, these cases group to MS-DRGs 981, 982, and 983. The reason for this grouping is because whenever there is a surgical procedure reported on a claim that is unrelated to the MDC to which the case was assigned based on the principal diagnosis, it results in an MS-DRG assignment to a surgical class referred to as “unrelated operating room procedures.”

For our review of this grouping issue and the request to have cases reporting procedure codes 03LM3DZ, 03LN3DZ, or 03LR3DZ added to MDC 03 in MS-DRGs 133 through 134, we first examined claims data from September 2019 update of the FY 2019 MedPAR file for cases reporting ICD-10-PCS procedure codes 03LM3DZ, 03LN3DZ, or 03LR3DZ with a principal diagnosis of R04.0 from MDC 03 that currently group to MS-DRGs 981 through 983. Our findings are shown in the following table.

We then examined the claims data to identify the average length of stay and average costs for all cases in MS-DRGs 133 and 134. Our findings are shown in the table.

As shown in the table, for MS-DRG 133, there were a total of 1,757 cases with an average length of stay of 5.6 days and average costs of $15,337. For MS-DRG 134, there were a total of 849 cases with an average length of stay of 2.5 days and average costs of $9,512. Our clinical advisors believe that procedure codes 03LM3DZ, 03LN3DZ, and 03LR3DZ are appropriate procedures to treat commonly occurring ear, nose, and throat bleeding diagnoses and expressed support for these procedure codes to group to MDC 03.

We noted that, as discussed in section II.D.4 of the preamble of the proposed rule and section II.E.4. of this final rule, we proposed to delete MS-DRGs 133 and 134 and create new MS-DRGs 143, 144, and 145 (Other Ear, Nose, Mouth and Throat O.R. Procedures with MCC, with CC, and without CC/MCC, respectively). Therefore, we proposed to add ICD-10-PCS procedure codes 03LM3DZ, 03LN3DZ, and 03LR3DZ to MDC 03 in new MS-DRGs 143, 144, and 145, if finalized. Under this proposal, cases reporting ICD-10-PCS procedure codes 03LM3DZ, 03LN3DZ, or 03LR3DZ with a principal diagnosis from MDC 03 would group to new MS-DRGs 143, 144, and 145.

The following table reflects our simulation for ICD-10-PCS procedure codes 03LM3DZ, 03LN3DZ, and 03LR3DZ in new MS-DRGs 143, 144, and 145.

Comment: A commenter supported our proposal to add procedure codes describing a percutaneous arterial embolization to MDC 03. This commenter also stated CMS should expand ICD-10-PCS to include procedure codes describing the control of bleeding of the nasal passages performed using a percutaneous and percutaneous endoscopic approach so the resources involved in addressing acute or postprocedural bleeding in this manner can be assessed.

Response: We appreciate the commenter's support. As discussed in section II.E.16. of the preamble of this final rule, the ICD-10 Coordination and Maintenance Committee addresses updates to the ICD-10-CM and ICD-10-PCS coding systems. We encourage commenters to submit proposals for procedure coding changes via Email to: ICDProcedureCodeRequest@cms.hhs.gov.

Comment: Another commenter questioned CMS's proposal and stated these procedures should be classified to the circulatory MS-DRGs if the bleed is due to an artery or vessel and a procedure is performed on that artery/vessel.

Response: We appreciate the comment and concerns raised on our proposal.

As explained in the proposed rule, when conducting the review of procedures producing assignment to MS-DRGs 981 through 983 or MS-DRGs 987 through 989, the objective is to identify those procedures occurring in conjunction with certain principal diagnoses with sufficient frequency to justify adding them to one of the surgical MS-DRGs for the MDC in which the diagnosis falls, or to move the principal diagnosis codes to the MDC in which the procedure falls.

As stated in the proposed rule, ICD-10-CM diagnosis code R04.0 (Epistaxis) is used to describe a hemorrhage of the nose or “nosebleed” and is currently assigned to MDC 03 (Diseases & Disorders of the Ear, Nose, Mouth & Throat), not MDC 05 (Diseases & Disorders of the Circulatory System). We proposed to add these procedures to MDC 03, to address the matter of these procedures producing assignment to MS-DRGs 981 through 983 when performed for a diagnosis of epistaxis.

We note that under this proposal ICD-10-PCS procedure codes 03LM3DZ, 03LN3DZ, and 03LR3DZ will continue to also be assigned to several MS-DRGs in five other MDCs (including MDC 05 (Diseases & Disorders of the Circulatory System)) as discussed in the proposed rule. With the exception of the pre-MDC, assignment to MDCs is driven by the principal diagnosis and not by the procedure. We also note that according to the ICD-10-CM Official Guidelines for Coding and Reporting, diagnoses described by codes from Chapter 18 (Symptoms, Signs and Abnormal Clinical and Laboratory Findings) of ICD-10-CM, such as R04.0, are acceptable for reporting when a related definitive diagnosis has not been established (confirmed) by the provider. If the nasal bleeding is determined to be due another condition, that condition should be coded as principal diagnosis instead and assignment to a MDC will be driven by that principal diagnosis. Our clinical advisors continue to believe that these procedures are also clearly related to the principal diagnoses ICD-10-CM diagnosis code R04.0 (Epistaxis), assigned to MDC 03 and believe that it is appropriate to add these procedures to MDC 03.

Therefore, after consideration of the public comments we received, we are finalizing our proposal to add ICD-10-PCS procedure codes 03LM3DZ, 03LN3DZ, and 03LR3DZ to MDC 03 in new MS-DRGs 143, 144, and 145. We refer the reader to section II.E.4. of this final rule for the comments regarding our proposal to create new MS-DRGs 143, 144, and 145, as well as our finalization of that proposal.

g. Revision or Removal of Synthetic Substitute in Peritoneal Cavity

As discussed in the proposed rule, during our review of the cases that group to MS-DRGs 981 through 983, we noted that when several ICD-10-PCS procedure codes describing revision or removal of synthetic substitute in the peritoneal cavity are reported in conjunction with ICD-10-CM diagnosis codes in MDC 01 (Diseases and Disorders of the Nervous System), such as complications of intracranial shunts, the cases group to MS-DRGs 981 through 983. ICD-10-PCS procedure codes 0WWG0JZ (Revision of synthetic substitute in peritoneal cavity, open approach), 0WWG4JZ (Revision of synthetic substitute in peritoneal cavity, percutaneous endoscopic approach), and 0WPG0JZ (Removal of synthetic substitute from peritoneal cavity, open approach) are currently assigned to MDC 06 (Diseases and Disorders of the Digestive System) in MS-DRGs 356, 357, and 358 (Other Digestive System O.R. Procedures with MCC, with CC, and without CC/MCC, respectively).

As stated in the proposed rule, we examined cases that reported a principal diagnosis in MDC 01 and procedure code 0WWG0JZ, 0WWG4JZ, or 0WPG0JZ that currently group to MS-DRGs 981 through 983. Our findings are shown in the following table.

Within MDC 01, our clinical advisors believe that these procedures, which describe revision or removal of synthetic substitute in peritoneal cavity, are most clinically similar to those in MS-DRGs 031, 032, and 033 (Ventricular Shunt Procedures with MCC, with CC, and without CC/MCC, respectively). We therefore examined the data for all cases in MS-DRGS 031, 032, and 033.

The average costs for the subset of cases in MS-DRGs 981, 982, and 983 that report procedures describing revision or removal of synthetic substitute in the peritoneal cavity with a principal diagnosis from MDC 01 are lower than the average costs of cases in MS-DRGs 031, 032, and 033 as a whole, and the average length of stay for this subset of cases is also lower in two of the MS-DRGs and higher in one. Our clinical advisors believe the procedure codes describing revision or removal of synthetic substitute in the peritoneal cavity are clearly related to the principal diagnosis codes describing complications of intracranial shunts and, therefore, it is clinically appropriate for the procedures to group to the same MS-DRGs (031, 032, and 033) as the principal diagnoses describing complications of intracranial shunts. We proposed to add ICD-10-PCS procedure codes 0WWG0JZ, 0WWG4JZ, and 0WPG0JZ to MDC 01 (Diseases and Disorders of the Nervous System) in MS-DRGs 031, 032, and 033.

Comments: Commenters supported our proposal to add ICD-10-PCS procedure codes 0WWG0JZ, 0WWG4JZ, and 0WPG0JZ to MDC 01 (Diseases and Disorders of the Nervous System) in MS-DRGs 031, 032, and 033. One commenter stated that ICD-10-PCS procedure codes describing revision or removal of synthetic substitute in the peritoneal cavity are related to the principal diagnosis codes describing complications of intracranial shunts, and so it is appropriate for the procedures to group to the same MS-DRGs as the principal diagnoses describing complications of intracranial shunts. Another commenter noted that another indication for shunt revision is most commonly complications of ventriculoperitoneal shunts, and ICD-10-CM diagnosis codes describing complication of the ventriculoperitoneal shunts are assigned to MDC 01.

Response: We appreciate the commenters' support.

After consideration of the public comments received, we are finalizing our proposal to add ICD-10-PCS procedure codes 0WWG0JZ, 0WWG4JZ, and 0WPG0JZ to MDC 01 (Diseases and Disorders of the Nervous System) in MS-DRGs 031, 032, and 033.

h. Revision of Totally Implantable Vascular Access Devices

As discussed in the proposed rule, during our review of the cases currently grouping to MS-DRGs 981 through 983, we noted that when procedure codes describing Totally Implantable Vascular Access Devices (TIVADs) are reported with ICD-10-CM diagnosis codes assigned to MDC 04 (Diseases and Disorders of the Respiratory System), MDC 06 (Diseases and Disorders of the Digestive System), MDC 07 (Diseases and Disorders of the Hepatobiliary System and Pancreas), MDC 08 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue), MDC 13 (Diseases and Disorders of the Female Reproductive System), or MDC 16 (Diseases and Disorders of Blood, Blood Forming Organs, Immunologic Disorders), the cases group to MS-DRGs 981 through 983.

TIVADs are port catheter devices inserted for chemotherapy treatment. The nine ICD-10-PCS procedure codes describing TIVADs are listed in this table.

We examined claims data to identify the average length of stay and average costs for cases in MS-DRGs 981 through 983 reporting ICD-10-PCS procedure codes describing TIVADs in conjunction with a principal diagnosis from MDCs 04, 06, 07, 08, 13, or 16. Our findings are shown in the following table.

We stated our clinical advisors believe that cases reporting TIVADs with a principal diagnosis in MDCs 04, 06, 07, 08, 13, or 16 would most suitably group to the MS-DRGs describing “Other” procedures for each of these MDCs. These TIVAD procedures cannot be assigned to the specific surgical MS-DRGs within these MDCs since they are not performed on the particular anatomical areas described by each of the specific surgical MS-DRGs. For example, in MDC 04, TIVADs could not be assigned to MS-DRGs 163, 164, and 165 (Major Chest Procedures with MCC, with CC, and without CC/MCC, respectively) because they are not major chest procedures.

We therefore examined the claims data for each of these MS-DRGs. Our findings are shown in the following table.

In the proposed rule, we noted that while the average costs and length of stay are similar in some cases and in some cases vary between the subset of cases currently grouping to MS-DRGs 981 through 983 and the cases currently grouping to the MS-DRGs describing “Other” procedures as set forth in the table, our clinical advisors noted that TIVADs are frequently inserted in order to administer chemotherapy for a variety of malignancies. MDCs 04, 06, 07, 08, 13, or 16 each contain ICD-10-CM diagnosis codes that describe a variety of malignancies. Therefore, our clinical advisors believe that the TIVAD procedures are clearly related to the principal diagnoses within MDCs 04, 06, 07, 08, 13, and 16. For the reasons previously indicated, our clinical advisors believe that cases reporting TIVADs with a principal diagnosis in MDCs 04, 06, 07, 08, 13, or 16 would mostly suitably group to the MS-DRGs describing “Other” procedures for each of these MDCs.

Therefore, we proposed to add the nine ICD-10-PCS procedure codes describing TIVADs as set forth in the table to the MS-DRGs describing “Other” procedures within each of MDCs 04, 06, 07, 08, 13, and 16, specifically: MDC 04 in MS-DRGs 166, 167, and 168, MDC 06 in MS-DRGs 356, 357, and 358, MDC 07 in MS-DRGs 423, 424, and 425, MDC 08 in MS-DRGs 515, 516, and 517, MDC 13 in MS-DRGs 749 and 750, and MDC 16 in MS-DRGs 802, 803, and 804. Under this proposal, cases reporting a principal diagnosis in MDCs 04, 06, 07, 08, 13, or 16 with a TIVAD procedure would group to the respective MS-DRGs within the MDC.

Comments: Commenters supported the addition of ICD-10-PCS procedure codes describing insertion of totally implantable vascular access devices to the MS-DRGs describing “Other” procedures within MDCs 04, 06, 07, 08, 13, and 16.

Response: We appreciate the commenters' support.

After consideration of the public comments received, we are finalizing our proposal to add the nine ICD-10-PCS procedure codes describing TIVADs as set forth in the table to the MS-DRGs describing “Other” procedures within each of MDCs 04, 06, 07, 08, 13, and 16, specifically: MDC 04 in MS-DRGs 166, 167, and 168, MDC 06 in MS-DRGs 356, 357, and 358, MDC 07 in MS-DRGs 423, 424, and 425, MDC 08 in MS-DRGs 515, 516, and 517, MDC 13 in MS-DRGs 749 and 750, and MDC 16 in MS-DRGs 802, 803, and 804.

i. Multiple Trauma With Internal Fixation of Joints

As discussed in the proposed rule, for FY 2020, we received a request to reassign cases involving diagnoses that identify multiple significant trauma combined with internal fixation of joint procedures from MS-DRGs 981, 982, and 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively) to MS-DRGs 957, 958, and 959 (Other O.R. Procedures for Multiple Significant Trauma with MCC, with CC, and without CC/MCC, respectively) in MDC 24 (Multiple Significant Trauma). The requestor provided an example of several ICD-10-CM diagnosis codes that together described multiple significant trauma in conjunction with ICD-10-PCS procedure codes beginning with the prefix “0RH” and “0SH” that describe internal fixation of upper and lower joints. The requestor provided several suggestions to address this reassignment, including: Adding all ICD-10-PCS procedure codes from MDC 08 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue) with the exception of codes that group to MS-DRG 956 (Limb Reattachment, Hip and Femur Procedures for Multiple Significant Trauma) to MS DRGs 957, 958, and 959; adding codes with the prefix “0RH” and “0SH” to MDC 24; and adding ICD-10-PCS procedure codes from all MDCs except those that currently group to MS-DRG 955 (Craniotomy for Multiple Significant Trauma) or MS-DRG 956 (Limb Reattachment, Hip and Femur Procedures for Multiple Significant Trauma) to MS-DRGs 957, 958, and 959 in MDC 24. In the FY 2020 IPPS/LTCH PPS proposed rule, we stated that we believe any potential reassignment of these cases requires significant analysis. We therefore did not propose any changes to the cases identified by the requestor.

For FY 2021, as the first step of the comprehensive analysis needed to assess the reassignment of cases involving diagnoses that identify multiple significant trauma combined with internal fixation of joint procedures, we stated in the proposed rule, our clinical advisors reviewed the list of procedure codes in the “0RH” and “0SH” code ranges, as suggested by the requestor. Our clinical advisors identified 161 ICD-10-PCS codes, which are listed in table 6P.1f., that they believe are clinically related to diagnoses assigned to MDC 24. We examined the claims data for cases that would be assigned to MDC 24 based on their diagnoses, but currently group to MS-DRGs 981 through 983 based on the presence of procedure codes in the “0RH” and “0SH” code ranges. Our findings are shown in this table.

In the proposed rule, we noted that we found only 8 claims, with varying lengths of stay and average costs. We also examined the claims data for all cases in MS-DRGs 957, 958, and 959. Our findings are shown in this table.

The very small number of claims we identified for cases that would be assigned to MDC 24 based on their diagnoses, but grouped to MS-DRGs 981 through 983 based on the presence of procedure codes in the “0RH” and “0SH” code ranges, have varying resource use relative to MS-DRGs 957, 958, and 959 as a whole. The average costs of the cases found in MS-DRGs 981-983 range from $7,015 to $72,331 with average lengths of stay ranging from 3 days to 14 days. The average costs of the cases found in MS-DRGs 957-959 range from $20,563 to $54,771 with average lengths of stay ranging from 5 days to 13.2 days. We stated given the nature of trauma cases, the resource use would be expected to vary based on the nature of the patient's injuries. In addition, as noted, our clinical advisors believe that these procedure codes are clinically related to the diagnoses in MDC 24. Therefore, we proposed to add the 161 ICD-10-PCS codes shown in Table 6P.1f associated with the proposed rule to MDC 24 in MS-DRGs 957, 958, and 959. Under this proposal, cases that would be assigned to MDC 24 based on their diagnoses, that also report one of the 161 ICD-10-PCS codes included in table 6P.1f, will group to MDC 24 in MS-DRGs 957, 958, and 959, rather than to MS-DRGs 981 through 983.

In the proposed rule, we noted that while we made this proposal to address the grouping issue for internal fixation of upper and lower joint procedures identified by the requestor, our clinical advisors believe that a more comprehensive analysis is required within MDC 24 to address the differences in severity level of diagnoses as well as the assignment of procedure codes to the MS-DRGs within MDC 24. We plan to continue this comprehensive analysis in future rulemaking.

Comment: Commenters supported our proposal to add the 161 ICD-10-PCS codes shown in Table 6P.1f to MDC 24 in MS-DRGs 957, 958, and 959. A commenter specifically stated they endorse the proposal as a means of more accurately representing the costs associated with the care and treatment of multi trauma patients. Commenters also stated they agreed that a more comprehensive analysis of the diagnoses and procedures assigned to MDC 24 should be undertaken.

Response: We appreciate the commenters' support.

After consideration of the public comments received, we are finalizing our proposal to add the 161 ICD-10-PCS codes shown in Table 6P.1f associated with this final rule to MDC 24 in MS-DRGs 957, 958, and 959. Accordingly, cases that would be assigned to MDC 24 based on their diagnoses, that also report one of the 161 ICD-10-PCS codes included in table 6P.1f, will group to MDC 24 in MS-DRGs 957, 958, and 959 under the ICD-10 MS-DRGs Version 38, effective October 1, 2020. As noted in the proposed rule, we plan to continue this comprehensive analysis in future rulemaking.

j. Reassignment of Procedures Among MS-DRGs 981 Through 983 and 987 Through 989

We also review the list of ICD-10-PCS procedures that, when in combination with their principal diagnosis code, result in assignment to MS-DRGs 981 through 983, or 987 through 989, to ascertain whether any of those procedures should be reassigned from one of those two groups of MS-DRGs to the other group of MS-DRGs based on average costs and the length of stay. We look at the data for trends such as shifts in treatment practice or reporting practice that would make the resulting MS-DRG assignment illogical. If we find these shifts, we would propose to move cases to keep the MS-DRGs clinically similar or to provide payment for the cases in a similar manner. Generally, we move only those procedures for which we have an adequate number of discharges to analyze the data.

Based on the results of our review of claims data in the September 2019 update of the FY 2019 MedPAR file, we proposed to reassign three procedure codes from MS-DRGs 981, 982, and 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, without CC/MCC, respectively) to MS-DRGs 987, 988, and 989 (Non-Extensive Procedure Unrelated to Principal Diagnosis with MCC, with CC, without CC/MCC, respectively). We also proposed to reassign three procedure codes from MS-DRGs 987, 988, and 989 (Non-Extensive Procedure Unrelated to Principal Diagnosis with MCC, with CC, without CC/MCC, respectively) to MS-DRGs 981, 982, and 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, without CC/MCC, respectively).

In conducting our review of the request to designate ICD-10-PCS procedure code 0W3G0ZZ (Control bleeding in peritoneal cavity, open approach) as an O.R. procedure (as described in section II.E.11.c.5. of this final rule), our clinical advisors noted that ICD-10-PCS codes 0W3G3ZZ (Control bleeding in peritoneal cavity, percutaneous approach) and 0W3G4ZZ (Control bleeding in peritoneal cavity, percutaneous endoscopic approach) are currently assigned to MS-DRGs 981 through 983 when reported with a principal diagnosis that is not assigned to one of the MDCs to which these procedure codes are assigned. We stated that our clinical advisors believe that these procedures would be more appropriately assigned to MS-DRGs 987 through 989 because they are on average less complex and difficult than the same procedure performed by an open approach, and therefore should be assigned to the “less extensive” DRG. Therefore, we proposed to reassign ICD-10-PCS codes 0W3G3ZZ and 0W3G4ZZ from MS-DRGs 981 through 983 to 987 through 989.

Comment: A commenter supported our proposal.

Response: We appreciate the commenter's support.

After consideration of the public comments we received, we are finalizing our proposal to reassign ICD-10-PCS codes 0W3G3ZZ and 0W3G4ZZ from MS-DRGs 981 through 983 to 987 through 989, effective October 1, 2020.

In conducting our review of the request to designate ICD-10-PCS procedure codes 0WBC4ZX (Excision of mediastinum, percutaneous endoscopic approach, diagnostic) and 0WBC3ZX (Excision of mediastinum, percutaneous approach, diagnostic) as O.R. procedures (as described in section II.E.11.c.1. of this final rule), our clinical advisors noted that ICD-10-PCS code 0WBC0ZX (Excision of mediastinum, open approach, diagnostic) is currently assigned to MS-DRGs 981 through 983 when reported with a principal diagnosis that is not assigned to one of the MDCs to which the procedure code is assigned. We stated that our clinical advisors believe that this procedure would be more appropriately assigned to MS-DRGs 987 through 989 because this assignment is consistent with the assignment of other procedures that describe excision of the mediastinum performed by an open, percutaneous, or percutaneous endoscopic approach, and is consistent with the proposal for procedure codes 0WBC4ZX and 0WBC3ZX (with diagnostic qualifier) as discussed in section II.E.11.c.1. of this final rule. Therefore, we proposed to reassign ICD-10-PCS code 0WBC0ZX from MS-DRGs 981 through 983 to 987 through 989.

Comment: A commenter supported our proposal.

Response: We appreciate the commenter's support.

After consideration of the public comments we received, we are finalizing our proposal to reassign ICD-10-PCS code 0WBC0ZX from MS-DRGs 981 through 983 to 987 through 989, effective October 1, 2020.

As discussed in the proposed rule, we received a request to examine cases reporting a procedure describing the open excision of gastrointestinal body parts in the gastrointestinal body system. The requester stated that when procedures describing the open excision of a specific gastrointestinal body part in the gastrointestinal body system are reported with a principal diagnosis such as C49.A3 (Gastrointestinal stromal tumor of small intestine (GIST)), the cases are assigned to MS-DRGs 987, 988, and 989 (Non-Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively). However, when procedures describing the excision of a general gastrointestinal body part in the gastrointestinal body system are reported with the same principal diagnosis of GIST, the cases are assigned to MS-DRGs 981, 982, and 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively). The requestor stated that procedures describing a specific body part value should be assigned to the same MS-DRG as procedures describing a general body part value.

The requestor provided four ICD-10-PCS procedure codes in its request. These four ICD-10-PCS procedure codes, as well as their MDC assignments, are listed in the table:

In the proposed rule, we noted that in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42120 through 42122), we finalized our proposal to move seven ICD-10-CM diagnosis codes describing gastrointestinal stromal tumors (GIST), including C49.A3, from MDC 08 to MDC 06, under the ICD-10 MS-DRGs Version 37, effective October 1, 2019. As a result, cases reporting a principal diagnosis of GIST and a procedure code that is assigned to MDC 06 (such as ICD-10-PCS codes 0DBA0ZZ, 0DBB0ZZ, 0DB80ZZ, and 0DB90ZZ) group to MS-DRGs in MDC 06.

We stated in the proposed rule that our analysis of this grouping issue found that these four ICD-10-PCS codes describing related procedures have dissimilar designations that determine whether and in what way the presence of the procedure impacts the MS-DRG assignment. We noted ICD-10-PCS code 0DB80ZZ is classified as an extensive O.R. procedure and ICD-10-PCS codes 0DB90ZZ, 0DBA0ZZ, and 0DBB0ZZ are classified as non-extensive O.R. procedures. As a result, whenever ICD-10-PCS code 0DB80ZZ is reported with a principal diagnosis that is assigned to a different MDC than the procedure code, the case would be assigned to MS-DRGs 981 through 983. When ICD-10-PCS codes 0DB90ZZ, 0DBA0ZZ, or 0DBB0ZZ are reported with a principal diagnosis that is assigned to a different MDC than the procedure code, the case would be assigned to MS-DRGs 987 through 989.

We examined the claims data to identify cases reporting procedure code 0DB80ZZ that are currently grouping to MS-DRGs 981, 982 and 983. Our findings are shown in this table:

We also examined the claims data to identify cases reporting procedure codes 0DB90ZZ, 0DBA0ZZ, and 0DBB0ZZ that are currently grouping to MS-DRGs 987, 988 and 989. Our findings are shown in this table:

We stated the results of our data analysis indicated that cases reporting procedure codes 0DB90ZZ, 0DBA0ZZ, and 0DBB0ZZ describing the open excision of a specific gastrointestinal body part in MS-DRGs 987, 988, and 989 generally have a longer length of stay and higher average costs when compared to all the cases in their assigned MS-DRG. The subset of cases reporting 0DB90ZZ, 0DBA0ZZ, and 0DBB0ZZ and the subset of cases in MS-DRGs 981, 982 and 983 reporting 0DB80ZZ are more closely aligned in terms of the lengths of stay and average costs. Further we stated, our clinical advisors believed that, given the similarity in resource use required for procedures describing an open excision of a gastrointestinal body part in terms of the use of an operating room, anesthesia and skills required, for clinical coherence and consistency in assignment with ICD-10-PCS code 0DB80ZZ, it would be appropriate to also designate ICD-10-PCS codes 0DB90ZZ, 0DBA0ZZ, and 0DBB0ZZ as extensive O.R. procedures.

Therefore, we proposed to change the designation of ICD-10-PCS codes 0DB90ZZ, 0DBA0ZZ and 0DBB0ZZ from non-extensive O.R. procedures to extensive O.R. procedures for FY 2021. Under this proposal, cases reporting procedure codes 0DB90ZZ, 0DBA0ZZ and 0DBB0ZZ, which are unrelated to the MDC to which the case would otherwise be assigned based on the principal diagnosis, will group to MS-DRGs 981, 982 and 983.

Comment: A commenter supported our proposal to change the designation of the three procedure codes so that when cases reporting procedure codes 0DB90ZZ, 0DBA0ZZ and 0DBB0ZZ, which are unrelated to the MDC to which the case would otherwise be assigned based on the principal diagnosis, will group to MS-DRGs 981, 982 and 983 instead of MS-DRGs 987, 988, and 989.

Response: We appreciate the commenter's support.

After consideration of the public comments we received, we are finalizing our proposal to change the designation of ICD-10-PCS codes 0DB90ZZ, 0DBA0ZZ and 0DBB0ZZ from non-extensive O.R. procedures to extensive O.R. procedures, effective October 1, 2020.

11. Operating Room (O.R.) and Non-O.R. Issues

a. Background

Under the IPPS MS-DRGs (and former CMS MS-DRGs), we have a list of procedure codes that are considered operating room (O.R.) procedures. Historically, we developed this list using physician panels that classified each procedure code based on the procedure and its effect on consumption of hospital resources. For example, generally the presence of a surgical procedure which required the use of the operating room would be expected to have a significant effect on the type of hospital resources (for example, operating room, recovery room, and anesthesia) used by a patient, and therefore, these patients were considered surgical. Because the claims data generally available do not precisely indicate whether a patient was taken to the operating room, surgical patients were identified based on the procedures that were performed. Generally, if the procedure was not expected to require the use of the operating room, the patient would be considered medical (non-O.R.).

Currently, each ICD-10-PCS procedure code has designations that determine whether and in what way the presence of that procedure on a claim impacts the MS-DRG assignment. First, each ICD-10-PCS procedure code is either designated as an O.R. procedure for purposes of MS-DRG assignment (“O.R. procedures”) or is not designated as an O.R. procedure for purposes of MS-DRG assignment (“non-O.R. procedures”). Second, for each procedure that is designated as an O.R. procedure, that O.R. procedure is further classified as either extensive or non-extensive. Third, for each procedure that is designated as a non-O.R. procedure, that non-O.R. procedure is further classified as either affecting the MS-DRG assignment or not affecting the MS-DRG assignment. We refer to these designations that do affect MS-DRG assignment as “non-O.R. affecting the MS-DRG.” For new procedure codes that have been finalized through the ICD-10 Coordination and Maintenance Committee meeting process and are proposed to be classified as O.R. procedures or non-O.R. procedures affecting the MS-DRG, our clinical advisors recommend the MS-DRG assignment which is then made available in association with the proposed rule (Table 6B.—New Procedure Codes) and subject to public comment. These proposed assignments are generally based on the assignment of predecessor codes or the assignment of similar codes. For example, we generally examine the MS-DRG assignment for similar procedures, such as the other approaches for that procedure, to determine the most appropriate MS-DRG assignment for procedures to be newly designated as O.R. procedures. As discussed in section II.E.13. of the preamble of this final rule, we are making Table 6B.—New Procedure Codes—FY 2021 available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html . We also refer readers to the ICD-10 MS-DRG Version 37 Definitions Manual at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.html for detailed information regarding the designation of procedures as O.R. or non-O.R. (affecting the MS-DRG) in Appendix E—Operating Room Procedures and Procedure Code/MS-DRG Index. In the FY 2020 IPPS/LTCH PPS proposed rule, we stated that, given the long period of time that has elapsed since the original O.R. (extensive and non-extensive) and non-O.R. designations were established, the incremental changes that have occurred to these O.R. and non-O.R. procedure code lists, and changes in the way inpatient care is delivered, we plan to conduct a comprehensive, systematic review of the ICD-10-PCS procedure codes. This will be a multi-year project during which we will also review the process for determining when a procedure is considered an operating room procedure. For example, we may restructure the current O.R. and non-O.R. designations for procedures by leveraging the detail that is now available in the ICD-10 claims data. We refer readers to the discussion regarding the designation of procedure codes in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38066) where we stated that the determination of when a procedure code should be designated as an O.R. procedure has become a much more complex task. This is, in part, due to the number of various approaches available in the ICD-10-PCS classification, as well as changes in medical practice. While we have typically evaluated procedures on the basis of whether or not they would be performed in an operating room, we believe that there may be other factors to consider with regard to resource utilization, particularly with the implementation of ICD-10.

We discussed in the FY 2020 IPPS/LTCH PPS proposed rule that as a result of this planned review and potential restructuring, procedures that are currently designated as O.R. procedures may no longer warrant that designation, and conversely, procedures that are currently designated as non-O.R. procedures may warrant an O.R. type of designation. We intend to consider the resources used and how a procedure should affect the MS-DRG assignment. We may also consider the effect of specific surgical approaches to evaluate whether to subdivide specific MS-DRGs based on a specific surgical approach. We plan to utilize our available MedPAR claims data as a basis for this review and the input of our clinical advisors. As part of this comprehensive review of the procedure codes, we also intend to evaluate the MS-DRG assignment of the procedures and the current surgical hierarchy because both of these factor into the process of refining the ICD-10 MS-DRGs to better recognize complexity of service and resource utilization.

We will provide more detail on this analysis and the methodology for conducting this review in future rulemaking. As we noted in the FY 2020 IPPS/LTCH PPS rulemaking, as we continue to develop our process and methodology, as previously noted, we are soliciting recommendations on other factors to consider in our refinement efforts to recognize and differentiate consumption of resources for the ICD-10 MS-DRGs. Therefore, in the FY 2021 proposed rule, we again solicited feedback on what factors or criteria to consider in determining whether a procedure is designated as an O.R. procedure in the ICD-10-PCS classification system for future consideration. We stated commenters should submit their recommendations to the following email address: MSDRGClassificationChange@cms.hhs.gov by October 20, 2020.

In this FY 2021 IPPS/LTCH PPS final rule, we present a summation of the comments we received in response to this discussion in the proposed rule.

Comment: Several commenters supported CMS' plan to continue to conduct the comprehensive, systematic review of the ICD-10-PCS codes that includes a process for determining when a procedure is designated as O.R. or Non-O.R. and acknowledged the magnitude of the potential impact to significantly restructure MS-DRGs.

Response: We thank the commenters for their support and appreciate their acknowledgement of the magnitude of this effort.

Comment: Two commenters stated that the public feedback they submitted by November 1, 2019 in response to CMS' request for feedback in the FY 2020 IPPS/LTCH PPS proposed rule was not stated in the FY 2021 IPPS/LTCH proposed rule.

Response: CMS appreciates the comments submitted in response to our request for feedback in both the FY 2020 IPPS/LTCH PPS proposed rule and in the FY 2021 IPPS/LTCH PPS proposed rule. While the comments submitted by the November 1, 2019 deadline were not specifically addressed in the FY 2021 IPPS/LTCH PPS proposed rule, feedback on what factors and/or criteria to consider in determining whether a procedure is designated as an O.R. procedure in the ICD-10-PCS classification system will be included when we provide more detail on this analysis and the methodology for conducting this comprehensive review in future rulemaking.

Comment: Several commenters requested that CMS consider the drivers of complexity and resource consumption surrounding the entire procedure and not only O.R. charges. The commenters stated that while large hospitals may have hybrid operating rooms or specialized procedure rooms (for example, interventional radiology suites), many smaller community hospitals may have multi-purpose O.R.s where the same room may be used for invasive general surgeries as well as procedures that may be performed in specialized procedure rooms in large hospitals. One of these commenters provided an example of the complexity and resource consumption of a procedure performed in a catheterization lab and stated that O.R verses Non O.R. may not be the most critical differentiator of resource consumption. Another commenter urged CMS to consider the definition of a “significant procedure” as defined in the Uniform Hospital Discharge Data Set (UHDDS) which states, “A significant procedure is one that is: Surgical in nature; carries a procedural risk; carries an aesthetic risk; or requires specialized training.” This commenter stated that this definition does not include whether an “O.R.” is required, but in many cases, the procedure itself determines if it is “surgical in nature” and other procedures that do not require an “O.R.” do require specialized training or carry risk.

Response: CMS appreciates the commenters' feedback and recommendations as to factors to consider in evaluating O.R. designations. As stated previously, we have typically evaluated procedures on the basis of whether or not they would be performed in an operating room. We agree with commenters and believe that there may be other factors to consider with regard to resource utilization, particularly with the implementation of ICD-10. As discussed in the proposed rule, we are exploring alternatives on how we may restructure the current O.R. and non-O.R. designations for procedures by leveraging the detail that is now available in the ICD-10 claims data. We continue to develop our process and methodology, and will provide more detail in future rulemaking.

Comment: Several commenters suggested that CMS assemble an advisory panel comprised of clinical, coding and financial stakeholders, physician specialty societies and experts to review methodologies for O.R. determination and that CMS should address procedures performed in all settings as there may be variations based on geographical differences, hospital size, resources and physician specialty availability. Two commenters suggested that CMS allow sufficient time for provider review and stated that thorough data analysis with provider input is critical to allow for appropriate insight in provider comments. These commenters stated that outside of the CMS noted intentions for consideration, additional data for each ICD-10-PCS procedure code should be provided so that a more thorough analysis can be completed. One of these commenters further suggested revising the October 20 deadline for submission of public comments if CMS could not provide the additional data timely.

Response: CMS appreciates this feedback. While CMS has already convened an internal workgroup comprised of clinicians, consultants, coding specialists and other policy analysts, we look forward to further collaboration with the industry. As discussed in section II.D.1.b. of the preamble of the proposed rule, given the continued increase in the number and complexity of the requested changes to the MS-DRG classifications since the adoption of ICD-10 MS-DRGs, and in order to consider as many requests as possible, more time is needed to carefully evaluate the requested changes, analyze claims data, and consider any proposed updates. Therefore, changing the deadline to October 20th of each year would allow CMS the additional time for the review and consideration of any proposed updates. However, as stated in section II.E.1.b. of this final rule, we are maintaining the deadline of November 1, 2020 for the submission of such requests for FY 2022. Recognizing sufficient time is needed to provide feedback on what factors or criteria to consider in determining whether a procedure should be designated as an O.R. procedure in the ICD-10-PCS classification system, we have provided opportunity for the public to provide feedback beginning with the FY 2018 final rule and we continue to solicit input. We encourage the public to submit comments on other factors to consider in our refinement efforts to recognize and differentiate consumption of resources for the ICD-10 MS-DRGs timely for consideration. Once we are in a position to provide more detail on this analysis and the methodology for conducting this comprehensive review in future rulemaking, the public will again have the opportunity to provide feedback.

In the FY 2021 IPPS/LTCH PPS proposed rule and this final rule, we are addressing requests that we received regarding changing the designation of specific ICD-10-PCS procedure codes from non-O.R. to O.R. procedures, or changing the designation from O.R. procedure to non-O.R. procedure. In this section of the rule we discuss the process that was utilized for evaluating the requests that were received for FY 2021 consideration. For each procedure, our clinical advisors considered—

• Whether the procedure would typically require the resources of an operating room;
• Whether it is an extensive or a nonextensive procedure; and
• To which MS-DRGs the procedure should be assigned.

We note that many MS-DRGs require the presence of any O.R. procedure. As a result, cases with a principal diagnosis associated with a particular MS-DRG would, by default, be grouped to that MS-DRG. Therefore, we do not list these MS-DRGs in our discussion in this section of this rule. Instead, we only discuss MS-DRGs that require explicitly adding the relevant procedure codes to the GROUPER logic in order for those procedure codes to affect the MS-DRG assignment as intended. In cases where we proposed to change the designation of procedure codes from non-O.R. procedures to O.R. procedures, we also proposed one or more MS-DRGs with which these procedures are clinically aligned and to which the procedure code would be assigned.

In addition, cases that contain O.R. procedures will map to MS-DRG 981, 982, or 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively) or MS-DRG 987, 988, or 989 (Non-Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively) when they do not contain a principal diagnosis that corresponds to one of the MDCs to which that procedure is assigned. These procedures need not be assigned to MS-DRGs 981 through 989 in order for this to occur. Therefore, if requestors included some or all of MS-DRGs 981 through 989 in their request or included MS-DRGs that require the presence of any O.R. procedure, we did not specifically address that aspect in summarizing their request or our response to the request in this section of this rule.

For procedures that would not typically require the resources of an operating room, our clinical advisors determined if the procedure should affect the MS-DRG assignment.

As indicated in the proposed rule, we received several requests to change the designation of specific ICD-10-PCS procedure codes from non-O.R. procedures to O.R. procedures, or to change the designation from O.R. procedures to non-O.R. procedures. In this section of this rule, as we did in the proposed rule, we detail and respond to some of those requests and, further, summarize and respond to the public comments we received in response to our proposals, if applicable. With regard to the remaining requests, as stated in the proposed rule, our clinical advisors believe it is appropriate to consider these requests as part of our comprehensive review of the procedure codes as previously discussed.

b. O.R. Procedures to Non-O.R. Procedures

(1) Endoscopic Revision of Feeding Devices

One requestor identified three ICD-10-PCS procedure codes that describe endoscopic revision of feeding devices, shown in the following table.

In the ICD-10 MS-DRG Version 37 Definitions Manual, these three ICD-10-PCS procedure codes are currently recognized as O.R. procedures for purposes of MS-DRG assignment. The requestor noted that these procedures would not require the resources of an operating room and that they consume resources comparable to related ICD-10-PCS procedure codes describing the endoscopic insertion of feeding tubes that currently are designated as Non-O.R. procedures.

In the proposed rule, we stated that we agreed with the requestors that these procedures do not typically require the resources of an operating room, and are not surgical in nature. Therefore, we proposed to remove 0DW08UZ, 0DW68UZ, and 0DWD8UZ from the FY 2021 ICD-10 MS-DRGs Version 38 Definitions Manual in Appendix E—Operating Room Procedures and Procedure Code/MS-DRG Index as O.R. procedures. We stated in the proposed rule that, under this proposal, these procedures would no longer impact MS-DRG assignment.

Comments: Commenters supported our proposal to designate ICD-10-PCS procedure codes 0DW08UZ, 0DW68UZ, 0DWD8UZ as non-O.R. procedures. One commenter specifically stated they believed that the endoscopic revision of feeding devices does not typically require the resources of an O.R. and can be safely performed in non-O.R. settings such as interventional radiology or endoscopy suites.

Response: We appreciate the commenters' support.

After consideration of the public comments we received, we are finalizing our proposal to change the designation of procedure codes 0DW08UZ, 0DW68UZ, and 0DWD8UZ from O.R. procedures to non-O.R. procedures, effective October 1, 2020.

c. Non-O.R. Procedures to O.R. Procedures

(1) Percutaneous/Endoscopic Biopsy of Mediastinum

One requestor identified ICD-10-PCS procedure code 0WBC4ZX (Excision of mediastinum, percutaneous endoscopic approach, diagnostic) that describes a percutaneous endoscopic biopsy of the mediastinum that the requestor stated is performed in the operating room under general anesthesia, requires an incision through the chest wall, insertion of a mediastinoscope in the space between the lungs and involves removal of a tissue sample. The requestor recommended that all procedures performed within the mediastinum by an open or percutaneous endoscopic approach, regardless of whether it is a diagnostic or therapeutic procedure, should be designated as O.R. procedures because the procedures require great skill and pose risks to patients due to the structures contained within the mediastinum. The requestor noted that the mediastinum contains loose connective tissue, the heart and great vessels, esophagus, trachea, nerves, and lymph nodes. The requestor further noted that redesignating these procedures from non-O.R. to O.R. would provide compensation for operating room resources and general anesthesia.

We note that under the ICD-10-PCS procedure classification, biopsy procedures are identified by the 7th digit qualifier value “diagnostic” in the code description. In response to the requestor's suggestion that all procedures performed within the mediastinum by an open or percutaneous endoscopic approach, regardless of whether it is a diagnostic or therapeutic procedure should be designated as an O.R. procedure, we examined the following procedure codes:

In the ICD-10 MS-DRGs Definitions Manual Version 37, procedure codes 0WBC0ZX, 0WBC0ZZ, 0WBC3ZZ, and 0WBC4ZZ are currently designated as O.R. procedures, however, procedure codes 0WBC3ZX and 0WBC4ZX are not recognized as O.R. procedures for purposes of MS-DRG assignment. We stated in the proposed rule that we agree with the requestor that procedure code 0WBC4ZX would typically require the resources of an operating room. We further stated that our clinical advisors also agree that procedure code 0WBC3ZX would typically require the resources of an operating room. Therefore, we proposed to add these 2 procedure codes to the FY 2021 ICD-10 MS-DRGs Version 38 Definitions Manual in Appendix E- Operating Room Procedures and Procedure Code/MS-DRG Index as O.R. procedures, assigned to MS-DRGs 166, 167 and 168 (Other Respiratory System O.R. Procedures with MCC, with CC, and without CC/MCC, respectively) in MDC 04 (Diseases and Disorders of the Respiratory System); MS-DRGs 628, 629, and 630 (Other Endocrine, Nutritional and Metabolic O.R. Procedures with MCC, with CC, and without CC/MCC, respectively) in MDC 10 (Endocrine, Nutritional and Metabolic Diseases and Disorders); MS-DRGs 820, 821, and 822 (Lymphoma and Leukemia with Major O.R. Procedure with MCC, with CC, and without CC/MCC, respectively) and MS-DRGs 826, 827, and 828 (Myeloproliferative Disorders or Poorly Differentiated Neoplasms with Major O.R. Procedure with MCC, with CC, and without CC/MCC, respectively) in MDC 17 (Myeloproliferative Diseases and Disorders, Poorly Differentiated Neoplasms); and to MS-DRGs 987, 988, and 989 (Non-Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC and without MCC/CC, respectively).

As previously noted, procedure codes 0WBC0ZX, 0WBC0ZZ, 0WBC3ZZ, and 0WBC4ZZ are currently designated as O.R. procedures. As displayed in the FY 2020 ICD-10 MS-DRGs Version 37 Definitions Manual in Appendix E- Operating Room Procedures and Procedure Code/MS-DRG Index, these procedure codes are assigned to several MS-DRGs across many MDCs. During our process of reviewing potential MDC and MS-DRG assignments for procedure codes 0WBC3ZX and 0WBC4ZX, our clinical advisors recommended that we reassign procedure codes 0WBC0ZZ, 0WBC3ZZ, and 0WBC4ZZ from their current MS-DRG assignments in MDC 04 (Diseases and Disorders of the Respiratory System). Procedure codes 0WBC0ZZ, 0WBC3ZZ, and 0WBC4ZZ are currently assigned to MS-DRGs 163, 164, and 165 (Major Chest Procedures with MCC, with CC, and without CC/MCC, respectively) and procedure code 0WBC0ZX is assigned to MS-DRGs 166, 167 and 168 (Other Respiratory System O.R. Procedures with MCC, with CC, and without CC/MCC, respectively). We stated in the proposed rule that according to our clinical advisors, procedure codes 0WBC0ZZ, 0WBC3ZZ, and 0WBC4ZZ would be more appropriately and clinically aligned with the same MS-DRG assignment as procedure code 0WBC0ZX, which is also consistent with the assignment for other procedures performed on the mediastinum. Therefore, we proposed to reassign procedure codes 0WBC0ZZ, 0WBC3ZZ, and 0WBC4ZZ to MS-DRGs 166, 167 and 168 (Other Respiratory System O.R. Procedures with MCC, with CC, and without CC/MCC, respectively).

Comment: Commenters supported the proposal to reclassify ICD-10-PCS procedure codes 0WBC4ZX (Excision of mediastinum, percutaneous endoscopic approach, diagnostic) and 0WBC3ZX (Excision of mediastinum, percutaneous approach, diagnostic) as O.R. procedures for the purposes of MS-DRG assignment for FY 2021. A commenter stated their belief that surgeries performed within the mediastinum by an open or percutaneous endoscopic approach, regardless of whether it is a diagnostic or therapeutic procedure, typically require the resources of the O.R. to control for possible damage to the structures contained within the mediastinum, including loose connective tissue, the heart and great vessels, esophagus, trachea, nerves, and lymph nodes. The commenter noted that the invasive nature of these procedures also necessitates the sterile environment of an O.R. to limit the risk of secondary infection.

Commenters also supported the proposal to reassign procedure codes 0WBC0ZZ, 0WBC3ZZ, and 0WBC4ZZ from MS-DRGs 163, 164, and 165 to MS-DRGs 166, 167, and 168. However, a couple commenters did not agree with the proposal and stated that the open, percutaneous, and endoscopic therapeutic mediastinal excisions should remain distinct from the diagnostic mediastinal procedures. The commenters noted that while the approaches of the procedures are the same, the time, risk and resource utilization is different for the therapeutic and diagnostic procedures. The commenters stated that diagnostic procedures require only a small mediastinal resection, more specifically an incisional biopsy, for diagnostic purposes while the therapeutic mediastinal resection involves the complete resection of large tumors, cysts or masses that may be malignant or benign juxtaposed to critical mediastinal structures. In addition, the commenters reported that therapeutic mediastinal resections will often require more time in the O.R., slightly longer lengths of stay, and more post-operative care due to the invasive nature of the procedures.

Response: We appreciate the commenters' feedback on the proposal to reclassify ICD-10-PCS procedure codes 0WBC4ZX and 0WBC3ZX as O.R. procedures for the purposes of MS-DRG assignment and on the proposal to reassign procedure codes 0WBC0ZZ, 0WBC3ZZ, and 0WBC4ZZ from MS-DRGs 163, 164, and 165 to MS-DRGs 166, 167, and 168. In response to the commenters who did not agree with the proposal to reassign procedure codes 0WBC0ZZ, 0WBC3ZZ, and 0WBC4ZZ from MS-DRGs 163, 164, and 165 to MS-DRGs 166, 167, and 168, as noted by the commenters, the approaches of the therapeutic and diagnostic procedures are the same, however our clinical advisors did not agree that the time, risk and resource utilization are necessarily different for the therapeutic and diagnostic procedures.

While the commenters' asserted that therapeutic mediastinal procedures will often require more time in the O.R., slightly longer lengths of stay, and more post-operative care due to the invasive nature of the procedures, our analysis of claims data found that the average length of stay and the average costs for the diagnostic procedures were greater than those of the therapeutic procedures. We examined data from the September 2019 update of the FY 2019 MedPAR data for both diagnostic and therapeutic mediastinal excision procedures across all MS-DRGs. Our findings are shown in the table below.

As shown in the table, there were a total of 1,141 cases reporting a diagnostic excision of mediastinum procedure with an average length of stay of 8.2 days and average costs of $21,279 and a total of 291 cases reporting a therapeutic excision of mediastinum procedure with an average length of stay of 4.3 days and average costs of $17,267. Our clinical advisors maintain that therapeutic and diagnostic procedures involving excision of the mediastinum are clinically aligned and should be grouped together. However, as noted in prior rule making (84 FR 42148), our clinical advisors recognize that MS-DRGs 163, 164, 165, 166, 167, and 168 may warrant further review and therefore, we plan to begin this more detailed review beginning with our FY 2022 MS-DRG classification analysis of claims data and determine what modifications may need to be considered for future rulemaking.

After consideration of the public comments we received, we are finalizing our proposal to add procedure codes 0WBC4ZX and 0WBC3ZX as O.R. procedures to the FY 2021 ICD-10 MS-DRGs Version 38 Definitions Manual in Appendix E—Operating Room Procedures and Procedure Code/MS- DRG Index as O.R. procedures, assigned to MS-DRGs 166, 167, and 168 (Other Respiratory System O.R. Procedures with MCC, with CC, and without CC/MCC, respectively) in MDC 04 (Diseases and Disorders of the Respiratory System); MS-DRGs 628, 629, and 630 (Other Endocrine, Nutritional and Metabolic O.R. Procedures with MCC, with CC, and without CC/MCC, respectively) in MDC 10 (Endocrine, Nutritional and Metabolic Diseases and Disorders); MS-DRGs 820, 821, and 822 (Lymphoma and Leukemia with Major O.R. Procedure with MCC, with CC, and without CC/MCC, respectively) and MS-DRGs 826, 827, and 828 (Myeloproliferative Disorders or Poorly Differentiated Neoplasms with Major O.R. Procedure with MCC, with CC, and without CC/MCC, respectively) in MDC 17 (Myeloproliferative Diseases and Disorders, Poorly Differentiated Neoplasms); and to MS-DRGs 987, 988, and 989 (Non-Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC and without MCC/CC, respectively). We are also finalizing our proposal to reassign procedure codes 0WBC0ZZ, 0WBC3ZZ, and 0WBC4ZZ from MS-DRGs 163, 164, and 165 to MS-DRGs 166, 167, and 168, effective FY 2021.

One requestor identified ICD-10-PCS procedure code 3E0L4GC (Introduction of other therapeutic substance into pleural cavity, percutaneous endoscopic approach) that the requestor stated is currently not recognized as an O.R. procedure for purposes of MS-DRG assignment. The requestor noted that talc pleurodesis via video-assisted thoracoscopic surgery (VATS), involves placing a thoracoscope through the chest wall for visualization, then placing a port and injecting talc, doxycycline, or other chemical into the pleural cavity under general anesthesia and should therefore be recognized as an O.R. procedure for purposes of MS-DRG assignment.

We stated in the proposed rule that we agreed with the requestor that ICD-10-PCS procedure code 3E0L4GC typically requires the resources of an operating room. We also note that the AHA published Coding Clinic advice in 2015 that instructed to code both ICD-10-PCS procedure codes 0BJQ4ZZ (Inspection of pleura, percutaneous endoscopic approach) and 3E0L3GC (Introduction of other therapeutic substance into pleural cavity, percutaneous approach) for thoracoscopic chemical pleurodesis. In the publication, code 0BJQ4ZZ, recognized as an O.R. procedure for purposes of MS-DRG assignment, was instructed to be reported for the video-assisted thoracoscopic portion of the procedure since the endoscopic component of the procedure could not be captured by the approach values available at the time. In FY 2018, the approach value “4” Percutaneous Endoscopic was added to the root operation Introduction table 3E0, to capture percutaneous endoscopic administration of a therapeutic substance, meaning that code 0BJQ4ZZ was no longer needed along with code 3E0L3GC to report thoracoscopic chemical pleurodesis. Only code 3E0L4GC is needed to report all components of the procedure. Designating code 3E0L4GC as an O.R. procedure for purposes of MS-DRG assignment classifies the procedure as intended when two codes were needed to fully code the procedure. Therefore, we proposed to add procedure code 3E0L4GC to the FY 2021 ICD-10 MS-DRG Version 38 Definitions Manual in Appendix E—Operating Room Procedures and Procedure Code/MS-DRG Index as an O.R. procedure assigned to MS-DRGs 166, 167, and 168 (Other Respiratory System O.R. procedures with MCC, CC, without CC/MCC, respectively) in MDC 04 (Diseases and Disorders of the Respiratory System); and MS-DRG 264 (Other Circulatory System O.R. Procedures) in MDC 05 (Diseases and Disorders of the Circulatory System).

Comments: Commenters supported our proposal to designate ICD-10-PCS procedure code 3E0L4GC as an O.R. procedure. A commenter noted that since code 0BJQ4ZZ, Inspection of pleura, percutaneous endoscopic approach, is no longer necessary as an additional code to capture the endoscopic component of the procedure it makes sense for code 3E0L4GC to be designated as an O.R. procedure.

Response: We appreciate the commenters' support.

After consideration of the public comments we received, we are finalizing our proposal to change the designation of procedure code 3E0L4GC from non-O.R. procedure to O.R. procedure, effective October 1, 2020.

(3) Percutaneous Endoscopic Excision of Stomach

One requestor identified ICD-10-PCS procedure code 0DB64ZZ (Excision of stomach, percutaneous endoscopic approach) that the requestor stated is currently not recognized as an O.R. procedure for purposes of MS-DRG assignment. The requestor noted that percutaneous endoscopic excisions of gastric lesions and percutaneous endoscopic partial gastrectomies are performed in the operating room under general anesthesia, use comparable resources, and are designated as O.R. procedures. Therefore, the requestor stated that this procedure should also be recognized as O.R. procedure for purposes of MS-DRG assignment.

We stated in the proposed rule that we agreed with the requestor that ICD-10-PCS procedure code 0DB64ZZ typically requires the resources of an operating room. During our review, we also noted that ICD-10-PCS code 0DB64ZX (Excision of stomach, percutaneous endoscopic approach, diagnostic) was not currently recognized as an O.R. procedure. We proposed to add these codes to the FY 2021 ICD-10 MS-DRG Version 38 Definitions Manual in Appendix E—Operating Room Procedures and Procedure Code/MS-DRG Index as O.R. procedures assigned to MS-DRGs 326, 327, and 328 (Stomach, Esophageal and Duodenal Procedures with MCC, with CC, and without CC/MCC, respectively) in MDC 06 (Diseases and Disorders of the Digestive System); MS-DRGs 619, 620, and 621 (Procedures for Obesity with MCC, with CC, and without CC/MCC, respectively) in MDC 10 (Endocrine, Nutritional and Metabolic Diseases and Disorders); and MS-DRGs 820, 821, and 822 (Lymphoma and Leukemia with Major Procedure with MCC, with CC, and without CC/MCC, respectively), MS-DRGs 826, 827, and 828 (Myeloproliferative Disorders or Poorly Differentiated Neoplasms with Major Procedure with MCC, with CC, and without CC/MCC, respectively), and MS-DRGs 829 and 830 (Myeloproliferative Disorders or Poorly Differentiated Neoplasms with Other Procedure with CC/MCC and without CC/MCC, respectively) in MDC 17 (Myeloproliferative Diseases and Disorders, Poorly Differentiated Neoplasms).

Comments: Many commenters supported our proposal. One commenter specifically stated they concurred with the requestor's statement that similar procedures such as percutaneous endoscopic excisions of gastric lesions and percutaneous endoscopic partial gastrectomies are currently classified as O.R. procedures, and that the two listed stomach excision codes should be designated as O.R. procedures due to comparable costs and resource use. This commenter also stated they believed that the invasive nature of such procedures also necessitates the sterile environment of an O.R. to limit the risk of secondary infection.

Response: We appreciate the commenters' support.

After consideration of the public comments we received, we are finalizing our proposal to change the designation of procedure codes 0DB64ZZ and 0DB64ZX from non-O.R. procedures to O.R. procedures, effective October 1, 2020.

As discussed in the proposed rule, during our review, we also noted that ICD-10-PCS procedure code 0DB64Z3 (Excision of stomach, percutaneous endoscopic approach, vertical (sleeve)), which is clinically similar to ICD-10-PCS codes 0DB64ZZ and 0DB64ZX, is designated as an O.R. procedure assigned to the same MS-DRGs as we proposed for ICD-10-PCS codes 0DB64ZZ and 0DB64ZX, as well as to MS-DRG 264 (Other Circulatory System O.R. Procedures) in MDC 05 (Diseases and Disorders of the Circulatory System); MS-DRGs 907, 908, and 909 (Other O.R. Procedures for Injuries, with MCC, with CC, and without CC/MCC, respectively) in MDC 21 (Injuries, Poisonings and Toxic Effects of Drugs); and MS-DRGs 957, 958, and 959 (Other O.R. procedures for multiple significant trauma, with MCC, with CC, and without CC/MCC, respectively) in MDC 24 (Multiple Significant Trauma). We stated our clinical advisors believe that principal diagnoses in MDCs 05 and 21 are typically not indications for procedures describing percutaneous endoscopic excision of stomach and that ICD-10-PCS procedure code 0DB64Z3 should be assigned to the same MS-DRGs as ICD-10-PCS codes 0DB64ZZ and 0DB64ZX.

We examined claims data from the September 2019 update of the FY 2019 MedPAR file to determine if there were any cases that reported 0DB64Z3 and were assigned to MDC 05, MDC 21, or MDC 24. The following table shows our findings:

We found zero cases in MS-DRGs 957, 958, and 959 reporting 0DB64Z3 and a principal diagnosis in MDC 24 (Multiple Significant Trauma). We stated our analysis demonstrated that diagnoses assigned to MDC 05, MDC 21, and MDC 24 are not typically corrected surgically by percutaneous endoscopic vertical (sleeve) gastrectomy given the small number of cases reporting this procedure in these MDCs. We also stated our clinical advisors believe procedure codes describing the percutaneous endoscopic excision of stomach should have the same MDC assignments in the ICD-10 MS-DRGs Version 38 for coherence. Therefore, we proposed to remove the assignments of code 0DB64Z3 from MS-DRG 264 (Other Circulatory System O.R. Procedures) in MDC 05 (Diseases and Disorders of the Circulatory System); MS-DRGs 907, 908, and 909 (Other O.R. Procedures for Injuries, with MCC, with CC, and without CC/MCC, respectively) in MDC 21 (Injuries, Poisonings and Toxic Effects of Drugs); and MS-DRGs 957, 958, and 959 (Other O.R. procedures for multiple significant trauma, with MCC, with CC, and without CC/MCC, respectively) in MDC 24 (Multiple Significant Trauma).

Comments: Commenters supported our proposal and stated they agreed that diagnoses assigned to MDC 05 (Diseases and Disorders of the Circulatory System), MDC 21 (Injuries, Poisonings and Toxic Effects of Drugs), and MDC 24 (Multiple Significant Trauma) are not typically corrected surgically by percutaneous endoscopic vertical (sleeve) gastrectomy, and that procedure codes describing the percutaneous endoscopic excision of stomach should all be assigned to the same MDCs.

Response: We appreciate the commenters' support.

After consideration of the public comments we received, we are finalizing our proposal to remove the assignments of code 0DB64Z3 from MS-DRG 264 (Other Circulatory System O.R. Procedures) in MDC 05 (Diseases and Disorders of the Circulatory System); MS-DRGs 907, 908, and 909 (Other O.R. Procedures for Injuries, with MCC, with CC, and without CC/MCC, respectively) in MDC 21 (Injuries, Poisonings and Toxic Effects of Drugs); and MS-DRGs 957, 958, and 959 (Other O.R. procedures for multiple significant trauma, with MCC, with CC, and without CC/MCC, respectively) in MDC 24 (Multiple Significant Trauma), effective October 1, 2020.

Lastly, we stated while we were reviewing this request, we noted inconsistencies in how procedures involving the excision of stomach are designated. Excision of stomach codes differ by approach and qualifier. ICD-10-PCS procedure codes describing excision of stomach with similar approaches have been assigned different attributes in terms of designation as an O.R. or Non-O.R. procedure. We identified the following five related codes:

As discussed in the proposed rule, in the ICD-10 MS-DRGs Version 37, these ICD-10-PCS codes are currently recognized as O.R. procedures for purposes of MS-DRG assignment, while similar excision of stomach procedure codes with the same approach but different qualifiers are recognized as Non-O.R. procedures. We stated our clinical advisors indicated that these procedures are not surgical in nature and do not require an incision. Therefore, we proposed to remove ICD-10-PCS procedure codes 0DB63Z3, 0DB63ZZ, 0DB67Z3, 0DB67ZZ, and 0DB68Z3 from the FY 2021 ICD-10 MS-DRG Version 38 Definitions Manual in Appendix E—Operating Room Procedures and Procedure Code/MS-DRG Index as O.R. procedures. Under this proposal, these procedures would no longer impact MS-DRG assignment.

Comments: Commenters opposed our proposal. A few commenters noted that the five procedure codes describing excision of stomach listed are similar in nature to procedure codes 0DB64ZZ and 0DB64ZX that describe percutaneous endoscopic excisions of the stomach, which CMS proposed to change from non-O.R. procedures to O.R. procedures. One commenter also stated that procedure codes describing excision of stomach via percutaneous approach or excision of stomach via percutaneous endoscopic approach should have the same O.R. procedure designation.

Response: We appreciate the comments and concerns raised on our proposal.

Our clinical advisors continue to indicate that these procedures are not surgical in nature and do not require an incision however, after acknowledging the concerns raised by commenters, believe it would be appropriate to take additional time to review the inconsistencies in how procedures involving the excision of stomach are designated. Therefore, after consideration of public comments, we are not finalizing our proposal to remove ICD-10-PCS procedure codes 0DB63Z3, 0DB63ZZ, 0DB67Z3, 0DB67ZZ, and 0DB68Z3 from the FY 2021 ICD-10 MS-DRG Version 38 Definitions Manual in Appendix E—Operating Room Procedures and Procedure Code/MS-DRG Index as O.R. procedures. Accordingly, these procedures will continue to impact MS-DRG assignment under the ICD-10 MS-DRGs Version 38, effective October 1, 2020.

(4) Percutaneous Endoscopic Drainage

One requestor identified six ICD-10-PCS procedure codes that describe procedures involving laparoscopic drainage of peritoneum, peritoneal cavity, and gallbladder that the requestor stated are currently not recognized as O.R. procedures for purposes of MS-DRG assignment. The six procedure codes are listed in the following table:

The requestor stated these procedures would commonly be performed under general anesthesia and require the resources of an operating room. The requestor also noted that similar procedures such as percutaneous endoscopic inspection of gallbladder, percutaneous endoscopic excision of peritoneum and percutaneous endoscopic extirpation of matter from peritoneal cavity are currently classified as O.R. procedures in Version 37 of the ICD-10 MS-DRGs and that the six listed procedure codes should be designated as O.R. procedures due to comparable costs and resource use.

We stated in the proposed rule that we agreed with the requestor that the six ICD-10-PCS procedure codes listed in the table typically require the resources of an operating room. Therefore, to the FY 2021 ICD-10 MS-DRG Version 38 Definitions Manual in Appendix E—Operating Room Procedures and Procedure Code/MS-DRG Index, we proposed to add codes 0D9W4ZZ and 0D9W40Z as O.R. procedures assigned to MS-DRGs 356, 357, and 358 (Other Digestive System O.R. Procedures, with MCC, with CC, and without CC/MCC, respectively) in MDC 06 (Diseases and Disorders of the Digestive System); and MS-DRGs 907, 908, and 909 (Other O.R. Procedures for Injuries with MCC, with CC, and without CC/MCC, respectively) in MDC 21 (Injuries, Poisonings and Toxic Effects of Drugs). We also proposed to add codes 0W9G4ZZ and 0W9G40Z as O.R. procedures assigned to MS-DRGs 356, 357, and 358 (Other Digestive System O.R. Procedures with MCC, with CC, and without CC/MCC, respectively) in MDC 06 (Diseases and Disorders of the Digestive System); MS-DRGs 420, 421, and 422 (Hepatobiliary Diagnostic Procedures, with MCC, with CC, and without CC/MCC, respectively) in MDC 07 (Diseases and Disorders of the Hepatobiliary System and Pancreas); MS-DRGs 673, 674, and 675 (Other Kidney and Urinary Tract Procedures, with MCC, with CC, and without CC/MCC, respectively) in MDC 11 (Diseases and Disorders of the Kidney and Urinary Tract); MS-DRGs 749 and 750 (Other Female Reproductive System Procedures with and without CC/MCC, respectively) in MDC 13 (Diseases and Disorders of the Female Reproductive System); MS-DRGs 802, 803, and 804 (Other O.R. Procedures of the Blood and Blood Forming Organs, with MCC, with CC, and without CC/MCC, respectively) in MDC 16 (Diseases and Disorders of Blood, Blood Forming Organs, Immunologic Disorders); MS-DRGs 820, 821, and 822 (Lymphoma and Leukemia with Major Procedure with MCC, with CC, and without CC/MCC, respectively) and MS-DRGs 826, 827, and 828 (Myeloproliferative Disorders or Poorly Differentiated Neoplasms with Major Procedure with MCC, with CC, and without CC/MCC, respectively) in MDC 17 (Myeloproliferative Diseases and Disorders, Poorly Differentiated Neoplasms); and MS-DRGs 907, 908, and 909 (Other O.R. Procedures for Injuries with MCC, with CC, and without CC/MCC, respectively) in MDC 21 (Injuries, Poisonings and Toxic Effects of Drugs). Lastly, we proposed to add codes 0F944ZZ and 0F9440Z as O.R. procedures assigned to MS-DRGs 408, 409, and 410 (Biliary Tract Procedures Except Only Cholecystectomy with or without C.D.E., with MCC, with CC, and without CC/MCC, respectively) in MDC 07 (Diseases and Disorders of the Hepatobiliary System and Pancreas).

Comments: Commenters supported our proposal. One commenter stated they concurred with the requestor's statement that similar procedures such as percutaneous endoscopic inspection of gallbladder, percutaneous endoscopic excision of peritoneum and percutaneous endoscopic extirpation of matter from peritoneal cavity are currently classified as O.R. procedures, and that the six listed procedure codes should be designated as O.R. procedures due to comparable costs and resource use. The commenter also stated they believed that the invasive nature of such procedures also necessitates the sterile environment of an O.R. to limit the risk of secondary infection. Other commenters stated they agreed all ICD-10-PCS procedure codes describing procedures involving laparoscopic drainage of peritoneum, peritoneal cavity, or gallbladder should be designated as O.R. procedures.

Response: We appreciate the commenters' support.

After consideration of the public comments we received, we are finalizing our proposal to change the designation of ICD-10-PCS procedure codes 0D9W4ZZ, 0D9W40Z, 0W9G4ZZ 0W9G40Z, 0F944ZZ and 0F9440Z from non-O.R. procedures to O.R. procedures, effective October 1, 2020.

As discussed in the proposed rule, during our review of this request, we identified related ICD-10-PCS procedure code 0F944ZX (Drainage of gallbladder, percutaneous endoscopic approach, diagnostic) that is also currently not recognized as an O.R. procedure for purposes of MS-DRG assignment. We stated that our clinical advisors believe that similar to the six procedure codes submitted by the requester, this procedure typically requires the resources of an operating room and should have the same attributes in Version 38 for coherence. Therefore, we proposed to add code 0F944ZX as an O.R. procedure assigned to MS-DRGs 420, 421 and 422 (Hepatobiliary Diagnostic Procedures, with MCC, with CC, and without CC/MCC, respectively) in MDC 07 (Diseases and Disorders of the Hepatobiliary System and Pancreas) to the FY 2021 ICD-10 MS-DRG Version 38 Definitions Manual in Appendix E—Operating Room Procedures and Procedure Code/MS-DRG Index.

Comments: Commenters supported our proposal and as previously mentioned stated they agreed all ICD-10-PCS procedure codes describing procedures involving laparoscopic drainage of the peritoneum, peritoneal cavity, or gallbladder should be designated as O.R. procedures.

Response: We appreciate the commenters' support.

After consideration of the public comments we received, we are finalizing our proposal to change the designation of 0F944ZX from non-O.R. procedure to O.R. procedure, effective October 1, 2020.

In the proposed rule, we stated during our review, we also identified the related ICD-10-PCS procedure codes 0F940ZZ (Drainage of gallbladder, open approach), 0F940ZX (Drainage of gallbladder, open approach, diagnostic) and 0F9400Z (Drainage of gallbladder with drainage device, open approach). Our analysis found that the ICD-10-PCS codes describing drainage of gallbladder have dissimilar MDC assignments. Procedure codes 0F940ZZ and 0F940ZX are currently assigned to MS-DRGs 356, 357, and 358 (Other Digestive System O.R. Procedures, with MCC, with CC, and without CC/MCC, respectively) in MDC 06 (Diseases and Disorders of the Digestive System) and MS-DRGs 408, 409, and 410 (Biliary Tract Procedures Except Only Cholecystectomy with or without C.D.E, with MCC, with CC, and without CC/MCC, respectively) in MDC 07 (Diseases and Disorders of the Hepatobiliary System and Pancreas). However, ICD-10-PCS procedure code 0F9400Z is currently assigned to MS-DRGs 408, 409, and 410 (Biliary Tract Procedures Except Only Cholecystectomy with or without C.D.E, with MCC, with CC, and without CC/MCC, respectively) in MDC 07 (Diseases and Disorders of the Hepatobiliary System and Pancreas) alone. We stated our clinical advisors believe that principal diagnoses in MDC 06 are typically not indications for procedures describing the drainage of gallbladder. We examined claims data from the September 2019 update of the FY 2019 MedPAR file to determine if there were any cases that reported procedure codes 0F940ZZ or 0F940ZX and were assigned to MDC 06. We found zero cases in MS-DRGs 356, 357, and 358 reporting code 0F944ZZ or 0F940ZX and a principal diagnosis in MDC 06 (Diseases and Disorders of the Digestive System), demonstrating that diagnoses in MDC 06 are not typically corrected surgically by drainage of the gallbladder. Our clinical advisors believe procedure codes describing the drainage of gallbladder should have the same MDC assignments in Version 38 for coherence. Therefore, we proposed to remove procedure codes 0F940ZZ and 0F940ZX from MS-DRGs 356, 357, and 358 in MDC 06 (Diseases and Disorders of the Digestive System).

Comments: Commenters supported our proposal and stated they agreed that procedure codes describing the drainage of the gallbladder should be assigned to the same MDC.

Response: We appreciate the commenters' support.

After consideration of the public comments we received, we are finalizing our proposal to remove procedure codes 0F940ZZ and 0F940ZX from MS-DRGs 356, 357, and 358 in MDC 06 (Diseases and Disorders of the Digestive System), effective October 1, 2020.

As stated in the proposed rule, our further analysis of this request identified the nine ICD-10-PCS codes in the following table describing drainage of the peritoneum, peritoneal cavity, or gallbladder:

We noted that these procedures are currently classified as extensive O.R. procedures. Our clinical advisors have noted that treatment practices have shifted since the initial O.R. procedure designations. We stated our clinical advisors believe that, given the similarity in factors such as complexity, resource utilization, and requirement for anesthesia administration between procedures describing the drainage of the peritoneum, peritoneal cavity, and gallbladder, it would be more appropriate to designate these nine ICD-10-PCS codes as non-extensive O.R. procedures. Therefore, we also proposed to change the designation of ICD-10-PCS codes 0D9W00Z, 0D9W0ZX, 0D9W0ZZ, 0D9W4ZX, 0W9G00Z, 0W9G0ZZ, 0F9400Z, 0F940ZZ and 0F940ZX from extensive O.R. procedures to non-extensive O.R. procedures for FY 2021.

Comment: A commenter supported our proposal to designate the nine ICD-10-PCS codes describing drainage of the peritoneum, peritoneal cavity, or gallbladder that are currently classified as extensive O.R. procedures as non-extensive O.R. procedures.

Response: We appreciate the commenter's support.

Comment: One commenter opposed CMS' proposal and stated location should be factored in. The commenter stated the designation of these procedures should differ depending if the procedure was performed in an operating room versus a radiology suite versus a procedure room. The commenter also stated procedures performed via an open approach should be designated as extensive O.R. procedures and procedures performed via a percutaneous endoscopic approach should be designated as non-extensive O.R. procedures. This same commenter specifically opposed changing the designation of procedure codes that describe the open drainage of the peritoneal cavity from extensive O.R. to non-extensive O.R. procedure and believed the designation should depend on how deep the open drainage incision site is.

Response: We do not agree that unilaterally all open procedures should be designated as extensive O.R. procedures and procedures performed laparoscopically should be designated as non-extensive O.R. procedures. While the site in which the procedure is performed and the procedural approach are important considerations in the designation of a procedure, there are other clinical factors such as procedure complexity, resource utilization, and need for anesthesia administration that should also be considered. In this regard, our clinical advisors believe the nine ICD-10-PCS codes that describe the drainage of the peritoneum, peritoneal cavity, and gallbladder, regardless of approach, are generally less complex than other procedures designated as extensive O.R. procedures.

Also, we are not clear what the commenter means when they state that “the designation of procedure codes describing the open drainage of the peritoneum should depend on how deep the open drainage incision site is”. The peritoneum is defined as the smooth transparent serous membrane that lines the cavity of the abdomen. Procedure codes for the open drainage of the peritoneum are used to describe any procedure where the skin or mucous membrane and any other body layers necessary to expose the peritoneum are cut through to take or let out fluid and/or gases. Any anatomical differences from patient to patient that might factor into the technical complexity of the procedure, such as habitus, would be captured in the ICD-10-CM diagnosis coding.

In the absence of a compelling clinical rationale for maintaining the designation of these procedures as extensive O.R. procedures, our clinical advisors continue to believe that, given the similarity in factors such as complexity, resource utilization, and requirement for anesthesia administration between procedures describing the drainage of the peritoneum, peritoneal cavity, and gallbladder, it would be more appropriate to designate these nine ICD-10-PCS codes as non-extensive O.R. procedures. Therefore, after consideration of the public comments we received, we are finalizing our proposal to change the designation of ICD-10-PCS codes 0D9W00Z, 0D9W0ZX, 0D9W0ZZ, 0D9W4ZX, 0W9G00Z, 0W9G0ZZ, 0F9400Z, 0F940ZZ and 0F940ZX from extensive O.R. procedures to non-extensive O.R. procedures, effective October 1, 2020.

(5) Control of Bleeding

One requestor identified ICD-10-PCS procedure code 0W3G0ZZ (Control bleeding in peritoneal cavity, open approach) that describes a procedure in which the bleeding source within the peritoneal cavity is controlled by cautery, clips, and/or suture through an open abdominal incision with direct visualization of the surgical site, that the requestor stated requires the resources of an operating room and general anesthesia but is currently not recognized as an O.R. procedure for purposes of MS-DRG assignment. The requestor also noted that ICD-10-PCS procedure codes 0W3F0ZZ (Control bleeding in abdominal wall, open approach), 0W3H0ZZ (Control bleeding in retroperitoneum, open approach), and 0W3J0ZZ (Control bleeding in pelvic cavity, open approach) describe procedures to control bleeding in various anatomic sites and are currently classified as O.R. procedures.

We stated in the proposed rule that we agree with the requestor that it would be clinically appropriate to redesignate procedure code 0W3G0ZZ as an O.R. procedure consistent with procedure codes 0W3F0ZZ, 0W3H0ZZ and 0W3J0ZZ, that also describe procedures performed to control bleeding and are designated as O.R. procedures. Therefore, we proposed to add procedure code 0W3G0ZZ to the FY 2021 ICD-10 MS-DRG Version 38 Definitions Manual in Appendix E—Operating Room Procedures and Procedure Code/MS-DRG Index as an O.R. procedure assigned to MS-DRG 264 (Other Circulatory O.R. Procedures) in MDC 05 (Diseases and Disorders of the Circulatory System); MS-DRGs 356, 357, and 358 (Other Digestive System O.R. Procedures with MCC, with CC, and without CC/MCC, respectively) in MDC 06 (Diseases and Disorders of the Digestive System); MS-DRGs 423, 424, and 425 (Other Hepatobiliary or Pancreas O.R. Procedures with MCC, with CC, and without CC/MCC, respectively) in MDC 07 (Diseases and Disorders of the Hepatobiliary System and Pancreas); MS-DRGs 673, 674, and 675 (Other Kidney and Urinary Tract Procedures with MCC, with CC, and without CC/MCC, respectively) in MDC 11 (Diseases and Disorders of the Kidney and Urinary Tract); MS-DRGs 820, 821, and 822 (Lymphoma and Leukemia with Major O.R. Procedure with MCC, with CC, and without CC/MCC, respectively), MS-DRGs 826, 827, and 828 (Myeloproliferative Disorders or Poorly Differentiated Neoplasms with Major O.R. Procedure with MCC, with CC, and without CC/MCC, respectively), and MS-DRGs 829 and 830 (Myeloproliferative Disorders or Poorly Differentiated Neoplasms with Other Procedure with and without CC/MCC, respectively) in MDC 17 (Myeloproliferative Diseases and Disorders, Poorly Differentiated Neoplasms); MS-DRGs 907, 908, and 909 (Other O.R. Procedures for Injuries with and without CC/MCC, respectively) in MDC 21 ((Injuries, Poisonings and Toxic Effects of Drugs); MS-DRGs 957, 958, and 959 (Other O.R. Procedures for Multiple Significant Trauma, with MCC, with CC, and without CC/MCC, respectively) in MDC 24 (Multiple Significant Trauma) and to MS-DRGs 981, 982 and 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively).

Comment: Commenters agreed with the proposed redesignation of ICD-10-PCS procedure code 0W3G0ZZ as an O.R. procedure, and stated this would be consistent with similar procedure codes describing control of bleeding in other anatomic sites.

Response: We thank the commenters for their support.

After consideration of the public comments received, we are finalizing our proposal to add ICD-10-PCS procedure code 0W3G0ZZ to the ICD-10 MS-DRG Version 38 Definitions Manual in Appendix E—Operating Room Procedures and Procedure Code/MS-DRG Index as an O.R. procedure assigned to the MDCs and MS-DRGs noted earlier in this section, effective October 1, 2020.

(6) Inspection of Penis

As discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32549), one requestor stated that ICD-10-PCS procedure code 0VJS0ZZ (Inspection of penis, open approach) is currently not recognized as an O.R. procedure for purposes of MS-DRG assignment. The requestor noted that there are circumstances that warrant inpatient admission for open exploration of the penis, such as to rule out penile fracture and extravasation due to trauma. The requestor stated their belief that because this procedure involves an open incision for exploration of penile structures and utilizes general anesthesia in the operating room, it would be appropriately classified as an O.R. procedure. In the proposed rule, we stated that we agreed with the requestor that ICD-10-PCS procedure code 0VJS0ZZ typically requires the resources of an operating room. Therefore, we proposed to add ICD-10-PCS procedure code 0VJS0ZZ to the FY 2021 ICD-10 MS-DRG Version 38 Definitions Manual in Appendix E- Operating Room procedures and procedure code/MS-DRG Index as an O.R. procedure assigned to MS-DRGs 709 (Penis Procedures with CC/MCC) and 710 (Penis Procedures without CC/MCC) in MDC 12 (Diseases and Disorders of the Male Reproductive System).

Comments: Several commenters supported CMS' proposal to reclassify ICD-10-PCS procedure code 0VJS0ZZ from a non-O.R. procedure to an O.R procedure for purposes of MS-DRG assignment for MS-DRGs 709 and 710.

Response: We appreciate the commenters' support.

After consideration of the public comments received, we are finalizing our proposal to add ICD-10-PCS procedure code 0VJS0ZZ (Inspection of penis, open approach) to the FY2021 ICD-10 MS-DRG Version 38 Definitions Manual in Appendix E Operating Room Procedures and Procedure Code/MS-DRG Index as an O.R. procedure to MS-DRGs 709 (Penis Procedures with CC/MCC) and 710 (Penis Procedures without CC/MCC) in MDC 12 (Diseases and Disorders of the Male Reproductive System) for FY2021 effective October 1, 2020.

12. Changes to the MS-DRG Diagnosis Codes for FY 2021

a. Background of the CC List and the CC Exclusions List

Under the IPPS MS-DRG classification system, we have developed a standard list of diagnoses that are considered CCs. Historically, we developed this list using physician panels that classified each diagnosis code based on whether the diagnosis, when present as a secondary condition, would be considered a substantial complication or comorbidity. A substantial complication or comorbidity was defined as a condition that, because of its presence with a specific principal diagnosis, would cause an increase in the length-of-stay by at least 1 day in at least 75 percent of the patients. However, depending on the principal diagnosis of the patient, some diagnoses on the basic list of complications and comorbidities may be excluded if they are closely related to the principal diagnosis. In FY 2008, we evaluated each diagnosis code to determine its impact on resource use and to determine the most appropriate CC subclassification (non-CC, CC, or MCC) assignment. We refer readers to sections II.D.2. and 3. of the preamble of the FY 2008 IPPS final rule with comment period for a discussion of the refinement of CCs in relation to the MS-DRGs we adopted for FY 2008 (72 FR 47152 through 47171).

b. Overview of Comprehensive CC/MCC Analysis

In the FY 2008 IPPS/LTCH PPS final rule (72 FR 47159), we described our process for establishing three different levels of CC severity into which we would subdivide the diagnosis codes. The categorization of diagnoses as a MCC, a CC, or a non-CC was accomplished using an iterative approach in which each diagnosis was evaluated to determine the extent to which its presence as a secondary diagnosis resulted in increased hospital resource use. We refer readers to the FY 2008 IPPS/LTCH PPS final rule (72 FR 47159) for a complete discussion of our approach. Since the comprehensive analysis was completed for FY 2008, we have evaluated diagnosis codes individually when receiving requests to change the severity level of specific diagnosis codes.

We noted in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19235) that with the transition to ICD-10-CM and the significant changes that have occurred to diagnosis codes since the FY 2008 review, we believed it was necessary to conduct a comprehensive analysis once again. Based on this analysis, we proposed changes to the severity level designations for 1,492 ICD-10-CM diagnosis codes and invited public comments on those proposals. As summarized in the FY 2020 IPPS/LTCH PPS final rule, many commenters expressed concern with the severity level designation changes overall and recommended that CMS conduct further analysis prior to finalizing any proposals. After careful consideration of the public comments we received, as discussed further in the FY 2020 final rule, we generally did not finalize our changes to the severity designations for the ICD-10-CM diagnosis codes, other than the changes to the severity level designations for the diagnosis codes in category Z16- (Resistance to antimicrobial drugs) from a non-CC to a CC. We stated that postponing adoption of the comprehensive changes in the severity level designations would allow further opportunity to provide additional background to the public on the methodology utilized and clinical rationale applied across diagnostic categories to assist the public in its review. We refer readers to the FY 2020 IPPS/LTCH PPS final rule (84 FR 42150 through 42152) for a complete discussion of our response to public comments regarding the severity level designation changes for FY 2020.

c. Guiding Principles for Making Changes to Severity Levels

As discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32550), to provide the public with more information on the CC/MCC comprehensive analysis discussed in the FY 2020 IPPS/LTCH PPS proposed and final rules, CMS hosted a listening session on October 8, 2019. The listening session included a review of the methodology to measure the impact on resource use. It also provided an opportunity for CMS to receive public input on this analysis and to address any questions in order to assist the public in formulating written comments on the current severity level designations for consideration in the FY 2021 rulemaking. We refer readers to https://www.cms.gov/Outreach-and-Education/Outreach/OpenDoorForums/PodcastAndTranscripts.html for the transcript and audio file of the listening session. We also refer readers to https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.html for the supplementary file containing the data describing the impact on resource use of specific ICD-10-CM diagnosis codes when reported as a secondary diagnosis that was made available for the listening session.

Following the listening session, we further considered the public comments received and reconvened an internal workgroup comprised of clinicians, consultants, coding specialists and other policy analysts to identify guiding principles to apply in evaluating whether changes to the severity level designations of diagnoses are needed and to ensure the severity designations appropriately reflect resource use based on review of the claims data, as well as consideration of relevant clinical factors (for example, the clinical nature of each of the secondary diagnoses and the severity level of clinically similar diagnoses) and improve the overall accuracy of the IPPS payments. In the proposed rule, we stated our goal was to develop a set of guiding principles that, when applied, could assist in determining whether the presence of the specified secondary diagnosis would lead to increased hospital resource use in most instances. The workgroup identified the following nine guiding principles as meaningful indicators of expected resource use by a secondary diagnosis.

• Represents end of life/near death or has reached an advanced stage associated with systemic physiologic decompensation and debility.
• Denotes organ system instability or failure.
• Involves a chronic illness with susceptibility to exacerbations or abrupt decline.
• Serves as a marker for advanced disease states across multiple different comorbid conditions.
• Reflects systemic impact.
• Post-operative condition/complication impacting recovery.
• Typically requires higher level of care (that is, intensive monitoring, greater number of caregivers, additional testing, intensive care unit care, extended length of stay).
• Impedes patient cooperation and/or management of care.
• Recent (last 10 years) change in best practice, or in practice guidelines and review of the extent to which these changes have led to concomitant changes in expected resource use.

We stated in the FY 2021 IPPS/LTCH PPS proposed rule that we plan to continue a comprehensive CC/MCC analysis, using a combination of mathematical analysis of claims data as discussed in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19235) and the application of these guiding principles, and present the findings and proposals in future rulemaking. We invited public comments regarding these guiding principles, as well as other possible ways we could incorporate meaningful indicators of clinical severity. When providing additional feedback or comments, we encouraged the public to provide a detailed explanation of how applying a suggested concept or principle would ensure that the severity designation appropriately reflects resource use for any diagnosis code.

Comment: Many commenters supported the guiding principles. Commenters stated the application of the nine guiding principles, as laid out in the proposed rule, rather than solely relying on a mathematical analysis of claims data is a reasoned approach in addressing the concerns raised last year. A commenter specifically stated they acknowledge and appreciate CMS' recognition that the transition to ICD-10-CM, and the significant changes that have occurred to diagnosis codes since the FY 2008 review, warrants a comprehensive CC/MCC analysis.

Response: We thank the commenters for their support.

Comment: Some commenters noted general concerns with the guiding principles. Commenters stated that the nine guiding principles appeared to be open to interpretation or differences in clinical opinion and do not provide clear logic for decision-making. Other commenters stated that it was not clear how CMS will apply these guiding principles in conjunction with the mathematical analyses of claims data to make decisions about severity levels. These commenters stated that more information is needed to better understand CMS's process for decision making on the designation of diagnosis severity levels.

Response: We thank the commenters for sharing their concerns.

The nine guiding principles are not criteria, intended to turn the analysis into a quantitative exercise, but instead to provide a framework for assessing relevant clinical factors. As patients present with a variety of diagnoses, in examining the secondary diagnoses, we would consider what additional resources are required, above and beyond those that are already being utilized to address the principal diagnosis and/or other secondary diagnoses that might also be present on the claim. The goal of our comprehensive analysis is to create stratification for reimbursing inpatient hospitalization in the fewest amount of categories with the most explanatory power in a clinically cohesive way.

Our intended approach is first, CMS will use these guiding principles in making an initial clinical assessment of the appropriate severity level designation for each ICD-10-CM code as a secondary diagnosis. CMS will then use a mathematical analysis of claims data as discussed in the FY 2020 IPPS/LTCH PPS proposed rule to determine if the presence of the ICD-10-CM code as a secondary diagnosis appears to, or does not appear to, increase hospital resource consumption. There may be instances in which we would decide that the clinical analysis weighs in favor of proposing to maintain or proposing to change the severity designation of an ICD-10-CM code after application of the nine guiding principles.

Comment: Some commenters stated that the guiding principles appeared to be more applicable to MCC conditions, were too strict and could potentially eliminate CC conditions. A commenter stated that the application of the guiding principles would represent a substantial revision to the definition of a CC, noting MS-DRG Definition Manual Version 37.1 provides the following definition: “A substantial complication or comorbidity was defined as a condition that because of its presence with a specific principal diagnosis would cause an increase in length of stay by at least one day in at least 75 percent of the patients.” A few commenters highlighted individual ICD-10-CM diagnoses and stated these conditions warrant assignment into CC or MCC MS-DRGs based on certain clinical criteria.

Response: We appreciate the commenters' feedback.

We do not believe the nine guiding principles would be mostly applicable, or only applicable, to MCC conditions. In applying the nine guiding principles in our review of the appropriate severity level designation, the intention is not to require that a diagnosis code satisfy each principle, or a specific number of principles in assessing whether to designate a secondary diagnosis code as a non-CC versus a CC versus a MCC. Rather, the severity level determinations would be based on the consideration of the clinical factors captured by these principles as well as the empirical analysis of the additional resources associated with the secondary diagnosis.

We wish to clarify that the definition of a “substantial complication or comorbidity” from the MS-DRG Definition Manual that the commenter referenced, is the definition of a CC that was used in Version 8 of the DRGs. In FY 2008, for Version 25 of the MS-DRGs, the diagnoses comprising the CC list were completely redefined and instead each CC was categorized as a major CC or a CC (that is, non-major CC) based on relative resource use. As stated previously, we refer readers to the FY 2008 IPPS/LTCH PPS final rule (72 FR 47159) for a complete discussion of our approach. We also wish to clarify that there is a difference between the non-CC, CC, or MCC designation of an individual diagnosis code and the requirements for GROUPER assignment into a severity split MS-DRG. MS-DRG assignment is a different issue and is based on GROUPER logic and the other codes reported on a claim.

Comment: A commenter encouraged the use of the APR-DRG GROUPER to analyze severity levels for individual diagnoses and in conjunction with certain principal diagnoses to reinforce change decisions or identify conflicts requiring re-evaluation. Some commenters questioned how conditions such as obstetrical diagnoses or congenital conditions would, or would not, be considered in the application of the guiding principles.

Response: We thank the commenters for sharing their input and suggestions.

The Medicare GROUPER is for the Medicare population and is not designed to account for all populations like the APR-DRG GROUPER, so we generally do not believe it would be appropriate to use the APR-DRG GROUPER severity of illness and risk of mortality scores to analyze severity levels as they relate to Medicare inpatient prospective payment. In regards to obstetric conditions, given the limited number of cases reporting ICD-10-CM obstetrical codes in the Medicare claims data, we are considering use of datasets other than MedPAR cost data, as we indicated in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42152), to be used in addition to the application of these guiding principles for future evaluation of severity level designation for the ICD-10-CM diagnosis codes from the Obstetrics chapter of the ICD-10-CM classification. In contrast, the diagnosis codes from the Congenital Malformations, Deformities and Chromosomal Abnormalities Chapter of the ICD-10-CM classification may be used throughout the life of the patient. Our internal workgroup believe the nine guiding principles are applicable to these conditions and these codes lend themselves to review using a combination of mathematical analysis of claims data as discussed in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19235) and the application of these guiding principles.

In this FY 2021 IPPS/LTCH PPS final rule, we present a summation of the comments we received for each of the nine guiding principles and our responses to those comments. We thank commenters for sharing their views and their willingness to support CMS in our efforts to continue a comprehensive CC/MCC analysis.

• Represents end of life/near death or has reached an advanced stage associated with systemic physiologic decompensation and debility.

Comment: A commenter opposed this principle and stated that decisions in these patients are complex, especially when being guided by family members as part of `person and community engagement' which hospitals are scored on under the Value Based Purchasing program. This commenter expressed concern that a family may insist on continued use of resources that CMS then determines it will not pay for, placing the financial burden onto the hospital.

Response: We note the target of our analysis is on individual ICD-10-CM codes, as secondary diagnosis codes, as they relate to inpatient prospective payment. While we appreciate the commenters' concern, we note that in certain instances, conditions that denote end of life or near death may conversely also decrease resource use as the decision to withdraw care is made. We also note that the impact of the secondary diagnosis is dependent on the principal diagnosis reported, with which it is associated. If the secondary diagnosis is reported with a principal diagnosis that reflects serious illness with treatment complexity, then the marginal contribution of the secondary diagnosis to the overall resource use may actually be relatively small. In applying these principles as part of the clinical analysis of the appropriate severity level designation for each ICD-10-CM code as a secondary diagnosis, CMS will take this into consideration.

• Denotes organ system instability or failure.

Comments: Commenters supported this guiding principle.

Response: We appreciate the commenters' support.

• Involves a chronic illness with susceptibility to exacerbations or abrupt decline.

Comments: Some commenters opposed this principle and stated this principle may not be able to be applied across the board as many ICD-10-CM diagnosis codes do not distinguish exacerbation. The commenters stated there are conditions that have separate acute and chronic diagnosis codes, combined acute/chronic concepts into single diagnosis codes, and some conditions for which the diagnosis code does not indicate the specificity of acute or chronic.

Response: All ICD-10-CM diagnosis codes, including codes that do not explicitly describe acute exacerbations, would be reviewed using this guiding principle to assess the degree to which the individual ICD-10-CM diagnosis code as a secondary diagnosis affects hospital resource consumption, to determine if the severity designation is more appropriately non-CC, CC, or MCC. The intention is again, not to require that every diagnosis code satisfy each principle, but instead to identify relevant clinical factors to help denote if, and to what degree, additional resources are required above and beyond those that are already being utilized to address the principal diagnosis and/or other secondary diagnoses that might also be present on the claim.

• Serves as a marker for advanced disease states across multiple different comorbid conditions.

Comment: A few commenters noted that this guiding principle is open to interpretation.

Response: A marker is a clinical measurement that is associated with or believed to be related pathophysiologically to a clinical outcome and can serve as an indicator for health or disease. While we appreciate that assessing relevant clinical factors will depend on the particular diagnosis codes at issue, our clinical advisors believe this principle, along with the other 8 principles, would provide appropriate parameters for our clinical review.

• Reflects systemic impact.

Comment: A commenter noted that many current CC or MCC diagnoses are limited to a single body system and therefore, stated it is unclear what the guideline means by “systemic impact.”

Response: Systemic impact refers to conditions that affect more than one body system or the entire body.

• Post-operative condition/complication impacting recovery.

Comment: Several commenters recommended that CMS revise the language used so that this guiding principle includes the term “post-procedure” to more broadly recognize that some procedures also have associated complications that are severe that can typically warrant additional resources (that is, drugs, supplies, ancillary tests, etc.). These commenters stated they believed stakeholders are likely to take the wording of this guiding principle literally as originally stated. Commenters also stated that the term “recovery” is conceptually appropriate, so long as its use does not result in the exclusion of consideration of costs that may impact the patient stay. Another commenter also stated that CMS should describe the cost implications of each of these principles.

Response: CMS agrees that adding the term “post-procedure” would be appropriate to encompass procedures that have associated complications that may warrant additional resources. We are revising this guiding principle to “post-operative/post-procedure condition/complication impacting recovery”. To clarify for the commenters, when reviewing costs, we do not analyze impact using a detailed cost accounting approach. The approach that is utilized in the mathematical analysis of claims data for impact analysis is the same expected cost approach that used in the relative weight computations. All charges in each revenue bucket, that already include supply and ancillary costs, are adjusted specific to the revenue cost to charge ratio, on a national scale and incorporated into impact values from a total estimated cost perspective. As part of this statistical review to determine if a secondary diagnosis appears to, or does not appear to, increase resource consumption, our clinical workgroup will also examine the additional days the secondary diagnosis contributed to the length of stay against what would be expected.

• Typically requires higher level of care (that is, intensive monitoring, greater number of caregivers, additional testing, intensive care unit care, extended length of stay).

Comment: Commenters stated that while they agree with this principle, they request that CMS clarify if “intermediate care” will be considered within this guiding principle. Other commenters requested clarification on how conditions meeting this principle would be determined. Other commenters noted that this principle is similar to Section III of the ICD-10-CM Guidelines for Coding and Reporting regarding reportable secondary diagnosis.

Response: Mathematical data regarding ICU usage will inform the clinical decision making of our internal workgroup, but we note that definitions for terms such as “intermediate care” and “ICU” vary from institution to institution. We note as stated above, our intention is not to be prescriptive in matching hospital costs, instead our intention is to ensure the severity designations appropriately reflect resource use and improve the overall accuracy of the IPPS payment system. To clarify for the commenters, the definition for “other diagnoses” as stated in the ICD-10-CM Official Guidelines for Coding and Reporting is intended to ensure inpatient data elements are reported in a standardized manner. This guiding principle is to intended to assist in assessing what additional resources are required for each ICD-10-CM code as a secondary diagnosis, above and beyond those that are already being utilized to address the principal diagnosis and/or other secondary diagnoses that might also be present on the claim.

• Impedes patient cooperation and/or management of care.

Comment: A number of commenters requested that codes for various social determinants of health (SDOH) be considered in this principle and in subsequent data analysis. One commenter suggested that CMS use registry information, rather than relying solely on administrative data, to take into consideration these underlying risk factors, including socioeconomic status. Another commenter questioned whether the post discharge environment should be added as a guiding principle.

Response: The ICD-10-CM classification in its entirety will be reviewed in our comprehensive CC/MCC analysis, not excluding the ICD-10-CM codes for the social determinants of health, which are the socioeconomic, cultural and environmental circumstances in which individuals live. We note the focus of our comprehensive analysis is on the appropriate severity level designation of individual ICD-10-CM codes as secondary diagnosis codes as they relate to the resource utilization required while the patient is in the hospital and on inpatient prospective payment. In reference to the comment that CMS use registry information, we appreciate the suggestion but we do not believe there is enough consistency in voluntary registry data for this purpose, and it would also be challenging for CMS to operationalize.

• Recent (last 10 years) change in best practice, or in practice guidelines and review of the extent to which these changes have led to concomitant changes in expected resource use.

Comment: Many commenters stated CMS needs a method to assign CC and MCC designations to new ICD-10-CM diagnosis codes in advance of receiving claims data, since the availability of claims data lags for two years after new codes are released, to account for diagnoses which require costly treatment or might otherwise require ICU care or lengthier stays. Another commenter stated this guiding principle is poorly worded at best and vague on how it would be converted to a decision by CMS. Another commenter questioned the validity of this principle and noted that most medical conditions have potentially had some changes in best practices in the last 10 years

Response: We would like to clarify and note that CMS does have an established process to assign severity level designation to new diagnosis codes. Our process in assigning a severity level designation to a new diagnosis code generally begins with identifying the designation of the predecessor ICD-10-CM code. To inform our assignments, we also review materials from the discussions relating to proposed new diagnosis codes from the ICD-10 Coordination and Maintenance Committee meetings to determine if there are new or revised clinical concepts included in the new diagnosis codes that should also be considered when assigning a severity level designation. We refer readers to section II.E.16. of the preamble of this final rule for a discussion of the ICD-10 (previously ICD-9-CM) Coordination and Maintenance Committee meeting process.

We agree with the commenter that most medical conditions have potentially had some changes in best practices in the last 10 years. Significant strides have been made in the past 10 years to ensure that Medicare beneficiaries have access to critical and life-saving new cures and technologies that improve beneficiary health outcomes. Consequently, we believe this comprehensive analysis should take into account the way changes in medical practice have, or have not, affected the impact on relative resource use for each ICD-10-CM code as a secondary diagnosis since our last comprehensive analysis in FY 2008.

Therefore, after consideration of the public comments we received, we are updating the nine guiding principles as follows:

• Represents end of life/near death or has reached an advanced stage associated with systemic physiologic decompensation and debility.
• Denotes organ system instability or failure.
• Involves a chronic illness with susceptibility to exacerbations or abrupt decline.
• Serves as a marker for advanced disease states across multiple different comorbid conditions.
• Reflects systemic impact.
• Post-operative/post-procedure condition/complication impacting recovery.
• Typically requires higher level of care (that is, intensive monitoring, greater number of caregivers, additional testing, intensive care unit care, extended length of stay).
• Impedes patient cooperation and/or management of care.
• Recent (last 10 years) change in best practice, or in practice guidelines and review of the extent to which these changes have led to concomitant changes in expected resource use.

Comment: A few commenters recommended that CMS convene a technical advisory panel comprised of industry stakeholders and subject matter experts (including clinicians and health information professionals) to review the guiding principles. Other commenters requested that the mathematical data to be utilized in our comprehensive analysis be again presented and explained in a public listening session, similar to what the agency held in October 2019 on this topic.

Response: We again thank commenters for sharing their views and their willingness to support CMS in our efforts to continue a comprehensive CC/MCC analysis. While CMS has already convened an internal workgroup comprised of clinicians, consultants, coding specialists and other policy analysts, as well as provided opportunity to provide feedback on the guiding principles, we look forward to further collaboration with the industry. We plan to make an updated impact on resource use file available after publication of this final rule.

We continue to solicit feedback regarding these guiding principles, as well as other possible ways we can incorporate meaningful indicators of clinical severity. When providing additional feedback or comments, we encourage the public to provide a detailed explanation of how applying a suggested concept or principle would ensure that the severity designation appropriately reflects resource use for any diagnosis code.

Commenters should submit their recommendations to the following email address: MSDRGClassificationChange@cms.hhs.gov by November 1, 2020.

d. Additions and Deletions to the Diagnosis Code Severity Levels for FY 2021

In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32550) we noted the following tables identify the proposed additions and deletions to the diagnosis code MCC severity levels list and the proposed additions and deletions to the diagnosis code CC severity levels list for FY 2021 and are available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.

Table 6I.1—Proposed Additions to the MCC List—FY 2021;

Table 6I.2—Proposed Deletions to the MCC List—FY 2021;

Table 6J.1—Proposed Additions to the CC List—FY 2021; and

Table 6J.2—Proposed Deletions to the CC List—FY 2021.

Comment: Commenters agreed with the proposed additions and deletions to the MCC and CC lists as shown in tables 6I.1, 6I.2, 6J.1, and 6J.2 associated with the proposed rule.

Response: We appreciate the commenters' support.

As discussed in section II.E.13. of the preamble of this final rule, after consideration of the public comments received, we are finalizing changes to the severity levels for new diagnosis codes D89.833, D89.834, and D89.835 describing cytokine release syndrome (CRS) from NonCC to CC for FY 2021. Therefore, these diagnosis codes are now reflected in Table 6J.1—Additions to the CC List—FY 2021.

The following tables associated with this final rule reflect the finalized severity levels under Version 38 of the ICD-10 MS-DRGs for FY 2021 and are available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.

Table 6I.—Complete MCC List—FY 2021;

Table 6I.1—Additions to the MCC List—FY 2021;

Table 6I.2—Deletions to the MCC List—FY 2021;

Table 6J.—Complete CC List—FY 2021;

Table 6J.1—Additions to the CC List—FY 2021; and

Table 6J.2—Deletions to the CC List—FY 2021.

e. CC Exclusions List for FY 2021

In the September 1, 1987 final notice (52 FR 33143) concerning changes to the DRG classification system, we modified the GROUPER logic so that certain diagnoses included on the standard list of CCs would not be considered valid CCs in combination with a particular principal diagnosis. We created the CC Exclusions List for the following reasons: (1) To preclude coding of CCs for closely related conditions; (2) to preclude duplicative or inconsistent coding from being treated as CCs; and (3) to ensure that cases are appropriately classified between the complicated and uncomplicated DRGs in a pair.

In the May 19, 1987 proposed notice (52 FR 18877) and the September 1, 1987 final notice (52 FR 33154), we explained that the excluded secondary diagnoses were established using the following five principles:

• Chronic and acute manifestations of the same condition should not be considered CCs for one another;
• Specific and nonspecific (that is, not otherwise specified (NOS)) diagnosis codes for the same condition should not be considered CCs for one another;
• Codes for the same condition that cannot coexist, such as partial/total, unilateral/bilateral, obstructed/unobstructed, and benign/malignant, should not be considered CCs for one another;
• Codes for the same condition in anatomically proximal sites should not be considered CCs for one another; and
• Closely related conditions should not be considered CCs for one another.

The creation of the CC Exclusions List was a major project involving hundreds of codes. We have continued to review the remaining CCs to identify additional exclusions and to remove diagnoses from the master list that have been shown not to meet the definition of a CC. We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50541 through 50544) for detailed information regarding revisions that were made to the CC and CC Exclusion Lists under the ICD-9-CM MS-DRGs.

The ICD-10 MS-DRGs Version 37 CC Exclusion List is included as Appendix C in the ICD-10 MS-DRG Definitions Manual, which is available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.html and includes two lists identified as Part 1 and Part 2. Part 1 is the list of all diagnosis codes that are defined as a CC or MCC when reported as a secondary diagnosis. For all diagnosis codes on the list, a link is provided to a collection of diagnosis codes which, when used as the principal diagnosis, would cause the CC or MCC diagnosis to be considered as a non-CC. Part 2 is the list of diagnosis codes designated as a MCC only for patients discharged alive; otherwise, they are assigned as a non-CC.

In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32550 through 32551), we discussed a request we received to consider removing diagnosis codes describing any type of stroke that is designated as a MCC in the code range I60.00 through I63.9 from the CC Exclusion list when a principal diagnosis of diabetes in the code range E08.00 through E13 is reported. According to the requestor, acute strokes and chronic diabetes are two distinct conditions, therefore a stroke that occurs during an admission for an underlying diabetic condition should not be excluded from acting as a MCC. The requestor provided an example of a patient with type 2 diabetes who was admitted for treatment of infected foot ulcers and then experienced a stroke prior to discharge, resulting in assignment to MS-DRG 639 (Diabetes without CC/MCC). The requestor asserted the more appropriate assignment is MS-DRG 637 (Diabetes with MCC), which they stated more appropriately reflects severity of illness and resources involved in the treatment of an acute stroke. In another example provided by the requestor, a patient with type 2 diabetes and osteomyelitis underwent a left below the knee amputation and experienced a stroke before discharge, resulting in assignment to MS-DRG 617 (Amputation of Lower Limb for Endocrine, Nutritional, and Metabolic Diseases with CC). The requestor asserted the more appropriate assignment is MS-DRG 616 (Amputation of Lower Limb for Endocrine, Nutritional, and Metabolic Diseases with MCC), which they stated more appropriately reflects severity of illness and resources involved in the treatment of an acute stroke.

We stated in the proposed rule that our clinical advisors agreed that acute strokes and chronic diabetes are two distinct conditions and a case reporting a secondary diagnosis of a stroke in the code range I60.00 through I63.9 should not be excluded from acting as a MCC when reported with a principal diagnosis of diabetes in the code range E08.00 through E13.9.

As noted in the proposed rule, we analyzed claims data from the September 2019 update of the FY 2019 MedPAR file for cases reporting a principal diagnosis of diabetes in the code range E08.00 through E13.9 with a secondary diagnosis of a stroke in the code range I60.00 through I63.9. We refer the reader to table 6P.3a for a detailed list of the diagnosis codes describing diabetes that were analyzed and table 6P.3b associated with the proposed rule for a detailed list of the diagnosis codes describing a stroke that were analyzed and that are also designated as a MCC in this code range. We found a total of 1,109 cases across 40 MS-DRGs with an average length of stay of 10.1 days and average costs of $24,672 reporting a principal diagnosis of diabetes with a secondary diagnosis of a stroke that was excluded from acting as a MCC. Of those 1,109 cases, we identified 161 cases that would result in assignment to the higher severity level “with MCC” MS-DRG if the diagnosis of stroke was no longer excluded from acting as a MCC. The remaining 948 cases would maintain their existing MS-DRG assignment since they were either already grouped to the highest MCC severity level based on another diagnosis code that is designated as a MCC or they were assigned to one of the Pre-MDC MS-DRGs. We refer the reader to table 6P.4a associated with the proposed rule for the detailed analysis.

Based on the advice of our clinical advisors, for FY 2021, we proposed to remove the diagnosis codes describing stroke in the code range I60.00 through I63.9 that are designated as a MCC from the list of CC Exclusions when reported with a principal diagnosis of diabetes in the code range E08.00 through E13.9 from the ICD-10 MS-DRGs Version 38 CC Exclusion List as reflected in Table 6H.1.—Proposed Secondary Diagnosis Order Deletions to the CC Exclusions List—FY 2021 and Table 6H.2.—Proposed Principal Diagnosis Order Deletions to the CC Exclusions List—FY 2021 associated with the proposed rule and available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS.

Comment: Commenters supported the proposal to remove diagnosis codes describing stroke in the code range I60.00 through I63.9 that are designated as a MCC from the list of CC Exclusions when reported with a principal diagnosis of diabetes in the code range E08.00 through E13.9.

Response: We thank the commenters for their support.

We proposed additional changes to the ICD-10 MS-DRGs Version 38 CC Exclusion List based on the diagnosis and procedure code updates as discussed in section II.D.13. of the FY 2021 IPPS/LTCH PPS proposed rule and set forth in Tables 6G.1, 6G.2, 6H.1, and 6H.2 associated with the proposed rule and available via the internet on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS.

Comment: Commenters supported the proposed additions and deletions to the CC Exclusion List as shown in tables 6G.1, 6G.2, 6H.1 and 6H.2.

Response: We appreciate the commenters' support.

After consideration of the public comments we received, we are finalizing our proposal to remove diagnosis codes describing stroke in the code range I60.00 through I63.9 that are designated as a MCC from the list of CC Exclusions when reported with a principal diagnosis of diabetes in the code range E08.00 through E13.9.

The proposed CC Exclusions for a subset of the diagnosis codes as set forth in Tables 6G.1, 6G.2, 6H.1, and 6H.2 associated with the FY 2021 IPPS/LTCH PPS proposed rule reflect the proposed severity level designations as discussed in section II.D.13. of the preamble of the proposed rule. As discussed in section II.E.13. of the preamble of this final rule, we are finalizing changes to the severity level designations for three diagnosis codes after consideration of the public comments received. Therefore, the finalized CC Exclusions List as displayed in Tables 6G.1, 6G.2, 6H.1 6H.2, and 6K, associated with this final rule reflect the severity levels under Version 38 of the ICD-10 MS-DRGs.

We have developed Table 6G.1.—Secondary Diagnosis Order Additions to the CC Exclusions List—FY 2021; Table 6G.2.—Principal Diagnosis Order Additions to the CC Exclusions List—FY 2021; Table 6H.1.—Secondary Diagnosis Order Deletions to the CC Exclusions List—FY 2021; Table 6H.2.—Principal Diagnosis Order Deletions to the CC Exclusions List—FY 2021; and Table 6K.—Complete List of CC Exclusions—FY 2021. For Table 6G.1, each secondary diagnosis code for addition to the CC Exclusion List is shown with an asterisk and the principal diagnoses to exclude the secondary diagnosis code are provided in the indented column immediately following it. For Table 6G.2, each of the principal diagnosis codes for which there is a CC exclusion is shown with an asterisk and the conditions for addition to the CC Exclusion List that will not count as a CC are provided in an indented column immediately following the affected principal diagnosis. For Table 6H.1, each secondary diagnosis code for deletion from the CC Exclusion List is shown with an asterisk followed by the principal diagnosis codes that currently exclude it. For Table 6H.2, each of the principal diagnosis codes is shown with an asterisk and the proposed deletions to the CC Exclusions List are provided in an indented column immediately following the affected principal diagnosis. Table 6K is a list of all of the codes that are defined as either CC or a MCC when used as a secondary diagnosis. Within the table each code is specifically indicated as CC or MCC. A table number is given to a collection of diagnosis codes which, when used as the principal diagnosis, will cause the CC or MCC to be considered as only a non-CC. Tables 6G.1., 6G.2., 6H.1., 6H.2., and 6K. associated with this final rule are available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.

The ICD-10 MS-DRGs Version 38 CC Exclusion List is included as Appendix C of the Definitions Manual (available in two formats; text and HTML). The manuals are available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software and each format includes two lists identified as Part 1 and Part 2. Part 1 is the list of all diagnosis codes that are defined as a CC or MCC when reported as a secondary diagnosis. For all diagnosis codes on the list, a link (HTML version) is provided to a collection of diagnosis codes which, when used as the principal diagnosis, would cause the CC or MCC diagnosis to be considered as a non-CC. Part 2 is the list of diagnosis codes designated as a MCC only for patients discharged alive; otherwise, they are assigned as a non-CC.

13. Changes to the ICD-10-CM and ICD-10-PCS Coding Systems

To identify new, revised and deleted diagnosis and procedure codes, for FY 2021, we have developed Table 6A.—New Diagnosis Codes, Table 6B.—New Procedure Codes, Table 6C.—Invalid Diagnosis Codes, and Table 6E.—Revised Diagnosis Code Titles for this final rule.

These tables are not published in the Addendum to the proposed rule or final rule, but are available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee- for-Service-Payment/AcuteInpatientPPS/index.html as described in section VI. of the Addendum to this final rule. As discussed in section II.E.16. of the preamble of this final rule, the code titles are adopted as part of the ICD-10 (previously ICD-9-CM) Coordination and Maintenance Committee meeting process. Therefore, although we publish the code titles in the IPPS proposed and final rules, they are not subject to comment in the proposed or final rules.

In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32551 through 32552), we proposed the MDC and MS-DRG assignments for the new diagnosis codes and procedure codes as set forth in Table 6A.—New Diagnosis Codes and Table 6B.—New Procedure Codes. We also stated that the proposed severity level designations for the new diagnosis codes are set forth in Table 6A. and the proposed O.R. status for the new procedure codes are set forth in Table 6B.

Comment: A commenter stated they appreciated the finalization of new ICD-10-CM diagnosis code J84.170 (Interstitial lung disease with progressive fibrotic phenotype in diseases classified elsewhere) that was included in Table 6A—New Diagnosis Codes associated with the proposed rule. The commenter stated this new diagnosis code will provide clarification for current coding of Interstitial Lung Disease (ILD) within the ICD-10-CM classification by enabling identification of patients with chronic fibrotic ILD who exhibit a progressive phenotype. The commenter noted this update is critical for facilitating research for patients with a progressive fibrotic ILD phenotype which is an area of high unmet needs. Another commenter also supported the creation of diagnosis code J84.170 and stated they generally support new ICD-10 codes that enable identification of beneficiaries with specific diseases or clinically important diagnoses, such as that represented by diagnosis code J84.170. However, the commenter expressed concern that the process for obtaining new ICD-10 codes can be cumbersome and cause delays in approving new codes that are important to identify and support appropriate treatment for patients with specific diseases or conditions. The commenter provided an example that current ICD-10 codes do not accurately characterize the disease progression of Alzheimer's Disease and have not kept up with the current clinical documentation and management of patient treatments, and do not accurately reflect the various stages of disease progression. The commenter noted that proper identification is necessary, not only in clinical practice, but also to track the real word outcomes as patients progress through the disease states. The commenter stated CMS, along with the CDC, should consider steps to expedite the timetable for implementing important new diagnosis codes in emerging therapeutic areas in order to ensure timely patient access to vital treatment options.

Response: We appreciate the commenters' support. In response to the commenter who expressed concern regarding the process and timing for obtaining new ICD-10 codes, we note that, as discussed in section II.E.16. of the preamble of this final rule, the CDC/NCHS has lead responsibility for the ICD-10-CM diagnosis classification while CMS has lead responsibility for the ICD-10-PCS procedure classification. Each organization has their own established process in responding to requests for code updates, including when specific topics may appear on the agenda of an ICD-10 Coordination and Maintenance Committee meeting and the fiscal year in which code proposals are considered for implementation. With regard to the commenter's concerns involving outdated and insufficient diagnosis code descriptions for Alzheimer's Disease, we encourage the commenter to contact the CDC/NCHS directly as they have lead responsibility for the ICD-10-CM diagnosis classification. Requests for new and revised diagnosis code updates must be submitted to nchsicd10cm@cdc.gov for consideration. In response to the commenter's suggestion that CMS and CDC should consider steps to expedite the timetable for implementing important new diagnosis codes in emerging therapeutic areas in order to ensure timely patient access to vital treatment options, we note that, as also discussed in section II.E.16. of the preamble of this final rule, there are existing processes in place to implement diagnosis codes in an expedited manner.

Comment: A commenter expressed appreciation for CMS' request for comment on the MDC, MS-DRG and severity level for diagnosis code U07.1 (COVID-19). The commenter stated there are variable and changing practices related to COVID-19, particularly as related to medication use. In addition, the commenter noted as medications may be used off-label or become newly approved for COVID-19, the cost of those medications remains to be seen. According to the commenter, these costs may have a significant impact on a hospital's ability to treat patients with COVID-19. Therefore, the commenter suggested that as CMS considers the most appropriate MDC, MS-DRG and severity level assignments for diagnosis code U07.1, it recommended the agency account for the ongoing changes in best practices and medication use related to COVID-19, and whether additional reimbursement options or flexibilities could be provided to limit financial risks to hospitals. Another commenter applauded the speed with which CMS and CDC/NCHS addressed and implemented the new ICD-10-CM diagnosis codes U07.0 (Vaping-related disorder) and U07.1 (COVID-19) effective April 1, 2020 with MS-DRG assignments. This commenter encouraged the agencies to respond swiftly to address any similar public health emergencies in the future.

Response: We thank the commenters for their support. In Table 6A—New Diagnosis Codes, associated with the proposed rule, we proposed to continue to designate diagnosis code U07.1 (COVID-19) as a MCC in MDC 04 (Diseases and Disorders of the Respiratory System) for MS-DRGs 177, 178, and 179 (Respiratory Infections and Inflammations with MCC, with CC, and without CC/MCC, respectively); in MDC 15 (Newborns and Other Neonates with Conditions Originating in Perinatal Period) for MS-DRGs 791 (Prematurity with Major Problems) and 793 (Full Term Neonate with Major Problems); and in MDC 25 (Human Immunodeficiency Virus Infections) for MS-DRGs 974, 975, and 976 (HIV with Major Related Condition with MCC, with CC, and without CC/MCC, respectively). We note that these are the same MDC and MS-DRG assignments that were applied at the time diagnosis code U07.1 was implemented, effective April 1, 2020, as discussed in section II.D.16. of the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32559). In response to the commenter's recommendation that CMS account for changes in best practices and medications used for the treatment of COVID-19 with respect to providing additional payment options and flexibilities to limit financial risk to hospitals, we note that we have developed several resources in the form of a Coronavirus (COVID-19) Partner Toolkit available at the following CMS webpage: https://www.cms.gov/outreach-education/partner-resources/coronavirus-covid-19-partner-toolkit for various providers with respect to the COVID-19 public health emergency. Specifically, on that CMS webpage under the section titled “If you are in a Care Setting” there is a “Hospitals and Healthcare Systems” list of 20 resource documents that have been made publicly available.

Comment: Several commenters expressed concern regarding the proposed NonCC severity level designation for a subset of the new ICD-10-CM diagnosis codes describing cytokine release syndrome (CRS) as displayed in Table 6A—New Diagnosis Codes (associated with the proposed rule and available via the internet on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS ). Specifically, the commenters stated diagnosis codes D89.833 (Cytokine release syndrome, grade 3), D89.834 (Cytokine release syndrome, grade 4), and D89.835 (Cytokine release syndrome, grade 5) warrant further consideration. The commenters noted that CRS has emerged as an established diagnosis in association with CAR T-cell therapy for various cancers, and providers are now seeing this syndrome in patients who present with COVID-19. The commenters requested CMS reconsider how the diagnosis codes describing CRS are designated within the ICD-10 MS-DRGs.

Some commenters suggested that the American Society for Transplantation and Cellular Therapy (ASTCT) CRS Grading system be examined in review of potential CC and MCC designations for the CRS diagnosis codes. Other commenters stated that based on the ASTCT CRS Grading system, the CRS diagnosis codes describing grades 3, 4, and 5 appear to satisfy many of the CMS guiding principles discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32550). A commenter recommended that severity level assignments for the various grades of CRS could be used as a test case for these new guiding principles. According to the commenter, the guiding principles as described in the proposed rule do not indicate that a required threshold for the number of cases for Medicare patients be attained before an analysis of the severity level assignment occurs. The commenter stated that based on the ASTCT CRS Grading system, grades 3, 4 and 5 meet the criteria for 7 of the 9 proposed guiding principles. The commenter provided the following information for CMS' consideration.

This same commenter also suggested that CMS consider expanding the logic for the CRS diagnosis codes to include patients diagnosed with COVID-19. The commenter reported that based on current academic literature, CRS is a common occurrence and a focus of treatment in patients presenting with advanced COVID-19. According to the commenter, the presence of CRS in the COVID-19 population also indicates that the new CRS diagnosis codes meet the 4th guiding principle of “marker for advanced disease states across multiple different comorbid conditions.”

Another commenter urged CMS to assign the CRS diagnosis codes identified as Grades 3, 4, and 5 (D89.833, D89.834, and D89.835, respectively) as a MCC and to assign the CRS diagnosis code identified as Grade 2, D89.832 (Cytokine release syndrome, grade 2) as a CC based on clinical significance. The commenter agreed with the proposed NonCC designation for the CRS diagnosis code identified as Grade 1, D89.831 (Cytokine release syndrome, grade 1) until additional data is available for analysis and consideration.

A commenter noted that for Table 6A—New Diagnosis Codes, associated with the proposed rule, that the proposed MDC for the new CRS diagnosis codes is MDC 16 (Diseases and Disorders of Blood, Blood Forming Organs, Immunologic Disorders) and the proposed MS-DRGs are 814, 815, and 816 (Reticuloendothelial and Immunity Disorders with MCC, with CC, and without CC/MCC, respectively). The commenter stated that since the CRS diagnosis codes were proposed as NonCC it understood this to equate to the CRS diagnosis codes being assigned to MS-DRG 816. The commenter disagreed with the proposed severity levels for the CRS diagnosis codes and recommended CMS consider revising. According to the commenter, CRS is the most common complication of Immune Effector Cell (IEC) therapy as described in the ASTCT's Consensus Grading paper. Symptoms can be progressive, include fever at the onset, and may include hypotension, hypoxia, and end organ dysfunction. The commenter noted that patients with CRS grade 3 require treatment for hypotension and hypoxia and patients with CRS grade 4 experience hypoxia requiring treatment, are hemodynamically unstable, and have capillary leak which can lead to pulmonary edema and ventilation impairment and may require mechanical ventilation. Lastly, the commenter noted CRS grade 5 is defined as “death due to CRS,” and suggested this condition be considered a MCC. In addition, the commenter compared the APR-DRG Grouper severity levels, as described in the FY 2008 IPPS/LTCH PPS final rule (72 FR 47158) to inform how CMS should assign CC/MCC designations for the new CRS codes. For example, the commenter suggested diagnosis code D89.831 (Cytokine release syndrome, grade (1) should be designated as NonCC; diagnosis code D86.832 (Cytokine release syndrome, grade (2) should be designated as CC; diagnosis code D89.833 (Cytokine release syndrome, grade (3) should be designated as MCC; diagnosis code D89.834 (Cytokine release syndrome, grade (4) should be designated as MCC; diagnosis code D89.835 (Cytokine release syndrome, grade (5) should be designated as MCC; and diagnosis code D89.839 (Cytokine release syndrome, grade unspecified) should be designated as NonCC.

Similar to comments discussed earlier in this section, this commenter also stated that when applying CMS' guiding principles as described in the proposed rule for severity level assignments, many of them are applicable to the new CRS diagnosis codes. The commenter provided the following table for CMS' consideration and review which also included recommended MS-DRG assignments.

The commenter also noted that coding guidelines instruct the CRS diagnosis codes to be sequenced as a secondary diagnosis with a complication code (T code) sequenced first when CRS is a complication due to a procedure. The commenter expressed concern regarding how CRS cases will group into MS-DRGs 814, 815, and 816 as proposed by CMS since sequencing a T code as the principal diagnosis results in a different MS-DRG assignment. The commenter suggested CMS consider revising the Grouper logic, proposing different MS-DRGs for CRS and allow for public comment, or urging NCHS to change the coding instruction at subcategory D89.83 to allow only for diagnosis code T80.90XA (Unspecified complication following infusion and therapeutic injection) to be reported first since it would group to MS-DRGs 814, 815, and 816. The commenter also urged CMS to request that the NCHS and the AHA publish clear coding guidance to eliminate any confusion about the appropriate T code to report for CRS due to CAR T-cell therapy.

Another commenter also recommended that CMS assign the new CRS diagnosis codes to CC and MCC MS-DRGs within the MS-DRG 814, 815, and 816 series. The commenter stated their belief that several of the CMS guiding principles described in the proposed rule provide sufficient rationale for such assignments. The commenter also stated that once information regarding the CRS codes becomes available in the claims data, CMS can re-evaluate MS-DRG assignments.

Response: Consistent with our annual process of assigning new diagnosis codes to MDCs, MS-DRGs, and designating a severity level (MCC, CC or NonCC), we reviewed the predecessor diagnosis code assignment for CRS. The predecessor code for CRS is diagnosis code D89.89 (Other specified disorders involving the immune mechanism, not elsewhere classified) which is designated as a NonCC, therefore our proposed severity level designation for each of the CRS codes was also a NonCC. After consideration of the commenters' concerns regarding the proposed severity level designations for the new ICD-10-CM diagnosis codes describing cytokine release syndrome (hereafter referred to as “CRS codes”) as displayed in Table 6A—New Diagnosis Codes, associated with proposed rule, we agree that the CRS codes warrant further consideration.

Upon further review and consideration, our clinical advisors believe a CC severity level for CRS codes identified as grade 3, 4, or 5 would be warranted since these patients may require additional resources and treatment including intensive monitoring, blood pressure support, oxygen or mechanical ventilation, that are above and beyond the resources required for patients with CRS identified as a grade 1, 2, or an unspecified grade. Our clinical advisors continue to believe that CRS codes with a grade 1, 2, or an unspecified grade do not warrant the CC severity level.

Our clinical advisors also acknowledged the commenters' recommendations to review the American Society for Transplantation and Cellular Therapy (ASTCT) CRS Grading system to reassess potential CC and MCC designations for the CRS codes and consider how the CMS guiding principles discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32550) could be applied as a test case for the various grades of the CRS codes. As noted previously, we applied our established process in proposing severity level assignments for these codes and the other new diagnosis codes for FY 2021. We also note that the guiding principles continue to be under development as we consider the public comments received, as discussed in section II.E.12.c. of the preamble of this final rule. We further note that with respect to proposing severity level assignments for new diagnosis codes in the future, we anticipate continuing our current process of first reviewing the predecessor code assignment, followed by review and consideration of the guiding principles that may be applied, in future rulemaking.

We note that while our clinical advisors do not dispute the commenters' assessments that the CRS codes would appear to meet most of the guiding principles, they also noted, as discussed previously, that a distinction between assigning the codes as a CC versus a MCC cannot be made based on the fact that they appear to meet several of the guiding principles nor can assignment of a secondary diagnosis be based on whether the code meets 1 or 2 principles or meets 7 or 8 of the principles. Our clinical advisors maintain that generally, the proposed severity level ultimately depends on clinical judgement and, where the data is available, the empirical analysis of the additional resources associated with the secondary diagnosis. The impact of the secondary diagnosis is dependent on the principal diagnosis reported, with which it is associated. If the secondary diagnosis is reported primarily with a principal diagnosis that reflects serious illness with treatment complexity, then the marginal contribution of the secondary diagnosis to the overall resource use may actually be relatively small. The CRS codes initially appeared to fall into this category, since it occurs in patients who are quite ill to begin with, the “grading” definitions have varied among organizations, and it has evolved over time. However, for the reasons noted, and after further consideration, we believe that a CC severity level for CRS codes identified as grade 3, 4, or 5 is warranted. We will continue to monitor the CRS codes and their impact on resource use once the claims data becomes available to determine if further modifications to the severity level are warranted.

In response to the commenter who expressed concern regarding how CRS cases will group into MS-DRGs 814, 815, and 816 as proposed by CMS (since sequencing certain T codes as the principal diagnosis results in a different MS-DRG assignment), we note that after notification and consideration of the concerns involving the proposed Tabular List instructions for the CRS codes were brought to its attention, the CDC/NCHS updated and finalized the Tabular instruction for the CRS codes. As noted in section II.E.16. of the preamble of this final rule, the CDC/NCHS has lead responsibility for the diagnosis codes and CMS has lead responsibility for the ICD-10-PCS procedure codes. The finalized changes effective FY 2021 include updates to the diagnosis codes instructed to be sequenced first, followed by the applicable CRS code as follows:

D89.83 Cytokine release syndrome

Code first underlying cause, such as:

Complications following infusion, transfusion and therapeutic injection (T80.89-)

complications of transplanted organs and tissue (T86.-)

Use additional code to identify associated manifestations

D89.831 Cytokine release syndrome, grade 1

D89.832 Cytokine release syndrome, grade 2

D89.833 Cytokine release syndrome, grade 3

D89.834 Cytokine release syndrome, grade 4

D89.835 Cytokine release syndrome, grade 5

D89.839 Cytokine release syndrome, grade unspecified

As a result, CMS considered modifications to the GROUPER logic to allow cases reporting diagnosis code T80.89XA (Other complications following infusion, transfusion and therapeutic injection) as the principal diagnosis with any one of the CRS codes as a secondary diagnosis to group to MS-DRGs 814, 815, and 816. We note that diagnosis code T80.90XA (Unspecified complication following infusion and therapeutic injection) as the commenter suggested would not be appropriate to report as the principal diagnosis for these cases since the code descriptor refers to an “unspecified complication” and the complication is specified as CRS. In response to the commenter's suggestion that CMS request the NCHS and the AHA publish clear coding guidance to eliminate any confusion about the appropriate T code to report for CRS due to CAR T-cell therapy, we note that it is standard practice for the AHA to publish coding guidance for the annual diagnosis and procedure code updates in the AHA's Coding Clinic for ICD-10-CM and ICD-10-PCS 4th Quarter publication each year.

With respect to the commenter who recommended that CMS assign the new CRS diagnosis codes to CC and MCC MS-DRGs within the MS-DRG 814, 815, and 816 series, we note that whenever there are new diagnosis codes finalized, the first step for incorporating the new diagnosis code into the logic of the ICD-10 MS-DRGs is to assign the diagnosis code to the appropriate MDC. The next step is to determine if and how the diagnosis code may define the logic for a specific MS-DRG assignment. For example, the diagnosis may be listed as principal or as any one of the secondary diagnoses, as a secondary diagnosis, or only as a secondary diagnosis as noted in more detail below.

• Principal or secondary diagnoses. Indicates that a specific set of diagnoses are used in the definition of the MS-DRG. The diagnoses may be listed as principal or as any one of the secondary diagnoses. A special case of this condition is MS-DRG 008 in which two diagnoses (for example, renal and diabetic) must both be present somewhere in the list of diagnoses in order to be assigned to MS-DRG 008.
• Secondary diagnoses. Indicates that a specific set of secondary diagnoses are used in the definition of the MS-DRG. For example, a secondary diagnosis of acute leukemia with chemotherapy is used to define MS-DRG 839.
• Only secondary diagnoses. Indicates that in order to be assigned to the specified MS-DRG no secondary diagnoses other than those in the specified list may appear on the patient's record. For example, in order to be assigned to MS-DRG 795, only secondary diagnoses from the specified list may appear on the patient's record.

As discussed earlier in this section, modifications to the GROUPER logic were made to allow cases reporting diagnosis code T80.89XA (Other complications following infusion, transfusion and therapeutic injection) as the principal diagnosis with any one of the CRS codes as a secondary diagnosis to group to MS-DRGs 814, 815, and 816. We note that whenever there is a secondary diagnosis component to the MS-DRG logic, the diagnosis code can either be used in the logic for assignment to the MS-DRG or to act as a CC/MCC. For this specific scenario, the CRS codes, as secondary diagnoses, are being used in the definition of the logic for assignment to MS-DRGs 814, 815, and 816, similar to the example described above, where a secondary diagnosis of acute leukemia with chemotherapy is used to define MS-DRG 839.

In response to the commenter that suggested CMS consider expanding the logic for the CRS diagnosis codes to include patients diagnosed with COVID-19, we note that for cases where CRS is present in a patient diagnosed with COVID-19, depending on the circumstances of the admission, the COVID-19 would be reported as the principal diagnosis and the appropriate CRS code would be reported as a secondary diagnosis. In this scenario, the case would group to a MS-DRG under MDC 04 (Diseases and Disorders of the Respiratory System) because that is where diagnosis code U07.1, (COVID-19) is assigned. Therefore, we do not agree that it is necessary to create specific logic for these patients.

After consideration of the public comments received, and for the reasons previously discussed, for FY 2021, we are modifying our proposed severity level designations for a subset of the CRS codes as shown in Table 6A—New Diagnosis Codes, associated with this final rule, and displayed in the table below.

We are also finalizing modifications to the ICD-10 MS-DRG GROUPER logic V38 for MS-DRGs 814, 815, and 816. Effective with discharges on and after October 1, 2020 (FY 2021), the logic for case assignment to MS-DRGs 814, 815, and 816 will include a principal diagnosis of T89.89XA with a secondary diagnosis of any CRS code as noted below.

Principal Diagnosis

T80.89XA Other complications following infusion, transfusion and therapeutic injection, initial encounter

with

Secondary Diagnosis

D89.831 Cytokine release syndrome, grade 1

D89.832 Cytokine release syndrome, grade 2

D89.833 Cytokine release syndrome, grade 3

D89.834 Cytokine release syndrome, grade 4

D89.835 Cytokine release syndrome, grade 5

D89.839 Cytokine release syndrome, grade unspecified

Comment: Several commenters requested that CMS consider higher reimbursement for the performance of ultrasound accelerated thrombolysis procedures utilizing the EKOS^TM device. Specifically, the commenters recommended that ultrasound accelerated thrombolysis procedures performed with the EKOS^TM device for the treatment of pulmonary embolism (PE) should be assigned to MS-DRGs 163, 164, and 165 (Major Chest Procedures with MCC, with CC, and without CC/MCC, respectively) versus MS-DRGs 166, 167, and 168 (Other Respiratory System O.R. Procedures with MCC, with CC, and without CC/MCC, respectively), and ultrasound accelerated thrombolysis procedures performed with the EKOS^TM device for the treatment of deep venous thrombosis (DVT) should be assigned to MS-DRGs 270, 271, and 272 (Other Major Cardiovascular Procedures with MCC, with CC, and without CC/MCC, respectively) versus MS-DRGs 252, 253, and 254 (Other Vascular Procedures with MCC, with CC, and without CC/MCC, respectively), as proposed in Table 6B—New Procedure Codes associated with the proposed rule, regardless of a physician's clinical decision to use a device that removes matter or a device that fragments matter using ultrasound accelerated thrombolysis. Some commenters asserted that unique devices that remove matter, known as extirpating devices, are very similar to the EKOS^TM device in the performance of an ultrasound accelerated thrombolysis procedure to treat PE or DVT. The commenters stated the difference is that these extirpating devices, specifically the FlowTriever® and ClotTriever® (Inari Medical, Inc) and the Indigo® System (Penumbra), remove matter and the EKOS^TM device (Boston Scientific), fragments matter with the use of thrombolytics and ultrasonic assistance.

A commenter stated its belief that:

A. Percutaneous ultrasonic fragmentation and extirpation are both catheter-based procedures that address solid matter in a body part;

B. Percutaneous ultrasonic fragmentation is similar to other procedures in the requested MS-DRGs;

C. Both fragmentation and extirpation procedures were evaluated using similar PE pivotal trial designs and have similar efficacy results;

D. Both types of procedures have similar overall hospital resource utilization;

E. Medicare cost data do not reflect EKOS^TM cost; and

F. Medicare precedent exists for assignment of new codes to higher paying groups.

Below we provide the commenters' summaries for each of the statements listed above which also reflect similar statements or sentiments submitted by several of the other commenters.

A. Percutaneous Ultrasonic Fragmentation and Extirpation are Both Catheter-Based Procedures That Address Solid Matter in a Body Part

According to the commenter, clot reduction using percutaneous ultrasonic fragmentation is similar to extirpation in many respects. The commenter stated these technologies all use percutaneous approaches, all treat serious PE, all reduce thrombus burden and all treat patients in the inpatient hospital setting with intensive care unit (ICU) care. The commenter provided the following table for comparison of the different technologies.

The commenter stated that similarly, procedures using percutaneous clot reduction devices for peripheral vascular (PV) procedures exhibit many key similarities. All use percutaneous approaches, all manage PV thromboemboli, all reduce thrombus burden, and all involve inpatient hospital admission with ICU care. The commenter provided the following table for comparison.

B. Percutaneous Ultrasonic Fragmentation Is Similar to Procedures in the Requested MS-DRGs

According to the commenter, for PE, percutaneous ultrasonic fragmentation procedures are clinically similar to procedures that are assigned to MS-DRGs 163, 164, and 165. The commenter stated that both extirpation codes and percutaneous ultrasonic fragmentation codes are reporting services that are intended to reduce clot burden, addressing matter in the body. The commenter provided the following list of procedure codes describing extirpation of matter from pulmonary structures that are currently assigned to MS-DRGs 163, 164, and 165 that it stated are clinically similar to percutaneous ultrasonic fragmentation procedures for PE.

Alternatively, the commenter stated that PE percutaneous ultrasonic fragmentation procedures are not clinically similar to other procedures assigned to MS-DRGs 166, 167, and 168. According to the commenter, percutaneous ultrasonic fragmentation is unlike the other percutaneous procedure codes assigned to these MS-DRGs and even opposite to some. The commenter noted an example of how occlusion procedures stop flow, while percutaneous ultrasonic fragmentation restore flow. The commenter provided the following list of procedure codes describing occlusion and repair of pulmonary structures that are currently assigned to MS-DRGs 166, 167, and 168 that it stated are not clinically similar to percutaneous ultrasonic fragmentation procedures for a PE.

In addition, the commenter stated that for PV procedures, percutaneous ultrasonic fragmentation procedures are clinically similar to procedures in MS-DRGs 270, 271, and 272. The commenter reiterated that both extirpation codes and fragmentation codes identify services that are intended to reduce clot burden, addressing matter in the body. The commenter provided the following list of procedure codes describing extirpation of matter from PV structures that are currently assigned to MS-DRGs 270, 271, and 272 it stated are clinically similar to percutaneous ultrasonic fragmentation procedures for PE.

According to the commenter, as it noted with PE, percutaneous ultrasonic fragmentation PV procedures are generally unlike the codes and even opposite to some of the other ICD-10-PCS procedures in MS-DRGs 252, 253, and 254. For example, the commenter stated that percutaneous ultrasonic fragmentation is not comparable to dilation, which is the root operation for balloon angioplasty or vascular stenting and is primarily used to address peripheral artery disease, a condition which is very different than thrombotic events. The commenter reported that percutaneous ultrasonic fragmentation procedures using the EKOS^TM device typically involve leaving the EKOS^TM device in the body for multiple hours and in many cases overnight, which allows time for the thrombolytic to break apart the thrombus with ultrasonic assistance. The commenter noted the duration of angioplasty or stenting procedures are typically measured in minutes, rather than in hours. The commenter also noted that percutaneous ultrasonic fragmentation procedures are not similar to release procedures such as a carpal tunnel release procedure, which usually takes around ten minutes and involves cutting the carpal ligament. Conversely, percutaneous ultrasonic fragmentation catheters typically remain in the patient's body for multiple hours or overnight and do not cut ligaments, according to the commenter. The commenter provided the following list of procedure codes describing dilation (angioplasty) and release of PV structures that are currently assigned to MS-DRGs 252, 253, and 254 that it stated are not clinically similar to percutaneous ultrasonic fragmentation procedures for a PV procedure.

C. Similar PE Pivotal Trial Designs and Efficacy Results

The commenter stated that pivotal clinical studies for the treatment of PE with percutaneous ultrasonic fragmentation using EKOS^TM and for extirpation using comparable devices are consistent, with all designed using the same primary outcome measure. According to the commenter, the design of pivotal studies for the extirpating devices (FLARE and EXTRACT-PE) closely mirrors that of the EKOS^TM PE study, SEATTLE II. The commenter provided a table of device comparisons that were used in the three pivotal clinical trials to assess treatment of PE followed by another table to illustrate its findings.

The commenter stated that the FLARE and EXTRACT-PE trials have nearly identical primary outcome measures and comparable results to that of the EKOS^TM device SEATTLE II study, further validating the clinical similarity between the EKOS^TM device and the comparable extirpating devices. According to the commenter, mirroring the EKOS^TM SEATTLE II study design validates comparability of patients and procedures. The commenter asserted that percutaneous ultrasonic fragmentation procedures with the EKOS^TM device have comparable, and in some cases even greater, use of hospital resources than extirpation procedures, with a longer length of stay in the SEATTLE II study than extirpation procedures in the FLARE study, with multi-day confidence intervals.

D. Similar Hospital Resource Utilization

The commenter stated that the SEATTLE II pivotal trial demonstrated an average length of stay of 8.8 ± 5 days for percutaneous ultrasonic fragmentation procedures with the EKOS^TM device and the FLARE pivotal trial showed the hospital average length of stay of 4.1 ± 3.5 days for the FlowTriever® device. The commenter also stated that an analysis of MedPAR claims for extirpating PE admissions showed a geometric mean length of stay similar to the FLARE study, with length of stay ranging from 2.9 to 5.1 days across MS-DRGs 163, 164 and 165. The commenter further stated that from a hospital resource utilization perspective, the SEATTLE II trial demonstrated that percutaneous ultrasonic fragmentation procedures with the EKOS^TM device involved a length of stay greater than or equal to that of the comparable extirpation procedures performed with extirpation devices, given multi-day confidence intervals. The commenter provided a table to illustrate its findings of extirpation procedures performed for PE across MS-DRGs 163, 164, and 165.

The commenter also reported that the cost of the percutaneous ultrasonic fragmentation procedure performed with the EKOS^TM device is highly comparable to the cost of the extirpation procedure performed with the Indigo® System, which is assigned to the higher paying MS-DRGs. The commenter provided the following table to illustrate its findings of the costs for performing a PE procedure among the different devices.

According to the commenter, overall, hospital resource utilization is comparable: the length of stay of percutaneous ultrasonic fragmentation procedures with the EKOS^TM device is at least as great as if not longer than comparable extirpation procedures based on the SEATTLE II study and Medicare claims data, and device costs are similar to the Indigo® System.

E. Medicare Claims Data Do Not Reflect EKOS^TM Cost

The commenter stated that the EKOS^TM device obtained FDA indications for PV procedures in July 2008 and for PE in May 2014. The commenter noted that there has not been ICD-10 procedure coding specific to EKOS^TM, and the American Hospital Association (AHA) recommended a combination of codes to describe the use of EKOS^TM in PE procedures in late 2014:

• 6A750Z7 Ultrasound therapy of vessels, single
• 3E06317 Introduction of other thrombolytic into central artery, percutaneous approach

The commenter conducted its own analysis for the following ICD-10-PCS procedure codes describing the use of ultrasound and the percutaneous introduction of thrombolytics and noted they found 544 claims, with 408 of those assigned to MS-DRG 175 (Pulmonary Embolism with MCC or Acute Cor Pulmonale) and 116 of those assigned to MS-DRG 176 (Pulmonary Embolism without MCC). According to the commenter, while the AHA coding recommendation was helpful, it was unable to provide an accurate assessment of volumes and costs.

F. Medicare Precedent Exists for Assignment of New Codes to Higher Paying Groups

The commenter stated there is precedent for CMS to use its discretion to assign new codes to higher paying groups, such as the APCs and MS-DRGs. The commenter provided an example of the 2020 Outpatient Prospective Payment System (OPPS) Proposed Rule and noted that CMS proposed assigning two new procedure codes for describing percutaneous creation of AV fistula to a lower level endovascular APC and after reviewing comments, CMS decided to reconsider this recommendation and ultimately assigned the codes to a higher level endovascular APC, as noted in the 2020 OPPS final rule.

Finally, the commenter provided the following table that identifies the procedure codes describing fragmentation of pulmonary and peripheral vascular structures and the proposed O.R., MDC, and MS-DRG assignments for the codes as shown in Table 6B—New Procedure Codes associated with the proposed rule. The commenter added a column with its requested MS-DRG assignments, as shown in the last column to the right.

Another commenter indicated it was made aware of comments being submitted in response to the FY 2021 IPPS/LTCH PPS proposed rule regarding fragmentation codes (04FC3ZZ through 04FY3ZZ). This commenter noted that in each case, the commenter's request was for CMS to revise the MS-DRG assignment of the fragmentation codes listed in the FY 2021 IPPS/LTCH PPS proposed rule, from MS-DRGs 252, 253 and 254 to MS-DRGs 270, 271 and 272, which include extirpation procedures, by stating that fragmentation procedures are clinically and economically similar to extirpation procedures. The commenter stated it disagreed with the comparison provided in these comments and specifically with the comment that intravascular lithotripsy (IVL) fragmentation is more like extirpation of matter than like other intraluminal balloon-based procedures. This commenter further disagreed that fragmentation and extirpation are of similar complexity or accomplish the same treatment intent in peripheral vascular disease, especially for patients with critical limb ischemia. The commenter requested that CMS maintain its current proposed assignments of the new ICD-10-PCS codes for IVL procedures (04FC3ZZ through 04FY3ZZ) to the MS-DRGs as described in the proposed rule, and defer any changes to MS-DRG assignments until such time that additional long-term clinical and economic data become available to evaluate the new IVL procedures described by these new codes.

Response: We appreciate the commenters' feedback on the proposed MS-DRG assignments for the procedure codes that capture ultrasound accelerated thrombolysis performed with the EkoSonic^TM Endovascular System (EKOS^TM), identified as ultrasonic fragmentation procedures as displayed in Table 6B.—New Procedure Codes, associated with the proposed rule and available via the internet on the CMS web page: ( https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS ). We refer the reader to the table above for the list of ICD-10-PCS procedure codes submitted by a commenter that accurately identifies the procedure codes describing fragmentation of pulmonary and peripheral vascular structures with ultrasound and the proposed O.R., MDC, and MS-DRG assignments as shown in Table 6B—New Procedure Codes associated with the proposed rule, that are effective October 1, 2020 for reporting ultrasound assisted thrombolysis.

As noted in prior rulemaking (85 FR 32543), for new procedure codes that have been finalized through the ICD-10 Coordination and Maintenance Committee meeting process and are proposed to be classified as O.R. procedures or non-O.R. procedures affecting the MS-DRG, our clinical advisors recommend the MS-DRG assignment which is then made available in association with the proposed rule (Table 6B—New Procedure Codes) and subject to public comment. These proposed assignments are generally based on the assignment of predecessor codes or the assignment of similar codes. Consistent with our established process, we examined the MS-DRG assignment for the predecessor codes to determine the most appropriate MS-DRG assignment. The predecessor codes for the new procedure codes describing fragmentation of pulmonary and peripheral vascular structures with ultrasound as shown in the September 10, 2019 ICD-10 Coordination and Maintenance Committee meeting materials are 6A750Z7 (Ultrasound therapy of other vessels, single) and 3E06317 (Introduction of other thrombolytic into central artery, percutaneous approach) or 3E05317 (Introduction of other thrombolytic into peripheral artery, percutaneous approach). Because these procedure codes are designated as non-O.R. they do not impact the MS-DRG assignment. Therefore, when any combination of these procedure codes is currently reported, case assignment is dependent upon the principal diagnosis, any secondary diagnoses, and whether or not any other procedures may have been performed and reported on the claim. The MS-DRG assignment for cases with a principal diagnosis of PE is generally medical MS-DRG 175 (Pulmonary Embolism with MCC or Acute Cor Pulmonale) or medical MS-DRG 176 (Pulmonary Embolism without MCC). The MS-DRG assignment for cases with a principal diagnosis of DVT is generally medical MS-DRG 299, 300, or 301 (Peripheral Vascular Disorders with MCC, with CC, and without CC/MCC, respectively). Therefore, cases currently reporting the use of ultrasound accelerated thrombolysis for PE or DVT would generally be assigned to one of those medical MS-DRGs.

The commenters are correct that there are different types of devices available in the treatment of pulmonary embolism (PE) and deep venous thrombosis (DVT). The commenters are also correct that some devices remove matter (clot, thrombus, etc.) while others fragment (break up) matter, with or without the use of thrombolytics. Under the ICD-10-PCS procedure classification system there are two root operations, extirpation and fragmentation, specifically defined as:

Extirpation: Taking or cutting out solid matter from a body part

Fragmentation: Breaking solid matter in a body part into pieces

that are reported to describe the respective procedure that was performed. Because the EKOS^TM device fragments matter, procedures performed utilizing this device are identified and described by the root operation Fragmentation, as shown in the titles of the procedure codes listed in the table previously mentioned and discussed above. We do not agree that a change in the proposed MS-DRG assignments for the procedure codes describing ultrasound assisted thrombolysis with the root operation Fragmentation is warranted at this time. We appreciate the information provided by the commenters, however, our clinical advisors do not believe that the treatment difficulty, resource utilization and complexity of service for fragmentation and extirpation procedures are similar in the treatment of PE and DVT. In response to the commenter's statement that both extirpation codes and percutaneous ultrasonic fragmentation codes are reporting services that are intended to reduce clot burden, our clinical advisors agree, however, as shown above, each of these procedures are defined by clinically distinct definitions and objectives, and why there are separate and unique ICD-10-PCS procedure codes within the classification for reporting purposes. Our clinical advisors also do not believe it is appropriate to specifically compare the devices being utilized in the performance of these distinct procedures in consideration of MS-DRG assignment (as the assignment is not related to a new technology add-on payment application), rather, the emphasis is on the fragmentation and extirpation procedures performed and evaluating the treatment difficulty, resource utilization and complexity of service.

With respect to the commenter's statement that PE percutaneous ultrasonic fragmentation procedures are not clinically similar to other procedures assigned to MS-DRGs 166, 167, and 168, and PV percutaneous ultrasonic fragmentation procedures are not clinically similar to other procedures assigned to MS-DRGs 252, 253, and 254, we note that, as stated in the ICD-10 MS-DRG Definitions Manual, “In each MDC there is usually a medical and a surgical class referred to as “other medical diseases” and “other surgical procedures,” respectively. The “other” medical and surgical classes are not as precisely defined from a clinical perspective. The other classes would include diagnoses or procedures which were infrequently encountered or not well defined clinically. For example, the “other” medical class for the Respiratory System MDC would contain the diagnoses “other somatoform disorders” and “congenital malformation of the respiratory system,” while the “other” surgical class for the female reproductive MDC would contain the surgical procedures “excision of liver” (liver biopsy in ICD-9-CM) and “inspection of peritoneal cavity” (exploratory laparotomy in ICD-9-CM). The “other” surgical category contains surgical procedures which, while infrequent, could still reasonably be expected to be performed for a patient in the particular MDC. There are, however, also patients who receive surgical procedures which are completely unrelated to the MDC to which the patient was assigned. An example of such a patient would be a patient with a principal diagnosis of pneumonia whose only surgical procedure is a destruction of prostate (transurethral prostatectomy in ICD-9-CM). Such patients are assigned to a surgical class referred to as “unrelated operating room procedures.” These patients are ultimately never assigned to a well-defined DRG.” We further note that MS-DRGs 166, 167, and 168 (Other Respiratory System O.R. Procedures with MCC, with CC, and without CC/MCC, respectively) and MS-DRGs 252, 253, and 254 (Other Vascular Procedures with MCC, with CC, and without CC/MCC, respectively) are examples of the “other” surgical class, therefore it is expected that there will be procedures not precisely clinically aligned within the definition (logic) of these MS-DRGs.

We appreciate the commenter's feedback and information pertaining to the pivotal trials that have been conducted, however, as stated previously, fragmentation and extirpation procedures are clinically distinct and separate procedures, uniquely defined within the classification, and our clinical advisors do not believe it is appropriate to specifically compare the devices being utilized in the performance of these distinct procedures with respect to resource utilization and in consideration of MS-DRG assignment. As discussed earlier in this section, we followed our established process for determining the most appropriate MS-DRG assignment for new procedure codes.

We acknowledge the claims analysis conducted by the commenter and because the current procedure codes do not uniquely identify and describe ultrasound accelerated thrombolysis we concur it is difficult to accurately assess the data.

The ICD-10-CM diagnosis codes that identify pulmonary embolism and acute cor pulmonale that are included in the logic for MS-DRGs 175 and 176 are:

We analyzed claims data from the September 2019 update of the FY 2019 MedPAR file for cases reporting fragmentation procedures in MS-DRGs 175 and 176 with a principal diagnosis of PE and procedure codes 6A750Z7 with 3E06317 to identify the use of fragmentation via ultrasound and thrombolytics. Our findings are shown in the following table.

The data demonstrates that the 297 cases reporting a principal diagnosis of PE with the use of ultrasound and thrombolytics in MS-DRGs 175 and 176 (235+62=297) have higher average costs compared to all the cases in MS-DRGs 175 and 176 ($21,191 versus $10,515 and $19,035 versus $6,268, respectively) and a comparable average length of stay (5.0 days versus 5.0 days and 3.8 days versus 3.1 days, respectively).

The ICD-10-CM diagnosis codes that identify DVT that are included in the logic for MS-DRGs 299, 300 and 301 are:

We also examined claims for cases reporting fragmentation procedures in MS-DRGs 299, 300 and 301 with a principal diagnosis of DVT and procedure codes 6A750Z7 with 3E06317 to identify the use of fragmentation via ultrasound and thrombolytics. Our findings are shown in the following table.

The data demonstrates that the 4 cases reporting a principal diagnosis of DVT with the use of ultrasound and thrombolytics in MS-DRGs 299 and 300 (3+1=4) have higher average costs compared to all the cases in MS-DRGs 299 and 300 ($15,942 versus $10,611 and $12,930 versus $7,378, respectively) and a comparable average length of stay (3.3 days versus 5.2 days and 4.0 days versus 3.9 days, respectively). We note that there were no cases found reporting a principal diagnosis of DVT with the use of ultrasound and thrombolytics in MS-DRG 301.

We then analyzed claims data from the September 2019 update of the FY 2019 MedPAR data for MS-DRGs 163, 164, and 165 and MS-DRGs 270, 271, and 272. Our findings are shown in the following table.

Overall, the data demonstrates that cases reporting a principal diagnosis of PE with ultrasound and thrombolytic (fragmentation) in MS-DRG 175 have average costs and an average length of stay that are less than the average costs and average length of stay of all the cases in MS-DRG 163 ($21,191 versus $34,718) and (5.0 days versus 11.6 days). The data also demonstrates that cases reporting a principal diagnosis of PE with ultrasound and thrombolytic (fragmentation) in MS-DRG 176 have average costs and an average length of stay that are less than the average costs and average length of stay of all the cases in MS-DRG 164 ($19,035 versus $19,120) and (3.8 days versus 5.4 days). We note that because MS-DRG 175 is the “with MCC” MS-DRG and MS-DRG 176 is the “without MCC” (CC+NonCC) MS-DRG that it's possible a subset of the 62 cases found reporting a principal diagnosis of PE with ultrasound and thrombolytic in MS-DRG 176 did not report a CC and those cases would then be compared to MS-DRG 165, however, we were unable to analyze the detailed data for the 62 cases.

The data demonstrates that cases reporting a principal diagnosis of DVT with ultrasound and thrombolytic (fragmentation) in MS-DRG 299 have average costs and an average length of stay that are less than the average costs and average length of stay of all the cases in MS-DRG 270 ($15,942 versus $37,100) and (3.3 days versus 9.4 days). The data also demonstrates that cases reporting a principal diagnosis of DVT with ultrasound and thrombolytic (fragmentation) in MS-DRG 300 have average costs and an average length of stay that are less than the average costs and average length of stay of all the cases in MS-DRG 271 ($12,930 versus $28,219) and (4.0 days versus 5.8 days). For these reasons, based on the claims analysis, our clinical advisors do not support assignment of the new procedure codes describing fragmentation via ultrasound accelerated thrombolysis for the treatment of PE to MS-DRGs 163, 164, and 165 or to MS-DRGs 270, 271, and 272 for the treatment of DVT.

We then analyzed claims data from the September 2019 update of the FY 2019 MedPAR data for MS-DRGs 166, 167, and 168 and MS-DRGs 252, 253, and 254. Our findings are shown in the following table.

Overall, the data demonstrates that cases reporting a principal diagnosis of PE with ultrasound and thrombolytic (fragmentation) in MS-DRG 175 have average costs and an average length of stay that are more consistent with the average costs and average length of stay of all the cases in MS-DRG 166 ($21,191 versus $26,702) and (5.0 days versus 10.3 days). The data also demonstrates that cases reporting a principal diagnosis of PE with ultrasound and thrombolytic (fragmentation) in MS-DRG 176 have average costs and an average length of stay that are more consistent with the average costs and average length of stay of all the cases in MS-DRG 167 ($19,035 versus $13,566) and (3.8 days versus 4.9 days). We note that it's possible that a subset of the 62 cases found reporting a principal diagnosis of PE with ultrasound and thrombolytic in MS-DRG 176 did not report a CC and those cases would then be compared to MS-DRG 168, however, we were unable to analyze the detailed data for the 62 cases.

The data also demonstrates that cases reporting a principal diagnosis of DVT with ultrasound and thrombolytic (fragmentation) in MS-DRG 299 have average costs and an average length of stay that are more consistent with the average costs and average length of stay of all the cases in MS-DRG 252 ($15,942 versus $24,369) and (3.3 days versus 7.5 days). The data also demonstrates that cases reporting a principal diagnosis of DVT with ultrasound and thrombolytic (fragmentation) in MS-DRG 300 have average costs and an average length of stay that are more consistent with the average costs and average length of stay of all the cases in MS-DRG 253 ($12,930 versus $19,316) and (4.0 days versus 5.4 days). As previously noted, there were no cases found reporting a principal diagnosis of DVT with ultrasound and thrombolytic (fragmentation) in MS-DRG 301. For these reasons, our clinical advisors stated the claims analysis supports assignment of the new procedure codes describing fragmentation via ultrasound accelerated thrombolysis for the treatment of PE to MS-DRGs 166, 167, and 168 and to MS-DRGs 252, 253, and 254 for the treatment of DVT.

With respect to the commenter who stated it disagreed with the comparison provided in the other comments, specifically for IVL fragmentation, we appreciate the commenter's feedback, however, we believe that the commenter expressed concerns regarding a different subset of procedure codes that are also reported with the root operation fragmentation. The procedure codes describing fragmentation that are reported to identify an IVL procedure was performed do not include the term “ultrasonic” that is reported with the 7th digit character qualifier value of “0” for the ultrasound accelerated thrombolysis procedures. Alternatively, the procedure codes describing fragmentation that are reported to identify an IVL procedure was performed are reported with the 7th digit character qualifier value of “Z”.

After consideration of the public comments we received, and for reasons previously discussed, we are finalizing our proposal to assign the ultrasound accelerated thrombolysis procedures described by the root operation fragmentation and performed for the treatment of PE to MS-DRGs 166, 167, and 168 and for the treatment of DVT to MS-DRGs 252, 253, and 254 as proposed in Table 6B—New Procedure Codes associated with the proposed rule, and shown in Table 6B—New Procedure Codes associated with this final rule.

We note that, as stated in prior rule making (84 FR 42148), our clinical advisors recognize that MS-DRGs 163, 164, 165, 166, 167, and 168 may warrant further review and therefore, we plan to begin conducting this detailed review beginning with our FY 2022 MS-DRG classification analysis of claims data and determine what modifications may need to be considered for future rulemaking.

Comment: A commenter expressed concern that ICD-10-PCS procedure code XW0Q316 (Introduction of eladocagene exuparvovec into cranial cavity and brain, percutaneous approach, new technology group 6) did not have an O.R. procedure status proposed for FY 2021 as displayed in Table 6—New Procedure Codes associated with the proposed rule. According to the commenter, this new procedure code should have O.R. status because it involves traversing the skull in order to place a substance within the cranial cavity or brain. The commenter stated that the skull must be opened by drilling/cutting a burr hole and that although percutaneous (burr hole) procedures are performed through smaller openings in the skull than larger open burr hole procedures, they nonetheless require drilling through the skull under sterile technique with anesthesia for pain control. The commenter also stated that specialized equipment for a stereotactic approach, image-guidance and/or endoscope is required. Lastly, the commenter reported that other percutaneous procedures (including drainages) of the cranial cavities and brain have been discussed with CMS and appropriately re-classified to OR procedure status.

Response: We appreciate the commenter's feedback. Consistent with our annual process of assigning new procedure codes to MDCs and MS-DRGs, and designating a procedure as an O.R. or non-O.R. procedure, we reviewed the predecessor procedure code assignment. The predecessor code for procedure code XW0Q316 is procedure code 3E0Q3GC (Introduction of other therapeutic substance into cranial cavity and brain, percutaneous approach) which is designated as a non-O.R. procedure. In the absence of claims data, our clinical advisors also considered the indication for the specific procedure being described by the new procedure code, the treatment difficulty, and the resources utilized. Upon review, our clinical advisors do not believe that a change in the O.R. status for this procedure is warranted at this time.

After consideration of the comment we received, we are finalizing our proposal to designate procedure code XW0Q316 as non-O.R. for FY 2021. As claims data becomes available for this procedure we can reevaluate for future rule making.

We are making available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html the following tables associated with this final rule:

• Table 6A—New Diagnosis Codes-FY 2021;
• Table 6B—New Procedure Codes-FY 2021;
• Table 6C—Invalid Diagnosis Codes-FY 2021;
• Table 6E—Revised Diagnosis Code Titles-FY 2021;
• Table 6G.1—Secondary Diagnosis Order Additions to the CC Exclusions List-FY 2021;
• Table 6G.2—Principal Diagnosis Order Additions to the CC Exclusions List-FY 2021;
• Table 6H.1—Secondary Diagnosis Order Deletions to the CC Exclusions List-FY 2021;
• Table 6H.2—Principal Diagnosis Order Deletions to the CC Exclusions List—FY 2021;
• Table 6I—Complete MCC List-FY 2021;
• Table 6I.1—Additions to the MCC List-FY 2021;
• Table 6I.2-Deletions to the MCC List-FY 2021;
• Table 6J—Complete CC List -FY 2021;
• Table 6J.1—Additions to the CC List-FY 2021;
• Table 6J.2—Deletions to the CC List -FY 2021; and
• Table 6K—Complete List of CC Exclusions -FY 2021.14. Changes to the Medicare Code Editor (MCE)

The Medicare Code Editor (MCE) is a software program that detects and reports errors in the coding of Medicare claims data. Patient diagnoses, procedure(s), and demographic information are entered into the Medicare claims processing systems and are subjected to a series of automated screens. The MCE screens are designed to identify cases that require further review before classification into an MS-DRG.

As discussed in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42156), we made available the FY 2020 ICD-10 MCE Version 37 manual file. The manual contains the definitions of the Medicare code edits, including a description of each coding edit with the corresponding diagnosis and procedure code edit lists. The link to this MCE manual file, along with the link to the mainframe and computer software for the MCE Version 37 (and ICD-10 MS-DRGs) are posted on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software .

In the FY 2021 IPPS/LTCH PPS proposed rule, we addressed the MCE requests we received by the November 1, 2019 deadline. We also discussed the proposals we were making based on internal review and analysis. In this FY 2021 IPPS/LTCH PPS final rule, we present a summation of the comments we received in response to the MCE requests and proposals presented based on internal reviews and analyses in the proposed rule, our responses to those comments, and our finalized policies.

In addition, as a result of new and modified code updates approved after the annual spring ICD-10 Coordination and Maintenance Committee meeting, we routinely make changes to the MCE. In the past, in both the IPPS proposed and final rules, we have only provided the list of changes to the MCE that were brought to our attention after the prior year's final rule. We historically have not listed the changes we have made to the MCE as a result of the new and modified codes approved after the annual spring ICD-10 Coordination and Maintenance Committee meeting. These changes are approved too late in the rulemaking schedule for inclusion in the proposed rule. Furthermore, although our MCE policies have been described in our proposed and final rules, we have not provided the detail of each new or modified diagnosis and procedure code edit in the final rule. However, we make available the finalized Definitions of Medicare Code Edits (MCE) file. Therefore, we are making available the FY 2021 ICD-10 MCE Version 38 Manual file, along with the link to the mainframe and computer software for the MCE Version 38 (and ICD-10 MS-DRGs), on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.

a. Age Conflict Edit

In the MCE, the Age conflict edit exists to detect inconsistencies between a patient's age and any diagnosis on the patient's record; for example, a 5-year-old patient with benign prostatic hypertrophy or a 78-year-old patient coded with a delivery. In these cases, the diagnosis is clinically and virtually impossible for a patient of the stated age. Therefore, either the diagnosis or the age is presumed to be incorrect. Currently, in the MCE, the following four age diagnosis categories appear under the Age conflict edit and are listed in the manual and written in the software program:

• Perinatal/Newborn—Age 0 years only; a subset of diagnoses which will only occur during the perinatal or newborn period of age 0 (for example, tetanus neonatorum, health examination for newborn under 8 days old).
• Pediatric—Age is 0-17 years inclusive (for example, Reye's syndrome, routine child health exam).
• Maternity—Age range is 9-64 years inclusive (for example, diabetes in pregnancy, antepartum pulmonary complication).
• Adult—Age range is 15-124 years inclusive (for example, senile delirium, mature cataract).

(1) Maternity Diagnoses

Under the ICD-10 MCE, the Maternity diagnoses category for the Age conflict edit considers the age range of 9 to 64 years inclusive. For that reason, the diagnosis codes on this Age conflict edit list would be expected to apply to conditions or disorders specific to that age group only.

As discussed in section II.D.13. of the preamble of the proposed rule and section II.E.13. of this final rule, Table 6A.—New Diagnosis Codes, lists the diagnosis codes that have been approved to date which will be effective with discharges on and after October 1, 2020. We proposed to add the following new ICD-10-CM diagnosis codes listed in this section of this rule to the Maternity diagnoses category code list under the Age conflict edit.

In addition, as discussed in section II.D.13. of the preamble of the proposed rule and section II.E.13. of this final rule, Table 6C.—Invalid Diagnosis Codes, lists the diagnosis codes that are no longer effective October 1, 2020. Included in this table is ICD-10-CM diagnosis code O99.89 (Other specified diseases and conditions complicating pregnancy, childbirth and the puerperium) which is currently listed on the Maternity diagnoses category code list under the Age Conflict edit. We proposed to remove this code from the Maternity diagnoses category code list.

Comment: Commenters agreed with CMS' proposal to add the diagnosis codes listed in the previous table to the Maternity diagnoses category code list under the Age conflict edit. Commenters also agreed to remove ICD-10-CM diagnosis code O99.89 (Other specified diseases and conditions complicating pregnancy, childbirth and the puerperium) from the Maternity diagnoses category edit code list under the Age Conflict edit since it is no longer a valid code effective October 1, 2020.

Response: We appreciate the commenters' support.

After consideration of the public comments we received, we are finalizing our proposal to add the diagnosis codes listed in the previous table to the Maternity diagnoses category edit code list and our proposal to remove ICD-10-CM diagnosis code O99.89 from the Maternity diagnoses category edit code list under the ICD-10 MCE Version 38, effective October 1, 2020.

(2) Adult Diagnoses

Under the ICD-10 MCE, the Adult diagnoses category for the Age conflict edit considers the age range of 15 to 124 years inclusive. For that reason, the diagnosis codes on this Age conflict edit list would be expected to apply to conditions or disorders specific to that age group only.

As discussed in section II.D.13. of the preamble of the proposed rule and section II.E.13. of this final rule, Table 6A.—New Diagnosis Codes, lists the diagnosis codes that have been approved to date which will be effective with discharges on and after October 1, 2020. We proposed to add the following new ICD-10-CM diagnosis codes to the Adult diagnoses category code list under the Age conflict edit.

Comment: Commenters supported the proposal to add the diagnosis codes listed in the previous table to the Adult diagnoses category code list under the Age conflict edit.

Response: We thank the commenters for their support.

After consideration of the public comments we received, we are finalizing our proposal to add the diagnosis codes listed in the previous table to the Adult diagnoses category edit code list under the ICD-10 MCE Version 38, effective October 1, 2020.

b. Sex Conflict Edit

In the MCE, the Sex conflict edit detects inconsistencies between a patient's sex and any diagnosis or procedure on the patient's record; for example, a male patient with cervical cancer (diagnosis) or a female patient with a prostatectomy (procedure). In both instances, the indicated diagnosis or the procedure conflicts with the stated sex of the patient. Therefore, the patient's diagnosis, procedure, or sex is presumed to be incorrect.

(1) Diagnoses for Females Only Edit

As discussed in section II.D.13. of the preamble of the proposed rule and section II.E.13. of this final rule, Table 6A.—New Diagnosis Codes, lists the new diagnosis codes that have been approved to date which will be effective with discharges on and after October 1, 2020. We proposed to add the following new ICD-10-CM diagnosis codes listed in this section of this rule to the edit code list for the Diagnoses for Females Only edit.

In addition, as discussed in section II.D.13. of the preamble of the proposed rule and section II.E.13. of this final rule, Table 6C.—Invalid Diagnosis Codes, lists the diagnosis codes that are no longer effective October 1, 2020. Included in this table are ICD-10-CM diagnosis code O99.89 (Other specified diseases and conditions complicating pregnancy, childbirth and the puerperium) and ICD-10-CM diagnosis code Q51.20 (Other doubling of uterus, unspecified) which are currently listed on the Diagnoses for Females Only edit code list. We proposed to delete these codes from the Diagnoses for Females Only edit code list.

Comment: Commenters supported the proposal to add the ICD-10-CM diagnosis codes listed in the previous table to the Diagnoses for Females Only edit code list and to remove ICD-10-CM diagnosis codes O99.89 and Q51.20 from the list of diagnosis codes for the Diagnoses for Females Only edit code list.

Response: We appreciate the commenters' support.

After consideration of the public comments that we received, we are finalizing our proposal to add the diagnosis codes displayed in the previous table to the Diagnoses for Females Only edit code list and our proposal to remove ICD-10-CM diagnosis code O99.89 and Q51.20 from the Diagnoses for Females Only edit code list under the ICD-10 MCE Version 38, effective October 1, 2020.

(2) Procedures for Females Only Edit

As discussed in section II.D.13. of the preamble of the proposed rule and section II.E.13. of this final rule, Table 6B—New Procedure Codes, lists the new procedure codes that have been approved to date which will be effective with discharges on and after October 1, 2020. We proposed to add the following new ICD-10-PCS procedure codes listed in this section of this rule to the edit code list for the Procedures for Females Only edit.

Comments: Commenters supported our proposal to add the ICD-10-PCS procedure codes listed in the previous table to the edit code list for the Procedures for Females Only edit.

Response: We thank the commenters for their support.

After consideration of the public comments that we received, we are finalizing our proposal to add the ICD-10-PCS procedure codes listed in the previous table to the edit code list for the Procedures for Females Only edit under the ICD-10 MCE Version 38, effective October 1, 2020.

(3) Procedures for Males Only

As discussed in section II.D.13. of the preamble of the proposed rule and in section II.E.13. of this final rule, Table 6B—New Procedure Codes, lists the new procedure codes that have been approved to date which will be effective with discharges on and after October 1, 2020. We proposed to add the following new ICD-10-PCS procedure codes listed in this section of this rule to the edit code list for the Procedures for Males Only edit.

Comments: Commenters agreed with our proposal to add the ICD-10-PCS procedure codes listed in the previous table to the edit code list for the Procedures for Males Only edit.

Response: We appreciate the commenters' support.

After consideration of the public comments that we received, we are finalizing our proposal to add the ICD-10-PCS procedure codes listed in the previous table to the edit code list for the Procedures for Males Only edit under the ICD-10 MCE Version 38, effective October 1, 2020.

c. Manifestation Code as Principal Diagnosis Edit

In the ICD-10-CM classification system, manifestation codes describe the manifestation of an underlying disease, not the disease itself, and therefore should not be used as a principal diagnosis.

As discussed in section II.D.13. of the preamble of the proposed rule and section II.E.13. of this final rule, Table 6A—New Diagnosis Codes, lists the new diagnosis codes that have been approved to date which will be effective with discharges on and after October 1, 2020. We proposed to add the following new ICD-10-CM diagnosis codes listed in this section of this rule to the edit code list for the Manifestation Codes Not Allowed as Principal Diagnosis edit code list because these codes are describing the manifestation of an underlying disease and not the disease itself.

Comment: We received comments in support of our proposal to add the codes listed in the previous table to the Manifestation Codes Not Allowed as Principal Diagnosis edit code list.

Response: We appreciate the commenters' support.

After consideration of the public comments that we received, we are finalizing our proposal to add the ICD-10-CM diagnosis codes listed in the previous table to the edit code list for the Manifestation Codes Not Allowed as Principal Diagnosis edit under the ICD-10 MCE Version 38, effective October 1, 2020.

In addition, as discussed in section II.D.13. of the preamble of the proposed rule and in section II.E.13. of this final rule, Table 6C.—Invalid Diagnosis Codes, lists the diagnosis codes that are no longer effective October 1, 2020. Included in this table is ICD-10-CM diagnosis code J84.17 (Other interstitial pulmonary diseases with fibrosis in diseases classified elsewhere) which is currently listed on the Manifestation Codes Not Allowed as Principal Diagnosis edit code list. We proposed to delete this code from the Manifestation Codes Not Allowed as Principal Diagnosis edit code list.

Comment: Commenters agreed with the proposal to delete ICD-10-CM diagnosis code J84.17 (Other interstitial pulmonary diseases with fibrosis in diseases classified elsewhere) from the Manifestation Codes Not Allowed as Principal Diagnosis edit code list.

Response: We appreciate the commenters' support of our proposal.

After consideration of the public comments that we received, we are finalizing our proposal to delete ICD-10-CM diagnosis code J84.17 from the Manifestation Codes Not Allowed as Principal Diagnosis edit code list under the ICD-10 MCE Version 38, effective October 1, 2020.

d. Unacceptable Principal Diagnosis Edit

In the MCE, there are select codes that describe a circumstance which influences an individual's health status but does not actually describe a current illness or injury. There also are codes that are not specific manifestations but may be due to an underlying cause. These codes are considered unacceptable as a principal diagnosis. In limited situations, there are a few codes on the MCE Unacceptable Principal Diagnosis edit code list that are considered “acceptable” when a specified secondary diagnosis is also coded and reported on the claim.

As discussed in Section II.D.13. of the preamble of the proposed rule and section II.E.13. of this final rule, Table 6A.—New Diagnosis Codes, lists the new diagnosis codes that have been approved to date which will be effective with discharges on and after October 1, 2020. We proposed to add the following new ICD-10-CM diagnosis codes listed in this section of this rule to the Unacceptable Principal Diagnosis edit code list.

Comment: Commenters supported our proposal to add the diagnosis codes listed in the previous table to the Unacceptable Principal Diagnosis edit code list. However, one commenter disagreed with adding the diagnosis codes describing Cytokine release syndrome (CRS) (D89.831 through D89.839) to the Unacceptable Principal Diagnosis edit code list. The commenter noted that at the ICD-10 Coordination and Maintenance Committee meeting held on September 11-12, 2019, CRS was described as a condition that may occur after treatment with some types of immunotherapy, such as Chimeric Antigen Receptor (CAR) T-cell therapy, and is the most common reaction after CAR T-cell therapy. The commenter stated that if CRS is the reason for the admission and is an adverse effect of the therapy/drug, the diagnosis code for the CRS must be sequenced as the principal diagnosis per coding guidelines, therefore, the CRS diagnosis codes should not be included on the Unacceptable Principal Diagnosis edit code list. This commenter also disagreed with adding diagnosis codes K74.00 (Hepatic fibrosis, unspecified), K74.01 (Hepatic fibrosis, early fibrosis), and K74.02 (Hepatic fibrosis, advanced fibrosis) to the Unacceptable Principal Diagnosis edit code list. The commenter noted that hepatic fibrosis may be determined to be the underlying cause of symptoms such as weakness, nausea, jaundice, or appetite loss in a patient. The commenter also stated that the current diagnosis code, K74.0 (Hepatic fibrosis) is not on the Unacceptable Principal Diagnosis edit code list, therefore, diagnosis codes K74.00, K74.01 and K74.02 should not be included on the Unacceptable Principal Diagnosis edit code list. This same commenter also disagreed with adding diagnosis codes Z03.821 (Encounter for observation for suspected ingested foreign body ruled out), Z03.822 (Encounter for observation for suspected aspirated (inhaled) foreign body ruled out), and Z03.823 (Encounter for observation for suspected inserted (injected) foreign body ruled out) to the Unacceptable Principal Diagnosis edit code list. The commenter stated that current codes in subcategory Z03.8 are only reportable as principal diagnosis/first listed except when there are multiple encounters on the same day and the medical records for the encounters are combined and therefore, diagnosis codes Z03.821, Z03.822, and Z03.823 should not be included on the Unacceptable Principal Diagnosis edit code list.

Response: We appreciate the commenters' feedback on our proposal. In response to the commenter who disagreed with our proposal to add the diagnosis codes describing Cytokine release syndrome (CRS) (D89.831 through D89.839) to the Unacceptable Principal Diagnosis edit code list, we note that we consulted with the staff at the Centers for Disease Control and Prevention's (CDC's) National Center for Health Statistics (NCHS) because NCHS has the lead responsibility for the ICD-10-CM diagnosis codes. The NCHS' staff confirmed that they do not consider CAR T-cell therapy to be a drug since it is a gene therapy. They noted that the ICD-10-CM Tabular instruction at subcategory D89.83- (Cytokine release syndrome) has a “Code first” that reads:

“Code first underlying cause, such as:

complications following infusion, transfusion and therapeutic injection (T80.89-) complications of transplanted organs and tissue (T86.-)”

They also stated that the intent is for the CRS codes to not be reported as a principal diagnosis. Diagnosis codes K74.00 (Hepatic fibrosis, unspecified), K74.01 (Hepatic fibrosis, early fibrosis), and K74.02 (Hepatic fibrosis, advanced fibrosis) also have a “Code first” note at the new subcategory K74.0 (Hepatic fibrosis), effective October 1, 2020. The commenter is correct that currently, diagnosis code K74.0 is not on the Unacceptable Principal Diagnosis Code list and we note that there is not a “Code first” note currently at that diagnosis code. We point out that diagnosis code K74.0 has been expanded effective October 1 and is therefore classified as a subcategory. The ICD-10-CM Tabular instruction at new subcategory K74.0 has a “Code first” note that reads:

“Code first underlying liver disease, such as:

nonalcoholic steatohepatitis (NASH) (K75.81)”

The “Code first” note at this subcategory applies to all three new diagnosis codes, K74.00, K74.01, and K74.02.

In response to the commenter's disagreement with adding diagnosis codes Z03.821 (Encounter for observation for suspected ingested foreign body ruled out), Z03.822 (Encounter for observation for suspected aspirated (inhaled) foreign body ruled out), and Z03.823 (Encounter for observation for suspected inserted (injected) foreign body ruled out) to the Unacceptable Principal Diagnosis edit code list, we note that these diagnosis codes were created in response to a request from the American Academy of Pediatrics, which indicated that since a child is often not able to communicate what occurred, there needs to be a way to identify and track these kinds of encounters, therefore, we would not expect these codes to be reported in our Medicare claims data for an inpatient stay.

After consideration of the public comments that we received, we are finalizing our proposal to add the diagnosis codes listed in the previous table to the Unacceptable Principal Diagnosis edit code list under the ICD-10 MCE Version 38, effective October 1, 2020.

In addition, as discussed in section II.D.13. of the preamble of the proposed rule and in section II.E.13. of this final rule, Table 6C.—Invalid Diagnosis Codes, lists the diagnosis codes that are no longer effective October 1, 2020. Included in this table are the following ICD-10-CM diagnosis codes that are currently listed on the Unacceptable Principal Diagnosis edit code list. We proposed to delete these codes from the Unacceptable Principal Diagnosis edit code list.

Comment: Commenters agreed with our proposal to remove the codes listed in the previous table from the Unacceptable Principal Diagnosis edit code list since they are no longer valid effective October 1, 2020.

Response: We thank the commenters for their support.

After consideration of the public comments that we received, we are finalizing our proposal to remove the diagnosis codes, as previously listed, from the Unacceptable Principal Diagnosis edit code list under the ICD-10 MCE Version 38, effective October 1, 2020.

e. Future Enhancement

In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38053 through 38054) we noted the importance of ensuring accuracy of the coded data from the reporting, collection, processing, coverage, payment and analysis aspects. Subsequently, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20235) we stated that we engaged a contractor to assist in the review of the limited coverage and non-covered procedure edits in the MCE that may also be present in other claims processing systems that are utilized by our MACs. The MACs must adhere to criteria specified within the National Coverage Determinations (NCDs) and may implement their own edits in addition to what is already incorporated into the MCE, resulting in duplicate edits. The objective of this review is to identify where duplicate edits may exist and to determine what the impact might be if these edits were to be removed from the MCE. The contractor is continuing to conduct this review.

We have also noted that the purpose of the MCE is to ensure that errors and inconsistencies in the coded data are recognized during Medicare claims processing. As we indicated in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41228), we are considering whether the inclusion of coverage edits in the MCE necessarily aligns with that specific goal because the focus of coverage edits is on whether or not a particular service is covered for payment purposes and not whether it was coded correctly.

As we continue to evaluate the purpose and function of the MCE with respect to ICD-10, we encourage public input for future discussion. As we have discussed in prior rulemaking, we recognize a need to further examine the current list of edits and the definitions of those edits. We continue to encourage public comments on whether there are additional concerns with the current edits, including specific edits or language that should be removed or revised, edits that should be combined, or new edits that should be added to assist in detecting errors or inaccuracies in the coded data. Comments should be directed to the MS-DRG Classification Change Mailbox located at MSDRGClassificationChange@cms.hhs.gov by November 1, 2020.

15. Changes to Surgical Hierarchies

Some inpatient stays entail multiple surgical procedures, each one of which, occurring by itself, could result in assignment of the case to a different MS-DRG within the MDC to which the principal diagnosis is assigned. Therefore, it is necessary to have a decision rule within the GROUPER by which these cases are assigned to a single MS-DRG. The surgical hierarchy, an ordering of surgical classes from most resource-intensive to least resource-intensive, performs that function. Application of this hierarchy ensures that cases involving multiple surgical procedures are assigned to the MS-DRG associated with the most resource-intensive surgical class.

A surgical class can be composed of one or more MS-DRGs. For example, in MDC 11, the surgical class “kidney transplant” consists of a single MS-DRG (MS-DRG 652) and the class “major bladder procedures” consists of three MS-DRGs (MS-DRGs 653, 654, and 655). Consequently, in many cases, the surgical hierarchy has an impact on more than one MS-DRG. The methodology for determining the most resource-intensive surgical class involves weighting the average resources for each MS-DRG by frequency to determine the weighted average resources for each surgical class. For example, assume surgical class A includes MS-DRGs 001 and 002 and surgical class B includes MS-DRGs 003, 004, and 005. Assume also that the average costs of MS-DRG 001 are higher than that of MS-DRG 003, but the average costs of MS-DRGs 004 and 005 are higher than the average costs of MS-DRG 002. To determine whether surgical class A should be higher or lower than surgical class B in the surgical hierarchy, we would weigh the average costs of each MS-DRG in the class by frequency (that is, by the number of cases in the MS-DRG) to determine average resource consumption for the surgical class. The surgical classes would then be ordered from the class with the highest average resource utilization to that with the lowest, with the exception of “other O.R. procedures” as discussed in this final rule.

This methodology may occasionally result in assignment of a case involving multiple procedures to the lower-weighted MS-DRG (in the highest, most resource-intensive surgical class) of the available alternatives. However, given that the logic underlying the surgical hierarchy provides that the GROUPER search for the procedure in the most resource-intensive surgical class, in cases involving multiple procedures, this result is sometimes unavoidable. We note that, notwithstanding the foregoing discussion, there are a few instances when a surgical class with a lower average cost is ordered above a surgical class with a higher average cost. For example, the “other O.R. procedures” surgical class is uniformly ordered last in the surgical hierarchy of each MDC in which it occurs, regardless of the fact that the average costs for the MS-DRG or MS-DRGs in that surgical class may be higher than those for other surgical classes in the MDC. The “other O.R. procedures” class is a group of procedures that are only infrequently related to the diagnoses in the MDC, but are still occasionally performed on patients with cases assigned to the MDC with these diagnoses. Therefore, assignment to these surgical classes should only occur if no other surgical class more closely related to the diagnoses in the MDC is appropriate.

A second example occurs when the difference between the average costs for two surgical classes is very small. We have found that small differences generally do not warrant reordering of the hierarchy because, as a result of reassigning cases on the basis of the hierarchy change, the average costs are likely to shift such that the higher-ordered surgical class has lower average costs than the class ordered below it.

Based on the changes that we proposed to make in the FY 2021 IPPS/LTCH PPS proposed rule, as discussed in section II.E.2.b. of the preamble of this final rule, we proposed to revise the surgical hierarchy for the Pre-MDC MS-DRGs as follows: In the Pre-MDC MS-DRGs we proposed to sequence proposed new Pre-MDC MS-DRG 018 (Chimeric Antigen Receptor (CAR) T-cell Immunotherapy) above Pre-MDC MS-DRGs 001 and 002 (Heart Transplant or Implant of Heart Assist System with and without MCC, respectively). We also note that, as discussed in section II.D.2.b. of the preamble of the proposed rule and in section II.E.2.b. of this final rule, we proposed to revise the title for Pre-MDC MS-DRG 016 to “Autologous Bone Marrow Transplant with CC/MCC”. In addition, based on the changes that we proposed to make as discussed in section II.D.8.a. of the preamble of the proposed rule and in section II.E.8.a. of this final rule, we also proposed to sequence proposed new Pre-MDC MS-DRG 019 (Simultaneous Pancreas/Kidney Transplant with Hemodialysis) above Pre-MDC MS-DRG 008 (Simultaneous Pancreas/Kidney Transplant) and below Pre-MDC MS-DRG 007 (Lung Transplant).

As discussed in section II.D.4. of the preamble of the proposed rule and section II.E.4. of this final rule, we proposed to delete MS-DRGs 129 (Major Head and Neck Procedures with CC/MCC or Major Device) and MS-DRG 130 (Major Head and Neck Procedures without CC/MCC), MS-DRGs 131 and 132 (Cranial and Facial Procedures with CC/MCC and without CC/MCC, respectively), and MS-DRGs 133 and 134 (Other Ear, Nose, Mouth and Throat O.R. Procedures with CC/MCC and without CC/MCC, respectively). Based on the changes we proposed to make for those MS-DRGs in MDC 03, we proposed to revise the surgical hierarchy for MDC 03 (Diseases and Disorders of the Ear, Nose, Mouth and Throat) as follows: In MDC 03, we proposed to sequence proposed new MS-DRGs 140, 141, and 142 (Major Head and Neck Procedures with MCC, with CC, and without CC/MCC, respectively) above new MS-DRGs 143, 144, and 145 (Other Ear, Nose, Mouth and Throat O.R. Procedures with MCC, with CC, and without CC/MCC, respectively). We also proposed to sequence proposed new MS-DRGs 143, 144, and 145 above MS-DRGs 135 and 136 (Sinus and Mastoid Procedures with CC/MCC and without CC/MCC, respectively). We also note that, based on the changes that we proposed to make, as discussed in section II.D.7.b. of the preamble of the proposed rule and section II.E.7.b. of this final rule, we proposed to revise the surgical hierarchy for MDC 08 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue) as follows: In MDC 08, we proposed to sequence proposed new MS-DRGs 521 and 522 (Hip Replacement with Principal Diagnosis of Hip Fracture with and without MCC, respectively) above MS-DRGs 469 (Major Hip and Knee Joint Replacement or Reattachment of Lower Extremity with MCC or Total Ankle Replacement) and 470 (Major Hip and Knee Joint Replacement or Reattachment of Lower Extremity without MCC). We further note that, based on the changes we proposed to make, as discussed in section II.D.8.a. of the preamble of the proposed rule and section II.E.8.a. of this final rule, we proposed to revise the surgical hierarchy for MDC 11 (Diseases and Disorders of the Kidney and Urinary Tract) as follows: In MDC 11, we proposed to sequence proposed new MS-DRGs 650 and 651 (Kidney Transplant with Hemodialysis with and without MCC, respectively) above MS-DRG 652 (Kidney Transplant).

Our proposal for Appendix D MS-DRG Surgical Hierarchy by MDC and MS-DRG of the ICD-10 MS-DRG Definitions Manual Version 38 is illustrated in the following tables.

Comment: Commenters supported our proposal to sequence proposed new Pre-MDC MS-DRG 018 above Pre-MDC MS-DRGs 001 and 002. Commenters also supported our proposal to sequence proposed new Pre-MDC MS-DRG 019 above Pre-MDC MS-DRG 008 and below Pre-MDC MS-DRG 007.

Response: We appreciate the commenters' support. As discussed in section II.E.2.b. of the preamble of this final rule, we are finalizing our proposal to create new Pre-MDC MS-DRG 018. In addition, as discussed in section II.E.8.a. of the preamble of this final rule, we are finalizing our proposal to create new Pre-MDC MS-DRG 019.

Comment: Commenters agreed with our proposal to sequence proposed new MS-DRGs 140, 141, and 142 above proposed new MS-DRGs 143, 144, and 145 and our proposal to sequence proposed new MS-DRGs 143, 144, and 145 above MS-DRGs 135 and 136 in MDC 03.

Response: We thank the commenters for their support. As discussed in section II.E.4. of the preamble of this final rule, we are finalizing our proposal to create new MS-DRGs 140, 141, and 142 and new MS-DRGs 143, 144, and 145.

Comment: Commenters supported our proposal to sequence proposed new MS-DRGs 521 and 522 above MS-DRGs 469 and 470 in MDC 08.

Response: We appreciate the commenters' support. As discussed in section II.E.7.b. of the preamble of this final rule, we are finalizing our proposal to create new MS-DRGs 521 and 522.

Comment: Commenters agreed with our proposal to sequence proposed new MS-DRGs 650 and 651 above MS-DRG 652 (Kidney Transplant) in MDC 11.

Response: We thank the commenters for their support. As discussed in section II.E.8.a. of the preamble of this final rule, we are finalizing our proposal to create new MS-DRGs 650 and 651.

After consideration of the public comments we received, we are finalizing the proposed changes as illustrated in the tables above for the surgical hierarchy within Appendix D MS-DRG Surgical Hierarchy by MDC and MS-DRG of the ICD-10 MS-DRG Definitions Manual Version 38 for FY 2021.

16. Maintenance of the ICD-10-CM and ICD-10-PCS Coding Systems

In September 1985, the ICD-9-CM Coordination and Maintenance Committee was formed. This is a Federal interdepartmental committee, co-chaired by the CDC National Center for Health Statistics (NCHS) and CMS, charged with maintaining and updating the ICD-9-CM system. The final update to ICD-9-CM codes was made on October 1, 2013. Thereafter, the name of the Committee was changed to the ICD-10 Coordination and Maintenance Committee, effective with the March 19-20, 2014 meeting. The ICD-10 Coordination and Maintenance Committee addresses updates to the ICD-10-CM and ICD-10-PCS coding systems. The Committee is jointly responsible for approving coding changes, and developing errata, addenda, and other modifications to the coding systems 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 official list of ICD-9-CM diagnosis and procedure codes by fiscal year can be found on the CMS website at: http://cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/codes.html . The official list of ICD-10-CM and ICD-10-PCS codes can be found on the CMS website at: http://www.cms.gov/Medicare/Coding/ICD10/index.html .

The NCHS has lead responsibility for the ICD-10-CM and ICD-9-CM diagnosis codes included in the Tabular List and Alphabetic Index for Diseases, while CMS has lead responsibility for the ICD-10-PCS and ICD-9-CM procedure codes included in the Tabular List and Alphabetic Index for Procedures.

The Committee encourages participation in the previously mentioned process by health-related organizations. In this regard, the Committee holds public meetings for discussion of educational issues and 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), the American Hospital Association (AHA), and various physician specialty groups, as well as individual physicians, health information management professionals, and other members of the public, to contribute ideas on coding matters. After considering the opinions expressed at the public meetings and in writing, the Committee formulates recommendations, which then must be approved by the agencies.

The Committee presented proposals for coding changes for implementation in FY 2021 at a public meeting held on September 10-11, 2019, and finalized the coding changes after consideration of comments received at the meetings and in writing by November 08, 2019.

The Committee held its 2020 meeting on March 17-18, 2020. The deadline for submitting comments on these code proposals was April 17, 2020. It was announced at this meeting that any new diagnosis and procedure codes for which there was consensus of public support and for which complete tabular and indexing changes would be made by June 2020 would be included in the October 1, 2020 update to the ICD-10-CM diagnosis and ICD-10-PCS procedure code sets. As discussed in earlier sections of the preamble of this final rule, there are new, revised, and deleted ICD-10-CM diagnosis codes and ICD-10-PCS procedure codes that are captured in Table 6A—New Diagnosis Codes, Table 6B—New Procedure Codes, Table 6C.—Invalid Diagnosis Codes, and Table 6E—Revised Diagnosis Code Titles for this final rule, which are available via the internet on the CMS website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html . The code titles are adopted as part of the ICD-10 (previously ICD-9-CM) Coordination and Maintenance Committee process. Therefore, although we make the code titles available for the IPPS proposed rule, they are not subject to comment in the proposed rule. Because of the length of these tables, they are not published in the Addendum to the proposed or final rule. Rather, they are available via the internet as discussed in section VI. of the Addendum to the proposed rule and this final rule.

Live Webcast recordings of the discussions of the diagnosis and procedure codes at the Committee's September 10-11, 2019 meeting and a recording of the virtual meeting held on March 17-18, 2020 can be obtained from the CMS website at: https://www.cms.gov/Medicare/Coding/ICD10/C-and-M-Meeting-Materials . The materials for the discussions relating to diagnosis codes at the September 10-11, 2019 meeting and March 17-18, 2020 meeting can be found at: http://www.cdc.gov/nchs/icd/icd10cm_maintenance.html . These websites also provide detailed information about the Committee, including information on requesting a new code, attending or participating in a Committee meeting, timeline requirements and meeting dates.

We encourage commenters to address suggestions on coding issues involving diagnosis codes via Email to: nchsicd10cm@cdc.gov.

Questions and comments concerning the procedure codes should be submitted via Email to: ICDProcedureCodeRequest@cms.hhs.gov.

Comment: A commenter stated that there was a need to establish and adhere to principles of greater transparency through making coding proposals and revisions public. The commenter also recommended that information be provided to entities that submit similar or related coding requests to enable more efficient and in depth public discussion and that reasonable notice is provided along with timely and accurate agendas when a coding change is accepted for discussion so that key stakeholders are able to participate in public meetings. The commenter also suggested that clear and timely transcripts or recordings of such meetings should always be made publicly available as well as any written comments that are provided following public meetings so that stakeholders can understand the different perspectives under consideration. According to the commenter, these improvements would allow for timely and knowledgeable participation by experts in the field, enabling CMS staff to have the background and understanding of the current trajectory of treatment options to be reflected in their recommended policies.

Response: As noted earlier in this section, the ICD-10 Coordination and Maintenance Committee is co-chaired by the NCHS/CDC, and CMS. The NCHS has lead responsibility for the ICD-10-CM diagnosis classification while CMS has lead responsibility for the ICD-10-PCS procedure classification. While it is an interdepartmental committee, each organization has their own established processes in responding to requests for coding updates and communicating with the requestors. With regard to the commenter's recommendation that information be provided to entities who submit similar or related coding requests to enable more efficient and in depth public discussion, CMS currently, and has historically informed requestors of similar or related coding requests to provide those requestors with the option and opportunity to collaborate on a joint proposal if they choose to do so. In response to the commenter's recommendation that reasonable notice is provided along with timely and accurate agendas when a coding change (proposal) is accepted for discussion so that key stakeholders are able to participate in public meetings, we note that notice of topics being considered for discussion is provided in an announcement that is published in the Federal Register two months in advance of each ICD-10 Coordination and Maintenance Committee meeting. For example, on January 30, 2020, the Federal Register Notice announcing the March 17-18, 2020 committee meetings was published with the tentative agenda items listed for both diagnosis and procedure code topics. This notice is located at: https://www.federalregister.gov/documents/2020/01/30/2020-01756/national-center-for-health-statistics-nchs-icd-10-coordination-and-maintenance-candm-committee . The agenda is considered tentative leading up to the meeting date as requestors may decide to withdraw their topic request or other topics that were not yet finalized for that specific meeting at the time of the development of the Federal Register Notice may subsequently be added to the final agenda. Upon receipt of a procedure code request, CMS immediately acknowledges receipt of the request and communicates to the requestor that additional follow up will occur once an analyst has been assigned. In addition, CMS provides information via Email communication in a letter to each requestor outlining the meeting process and, beginning in 2019, CMS initiated standard pre-meeting conference calls with requestors to discuss their procedure code topic request in more detail in advance of the meeting. Also, prior to the committee meeting, we make the procedure code topic meeting materials publicly available, commonly referred to as the “Agenda and Handout” packet on our website at: https://www.cms.gov/Medicare/Coding/ICD10/C-and-M-Meeting-Materials. Lastly, once the meeting has concluded, CMS sends a follow-up letter to the requestor informing them of next steps in the process so they can anticipate what to expect.

In response to the commenter's recommendation that clear and timely transcripts or recordings of such meetings should always be made publicly available, as well as any written comments that are provided following public meetings so that stakeholders can understand the different perspectives under consideration, we note that we announce during the meeting that a link to the recording (or webcast) will be made publicly available on both the CDC and CMS web pages following the meeting, along with the slides that were presented. This information is generally posted no later than one week following the meeting and additional details regarding each organization's website where materials are posted is also included in our IPPS rule as discussed earlier in this section. With respect to making written comments that are received after the meeting publicly available so that stakeholders can understand different perspectives, we will take that into consideration for the future. We note that some organizations, such as the AHIMA, routinely display the comments they have submitted in response to code proposals on their website. Therefore, in response to the commenter's concern, we believe that the processes we currently have in place enable the CMS staff to have the background and understanding of the current trajectory of treatment options to be considered in our proposed policies.

In the September 7, 2001 final rule implementing the IPPS new technology add-on payments (66 FR 46906), we indicated we would attempt to include proposals for procedure codes that would describe new technology discussed and approved at the Spring meeting as part of the code revisions effective the following October.

Section 503(a) of Public Law 108-173 included a requirement for updating diagnosis and procedure codes twice a year instead of a single update on October 1 of each year. This requirement was included as part of the amendments to the Act relating to recognition of new technology under the IPPS. Section 503(a) of Public Law 108-173 amended section 1886(d)(5)(K) of the Act by adding a clause (vii) which states that the Secretary shall provide for the addition of new diagnosis and procedure codes on April 1 of each year, but the addition of such codes shall not require the Secretary to adjust the payment (or diagnosis-related group classification) until the fiscal year that begins after such date. This requirement improves the recognition of new technologies under the IPPS by providing information on these new technologies at an earlier date. Data will be available 6 months earlier than would be possible with updates occurring only once a year on October 1.

While section 1886(d)(5)(K)(vii) of the Act states that the addition of new diagnosis and procedure codes on April 1 of each year shall not require the Secretary to adjust the payment, or DRG classification, under section 1886(d) of the Act until the fiscal year that begins after such date, we have to update the DRG software and other systems in order to recognize and accept the new codes. We also publicize the code changes and the need for a mid-year systems update by providers to identify the new codes. Hospitals also have to obtain the new code books and encoder updates, and make other system changes in order to identify and report the new codes.

Comment: A commenter suggested that CMS consider accelerating the ICD-10 coding timeline for novel indications to address rare and unmet clinical needs, such as expediting the implementation of innovative diagnosis codes for new or emerging therapeutic areas. The commenter provided an example of how the Food and Drug Administration's (FDA's) accelerated approval pathways, such as Breakthrough Designation, play an important role in providing priority review for products that address significant unmet need and have compelling clinical data. According to the commenter, after FDA-approval, however, patients are often still unable to access these therapies if the disease does not yet have an appropriate ICD-10 diagnosis code. The commenter stated that a lack of accurate ICD-10 coding may delay patient access to treatment as providers engage in the time-consuming process of demonstrating their patients' diagnosis to payers, which the commenter stated typically results in ongoing appeals and exception requests. The commenter stated this is particularly concerning in patient populations with rare diseases experiencing progressive, and oftentimes fatal, conditions.

The commenter acknowledged that CMS may grant implementation exceptions for codes capturing new technology and understands that topics presented during the fall meeting are considered for April 1 implementation if there is a strong and convincing case made by the requester at the Committee's public meeting. However, relying on this rationale, the commenter stated their belief that it is critical to establish a process for expedited assignment of new ICD-10 diagnosis codes for therapeutic areas that have medications under review via an accelerated FDA review. According to the commenter, without timely assignment of ICD-10 diagnosis codes, access to new products may be delayed or denied, and resources appropriated by Congress and used by FDA for its accelerated approval pathways go to waste. The commenter encouraged CMS to revise and update the ICD-10 process to ensure timely access to these innovative products.

Response: As stated earlier in this section, the ICD-10 Coordination and Maintenance Committee meeting is co-chaired by CDC/NCHS and CMS with the CDC/NCHS having lead responsibility for the ICD-10-CM diagnosis classification. Requests for new diagnosis codes must be submitted to nchsicd10cm@cdc.gov for consideration. Also, as previously noted, section 503(a) of Public Law 108-173 amended section 1886(d)(5)(K) of the Act by adding a clause (vii) which states that the Secretary shall provide for the addition of new diagnosis and procedure codes on April 1 of each year. As discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32559), the CDC/NCHS implemented new ICD-10-CM diagnosis codes U07.0 (Vaping-related disorder) and U07.1, (COVID-19) for reporting effective April 1, 2020. Therefore, with respect to the commenter's concerns, we believe there are existing processes in place to implement diagnosis codes in an expedited manner, however, we also encourage the commenter to contact CDC/NCHS directly for additional information and further discussion of any remaining concerns.

The ICD-10 (previously the ICD-9-CM) Coordination and Maintenance Committee holds its meetings in the spring and fall in order to update the codes and the applicable payment and reporting systems by October 1 of each year. Items are placed on the agenda for the Committee meeting if the request is received at least 3 months prior to the meeting. This requirement allows time for staff to review and research the coding issues and prepare material for discussion at the meeting. It also allows time for the topic to be publicized in meeting announcements in the Federal Register as well as on the CMS website. A complete addendum describing details of all diagnosis and procedure coding changes, both tabular and index, is published on the CMS and NCHS websites in June of each year. Publishers of coding books and software use this information to modify their products that are used by health care providers. This 5-month time period has proved to be necessary for hospitals and other providers to update their systems.

A discussion of this timeline and the need for changes are included in the December 4-5, 2005 ICD-9-CM Coordination and Maintenance Committee Meeting minutes. The public agreed that there was a need to hold the fall meetings earlier, in September or October, in order to meet the new implementation dates. The public provided comment that additional time would be needed to update hospital systems and obtain new code books and coding software. There was considerable concern expressed about the impact this April update would have on providers.

In the FY 2005 IPPS final rule, we implemented section 1886(d)(5)(K)(vii) of the Act, as added by section 503(a) of Public Law 108-173, by developing a mechanism for approving, in time for the April update, diagnosis and procedure code revisions needed to describe new technologies and medical services for purposes of the new technology add-on payment process. We also established the following process for making these determinations. Topics considered during the Fall ICD-10 (previously ICD-9-CM) Coordination and Maintenance Committee meeting are considered for an April 1 update if a strong and convincing case is made by the requestor at the Committee's public meeting. The request must identify the reason why a new code is needed in April for purposes of the new technology process. The participants at the meeting and those reviewing the Committee meeting materials and live webcast are provided the opportunity to comment on this expedited request. All other topics are considered for the October 1 update. Participants at the Committee meeting are encouraged to comment on all such requests.

There were not any requests submitted for an expedited April 1, 2020 implementation of a new code at the September 10-11, 2019 Committee meeting. However, as announced by the CDC on December 9, 2019, a new ICD-10 emergency code was established by the World Health Organization (WHO) in response to recent occurrences of vaping related disorders. Consistent with this update, the CDC/NCHS implemented a new ICD-10-CM diagnosis code, U07.0 (Vaping-related disorder) for U.S. reporting of vaping-related disorders effective April 1, 2020. In addition, as announced by the CDC, a new emergency code was established by the WHO on January 31, 2020, in response to the 2019 Novel Coronavirus (2019-nCoV) disease outbreak that was declared a public health emergency of international concern. Consistent with this update, the CDC/NCHS implemented a new ICD-10-CM diagnosis code, U07.1 (COVID-19) for U.S. reporting of the 2019 Novel Coronavirus disease effective April 1, 2020. We refer the reader to the CDC web page at https://www.cdc.gov/nchs/icd/icd10cm.htm for additional details regarding the implementation of these new diagnosis codes.

We provided the MS-DRG assignments for these codes effective with discharges on and after April 1, 2020, consistent with our established process for assigning new diagnosis codes. Specifically, we review the predecessor diagnosis code and MS-DRG assignment most closely associated with the new diagnosis code, and consider other factors that may be relevant to the MS-DRG assignment, including the severity of illness, treatment difficulty, and the resources utilized for the specific condition/diagnosis. We note that this process does not automatically result in the new diagnosis code being assigned to the same MS-DRG as the predecessor code. Effective with discharges on and after April 1, 2020, diagnosis code U07.0 is assigned to MDC 04 (Diseases and Disorders of the Respiratory System) in MS-DRGs 205 and 206 (Other Respiratory System Diagnoses with and without MCC, respectively), consistent with the assignment of the predecessor diagnosis code. Effective with discharges on and after April 1, 2020, diagnosis code U07.1 is assigned to MDC 04 in MS-DRGs 177, 178 and 179 (Respiratory Infections and Inflammations with MCC, with CC, and without CC/MCC, respectively), MDC 15 (Newborns and Other Neonates with Conditions Originating in Perinatal Period) in MS-DRG 791 (Prematurity with Major Problems) and MS-DRG 793 (Full Term Neonate with Major Problems), and MDC 25 (Human Immunodeficiency Virus Infections) in MS-DRGs 974, 975, and 976 (HIV with Major Related Condition with MCC, with CC, and without CC/MCC, respectively).

These assignments for diagnosis codes U07.0 and U07.1 are reflected in Table 6A- New Diagnosis Codes associated with the proposed rule and this final rule (which is available via the internet on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS ). We also noted that Change Request (CR) 11623, Transmittal 4499, titled “Update to the International Classification of Diseases, Tenth Revision, Clinical Modification (ICD-10-CM) for Vaping Related Disorder”, was issued on January 24, 2020 (available via the internet on the CMS website at: https://www.cms.gov/files/document/r4499cp.pdf ) regarding the release of an updated version of the ICD-10 MS-DRG Grouper and Medicare Code Editor (MCE) software, Version 37.1, to be effective with discharges on or after April 1, 2020 reflecting new diagnosis code U07.0. The updated software, along with the updated ICD-10 MS-DRG V37.1 Definitions Manual and the Definitions of Medicare Code Edits V37.1 manual was made available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software . In response to the implementation of diagnosis code U07.1 (COVID-19), we subsequently released a new updated version of the ICD-10 MS-DRG Grouper and Medicare Code Editor (MCE) software, Version 37.1 R1, effective with discharges on or after April 1, 2020 reflecting this new code, which replaced the ICD-10 MS-DRG Grouper and Medicare Code Editor (MCE) software, Version 37.1 that reflected diagnosis code U07.0 (Vaping-related disorder). The updated software, along with the updated ICD-10 MS-DRG V37.1 R1 Definitions Manual and the Definitions of Medicare Code Edits V37.1 R1 manual are available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software .

In response to the COVID-19 pandemic and new treatments that have followed, on July 30, 2020 we announced the implementation of 12 new ICD-10-PCS procedure codes to identify the introduction or infusion of therapeutics for treating hospital inpatients with COVID-19. These procedure codes will afford the healthcare industry the ability to track the use of these drugs and their effectiveness in the inpatient setting, effective with discharges on and after August 1, 2020. The 12 new ICD-10-PCS procedure codes listed in this section of this rule are designated as non-O.R. and do not affect any MDC or MS-DRG assignment as shown in the following table.

We also note that Change Request (CR) 11623, Transmittal 10317, titled “Update to the International Classification of Diseases, Tenth Revision, (ICD-10) Diagnosis Codes for Vaping Related Disorder and Diagnosis and Procedure Codes for the 2019 Novel Coronavirus (COVID-19)”, was issued on August 21, 2020 (available via the internet on the CMS website at: https://www.cms.gov/files/document/r10317OTN.pdf )

In response to the implementation of these procedure codes, we subsequently released a new updated version of the ICD-10 MS-DRG Grouper and Medicare Code Editor (MCE) software, Version 37.2, effective with discharges on or after August 1, 2020 reflecting these new codes, which replaced the ICD-10 MS-DRG Grouper and Medicare Code Editor (MCE) software, Version 37.1 R1 that reflected diagnosis codes U07.0 (Vaping-related disorder) and U07.1 (COVID-19). The updated software, along with the updated ICD-10 MS-DRG V37.2 Definitions Manual and the Definitions of Medicare Code Edits V37.2 manual are available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software .

ICD-9-CM addendum and code title information is published on the CMS website at: http://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html?redirect=/icd9ProviderDiagnosticCodes/01overview.asp#TopofPage . ICD-10-CM and ICD-10-PCS addendum and code title information is published on the CMS website at: http://www.cms.gov/Medicare/Coding/ICD10/index.html . CMS also sends copies of all ICD-10-CM and ICD-10-PCS coding changes to its Medicare contractors for use in updating their systems and providing education to providers.

Information on ICD-10-CM diagnosis codes, along with the Official ICD-10-CM Coding Guidelines, can also be found on the CDC website at: http:// www.cdc.gov/nchs/icd/icd10.htm . Additionally, information on new, revised, and deleted ICD-10-CM diagnosis and ICD-10-PCS procedure codes is provided to the AHA for publication in the Coding Clinic for ICD-10. AHA also distributes coding update information to publishers and software vendors.

The following chart shows the number of ICD-10-CM and ICD-10-PCS codes and code changes since FY 2016 when ICD-10 was implemented.

As mentioned previously, the public is provided the opportunity to comment on any requests for new diagnosis or procedure codes discussed at the ICD-10 Coordination and Maintenance Committee meeting.

17. Replaced Devices Offered Without Cost or With a Credit

a. Background

In the FY 2008 IPPS final rule with comment period (72 FR 47246 through 47251), we discussed the topic of Medicare payment for devices that are replaced without cost or where credit for a replaced device is furnished to the hospital. We implemented a policy to reduce a hospital's IPPS payment for certain MS-DRGs where the implantation of a device that subsequently failed or was recalled determined the base MS-DRG assignment. At that time, we specified that we will reduce a hospital's IPPS payment for those MS-DRGs where the hospital received a credit for a replaced device equal to 50 percent or more of the cost of the device.

In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51556 through 51557), we clarified this policy to state that the policy applies if the hospital received a credit equal to 50 percent or more of the cost of the replacement device and issued instructions to hospitals accordingly.

b. Changes for FY 2021

As discussed in the FY 2021 IPPS/LTCH proposed rule (84 FR 32560 through 32564) for FY 2021, we proposed to delete MS-DRGs 129 and 130, add new MS-DRGs 140, 141, and 142 (Major Head and Neck Procedures with MCC, with CC, and without CC/MCC, respectively) and to reassign a subset of the procedures currently assigned to MS-DRGs 129 and 130 to new MS-DRGs 140 through 142. Additionally, we proposed to create new MS-DRGs 521 and 522 (Hip Replacement with Principal Diagnosis of Hip Fracture with and without MCC, respectively) and to assign a subset of the procedures currently assigned to MS-DRGs 469 and 470 to new MS-DRGs 521 and 522. (We note that in the proposed rule, we inadvertently referred to these as MS-DRGs 551 and 552.)

As stated in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24409), we generally map new MS-DRGs onto the list when they are formed from procedures previously assigned to MS-DRGs that are already on the list. Currently, MS-DRGs 129, 130, 469 and 470 are on the list of MS-DRGs subject to the policy for payment under the IPPS for replaced devices offered without cost or with a credit as shown in the table in this section of this rule. Therefore, we proposed that if the applicable MS-DRG changes are finalized, in addition to deleting MS-DRGs 129 and 130, we also would add new MS-DRGs 140, 141, 142, 521 and 522 to the list of MS-DRGs subject to the policy for payment under the IPPS for replaced devices offered without cost or with a credit and make conforming changes as reflected in the table. We also proposed to continue to include the existing MS-DRGs currently subject to the policy as also displayed in the table in this section of this rule.

As discussed in section II.E.5.a. of the preamble of this final rule, we are finalizing our proposal to delete MS-DRGs 129 and 130, add new MS-DRGs 140, 141, and 142, and to reassign a subset of the procedures currently assigned to MS-DRGs 129 and 130 to new MS-DRGs 140 through 142. Additionally, we are finalizing our proposal to create new MS-DRGs 521 and 522 and to reassign a subset of the procedures currently assigned to MS-DRGs 469 and 470 to new MS-DRGs 521 and 522. We did not receive any public comments opposing our proposal to delete MS-DRGs 129 and 130. Additionally, we did not receive any public comments opposing our proposal to add MS-DRGs 140, 141, 142, 521 and 522 to the policy for replaced devices offered without cost or with credit as reflected in the previous table or to continue to include the existing MS-DRGs currently subject to the policy. Therefore, we are finalizing the list of MS-DRGs in the table included in the proposed rule and in this rule that will be subject to the replaced devices offered without cost or with a credit policy effective October 1, 2020.

The final list of MS-DRGs subject to the IPPS policy for replaced devices offered without cost or with a credit will be issued to providers in the form of a Change Request (CR).

18. Out of Scope Public Comments Received

We received public comments on MS-DRG related issues that were outside the scope of the proposals included in the FY 2021 IPPS/LTCH PPS proposed rule.

Because we consider these public comments to be outside the scope of the proposed rule, we are not addressing them in this final rule. As stated in section II.E.1.b. of the preamble of this final rule, we encourage individuals with comments about MS-DRG classifications to submit these comments no later than November 1, 2020 so that they can be considered for possible inclusion in the annual proposed rule. We will consider these public comments for possible proposals in future rulemaking as part of our annual review process.

E. Recalibration of the FY 2021 MS-DRG Relative Weights

1. Data Sources for Developing the Relative Weights

Consistent with our established policy, in developing the MS-DRG relative weights for FY 2021, we proposed to use two data sources: Claims data and cost report data. The claims data source is the MedPAR file, which includes fully coded diagnostic and procedure data for all Medicare inpatient hospital bills. The FY 2019 MedPAR data used in this final rule include discharges occurring on October 1, 2018, through September 30, 2019, based on bills received by CMS through March 31, 2019, from all hospitals subject to the IPPS and short-term, acute care hospitals in Maryland (which at that time were under a waiver from the IPPS). The FY 2019 MedPAR file used in calculating the relative weights includes data for approximately 9,218,950 Medicare discharges from IPPS providers. Discharges for Medicare beneficiaries enrolled in a Medicare Advantage managed care plan are excluded from this analysis. These discharges are excluded when the MedPAR “GHO Paid” indicator field on the claim record is equal to “1” or when the MedPAR DRG payment field, which represents the total payment for the claim, is equal to the MedPAR “Indirect Medical Education (IME)” payment field, indicating that the claim was an “IME only” claim submitted by a teaching hospital on behalf of a beneficiary enrolled in a Medicare Advantage managed care plan. In addition, the March 31, 2020 update of the FY 2019 MedPAR file complies with version 5010 of the X12 HIPAA Transaction and Code Set Standards, and includes a variable called “claim type.” Claim type “60” indicates that the claim was an inpatient claim paid as fee-for-service. Claim types “61,” “62,” “63,” and “64” relate to encounter claims, Medicare Advantage IME claims, and HMO no-pay claims. Therefore, the calculation of the relative weights for FY 2021 also excludes claims with claim type values not equal to “60.” The data exclude CAHs, including hospitals that subsequently became CAHs after the period from which the data were taken. We note that the FY 2021 relative weights are based on the ICD-10-CM diagnosis codes and ICD-10-PCS procedure codes from the FY 2019 MedPAR claims data, grouped through the ICD-10 version of the FY 2021 GROUPER (Version 38).

The second data source used in the cost-based relative weighting methodology is the Medicare cost report data files from the HCRIS. Normally, we use the HCRIS dataset that is 3 years prior to the IPPS fiscal year. Specifically, we used cost report data from the March 31, 2020 update of the FY 2018 HCRIS for calculating the FY 2021 cost-based relative weights.

2. Methodology for Calculation of the Relative Weights

a. General

In this final rule, as we proposed, we calculated the FY 2021 relative weights based on 19 CCRs, as we did for FY 2020. The methodology we proposed to use to calculate the FY 2021 MS-DRG cost-based relative weights based on claims data in the FY 2019 MedPAR file and data from the FY 2018 Medicare cost reports is as follows:

• To the extent possible, all the claims were regrouped using the FY 2021 MS-DRG classifications discussed in sections II.B. and II.F. of the preamble of this final rule.
• The transplant cases that were used to establish the relative weights for heart and heart-lung, liver and/or intestinal, and lung transplants (MS-DRGs 001, 002, 005, 006, and 007, respectively) were limited to those Medicare-approved transplant centers that have cases in the FY 2019 MedPAR file. (Medicare coverage for heart, heart-lung, liver and/or intestinal, and lung transplants is limited to those facilities that have received approval from CMS as transplant centers.)
• Organ acquisition costs for kidney, heart, heart-lung, liver, lung, pancreas, and intestinal (or multivisceral organs) transplants continue to be paid on a reasonable cost basis. Because these acquisition costs are paid separately from the prospective payment rate, it is necessary to subtract the acquisition charges from the total charges on each transplant bill that showed acquisition charges before computing the average cost for each MS-DRG and before eliminating statistical outliers.
• Claims with total charges or total lengths of stay less than or equal to zero were deleted. Claims that had an amount in the total charge field that differed by more than $30.00 from the sum of the routine day charges, intensive care charges, pharmacy charges, implantable devices charges, supplies and equipment charges, therapy services charges, operating room charges, cardiology charges, laboratory charges, radiology charges, other service charges, labor and delivery charges, inhalation therapy charges, emergency room charges, blood and blood products charges, anesthesia charges, cardiac catheterization charges, CT scan charges, and MRI charges were also deleted.
• At least 92.8 percent of the providers in the MedPAR file had charges for 14 of the 19 cost centers. All claims of providers that did not have charges greater than zero for at least 14 of the 19 cost centers were deleted. In other words, a provider must have no more than five blank cost centers. If a provider did not have charges greater than zero in more than five cost centers, the claims for the provider were deleted.
• Statistical outliers were eliminated by removing all cases that were beyond 3.0 standard deviations from the geometric mean of the log distribution of both the total charges per case and the total charges per day for each MS-DRG.
• Effective October 1, 2008, because hospital inpatient claims include a POA indicator field for each diagnosis present on the claim, only for purposes of relative weight-setting, the POA indicator field was reset to “Y” for “Yes” for all claims that otherwise have an “N” (No) or a “U” (documentation insufficient to determine if the condition was present at the time of inpatient admission) in the POA field.

Under current payment policy, the presence of specific HAC codes, as indicated by the POA field values, can generate a lower payment for the claim. Specifically, if the particular condition is present on admission (that is, a “Y” indicator is associated with the diagnosis on the claim), it is not a HAC, and the hospital is paid for the higher severity (and, therefore, the higher weighted MS-DRG). If the particular condition is not present on admission (that is, an “N” indicator is associated with the diagnosis on the claim) and there are no other complicating conditions, the DRG GROUPER assigns the claim to a lower severity (and, therefore, the lower weighted MS-DRG) as a penalty for allowing a Medicare inpatient to contract a HAC. While the POA reporting meets policy goals of encouraging quality care and generates program savings, it presents an issue for the relative weight-setting process. Because cases identified as HACs are likely to be more complex than similar cases that are not identified as HACs, the charges associated with HAC cases are likely to be higher as well. Therefore, if the higher charges of these HAC claims are grouped into lower severity MS-DRGs prior to the relative weight-setting process, the relative weights of these particular MS-DRGs would become artificially inflated, potentially skewing the relative weights. In addition, we want to protect the integrity of the budget neutrality process by ensuring that, in estimating payments, no increase to the standardized amount occurs as a result of lower overall payments in a previous year that stem from using weights and case-mix that are based on lower severity MS-DRG assignments. If this would occur, the anticipated cost savings from the HAC policy would be lost.

To avoid these problems, we reset the POA indicator field to “Y” only for relative weight-setting purposes for all claims that otherwise have an “N” or a “U” in the POA field. This resetting “forced” the more costly HAC claims into the higher severity MS-DRGs as appropriate, and the relative weights calculated for each MS-DRG more closely reflect the true costs of those cases.

In addition, in the FY 2013 IPPS/LTCH PPS final rule, for FY 2013 and subsequent fiscal years, we finalized a policy to treat hospitals that participate in the Bundled Payments for Care Improvement (BPCI) initiative the same as prior fiscal years for the IPPS payment modeling and ratesetting process without regard to hospitals' participation within these bundled payment models (77 FR 53341 through 53343). Specifically, because acute care hospitals participating in the BPCI Initiative still receive IPPS payments under section 1886(d) of the Act, we include all applicable data from these subsection (d) hospitals in our IPPS payment modeling and ratesetting calculations as if the hospitals were not participating in those models under the BPCI initiative. We refer readers to the FY 2013 IPPS/LTCH PPS final rule for a complete discussion on our final policy for the treatment of hospitals participating in the BPCI initiative in our ratesetting process. For additional information on the BPCI initiative, we refer readers to the CMS' Center for Medicare and Medicaid Innovation's website at: http://innovation.cms.gov/initiatives/Bundled-Payments/index.html and to section IV.H.4. of the preamble of the FY 2013 IPPS/LTCH PPS final rule (77 FR 53341 through 53343).

The participation of hospitals in the BPCI initiative concluded on September 30, 2018. The participation of hospitals in the BPCI Advanced model started on October 1, 2018. The BPCI Advanced model, tested under the authority of section 1115A of the Act, is comprised of a single payment and risk track, which bundles payments for multiple services beneficiaries receive during a Clinical Episode. Acute care hospitals may participate in BPCI Advanced in one of two capacities: As a model Participant or as a downstream Episode Initiator. Regardless of the capacity in which they participate in the BPCI Advanced model, participating acute care hospitals will continue to receive IPPS payments under section 1886(d) of the Act. Acute care hospitals that are Participants also assume financial and quality performance accountability for Clinical Episodes in the form of a reconciliation payment. For additional information on the BPCI Advanced model, we refer readers to the BPCI Advanced web page on the CMS Center for Medicare and Medicaid Innovation's website at: https://innovation.cms.gov/initiatives/bpci-advanced/ . Consistent with our policy for FY 2020, and consistent with how we have treated hospitals that participated in the BPCI Initiative, for FY 2021, we continue to believe it is appropriate to include all applicable data from the subsection (d) hospitals participating in the BPCI Advanced model in our IPPS payment modeling and ratesetting calculations because, as noted previously, these hospitals are still receiving IPPS payments under section 1886(d) of the Act. Consistent with FY 2020 IPPS/LTCH PPS final rule, we also proposed to include all applicable data from subsection (d) hospitals participating in the Comprehensive Care for Joint Replacement (CJR) Model in our IPPS payment modeling and ratesetting calculations.

The charges for each of the 19 cost groups for each claim were standardized to remove the effects of differences in area wage levels, IME and DSH payments, and for hospitals located in Alaska and Hawaii, the applicable cost-of-living adjustment. Because hospital charges include charges for both operating and capital costs, we standardized total charges to remove the effects of differences in geographic adjustment factors, cost-of-living adjustments, and DSH payments under the capital IPPS as well. Charges were then summed by MS-DRG for each of the 19 cost groups so that each MS-DRG had 19 standardized charge totals. Statistical outliers were then removed. These charges were then adjusted to cost by applying the national average CCRs developed from the FY 2018 cost report data.

The 19 cost centers that we used in the relative weight calculation are shown in a supplemental data file posted via the internet on the CMS website for this final rule and available at http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html . The supplemental data file shows the lines on the cost report and the corresponding revenue codes that we used to create the 19 national cost center CCRs. We stated in the proposed rule that, if we receive comments about the groupings in this supplemental file, we may consider these comments as we finalize our policy. However, we did not receive any comments on the groupings in this table, and therefore, we are finalizing the groupings as proposed.

We invited public comments on our proposals related to recalibration of the FY 2021 relative weights and the changes in relative weights from FY 2020.

Comment: A commenter requested an explanation for the 187 discharge difference in total discharges in Table 7A and Table 7B (proposed Table 7A for Grouper V37 included 9,127,118 discharges, yet proposed Table 7B for Grouper V38 included 9,126,931 discharges).

Response: The discharge difference arises from the proposed modification to our relative weight methodology to account for the clinical trial CAR T-cell therapy cases(85 FR 32566). In the proposed rule's Table 7B, proposed MS-DRG 018 showed only the 116 non-clinical trial discharges for CAR-T cell therapy cases, under the proposed relative weight calculation discussed in the next section. The 187 discharges the commenter referenced were clinical trial CAR T-cell therapy cases, which are not included in the calculation of the average cost for MS-DRG 018. In addition, these cases are not included in calculating the average and percentile lengths of stay data for MS-DRG 018, so they are not included in the number of discharges in Table 7B.

In the proposed rule, we noted that in the FY 2020 IPPS/LTCH PPS final rule, we adopted a temporary one-time measure for FY 2020 for an MS-DRG where the FY 2018 relative weight declined by 20 percent from the FY 2017 relative weight, and the FY 2020 relative weight would have declined by 20 percent or more from the FY 2019 relative weight, which was maintained at the FY 2018 relative weight. For an MS-DRG meeting this criterion, the FY 2020 relative weight was set equal to the FY 2019 relative weight, which in turn had been set equal to the FY 2018 relative weight (84 FR 42167). For FY 2020, the only MS-DRG meeting this criterion was MS-DRG 215. We invited public comments on the proposed FY 2021 weight for MS-DRG 215 (Other Heart Assist System Implant) as set forth in Table 5 associated with the proposed rule, including comments on whether we should consider a policy under sections 1886(d)(4)(B) and (C) of the Act similar to the measure adopted in the FY 2020 IPPS/LTCH PPS final rule to maintain the FY 2021 relative weight equal to the FY 2020 relative weight for MS-DRG 215, or an alternative approach such as averaging the FY 2020 relative weight and the otherwise applicable FY 2021 weight.

Comment: Commenters supported a policy that would either maintain the FY 2021 relative weight equal to the FY 2020 relative weight for MS-DRG 215, or average the FY 2020 relative weight and the otherwise applicable FY 2021 weight. Commenters stated that heart assist devices are lifesaving devices that are implanted in patients undergoing high risk procedures or are in cardiogenic shock, and that there have been extensive coding changes such that hospitals are still not correctly reporting their costs. Commenters stated that the proposed relative weight would result in a payment that would be significantly below the cost incurred by providers to provide these procedures and could thereby limit access to Medicare beneficiaries. Commenters indicated that CMS had the authority to adjust the relative weights to ensure appropriate payment to providers for heart assist devices.

Some commenters requested that CMS consider this approach in any situation when the relative weight for an MS-DRG is drastically reduced in a given year, particularly when it follows a significant decline in prior years. Some commenters pointed to MS-DRGs 796 (Vaginal Delivery with Sterilization/D&C with MCC) and 933 (Extensive Burns or Full Thickness Burns with MV >96 hrs without Skin Graft), which also have significant decreases relative to FY 2020.

Response: As we indicated in the FY 2018 IPPS/LTCH final rule (82 FR 38103), and in response to similar comments in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41273) and the FY 2020 IPPS/LTCH final rule (84 FR 42167), we do not believe it is normally appropriate to address relative weight fluctuations that appear to be driven by changes in the underlying data. Nevertheless, after reviewing the comments received and the data used in our ratesetting calculations, we acknowledge an outlier circumstance where the weight for MS-DRG 215 is seeing a significant reduction for each of the 4 years since CMS began using the ICD-10 data in calculating the relative weights. While we would ordinarily consider this weight change to be appropriately driven by the underlying data, given the comments received, and in an abundance of caution because this may be the MS-DRG assigned when a hospital provides temporary right ventricular support for up to 14 days in critical care patients for the treatment of acute right heart failure or decompensation caused by complications related to COVID-19, including pulmonary embolism, we are adopting a temporary one-time measure for FY 2021 for MS-DRG 215. Specifically, we will set the 2021 relative weight for MS-DRG 215 equal to the average of the FY 2020 relative weight and the otherwise applicable FY 2021 weight.

With regard to the commenters who raised concerns about other MS-DRGs with significant reductions relative to FY 2020, the other MS-DRGs are low volume in our claims data, and therefore typically experience a greater degree of year-to-year variation. For example, while MS-DRGs 796 and 933 would have significant decreases relative to FY 2020, those MS-DRGs experienced considerable increases between FY 2019 and FY 2020. We acknowledge the longstanding concerns related to low volume MS-DRGs and will take into consideration the unique issues relating to such MS-DRGs and the stability of their weights for future rulemaking.

Comment: Some commenters requested that CMS adopt a permanent solution to stabilize payment for MS-DRG 215, in addition to adopting a hold-harmless or blended rate to stabilize the relative weight for MS-DRG 215, effective with discharges beginning October 1, 2020 for FY 2021. Specifically, the commenters suggested that CMS reassign cases reporting procedure code 02HA3RJ (Insertion of short-term external heart assist system into heart, intraoperative, percutaneous approach) from MS-DRG 215 to MS-DRGs 216, 217, and 218 (Cardiac Valve and Other Major Cardiothoracic Procedures with Cardiac Catheterization with MCC, with CC, and without CC/MCC, respectively). According to the commenters, these cases are more clinically aligned with MS-DRGs 216, 217, and 218 and this reassignment would improve the long-term stability of the heart assist MS-DRGs including MS-DRG 215. The commenters also noted that reassigning the cases reporting heart assist system procedures performed intraoperatively from MS-DRG 215 into MS-DRGs 216, 217, and 218 in the FY 2021 IPPS/LTCH PPS final rule would be consistent with CMS precedent and authority.

Response: We note that we did not propose any changes to the assignment of heart assist devices and need additional time to fully analyze this request. Therefore, we are not making changes in this final rule to the assignment of cases reporting heart assist system procedures performed intraoperatively, and we will consider this issue in future rulemaking.

b. Relative Weight Calculation for New MS-DRG 018 for CAR T-cell Therapy

As discussed in section II.E.2.b. of this final rule, we proposed, and are finalizing, to create new MS-DRG 018 for cases that include procedures describing CAR T-cell therapies, which are currently reported using ICD-10-PCS procedure codes XW033C3 or XW043C3. As discussed in section IV.I. of this final rule, given the high cost of the CAR T-cell product, we proposed, and are finalizing, a differential payment for cases where the CAR T-cell product is provided without cost as part of a clinical trial to ensure that the payment amount for CAR T-cell therapy clinical trial cases appropriately reflects the relative resources required for providing CAR T-cell therapy as part of a clinical trial.

We stated in the proposed rule that we also believe it would be appropriate to modify our existing relative weight methodology to ensure that the relative weight for new MS-DRG 018 appropriately reflects the relative resources required for providing CAR T-cell therapy outside of a clinical trial, while still accounting for the clinical trial cases in the overall average cost for all MS-DRGs. Specifically, we proposed that clinical trial claims that group to new MS-DRG 018 would not be included when calculating the average cost for new MS-DRG 018 that is used to calculate the relative weight for this MS-DRG, so that the relative weight reflects the costs of the CAR T-cell therapy drug. Consistent with our analysis of the FY 2019 MedPAR claims data as discussed in section IV.I. of this final rule, we identified clinical trial claims as claims that contain ICD-10-CM diagnosis code Z00.6 or contain standardized drug charges of less than $373,000, which is the average sales price of KYMRIAH and YESCARTA, which are the two CAR T-cell biological products licensed to treat relapsed/refractory large B-cell lymphoma as of the time of the development of the proposed rule and this final rule. We also proposed to calculate the following adjustment to account for the CAR T-cell therapy cases identified as clinical trial cases in calculating the national average standardized cost per case that is used to calculate the relative weights for all MS-DRGs and for purposes of budget neutrality and outlier simulations:

• Calculate the average cost for cases to be assigned to new MS-DRG 018 that contain ICD-10-CM diagnosis code Z00.6 or contain standardized drug charges of less than $373,000.
• Calculate the average cost for cases to be assigned to new MS-DRG 018 that do not contain ICD-10-CM diagnosis code Z00.6 or standardized drug charges of at least $373,000.
• Calculate an adjustor by dividing the average cost calculated in step 1 by the average cost calculated in step 2.
• Apply the adjustor calculated in step 3 to the cases identified in step 1 as clinical trial cases, then add this adjusted case count to the non-clinical trial case count prior to calculating the average cost across all MS-DRGs.

Each year, when we calculate the relative weights, we use a transfer-adjusted case count for each MS-DRG, which accounts for payment adjustments resulting from our postacute care transfer policy. This process is described in the FY 2006 IPPS/LTCH PPS final rule (70 FR 47697). We proposed to apply this adjustor to the case count for MS-DRG 018 in a similar manner. We proposed to first calculate the transfer-adjusted case count for MS-DRG 018, and then further adjust the transfer-adjusted case count by the adjustor described previously. Then, we proposed to use this adjusted case count for MS-DRG 018 in calculating the national average cost per case, which is used in the calculation of the relative weights. Based on the December 2019 update of the FY 2019 MedPAR file, we estimated that the average costs of CAR T-cell therapy cases identified as clinical trial cases were 15% of the average costs of the CAR T-cell therapy cases identified as non-clinical trial cases, and therefore, in calculating the national average cost per case for purposes of the proposed rule, each case identified as a clinical trial case was adjusted to 0.15. We indicated that we expected to recalculate this proposed adjustor for the CAR T cell therapy clinical trial cases for the final rule based on the updated data available. We also noted that we were applying this proposed adjustor for CAR T-cell therapy clinical trial cases for purposes of budget neutrality and outlier simulations, as discussed further in section II.A. of the Addendum to the proposed rule and this final rule.

We invited public comments on our proposal.

Comment: A commenter expressed concern with our methodology to divide cases into clinical trial and non-clinical trial cohorts, stating that both criteria used to identify clinical trial cases, the presence of ICD-10-CM diagnosis code Z00.6 or standardized drug charges of less than $373,000, are problematic given the inconsistency of charging practices for CAR T-cell therapies and the application of ICD-10-CM diagnosis code Z00.6 in all clinical trial cases. This commenter noted that it is possible that some cases were excluded as clinical trial cases when the hospital actually incurred the full cost of the drug. This commenter suggested that these criteria may have resulted in a lower average adjusted cost for non-clinical trial cases below the cost of the drug.

Some commenters also raised issues in the context of the payment adjustment for CAR T-cell clinical trial cases regarding two relatively less frequent scenarios. Commenters stated that when CAR T-cell therapy products are used out of specification (also termed expanded access), hospitals do not incur the cost of the CAR T-cell therapy product, but the claim would not include ICD-10-CM diagnosis code Z00.6 because the case is not part of a clinical trial. Commenters identified an additional scenario, in which the CAR T-cell therapy product is purchased in the usual manner, but the case involves a clinical trial of another drug, in which case ICD-10-CM diagnosis code Z00.6 would be included on the claim.

Response: We believe that given the available data, our methodology to divide cases into clinical trial and non-clinical trial cohorts provides reasonable estimates on average of the costs for clinical trial and non-clinical trial cases. We note that in the MedPAR data used in the proposed rule, there were only two cases that were flagged as clinical trials that contained drug charges of more than $373,000. The average drug charge of these two cases was less than the average drug charge for all cases that were identified as non-clinical trial cases. Had we instead assumed that these cases were not clinical trial cases for CAR T-cell therapies, and included these two cases in the calculation of the relative weight, the relative weight would have been slightly lower, rather than higher as the commenter suggested. With respect to the concern about hospital charging practices, we reiterate our earlier response that there is nothing that precludes hospitals from setting their drug charges consistent with their CCRs.

In response to commenters who raised issues in the context of the payment adjustment for CAR T-cell clinical trial cases regarding two scenarios, as discussed elsewhere in this final rule, we are adjusting our proposed policy for the payment adjustment for CAR T-cell clinical trial cases to address these scenarios. Similarly, we are adjusting our methodology here such that (a) when the CAR T-cell therapy product is purchased in the usual manner, but the case involves a clinical trial of a different product, the claim will be included when calculating the average cost for cases not determined to be clinical trial cases to the extent such cases can be identified in the historical data, and (b) when there is expanded access use of immunotherapy, these cases will be included when calculating the average cost for cases determined to be clinical trial cases to the extent such cases can be identified in the historical data. To the best of our knowledge there are no claims in the historical data used in the calculation of the adjustment for cases involving a clinical trial of a different product, and to the extent the historical data contain claims for cases involving expanded access use of immunotherapy we believe those claims would have drug charges less than $373,000.

Comment: Some commenters asked whether standardized drug charges included charges for revenue center 891 in addition to charges from revenue centers 025X, 026X, and 63X. Several commenters questioned whether charges for revenue center 891 were included in CMS' calculation of standardized drug charges given that the MedPAR data dictionary seems to indicate that charges from revenue codes 081X-089X are excluded from ratesetting. Commenters stated that it would be incorrect to exclude charges in revenue center 891, since they would include CAR T product charges. Another commenter asked that CMS include claims with charges of greater than $373,000 in revenue center 891 in identifying claims that were not part of a clinical trial. One commenter requested that CMS apply a series of steps to determine whether charges in revenue center 891 were related to CAR T-cell therapy product acquisition.

Response: We appreciate commenters bringing this issue to our attention. We agree with commenters that while revenue centers 081X-089X are typically excluded from ratesetting, charges from revenue center 891 should be included in our calculation of standardized drug charges for MS-DRG 018. Therefore, for cases that group to MS-DRG 018, we will consider the charges reported in revenue center 891 to be related to CAR T-cell therapy product acquisition and include these charges in determining whether the case contains standardized drug charges of at least $373,000 and therefore should be determined to be non-clinical trial case for purposes of this modified relative weight methodology. We note that the same trims used in calculating the standardized drug costs would apply to determine whether or not a given case is determined to be a clinical trial case for purposes of these modifications to the relative weight methodology.

After consideration of public comments received, we are finalizing our proposal to not include claims determined to be clinical trial claims that group to new MS-DRG 018 when calculating the average cost for new MS-DRG 018 that is used to calculate the relative weight for this MS-DRG, with the additional refinements that (a) when the CAR T-cell therapy product is purchased in the usual manner, but the case involves a clinical trial of a different product, the claim will be included when calculating the average cost for new MS-DRG 018 to the extent such claims can be identified in the historical data, and (b) when there is expanded access use of immunotherapy, these cases will not be included when calculating the average cost for new MS-DRG 018 to the extent such claims can be identified in the historical data. We are also finalizing our proposal to calculate the adjustment described above to account for the CAR T-cell therapy cases determined to be clinical trial cases, with the additional refinement of including revenue center 891 in our calculation of standardized drug charges for MS-DRG 018. Applying this finalized methodology, based on the March 2020 update of the FY 2019 MedPAR file, we estimate that the average costs of CAR T-cell therapy cases determined to be clinical trial cases ($46,0662) are 17 percent of the average costs of CAR T cell therapy cases determined to be non-clinical trial cases ($276,042), and therefore, in calculating the national average cost per case for purposes of this final rule, each case identified as a clinical trial case was adjusted to 0.17. We also note that we are applying this finalized adjustor for cases determined to be CAR T-cell therapy clinical trial cases for purposes of budget neutrality and outlier simulations, as discussed further in section II.A. of the Addendum to the this final rule.

3. Development of National Average CCRs

We developed the national average CCRs as follows:

Using the FY 2018 cost report data, we removed CAHs, Indian Health Service hospitals, all-inclusive rate hospitals, and cost reports that represented time periods of less than 1 year (365 days). We included hospitals located in Maryland because we include their charges in our claims database. Then we created CCRs for each provider for each cost center (see the supplemental data file for line items used in the calculations) and removed any CCRs that were greater than 10 or less than 0.01. We normalized the departmental CCRs by dividing the CCR for each department by the total CCR for the hospital for the purpose of trimming the data. Then we took the logs of the normalized cost center CCRs and removed any cost center CCRs where the log of the cost center CCR was greater or less than the mean log plus/minus 3 times the standard deviation for the log of that cost center CCR. Once the cost report data were trimmed, we calculated a Medicare-specific CCR. The Medicare-specific CCR was determined by taking the Medicare charges for each line item from Worksheet D-3 and deriving the Medicare-specific costs by applying the hospital-specific departmental CCRs to the Medicare-specific charges for each line item from Worksheet D-3. Once each hospital's Medicare-specific costs were established, we summed the total Medicare-specific costs and divided by the sum of the total Medicare-specific charges to produce national average, charge-weighted CCRs.

After we multiplied the total charges for each MS-DRG in each of the 19 cost centers by the corresponding national average CCR, we summed the 19 “costs” across each MS-DRG to produce a total standardized cost for the MS-DRG. The average standardized cost for each MS-DRG was then computed as the total standardized cost for the MS-DRG divided by the transfer-adjusted case count for the MS-DRG. The average cost for each MS-DRG was then divided by the national average standardized cost per case to determine the relative weight.

The FY 2021 cost-based relative weights were then normalized by an adjustment factor of 1.819227 so that the average case weight after recalibration was equal to the average case weight before recalibration. The normalization adjustment is intended to ensure that recalibration by itself neither increases nor decreases total payments under the IPPS, as required by section 1886(d)(4)(C)(iii) of the Act.

The 19 national average CCRs for FY 2021 are as follows:

Since FY 2009, the relative weights have been based on 100 percent cost weights based on our MS-DRG grouping system.

When we recalibrated the DRG weights for previous years, we set a threshold of 10 cases as the minimum number of cases required to compute a reasonable weight. We proposed to use that same case threshold in recalibrating the MS-DRG relative weights for FY 2021. Using data from the FY 2019 MedPAR file, there were 7 MS-DRGs that contain fewer than 10 cases. For FY 2021, because we do not have sufficient MedPAR data to set accurate and stable cost relative weights for these low-volume MS-DRGs, we proposed to compute relative weights for the low-volume MS-DRGs by adjusting their final FY 2020 relative weights by the percentage change in the average weight of the cases in other MS-DRGs from FY 2020 to FY 2021. The crosswalk table is as follows.

After consideration of the comments we received, we are finalizing our proposals, with the modifications for recalibrating the relative weights for FY 2021 for MS-DRG 018 by including the charges reported in revenue center 891 in determining whether the case should be determined to be a non-clinical trial case, and for MS-DRG 215 by setting the relative weight equal to the average of the FY 2020 relative weight and the otherwise applicable FY 2021 weight.

F. Add-On Payments for New Services and Technologies for FY 2021

1. Background

Sections 1886(d)(5)(K) and (L) of the Act establish a process of identifying and ensuring adequate payment for new medical services and technologies (sometimes collectively referred to in this section as “new technologies”) under the IPPS. Section 1886(d)(5)(K)(vi) of the Act specifies that a medical service or technology will be considered new if it meets criteria established by the Secretary after notice and opportunity for public comment. Section 1886(d)(5)(K)(ii)(I) of the Act specifies that a new medical service or technology may be considered for new technology add-on payment if, based on the estimated costs incurred with respect to discharges involving such service or technology, the DRG prospective payment rate otherwise applicable to such discharges under this subsection is inadequate. We note that, beginning with discharges occurring in FY 2008, CMS transitioned from CMS- DRGs to MS-DRGs. The regulations at 42 CFR 412.87 implement these provisions and § 412.87(b) specifies three criteria for a new medical service or technology to receive the additional payment: (1) The medical service or technology must be new; (2) the medical service or technology must be costly such that the DRG rate otherwise applicable to discharges involving the medical service or technology is determined to be inadequate; and (3) the service or technology must demonstrate a substantial clinical improvement over existing services or technologies. In addition, certain transformative new devices and Qualified Infectious Disease Products may qualify under an alternative inpatient new technology add-on payment pathway, as set forth in the regulations at § 412.87(c) and (d). In this rule, we highlight some of the major statutory and regulatory provisions relevant to the new technology add-on payment criteria, as well as other information. For a complete discussion on the new technology add-on payment criteria, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51572 through 51574) and the FY 2020 IPPS/LTCH PPS final rule (84 FR 42288 through 42300).

a. New Technology Add On Payment Criteria

(1) Newness Criterion

Under the first criterion, as reflected in § 412.87(b)(2), a specific medical service or technology will be considered “new” for purposes of new medical service or technology add-on payments until such time as Medicare data are available to fully reflect the cost of the technology in the MS-DRG weights through recalibration. We note that we do not consider a service or technology to be new if it is substantially similar to one or more existing technologies. That is, even if a medical product receives a new FDA approval or clearance, it may not necessarily be considered “new” for purposes of new technology add-on payments if it is “substantially similar” to another medical product that was approved or cleared by FDA and has been on the market for more than 2 to 3 years. In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43813 through 43814), we established criteria for evaluating whether a new technology is substantially similar to an existing technology, specifically: (1) Whether a product uses the same or a similar mechanism of action to achieve a therapeutic outcome; (2) whether a product is assigned to the same or a different MS-DRG; and (3) whether the new use of the technology involves the treatment of the same or similar type of disease and the same or similar patient population. If a technology meets all three of these criteria, it would be considered substantially similar to an existing technology and would not be considered “new” for purposes of new technology add-on payments. For a detailed discussion of the criteria for substantial similarity, we refer readers to the FY 2006 IPPS final rule (70 FR 47351 through 47352), and the FY 2010 IPPS/LTCH PPS final rule (74 FR 43813 through 43814).

(2) Cost Criterion

a. Overview

Under the second criterion, § 412.87(b)(3) further provides that, to be eligible for the add-on payment for new medical services or technologies, the MS-DRG prospective payment rate otherwise applicable to discharges involving the new medical service or technology must be assessed for adequacy. Under the cost criterion, consistent with the formula specified in section 1886(d)(5)(K)(ii)(I) of the Act, to assess the adequacy of payment for a new technology paid under the applicable MS-DRG prospective payment rate, we evaluate whether the charges for cases involving the new technology exceed certain threshold amounts. The MS-DRG threshold amounts generally used in evaluating new technology add-on payment applications for FY 2021 are presented in a data file that is available, along with the other data files associated with the FY 2020 IPPS/LTCH PPS final rule and correction notice, on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index. However, we refer readers to section II.G.1.a.(2)b. of the preamble of this final rule where we discuss our final policy to apply the proposed threshold value for new MS-DRG 018 in evaluating the cost criterion for the CAR T-cell therapy technologies for purposes of FY 2021 new technology add-on payments.

As finalized in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41275), beginning with FY 2020, we include the thresholds applicable to the next fiscal year (previously included in Table 10 of the annual IPPS/LTCH PPS proposed and final rules) in the data files associated with the prior fiscal year. Accordingly, the final thresholds for applications for new technology add-on payments for FY 2022 are presented in a data file that is available on the CMS website, along with the other data files associated with this FY 2021 final rule, by clicking on the FY 2021 IPPS Final Rule Home Page at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index . We note that, under our final policy discussed in section II.G.1.a.(2).b. of the preamble of this final rule, beginning with FY 2022, we will use the proposed threshold values associated with the proposed rule for that fiscal year to evaluate the cost criterion for all applications for new technology add-on payments and previously approved technologies that may continue to receive new technology add-on payments, if those technologies would be assigned to a proposed new MS-DRG for that same fiscal year. In the September 7, 2001 final rule that established the new technology add-on payment regulations (66 FR 46917), we discussed that applicants should submit a significant sample of data to demonstrate that the medical service or technology meets the high-cost threshold. Specifically, applicants should submit a sample of sufficient size to enable us to undertake an initial validation and analysis of the data. We also discussed in the September 7, 2001 final rule (66 FR 46917) the issue of whether the Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule at 45 CFR parts 160 and 164 applies to claims information that providers submit with applications for new medical service or technology add-on payments. We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51573) for complete information on this issue.

b. Cost Threshold Evaluation for Proposed New MS-DRG Reassignment

In the FY 2021 IPPS/LTCH PPS proposed rule, we made proposals relating to our evaluation of the cost criterion for technologies that are proposed to be assigned to a new MS-DRG (85 FR 32643 and 32644 and 32650 and 32651). We noted that, as we have discussed in prior rulemaking with regard to the potential creation of a new MS-DRG for CAR T-cell therapies (83 FR 41172), if a new MS-DRG for CAR T-cell therapies were to be created, then consistent with section 1886(d)(5)(K)(ix) of the Act, there may no longer be a need for a new technology add-on payment under section 1886(d)(5)(K)(ii)(III) of the Act. Section 1886(d)(5)(K)(ix) of the Act requires that, before establishing any add-on payment for a new medical service or technology, the Secretary shall seek to identify one or more DRGs associated with the new technology, based on similar clinical or anatomical characteristics and the costs of the technology and shall assign the new technology into a DRG where the average costs of care most closely approximate the costs of care using the new technology. As discussed in previous rulemaking (71 FR 47996), no add-on payment will be made if the new technology is assigned to a DRG that most closely approximates its costs.

In the proposed rule, we referred readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 49481 and 49482), where we discussed whether the WATCHMAN® System met the cost criterion for a new technology add-on payment. Specifically, we discussed whether the threshold value associated with a proposed new MS-DRG should be considered in determining whether the applicant meets the cost criterion. We also discussed instances in the past where the coding associated with a new technology application is included in a finalized policy to change one or more MS-DRGs. For example, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53360 through 53362), we described the cost analysis for the Zenith® Fenestrated Abdominal Aortic Aneurysm Endovascular Graft, which was identified by ICD-9-CM procedure code 39.78 (Endovascular implantation of branching or fenestrated graft(s) in aorta). In that same rule, we finalized a change to the assignment of that procedure code, reassigning it from MS- DRGs 252, 253, and 254 to MS-DRGs 237 and 238. Because of that change, we determined that, for FY 2013, in order for the Zenith® Fenestrated Abdominal Aortic Aneurysm Endovascular Graft to meet the cost criteria, it must demonstrate that the average case weighted standardized charge per case exceeded the thresholds for MS-DRGs 237 and 238. We noted that, in that example, MS-DRGs 237 and 238 existed previously; therefore, thresholds that were 75 percent of one standard deviation beyond the geometric mean standardized charge for these MS-DRGs were available to the public in Table 10 at the time the application was submitted. (We note that for fiscal years prior to FY 2020, Table 10 included the cost thresholds used to evaluate applications for new technology add-on payments for the next fiscal year.) We stated in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24460) that in the case of WATCHMAN® System, if MS-DRGs 273 and 274 were to be finalized for FY 2016, we recognized that thresholds that are 75 percent of one standard deviation beyond the geometric mean standardized charge would not have been available at the time the application was submitted. We stated our belief that it could be appropriate for the applicant to demonstrate that the average case weighted standardized charge per case exceeded these thresholds for MS-DRGs 273 and 274, for which this technology would be reassigned. Accordingly, we made available supplemental threshold values on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/newtech that were calculated using the data used to generate the FY 2015 IPPS/LTCH PPS Table 10 and reassigned the procedure codes, in accordance with the finalized policies discussed in section II.G.3.b. of the preamble of the FY 2016 IPPS/LTCH PPS final rule.

We also noted that in the FY 2016 IPPS/LTCH PPS proposed rule, we invited public comments on whether considering these supplemental threshold values as part of the cost criterion evaluation for this application was appropriate and also on how to address similar future situations in a broader policy context should they occur. After consideration of the comments, in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49482) we stated that we agreed with the commenters that we should evaluate the cost threshold in effect at the time the new technology add-on payment application is submitted to determine if an applicant exceeds the cost threshold. We stated that we agreed with commenters that this policy is most predictable for applicants. We also stated that we were maintaining our current policy to use the thresholds issued with each final rule for the upcoming fiscal year when making a determination to continue add-on payments for those new technologies that were approved for new technology add-on payments from the prior fiscal year.

In the FY 2021 IPPS/LTCH PPS proposed rule, we noted that at the time of the FY 2016 final rule, in applying this policy, we did not anticipate the onset of new, extremely high cost, technologies such as CAR T-cell therapy, nor such significant variance between the thresholds at the time of application and the thresholds based on the finalized MS-DRG assignment for the upcoming year. For example, in the FY 2016 final rule, the difference between the MS-DRG threshold amount for MS-DRGs 237 ($121,777) and 238 ($87,602) set forth in Table 10 associated with the FY 2015 final rule, and the supplemental MS- DRG threshold amount based on the proposed new MS-DRGs 273 ($95,542) and 274 ($77,230), was $26,235 and $10,372 respectively. By comparison, based on the data file released with the FY 2020 final rule (and corresponding correction notice) for FY 2021 applications, the threshold amount for MS-DRG 016 is $170,573. However, the threshold amount for proposed new MS-DRG 018 (in the data file released with this proposed rule) is $1,237,393, which is more than 7 times greater.

We stated that in light of the development of new technologies, such as CAR T-cell therapies, and the more substantial shifts in the MS-DRG threshold amounts that may result from the reassignment of new technologies for the upcoming fiscal year, we believe it is appropriate to revisit the policy described in the FY 2016 final rule. We stated that while we continue to believe that predictability for applicants is important, we also believe payment accuracy is equally important. We stated our belief that it is necessary to balance predictability with a more accurate evaluation of whether a new technology meets the new technology add-on payment cost criterion by using threshold values that are consistent with how the cases involving the use of the new technology will be paid for in the upcoming fiscal year. We proposed to revise our policy in situations when the procedure coding associated with a new technology application is proposed to be assigned to a proposed new MS-DRG. Specifically, we proposed that effective for FY 2022, for applications for new technology add-on payments and previously approved technologies that may continue to receive new technology add-on payments, the proposed threshold for a proposed new MS-DRG for the upcoming fiscal year would be used to evaluate the cost criterion for technologies that would be assigned to a proposed new MS-DRG. For example, consider a technology that would be coded using procedure codes assigned to MS-DRG ABC at the time of its application for FY 2022, and then the procedure coding associated with the new technology was proposed to be assigned to a proposed new MS-DRG XYZ in the FY 2022 proposed rule. Instead of using the threshold for MS-DRG ABC based on the data file released with the FY 2021 final rule for FY 2022 applications, we proposed to use the proposed threshold for the newly proposed MS-DRG XYZ based on the data file released with the FY 2022 proposed rule, which would otherwise contain the proposed thresholds for FY 2023 applications. We stated our belief that using the proposed rule thresholds for the proposed new MS-DRG would further promote payment accuracy by using the latest data available to assess how the technology would be paid for in the upcoming fiscal year, if the proposed reassignment to the new MS-DRG was finalized, while also providing the applicant and the public adequate time to analyze whether the technology meets the cost criterion using these proposed thresholds and to provide public comment following the proposed rule.

In the FY 2021 proposed rule, we stated that we believe it is important that the cost criterion be applied in a manner that accurately reflects the anticipated payment for the technology. In assessing the adequacy of the otherwise applicable MS-DRG payment rate for a high cost new technology, where the reassignment of such a technology to a proposed new MS-DRG may result in a substantial change in the MS-DRG threshold amounts, we stated our belief that it is necessary to evaluate that technology using the proposed thresholds for the newly proposed MS-DRG to which the technology would be reassigned.

We also stated that we believe this policy is consistent with section 1886(d)(5)(K)(ix) of the Act which, as previously noted, requires that before establishing any add-on payment for a new medical service or technology, the Secretary seek to identify one or more DRGs associated with the new technology, based on similar clinical or anatomical characteristics and the costs of the technology, and assign the new technology into a DRG where the average costs of care most closely approximate the costs of care using the new technology. This provision further states that no add-on payment will be made with respect to such new technology. As we have noted in prior rulemaking with regard to the CAR T cell therapies (83 FR 41172), if a new MS-DRG were to be created, then consistent with section 1886(d)(5)(K)(ix) of the Act, there may no longer be a need for a new technology add-on payment under section 1886(d)(5)(K)(ii)(III) of the Act. For these reasons, we also proposed, for purposes of FY 2021 new technology add-on payments, to evaluate the cost criterion for the CAR T-cell therapy technologies using the proposed threshold for the newly proposed MS-DRG to which the procedure codes describing the use of the CAR T-cell therapies would be assigned in FY 2021 (MS-DRG 018). We noted that this proposed policy would apply to the new FY 2021 CAR T-cell therapy applications, KTE-X19 and Liso-cel, and those CAR T-cell therapies previously approved for new technology add-on payments, KYMRIAH® and YESCARTA® (we note that KTE-X19 and Liso-cel did not meet the July 1 deadline as specified in § 412.87(e)). As discussed in section II.E.2.b. of the preamble of this final rule, we are finalizing our proposal to create a new MS-DRG 018 for cases reporting ICD-10-PCS procedure codes XW033C3 or XW043C3 for FY 2021.

Comment: We did not receive any comments specifically regarding our proposal that, effective for FY 2022, for applications for new technology add-on payments and previously approved technologies that may continue to receive new technology add-on payments, the proposed threshold for a proposed new MS-DRG for the upcoming fiscal year would be used to evaluate the cost criterion for technologies that would be assigned to a proposed new MS-DRG. We also did not receive any comments specifically on our proposal to apply this policy, effective for FY 2021, for purposes of evaluating the cost criterion for the CAR-T cell therapy technologies using the proposed threshold for the newly proposed MS-DRG to which the procedure codes describing the use of the CAR-T cell therapies would be assigned in FY 2021 (MS-DRG 018).

Several commenters, who were also applicants for new technology add-on payments for FY 2021, disagreed with CMS's position that their technologies would not meet the cost criterion based on the MS-DRG 018 threshold amount of $1,237,393. These commenters presented updated cost analyses that they believe demonstrate that the applicant technology meets the cost criterion. One commenter stated that the proposed cost threshold for MS-DRG 018 is inaccurate. Specifically, the commenter believed that $913,244, which CMS cited as the standardized charge per case for DRG 018, is based on the standard deviation charges for those cases, and that the actual average standardized charge per case, according to the FY 2021 Proposed BOR file for Version 38 of the MS-DRGs is $1,387,946.33, which exceeds the cost threshold for MS-DRG 018. This commenter urged CMS to audit its calculations and then reapply the new cost threshold to current new technology add-on payment applicants.

Response: We thank the commenters for their input. We have reviewed the data and agree that we inadvertently used the wrong value for the average case-weighted standardized charge from the FY 2021 Proposed BOR File. The commenter is correct that using the arithmetic mean charge of $1,387,946.33 would exceed the proposed threshold for new MS-DRG 018 of $1,237,393.

We noted in the FY 2021 IPPS/LTCH PPS proposed rule that, if finalized, this policy would apply to the new FY 2021 CAR T-cell therapy applications, KTE-X19 and Liso-cel., and those CAR T-cell therapies previously approved for new technology add-on payments, KYMRIAH® and YESCARTA®. However, we note that neither Kite Pharma (the applicant for KTE-X19) nor Juno Therapeutics, a Bristol-Myers Squibb Company (the applicant for Liso-cel) received FDA approval for their therapies by July 1, and therefore, these technologies were not eligible for consideration for new technology add-on payments for FY 2021. We also note, as discussed later in this rule, that KYMRIAH® and YESCARTA® are no longer considered “new” for purposes of new technology add-on payments for FY 2021. Accordingly, we are not applying this policy to evaluate the cost criterion for CAR T-cell therapy technologies using the proposed threshold for MS-DRG 018 to which the procedure codes describing the use of the CAR T-cell therapies will be assigned beginning in FY 2021.

As discussed in the preamble of the proposed rule and this final rule, while we continue to believe that predictability for applicants is important, we also believe payment accuracy is equally important. In order to promote payment accuracy, as previously discussed, and after consideration of the comments received, we are finalizing our proposal to use the proposed threshold for the upcoming fiscal year for any proposed new MS-DRG to evaluate the cost criterion for technologies that would be assigned to the proposed new MS-DRG, beginning with FY 2022 new technology add-on payments for all applicants and previously approved technologies that may continue to receive new technology add-on payments in FY 2022. As we have noted in prior rulemaking with regard to the CAR T cell therapies (83 FR 41172), if a new MS-DRG were to be created, then consistent with section 1886(d)(5)(K)(ix) of the Act, there may no longer be a need for a new technology add-on payment under section 1886(d)(5)(K)(ii)(III) of the Act.

Finally, amidst our work on payment accuracy and coverage for CAR-T, we have heard from stakeholders that cell therapy goes beyond CAR-T to include Tumor-Infiltrating Lymphocyte (TIL) Therapy and Engineered T Cell Receptor (TCR) Therapy. While all of these treatments are autologous, CAR-T is currently limited to liquid tumors, and we foresee the need to address solid tumor treatments such as TIL and TCR in the near future. As the process and decisions on these issues take time, we plan to continue to engage with stakeholders to understand the needs necessary for patients and providers to get appropriate access as quickly as possible to these potentially lifesaving treatments. Our processes continue to evolve as innovative treatments evolve.

c. Substantial Clinical Improvement Criterion

Under the third criterion at § 412.87(b)(1), a medical service or technology must represent an advance that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries. In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42288 through 42292) we prospectively codified in our regulations at § 412.87(b) the following aspects of how we evaluate substantial clinical improvement for purposes of new technology add-on payments under the IPPS:

• The totality of the circumstances is considered when making a determination that a new medical service or technology represents an advance that substantially improves, relative to services or technologies previously available, the diagnosis or treatment of Medicare beneficiaries.
• A determination that a new medical service or technology represents an advance that substantially improves, relative to services or technologies previously available, the diagnosis or treatment of Medicare beneficiaries means—

++ The new medical service or technology offers a treatment option for a patient population unresponsive to, or ineligible for, currently available treatments;

++ The new medical service or technology offers the ability to diagnose a medical condition in a patient population where that medical condition is currently undetectable, or offers the ability to diagnose a medical condition earlier in a patient population than allowed by currently available methods, and there must also be evidence that use of the new medical service or technology to make a diagnosis affects the management of the patient;

++ The use of the new medical service or technology significantly improves clinical outcomes relative to services or technologies previously available as demonstrated by one or more of the following: A reduction in at least one clinically significant adverse event, including a reduction in mortality or a clinically significant complication; a decreased rate of at least one subsequent diagnostic or therapeutic intervention; a decreased number of future hospitalizations or physician visits; a more rapid beneficial resolution of the disease process treatment including, but not limited to, a reduced length of stay or recovery time; an improvement in one or more activities of daily living; an improved quality of life; or, a demonstrated greater medication adherence or compliance; or

++ The totality of the circumstances otherwise demonstrates that the new medical service or technology substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries.

• Evidence from the following published or unpublished information sources from within the United States or elsewhere may be sufficient to establish that a new medical service or technology represents an advance that substantially improves, relative to services or technologies previously available, the diagnosis or treatment of Medicare beneficiaries: Clinical trials, peer reviewed journal articles; study results; meta-analyses; consensus statements; white papers; patient surveys; case studies; reports; systematic literature reviews; letters from major healthcare associations; editorials and letters to the editor; and public comments. Other appropriate information sources may be considered.
• The medical condition diagnosed or treated by the new medical service or technology may have a low prevalence among Medicare beneficiaries.
• The new medical service or technology may represent an advance that substantially improves, relative to services or technologies previously available, the diagnosis or treatment of a subpopulation of patients with the medical condition diagnosed or treated by the new medical service or technology.

We refer the reader to the FY 2020 IPPS/LTCH PPS final rule for additional discussion of the evaluation of substantial clinical improvement for purposes of new technology add-on payments under the IPPS.

We note, consistent with the discussion in the FY 2003 IPPS Final Rule (67 FR 50015), although we are affiliated with FDA and we do not question FDA's regulatory responsibility for decisions related to marketing authorization (for example, approval, clearance, etc.), we do not use FDA criteria to determine what drugs, devices, or technologies qualify for new technology add-on payments under Medicare. Our criteria do not depend on the standard of safety and efficacy on which FDA relies but on a demonstration of substantial clinical improvement in the Medicare population (particularly patients over age 65).

d. Alternative Inpatient New Technology Add-on Payment Pathway

Under § 412.87(c) and (d) of the regulations, beginning with applications for new technology add-on payments for FY 2021, certain transformative new devices and Qualified Infectious Disease Products (QIDPs) may qualify for the new technology add-on payment under an alternative pathway, as described in this section. We refer the reader to the FY 2020 IPPS/LTCH PPS final rule for complete discussion on this policy (84 FR 42292 through 42297). We note, in section II.G.9.b. of this preamble, we discuss our final policy to expand our current alternative new technology add-on payment pathway for QIDPs to include products approved under the Limited Population Pathway for Antibacterial and Antifungal Drugs (LPAD) pathway. In addition, we are finalizing our policy to refer more broadly to “certain antimicrobial products” rather than specifying the particular FDA programs for antimicrobial products (that is, QIDPs and LPADs) that are the subject of the alternative new technology add-on payment pathway. (We refer the reader to section II.G.9.b. of this preamble below for a complete discussion regarding this final policy.) We note that a technology is not required to have the specified FDA designation at the time the new technology add-on payment application is submitted. CMS will review the application based on the information provided by the applicant under the alternative pathway specified by the applicant. However, to receive approval for the new technology add-on payment under that alternative pathway, the technology must have the applicable designation and meet all other requirements in the regulations in § 412.87(c) and (d), as applicable.

(1) Alternative Pathway for Certain Transformative New Devices

For applications received for new technology add-on payments for FY 2021 and subsequent fiscal years, if a medical device is part of FDA's Breakthrough Devices Program and received FDA marketing authorization, it will be considered new and not substantially similar to an existing technology for purposes of the new technology add-on payment under the IPPS, and will not need to meet the requirement under § 412.87(b)(1) that it represent an advance that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries. This policy is codified at § 412.87(c). Under this alternative pathway, a medical device that has received FDA marketing authorization (that is, has been approved or cleared by, or had a De Novo classification request granted by, FDA) and that is part of FDA's Breakthrough Devices Program will need to meet the cost criterion under § 412.87(b)(3), as reflected in § 412.87(c)(3), and will be considered new as reflected in § 412.87(c)(2). We note, in section II.G.8. of the preamble of this final rule, we are clarifying our policy that a new medical device under this alternative pathway must receive marketing authorization for the indication covered by the Breakthrough Devices Program designation. (We refer the reader to section II.G.8. of this preamble below for a complete discussion regarding this clarification.)

(2) Alternative Pathway for Qualified Infectious Disease Products (QIDPs)

For applications received for new technology add-on payments for FY 2021 and subsequent fiscal years, if a technology is designated by FDA as a QIDP and received FDA marketing authorization, it will be considered new and not substantially similar to an existing technology for purposes of new technology add-on payments and will not need to meet the requirement that it represent an advance that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries. We codified this policy at § 412.87(d). Under this alternative pathway for QIDPs, a medical product that has received FDA marketing authorization and is designated by FDA as a QIDP will need to meet the cost criterion under § 412.87(b)(3), as reflected in § 412.87(d)(3), and will be considered new as reflected in § 412.87(d)(2).

We refer the reader to the FY 2020 IPPS/LTCH PPS final rule for complete discussion on this policy (84 FR 42292 through 42297). We note, in section II.G.9.b. of the preamble of this final rule, we are clarifying a new medical product seeking approval for the new technology add-on payment under the alternative pathway for QIDPs must receive marketing authorization for the indication covered by the QIDP designation. (We refer the reader to section II.G.9.b. of this preamble below for a complete discussion regarding this clarification.)

e. Additional Payment for New Medical Service or Technology

The new medical service or technology add-on payment policy under the IPPS provides additional payments for cases with relatively high costs involving eligible new medical services or technologies, while preserving some of the incentives inherent under an average-based prospective payment system. The payment mechanism is based on the cost to hospitals for the new medical service or technology. For discharges occurring before October 1, 2019, under § 412.88, if the costs of the discharge (determined by applying CCRs as described in § 412.84(h)) exceed the full DRG payment (including payments for IME and DSH, but excluding outlier payments), Medicare made an add-on payment equal to the lesser of: (1) 50 percent of the costs of the new medical service or technology; or (2) 50 percent of the amount by which the costs of the case exceed the standard DRG payment.

Beginning with discharges on or after October 1, 2019, for the reasons discussed in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42297 through 42300), we finalized an increase in the new technology add-on payment percentage, as reflected at § 412.88(a)(2)(ii). Specifically, for a new technology other than a medical product designated by FDA as a QIDP, beginning with discharges on or after October 1, 2019, if the costs of a discharge involving a new technology (determined by applying CCRs as described in § 412.84(h)) exceed the full DRG payment (including payments for IME and DSH, but excluding outlier payments), Medicare will make an add-on payment equal to the lesser of: (1) 65 percent of the costs of the new medical service or technology; or (2) 65 percent of the amount by which the costs of the case exceed the standard DRG payment. For a new technology that is a medical product designated by FDA as a QIDP, beginning with discharges on or after October 1, 2019, if the costs of a discharge involving a new technology (determined by applying CCRs as described in § 412.84(h)) exceed the full DRG payment (including payments for IME and DSH, but excluding outlier payments), Medicare will make an add-on payment equal to the lesser of: (1) 75 percent of the costs of the new medical service or technology; or (2) 75 percent of the amount by which the costs of the case exceed the standard DRG payment. As set forth in § 412.88(b)(2), unless the discharge qualifies for an outlier payment, the additional Medicare payment will be limited to the full MS-DRG payment plus 65 percent (or 75 percent for a medical product designated by FDA as a QIDP) of the estimated costs of the new technology or medical service.

We refer the reader to the FY 2020 IPPS/LTCH PPS final rule (84 FR 42297 through 42300) for complete discussion on the increase in the new technology add on payment beginning with discharges on or after October 1, 2019. We note, in section II.G.9.b. of the preamble of this final rule, we discuss our final policy to increase the new technology add-on payment percentage to 75 percent for products approved under FDA's LPAD pathway. (We refer the reader to section II.G.9.b. of this preamble below for a complete discussion regarding this final policy.)

Section 503(d)(2) of Public Law 108-173 provides that there shall be no reduction or adjustment in aggregate payments under the IPPS due to add-on payments for new medical services and technologies. Therefore, in accordance with section 503(d)(2) of Public Law 108-173, add-on payments for new medical services or technologies for FY 2005 and subsequent years have not been subjected to budget neutrality.

f. Evaluation of Eligibility Criteria for New Medical Service or Technology Applications

In the FY 2009 IPPS final rule (73 FR 48561 through 48563), we modified our regulations at § 412.87 to codify our longstanding practice of how CMS evaluates the eligibility criteria for new medical service or technology add-on payment applications. That is, we first determine whether a medical service or technology meets the newness criterion, and only if so, do we then make a determination as to whether the technology meets the cost threshold and represents a substantial clinical improvement over existing medical services or technologies. We amended § 412.87(c) to specify that all applicants for new technology add-on payments must have FDA approval or clearance by July 1 of the year prior to the beginning of the fiscal year for which the application is being considered. We note, in section II.G.9.c. of the preamble of this final rule, we discuss our finalized process by which a technology for which an application for new technology add-on payments is submitted under the alternative pathway for certain antimicrobial products would receive conditional approval for such payment, provided the product receives FDA marketing authorization by July 1 of the year for which the new technology add-on payment application was submitted. (We refer the reader to section II.G.9.c. of this preamble of this final rule for a complete discussion regarding this final policy.)

g. Council on Technology and Innovation (CTI)

The Council on Technology and Innovation at CMS oversees the agency's cross-cutting priority on coordinating coverage, coding and payment processes for Medicare with respect to new technologies and procedures, including new drug therapies, as well as promoting the exchange of information on new technologies and medical services between CMS and other entities. The CTI, composed of senior CMS staff and clinicians, was established under section 942(a) of Public Law 108-173. The Council is co-chaired by the Director of the Center for Clinical Standards and Quality (CCSQ) and the Director of the Center for Medicare (CM), who is also designated as the CTI's Executive Coordinator.

The specific processes for coverage, coding, and payment are implemented by CM, CCSQ, and the local Medicare Administrative Contractors (MACs) (in the case of local coverage and payment decisions). The CTI supplements, rather than replaces, these processes by working to assure that all of these activities reflect the agency-wide priority to promote high-quality, innovative care. At the same time, the CTI also works to streamline, accelerate, and improve coordination of these processes to ensure that they remain up to date as new issues arise. To achieve its goals, the CTI works to streamline and create a more transparent coding and payment process, improve the quality of medical decisions, and speed patient access to effective new treatments. It is also dedicated to supporting better decisions by patients and doctors in using Medicare-covered services through the promotion of better evidence development, which is critical for improving the quality of care for Medicare beneficiaries.

To improve the understanding of CMS' processes for coverage, coding, and payment and how to access them, the CTI has developed an “Innovator's Guide” to these processes. The intent is to consolidate this information, much of which is already available in a variety of CMS documents and in various places on the CMS website, in a user friendly format. This guide was published in 2010 and is available on the CMS website at: https://www.cms.gov/Medicare/Coverage/CouncilonTechInnov/Downloads/Innovators-Guide-Master-7-23-15.pdf .

As we indicated in the FY 2009 IPPS final rule (73 FR 48554), we invite any product developers or manufacturers of new medical services or technologies to contact the agency early in the process of product development if they have questions or concerns about the evidence that would be needed later in the development process for the agency's coverage decisions for Medicare.

The CTI aims to provide useful information on its activities and initiatives to stakeholders, including Medicare beneficiaries, advocates, medical product manufacturers, providers, and health policy experts. Stakeholders with further questions about Medicare's coverage, coding, and payment processes, or who want further guidance about how they can navigate these processes, can contact the CTI at CTI@cms.hhs.gov.

h. Application Information for New Medical Services or Technologies

Applicants for add-on payments for new medical services or technologies for FY 2022 must submit a formal request, including a full description of the clinical applications of the medical service or technology and the results of any clinical evaluations demonstrating that the new medical service or technology represents a substantial clinical improvement (unless the application is under one of the alternative pathways as previously described), along with a significant sample of data to demonstrate that the medical service or technology meets the high-cost threshold. Complete application information, along with final deadlines for submitting a full application, will be posted as it becomes available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/newtech.html . To allow interested parties to identify the new medical services or technologies under review before the publication of the proposed rule for FY 2022, the CMS website also will post the tracking forms completed by each applicant. We note that the burden associated with this information collection requirement is the time and effort required to collect and submit the data in the formal request for add-on payments for new medical services and technologies to CMS. The aforementioned burden is subject to the PRA and approved under OMB control number 0938-1347.

As discussed previously, in the FY 2020 IPPS/LTCH PPS final rule, we adopted an alternative inpatient new technology add-on payment pathway for certain transformative new devices and for Qualified Infectious Disease Products, as set forth in the regulations at § 412.87(c) and (d). The change in burden associated with these changes to the new technology add-on payment application process were discussed in a revision of the information collection requirement (ICR) request currently approved under OMB control number 0938-1347. In accordance with the implementing regulations of the PRA, we detailed the revisions of the ICR and published the required 60-day notice on August 15, 2019 (84 FR 41723) and 30-day notice on December 17, 2019 (84 FR 68936) to solicit public comments. The ICR is currently pending OMB approval.

2. Public Input Before Publication of a Notice of Proposed Rulemaking on Add-On Payments

Section 1886(d)(5)(K)(viii) of the Act, as amended by section 503(b)(2) of Pub. L. 108-173, provides for a mechanism for public input before publication of a notice of proposed rulemaking regarding whether a medical service or technology represents a substantial clinical improvement or advancement. The process for evaluating new medical service and technology applications requires the Secretary to—

• Provide, before publication of a proposed rule, for public input regarding whether a new service or technology represents an advance in medical technology that substantially improves the diagnosis or treatment of Medicare beneficiaries;
• Make public and periodically update a list of the services and technologies for which applications for add-on payments are pending;
• Accept comments, recommendations, and data from the public regarding whether a service or technology represents a substantial clinical improvement; and
• Provide, before publication of a proposed rule, for a meeting at which organizations representing hospitals, physicians, manufacturers, and any other interested party may present comments, recommendations, and data regarding whether a new medical service or technology represents a substantial clinical improvement to the clinical staff of CMS.

In order to provide an opportunity for public input regarding add-on payments for new medical services and technologies for FY 2021 prior to publication of the FY 2021 IPPS/LTCH PPS proposed rule, we published a notice in the Federal Register on October 8, 2019 (84 FR 53732), and held a town hall meeting at the CMS Headquarters Office in Baltimore, MD, on December 16, 2019. In the announcement notice for the meeting, we stated that the opinions and presentations provided during the meeting would assist us in our evaluations of applications by allowing public discussion of the substantial clinical improvement criterion for the FY 2021 new medical service and technology add-on payment applications before the publication of the FY 2021 IPPS/LTCH PPS proposed rule.

We stated in the FY 2021 IPPS/LTCH PPS proposed rule that approximately 100 individuals registered to attend the town hall meeting in person, while additional individuals listened over an open telephone line. We also live-streamed the town hall meeting and posted the morning and afternoon sessions of the town hall on the CMS YouTube web page at: https://www.youtube.com/watch?v=4z1AhEuGHqQ and https://www.youtube.com/watch?v=m26Xj1EzbIY , respectively. We considered each applicant's presentation made at the town hall meeting, as well as written comments submitted on the applications that were received by the due date of January 3, 2020, in our evaluation of the new technology add-on payment applications for FY 2021 in the development of the FY 2021 IPPS/LTCH PPS proposed rule.

In response to the published notice and the December 16, 2019 New Technology Town Hall meeting, we received written comments regarding the applications for FY 2021 new technology add-on payments. We also noted in the FY 2021 IPPS/LTCH PPS proposed rule that we do not summarize comments that are unrelated to the “substantial clinical improvement” criterion. As explained earlier and in the Federal Register notice announcing the New Technology Town Hall meeting (84 FR 53732 through 53734), the purpose of the meeting was specifically to discuss the substantial clinical improvement criterion in regard to pending new technology add-on payment applications for FY 2021. Therefore, we did not summarize those written comments in the proposed rule that are unrelated to the substantial clinical improvement criterion. In section II.G.5. of the preamble of the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32581 through 32678), we summarized comments regarding individual applications, or, if applicable, indicated that there were no comments received in response to the New Technology Town Hall meeting notice or New Technology Town Hall meeting, at the end of each discussion of the individual applications.

3. ICD-10-PCS Section “X” Codes for Certain New Medical Services and Technologies

As discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49434), the ICD-10-PCS includes a new section containing the new Section “X” codes, which began being used with discharges occurring on or after October 1, 2015. Decisions regarding changes to ICD-10-PCS Section “X” codes will be handled in the same manner as the decisions for all of the other ICD-10-PCS code changes. That is, proposals to create, delete, or revise Section “X” codes under the ICD-10-PCS structure will be referred to the ICD-10 Coordination and Maintenance Committee. In addition, several of the new medical services and technologies that have been, or may be, approved for new technology add-on payments may now, and in the future, be assigned a Section “X” code within the structure of the ICD-10-PCS. We posted ICD-10-PCS Guidelines on the CMS website at: http://www.cms.gov/Medicare/Coding/ICD10/2016-ICD-10-PCS-and-GEMs.html , including guidelines for ICD-10-PCS Section “X” codes. We encourage providers to view the material provided on ICD-10-PCS Section “X” codes.

4. FY 2021 Status of Technologies Approved for FY 2020 New Technology Add-On Payments

In section II.G.4. of the proposed rule (85 FR 32572 through 32580), we discussed the proposed FY 2021 status of 18 technologies approved for FY 2020 new technology add-on payments. In general, we extend new technology add-on payments for an additional year only if the 3-year anniversary date of the product's entry onto the U.S. market occurs in the latter half of the upcoming fiscal year. We refer readers to a table at the end of this section summarizing for FY 2021 the name of each technology, newness start date, whether we are continuing or discontinuing the add-on payment for FY 2021, relevant final rule citations, final maximum add-on payment amount and coding assignments.

a. KYMRIAH® (Tisagenlecleucel) and YESCARTA® (Axicabtagene Ciloleucel)

Two manufacturers, Novartis Pharmaceuticals Corporation and Kite Pharma, Inc., submitted separate applications for new technology add-on payments for FY 2019 for KYMRIAH® (tisagenlecleucel) and YESCARTA® (axicabtagene ciloleucel), respectively. Both of these technologies are CD-19- directed T-cell immunotherapies used for the purposes of treating patients with aggressive variants of non-Hodgkin lymphoma (NHL). On May 1, 2018, Novartis Pharmaceuticals Corporation received FDA approval for KYMRIAH®'s second indication, the treatment of adult patients with relapsed or refractory (r/r) large B-cell lymphoma after two or more lines of systemic therapy including diffuse large B-cell lymphoma (DLBCL) not otherwise specified, high grade B-cell lymphoma and DLBCL arising from follicular lymphoma. On October 18, 2017, Kite Pharma, Inc. received FDA approval for the use of YESCARTA® indicated for the treatment of adult patients with r/r large B-cell lymphoma after two or more lines of systemic therapy, including DLBCL not otherwise specified, primary mediastinal large B-cell lymphoma, high grade B-cell lymphoma, and DLBCL arising from follicular lymphoma. With respect to the newness criterion, because potential cases representing patients who may be eligible for treatment using KYMRIAH® and YESCARTA® would group to the same MS-DRGs (because the same ICD-10-CM diagnosis codes and ICD-10-PCS procedures codes are used to report treatment using either KYMRIAH® or YESCARTA®), and because we believed that these technologies are intended to treat the same or similar disease in the same or similar patient population, and are purposed to achieve the same therapeutic outcome using the same or similar mechanism of action, we considered these two technologies to be substantially similar to each other. We refer readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR 41285 through 41286) and FY 2020 IPPS/LTCH/PPS final rule (84 FR 42185 through 42187) for a complete discussion. We stated in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41285 through 41286) and FY 2020 IPPS/LTCH PPS final rule (84 FR 42185 through 42186) that in accordance with our policy, since we consider the technologies to be substantially similar to each other, it is appropriate to use the earliest market availability date submitted as the beginning of the newness period for both technologies. According to the applicant for YESCARTA®, the first commercial shipment of YESCARTA® was received by a certified treatment center on November 22, 2017. Therefore, based on our policy, with regard to both technologies, we stated that the beginning of the newness period would be November 22, 2017. KYMRIAH® and YESCARTA® were approved for new technology add-on payments for FY 2019 (83 FR 41299). We refer readers to section II.H.5.a. of the preamble of the FY 2019 IPPS/LTCH PPS final rule (83 FR 41283 through 41299) and section II.H.4.d. of the preamble of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42185 through 42187) for a complete discussion of the new technology add-on payment application, coding and payment amount for KYMRIAH® and YESCARTA® for FY 2019 and FY 2020.

Our policy is that a medical service or technology may continue to be considered “new” for purposes of new technology add-on payments within 2 or 3 years after the point at which data begin to become available reflecting the inpatient hospital code assigned to the new service or technology. Our practice has been to begin and end new technology add-on payments on the basis of a fiscal year, and we have generally followed a guideline that uses a 6-month window before and after the start of the fiscal year to determine whether to extend the new technology add-on payment for an additional fiscal year. In general, we extend new technology add-on payments for an additional year only if the 3-year anniversary date of the product's entry onto the U.S. market occurs in the latter half of the fiscal year (70 FR 47362).

With regard to the newness criterion for KYMRIAH® and YESCARTA®, as discussed in the FY 2019 IPPS/LTCH PPS final rule, according to the applicant for YESCARTA®, the first commercial shipment of YESCARTA® was received by a certified treatment center on November 22, 2017. As previously stated, we use the earliest market availability date submitted as the beginning of the newness period for both KYMRIAH® and YESCARTA®. Therefore, we consider the beginning of the newness period for both KYMRIAH® and YESCARTA® to commence November 22, 2017. Because the 3-year anniversary date of the entry of the technology onto the U.S. market (November 22, 2020) will occur in the first half of FY 2021, we proposed to discontinue new technology add-on payments for this technology for FY 2021. We invited public comments on our proposal to discontinue new technology add-on payments for KYMRIAH® and YESCARTA® for FY 2021.

Comment: Commenters supported CMS' proposal to discontinue new technology add-on payments for KYMRIAH® and YESCARTA® for FY 2021. One commenter expressed support for CMS's proposal to either continue or discontinue new technology add-on payments based on the anniversary date of the product's entry on the market, noting the exception of products that enter the U.S. market in the latter half of the fiscal year.

We also received comments that were not supportive of the proposal. According to these commenters, the removal of new technology add-on payment eligibility for KYMRIAH® and YESCARTA® will widen the gap between therapy cost and reimbursement. According to the commenters, reimbursement provided through a new MS-DRG payment will not fully compensate providers for the extraordinarily high cost of the treatment and the expanding gaps between reimbursement and total cost of care may create barriers to this innovative treatment for Medicare beneficiaries. Another commenter offered that CMS has the authority to extend new technology add-on payments for CAR T-cell products into FY 2021 as the third program year. According to the commenter, although November 22, 2017 was the date the first FDA-approved CAR T-cell product was delivered for use to an approved facility, there were very few facilities even able to conduct these procedures, and of those, several were unwilling to do so due to the high cost of the product and low likelihood of getting paid for it. As such, the commenter indicated that November 22, 2017 is not the date to most appropriately coincide with when the market was fully formed for CAR T-cell products and procedures, particularly within the Medicare beneficiary patient population. According to the commenter, a more appropriate date to describe when the market was fully formed, consisting of buyers and sellers of CAR T-cell products, was October 1, 2018, with the inclusion of CAR T-cell therapies within MS-DRG 016 for FY 2019. The commenter explained that they believe this date is the more appropriate “first year” of new technology add-on payment eligibility under the newness criterion, in which case the third year begins in full with the start of FY 2021. According to the commenter, even if CMS is unwilling or unable to consider this alternate conception of “market availability” and adjust the CAR T-cell newness date accordingly, CMS nonetheless retains the authority to simply waive its informal, internal “six months” policy and grant new technology add-on payment participation for the entirety of FY 2021 as the third (and final) new technology add-on payment year for KYMRIAH® and YESCARTA®. Another commenter provided support for the extension of the new technology add-on payment to KYMRIAH® and YESCARTA® for another year but suggested that all CAR T-cell product that becomes FDA-approved automatically receive new technology add-on payment as well. Finally, other commenters stated a general support for a continuation of new technology add-on payments for all FDA approved CAR T-cell therapies for FY 2021.

Response: We thank the commenters for their input and suggestions. While we appreciate the commenters' concerns, with regard to the technology's newness, as discussed in the FY 2005 IPPS final rule (69 FR 49003), the timeframe that a new technology can be eligible to receive new technology add-on payments begins when data become available. Section 412.87(b)(2) states that a medical service or technology may be considered new within 2 or 3 years after the point at which data begin to become available reflecting the inpatient hospital code assigned to the new service or technology (depending on when a new code is assigned and data on the new service or technology become available for DRG recalibration). Section 412.87(b)(2) also states that after CMS has recalibrated the DRGs, based on available data, to reflect the costs of an otherwise new medical service or technology, the medical service or technology will no longer be considered “new” under the criterion of the section.

With respect to the comment that CMS should consider the date when the market was “fully formed” as the start of the newness period, we note that while CMS may consider a documented delay in a technology's availability on the U.S. market in determining when the newness period begins, under our historical policy, we do not consider how frequently the medical service or technology has been used in our determination of newness (70 FR 47349). Similarly, our policy for determining whether to extend new technology add-on payments for a third year generally applies regardless of the claims volume for the technology after the start of the newness period. As discussed in the FY 2006 IPPS final rule (70 FR 47349), we do not believe that case volume is a relevant consideration for making the determination as to whether a product is “new.” Consistent with the statute, a technology no longer qualifies as “new” once it is more than 2 to 3 years old, irrespective of how frequently it has been used in the Medicare population. Therefore, if a product is more than 2 to 3 years old, we consider its costs to be included in the MS-DRG relative weights whether its use in the Medicare population has been frequent or infrequent.

For these reasons, we do not agree that we should use October 1, 2018 as the start of the newness period or otherwise modify our policy for determining whether to extend new technology add-on payments for a third year in considering whether to continue new technology add-on payments for FY 2021 for KYMRIAH® and YESCARTA®. Therefore, KYMRIAH® and YESCARTA® are no longer considered “new” for purposes of new technology add-on payments for FY 2021. We are finalizing our proposal to discontinue new technology add-on payments for KYMRIAH® and YESCARTA® for FY 2021.

As discussed in section II.E.2.b. of the preamble of this final rule, currently procedures involving CAR T-cell therapies are identified with ICD-10-PCS procedure codes XW033C3 (Introduction of engineered autologous chimeric antigen receptor t-cell immunotherapy into peripheral vein, percutaneous approach, new technology group 3) and XW043C3 (Introduction of engineered autologous chimeric antigen receptor t-cell immunotherapy into central vein, percutaneous approach, new technology group 3), which became effective October 1, 2017. As discussed in section II.E.2.b. of the preamble of this final rule, we are finalizing our proposal to create a new MS-DRG 018 for cases reporting ICD-10-PCS procedure codes XW033C3 or XW043C3 for FY 2021. We also refer readers to section II.G.1.a.(2).b. of the preamble of this final rule for a complete discussion of our final policy that, effective for FY 2022, for applications for new technology add-on payments and for previously approved technologies that may continue to receive new technology add-on payments, the proposed threshold for the upcoming fiscal year for a proposed new MS-DRG would be used to evaluate the cost criterion for any new technologies that would be assigned to a proposed new MS-DRG. As we also discuss in section II.G.1.a.(2)b. of the preamble of this final rule, in the proposed rule we stated that in light of the significant variance in the threshold amount for proposed new MS-DRG 018 for cases involving CAR T-cell therapies, we proposed to apply this policy in evaluating the CAR T-cell therapy technologies for FY 2021 new technology add-on payments. We stated that this would include both the new FY 2021 CAR T-cell therapy applications and those CAR T-cell therapy technologies previously approved for new technology add-on payments, KYMRIAH® and YESCARTA®. Therefore, in the proposed rule we stated that even if KYMRIAH® and/or YESCARTA® were still considered new and within the 3-year anniversary date of the entry of the technology onto the U.S. market, in determining whether these technologies would continue to be eligible for the new technology add-on payment, we proposed to evaluate whether they meet the cost criterion using the proposed threshold for the proposed new MS-DRG 018 for FY 2021 payment.

Per the applicants' cost analyses in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41291), the final inflated average case-weighted standardized charge per case for KYMRIAH® and YESCARTA® is $39,723 (not including the charges related to the technology) and $118,575 (not including the charges related to the technology), respectively. However, we stated in the proposed rule that we now have cases involving the use of CAR T-cell therapy within the FY 2019 MedPAR data that we believe represent cases that would be eligible for KYMRIAH® and YESCARTA® and which can be used to estimate the average standardized charge per case for purposes of the proposed rule. This charge information from the FY 2019 MedPAR data can be found in the FY 2021 Proposed Before Outliers Removed (BOR) File (available on the CMS website) for Version 38 of the MS- DRGs. We stated that based on information from the FY 2021 Proposed BOR File for Version 38 of the MS-DRGs, the standardized charge per case for MS-DRG 018 is $913,224. The average case-weighted threshold amount based on the proposed new MS-DRG 018 is $1,237,393. We stated that because this estimated average case-weighted standardized charge per case for KYMRIAH® and YESCARTA® ($913,224) does not exceed the average case-weighted threshold amount for proposed new MS-DRG 018 ($1,237,393), we did not believe that the technology would meet the cost criterion and, as previously stated, proposed to discontinue new technology add-on payments for this technology for FY 2021. We invited public comment on our proposals.

Comment: According to one commenter, CMS' calculations explained in the proposal may be based on an inappropriate figure. According to the commenter, $913,244 was cited as the standardized charge per case for MS-DRG 018; however, based on a review of information released with the proposed rule, this figure is the standard deviation charges for those cases, rather than the average standardized charge. According to the commenter, the actual average standardized charge per case, according to the FY 2021 Proposed BOR file for Version 38 of the MS-DRGs is $1,387,946.33, which exceeds the cost threshold for MS-DRG 018. The commenter encouraged CMS to re-run its calculations and to clarify this issue and the amounts in the final rule.

Response: We reviewed the data and agree we inadvertently used the wrong value for the average case-weighted standardized charge from the FY 2021 Proposed BOR File. The commenter is correct that using the arithmetic mean charge of $1,387,946.33 would exceed the proposed threshold for new MS-DRG 018 of $1,237,393. As previously noted, KYMRIAH® and YESCARTA® are no longer considered “new” for purposes of new technology add-on payments for FY 2021 and therefore, as previously stated, we are finalizing our proposal to discontinue new technology add-on payments for KYMRIAH® and YESCARTA® for FY 2021.

b. VYXEOS^TM (Daunorubicin and Cytarabine) Liposome for Injection

Jazz Pharmaceuticals, Inc. submitted an application for new technology add-on payments for the VYXEOS^TM technology for FY 2019. VYXEOS^TM was approved by FDA on August 3, 2017, for the treatment of adults with newly diagnosed therapy-related acute myeloid leukemia (t-AML) or AML with myelodysplasia-related changes (AML- MRC). CMS approved VYXEOS^TM for new technology add on payments for FY 2019 (83 FR 41299). We refer readers to section II.H.5.b. of the preamble of the FY 2019 IPPS/LTCH PPS final rule (83 FR 41299 through 41305) and section II.H.4.e. of the preamble of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42187 through 42188) for a complete discussion of the new technology add on payment application, coding, and payment amount for VYXEOS^TM for FY 2019 and FY 2020.

With regard to the newness criterion for VYXEOS^TM, we consider the beginning of the newness period to commence when VYXEOS^TM was approved by FDA (August 3, 2017). Because the 3-year anniversary date of the entry of the VYXEOS^TM onto the U.S. market (August 3, 2020) will occur in FY 2020, we proposed to discontinue new technology add-on payments for this technology for FY 2021. We invited public comments on our proposal to discontinue new technology add-on payments for VYXEOS^TM for FY 2021.

Comment: A commenter supported CMS' proposal to discontinue new technology add-on payments for VYXEOS^TM for FY 2021.

Response: We appreciate the commenter's support. After consideration of the public comments we received, we are finalizing our proposal to discontinue new technology add-on payments for VYXEOS^TM for FY 2021.

c. VABOMERE^TM (Meropenem and Vaborbactam)

Melinta Therapeutics, Inc., submitted an application for new technology add-on payments for VABOMERE^TM for FY 2019. VABOMERE^TM is indicated for use in the treatment of adult patients who have been diagnosed with complicated urinary tract infections (cUTIs), including pyelonephritis caused by designated susceptible bacteria. VABOMERE^TM received FDA approval on August 29, 2017 and was approved for new technology add on payments for FY 2019 (83 FR 41311). We refer readers to section II.H.5.c. of the preamble of the FY 2019 IPPS/LTCH PPS final rule (83 FR 41305 through 41311) and section II.H.4.f. of the preamble of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42188 through 42189) for a complete discussion of the new technology add on payment application, coding, and payment amount for VABOMERE^TM for FY 2019 and FY 2020.

With regard to the newness criterion for VABOMERE^TM, we consider the beginning of the newness period to commence when VABOMERE^TM received FDA approval (August 29, 2017). Because the 3-year anniversary date of the entry of VABOMERE^TM onto the U.S. market (August 29, 2020) will occur in FY 2020, we proposed to discontinue new technology add-on payments for this technology for FY 2021. We invited public comments on our proposal to discontinue new technology add-on payments for VABOMERE^TM for FY 2021.

Comment: Several commenters, including the applicant, did not support CMS' proposal to discontinue new technology add-on payments for FY 2021 for VABOMERE^TM. Commenters highlighted the global health crisis of antimicrobial resistance and corresponding importance of add-on payments for maintaining adequate patient access to novel antibiotics that are effective against multidrug resistant gram-negative bacteria. Some commenters acknowledged the infrequent use of VABOMERE^TM due to antibiotic stewardship considerations, but nonetheless expressed concern about the cost burden of novel agents like VABOMERE^TM in light of limited treatment options. A few commenters urged CMS to consider the data limitations regarding the infrequent use of novel antibiotics and their dispersion across many MS-DRGs as justification for continuing add-on payments for VABOMERE^TM for purposes of additional data collection and further opportunity for relevant MS-DRGs to adjust to the availability of VABOMERE^TM. A commenter, who is also the applicant, suggested that without appropriate reimbursement for novel antibiotics, such as VABOMERE^TM, it is unlikely that manufacturers will continue investing in these vitally necessary products.

Several commenters described what they asserted was the particular value of VABOMERE^TM during the current public health emergency, as extended hospital stays and prolonged ventilator use for many COVID-19 patients can increase the risk of multidrug resistant bacterial infections. A commenter, who is also the applicant, suggested that CMS employ all of the tools within its authority to address the unprecedented financial challenges health care providers are facing as a result of the economic crisis caused by the COVID-19 pandemic and ensuing public health emergency, including, at a minimum, ensuring eligibility continues for the maximum period of time permitted by statute (currently, a full three years) for qualified infectious disease products (QIDPs), including VABOMERE^TM. The applicant also encouraged CMS to implement a DRG carve-out policy for QIDPs that would provide for payment of QIDPs at 100 percent of ASP under the IPPS, which it asserted would improve the balance of incentives for providers who are treating patients with resistant infections, maintain the sustainability of companies that develop and commercialize QIDPs, as well as spur innovation in this critically important area affecting clinical outcomes and public health.

Response: We thank the commenters for their comments. While we appreciate the commenters' concerns, with regard to the technology's newness, as discussed in the FY 2005 IPPS final rule (69 FR 49003), the timeframe that a new technology can be eligible to receive new technology add-on payments begins when data become available. Section 412.87(b)(2) states that a medical service or technology may be considered new within 2 or 3 years after the point at which data begin to become available reflecting the inpatient hospital code assigned to the new service or technology (depending on when a new code is assigned and data on the new service or technology become available for DRG recalibration). Section 412.87(b)(2) also states that after CMS has recalibrated the DRGs, based on available data, to reflect the costs of an otherwise new medical service or technology, the medical service or technology will no longer be considered “new” under the criterion of the section.

In addition, and as discussed in the FY 2006 IPPS final rule (70 FR 47349), we do not believe that case volume is a relevant consideration for making the determination as to whether a product is “new.” Consistent with the statute, a technology no longer qualifies as “new” once it is more than 2 to 3 years old, irrespective of how frequently it has been used in the Medicare population, or how many MS-DRGs the technology may be spread across. Therefore, if a product is more than 2 to 3 years old, we consider its costs to be included in the MS-DRG relative weights whether its use in the Medicare population has been frequent or infrequent. Additionally, we did not propose any policies relating to a DRG carve-out for QIDPs but appreciate the commenter's suggestion.

Based on the reasons stated above, VABOMERE^TM is no longer considered “new” for purposes of new technology add-on payments for FY 2021. We are finalizing our proposal to discontinue new technology add-on payments for VABOMERE^TM for FY 2021.

d. remedē® System

Respicardia, Inc. submitted an application for new technology add-on payments for the remedē® System for FY 2019. The remedē® System is indicated for use as a transvenous phrenic nerve stimulator in the treatment of adult patients who have been diagnosed with moderate to severe central sleep apnea (CSA). On October 6, 2017, the remedē® System was approved by FDA. The remedē® System was approved for new technology add on payments for FY 2019. We refer readers to section II.H.5.d. of the preamble of the FY 2019 IPPS/LTCH PPS final rule (83 FR 41311 through 41320) and section II.H.4.g. of the preamble of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42189 through 42190) for a complete discussion of the new technology add on payment application, coding and payment amount for the remedē® System for FY 2019 and FY 2020.

With regard to the newness criterion for the remedē® System, as we have discussed in prior rulemaking, we consider the beginning of the newness period to commence when the remedē® System was approved by FDA on October 6, 2017. However, as we summarized in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42189 through 42190), a commenter on the FY 2020 IPPS/LTCH PPS proposed rule, who was also the applicant, believed that the newness period for the remedē® System should start on February 1, 2018, instead of the FDA approval date of October 6, 2017. The commenter stated that due to the required build out of operational and commercial capabilities, the remedē® System was not commercially available upon FDA approval and the first case involving its use did not occur until February 1, 2018. The commenter asserted that the date of the first implant should mark the start of the newness period since before that, the technology was not commercially available. In response to that comment, we indicated that we would consider the additional information the applicant provided when proposing whether to continue new technology add-on payments for the remedē® System for FY 2021.

As we have discussed in prior rulemaking (77 FR 53348), generally, our policy is to begin the newness period on the date of FDA approval or clearance or, if later, the date of availability of the product on the U.S. market. With regard to the commenter's assertion that the date of the first implant should mark the start of the newness period, we note that while we may consider a documented delay in a technology's availability on the U.S. market in determining when the newness period begins, under our historical policy, we do not consider how frequently the medical service or technology has been used in our determination of newness (70 FR 47349). As we discussed in the proposed rule, without additional information from the applicant, we cannot determine a newness date based on such a documented delay in commercial availability (and not the first case involving use of the remedē® System on February 1, 2018). However, even if we were to consider the newness period to commence on February 1, 2018, as recommended by the commenter, such that the 3-year anniversary date of the entry of the remedē® System onto the U.S. market would be February 1, 2021 rather than October 6, 2020, that 3-year anniversary date would still occur within the first half of FY 2021. Because the 3-year anniversary date of the entry of the remedē® System onto the U.S. market will occur in the first half of FY 2021, we proposed to discontinue new technology add-on payments for this technology for FY 2021. We invited public comments on our proposal to discontinue new technology add-on payments for the remedē® System for FY 2021.

Comment: A commenter supported CMS' proposal to discontinue new technology add-on payments for FY 2021 for the remedē® System.

Response: We appreciate the commenter's support.

Comment: A commenter did not support CMS' proposal to discontinue new technology add-on payments for FY 2021 for the remedē® System. The commenter, who was also the applicant, requested that CMS extend for one additional year all new technology add-on payments set to expire at the end of FY 2020 due to the extraordinary circumstances of the COVID-19 public health emergency. They expressed concerns that the public health emergency dramatically limited availability of the remedē® System since March 2020, when most elective procedures were halted across the United States. The commenter stated that the reduced access to new technologies for Medicare beneficiaries should be factored into consideration of the newness period expiration date.

Response: We thank the commenter for their comments. While we appreciate the commenter's concerns, with regard to the technology's newness, as discussed in the FY 2005 IPPS final rule (69 FR 49003), the timeframe that a new technology can be eligible to receive new technology add-on payments begins when data become available. Section 412.87(b)(2) states that a medical service or technology may be considered new within 2 or 3 years after the point at which data begin to become available reflecting the inpatient hospital code assigned to the new service or technology (depending on when a new code is assigned and data on the new service or technology become available for DRG recalibration). Section 412.87(b)(2) also states that after CMS has recalibrated the DRGs, based on available data, to reflect the costs of an otherwise new medical service or technology, the medical service or technology will no longer be considered “new” under the criterion of the section. In addition, CMS's policy for determining whether to extend new technology add-on payments for a third year generally applies regardless of the claims volume for the technology. As discussed in the FY 2006 IPPS final rule (70 FR 47349) and earlier in this section, we do not believe that case volume is a relevant consideration for making the determination as to whether a product is “new.” Consistent with the statute, a technology no longer qualifies as “new” once it is more than 2 to 3 years old, irrespective of how frequently it has been used in the Medicare population. Therefore, if a product is more than 2 to 3 years old, we consider its costs to be included in the MS-DRG relative weights whether its use in the Medicare population has been frequent or infrequent.

Based on the reasons stated above, the remedē® System is no longer considered “new” for purposes of new technology add-on payments for FY 2021. We are finalizing our proposal to discontinue new technology add-on payments for the remedē® System for FY 2021.

e. ZEMDRI^TM (Plazomicin)

Achaogen, Inc. submitted an application for new technology add-on payments for ZEMDRI^TM (plazomicin) for FY 2019. According to the applicant, ZEMDRI^TM is a next generation aminoglycoside antibiotic, which has been found in vitro to have enhanced activity against many multidrug resistant (MDR) gram-negative bacteria. The applicant received approval from FDA on June 25, 2018, for use in the treatment of adults who have been diagnosed with cUTIs, including pyelonephritis. ZEMDRI^TM was approved for new technology add on payments for FY 2019 (83 FR 41334). We refer readers to section II.H.5.f. of the preamble of the FY 2019 IPPS/LTCH PPS final rule (83 FR 41326 through 41334) and section II.H.4.h. of the preamble of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42190 through 42191) for a complete discussion of the new technology add on payment application, coding and payment amount for ZEMDRI^TM for FY 2019 and FY 2020.

With regard to the newness criterion for ZEMDRI^TM, we consider the beginning of the newness period to commence when ZEMDRI^TM was approved by FDA on June 25, 2018. As discussed previously in this section, in general, we extend new technology add-on payments for an additional year only if the 3-year anniversary date of the product's entry onto the U.S. market occurs in the latter half of the upcoming fiscal year. Because the 3-year anniversary date of the entry of ZEMDRI^TM onto the U.S. market (June 25, 2021) will occur in the second half of FY 2021, we proposed to continue new technology add-on payments for this technology for FY 2021. We proposed that the maximum new technology add-on payment amount for a case involving the use of ZEMDRI^TM would remain at $4,083.75 for FY 2021 (we refer readers to the FY 2020 IPPS/LTCH PPS final rule for complete discussion of the calculation of the new technology add on payment amount for ZEMDRI^TM). Cases involving ZEMDRI^TM that are eligible for new technology add-on payments are identified by ICD-10-PCS procedure codes XW033G4 (Introduction of Plazomicin anti-infective into peripheral vein, percutaneous approach, new technology group 4) or XW043G4 (Introduction of Plazomicin antiinfective into central vein, percutaneous approach, new technology group 4). We invited public comments on our proposal to continue new technology add-on payments for ZEMDRI^TM for FY 2021.

Comment: A commenter supported CMS' proposal to continue new technology add-on payments for ZEMDRI^TM for FY 2021.

Response: We appreciate the commenter's support. After consideration of the public comments we received, we are finalizing our proposal to continue new technology add-on payments for ZEMDRI^TM for FY 2021. The maximum new technology add-on payment amount for a case involving the use of ZEMDRI^TM will remain at $4,083.75 for FY 2021; that is, 75 percent of the average cost of the technology.

f. GIAPREZA^TM (angiotensin II)

The La Jolla Pharmaceutical Company submitted an application for new technology add-on payments for GIAPREZA^TM for FY 2019. GIAPREZA^TM, a synthetic human angiotensin II, is administered through intravenous infusion to raise blood pressure in adult patients who have been diagnosed with septic or other distributive shock. GIAPREZA^TM was granted a Priority Review designation under FDA's expedited program and received FDA approval on December 21, 2017, for the use in the treatment of adults who have been diagnosed with septic or other distributive shock as an intravenous infusion to increase blood pressure. GIAPREZA^TM was approved for new technology add on payments for FY 2019 (83 FR 41342). We refer readers to section II.H.5.g. of the preamble of the FY 2019 IPPS/LTCH PPS final rule (83 FR 41334 through 41342) and section II.H.4.i. of the preamble of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42191) for a complete discussion of the new technology add on payment application, coding and payment amount for GIAPREZA^TM for FY 2019 and FY 2020.

With regard to the newness criterion for GIAPREZA^TM, we consider the beginning of the newness period to commence when GIAPREZA^TM was approved by FDA (December 21, 2017). As discussed previously in this section, in general, we extend new technology add-on payments for an additional year only if the 3-year anniversary date of the product's entry onto the U.S. market occurs in the latter half of the upcoming fiscal year. Because the 3-year anniversary date of the entry of GIAPREZA^TM onto the U.S. market (December 21, 2020) will occur in the first half of FY 2021, we proposed to discontinue new technology add-on payments for this technology for FY 2021. We invited public comments on our proposal to discontinue new technology add-on payments for GIAPREZA^TM for FY 2021.

Comment: A commenter supported CMS' proposal to discontinue new technology add-on payments for GIAPREZA^TM for FY 2021.

Response: We appreciate the commenter's support. After consideration of the public comments we received, we are finalizing our proposal to discontinue new technology add-on payments for GIAPREZA^TM for FY 2021.

g. Cerebral Protection System (Sentinel® Cerebral Protection System)

Claret Medical, Inc. submitted an application for new technology add-on payments for the Cerebral Protection System (Sentinel® Cerebral Protection System) for FY 2019. According to the applicant, the Sentinel Cerebral Protection System is indicated for the use as an embolic protection (EP) device to capture and remove thrombus and debris while performing transcatheter aortic valve replacement (TAVR) procedures. The device is percutaneously delivered via the right radial artery and is removed upon completion of the TAVR procedure. The De Novo request for the Sentinel® Cerebral Protection System was granted by FDA on June 1, 2017. The Sentinel Cerebral Protection System was approved for new technology add on payments for FY 2019 (83 FR 41348). We refer readers to section II.H.5.h. of the preamble of the FY 2019 IPPS/LTCH PPS final rule (83 FR 41342 through 41348) and section II.H.4.j. of the preamble of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42191 through 42192) for a complete discussion the new technology add on payment application, coding, and payment amount for the Sentinel® Cerebral Protection System for FY 2019 and FY 2020.

With regard to the newness criterion for the Sentinel® Cerebral Protection System, we consider the beginning of the newness period to commence when FDA granted the De Novo request for the Sentinel® Cerebral Protection System (June 1, 2017). Because the 3-year anniversary date of the entry of the Sentinel® Cerebral Protection System onto the U.S. market (June 1, 2020) will occur in FY 2020, we proposed to discontinue new technology add-on payments for this technology for FY 2021. We invited public comments on our proposal to discontinue new technology add-on payments for the Sentinel® Cerebral Protection System for FY 2021.

Comment: A commenter supported CMS' proposal to discontinue new technology add-on payments for the Sentinel® Cerebral Protection System for FY 2021.

Response: We appreciate the commenter's support. After consideration of the public comments we received, we are finalizing our proposal to discontinue new technology add-on payments for the Sentinel® Cerebral Protection System for FY 2021.

h. The AQUABEAM System (Aquablation)

PROCEPT BioRobotics Corporation submitted an application for new technology add-on payments for the AQUABEAM System (Aquablation) for FY 2019. According to the applicant, the AQUABEAM System is indicated for the use in the treatment of patients experiencing lower urinary tract symptoms caused by a diagnosis of benign prostatic hyperplasia (BPH). FDA granted the AQUABEAM System's De Novo request on December 21, 2017, for use in the resection and removal of prostate tissue in males suffering from lower urinary tract symptoms (LUTS) due to benign prostatic hyperplasia. The AQUABEAM System was approved for new technology add on payments for FY 2019 (83 FR 41355). We refer readers to section II.H.5.i. of the preamble of the FY 2019 IPPS/LTCH PPS final rule (83 FR 41348 through 41355) and section II.H.4.k. of the preamble of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42192 through 42193) for a complete discussion of the new technology add on payment application, coding, and payment for the AQUABEAM System for FY 2019 and FY 2020.

With regard to the newness criterion for the AQUABEAM System, we consider the beginning of the newness period to commence on the date FDA granted the De Novo request (December 21, 2017). As discussed previously in this section, in general, we extend new technology add-on payments for an additional year only if the 3-year anniversary date of the product's entry onto the U.S. market occurs in the latter half of the upcoming fiscal year. Because the 3-year anniversary date of the entry of the AQUABEAM System onto the U.S. market (December 21, 2020) will occur in the first half of FY 2021, we proposed to discontinue new technology add-on payments for this technology for FY 2021. We invited public comments on our proposal to discontinue new technology add-on payments for the AQUABEAM System for FY 2021.

Comment: A commenter supported CMS' proposal to discontinue new technology add-on payments for the AQUABEAM System for FY 2021.

Response: We appreciate the commenter's support. After consideration of the public comments we received, we are finalizing our proposal to discontinue new technology add-on payments for the AQUABEAM System for FY 2021.

i. AndexXa^TM (coagulation factor Xa (recombinant), inactivated-zhzo)

Portola Pharmaceuticals, Inc. (Portola) submitted an application for new technology add-on payments for FY 2019 for the use of AndexXa^TM (coagulation factor Xa (recombinant), inactivated-zhzo). AndexXa^TM received FDA approval on May 3, 2018, and is indicated for use in the treatment of patients who are receiving treatment with rivaroxaban and apixaban, when reversal of anticoagulation is needed due to life-threatening or uncontrolled bleeding. AndexXa^TM was approved for new technology add on payments for FY 2019 (83 FR 41362). We refer readers to section II.H.5.j. of the preamble of the FY 2019 IPPS/LTCH PPS final rule (83 FR 41355 through 41362) and section II.H.4.k. of the preamble of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42193 through 42194) for a complete discussion of the new technology add on payment application, coding, and payment amount for AndexXa^TM for FY 2019 and FY 2020.

With regard to the newness criterion for AndexXa^TM, we consider the beginning of the newness period to commence when AndexXa^TM received FDA approval (May 3, 2018). As discussed previously in this section, in general, we extend new technology add-on payments for an additional year only if the 3-year anniversary date of the product's entry onto the U.S. market occurs in the latter half of the upcoming fiscal year. Because the 3-year anniversary date of the entry of AndexXa^TM onto the U.S. market (May 3, 2021) will occur in the second half of FY 2021, we proposed to continue new technology add-on payments for this technology for FY 2021. We proposed that the maximum new technology add-on payment for a case involving AndexXa^TM would remain at $18,281.25 for FY 2021 (we refer readers to the FY 2020 IPPS/LTCH PPS final rule for complete discussion of the calculation of the new technology add on payment amount for AndexXa^TM). Cases involving the use of AndexXa^TM that are eligible for new technology add-on payments are identified by ICD-10-PCS procedure codes XW03372 (Introduction of inactivated coagulation factor Xa into peripheral vein, percutaneous approach, new technology group 2) or XW04372 (Introduction of inactivated coagulation factor Xa into central vein, percutaneous approach, new technology group 2). We invited public comments on our proposal to continue new technology add-on payments for AndexXa^TM for FY 2021.

Comment: Several commenters, including the applicant, supported CMS' proposal to continue new technology add-on payments for FY 2021 for AndexXa^TM.

Response: We appreciate the commenters' support. After consideration of the public comments we received, we are finalizing our proposal to continue new technology add-on payments for AndexXa^TM for FY 2021. The maximum new technology add-on payment amount for a case involving AndexXa^TM will remain at $18,281.25 for FY 2021; that is, 65 percent of the average cost of the technology.

j. AZEDRA® (iobenguane Iodine-131) Solution

Progenics Pharmaceuticals, Inc. submitted an application for new technology add-on payments for AZEDRA® (iobenguane Iodine-131) for FY 2020. AZEDRA® is a drug solution formulated for intravenous (IV) use in the treatment of patients who have been diagnosed with obenguane avid malignant and/or recurrent and/or unresectable pheochromocytoma and paraganglioma (PPGL). AZEDRA was approved by FDA on July 30, 2018, as a radioactive therapeutic agent indicated for the treatment of adult and pediatric patients 12 years and older with iobenguane scan positive, unresectable, locally advanced or metastatic pheochromocytoma or paraganglioma who require systemic anticancer therapy. AZEDRA® was approved for new technology add on payments for FY 2020. We refer readers to section II.H.5.a. of the preamble of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42194 through 42201) for a complete discussion of the new technology add on payment application, coding and payment amount for AZEDRA® for FY 2020.

With regard to the newness criterion for AZEDRA®, we consider the beginning of the newness period to commence when AZEDRA® was approved by FDA (July 30, 2018). As discussed previously in this section, in general, we extend new technology add-on payments for an additional year only if the 3-year anniversary date of the product's entry onto the U.S. market occurs in the latter half of the upcoming fiscal year. Because the 3-year anniversary date of the entry of AZEDRA® onto the U.S. market (July 30, 2021) will occur in the second half of FY 2021, we proposed to continue new technology add-on payments for this technology for FY 2021. We proposed that the maximum new technology add-on payment for a case involving AZEDRA® would remain at $98,150 for FY 2021 (we refer readers to the FY 2020 IPPS/LTCH PPS final rule for complete discussion of the calculation of the new technology add on payment amount for AZEDRA®). Cases involving the use of AZEDRA® that are eligible for new technology add-on payments are identified by ICD-10-PCS procedure codes XW033S5 (Introduction of Iobenguane I-131 antineoplastic into peripheral vein, percutaneous approach, new technology group 5), and XW043S5 (Introduction of Iobenguane I-131 antineoplastic into central vein, percutaneous approach, new technology group 5). We invited public comments on our proposal to continue new technology add-on payments for AZEDRA® for FY 2021.

Comment: Several commenters supported CMS' proposal to continue new technology add-on payments for FY 2021 for AZEDRA®.

Response: We appreciate the commenters' support. After consideration of the public comments we received, we are finalizing our proposal to continue new technology add-on payments for AZEDRA® for FY 2021. The maximum new technology add-on payment amount for a case involving AZEDRA® will remain at $98,150.00 for FY 2021; that is, 65 percent of the average cost of the technology.

k. CABLIVI® (caplacizumab-yhdp)

The Sanofi Company submitted an application for new technology add-on payments for CABLIVI® (caplacizumab-yhdp) for FY 2020. The applicant described CABLIVI® as a humanized bivalent nanobody consisting of two identical building blocks joined by a tri alanine linker, which is administered through intravenous and subcutaneous injection to inhibit microclot formation in adult patients who have been diagnosed with acquired thrombotic thrombocytopenic purpura (aTTP). CABLIVI® received FDA approval on February 6, 2019, for the treatment of adult patients with acquired aTTP, in combination with plasma exchange and immunosuppressive therapy. CABLIVI® was approved for new technology add on payments for FY 2020. We refer readers to section II.H.5.b. of the preamble of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42201 through 42208) for a complete discussion of the new technology add on payment application, coding, and payment amount for CABLIVI® for FY2020.

With regard to the newness criterion for CABLIVI®, we consider the beginning of the newness period to commence when CABLIVI® was approved by FDA (February 6, 2019). Because the 3-year anniversary date of the entry of CABLIVI® onto the U.S. market (February 6, 2022) will occur after FY 2021, we proposed to continue new technology add-on payments for this technology for FY 2021. We proposed that the maximum new technology add-on payment for a case involving CABLIVI® would remain at $33,215 for FY 2021 (we refer readers to the FY 2020 IPPS/LTCH PPS final rule for complete discussion of the calculation of the new technology add on payment amount for CABLIVI®). Cases involving the use of CABLIVI® that are eligible for new technology add-on payments are identified by ICD-10-PCS procedure codes XW013W5 (Introduction of Caplacizumab into subcutaneous tissue, percutaneous approach, new technology group 5), XW033W5 (Introduction of Caplacizumab into peripheral vein, percutaneous approach, new technology group 5) and XW043W5 (Introduction of Caplacizumab into central vein, percutaneous approach, new technology group 5). We invited public comments on our proposal to continue new technology add-on payments for CABLIVI® for FY 2021.

Comment: A commenter supported CMS' proposal to continue new technology add-on payments for CABLIVI® for FY 2021.

Response: We appreciate the commenter's support. After consideration of the public comments we received, we are finalizing our proposal to continue new technology add-on payments for CABLIVI® for FY 2021. The maximum new technology add-on payment amount for a case involving CABLIVI® will remain at $33,215 for FY 2021; that is, 65 percent of the average cost of the technology.

l. ELZONRIS^TM (tagraxofusp-erzs)

Stemline Therapeutics submitted an application for new technology add-on payments for ELZONRIS^TM for FY 2020. ELZONRIS^TM (tagraxofusp-erzs) is a targeted therapy for the treatment of blastic plasmacytoid dendritic cell neoplasm (BPDCN) administered via infusion. On December 21, 2018, FDA approved ELZONRIS^TM for the treatment of blastic plasmacytoid dendritic cell neoplasm in adults and in pediatric patients 2 years old and older. ELZONRIS^TM was approved for new technology add on payments for FY 2020. We refer readers to section II.H.5.e. of the preamble of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42231 through 42237) for a complete discussion of the new technology add on payment application, coding and payment amount for ELZONRIS^TM for FY 2020.

With regard to the newness criterion for ELZONRIS^TM, we consider the beginning of the newness period to commence when ELZONRIS^TM was approved by FDA (December 21, 2018). Because the 3-year anniversary date of the entry of ELZONRIS^TM onto the U.S. market (December 21, 2021) will occur after FY 2021, we proposed to continue new technology add-on payments for this technology for FY 2021. We proposed that the maximum new technology add-on payment for a case involving ELZONRIS^TM would remain at $125,448.05 for FY 2021 (we refer readers to the FY 2020 IPPS/LTCH PPS final rule for complete discussion of the calculation of the new technology add on payment amount for ELZONRIS^TM). Cases involving the use of ELZONRIS^TM that are eligible for new technology add-on payments are identified by ICD-10-PCS procedure codes XW033Q5 (Introduction of Tagraxofusp-erzs antineoplastic into peripheral vein, percutaneous approach, new technology, group 5) and XW043Q5 (Introduction of Tagraxofusp-erzs antineoplastic into central vein, percutaneous approach, new technology group 5). We invited public comments on our proposal to continue new technology add-on payments for ELZONRIS^TM for FY 2021.

Comment: A commenter supported CMS' proposal to continue new technology add-on payments for ELZONRIS^TM for FY 2021.

Response: We appreciate the commenter's support. After consideration of the public comments we received, we are finalizing our proposal to continue new technology add-on payments for ELZONRIS^TM for FY 2021. The maximum new technology add-on payment amount for a case involving ELZONRIS^TM will remain at $125,448.05 for FY 2021; that is, 65 percent of the average cost of the technology.

m. Balversa^TM (Erdafitinib)

Johnson & Johnson Health Care Systems, Inc. (on behalf of Janssen Oncology, Inc.) submitted an application for new technology add-on payments for Balversa^TM for FY 2020. Balversa^TM is indicated for the second line treatment of adult patients who have been diagnosed with locally advanced or metastatic urothelial carcinoma whose tumors exhibit certain fibroblast growth factor receptor (FGFR) genetic alterations as detected by an FDA-approved test, and who have disease progression during or following at least one line of prior chemotherapy including within 12 months of neoadjuvant or adjuvant chemotherapy. Balversa^TM received FDA approval on April 12, 2019. Balversa^TM was approved for new technology add on payments for FY 2020. We refer readers to section II.H.5.f. of the preamble of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42237 through 42242) for a complete discussion of the new technology add on payment application, coding and payment amount for Balversa^TM for FY 2020.

With regard to the newness criterion for Balversa^TM, we consider the beginning of the newness period to commence when Balversa^TM was approved by FDA (April 12, 2019). Because the 3-year anniversary date of the entry of Balversa^TM onto the U.S. market (April 12, 2022) will occur after FY 2021, we proposed to continue new technology add-on payments for this technology for FY 2021. We proposed that the maximum new technology add-on payment for a case involving Balversa^TM would remain at $3,563.23 for FY 2021 (we refer readers to the FY 2020 IPPS/LTCH PPS final rule for complete discussion of the calculation of the new technology add on payment amount for Balversa^TM). Cases involving the use of Balversa^TM that are eligible for new technology add-on payments are identified by ICD-10-PCS procedure code XW0DXL5 (Introduction of Erdafitinib antineoplastic into mouth and pharynx, external approach, new technology group 5). We invited public comments on our proposal to continue new technology add-on payments for Balversa^TM for FY 2021.

Comment: A commenter supported CMS' proposal to continue new technology add-on payments for Balversa^TM for FY 2021.

Response: We appreciate the commenter's support. After consideration of the public comments we received, we are finalizing our proposal to continue new technology add-on payments for Balversa^TM for FY 2021. The maximum new technology add-on payment amount for a case involving Balversa^TM will remain at $3,563.23 for FY 2021; that is, 65 percent of the average cost of the technology.

n. ERLEADA^TM (Apalutamide)

Johnson & Johnson Health Care Systems Inc., on behalf of Janssen Products, LP, Inc., submitted an application for new technology add-on payments for ERLEADA^TM (apalutamide) for FY 2020. This oral drug is an androgen receptor inhibitor approved by FDA on February 14, 2018, for the treatment of patients who have been diagnosed with non-metastatic castration-resistant prostate cancer (nmCRPC). ERLEADA^TM was approved for new technology add on payments for FY 2020. We refer readers to section II.H.5.g. of the preamble of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42242 through 42247) for a complete discussion of the new technology add on payment application, coding and payment amount for ERLEADA^TM for FY 2020.

With regard to the newness criterion for ERLEADA^TM, we consider the beginning of the newness period to commence when ERLEADA^TM was approved by FDA (February 14, 2018). As discussed previously in this section, in general, we extend new technology add-on payments for an additional year only if the 3-year anniversary date of the product's entry onto the U.S. market occurs in the latter half of the upcoming fiscal year. Because the 3-year anniversary date of the entry of ERLEADA^TM onto the U.S. market (February 14, 2021) will occur in the first half of FY 2021, we proposed to discontinue new technology add-on payments for this technology for FY 2021. We invited public comments on our proposal to discontinue new technology add-on payments for ERLEADA^TM for FY 2021.

Comment: A commenter supported CMS' proposal to discontinue new technology add-on payments for ERLEADA^TM for FY 2021.

Response: We appreciate the commenter's support. After consideration of the public comments we received, we are finalizing our proposal to discontinue new technology add-on payments for ERLEADA^TM for FY 2021.

o. SPRAVATO^TM (Esketamine)

Johnson & Johnson Health Care Systems, Inc., on behalf of Janssen Pharmaceuticals, Inc., submitted an application for new technology add-on payments for SPRAVATO^TM (Esketamine) nasal spray for FY 2020. The FDA-approved indication for SPRAVATO^TM is treatment resistant depression (TRD). SPRAVATO^TM Nasal Spray was approved by FDA March 5, 2019. SPRAVATO^TM was approved for new technology add on payments for FY 2020. We refer readers to section II.H.5.h. of the preamble of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42247 through 42256) for a complete discussion of the new technology add on payment application, coding and payment amount for SPRAVATO^TM for FY 2020.

With regard to the newness criterion for SPRAVATO^TM, we consider the beginning of the newness period to commence when SPRAVATO^TM was approved by FDA (March 5, 2019). Because the 3-year anniversary date of the entry of SPRAVATO^TM onto the U.S. market (March 5, 2022) will occur after FY 2021, we proposed to continue new technology add-on payments for this technology for FY 2021. We proposed that the maximum new technology add-on payment for a case involving SPRAVATO^TM would remain at $1,014.79 for FY 2021 (we refer readers to the FY 2020 IPPS/LTCH PPS final rule for complete discussion of the calculation of the new technology add on payment amount for SPRAVATO^TM).

In the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19329), we noted that the applicant had submitted a request to the ICD-10 Coordination and Maintenance Committee for approval for a unique ICD-10-PCS procedure code to specifically identify cases involving the use of SPRAVATO^TM, beginning in FY 2020. As of the time of the development of the FY 2020 IPPS/LTCH PPS final rule, a unique ICD-10-PCS procedure code to specifically identify cases involving the use of SPRAVATO^TM had not yet been finalized in response to the applicant's request. Therefore, we stated that cases reporting SPRAVATO^TM would be identified by ICD-10-PCS procedure code 3E097GC (Introduction of other therapeutic substance into nose, via natural or artificial opening) for FY 2020. Subsequent to the FY 2020 IPPS/LTCH PPS final rule, a unique ICD-10-PCS procedure code to specifically identify cases involving the use of SPRAVATO^TM was finalized, effective October 1, 2020. As a result, cases involving the use of SPRAVATO^TM that are eligible for new technology add-on payments would be identified by ICD-10-PCS procedure code XW097M5 (Introduction of Esketamine Hydrochloride into nose, via natural or artificial opening, new technology group 5) for FY 2021. Because new ICD-10-PCS procedure code XW097M5 is not effective until October 1, 2020, ICD-10-PCS procedure code 3E097GC is the only code available to report the use of the SPRAVATO^TM for FY 2020. For FY 2021, beginning with discharges on or after October 1, 2020, cases involving SPRAVATO^TM that are eligible for new technology add-on payments will be identified using the new ICD-10-PCS procedure code XW097M5 (that is effective for FY 2021). We invited public comments on our proposal to continue new technology add-on payments for SPRAVATO^TM for FY 2021.

Comment: A commenter supported CMS' proposal to continue new technology add-on payments for SPRAVATO^TM for FY 2021.

Response: We appreciate the commenter's support. After consideration of the public comments we received, we are finalizing our proposal to continue new technology add-on payments for SPRAVATO^TM for FY 2021. The maximum new technology add-on payment amount for a case involving SPRAVATO^TM will remain at $1,014.79 for FY 2021; that is, 65 percent of the average cost of the technology.

p. XOSPATA® (gilteritinib)

Astellas Pharma U.S., Inc. submitted an application for new technology add-on payments for XOSPATA® (gilteritinib) for FY 2020. XOSPATA® received FDA approval November 28, 2018 and is indicated for the treatment of adult patients who have been diagnosed with relapsed or refractory acute myeloid leukemia (AML) with a FMS-like tyrosine kinase 3 (FLT3) mutation as detected by an FDA approved test. XOSPATA® was approved for new technology add on payments for FY 2020. We refer readers to section II.H.5.i. of the preamble of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42256 through 42260) for a complete discussion of the new technology add on payment application, coding and payment amount for XOSPATA®.

With regard to the newness criterion for XOSPATA®, we consider the beginning of the newness period to commence when XOSPATA® was approved by FDA (November 28, 2018). Because the 3-year anniversary date of the entry of XOSPATA® onto the U.S. market (November 28, 2021) will occur after FY 2021, we proposed to continue new technology add-on payments for this technology for FY 2021. We proposed that the maximum new technology add-on payment for a case involving XOSPATA® would remain at $7,312.50 for FY 2021 (we refer readers to the FY 2020 IPPS/LTCH PPS final rule for complete discussion of the calculation of the new technology add on payment amount for XOSPATA®). Cases involving the use of XOSPATA® that are eligible for new technology add-on payments are identified by ICD-10-PCS procedure code XW0DXV5 (Introduction of Gilteritinib antineoplastic into mouth and pharynx, external approach, new technology group 5). We invited public comments on our proposal to continue new technology add-on payments for XOSPATA® for FY 2021.

Comment: A commenter supported CMS' proposal to continue new technology add-on payments for XOSPATA® for FY 2021.

Response: We appreciate the commenter's support. After consideration of the public comments we received, we are finalizing our proposal to continue new technology add-on payments for XOSPATA® for FY 2021. The maximum new technology add-on payment amount for a case involving XOSPATA® will remain at $7,312.50 for FY 2021; that is, 65 percent of the average cost of the technology.

q. JAKAFI ^TM (ruxolitinib)

Incyte Corporation submitted an application for new technology add-on payments for JAKAFI ^TM (ruxolitinib) for FY 2020. According to the applicant, JAK inhibition represents a therapeutic approach for the treatment of acute graft-versus-host disease (aGVHD) in patients who have had an inadequate response to corticosteroids. JAKAFI ^TM received FDA approval on May 24, 2019 for the treatment of steroid-refractory aGVHD in adult and pediatric patients 12 years and older. JAKAFI ^TM was approved for new technology add on payments for FY 2020. We refer readers to section II.H.5.k. of the preamble of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42265 through 42273) for a complete discussion of the new technology add on payment application, coding and payment amount for JAKAFI ^TM for FY 2020.

With regard to the newness criterion for JAKAFI ^TM, we consider the beginning of the newness period to commence when JAKAFI ^TM was approved by FDA (May 24, 2019). Because the 3-year anniversary date of the entry of JAKAFI ^TM onto the U.S. market (May 24, 2022) will occur after FY 2021, we proposed to continue new technology add-on payments for this technology for FY 2021. We proposed that the maximum new technology add-on payment for a case involving JAKAFI ^TM would remain at $3,977.06 for FY 2021 (we refer readers to the FY 2020 IPPS/LTCH PPS final rule for complete discussion of the calculation of the new technology add on payment amount for JAKAFI ^TM). Cases involving the use of JAKAFI ^TM that are eligible for new technology add-on payments are identified by ICD-10-PCS procedure code XW0DXT5 (Introduction of Ruxolitinib into mouth and pharynx, external approach, new technology group 5). We invited public comments on our proposal to continue new technology add-on payments for JAKAFI ^TM for FY 2021.

Comment: Several commenters supported our proposal to continue new technology add-on payments for JAKAFI ^TM for FY 2021.

One commenter, who was also the applicant, presented results from a randomized, open-label, multicenter, Phase 3 REACH 2 study comparing ruxolitinib (JAKAFI^TM) with the investigator's choice of therapy in patients with steroid-refractory Grade II-IV aGVHD. The applicant stated that these results were published in May 2020 and reinforced findings from the previously reported Phase 2 REACH1 study. The applicant noted that the REACH2 study met its primary endpoint of overall response rate (ORR) at Day 28 with ruxolitinib treatment (62.3% [96/154]) compared to control therapy (39.4% [61/155]) and that no new safety signals were observed. According to the applicant, the most common adverse events up to Day 28 seen with JAKAFI^TM were thrombocytopenia, anemia, and cytomegalovirus infection. The applicant concluded that these data further support CMS' assessment that JAKAFI^TM met the substantial clinical improvement criterion in FY 2020.

The same commenter provided updated cost information and requested that we revise the maximum add-on payment amount for JAKAFI^TM to account for an increase in the Wholesale Acquisition Cost, which is currently $13,504 per 60 tablets. The commenter stated that per the FY 2020 IPPS final rule, CMS calculated the maximum new technology add-on payment using the WAC for 60 JAKAFI^TM tablets, determining the per tablet amount, multiplying that figure by two (as JAKAFI^TM is taken twice daily), and using a 14 day anticipated duration. Under this methodology, the average cost of JAKAFI^TM per case would change from $6,118.56 to $6,301.86 ($13,504/60 * 2 * 14), and limiting the maximum add-on payment to the lesser of 65% of the cost of the technology or 65% of the amount by which the costs of the case exceed the MS-DRG payment would result in a maximum payment of $4,096.21 for JAKAFI^TM for FY 2021.

Response: We appreciate the commenters' support and the updated cost information submitted by the applicant.

After consideration of the public comments we received, we are finalizing our proposal, with modification, to continue new technology add-on payments for JAKAFI ^TM for FY 2021. Based on the applicant's updated cost information, the maximum new technology add-on payment for a case involving the use of JAKAFI^TM is $4,096.21 for FY 2021; that is, 65 percent of the average cost of the technology.

r. T2Bacteria® Panel (T2Bacteria Test Panel)

T2Biosystems, Inc. submitted an application for new technology add-on payments for the T2Bacteria Test Panel (T2Bacteria® Panel) for FY 2020. The T2Bacteria® Panel received 510(k) clearance from FDA on May 24, 2018 for use as an aid in the diagnosis of bacteremia, bacterial presence in the blood, which is a precursor for sepsis. Per the FDA-cleared indication, results from the T2Bacteria® Panel are not intended to be used as the sole basis for diagnosis, treatment, or other patient management decisions in patients with suspected bacteremia. Concomitant blood cultures are necessary to recover organisms for susceptibility testing or further identification, and for organisms not detected by the T2Bacteria® Panel. The T2Bacteria® Panel was approved for new technology add on payments for FY 2020. We refer readers to section II.H.5.m. of the preamble of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42278 through 42288) for a complete discussion of the new technology add on payment application, coding and payment amount for the T2Bacteria® Panel for FY 2020.

With regard to the newness criterion for the T2Bacteria ® Panel, we consider the beginning of the newness period to commence when the T2Bacteria ® Panel was cleared by FDA (May 24, 2018). As discussed previously in this section, in general, we extend new technology add-on payments for an additional year only if the 3-year anniversary date of the product's entry onto the U.S. market occurs in the latter half of the upcoming fiscal year. Because the 3-year anniversary date of the entry of the T2Bacteria ® Panel onto the U.S. market (May 24, 2021) will occur in the second half of FY 2021, we proposed to continue new technology add-on payments for this technology for FY 2021. We proposed that the maximum new technology add-on payment for a case involving the T2Bacteria ® Panel would remain at $97.50 for FY 2021 (we refer readers to the FY 2020 IPPS/LTCH PPS final rule for complete discussion of the calculation of the new technology add on payment amount for the T2Bacteria ® Panel). Cases involving the use of the T2Bacteria ® Panel that are eligible for new technology add-on payments are identified by ICD-10-PCS procedure code XXE5XM5 (Measurement of infection, whole blood nucleic acid-base microbial detection, new technology group 5). We invited public comments on our proposal to continue new technology add-on payments for the T2Bacteria ® Panel for FY 2021.

Comment: Several commenters expressed support for our proposed continuation of new technology add-on payments for the T2Bacteria ® Panel for FY 2021. One commenter, who was also the applicant, stated that continuation of these payments for a second year is not only consistent with CMS' longstanding definition of newness but is also critical to increasing beneficiary access to the T2Bacteria ® Panel. The commenter noted that sepsis is the most expensive U.S. hospital-treated condition, representing $23.7 billion in healthcare costs per year and contributing to greater than 35% of inpatient deaths, many of them Medicare beneficiaries. The commenter concluded that, by enabling greater clinician access to the T2Bacteria ® Panel, CMS is playing a significant role in making sure Medicare beneficiaries receive the most effective therapy for the pathogen that they are infected with, reducing length-of-stay in the hospital and saving lives.

Response: We appreciate the commenters' support. After consideration of the public comments we received, we are finalizing our proposal to continue new technology add-on payments for the T2Bacteria ® Panel for FY 2021. The maximum new technology add-on payment amount for a case involving the T2Bacteria ® Panel will remain at $97.50 for FY 2021; that is, 65 percent of the average cost of the technology.

5. FY 2021 Applications for New Technology Add-On Payments (Traditional Pathway)

We received 17 applications for new technology add-on payments for FY 2021. In accordance with the regulations under § 412.87(e), applicants for new technology add-on payments must have FDA approval or clearance by July 1 of the year prior to the beginning of the fiscal year for which the application is being considered. Two applicants withdrew their applications prior to the issuance of the proposed rule. Three applicants, Accelerate Diagnostics, Inc (the applicant for Accelerate PhenoTest ^TM BC kit), Kite Pharma (the applicant for KTE-X19) and Juno Therapeutics, a Bristol-Myers Squibb Company (the applicant for Liso-cel) did not meet the deadline of July 1 for FDA approval or clearance of the technology and, therefore, the technologies are not eligible for consideration for new technology add-on payments for FY 2021. We note that we did receive some comments requesting that CMS extend the July 1 deadline for applications to receive FDA marketing authorization for FY 2021 due to the COVID-19 public health emergency. The July 1 deadline for FDA approval or clearance for consideration of new technology add-on payment applications, as set forth in the regulations at § 412.87(e), continues to apply to applications for new technology add-on payments for FY 2021, subject to our proposed conditional approval process for certain antimicrobial products. A discussion of the remaining 12 applications, which met this deadline, is presented in this final rule.

b. BioFire ® FilmArray ® Pneumonia Panel

BioFire Diagnostics, LLC submitted an application for new technology add-on payments for the BioFire ® FilmArray ® Pneumonia Panel for FY 2021. According to the applicant, the BioFire ® FilmArray ® Pneumonia Panel identifies 33 clinically relevant targets, including bacterial and viral targets, from sputum (including endotracheal aspirate) and bronchoalveolar lavage (including mini-BAL) samples in about an hour. The applicant also stated that for 15 bacteria, the BioFire ® FilmArray ® Pneumonia Panel provides semi-quantitative results, which may help determine whether an organism is a colonizer or a pathogen.

According to the applicant, lower respiratory tract infections are a leading cause of morbidity and mortality. The applicant stated that world-wide, they are the leading cause of infectious disease death and the 5th leading overall cause of death. The applicant also asserted that in the United States, community acquired pneumonia (CAP) is the second most common cause of hospitalization and the most common infectious disease cause of death. The applicant also stated that in addition to CAP, Hospital-acquired Pneumonia (HAP) and Ventilator-associated Pneumonia (VAP) are the most common hospital acquired infections (HAI) accounting for 22 percent of all HAIs. According to the applicant, HAP and VAP are of particular concern for patients admitted to intensive care units (ICUs) where mortality rates can be up to 50 percent.

According to the applicant, timely administration of effective antibiotics is essential for ensuring a good prognosis. The applicant stated that mortality increases for each hour of delay in initiating antibiotic therapy for hospitalized pneumonia patients, and ideally, antimicrobial therapy would be pathogen-specific and guided by the results of microbiology tests. However, the applicant stated that current microbiologic methods are slow and fail to identify a causative pathogen in over 50 percent of patients, even when comprehensive methods are used. As a result, the applicant noted that current guidelines recommend empiric treatment with broad spectrum antibiotics, and that broad-spectrum antibiotics lead to overuse of antibiotics, which increases the risk of an antibiotic related adverse event (for example, diarrhea, allergic reactions, C. difficile infection) for the patient and contributes to the well-known problem of antimicrobial resistance. In addition, the applicant noted that 6-15 percent of hospitalized patients with CAP fail to respond to the initial antibiotic treatment, in part due to ineffective antibiotic therapy.

According to the applicant, there are three current methods for determining the causative organism of pneumonia: bacterial culture, lab developed and commercial singleplex PCR (polymerase chain reaction) tests, and off-label use of upper respiratory multiplex syndromic panels.

According to the applicant, semi-quantitative bacterial culture is routinely performed on lower respiratory specimens. The applicant explained that a calibrated loop is used to spread sample on appropriate media. A quadrant streak method is generally employed and, depending on how many of the quadrants the organism grows in, determines its semi-quantification. According to the applicant, normal flora will often grow in all 4 quadrants and technicians must differentiate between potential pathogens and normal flora, and potential pathogens are picked from the plate and isolated on another media plate. According to the applicant, after growing isolate, final identification and susceptibility is performed.

According to the applicant, there are also FDA and lab-developed tests for single targets that cause pneumonia. The applicant stated that these are for the more serious pathogens (for example, Methicillin resistant Staphylococcus aureus, MRSA) or fastidious organisms (for example, Mycobacterium tuberculosis). According to the applicant, these tests range from sample-to-answer (Cepheid ® Xpert ® MTB/RIF) to lab-developed tests that are often multi-step and multiple pieces of equipment that require isolating nucleic acid from a sample and then adding appropriate reagents to perform a PCR assay on the isolated nucleic acid.

According to the applicant, a number of academic hospital labs have also performed off-label validation of commercially available respiratory panels designed for upper respiratory syndromes. The applicant stated that these tests are used primarily on BAL specimens for the rapid detection of viral causes of Pneumonia.

With respect to the newness criterion, the BioFire® FilmArray® Pneumonia Panel received FDA clearance via 510(k) on November 9, 2018, based on a determination of substantial equivalence to a legally marketed predicate device (Curetis Unyvero^TM). According to the applicant, the Pneumonia Panel was launched globally on December 11, 2018. According to the applicant, there was a delay between FDA clearance date and U.S. market availability (global launch date) in order to satisfy documentation requirements in preparation of the global launch. The applicant stated that it has been granted a Proprietary Laboratory Analyses (PLA) code by the American Medical Association; PLA Code 0151U was published on October 1, 2019 and became effective on January 1, 2020. According to the applicant, the PLA code assigned to the BioFire® FilmArray® Pneumonia Panel uniquely identifies this test and no other technologies use this code. The applicant submitted a request for approval for a unique ICD-10-PCS code for the administration of the BioFire® FilmArray® Pneumonia Panel beginning in FY 2021 and was granted approval for the following procedure code effective October 1, 2020: XXEBXQ6 (Measurement of infection, lower respiratory fluid nucleic acid-base microbial detection, new technology group 6).

As discussed previously, if a technology meets all three of the substantial similarity criteria, it would be considered substantially similar to an existing technology and would not be considered “new” for purposes of new technology add-on payments.

With regard to the first criterion, whether a product uses the same or similar mechanism of action to achieve a therapeutic outcome, according to the applicant, the BioFire® FilmArray® Pneumonia Panel is the only sample-to-answer, rapid (~1 hour), and comprehensive molecular panel available for the diagnosis of the major bacterial and viral causes of infectious pneumonia. The applicant further explained that the BioFire® FilmArray® Pneumonia Panel is also the only semi-quantitative molecular solution available for rapidly diagnosing infectious causes of pneumonia. The applicant noted that this important feature allows labs and clinicians to better differentiate whether an organism is normal flora or the cause of the patient's illness. The applicant asserted that the current best practice is standard culture technique, discussed previously. The applicant further stated that other comprehensive molecular technologies include Curetis Unyvero^TM which is a multi-step process, only has bacterial targets, and only provides qualitative results for all of its targets.

With respect to the second criterion, whether a product is assigned to the same or a different MS-DRG, the applicant stated that potential cases representing patients who may be eligible for treatment involving the BioFire® FilmArray® Pneumonia Panel would be assigned to the same MS-DRGs as cases representing patients who receive diagnostic information from competing technologies.

With respect to the third criterion, whether the new use of the technology involves the treatment of the same or similar type of disease and the same or similar patient population, according to the applicant, the BioFire® FilmArray® Pneumonia Panel is the only FDA cleared comprehensive molecular panel approved for use on both sputum (including endotracheal aspirate) and bronchoalveolar lavage (including mini-BAL) samples allowing for diagnosis of pneumonia in hospital, community, and ventilator associated populations. The applicant stated that the BioFire® FilmArray® Pneumonia Panel is also the only molecular panel that detects both bacterial and viral causes of lower respiratory infections and pneumonia.

In addition, the applicant added that the ability of the BioFire® FilmArray® Pneumonia Panel to detect pathogens and related susceptibility traits is a unique feature of the panel that differentiates it from existing respiratory panels that have been designed and approved for use on upper respiratory specimens and not lower respiratory specimens. The applicant stated that Furukawa, D., et al., evaluated the ability of the BioFire® FilmArray® Pneumonia Panel to detect pathogens and related susceptibility traits, specifically looking at the impact of MRSA detection, and showed that the BioFire® FilmArray® Pneumonia panel has the potential to significantly expedite time to MRSA results allowing for rapid escalation or de-escalation of therapy.

We stated in the proposed rule that based on the applicant's statements as presented previously, we are concerned there is insufficient information to determine whether the BioFire® FilmArray® Pneumonia Panel mechanism of action is different from existing products. In the FDA decision summary, the test is described as a multiplex nucleic acid test, or PCR accompanied by the applicant's software. However, it is unclear from the new technology add-on payment application how the mechanism of action is new or different from other products that utilize PCR. While the applicant described this test as the only sample-to-answer, rapid (~1 hour), and comprehensive molecular panel available for the diagnosis of the major causes of infectious pneumonia and as also semi-quantitative, and further described another comprehensive molecular product (Curetis Unyvero^TM) as having only bacterial targets and providing only qualitative results for all of its targets, we stated that we are uncertain how the underlying mechanism of action of the BioFire® FilmArray® Pneumonia Panel is different from existing PCR-based tests. Additionally, based on the information provided by the applicant, we stated that it appears as though the product does not treat a different disease or population compared to other products. Finally, with respect to the Furukawa study, which the applicant cited to support that the BioFire has the potential to specifically expedite time to MRSA results allowing for rapid escalation or de-escalation of therapy, we noted that the study authors also concluded that the BioFire® FilmArray® Pneumonia Panel “has good agreement with SOC for detection of bacteria and viruses” and that the BioFire® FilmArray® Pneumonia Panel “detects additional S. aureus bacteria not reported by SOC,” but that “[a]dditional S. aureus detection are more likely to be at low concentration and are of unclear clinical significance.” We invited public comments on whether the BioFire® FilmArray® Pneumonia Panel is substantially similar to other technologies and whether the BioFire® FilmArray® Pneumonia Panel meets the newness criterion.

We did not receive any public comments on whether the BioFire® FilmArray® Pneumonia Panel meets the newness criterion. We continue to have the same concerns as summarized in the proposed rule that the BioFire® FilmArray® Pneumonia Panel is substantially similar to other products that are currently available on the U.S. market. Despite the information the applicant previously submitted with its application describing the BioFire® FilmArray® Pneumonia Panel as the only sample-to-answer, rapid (~1 hour), and comprehensive molecular panel available for the diagnosis of the major causes of infectious pneumonia and as also semi-quantitative, it remains unclear how the mechanism of action is specifically new or different from other products that utilize PCR. Moreover, it appears that the patient population of cases that may be eligible for tests using the BioFire® FilmArray® Pneumonia Panel also currently has access to other PCR-based tests and similar technologies that are also used in the testing of similar conditions. Therefore, we are unable to determine that the BioFire® FilmArray® Pneumonia Panel meets the newness criterion.

With regard to the cost criterion, the applicant conducted the following analysis to demonstrate that the technology meets the cost criterion.

The applicant stated that it used 2018 data from Definitive Health Care at defhc.com, and that it searched these data for cases in MS-DRGs 193, 194, and 195 (Simple Pneumonia and Pleurisy with MCC, with CC, and without CC/MCC, respectively), which resulted in 297,956 cases. The applicant indicated that the data was from proprietary data drawn from one hospital in Indianapolis in 2018. However, the scope of the data as described by the applicant is unclear to us, as it seems unlikely that a single hospital in Indiana would have observed 297, 956 cases of simple pneumonia in 1 year. It is also not clear how these cases correspond to any of the later steps in the cost analysis. For example, the applicant did not indicate whether the charge values from the data are based on the same 297,956 cases identified in the three MS-DRGs.

In its analysis, the applicant stated that no charges were removed for any prior technologies as the BioFire® FilmArray® Pneumonia Panel does not eliminate culture testing of specimens. The applicant standardized the charges and then inflated the charges. The applicant reported using an inflation factor of 5.50 percent based on the charge inflation factor published by CMS in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42629). The applicant appears to have made a minor error in this inflation factor, since the actual, 1-year inflation factor in the FY 2020 IPPS/LTCH PPS final rule was 5.4 percent. To estimate the cost of the technology, the applicant used the per-test list price cost of the BioFire® FilmArray® Pneumonia Panel. The applicant indicated that it did not incorporate an estimate of technician time spent administering the test, asserting that “2-5 minutes of technician time is nearly obsolete due to ease of use of the test.” The applicant also indicated that it did not incorporate an estimate of instrumentation cost into its costing of the BioFire® FilmArray® Pneumonia Panel, noting that “a number of” labs already have sufficient instrumentation to run the BioFire® FilmArray® Pneumonia Panel test. The applicant added charges for the BioFire® FilmArray® Pneumonia Panel based on an estimated range of projected patient charges for the BioFire® FilmArray® Pneumonia Panel technology. The applicant stated that the charge to the patient varies by location and the methodology of the hospital or lab charge master. The applicant noted that the estimate was based on patient charges for other BioFire® products that had been reported by hospitals and reference labs. Based on this analysis, the applicant computed a final inflated average case-weighted standardized charge per case of $78,156, as compared to an average case-weighted threshold amount of $42,812. Because the final inflated average case-weighted standardized charge per case exceeded the average case-weighted threshold amount, the applicant asserted that the technology meets the cost criterion.

We stated in the proposed rule that we are concerned that many of the calculated values in the applicant's analysis, such as the average-cost-per case, unweighted and unstandardized, were reportedly based on proprietary claims data that came from one hospital in Indianapolis. We are concerned that an analysis based on one hospital would not adequately represent the cost of cases using the BioFire® FilmArray® Pneumonia Panel as the data could be skewed or biased based on one hospital. We stated in the proposed rule that we are also concerned with the lack of description of how the BioFire® FilmArray® Pneumonia Panel maps to the three MS-DRGs for simple pneumonia (that is, MS-DRGs 193, 194 and 195); for example, whether the analysis included all the cases in these MS-DRGs or was limited to specific cases. We note there are several additional pneumonia-related MS-DRGs to which we believe potential cases that may be eligible for the use of the product could be mapped, but which were not included in the cost analysis; for example, MS-DRGs 177, 178 and 179 (Respiratory Infections and Inflammations with MCC, with CC, and without CC/MCC, respectively) and MS-DRGs 974, 975, and 976 (HIV with Major Related Condition with MCC, with CC, and without CC/MCC, respectively). We invited public comments on whether the BioFire® FilmArray® Pneumonia Panel meets the cost criterion.

We did not receive any public comments on whether the BioFire® FilmArray® Pneumonia Panel meets the cost criterion. We continue to have the same concerns regarding the cost analysis for the BioFire® FilmArray® Pneumonia Panel as summarized previously. We remain concerned that many of the calculated values in the applicant's analysis would not adequately represent the cost of cases using the BioFire® FilmArray® Pneumonia Panel as they are based on proprietary claims data that came from one hospital. We also continue to be concerned with the lack of description of how the BioFire® FilmArray® Pneumonia Panel maps to the three MS-DRGs for simple pneumonia (that is, MS-DRGs 193, 194 and 195); for example, whether the analysis included all the cases in these MS-DRGs or was limited to specific cases. Therefore, we are unable to determine that the BioFire® FilmArray® Pneumonia Panel meets the cost criterion.

With respect to the substantial clinical improvement criterion, the applicant asserted that data from studies conducted with the BioFire® FilmArray® Pneumonia Panel show that it can detect major causes of pneumonia with a high degree of sensitivity and specificity in a clinically relevant timeframe. The applicant explained that results from the BioFire® FilmArray® Pneumonia Panel also have the potential to impact antibiotic usage and lead to improved stewardship and possible cost savings.

The applicant submitted four studies presented as posters at national conferences to support its assertion that the product represents a substantial clinical improvement, noting that data for this test is still new and has not yet been published in academic journals.

According to the applicant, Buchan, et al. compared the results of conventional testing (bacterial culture and clinician directed molecular testing for viruses and atypical bacteria) with the results from the BioFire® FilmArray® Pneumonia Panel for 259 BAL and 48 sputum samples. We note that in their poster, Buchan, et al. specified that conventional testing specifically included bacterial culture and PCR based on clinician order. Also, while Buchan, et al. did report on the BAL specimens, the poster did not appear to report information regarding sputum samples. According to Buchan, et al., specimens were obtained from inpatients aged 18 years and older with symptoms of respiratory tract infection at 8 hospitals in the U.S. Chart review was conducted to determine type and duration of antibiotic therapy for each subject. According to the applicant, at least one bacterial pathogen was identified by standard methods and by the BioFire® FilmArray® Pneumonia Panel for 23 percent of BALs samples (n=60) and 35 percent (n=17) of sputum samples; however, the BioFire® FilmArray® Pneumonia Panel detected a bacterial pathogen in an additional 15 percent (n=40) of BAL samples and 21 percent (n=10) of the sputum samples. For the 259 BAL samples, 75 bacteria were identified by both standard methods and by the BioFire® FilmArray® Pneumonia Panel. The applicant noted that the BioFire® FilmArray® Pneumonia Panel identified an additional 84 bacteria, with the most common detections for Staphylococcus aureus (N=21), Haemophilus influenzea (n=19), Moxaella catarrhalis (n=8), Pseudomonas aeruginosa (n=6) and Klebsiella oxytoca (n=6). The applicant also explained that an evaluation of the medical and laboratory records for the affected patients found that 50 percent had been on antibiotics within 72 hours of samples collection, 42 percent of the organisms may have been present in the culture but were not reported (due either to low quantification (<10⁴ cfu/mL) or the presence of mixed colonies) and only 8 percent of the detections were unexplained.

According to the applicant, an important feature of the BioFire® FilmArray® Pneumonia Panel is the inclusion of assays for viral agents. The applicant noted that in Buchan, et al., the BioFire® FilmArray® Pneumonia Panel identified at least 1 virus in 19 percent of 259 BAL samples from hospitalized adults and viruses were the only pathogen detection in 12 percent (n=31) of BAL specimens, while 7 percent (n=18) had both bacterial and viral pathogen detections. The applicant summarized that the most common viral pathogens were human rhinovirus (n=17), coronavirus (n=9) and influenza (n=5). Twenty-three percent of the samples with a viral detection had a corresponding test ordered as part of standard of care. The applicant stated that this finding highlights that the role of viruses in pneumonia is still under appreciated. The applicant further stated that identification of a viral agent in the absence of a bacterial detection may allow reduction in the use of antibiotics.

According to the applicant, the ability of the BioFire® FilmArray® Pneumonia Panel to impact patient management has been evaluated by two different groups (Buchan, et al. and Enne, et al). The applicant stated that Buchan, et al. performed a theoretical outcomes analysis by using the result of the BioFire® FilmArray® Pneumonia Panel to modify antimicrobial therapy and then judge if the modification was correct using the final microbiology results. The applicant explained that in this analysis of 243 BAL samples, 68 percent (n=165) could have had an antibiotic adjustment; 48 percent (n=122) would have had antibiotics appropriately de-escalated or discontinued, 31 percent (n=78) would have had no change, and 2 percent (n=5) would have had appropriate escalation or initiation of antibiotics. Alternately, 17 percent (n=42) would have received inappropriate escalation and 2 percent (n=6) would have received inappropriate de-escalation when compared to culture results. The applicant summarized that the most common de-escalations occurred due to discontinuation of vancomycin due to non-detection of MRSA (35 percent) and discontinuation of piperacillin/tazobactam due to non-detection of Enterobacteriaceae (23 percent). According to the applicant, the de-escalation due to non-detection of these pathogens is possible because the increased sensitivity of the BioFire® FilmArray® Pneumonia Panel for detection of bacterial pathogen provides a high negative predictive value for these non-detections. The applicant explained that the authors estimated the results could have potentially saved >18,000 antibiotic hours equating to an average of 6.5 days/patient (we note that in the poster by Buchan, et al., they reported an average of 6.2 d/patient rather than 6.5 mentioned in the application).

According to the applicant, in an analysis of 120 ICU patients (79 males and 41 females; 33 children, with a median age of 1; and adults with a median age of 68) in the UK by Enne, et al., patients were divided into a group with positive outcomes (pneumonia resolved within 21 days) and negative outcomes (pneumonia not resolved in 21 days or contributed to the patient's death). Enne, et al., evaluated the appropriateness of antimicrobials used for HAP/VAP versus both routine culture and two rapid PCR tests, BioFire® FilmArray® Pneumonia Panel (1h) and Curetis Unyvero^TM Pneumonia Panel (5.5h). Consented or assented ICU patients were recruited at 4 diverse UK hospitals: 1 district general, 1 tertiary referral, 1 children's and 1 private. Patients were those starting or changing antibiotics for suspected pneumonia, already hospitalized for >48h and with a timely respiratory sample. According to the applicant, the results of the BioFire® FilmArray® Pneumonia Panel and routine culture were evaluated to determine if the test results would have identified the antibiotic therapy as active or inactive. The applicant explained that in the group with positive outcomes, the results of the BioFire® FilmArray® Pneumonia Panel were able to correctly classify the patient's therapy as active for 35 percent of patients compared to only 20 percent for routine culture (p=0.005). The applicant also explained that in the group of 27 percent of patients that had negative outcomes, the results of the BioFire® FilmArray® Pneumonia Panel would have classified the initial antibiotic therapy as inactive for 41 percent of patients compared to only 15.6 percent for routine culture. The study authors also reported that routine microbiology and Curetis Unyvero^TM detected a potential pathogen in 41.7 percent and 59.2 percent of specimens respectively, whereas BioFire® FilmArray® Pneumonia Panel detected a potential pathogen in 66.7 percent of respiratory samples from patients enrolled in the study. The applicant stated that these study results indicate that the test results of the BioFire® FilmArray® Pneumonia Panel provide information that can lead to more targeted and effective therapy in a shorter period of time, and may help to improve patient outcomes.

The applicant also submitted Rand et al., which conducted a retrospective analysis of BAL (n=197) and endotracheal aspirates (n=93) samples from 270 unique hospitalized patients that were collected and stored at −70° C until thawed and tested on the BioFire® FilmArray® Pneumonia Panel compared to routine microbiology results. Patient data were extracted from the electronic medical record. Cultures were performed by standard methods and identified by Vitek II and mass spectrometry. The applicant explained that the authors found a high correlation between standard methods and BioFire® FilmArray® results and that the authors concluded the BioFire® FilmArray® Pneumonia Panel would have had a significant impact on time to result which could potentially lead to more rapid and appropriate use of antibiotics. The applicant also noted that the authors found significant association with clinical/outcome variables and that the BioFire® FilmArray® Pneumonia Panel's semi-quantification was “at least as strong” as standard culture methods, which according to the applicant, have been developed and improved over decades.

The applicant also submitted White, et al., which conducted a comparison of the BioFire® FilmArray® Pneumonia Panel on sputum samples to a multi-test diagnostic bundle for patients admitted from the emergency department (ED) with community acquired pneumonia (CAP). We note that White, et al. specifically described the diagnostic bundle as including the following: (1) Blood Cultures; (2) Sputum culture and sensitivity; (3) Urine antigens: Legionella and S. pneumoniae; (4) Nasal swab (NS) PCR for MRSA and S. pneumoniae; (5) FilmArray (Biofire) PCR Panel (NS): Detects 17 viruses, 4 bacteria. Of 585 enrolled patients, 278 were evaluable. The applicant explained that the authors found that the BioFire® FilmArray® Pneumonia Panel detected a higher rate of potential pathogens than the multi-test bundle (90.6 percent versus 81 percent). The applicant also noted that the authors determined that the urine antigen testing, S. aureus and S. pnuemoniae, and PCR upper respiratory panel use could be eliminated for this sample/patient type in the future.

The applicant also submitted a poster by Furukawa, et al. which reported a retrospective case review of 43 samples (17 used for clinical use and 26 obtained randomly by microbiology lab) in which BioFire® FilmArray® Multiplex PCR was utilized. According to the applicant, initial use of BioFire FilmArray Pneumonia panel had 100 percent intervention rate leading to de-escalation or prevention of inappropriate antibiotics and the authors found that there was a low risk of unnecessary antibiotics being administered due to the increased sensitivity of the BioFire® FilmArray® Pneumonia panel. The applicant added that the authors believe that with additional data they may be able to discontinue empiric broad spectrum coverage due to the rapid and sensitive nature of the BioFire FilmArray Pneumonia Panel. The applicant also noted that they have a number of ongoing prospective studies being conducted to further support their claims.

The applicant asserted that Buchan, et al. and Rand, et al. support their claim of decreased time to actionable results based on: (1) The conclusion in Buchan, et al., that greater than 60 percent of patients potentially could have had an antibiotic adjustment 3-4 days earlier than standard methods based on BioFire® FilmArray® Pneumonia Panel results, and (2) the conclusion in Rand, et al., that the BioFire® FilmArray® Pneumonia Panel would have a major impact on the time to report potential pathogens that may cause Pneumonia in intubated/ICU patients.

The applicant asserted that Buchan, et al., and Enne, et al. support their claim of improved antibiotic stewardship. The applicant pointed to the conclusions in Buchan, et al., that >60 percent of patients potentially could have had an antibiotic adjustment with BioFire® FilmArray® Pneumonia Panel results and 50 percent of potential antibiotic adjustments from BioFire® FilmArray® Pneumonia Panel testing were discontinuation or narrowing, as well as the estimate that the BioFire® FilmArray® Pneumonia Panel results enabled >18,000 antibiotic hours saved on 243 patients. The applicant pointed to Enne, et al. for the results that of the 27 percent of patients who had negative outcomes, 15.6 percent had a pathogen resistant to initial therapy based on culture and 41.9 percent were resistant to initial therapy based on BioFire® FilmArray® Pneumonia Panel results (p=0.029).

The applicant asserted that White, et al. and Enne, et al. support its claim of increased diagnostic yield because White, et al. concluded that of patients with a final diagnosis of pneumonia, BioFire® FilmArray® Pneumonia Panel detected a potential pathogen in 90.6 percent compared to 81 percent with standard methods, and Enne, et al. reported that routine methods detected a pathogen in 41.7 percent of specimens compared to the BioFire® FilmArray® Pneumonia Panel which detected a pathogen in 66.7 percent of specimens.

In summary, the applicant explained that lower respiratory tract infections are a common and serious health care problem, current diagnostic tests are slow and do not identify a causative pathogen in over 50 percent of patients, and the BioFire® FilmArray® Pneumonia Panel is an easy-to-use multiplex panel that has been shown to increase diagnostic yield and significantly decrease time to results when compared to standard testing both because of improved test sensitivity and because it includes assays for typical bacteria, viruses and selected antibiotic resistance genes. According to the applicant, retrospective review of BioFire® FilmArray® Pneumonia Panel and patient data indicates a potential to impact antibiotic utilization to ensure patients are on appropriate therapy in a timely manner. The applicant also noted that molecular testing for pneumonia is relatively new and there is a lot to learn about how to best use these tests, and that there are currently several prospective studies underway to clarify the role that this tool may play in improving the outcomes for patients with pneumonia, reducing use of unnecessary antibiotics, improving targeted therapy and potentially reducing health care costs due to more directed and efficient patient management. According to the applicant, early theoretical outcomes evaluations provide reason to be optimistic.

We noted in the proposed rule that the studies the applicant submitted to support its assertions regarding substantial clinical improvement were presented only as posters, and that information pertaining to full manuscripts with further study details were not provided. We stated that it is also unclear if the studies described in the posters have been submitted for peer-reviewed publication or whether full manuscripts with detailed methods and data tables are available.

We stated in the proposed rule that we are concerned that the studies do not appear to be designed or powered to be able to show conclusive evidence of clinical impact. In particular, the studies appear to describe analysis of clinical results for patients and state that there is potential for the results to impact clinical decisions about antimicrobial therapy. However, it appears the applicant did not submit evidence of the BioFire® FilmArray® Pneumonia Panel product in real-world, prospective use (randomized or non-randomized) with actual antimicrobial decisions or effect on patient management. This may require larger sample sizes. We stated that we are also concerned that only one study provided by the applicant (Enne, et al.) compared BioFire® FilmArray® Pneumonia Panel to Curetis Unyvero^TM, which is another PCR-based technology, and that a statistical difference was not reported between BioFire and Unyvero for the outcomes reported in the poster. While we understand that Curetis Unyvero^TM may be somewhat slower than BioFire® FilmArray® Pneumonia Panel and does not include viruses, the clinical impact of the differences between these two products is unclear. We stated that we are also uncertain how Buchan, et al. calculated their estimate that >18,000 antibiotic hours were saved on 243 patients using the BioFire® FilmArray® Pneumonia Panel results. The applicant stated that there are currently several prospective studies underway to clarify the role that this tool may play in improving the outcomes for patients with pneumonia, reducing use of unnecessary antibiotics, improving targeted therapy and potentially reducing health care costs due to more directed and efficient patient management; however, data or results from those studies were not included with the application. We invited public comment on whether the BioFire® FilmArray® Pneumonia Panel meets the substantial clinical improvement criterion.

Comment: One commenter suggested that the BioFire® FilmArray® Pneumonia Panel, as well as other rapid infectious diseases diagnostics tests, be evaluated based on their clinical improvements over historical microbiology testing methods as opposed to other rapid tests currently in the marketplace.

Response: We appreciate the commenter's input and suggestion. We note that consistent with our current approach in evaluating the new technology add-on payment substantial clinical improvement criterion we accept a wide range of data and other evidence to support the conclusion of substantial clinical improvement, including data regarding historical technologies and currently available technologies. We refer the commenter to the FY 2020 IPPS/LTCH PPS final rule (84 FR 42289 through 42292) for further discussion of the substantial clinical improvement criterion as well as to the regulations at § 412.87(b). For the purposes of evaluating whether the BioFire® FilmArray® Pneumonia Panel meets the substantial clinical improvement criterion, data regarding both historical technologies and currently available technologies were considered.

We did not receive any public comments addressing the concerns we indicated in the proposed rule regarding whether the BioFire® FilmArray® Pneumonia Panel meets the substantial clinical improvement criterion. Accordingly, after consideration of the public comment we received, we are unable to determine that the BioFire® FilmArray® Pneumonia Panel represents a substantial clinical improvement over the currently available technologies.

After consideration of the information previously submitted in the BioFire® FilmArray® Pneumonia Panel application and previously summarized in this final rule, and the public comment we received, we are unable to determine that the BioFire® FilmArray® Pneumonia Panel meets the newness, cost and substantial clinical improvement criteria. Therefore, we are not approving new technology add-on payments for the BioFire® FilmArray® Pneumonia Panel for FY 2021.

c. ContaCT

Viz.ai Inc. submitted an application for new technology add-on payments for ContaCT for FY 2021. The individual components of ContaCT are currently marketed by Viz.ai, Inc. under the tradenames “Viz LVO” (for the algorithm), “Viz Hub” (for the text messaging and calling platform), and “Viz View” (for the mobile image viewer). According to the applicant, ContaCT is a radiological computer-assisted triage and notification software system intended for use by hospital networks and trained clinicians. The applicant asserted that ContaCT analyzes computed tomography angiogram (CTA) images of the brain acquired in the acute setting, sends notifications to a neurovascular specialist(s) that a suspected large vessel occlusion (LVO) has been identified, and recommends review of those images.

The applicant asserted early notification of the stroke team can reduce time to treatment and increase access to effective specialist treatments, like mechanical thrombectomy. Specifically, the applicant asserted that shortening the time to identification of LVO is critical because the efficacy of thrombectomy in patients with acute ischemic stroke decreases as the time from symptom onset to treatment increases. The applicant also asserted in a condition like stroke, where 1.9 million neurons die every minute and for which 34 percent of patients hospitalized are under the age of 65, reducing time to treatment results in reduced disability. The applicant asserted ContaCT streamlines the standard workflow using artificial intelligence to substantially shorten the period of time between when a patient receives a stroke CT/CTA and when the patient is referred to a stroke neurologist and neurointerventional surgeon.

With respect to the newness criterion, according to the applicant, FDA granted marketing authorization to ContaCT on February 13, 2018 under the de novo pathway, which is only available to devices of a new type with low-to-moderate risk for which there are no legally marketed predicates, and classified it as a Class II medical device. We note that FDA issued a de novo order memorandum describing ContaCT as “an artificial intelligence algorithm [used] to analyze images for findings suggestive of a pre-specified clinical condition and to notify an appropriate medical specialist of these findings in parallel to standard of care image interpretation.” The order specified that “identification of suspected findings is not for diagnostic use beyond notification.”

The applicant asserted that ContaCT was not available immediately after FDA's marketing authorization due to establishing Quality Management Systems and processes for distributing ContaCT as well as staff training and installation. Per the applicant, ContaCT was not commercially available until October 2018. The applicant submitted a request for approval for a unique ICD-10-PCS procedure code for the administration of ContaCT beginning in FY 2021 and was granted approval for the following procedure code effective October 1, 2020: 4A03X5D (Measurement of arterial flow, intracranial, external approach).

As discussed above, if a technology meets all three of the substantial similarity criteria, it would be considered substantially similar to an existing technology and would not be considered “new” for purposes of new technology add-on payments.

With regard to the first criterion, whether a product uses the same or a similar mechanism of action to achieve a therapeutic outcome, the applicant asserted no existing technology is comparable to ContaCT. The applicant further asserted, because of the technology's novelty, the product was reviewed under FDA's de novo pathway. The applicant first outlined the clinical workflow for patients presenting to a hospital with signs or symptoms of LVO prior to the availability of ContaCT:

1—Patient presents with stroke/suspected stroke to hospital emergency department (ED).

2—Patient receives stroke CT/CTA imaging after brief initial evaluation by hospital ED physician.

3—Technologist processes and reconstructs the CT/CTA imaging and manually routes to hospital picture archiving and communication system (PACS).

4—Radiologist reads CT/CTA imaging.

5—If needed, a neuroradiology consult is sought.

6—A radiological diagnosis of LVO is made.

7—The radiologist informs hospital ED physician of positive LVO either verbally or in the radiologist report.

8—ED physician performs comprehensive exam and refers the patient to a stroke neurologist.

9—The stroke neurologist reviews the CT/CTA imaging and clinical history and determines whether to prescribe or recommend prescription of thrombolysis with tissue plasminogen activator (tPA).

10—The stroke neurologist refers the patient to a neurointerventional surgeon. Together they decide whether the patient is a candidate for mechanical thrombectomy.

11—If appropriate, the patient proceeds to treatment with mechanical thrombectomy.

The applicant asserted that facilities utilizing the ContaCT system can substantially shorten the period of time between when the patient receives stroke CT/CTA imaging (step 2) and when the patient is referred to a stroke neurologist and neurointerventional surgeon (steps 9 and 10). They further asserted that ContaCT streamlines this workflow using artificial intelligence to analyze CTA images of the brain automatically and notifies the stroke neurologist and neurointerventional surgeon that a suspected LVO has been identified, and then enables them to review imaging and make a treatment decision faster. The applicant concluded that shortening the time to identification of LVO is critical because the efficacy of thrombectomy in patients with acute ischemic stroke decreases as the time from symptom onset to treatment increases.

With regard to the second criterion, whether the technology is assigned to the same or a different MS-DRG, the applicant did not specifically address whether the technology meets this criterion. However, we believe that cases involving the use of the technology would be assigned to the same MS-DRGs as cases without the technology where the patient moves through the hospital according to the traditional workflow outlined above.

With regard to the third criterion, whether the use of the new technology involves the treatment of the same or similar type of disease and the same or similar patient population, the applicant also did not specifically address whether the technology meets this criterion. However, we stated in the proposed rule that we believe cases involving the use of the technology would treat the same or similar type of disease and the same or similar patient population as the traditional workflow outlined above.

We noted that the applicant described ContaCT's mechanism of action as shortening the time to identification of LVO through artificial intelligence (AI). Specifically, the applicant asserted that facilities utilizing the ContaCT system can substantially shorten the period of time between when the patient receives stroke CT/CTA imaging and when the patient is referred to a stroke neurologist and neurointerventional surgeon. We stated in the proposed rule that we were unclear as to whether the streamlining of hospital workflow would represent a unique mechanism of action. Rather, we stated that it seems that the mechanism of action for ContaCT would be the use of AI to analyze images and notify physicians rather than streamlining hospital workflow. However, we also referred the reader to our discussion below and in the proposed rule regarding our concerns with respect to general parameters for identifying a unique mechanism of action based on the use of AI, an algorithm and/or software.

To the extent that the applicant asserted that streamlined hospital workflow through the use of ContaCT represents a unique mechanism of action, we stated in the proposed rule that it was unclear to us the degree to which ContaCT changes the traditional workflow. Per the FDA, “ContaCT is limited to analysis of imaging data and should not be used in-lieu of full patient evaluation or relied upon to confirm diagnosis.” We stated that it was unclear to CMS how ContaCT shortens time to treatment via AI if the CT machine still performs the scanning and clinicians are still needed to view the images to diagnose an LVO and perform a full patient evaluation for the best course of treatment. The applicant also indicated to CMS that the use of ContaCT is not automatic, and the E.R. physician must submit an order to utilize it specifically when suspecting an LVO. We stated that we were unclear how ContaCT streamlines the workflow for stroke treatment via AI if it is not to be used for diagnostic purposes per the FDA and still requires personnel to order the scan and make the diagnosis.

We stated in the proposed rule that we were also generally concerned as to whether the use of AI, an algorithm or software, which are not tangible, may be considered or used to identify a unique mechanism of action. In addition, we questioned how updates to AI, an algorithm or software would affect an already approved technology or a competing technology, including whether software changes for an already approved technology could be considered a new mechanism of action. We also questioned whether, if there were competing technologies to an already approved AI new technology, an improved algorithm by a competitor would represent a unique mechanism of action if the outcome is the same as the technology first approved. We welcomed comments from the public regarding the general parameters for identifying a unique mechanism of action based on the use of AI, an algorithm and/or software.

We also invited public comments on whether the applicant meets the newness criterion, including specifically with respect to the mechanism of action.

Comment: The applicant submitted a comment to address newness concerns raised by CMS in the proposed rule. The applicant asserted that there was a brief delay in the availability of ContaCT due to establishing Quality Management Systems (QMS) and processes for distributing ContaCT. Because of this delay, the first hospital installation of ContaCT was not completed until January 2019. According to the applicant, because the commercial use of ContaCT did not begin at the start of FY 2019, the Medicare data which is used to set FY 2021 MS-DRG relative weights (data from FY 2019 October 1, 2018 through September 30, 2019), do not reflect fully the cost of the technology. Therefore, the applicant believed that the newness period should begin on the date the first installation was completed, rather than the date of commercial availability noted in the FY 2019 IPPS/LTCH PPS proposed rule (85 FR 32601), which was October 2018.

The applicant asserted that no existing technology is comparable to ContaCT. According to the applicant, with regard to the first criterion for newness, ContaCT does not use the same or a similar mechanism of action as compared to an existing technology. The applicant stated that ContaCT was reviewed through FDA's de novo pathway, which is only available to novel medical devices that have not previously been classified by the FDA. With regard to the second criterion for newness, the applicant stated that ContaCT is used in cases of stroke and suspected stroke. Consequently, stroke and suspected stroke cases in which ContaCT is used are expected to be assigned to the same DRGs as stroke and suspected stroke cases without the technology. With regard to the third criterion for newness, the applicant stated that cases in which ContaCT is used are expected to be the same or similar to cases without the technology.

With respect to the first substantial similarity criterion, the applicant asserted that computer-assisted triage and notification is the mechanism of action for ContaCT and that the mechanism of action for ContaCT is not AI per se. According to the applicant, AI is a necessary component of ContaCT, but is not sufficient to achieve therapeutic effect. Furthermore, the applicant stated that under 42 CFR 412.87(b)(2) and CMS criteria for evaluating a technology with respect to newness, there are no requirements that a new technology have a specific type of mechanism of action to be eligible for new technology add-on payments.

The applicant expressed concern that CMS is questioning whether AI, an algorithm or software may never be considered a unique mechanism of action, because such technology may simulate human intelligence or human processes that already exist. According to the applicant, CMS has defined an existing technology as another FDA approved or cleared technology. Human intelligence and human processes are not FDA approved or cleared technologies and, therefore, should not be used as a comparator to evaluate whether ContaCT, or any technology, meets the definition of newness. The applicant stated that, as for other new technologies, comparators for AI, algorithm or software-based devices should be other FDA approved or cleared technologies. More broadly, the applicant urged CMS not to make a broad determination that technologies that use AI, an algorithm or software to achieve a therapeutic effect are ineligible for new technology add-on payments. They stated CMS should evaluate each new technology individually with respect to whether it meets the established criteria.

In addressing CMS concerns about whether software changes for an already approved technology could be considered a new mechanism of action, the applicant stated that an update to the ContaCT algorithm that does not alter this mechanism of action would have the same or a similar mechanism of action. In addressing CMS concerns about whether an improved algorithm by a competitor would represent a unique mechanism of action if the outcome is the same as the technology first approved, the applicant likewise stated that a different technology that shortens time to notification in patients with acute ischemic stroke caused by large vessel occlusions by using an AI algorithm to identify suspected LVO, triage patients and notify the stroke team more rapidly would likely be determined to have a mechanism of action that is the same or similar to ContaCT.

In addition, the applicant stated that the newness of the overall mechanism of action or the means by which a product achieves the therapeutic outcome should be assessed, rather than the newness of the individual inputs or components. They provided an example from FY 2017 when CMS determined MIRODERM not to be “new” because the product achieved the intended therapeutic outcome, wound healing, in the same way as other acellular skin substitutes by providing a scaffold of collagen with a mix of matrix proteins (81 FR 56893). The applicant stated that CMS acknowledged that MIRODERM matrix proteins were different from the proteins found in other acellular skin substitutes, but the determination of newness was based on MIRODERM's overall mechanism of action—a collagen scaffold that promotes wound healing. Just as in the MIRODERM example where the matrix proteins were not sufficient to establish the technology as new, changes to the AI, algorithm and/or software would not be sufficient to establish future computer-aided triage and notification systems for large vessel occlusion ischemic stroke as new if these involve essentially the same mechanism of action as ContaCT. The applicant thus argued that technologies that utilize AI, an algorithm and/or software should be evaluated for newness in the same way as CMS evaluates any other medical device applying for new technology add-on payments.

Other commenters responded to CMS' concerns about whether the applicant meets the newness criterion. In response to our stated uncertainty regarding how ContaCT streamlines the workflow for stroke treatment via AI if it is not to be used for diagnostic purposes per the FDA and still requires personnel to order the scan and make the diagnosis, a commenter responded that ContaCT will enhance, not replace, human action as it relates to patient outcomes, and asserted that all innovation will be based upon AI in some fashion moving forward. Another commenter responded to our concerns as to whether the use of AI, an algorithm or software may be considered or used to identify a unique mechanism of action and also how updates to AI, an algorithm or software would affect an already approved technology or a competing technology for purposes of new technology add-on payments. The commenter stated that technologies that utilize AI, an algorithm and/or software may be evaluated for newness in the same way CMS evaluates any other medical device applying for new technology add-on payments. Such a technology would not be new if there is an existing FDA-approved technology that has been on the market for more than 2 to 3 years and that has the same mechanism of action, is assigned to the same DRGs, or is used in the same or similar type of disease and patient population. The commenter further suggested that this apply to both incremental changes to the same device as well as to competing devices. The commenter urged CMS to consider that evaluating technologies that use AI, an algorithm and/or software is no different than evaluating other technologies for purposes of new technology add-on payments. They stated that technologies are not required to have a specific type of mechanism of action to be eligible for add-on payment, and as such, each submission must be evaluated independently.

Response: After considering the comments received regarding the new technology add-on payment application for ContaCT, we agree that ContaCT does not use the same or a similar mechanism of action to achieve a therapeutic outcome when compared to existing treatments because there are currently no FDA approved or cleared technologies that use computer-assisted triage and notification to rapidly detect an LVO and shorten time to notification. Therefore, we believe that ContaCT is not substantially similar to an existing technology and meets the newness criterion. We consider the beginning of the newness period to commence on October 1, 2018. We have previously stated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53348) and FY 2019 IPPS/LTCH PPS final rule (83 FR 41313), generally, our policy is to begin the newness period on the date of FDA approval or clearance or, if later, the date of availability of the product on the U.S. market. Without additional information, we continue to believe that the newness period for ContaCT begins on October 1, 2018. We may consider any further information that may be provided regarding the date of availability in future rulemaking.

We will continue to consider the issues related to determining newness for technologies that use AI, an algorithm or software, including devices classified as radiological computer aided triage and notification software, as discussed in the proposed rule, including how these technologies may be considered or used to identify a unique mechanism of action, how updates to AI, an algorithm or software would affect an already approved technology or a competing technology, whether software changes for an already approved technology could be considered a new mechanism of action, and whether an improved algorithm by competing technologies would represent a unique mechanism of action if the outcome is the same as an already approved AI new technology, as we gain more experience in this area.

With respect to the cost criterion, the applicant provided the following analysis. First, the applicant extracted claims from the FY 2018 MedPAR dataset. The applicant explained that many patients present to the emergency department with signs or symptoms suggesting an LVO. That presentation would be the basis for ordering a CTA with ContaCT added. Of these patients, some will be identified as stroke and LVO, some as stroke but not from an LVO, and others will have diagnoses completely unrelated to stroke. As a result, according to the applicant, there may be a very broad range of principal diagnoses and MS-DRGs representing patients who would be eligible for and receive a CTA with ContaCT. The applicant noted that it used admitting diagnoses codes rather than principal or secondary diagnosis codes to identify cases of stroke due to LVO, stroke not due to LVO, and no stroke. The applicant utilized a multi-step approach:

• Step 1: The applicant first extracted claims from the stroke-related MS-DRGs (023, 024, 061, 062, 063, 064, 065, 066, 067, 068, and 069).
• Step 2: The applicant analyzed the admitting diagnosis on claims extracted in Step 1 to identify the reason for admission. The applicant found that the top five admitting diagnoses for patients in the stroke-related MS-DRGs included: Cerebral infarction, unspecified (I63.9), transient cerebral ischemic attack, unspecified (G45.9), slurred speech (R4781), aphasia (R4701), and facial weakness (R29.810).
• Step 3: The applicant identified all MS-DRGs assigned to the admitting diagnosis codes identified in Step 2 to identify ContaCT cases that did not map to one of the stroke MS-DRGs.
• Step 4: The applicant identified a list of unique MS-DRGs and admitting diagnosis code combinations to which cases involving ContaCT would map. The applicant stated that it reviewed with clinical experts the MS-DRG and admitting diagnosis combinations and eliminated any that were unlikely to include the use of ContaCT.

The applicant identified a total of 375,925 cases across 143 MS-DRGs, with approximately 66 percent of cases mapping to MS-DRGs 039, 057, 064, 065, 066, 069 and 312. The average unstandardized case-weighted charge per case was $52,001. The applicant noted it did not remove any charges for a prior technology, as it asserted that no other technology is comparable to ContaCT. Based on the results of a research study, the applicant assumed ContaCT cases resulting in mechanical thrombectomy would have charges reduced by 38% as a result of reduced specialty care days and therefore removed the related charges, which only affected cases mapping to MS-DRGs 023, 024, 025, and 026. The applicant standardized the charges and applied an inflation factor of 11.1 percent, which is the same inflation factor used by CMS to update the outlier threshold in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42629), to update the charges from FY 2018 to FY 2020.

The applicant then added the charges for the new technology. The applicant explained it calculated the cost per patient by dividing the total overall cost of ContaCT per year per hospital by the number of total estimated cases for which ContaCT was used at each hospital that currently subscribes to ContaCT (based on the estimated number of cases receiving CTA), and averaging across all such hospitals. The following is the methodology the applicant used to determine the cost per case:

• Step 1: The applicant first determined the estimated total cases (both Medicare and non-Medicare) for each current subscriber hospital. The applicant explained it used total cases for both Medicare and non-Medicare cases since the cost per case is not specific to Medicare cases. In order to determine total cases, which include both Medicare and non-Medicare cases, the applicant divided the total Medicare cases per subscriber hospital from the FY 2018 MedPAR data by the percentage of Medicare beneficiaries (71 percent) in the CONTACT FDA research study (for example, 1,136 Medicare cases divided by 0.71 equals 1,600 total Medicare and non-Medicare cases).
• Step 2: To analyze actual rates (percentages) of CTA across subscriber hospital cases, the applicant first used the beneficiary ID in the FY 2018 SAF data set to find matching physician claims in the carrier file for CT and CTA services with a site of service of 21 (Inpatient hospital) or 23 (emergency department) and a date of service consistent with the inpatient stay. The applicant then calculated provider-specific CTA rates (percentages) for each subscriber hospital. The applicant dropped five hospitals with a low volume of Medicare inpatient stays that had no matching services in the carrier file. The applicant calculated an average CTA rate of 21.6 percent across all hospitals that subscribe to ContaCT.
• Step 3: The applicant determined the estimated total number of cases that received CTA for each current subscriber hospital by multiplying the total cases (Medicare and non-Medicare) for each subscriber hospital in step 1 by the provider-specific CTA rate calculated in Step 2. In cases where a provider had fewer than 11 cases in the carrier file or where a provider had a CTA rate that was an outlier, the applicant multiplied the total cases for the provider by the average CTA rate of 21.6 percent.
• Step 4: The applicant then calculated the cost per year per hospital. If a hospital had multiple sites under the same CCN, the applicant multiplied the total overall cost of ContaCT per hospital by the number of sites. For example, if the cost for ContaCT was $25,000 per year and Hospital A had only one site under its CCN, then the total cost for ContaCT for Hospital A would be $25,000. However, if Hospital B had three sites under its CCN, then the total cost for ContaCT for Hospital B would be $75,000 per year ($25,000 × 3).
• Step 5: The applicant then divided the cost per year per hospital by the total cases that received CTA for each customer hospital in Step 3 to determine the estimated cost per case for each customer hospital. If Hospital A from the example in Step 4 had 50 patients, then the total hospital cost per case would be $500 per patient ($25,000/50). If Hospital B (with three sites under its CCN) also had 50 patients, then the total hospital cost per case would be $1,500 per patient ($75,000/50).
• Step 6: The applicant averaged the cost per case across all hospitals to determine the average cost per patient. The average cost per case across Hospital A and Hospital B in the previous example would be $1,000.
• Step 7: To convert the cost of the technology in Step 6 to charges, the applicant divided the average cost per patient by the national average cost-to-charge (CCR) of 0.14 for the Radiology cost center from the FY 2020 IPPS/LTCH PPS final rule (84 FR 42179). Although the applicant submitted data related to the cost of the technology, the applicant noted that the cost of the technology was proprietary information.

The applicant calculated a case-weighted threshold amount of $51,358 and a final inflated average case-weighted standardized charge per case of $62,006. Based on this analysis, the applicant asserted that ContaCT meets the cost criterion because the final inflated average case-weighted standardized charge per case exceeds the case-weighted threshold amount.

The applicant submitted three additional cost analyses to demonstrate that it meets the cost criterion using the same methodology above but with limits on the cases. The first alternative limited the analysis to only those cases in the primary stroke-related MS-DRGs 023, 024, 061, 062, 063, 064, 065, 066, 067, 068, and 069. This first alternative method resulted in a case-weighted threshold of $53,885 and a final inflated average case weighted standardized charge per case of $62,175. The second alternative limited the analysis to cases in MDC 01 (Diseases and Disorders of the Nervous System) with the following MS-DRGs:

This second alternative method resulted in a case-weighted threshold of $55,053 and a final inflated average case weighted standardized charge per case of $63,741. The third alternative limited cases to MS-DRGs where the total volume of cases was greater than 100. This third alternative method resulted in a case-weighted threshold of $49,652 and a final inflated average case-weighted standardized charge per case of $59,365. Across all cost-analysis methods, the applicant maintained that the technology meets the cost criterion because the final inflated average case-weighted standardized charge per case exceeds the average case-weighted threshold amount.

We noted in the proposed rule that we believe a case weight would provide more accuracy in determining the average cost per case as compared to the average of costs per case across all hospitals that was used by the applicant in Step 6 as summarized previously. We therefore computed a case-weighted cost per case across all current subscriber hospitals. We then inflated the case-weighted cost per case to a charge based on Step 7 above and used this amount in the comparison of the case-weighted threshold amount to the final inflated average case-weighted standardized charge per case (rather than the applicant's average cost per case). In all the scenarios above, the final inflated average case-weighted standardized charge per case exceeded the case-weighted threshold amount by an average of $2,961.

We stated in the proposed rule that we had the following concerns regarding whether the technology meets the cost criterion. The applicant used a single list price of ContaCT per hospital with a cost per patient that can vary based on the volume of cases. We stated that we were concerned that the cost per patient varies based on the utilization of the technology by the hospitals. The cost per patient could be skewed by the small number of hospitals utilizing the technology and their low case volumes. It is possible, if hospitals with large patient populations adopt ContaCT, the cost per patient would be significantly lower.

We stated in the proposed rule that an alternative to the applicant's calculation may be a methodology that expands the applicant's sample from total cases (which include both Medicare and non-Medicare cases) receiving CTA at subscriber hospitals in Step 1 to all inpatient hospitals for the use of ContaCT (and then using the same steps after Step 1 for the rest of the analysis). In this alternative, the applicant would continue to extract cases representing patients that are eligible for the use of ContaCT from MedPAR, but the cost per patient would be determined by dividing the overall cost per year per hospital by the average number of patients eligible for the use of ContaCT across all such hospitals. For example, if the cost for ContaCT is $25,000 per year and the average hospital has 500 patients who are eligible to receive ContaCT per year, then under this alternative methodology, the total cost per patient would be $50 ($25,000/500).

We noted in the proposed rule that if ContaCT were to be approved for new technology add-on payments for FY 2021, we believed the cost per case from the cost analysis above may also be used to determine the maximum new technology add-on payment (that is, 65 percent of the cost determined above). We stated that we understood there are unique circumstances to determining a cost per case for a technology that utilizes a subscription for its cost. We welcomed comments from the public as to the appropriate method to determine a cost per case for such technologies, including comments on whether the cost per case should be estimated based on subscriber hospital data as described previously, and if so, whether the cost analysis should be updated based on the most recent subscriber data for each year for which the technology may be eligible for the new technology add-on payment.

We also invited public comments on whether the applicant meets the cost criterion.

Comment: One commenter, who was also the applicant, maintained that ContaCT met the cost criterion and submitted two additional analyses following CMS' suggestions in the FY 2021 IPPS/LTCH PPS Proposed Rule.

First, the applicant updated its cost analyses to include all IPPS hospitals, utilizing the same methodology described in detail in the proposed rule. Under this methodology, the cost per patient is calculated by dividing the total overall cost of ContaCT per year per hospital by the number of total estimated cases for which ContaCT would be used at each hospital (based on the estimated number of cases receiving CTA), and then averaging across all such hospitals. The applicant's updated cost analysis included 3,035 Medicare provider numbers representing 3,062 general acute care hospitals. The updated analysis yielded a final inflated average case-weighted standardized charge per case of $71,568, which exceeded the threshold amount of $51,358.

The applicant also updated the three alternative analyses (which used the same methodology as above but limited the cases included) to include all IPPS hospitals. The parameters of these analyses were discussed in detail in the proposed rule (85 FR 32602 through 32603). Per the applicant, the first alternative analysis resulted in a case-weighted threshold of $53,885 and a final inflated average case-weighted standardized charge per case of $71,736; the second alternative analysis resulted in a case-weighted threshold of $55,053 and a final inflated average case weighted standardized charge per case of $73,302; and the third resulted in a case-weighted threshold of $49,652 and a final inflated average case-weighted standardized charge per case of $68,925. In all three alternative analyses, the final average case-weighted standardized charge per case exceeded the average case-weighted threshold amount, meeting the cost criterion.

The applicant also calculated a case-weighted average cost per case for each of the analyses above in response to CMS' suggestion that a case-weighted average cost per case would be more accurate compared to the average of costs per case across all hospitals, as the applicant had done initially. The applicant analyzed the average number of patients eligible to receive ContaCT per hospital among subscribers and compared it to the average number of patients eligible to receive ContaCT among all IPPS hospitals. The applicant found that, among ContaCT subscribers, the average number of patients eligible to receive ContaCT per Medicare provider number and per hospital are 141 and 121, respectively. In contrast, among all IPPS hospitals, the applicant found that the average number of patients eligible to receive ContaCT per Medicare provider number and per hospital are 99 and 82, respectively. The applicant concluded that ContaCT subscribers have a higher average number of patients eligible to receive ContaCT compared to all IPPS hospitals, and that the cost per patient for ContaCT is skewed to yield a higher cost per patient across all IPPS hospitals than among ContaCT subscribers alone. The applicant noted that the cost per patient among ContaCT subscribers is lower than if all IPPS hospitals adopted ContaCT, and that expanding the analyses above to include all IPPS hospitals increased the cost per patient.

Per the applicant, ContaCT would meet the cost criterion in each of these average number of patients eligible to receive ContaCT across all cost-analysis methods. Using a case-weighted cost per case, the applicant also met the cost criterion across all cost-analysis methods, as the final inflated average case-weighted standardized charge per case exceeded the average case-weighted threshold amount.

The applicant also noted that technologies sold on a subscription basis are provided to the customer at a recurring price at regular intervals. As a result, the cost per unit for a subscription technology is directly impacted not only by the price, but how frequently the customer utilizes the technology, in that customers with low utilization of a subscription-based technology have a higher cost per unit than customers with high utilization. The commenter stated that, because the overall cost per unit of subscription technologies is determined by each customer's ratio of price to utilization, an analysis that requires an estimate of cost per unit should be limited to subscribers. The commenter believed that including estimates of cost per unit for potential customers that do not currently subscribe to the technology may result in a cost-per-case that does not reflect the actual costs of current users. The commenter recommended that the cost per unit of technologies sold on a subscription basis, like ContaCT, should be based on data from current subscribers only. However, the applicant agreed with CMS that yearly updates to the cost per unit analysis are reasonable to reflect changes in subscribers and thus the overall cost per unit.

The commenter offered several examples of how its recommendation is consistent with CMS' methodology in calculating costs across a variety of payment systems and programs. The commenter noted that CMS considers only costs from hospitals for cases billed to Medicare when setting MS-DRG relative weights. In addition, if a hospital does not provide the type of care described by a specific MS-DRG, CMS does not attempt to estimate what the cost and MS-DRG relative weights might be if a broader range of hospitals delivered that type of care. The commenter stated that another example is the average sales price methodology used by CMS to determine payment for certain separately payable products, which includes only data from actual customer sales. The commenter noted that although the unit price for these products often varies based on utilization, with customers with low utilization paying more per unit than customers with higher utilization, CMS does not attempt to calculate average sales price by forecasting how future customers may alter the current average sales price. The applicant concluded that, consistent with these examples, the cost per unit for subscription technologies should be based on data from current subscribers only and yearly updates are reasonable.

Response: After consideration of the applicant's updated cost analyses for ContaCT, we agree that the average case-weighted standardized charge per case exceeded the average case-weighted threshold amount in all scenarios. Therefore, ContaCT meets the cost criterion for FY 2021. CMS will continue to consider the issues relating to calculation of the cost per unit of technologies sold on a subscription basis as we gain more experience in this area.

With respect to the substantial clinical improvement criterion, according to the applicant, ContaCT represents an advance that substantially improves the ability to diagnose a large vessel occlusion stroke earlier by automatically identifying suspected disease in CTA images and notifying the neurovascular specialist directly in parallel to the standard of care. The applicant further asserted a major limitation in the traditional acute stroke workflow is the time delay from initial image acquisition of a suspected LVO patient (CT, CT angiography, and CT perfusion), notification of the interventional team, and execution of an endovascular thrombectomy. The time from stroke onset to reperfusion (when blood supply returns to tissue after a period of ischemia or lack of oxygen) is negatively correlated with the probability of an independent functional status. The applicant stated the time from initial presentation to eventual reperfusion can be long, resulting in poor outcomes, using the existing standard of care. The median onset-to-revascularization time has been reported as 202.0 minutes for patients presenting directly to interventional centers (or comprehensive stroke centers), and 311.5 minutes for patients that initially presented to a non-interventional center. The applicant further stated that part of that time is the time from initial CTA to the time that the neurovascular specialist is notified of a possible LVO (the CTA to notification time). A retrospective study examined work-flow for stroke patients and demonstrated an initial CT to CSC (Comprehensive Stroke Center) notification time per standard of care >60 minutes in patients transferred for endovascular reperfusion in acute ischemic stroke.

The applicant asserted that ContaCT facilitates a workflow parallel to the standard of care workflow and results in a notified specialist entering the workflow earlier. In the applicant's study to support the De Novo request, ContaCT's performance was compared with standard of care workflow, demonstrating that ContaCT resulted in faster specialist notification. According to the applicant, the average time to specialist notification for ContaCT was 7.32 minutes [95% CI: 5.51, 9.13] whereas time to notification for standard of care workflow was 58.72 minutes [95% CI: 46.21, 71.23]. The applicant also asserted that ContaCT saved an average of 51.4 minutes, an improvement that could markedly improve time to intervention for LVO patients. In addition, the applicant noted that the standard deviation was reduced from 41.14 minutes in the standard of care workflow to 5.95 minutes with ContaCT, demonstrating ContaCT's potential to reduce variation in care and patient outcome across geographies and time of day.

To support the applicant's assertion that ContaCT substantially improves the ability to diagnose a large vessel occlusion stroke earlier, the applicant presented a multicenter prospective observational trial, DISTINCTION, which is ongoing and compares a prospective cohort of patients in which ContaCT is used (intervention arm) to a retrospective cohort in which ContaCT was not used (control arm). Patients are also segmented based on whether they initially present to a non-interventional center or an interventional center. Per the applicant, early data from one non-interventional hospital in the Erlanger Health System indicates that for the control arm the median time from CTA to clinician notification was 59.0 minutes. For the intervention arm, early data indicates that the median time from CTA to clinician notification was 5.3 minutes. The applicant stated that these early data indicate time savings of approximately 53 minutes, which is consistent with the 51.4 minute time savings demonstrated in the studies sponsored/conducted by the De Novo requester.

Next, the applicant presented the Automated Large Artery Occlusion Detection In Stroke Imaging Study (ALADIN), a multicenter retrospective analysis of CTAs randomly picked from a retrospective cohort of acute ischemic stroke patients, with and without anterior circulation LVOs, admitted at three tertiary stroke centers, from 2014-2017. Per the applicant, ALADIN evaluated ContaCT's performance characteristics including area under the curve, sensitivity, specificity, positive predictive value, negative predictive value, and processing or running time. The applicant asserted that, through this study, researchers concluded that the ContaCT algorithm may permit early and accurate identification of LVO stroke patients and timely notification to emergency teams, enabling quick decision-making for reperfusion therapies or transfer to specialized centers if needed.

According to the applicant, the use of ContaCT to facilitate a faster diagnosis and treatment decision directly affects management of the patient by enabling early notification of the neurovascular specialist and faster time to treatment utilizing mechanical thrombectomy to remove the large vessel occlusion. The applicant stated that mechanical thrombectomy with stent retrievers is one of the standards of care for treatment of acute ischemic stroke patients caused by LVO and that mechanical thrombectomy therapy is highly time-critical with each minute saved in onset-to-treatment time resulting in a reported average of 4.2 days of extra healthy life. According to the applicant, the use of ContaCT affects the management of the patient by facilitating early identification of patients with suspected LVO and early notification of the neurovascular specialist. The applicant asserted that this may affect the management of the patient in two ways. First, it may offer improved access to mechanical thrombectomy for patients who would otherwise not have access because of factors such as time of day and the specialty capabilities of the hospital they are in, and second, it may involve the neurovascular team earlier, decreasing the time to thrombectomy. The applicant stated that ContaCT saved an average of 51.4 minutes in time to notification relative to standard of care workflow and reduced standard deviation in time to notification from 41.14 minutes (standard of care workflow) to 5.95 minutes (ContaCT). Furthermore, the applicant stated that ContaCT could markedly improve time to intervention for LVO patients and has the potential to reduce variation in care and patient outcome across geographies and time of day.

The applicant stated that according to five clinical trials, the clinical efficacy of endovascular mechanical thrombectomy has been demonstrated for patients with LVO strokes up to 6 hours after onset of stroke. The applicant also stated that two meta-analyses of these randomized trials have been completed. Campbell et al. performed a patient-level pre-specified pooled meta-analysis of four randomized clinical trials which concluded that thrombectomy for large vessel ischemic stroke is safe and highly effective at reducing disability. Goyal et al. pooled and analyzed patient-level data from all five trials. Per the applicant, the results indicated that mechanical thrombectomy leads to significantly reduced disability. According to the applicant, together, these five randomized trials and two meta-analyses, have demonstrated that treatment for intracranial large vessel occlusion with mechanical thrombectomy with stent retrievers is the standard of care.

The applicant also asserted that real world evidence further supports the efficacy of mechanical thrombectomy. Data from the STRATIS registry (Systematic Evaluation of Patients Treated With Neurothrombectomy Devices for Acute Ischemic Stroke), which prospectively enrolled patients treated in the United States with a Solitaire Revascularization Device and Mindframe Capture Low Profile Revascularization Device within 8 hours from symptom onset, was compared with the interventional cohort from the patient-level meta-analysis from Campbell et al. to assess whether similar process timelines and technical and functional outcomes could be achieved in a large real-world cohort as in the randomized trials. The article concluded that the results indicate randomized trials can be reproduced in the real world (Mueller-Kronast et al., 2017).

The applicant stated that based on these data, U.S. clinical guidelines now recommend mechanical thrombectomy for the treatment of large vessel occlusion strokes when performed ≤6 hours from symptom onset. The American Stroke Association/American Heart Association (ASA/AHA) “2018 Guidelines for the Early Management of Patients With Acute Ischemic Stroke” recommended mechanical thrombectomy with a stent retriever in patients that meet the following criteria: (1) Prestroke modified Rankin Scale (mRS) 0-1; (2) causative occlusion of the internal carotid artery (ICA) or middle cerebral artery (MCA) segment 1 (M1); (3) age ≥18; (4) National Institute of Health Stroke Scale (NIHSS) ≥6; (5) Alberta Stroke Program Early CT Score (ASPECTS) ≥6; and (6) treatment can be initiated within 6 hours of symptom onset (Powers et al., 2018). The ASA/AHA notes the need for expeditious treatment with both intravenous thrombolysis and mechanical thrombectomy.

The applicant also stated that recently, randomized trials have demonstrated the clinical efficacy of mechanical thrombectomy for large vessel occlusion strokes for select patients from 6 to 24 hours after symptom onset. Among patients with acute stroke who were last known well 6 to 24 hours earlier and who had a mismatch between clinical deficit and infarct, outcomes for disability at 90 days were better with thrombectomy plus standard care compared with standard care alone.

The applicant asserted that the use of ContaCT reduces time to treatment by notifying the stroke team faster than the standard of care and enabling the team to diagnose and treat the patient earlier, which is known to improve clinical outcomes in stroke, and that mechanical thrombectomy has been shown to reduce disability, reduce length of stay and recovery time (Campbell et al., 2017).

According to the applicant, other studies have also demonstrated that time to reperfusion is a predictor of patient outcomes. The applicant asserted that several major randomized controlled trials for mechanical thrombectomy have demonstrated improvements in functionality with faster time to reperfusion. The primary outcome of some of these trials was the modified Rankin scale (mRs) score, a categorical scale measure of functional outcome, with scores ranging from 0 (no symptoms) to 6 (death) at 90 days. Pooled patient-level data from these five trials demonstrated that in the mechanical thrombectomy group the odds of better disability outcomes at 90 days (mRS scale distribution) declined with longer time from symptom onset to expected arterial puncture. Among the mechanical thrombectomy plus medical therapy group patients in whom substantial reperfusion was achieved, delays in reperfusion times were associated with increased levels of 3-month disability.

The applicant referred to the American Stroke Association/American Heart Association (ASA/AHA) “2018 Guidelines for the Early Management of Patients With Acute Ischemic Stroke,” which recognized that the benefit of mechanical thrombectomy is time dependent, with earlier treatment within the therapeutic window leading to bigger proportional benefits. The guidelines also state that any cause for delay to mechanical thrombectomy, including observing for a clinical response after intravenous alteplase, should be avoided.

The applicant asserted that the phrase “time is brain” emphasizes that human nervous tissue is rapidly lost as stroke progresses. Per the applicant, recent advances in quantitative neurostereology and stroke neuroimaging permit calculation of just how much brain is lost per unit time in acute ischemic stroke. To illustrate this point, the applicant stated that in the event of a large vessel acute ischemic stroke, the typical patient loses 1.9 million neurons, 13.8 billion synapses, and 12 km (7 miles) of axonal fibers each minute in which stroke is untreated. Furthermore, for each hour in which treatment fails to occur, the brain loses as many neurons as it does in almost 3.6 years of normal aging. The applicant asserted that given the time-dependent nature of treatment in acute ischemic stroke patients, ContaCT could play a critical role in preserving human nervous tissue, as the application results in faster detection in more than 95 percent of cases and saves an average of 51.4 minutes in time to notification.

We stated in the proposed rule that we had the following concerns regarding whether the technology meets the substantial clinical improvement criterion. The applicant provided a total of 19 articles specifically for the purposes of addressing the substantial clinical improvement criterion: four retrospective studies/analyses, nine randomized clinical trials (RCTs), three meta-analyses, one registry, one guideline, and one systematic review.

The four retrospective studies/analyses included the FDA decision memorandum, a single site of a RCT, and two abstracts related to the Automated Large Artery Occlusion Detection in Stroke Imaging (ALADIN) study. The applicant stated that the studies sponsored/conducted by the De Novo requester indicated that ContaCT substantially shortens the time to notifying the specialist for LVO cases as compared with the standard of care. However, the sample size was limited to only 85 out of 300 patients having sufficient data of CTA to notification time available. To calculate the sensitivity and specificity of ContaCT, neuro-radiologists reviewed images and established the empirical evidence. Specifically, the sensitivity and specificity was 87.8 percent (95% CI: 81.2-92.5%) and 89.6 percent (83.7-93.9%), respectively. In the proposed rule, we stated that we had concerns regarding whether this represents a substantial clinical improvement, as ContaCT missed approximately 12 percent of images with a true LVO and incorrectly identified approximately 10 percent as having an LVO. Additionally, the small sample size of less than 100 raises concerns for generalizability. Additionally, we agree with the FDA that ContaCT is limited to analysis of imaging data and should not be used in lieu of full patient evaluation or relied upon to make or confirm diagnosis.

With respect to the study that was a single site of an RCT presented by the applicant, the study conducted a retrospective review of the time between an initial CT at an outside hospital and the notification to the comprehensive stroke center. This retrospective analysis was conducted for one site enrolled in one of the RCTs (unspecified). The authors noted there was substantial difference in the time between initial CT at the outside hospital to comprehensive stroke center notification, due to multiple factors, including delays in neurological assessments, interpretation of imaging, utilization of advance modality imaging, and determination of tPA effectiveness. Specifically, the authors noted in their study that obtainment of advanced imaging contributed to a 57-minute delay in decision making without substantial benefits in patient outcome. We stated in the proposed rule that it was unclear whether and how this time delay and the utilization of faster notification would affect the clinical outcome of patients.

The applicant also submitted two separate abstracts for a retrospective analysis of the ALADIN study, which only provide interim results. The applicant noted for the primary analysis, the algorithm obtained sensitivity of 0.97 and specificity of 0.52, with a positive predictive value (PPV) of 0.74 and negative predictive (NPV) of 0.91, and overall accuracy of 0.78. For the secondary analysis, which included analysis of additional (secondary) vessels, the algorithm obtained sensitivity of 0.92 and specificity of 0.75, with a PPV of 0.92 and NPV of 0.75, and overall accuracy of 0.88. In the proposed rule, we stated that we were concerned both that these are only partial results as it is not clear what the full outcome of the ALADIN study will indicate, and also that the initial overall accuracy of ContaCT varied by 10 percent between the types of strokes.

The RCTs included the following: (1) Multicenter Randomized Clinical Trial of Endovascular Treatment of Acute Ischemic Stroke in the Netherlands (MR CLEAN);(2) Thrombolysis in Emergency Neurological Deficits—Intra-Arterial (EXTEND-IA) Trial; (3) The Endovascular Treatment for Small Core and Anterior Circulation Proximal Occlusion with Emphasis on Minimizing CT to Recanalization Times (ESCAPE) trial; (4) Randomized Trial of Revascularization with Solitaire FR Device versus Best Medical Therapy in the Treatment of Acute Stroke Due to Anterior Circulation Large Vessel Occlusion Presenting within Eight Hours of Symptom Onset (REVASCAT); (5) Solitaire with the Intention for Thrombectomy as Primary Endocascular Treatment (SWIFT PRIME) trial; (6) Endovascular Therapy Following Imaging Evaluation for Ischemic Stroke; (7) DWI or CTP Assessment with Clinical Mismatch in the Triage of Wake-Up and Late Presenting Strokes Undergoing Neurointervention with Trevo (DAWN) trial; and (8) Interventional Manage of Stroke (IMS) Phase I and II trials. The MR CLEAN trial, EXTEND-IA trial, ESCAPE trial, REVASCAT trial, SWIFT PRIME trial, Endovascular Therapy Following Imaging Evaluation for Ischemic Stroke trial, and DAWN were all multicenter prospective RCTs evaluating a treatment group of either a microcatheter with a thrombolytic agent or mechanical thrombectomy versus a control group of the standard of care. These RCTs were evaluating the outcomes from specific treatment for patients who suffered from various strokes and not the time of imaging to treatment. While each study may have included a time-element as an experimental analysis or additional end-point, we stated that we are unsure how they support the use of ContaCT as a substantial clinical improvement over existing technologies. Also, while the IMS trials provided evidence to support a positive clinical outcome following technically successful angiographic reperfusion using time from stroke onset to procedure termination, they did not specify which part of the overall standard of care treatment affected an increase or decrease of time. The three meta-analyses utilized data from the RCTs. The Safety and Efficacy of Solitaire Stent Thrombectomy examined four trials, ESCAPE, REVASCAT, SWIFT PRIME, and EXTEND-IA. The Highly Effective Reperfusion evaluated in Multiple Endovascular Stroke Trials (HERMES) collaboration authored two of the three meta-analyses. The HERMES collaboration examined data and results from five RCTs, MR CLEAN, ESCAPE, REVASCAT, SWIFT PRIME, and EXTEND-IA. These meta-analyses confirmed the results of each of the individual RCTs of the benefits of thrombectomy versus the standard of care. However, we stated that we have concerns as to whether these meta-analyses, along with the RCTs, indicate a substantial clinical improvement with shorter notification times of an LVO.

Two articles submitted by the applicant evaluated data using the STRATIS registry. One article evaluated the use of mechanical thrombectomy in consecutive patients with acute ischemic stroke because of LVO in the anterior circulation. The two groups consisted of (1) patients who presented directly to a comprehensive stroke center; and (2) patients who were transferred to a comprehensive stroke center. This study identified a difference of 124 minutes between groups, which was primarily related to longer door-to-tPA times at nonenrolling hospitals, delay between IV-tPA and departure from the initial hospital, and length of transport time. The author's primary outcome was functional status at 90 days, which found those with shorter time to treatment achieved better functional independence at 90 days. There was no difference in mortality in the two groups. While this article supports that shorter time to treatment may increase positive clinical outcomes for functional status, the study indicated time to departure from the non-enrolling hospital and transfer time as primary reasons in delayed thrombectomy treatment. These two time lapses include multiple covariates; for example, the distance between the facilities and the response of available transport (for example, ambulance). We stated in the proposed rule that these potential confounders raise questions as to the use of ContaCT shortening time to treatment.

Lastly, the applicant submitted the AHA/ASA guidelines and a systematic literature review as support for clinical improvement. We stated that we are concerned the guidelines do not support a finding of substantial clinical improvement for ContaCT because the guidelines are for the current standard of care. The systematic literature review identified the quantitative estimates of the pace of neural circuity loss in human ischemic stroke. While this supports the urgency of stroke care, we stated that we were unsure how it demonstrates a substantial clinical improvement in how ContaCT supports the urgency of stroke care.

We invited public comment as to whether ContaCT meets the substantial clinical improvement criterion.

Comment: In addressing substantial clinical improvement concerns raised by CMS in the proposed rule, the applicant summarized additional clinical evidence demonstrating ContaCT reduces time to notification, and that the device also reduces time to treatment and improves clinical outcomes.

With respect to improved clinical outcomes, the applicant described a study submitted for publication that used a prospectively-maintained database of patients undergoing thrombectomy for LVO and assessed the impact of ContaCT implementation on door-to-treatment time and patient outcomes for all patients who presented to a Primary Stroke Center currently utilizing ContaCT in the Mount Sinai Health System in New York and who subsequently underwent mechanical thrombectomy. To evaluate impact in a controlled fashion, data from pre-ContaCT implementation (October 1, 2018 to March 15, 2019) and post-ContaCT implementation (October 1, 2019 to March 15, 2020) were compared from a total of 42 patients who met the inclusion criteria. According to the applicant, the study investigators found that the post-ContaCT cohort had significantly better clinical outcomes and level of disability, as measured by a lower 5-day NIH Stroke Scores (NIHSS) and lower discharge modified Rankin Score (mRS) scores compared to the pre-ContaCT cohort, 10.78 vs. 21.93 (p=0.02) and 2.92 vs. 4.62 (p=0.03), respectively. The post-ContaCT cohort also demonstrated significantly lower median 90-day mRS scores compared to the pre-ContaCT cohort (3 vs. 5; p=0.02). In addition to these outcome measures, the post-ContaCT cohort also had significantly shorter median door-to-interventional radiologist (INR) notification time (21.5 vs. 36 minutes, p=0.02) and shorter median door-to-puncture time (165 vs. 185 minutes, p=0.20).

With respect to shorter time to treatment, the applicant summarized unpublished data from three distinct single center, retrospective investigator-initiated reviews from hospital systems that have implemented ContaCT in Colorado, Georgia, and Tennessee. The three reviews evaluated ContaCT's impact on the time from hospital arrival (Door) to skin puncture (Puncture), or DTSP, for LVO patients initially presenting to the clinical site.

At the first site, 32 patients initially presented to the emergency department at SkyRidge Medical Center in Colorado. Patients included in the analysis were divided into two cohorts. The pre-ContaCT cohort included the 16 thrombectomy patients immediately preceding ContaCT implementation and the post-ContaCT cohort included the 16 thrombectomy patients immediately after ContaCT implementation. Overall, ContaCT implementation resulted in an average reduction in door-to-puncture time of 24 minutes. Additionally, ContaCT implementation resulted in statistically significant improvements in the percentage of patients with door to puncture times of less than 90 minutes (p=0.013) and less than 60 minutes (p=.005). After installing ContaCT, 94 percent of thrombectomy cases had DTSP <90 minutes (p=0.013).

At the second site, 120 patients initially presented to the emergency department at Wellstar Hospital in Georgia. Patients included in the analysis were divided into two cohorts. Patients from pre-ContaCT implementation (July 2018 through June 2019) and patients from post-ContaCT implementation (July 2019 to June 2020) were compared. Overall, ContaCT implementation resulted in an average reduction in door to puncture time of 30 minutes (p=0.01).

At the third site, 46 patients initially presented to a Primary Stroke Center currently utilizing ContaCT in the Methodist LeBonheur Healthcare System in Tennessee. Patients included in the analysis were divided into two cohorts: Patients with LVOs identified by ContaCT and patients with LVOs not identified by ContaCT. Overall, ContaCT implementation resulted in an average reduction in door-to-puncture time of 44 minutes (p=0.03).

With respect to shorter time to notification, the applicant described data maintained by Viz.ai indicating that real-world performance of ContaCT is consistent with the results achieved in the FDA clinical study. Across 4,763 patients analyzed by ContaCT in the past six months, the median time from CT angiogram to notification of the specialist was 4.31 minutes. This compares with 5.6 minutes in the ContaCT cohort (compared with 58.7 minutes in the standard of care cohort) in the FDA clinical trial. The percentage of notifications viewed by the specialist within five minutes was 90 percent in the same cohort of patients.

In addressing concerns raised by CMS in the proposed rule regarding whether the clinical study supporting the applicant's De Novo request for ContaCT represents a substantial clinical improvement, the applicant stated that the sensitivity and specificity (87% and 90%, respectively) of ContaCT are consistent with the performance characteristic for other diagnostic services that inform clinical care and that no tests have perfect performance. Moreover, the applicant stated that because ContaCT is a triage and notification system, no harm is expected to result from false positives or false negatives. ContaCT will triage and alert on false positives resulting in an earlier read of the CT angiogram image than what otherwise would be and are quickly reviewed and appropriately triaged to non-treatment. False negatives, when no alert is sent, are managed exactly the same as today's standard of care without ContaCT, as no alert is sent in the standard of care. The applicant noted the benefit for patients with LVO that are correctly identified by ContaCT (true positives).

In addressing concerns raised by CMS in the proposed rule regarding whether the results of the clinical study supporting the applicant's De Novo request for ContaCT are generalizable, the applicant stated that data maintained by Viz.ai (and referenced above) suggest that real-world performance of ContaCT is even faster than what was found in the FDA clinical trial. According to the applicant, these internal data are supported by the additional clinical evidence provided to CMS that demonstrate not only does ContaCT reduce time to notification of the neurointerventionalist, it reduces time to treatment and improves clinical outcomes as demonstrated by lower 5-day NIHSS and lower discharge mRS.

The applicant also addressed concerns noted by CMS that results provided in the new technology application from the ALADIN study were partial results and showed somewhat more variable accuracy estimates than the FDA study. The applicant stated that complete results from the ALADIN study were unnecessary to support the performance of the ContaCT system as the primary objective of the ALADIN study was to fine-tune and optimize the ContaCT algorithm prior to the FDA study. According to the applicant, the best and most reliable data on the performance of the ContaCT device is the data from the pivotal study conducted for and submitted to the FDA as part of the de novo classification request.

In the proposed rule, CMS pointed to the multiple steps and variables that impact time to treatment and clinical outcomes in LVO, questioning the ability of ContaCT to shorten time to treatment. In their comment, the applicant stated that the existence of other variables that impact time to treatment and clinical outcomes does not preclude clinical benefits from one variable, such as time to notification. The applicant stated that alerting the stroke specialist earlier than the standard of care enables them to make treatment decisions earlier, shortening the amount of time to treatment and improving clinical outcomes.

The applicant also addressed CMS' concern about whether and how utilization of faster analysis and notification of suspected LVOs derived from CTA images would affect the clinical outcome of patients, considering evidence demonstrating that obtainment of advanced imaging like CTA contributed to a 57-minute delay in decision making. The applicant stated that AHA's “2019 Update to the 2018 Guidelines for the Early Management of Patients With Acute Ischemic Stroke” recommend vessel imaging, such as CTA, for patients with suspected LVOs. Furthermore, according to the applicant, the AHA's broad recommendations supporting vessel imaging are consistent with requirements of pivotal trials for mechanical thrombectomy, all of which required noninvasive CTA or MR angiography (MRA) diagnosis of LVO as an inclusion criterion. Additionally, secondary analyses from the Interventional Management of Stroke (IMS) III Trial, which helped established vessel imaging as standard of care in stroke imaging, found that use of CTA with or without CT perfusion did not delay IV-tPA or endovascular therapy as compared to non-contrast CT in the IMS III trial.

Finally, with regards to CMS' concerns about whether ContaCT provides substantial clinical improvement, the applicant stated that all available clinical guidelines support faster time to treatment. They reiterated that the importance of time in stroke care is well established, and that reducing time to treatment improves clinical outcomes. They asserted that the new clinical evidence provided in their comment demonstrated the direct effect that ContaCT has on both time to treatment and patient outcomes and they maintained that these data are consistent with a well-established body of evidence that reduced time to notification and treatment of LVO improves outcomes in patients with ischemic stroke.

We also received comments from many other commenters expressing their support for new technologies that reduce time to treatment for stroke patients, noting that rapid identification and treatment of these patients at comprehensive stroke centers offers the possibility to minimize the stroke burden and deficit and maximize the potential of a good outcome and return to function. Several commenters also recognized that rapid triaging of stroke patients has been endorsed as a best practice in published clinical guidelines. Some commenters supported the use of AI in the care of stroke patients and neuroscience patients generally, but did not endorse a particular technology, device, product, or manufacturer.

Several commenters noted their direct experience with ContaCT upon implementation of the new technology at their hospitals, asserting that communication between all providers involved in the acute care of patients with stroke has significantly improved. A commenter stated that the ContaCT triage and notification system directly saved the lives of many patients at their hospital. The commenter referenced that their hospital team performed analyses which demonstrated that the use of the ContaCT system resulted in a statistically significant improvement on transfer patient outcomes. Another commenter experienced with the ContaCT system stated it led to a dramatic improvement in patient workflow for acute stroke patients and has significantly decreased door-in door-out times for patients needing emergent treatment who present to spoke hospitals, improved decision times for “go” or “no go” for endovascular therapy at patients presenting to both spoke and hub hospitals, and has led to improved overall outcomes of patients.

Some commenters stated that rapid identification of stroke patients is especially pressing at smaller hospitals that are trying their best to transfer stroke patients to the nearest stroke center. A commenter noted that the reduction of time to treatment by ContaCT is leading to better outcomes clinically, less societal drain of resources, and fewer financial burdens to families requiring the incomes of the patients suffering from stroke disability. Another commenter asserted that if ContaCT receives approval for add-on payments, more hospitals would be able to implement this technology and, as a result, more patients would have access to life saving treatment, leading to a significant reduction of disability from stroke. According to the commenter, allowing hospitals to receive reimbursement for ContaCT would not only benefit communities in large metro areas but, more importantly, in rural areas where access to stroke care and technology is limited due to limited resources.

Response: We appreciate the commenters' input, including the additional information and analysis provided by the applicant in response to our concerns regarding substantial clinical improvement. After reviewing the additional clinical information and other analysis submitted by the applicant in response to our concerns raised in the proposed rule, we have determined that ContaCT represents a substantial clinical improvement over existing technologies because, based on the information provided by the applicant, the technology shortens time to notification, which has been shown in some instances to be critical in improving long-term outcomes in the treatment of stroke.

After consideration of the public comments we received, we have determined that ContaCT meets all of the criteria for approval for new technology add-on payments. Therefore, we are approving new technology add-on payments for ContaCT for FY 2021. Cases involving the use of ContaCT that are eligible for new technology add-on payments will be identified by ICD-10-PCS procedure code 4A03X5D.

In its application, the applicant stated that the cost per patient of ContaCT will vary based on the number of cases. As discussed previously, per the applicant, the cost per patient is calculated based on the annual list price of ContaCT multiplied by the number of subscribers, and divided by the number of ContaCT cases across such subscribers. We noted that, if ContaCT were to be approved for new technology add-on payments for FY 2021, we believed the cost per case from the applicant's original cost analysis above may also be used to determine the maximum new technology add-on payment (that is, 65 percent of the cost determined above). The applicant estimated that the average cost of ContaCT to the hospital is $1,600 based on customer data. Under § 412.88(a)(2), we limit new technology add-on payments to the lesser of 65 percent of the costs of the new medical service or technology, or 65 percent of the amount by which the costs of the case exceed the MS-DRG payment. As a result, the maximum new technology add-on payment for a case involving the use of ContaCT is $1,040 for FY 2021.

d. Supersaturated Oxygen (SSO₂) Therapy (DownStream® System)

TherOx, Inc. submitted an application for new technology add-on payments for Supersaturated Oxygen (SSO₂) Therapy (the TherOx DownStream® System) for FY 2021. We note that the applicant previously submitted an application for new technology add-on payments for FY 2019, which was withdrawn prior to the issuance of the FY 2019 IPPS/LTCH PPS final rule. We also note that the applicant again submitted an application for new technology add-on payments for FY 2020, but CMS was unable to determine that SSO₂ Therapy represents a substantial clinical improvement over the currently available therapies used to treat STEMI patients.

Per the applicant, The DownStream® System is an adjunctive therapy that creates and superoxygenated arterial blood and delivers it directly to reperfused areas of myocardial tissue which may be at risk after an acute myocardial infarction (AMI), or heart attack. Per FDA, SSO₂ Therapy is indicated for the preparation and delivery of SuperSaturated Oxygen Therapy (SSO₂ Therapy) to targeted ischemic regions perfused by the patient's left anterior descending coronary artery immediately following revascularization by means of percutaneous coronary intervention (PCI) with stenting that has been completed within 6 hours after the onset of anterior acute myocardial infarction (AMI) symptoms caused by a left anterior descending artery infarct lesion. The applicant stated that the net effect of the SSO₂ Therapy is to reduce the size of the infarction and, therefore, lower the risk of heart failure and mortality, as well as improve quality of life for STEMI patients.

SSO₂ Therapy consists of three main components: The DownStream® System; the DownStream cartridge; and the SSO₂ delivery catheter. The DownStream® System and cartridge function together to create an oxygen-enriched saline solution called SSO₂ solution from hospital-supplied oxygen and physiologic saline. A small amount of the patient's blood is then mixed with the SSO₂ solution, producing oxygen-enriched hyperoxemic blood, which is delivered to the left main coronary artery (LMCA) via the delivery catheter at a flow rate of 100 ml/min. The duration of the SSO₂ Therapy is 60 minutes and the infusion is performed in the catheterization laboratory. The oxygen partial pressure (pO₂) of the infusion is elevated to ~1,000 mmHg, therefore providing oxygen locally to the myocardium at a hyperbaric level for 1 hour. After the 60-minute SSO₂ infusion is complete, the cartridge is unhooked from the patient and discarded per standard practice. Coronary angiography is performed as a final step before removing the delivery catheter and transferring the patient to the intensive care unit (ICU).

The applicant for the SSO₂ Therapy received premarket approval from FDA on April 2, 2019. FDA noted the applicant must conduct “a post-approval study to confirm the safety and effectiveness of the TherOx DownStream System for use of delivery of SuperSaturated Oxygen Therapy (SSO₂ Therapy) to targeted ischemic regions of the patient's coronary vasculature in qualifying anterior acute myocardial infarction (AMI) patients who have undergone successful percutaneous coronary intervention (PCI) with stenting within 6 hours of experiencing AMI symptoms.” The applicant stated that use of the SSO₂ Therapy can be identified by the ICD-10-PCS procedure codes 5A0512C (Extracorporeal supersaturated oxygenation, intermittent) and 5A0522C (Extracorporeal supersaturated oxygenation, continuous).

As discussed previously, if a technology meets all three of the substantial similarity criteria, it would be considered substantially similar to an existing technology and would therefore not be considered “new” for purposes of new technology add-on payments. We note that in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42275), we stated that based on the information submitted by the applicant as part of its FY 2020 new technology add-on payment application for SSO₂ Therapy, as discussed in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19353), and as summarized in the FY 2020 IPPS/LTCH PPS final rule, we believe that SSO₂ Therapy has a unique mechanism of action as it delivers a localized hyperbaric oxygen equivalent to the coronary arteries immediately after administering the standard-of-care, PCI with stenting, in order to restart metabolic processes within the stunned myocardium and reduce infarct size. Therefore, we stated that we believe SSO₂ Therapy is not substantially similar to existing technologies and meets the newness criterion. We also stated that we would consider the beginning of the newness period to commence when SSO₂ Therapy was approved by the FDA on April 2, 2019. We refer the reader to the FY 2020 final rule for the complete discussion of how SSO₂ Therapy meets the newness criterion. We invited public comments on whether SSO₂ Therapy is substantially similar to an existing technology and whether it meets the newness criterion for purposes of its application for new technology add-on payments for FY 2021.

Comment: Several commenters, including the applicant, agreed with CMS' assessment in the FY 2020 IPPS/LTCH PPS final rule that SSO₂ Therapy meets the newness criterion and is not substantially similar to existing technologies. These commenters stated their belief that SSO₂ Therapy is a novel and efficacious therapy with a unique mechanism of action. The commenters stated that the current standard of care does not address myocardial tissue death and scarring, which is often linked to increased risk of heart failure and long-term mortality.

Response: We appreciate the commenters' support.

Based on consideration of the comments received and information submitted by the applicant as part of its FY 2021 new technology add-on payment application for SSO₂ Therapy, as discussed in the proposed rule (85 FR 32608-32609) and previously summarized in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42274-42275), we believe that SSO₂ Therapy does not use the same or a similar mechanism of action to achieve a therapeutic outcome when compared to existing treatments. Therefore, we believe that SSO₂ Therapy is not substantially similar to an existing technology and meets the newness criterion. We consider the beginning of the newness period to commence when SSO₂ Therapy was approved by the FDA on April 2, 2019.

With regard to the cost criterion, the applicant conducted the following analysis to demonstrate that SSO₂ Therapy meets the cost criterion. The applicant searched the FY 2018 MedPAR file for claims reporting diagnoses of anterior STEMI by ICD-10-CM diagnosis codes I21.01 (ST elevation (STEMI) myocardial infarction involving left main coronary artery), I21.02 (ST elevation (STEMI) myocardial infarction involving left anterior descending coronary artery), or I21.09 (ST elevation (STEMI) myocardial infarction involving other coronary artery of anterior wall) as a principal diagnosis, which the applicant believed would describe potential cases representing potential patients who may be eligible for treatment involving the SSO₂ Therapy. The applicant identified 9,111 cases mapping to 4 MS-DRGs, with approximately 95 percent of all potential cases mapping to MS-DRG 246 (Percutaneous Cardiovascular Procedures with Drug-Eluting Stent with MCC or 4+ Arteries/Stents) and MS-DRG 247 (Percutaneous Cardiovascular Procedures with -DrugEluting- Stent without MCC). The remaining 5 percent of potential cases mapped to MS-DRG 248 (Percutaneous Cardiovascular Procedures with Non-Drug-Eluting Stent with MCC or 4+ Arteries/Stents) and MS-DRG 249 (Percutaneous Cardiovascular Procedures with Non-Drug-Eluting Stent without MCC).

The applicant determined that the average case-weighted unstandardized charge per case was $97,049. The applicant then standardized the charges. The applicant did not remove charges for the current treatment because, as previously discussed, SSO₂ Therapy would be used as an adjunctive treatment option following successful PCI with stent placement. The applicant then added charges for the technology, which accounts for the use of 1 cartridge per patient, to the average charges per case. The applicant did not apply an inflation factor to the charges for the technology. The applicant also added charges related to the technology, to account for the additional supplies used in the administration of SSO₂ Therapy, as well as 70 minutes of procedure room time, including technician labor and additional blood tests. The applicant inflated the charges related to the technology. In the applicant's analysis, the inflated average case-weighted standardized charge per case was $150,115 and the average caseweighted- threshold amount was $98,332. Because the inflated average case-weighted standardized charge per case exceeds the average case-weighted threshold amount, the applicant maintained that the technology meets the cost criterion.

We invited public comments on whether the SSO₂ Therapy meets the cost criterion.

Comment: One commenter, who is also the applicant, supported CMS' conclusion in the FY 2020 IPPS/LTCH PPS final rule that SSO₂ Therapy meets the cost criterion, based on an analysis of the 2017 MedPAR file which yielded an inflated case-weighted standardized charge per case that exceeded the average case-weighted threshold amount. Other commenters stated their belief that SSO₂ Therapy is inadequately paid under the MS-DRGs noted in the application. These commenters urged CMS to approve SSO₂ Therapy for new technology add-on payments to ensure access to Medicare beneficiaries.

Response: Based on the applicant's cost analysis as previously summarized and consideration of the comments received, we agree that the average case-weighted standardized charge per case exceeded the average case-weighted threshold amount. Therefore, SSO₂ Therapy meets the cost criterion.

With regard to the substantial clinical improvement criterion, the applicant asserted that SSO₂ Therapy represents a substantial clinical improvement over existing technologies because it improves clinical outcomes for STEMI patients as compared to the currently available standard-of-care treatment, PCI with stenting alone. Specifically, the applicant asserted that: (1) Infarct size reduction improves mortality outcomes; (2) infarct size reduction improves heart failure outcomes; (3) SSO₂ Therapy significantly reduces infarct size; (4) SSO₂ Therapy prevents left ventricular dilation; and (5) SSO₂ Therapy reduces death and heart failure at 1 year. The applicant highlighted the importance of the SSO₂ Therapy's mechanism of action, which treats hypoxemic damage at the microvascular or microcirculatory level. Specifically, the applicant noted that microvascular impairment in the myocardium is irreversible and leads to a greater extent of infarction. According to the applicant, the totality of the data on myocardial infarct size, ventricular remodeling, and clinical outcomes strongly supports the substantial clinical benefit of SSO₂ Therapy administration over the SOC.

As stated above, TherOx, Inc. submitted an application for new technology add-on payments for FY 2020 that was denied on the basis of substantial clinical improvement. In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42278), we stated that we were not approving new technology add-on payments for SSO₂ Therapy for FY 2020 because, after consideration of the comments received, we remained concerned that the current data did not adequately support a sufficient association between the outcome measures of heart failure, rehospitalization, and mortality with the use of SSO₂ Therapy specifically to determine that the technology represents a substantial clinical improvement over existing available options. The applicant resubmitted its application for new technology add-on payments for FY 2021 with new information that, per the applicant, demonstrates that there is an unmet medical need for STEMI, and that SSO₂ Therapy provides a treatment option for a patient population unresponsive to currently available treatments. Below we summarize the studies the applicant submitted with both its FY 2020 and FY 2021 applications, followed by the new information the applicant submitted with its FY 2021 application to support that the technology represents a substantial clinical improvement.

In the FY 2020 application, as summarized in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42275), and the FY 2021 application, the applicant cited an analysis of the Collaborative Organization for RheothRx Evaluation (CORE) trial and a pooled patient-level analysis to support the claims that infarct size reduction improves mortality and heart failure outcomes.

• The CORE trial was a prospective, randomized, double-blinded, placebo-controlled trial of Poloxamer 188, a novel therapy adjunctive to thrombolysis at the time the study was conducted. The applicant sought to relate left ventricular ejection fraction (EF), end-systolic volume index (ESVI) and infarct size (IS), as measured in a single, randomized trial, to 6-month mortality after myocardial infarction treated with thrombolysis. According to the applicant, subsets of clinical centers participating in CORE also participated in one or two radionuclide sub-studies: (1) Angiography for measurement of EF and absolute, count-based LV volumes; and (2) single-photon emission computed tomographic sestamibi measurements of IS. These sub-studies were performed in 1,194 and 1,181 patients, respectively, of the 2,948 patients enrolled in the trial. Furthermore, ejection fraction, ESVI, and IS, as measured by central laboratories in these sub-studies, were tested for their association with 6-month mortality. According to the applicant, the results of the study showed that ejection fraction (n=1,137; p=0.0001), ESVI (n=945; p=0.055) and IS (n=1,164; p=0.03) were all associated with 6-month mortality, therefore, demonstrating the relationship between these endpoints and mortality.

• The pooled patient-level analysis was performed from 10 randomized, controlled trials (with a total of 2,632 patients) that used primary PCI with stenting. The analysis assessed infarct size within 1 month after randomization by either cardiac magnetic resonance (CMR) imaging or technetium-99m sestamibi single-photon emission computed tomography (SPECT), with clinical follow-up for 6 months. Infarct size was assessed by CMR in 1,889 patients (71.8 percent of patients) and by SPECT in 743 patients (28.2 percent of patients) including both inferior wall and more severe anterior wall STEMI patients. According to the applicant, median infarct size (or percent of left ventricular myocardial mass) was 17.9 percent and median duration of clinical follow-up was 352 days. The Kaplan-Meier estimated 1-year rates of all-cause mortality, re-infarction, and HF hospitalization were 2.2 percent, 2.5 percent, and 2.6 percent, respectively. The applicant noted that a strong graded response was present between infarct size (per 5 percent increase) and the 2 outcome measures of subsequent mortality (Cox-adjusted hazard ratio: 1.19 [95 percent confidence interval: 1.18 to 1.20]; p<0.0001) and hospitalization for heart failure (adjusted hazard ratio: 1.20 [95 percent confidence interval: 1.19 to 1.21]; p<0.0001), independent of other baseline factors. The applicant concluded from this study that infarct size, as measured by CMR or technetium-99m sestamibi SPECT within 1 month after primary PCI, is strongly associated with all-cause mortality and hospitalization for heart failure within 1 year.

In the FY 2020 application, the applicant also cited the AMIHOT I and II studies to support the claim that SSO₂ Therapy significantly reduces infarct size.

• The AMIHOT I clinical trial was designed as a prospective, randomized evaluation of patients who had been diagnosed with AMI, including both anterior and inferior patients, and received treatment with either PCI with stenting alone or with SSO₂ Therapy as an adjunct to successful PCI within 24 hours of symptom onset. The study included 269 randomized patients and 3 co-primary endpoints: Infarction size reduction, regional wall motion score improvement at 3 months, and reduction in ST segment elevation. The study was designed to demonstrate superiority of the SSO₂ Therapy group as compared to the control group for each of these endpoints, as well as to demonstrate non-inferiority of the SSO₂ Therapy group with respect to 30-day Major Adverse Cardiac Event (MACE). The applicant stated that results for the control versus SSO₂ Therapy group comparisons for the three co-primary effectiveness endpoints demonstrated a nominal improvement in the test group, although this nominal improvement did not achieve clinical and statistical significance in the entire population. The applicant further stated that a pre-specified analysis of the SSO₂ Therapy patients who were revascularized within 6 hours of AMI symptom onset and who had anterior wall infarction showed a marked improvement in all 3 co-primary endpoints as compared to the control group. Key safety data revealed no statistically significant differences in the composite primary endpoint of 1-month (30 days) MACE rates between the SSO₂ Therapy and control groups. MACE includes the combined incidence of death, re-infarction, target vessel revascularization, and stroke. In total, 9/134 (6.7 percent) of the patients in the SSO₂ Therapy group and 7/135 (5.2 percent) of the patients in the control group experienced 30-day MACE (p=0.62).

• The AMIHOT II trial randomized 301 patients who had been diagnosed with and were receiving treatment for anterior AMI with either PCI plus the SSO₂ Therapy or PCI alone. The AMIHOT II trial had a Bayesian statistical design that allows for the informed borrowing of data from the previously completed AMIHOT I trial. The primary efficacy endpoint of the study required proving superiority of the infarct size reduction, as assessed by Tc-99m Sestamibi SPECT imaging at 14 days post PCI/stenting, with the use of SSO₂ Therapy as compared to patients who were receiving treatment involving PCI with stenting alone. The primary safety endpoint for the AMIHOT II trial required a determination of non-inferiority in the 30-day MACE rate, comparing the SSO₂ Therapy group with the control group, within a safety delta of 6.0 percent. Endpoint evaluation was performed using a Bayesian hierarchical model that evaluated the AMIHOT II result conditionally in consideration of the AMIHOT I 30-day MACE data. According to the applicant, the results of the AMIHOT II trial showed that the use of SSO₂ therapy, together with PCI and stenting, demonstrated a relative reduction of 26 percent in the left ventricular infarct size and absolute reduction of 6.5 percent compared to PCI and stenting alone.

Next, to support the claim that SSO₂ Therapy prevents left ventricular dilation, the applicant cited the Leiden study, which represents a single-center, sub-study of AMIHOT I patients treated at Leiden University in the Netherlands. The study describes outcomes of randomized selective treatment with intracoronary aqueous oxygen (AO), the therapy delivered by SSO₂ Therapy, versus standard care in patients who had acute anterior wall myocardial infarction within 6 hours of onset. Of the 50 patients in the sub-study, 24 received treatment using adjunctive AO and 26 were treated according to standard care after PCI, with no significant differences in baseline characteristics between groups. LV volumes and function were assessed by contrast echocardiography at baseline and 1 month. According to the applicant, the results demonstrated that treatment with aqueous oxygen prevents LV remodeling, showing a reduction in LV volumes (3 percent decrease in LV end-diastolic volume and 11 percent decrease in LV end-systolic volume) at 1 month as compared to baseline in AO-treated patients, as compared to increasing LV volumes (14 percent increase in LV end diastolic volume and 18 percent increase in LV end-systolic volume) at 1 month in control patients. The results also show that treatment using AO preserves LV ejection fraction at 1 month, with AO-treated patients experiencing a 10 percent increase in LV ejection fraction as compared to a 2 percent decrease in LV ejection fraction among patients in the control group.

Finally, to support the claim that SSO₂ Therapy reduces death and heart failure at 1 year, the applicant submitted the results from the IC-HOT clinical trial, which was designed to confirm the safety and efficacy of the use of the SSO₂ Therapy in those individuals presenting with a diagnosis of anterior AMI, who have undergone successful PCI with stenting of the proximal and/or mid left anterior descending artery within 6 hours of experiencing AMI symptoms. It is an IDE, nonrandomized, single arm study. The study primarily focused on safety, utilizing a composite endpoint of 30-day Net Adverse Clinical Events (NACE). A maximum observed event rate of 10.7 percent was established based on a contemporary PCI trial of comparable patients who had been diagnosed with anterior wall STEMI. The results of the IC-HOT trial exhibited a 7.1 percent observed NACE rate, meeting the study endpoint. Notably, no 30-day mortalities were observed, and the type and frequency of 30-day adverse events occurred at similar or lower rates than in contemporary STEMI studies of PCI-treated patients who had been diagnosed with anterior AMI. Furthermore, according to the applicant, the results of the IC-HOT study supported the conclusions of effectiveness established in AMIHOT II with a measured 30-day median infarct size = 19.4 percent (as compared to the AMIHOT II SSO₂ Therapy group infarct size = 20.0 percent). The applicant stated that notable measures include 4-day microvascular obstruction (MVO), which has been shown to be an independent predictor of outcomes, 4-day and 30-day left ventricular end diastolic and end systolic volumes, and 30-day infarct size. The applicant also stated that the IC-HOT study results exhibited a favorable MVO as compared to contemporary trial data, and decreasing left ventricular volumes at 30 days, compared to contemporary PCI populations that exhibit increasing left ventricular size. The applicant asserted that the IC-HOT clinical trial data continue to demonstrate the substantial clinical benefit of the use of SSO₂ Therapy as compared to SOC, PCI with stenting alone.

The applicant also performed controlled studies in both porcine and canine AMI models to determine the safety, effectiveness, and mechanism of action of the SSO₂ Therapy. According to the applicant, the key summary points from these animal studies are:

• SSO₂ Therapy administration post-AMI acutely improves heart function as measured by left ventricular ejection fraction (LVEF) and regional wall motion as compared with non-treated control subjects.
• SSO₂ Therapy administration post-AMI results in tissue salvage, as determined by post-sacrifice histological measurements of the infarct size. Control animals exhibit larger infarcts than the SSO₂-treated animals.
• SSO₂ Therapy has been shown to be non-toxic to the coronary arteries, myocardium, and end organs in randomized, controlled swine studies with or without induced acute myocardial infarction.
• SSO₂ Therapy administration post-AMI has exhibited regional myocardial blood flow improvement in treated animals as compared to controls.
• A significant reduction in myeloperoxidase (MPO) levels in the SSO₂-treated animals versus controls, which indicate improvement in underlying myocardial hypoxia.
• Transmission electron microscopy (TEM) photographs showing amelioration of endothelial cell edema and restoration of capillary patency in ischemic zone cross-sectional histological examination of the SSO₂-treated animals, while non-treated controls exhibit significant edema and vessel constriction at the microvascular level.

In the FY 2020 final rule (84 FR 42278), after consideration of all the information from the applicant, as well as the public comments we received, we stated that we were unable to determine that SSO₂ Therapy represented a substantial clinical improvement over the currently available therapies used to treat STEMI patients. We stated that we remained concerned that the current data does not adequately support a sufficient association between the outcome measures of heart failure, rehospitalization, and mortality with the use of SSO₂ Therapy specifically to determine that the technology represented a substantial clinical improvement over existing available options. Therefore, we did not approve new technology add-on payments for SSO₂ Therapy for FY 2020.

For FY 2021, the applicant submitted new information that, according to the applicant, demonstrates that there is an unmet medical need for STEMI, and that SSO₂ Therapy provides a treatment option for a patient population unresponsive to currently available treatments. The applicant presented this information in the context of CMS's concerns as identified in the FY 2020 IPPS/LTCH PPS proposed and final rules, specifically that (1) it is unclear whether use of the SSO₂ Therapy would demonstrate the same clinical improvement as compared to the current standard of care; (2) that the current data does not adequately support a sufficient association between the outcome measures of heart failure, rehospitalization, and mortality with the use of SSO₂ Therapy, and (3) that SSO₂ may not provide long-term clinical benefits in patients with AMI. Below we summarize this information, which the applicant believes addresses these concerns.

With regard to CMS's concern that it is unclear whether use of SSO₂ Therapy would demonstrate the same clinical improvement as compared to the current standard-of care, the applicant restated our concern as whether “these data [AMIHOT I and AMIHOT II are] adequate to show the relevant outcomes in the control (standard of care percutaneous coronary intervention (PCI))”. In response to this concern, the applicant asserted that patient outcomes post-PCI have remained relatively stable over the past 10 years and there is a strong clinical need for new therapies like SSO₂ in addition to PCI in the management of patients with anterior STEMI to reduce the risk and severity of heart failure and death. To support its assertion of an unmet clinical need for anterior wall STEMI treatment, the applicant presented data from multiple references to illustrate the following:

• A plateau in STEMI 1-year mortality rates at 10 percent with the advent of drug-eluting stents, according to reports from the SWEDEHEART registry. This statistic is in agreement with the 9% 1 year STEMI mortality rate following PCI reported in a 2015 paper by Bullock et al.

• No improvement in U.S. in-hospital post-PCI STEMI mortality rates between 2001 and 2011 based on work done by Sugiyama et al.

• No decrease in one-year mortality risk as illustrated by Kalesan et al., a meta-analysis of 15 clinical trials totaling 7,867 patients that compared outcomes data for STEMI patients treated with bare metal stents versus drug eluting stents.

• A markedly higher one-year mortality rate at 19.4% for the Medicare population as compared to the total population of PCI-treated anterior wall STEMI patients, according to the most recent Medicare Standard Analytic File (SAF) data (2017).
• No improvement in congestive heart failure (CHF) rates after STEMI treated pPCI; the applicant referenced Szummer et al.'s work which indicated 1 year post primary PCI CHF rates of 10 percent as well as a statistical analysis of CHF readmission outcomes that showed heart failure rates for this patient population have remained stable at 9 to 10 percent from 2012 to 2017.

• A decrease in 30-day STEMI re-hospitalizations due to the evolution of PCI therapy; the applicant cited the work of Kim et al., noting the readmission rates trended slightly downward from approximately 12 percent in 2010 to 10 percent in 2014. According to the applicant, these data illustrate that PCI treats macrovascular aspects of STEMI events, but does not address the underlying infarct damage, which is highly correlated with worse long-term outcomes.

The applicant reiterated statements from its prior application that, in order to reduce outcomes like mortality and heart failure in the STEMI population, therapies must be available above and beyond PCI to reduce the size of the infarct that results from a STEMI event. Per the applicant, the benefits shown in the AMIHOT I 6-hour sub-study, AMIHOT II and IC-HOT studies show statistically significant and clinically meaningful improvements in infarct size, left ventricular size and function, and long term outcomes that support the claim that SSO₂ offers a substantial clinical improvement over PCI by filling an important gap in therapy with PCI, and specifically the need to reduce infarct size beyond simply opening occluded large vessels alone.

With regard to CMS's second concern that the current data does not adequately support a sufficient association between the outcome measures of heart failure, rehospitalization, and mortality with the use of SSO₂ Therapy, the applicant restated our concern as “the importance of the reduction of infarct size as an outcome for patients with anterior STEMI.” The applicant provided multiple animal and human studies to illustrate how TherOx SSO₂ potentially impacts outcome measures of heart failure, rehospitalization and mortality. Regarding animal studies, the applicant cited the porcine and canine study by Spears et al. and summarized above to illustrate how aqueous oxygen hyperoxemic perfusion attenuates microvascular ischemia. Regarding human studies, the applicant cited a 2004 review by Gibbons et al. to support its assertion that the best physical measure of the consequences of AMI in post-intervention patients is the quantification of the extent of necrosis or infarction in the muscle. In this 2004 review article, Gibbons et al. sought to summarize published evidence for quantification of infarct size using data from studies that assessed biomarkers, cardiac SPECT sestamibi and magnetic resonance imaging. Regarding the use of cardiac SPECT sestamibi imaging, Gibbons et al. found five separate lines of clinical evidence that validated the use of SPECT sestamibi imaging for determining infarct size. The applicant also referenced the CORE trial that it submitted with its original application and which we summarize above. Per the applicant, a substudy of CORE trial data by Burns et al. demonstrated that an absolute infarct size reduction of 3 percent was associated with a mortality benefit. Specifically, the trial showed that six-month mortality was significantly related to infarct size. Per the applicant, among the 753 patients who underwent ejection fraction measurements, the odds ratio for infarct size for six-month mortality was 1.033—that is, for each 1 percent increase in infarct size, mortality in the next 6 months was 1.033 times more likely. A 5 percent increase in infarct size would therefore mean that 6-month mortality was 1.176 times more likely. A patient with an infarct size that was greater by 5 percent of the left ventricle would therefore have a 17.6 percent greater chance of dying within the next 6 months.

The applicant further noted the CORE trial and associated studies were conducted when thrombolytic therapy was the standard of care for coronary artery reperfusion. The transition to PCI led directly to a measured absolute infarct size reduction of 5.1 percent in STEMI patients treated with PCI as compared to thrombolytic therapy, which correlated to a significant decrease in cardiovascular events. The applicant asserted that the infarct size reduction demonstrated with PCI compared to thrombolytic therapy helped establish PCI as the preferred standard of care, and that the results demonstrating the importance of infarct size reduction hold true in randomized PCI trials of STEMI patients, with infarct size evaluated by either Tc-99 sestabmibi SPECT imaging or cardiac MRI. The applicant referred to the substudy of CORE trial data by Burns et al., which found that, among the three clinical prognostic outcomes studied, ejection fraction (EF) was superior to infarct size (IS) and end-systolic volume index (ESVI) in predicting 6-month mortality. The authors also noted that all three radionuclide measures were significantly associated with each other, and that the strongest correlation was between ESVI and EF. The study noted that infarct size was significantly correlated with both EF and ESVI despite being determined from a different radionuclide measurement, and that infarct location was not found to be significant.

The applicant also provided a study by Stone et al. to address our concern that the current data does not adequately support a sufficient association between the outcome measures of heart failure, rehospitalization, and mortality with the use of SSO₂ Therapy. The applicant provided Stone et al.'s recent analysis of 10 pooled randomized trials involving 2,632 subjects, including some subjects from the AMIHOT II trial. Stone et al. set out to determine the strength of the relationship between infarct size assessed within 1 month after pPCI in STEMI and subsequent all-cause mortality, reinfarction and hospitalization for heart failure. Infarct size was assessed using cardiac SPECT sestamibi or cardiac magnetic resonance and clinical follow-up data greater than or equal to 6 months. The authors found infarct size reduction measured by either imaging method within 1 month correlated strongly with reduced mortality and heart failure hospitalization at 1 year. The applicant asserted that the results demonstrated that every 5 percent absolute increase in left ventricular infarct size was associated with a 19 percent increase in 1-year mortality, correlating well with the 17.6 percent estimate established from earlier data and underscoring the important, independent relationship between infarct size and mortality regardless of the treatment modality. The applicant asserted that the published analysis also demonstrated that infarct size measured within 1 month after pPCI for STEMI using either imaging method is a powerful independent predictor of hospitalization for heart failure at 1 year. The applicant reiterated that overall, a 5 percent absolute infarct size increase was associated with a 20 percent increase in either death or heart failure at 1 year. The applicant explained that because infarct size is the quantification of the extent of scarring of the left ventricle post-AMI, it is a direct measure of the health of the myocardium and indirectly of the heart's structure and function. A large infarct means the muscle cannot contract normally, leading to left ventricular enlargement, reduced ejection fraction, clinical heart failure, and death. Per the applicant, the Kaplan-Meier curves for the rates of heart failure at 12 months as a function of infarct size also show that a 5 percent increase in left ventricle infarct size corresponded to a 50-100 percent increase in the risk of heart failure at 12 months for the most severe infarcts. The applicant concluded that reducing infarct size 5 or more percentage points provides a clear and dramatic clinical benefit for patients as demonstrated by a wealth of trial data. Significantly, the applicant noted that even as treatment of the primary occlusion improved, the relationship between infarct size and mortality and heart failure persisted and remained present throughout the study data.

Finally, with regard to CMS's third concern that SSO₂ may not provide long-term clinical benefits in patients with AMI, the applicant again referred to the 1-year outcomes data collected from patients in the IC-HOT trial and which were compared to a control population from the INFUSE AMI study after propensity-matching. The applicant asserted that STEMI patients treated with SSO₂ Therapy showed statistically significant and clinically meaningful improvements in several critically important outcomes for patients with anterior STEMI at 1 year, such as—

• Death;
• New onset of heart failure and readmission for heart failure;
• Composite rate of death and new onset of heart failure;
• Composite rate of death, new onset of heart failure or readmission for heart failure, or clinically-driven target vessel revascularization;
• Composite of death, reinfarction/spontaneous MI, clinically driven target vessel revascularization or new onset heart failure or readmission for heart failure.

The applicant concluded that, taken together, there is abundant evidence to support the claim that SSO₂ Therapy represents a substantial clinical improvement over PCI alone in the management of patients with anterior STEMI. Per the applicant, there remains a strong unmet need for new therapies like SSO₂ in addition to PCI in the management of patients with anterior STEMI to reduce the risk and severity of heart failure and death. The applicant maintained that the timely delivery of supersaturated oxygen therapy improves microvascular and tissue level flow, reduces infarct size, facilitates recovery of left ventricular function and preserves left ventricular stability, and improves patient outcomes, most notably lowering mortality and heart failure rates at 1 year post-procedure.

We thank the applicant for the additional information to address the concerns discussed in the FY 2020 IPPS/LTCH PPS final rule. We appreciate how this information, and specifically the seven studies referenced in response to the applicant's restatement of our first concern, illustrates a potential unmet medical need. However, we stated in the proposed rule that we are concerned that the AMIHOT I and AMIHOT II data may not adequately demonstrate the relevant outcomes in the control (standard of care PCI) because the standard of care has evolved since the two trials were performed. Additionally, we stated that we are concerned that the results presented in these seven studies may be based on patients with all types of STEMI and are not specific to the FDA-approved indicated use of SSO₂ Therapy for the treatment of anterior STEMI. We stated that ultimately, we remain concerned that the current data does not support a sufficient association between the outcome measures of heart failure, rehospitalization, and mortality with the use of SSO₂ Therapy specifically to determine that the technology represents a substantial clinical improvement over existing available options. Therefore, we invited public comment on whether SSO₂ Therapy meets the substantial clinical improvement criterion.

We invited public comments on whether the SSO₂ Therapy meets the substantial clinical improvement criterion.

Comment: The applicant submitted comments regarding the concerns raised by CMS in the proposed rule about whether SSO₂ Therapy meets the substantial clinical improvement criterion. The commenter first recapped the clinical studies used to support SSO₂ Therapy's Premarket Approval, which were the AMIHOT I and II and IC-HOT clinical trials.

As discussed in the FY 2020 IPPS/LTCH PPS final rule and the FY 2021 IPPS/LTCH PPS proposed rule, the AMIHOT I was a prospective, randomized study that enrolled both inferior and anterior STEMI patients assigned to either PCI with stenting alone (control group) or with SSO₂ administered post-PCI (treatment group). The AMIHOT I trial showed a therapeutic benefit in the pre-specified anterior STEMI subgroup by reducing infarct size (the primary endpoint). However, as the AMIHOT I was not designed to test statistical superiority in the subgroup with anterior STEMI, for which SSO₂ Therapy is indicated, the manufacturer undertook a second prospective, randomized controlled trial for this population, the AMIHOT II study.

The AMIHOT II trial only enrolled anterior STEMI patients randomized to either PCI with stenting alone (control) or with SSO₂ administered post-PCI (treatment). At the FDA's recommendation, the AMIHOT II utilized a pre-specified Bayesian statistical model for the primary endpoint analysis, which pooled anterior STEMI patients from the AMIHOT I and AMIHOT II patients. The results of AMIHOT II demonstrated superiority in the anterior STEMI population for the primary endpoint of reducing infarct size, or heart muscle damage, which the commenter asserted is a well-recognized predictor of heart failure and mortality.

Finally, the manufacturer undertook a third study, IC-HOT. The purpose of IC-HOT was to confirm the safety and efficacy results of SSO₂ Therapy after technical modifications to device design. Per the applicant, the IC-HOT study enrolled a treatment-only cohort, met its primary endpoint, and confirmed the earlier AMIHOT findings for infarct size reduction and mortality. The commenter noted that the results are consistent across all key studies and demonstrate that SSO₂ Therapy significantly reduces infarct size, or heart muscle damage.

Next, the applicant presented two new studies that had not been available at the time its FY 2021 new technology add-on payment application was submitted. The first (which the applicant referred to as the Chen paper) was an analysis of mortality and heart failure rates found in IC-HOT patients as compared to a historical propensity-matched population of anterior STEMI patients from the 2012 INFUSE-AMI trial. The applicant referenced this analysis in its FY 2021 new technology add-on payment application and has since had it peer-reviewed and accepted for publication. The analysis presented one-year follow-up data showing mortality and heart failure rates between the two groups. This new data showed treatment with SSO₂ Therapy was associated with a lower 1-year rate of the composite endpoint of all-cause death or new-onset heart failure or hospitalization for heart failure (0.0% vs. 12.3%, p=0.001), with reductions in the individual 1-year outcomes of death (0% vs. 7.6%, p=0.01) and new-onset heart failure or hospitalization for heart failure (0.0% vs. 7.4%, p =0.001). However, we note that the applicant did not observe a statistically significant result in the outcome measurements of reinfarction and target vessel revascularization.

The applicant also commissioned the Medicare Mortality Analysis, which matched the IC-HOT patients with a population of anterior STEMI patients from 2018 Medicare inpatient data. The populations were matched for multiple covariates, using propensity scores and regression analysis. The applicant applied the same inclusion and exclusion criteria as the IC-HOT study, resulting in an eligible comparison group of 2,587 cases. The applicant then developed one-year follow-up data showing mortality rates between the two groups. Per the applicant, the IC-HOT treatment group had no mortality over the 30-day and 1-year follow-up periods, in contrast to the matched Medicare comparison group, which had a 30-day mortality of 5 percent and a 1-year mortality of 7.3 percent. The applicant stated that the differences in mortality between the IC-HOT sample and the matched Medicare sample were statistically significant at a 5 percent significance level. The applicant further developed data showing differences in the rate of re-hospitalization for chronic heart failure. The applicant found that the mortality rate in the IC-HOT sample was 1 percent over the 30-day and 1-year follow-up periods, but that the difference between the two populations was not statistically significant.

The applicant also presented a Medicare Longitudinal Analysis of heart failure outcomes in anterior STEMI patients treated with PCI. The applicant obtained Medicare inpatient claims data from 2005-2008 (when the AMIHOT trials were conducted) and from 2016-2018 (during enrollment of the IC-HOT trial). Because the 2005-2007 Medicare Inpatient Limited Datasets only report the quarter of discharge from the hospital, the applicant examined outcomes by quarters and divided their sample into two cohorts based on year of discharge from the hospital. The early cohort included cases discharged in 2005 and 2007, and the later cohort included cases discharged in 2016, 2017, and 2018. The applicant found that, among Medicare beneficiaries diagnosed with STEMI who are treated with PCI with stenting, 4-quarter mortality rates following hospitalization was 8.9 percent in the 2005/2007 cohort and 10.3 percent in the 2016/2017/2018 cohort. While the difference in these mortality rates between the early and later cohorts was statistically insignificant, the 8-quarter mortality rate increased from 11.4 percent in 2005 to 14.5 percent in 2016/2017, yielding a statistically significant difference of 3.1 percentage points. Per the applicant, controlling for differences in clinical characteristics between the early and later cohorts using Elixhauser comorbidities yielded a 4 quarter mortality rate that increased by 2.3 percentage points, and an 8-quarter mortality rate that increased by 4.2 percentage points between early and later cohorts. Per the applicant, risk-adjusted 4-quarter rehospitalization rates for chronic heart failure decreased by 6.9 percentage points between the 2005/2007 cohort and the 2016/2017/2018 cohort. The applicant found no statistically significant change in 8-quarter rehospitalization rate for chronic heart failure between the two cohorts. Per the applicant, these results demonstrate that mortality and heart failure outcomes in anterior STEMI patients treated with PCI have not improved since 2005 between the matched population of the earlier cohort and the later cohort.

The applicant then addressed CMS' concerns (85 FR 32613) individually. With respect to the concern that the AMIHOT I and AMIHOT II data may not adequately demonstrate the relevant outcomes in the control group because the standard of care has evolved since the two trials were performed, the applicant responded that refinements to the standard of care have not improved mortality or heart failure since the studies were conducted. According to the applicant, the changes to the standard of care since AMIHOT I and AMIHOT II were conducted have been modest rather than transformative, and largely comprised of (1) earlier PCI intervention through reduced door-to-balloon times, (2) new adjunctive pharmacological alternatives, and (3) incremental improvements in stent design and delivery tools and techniques. The applicant reiterated that these changes have led to a reduction in rehospitalization and revascularization, but no improvement in mortality or heart failure rates.

The applicant further noted that, with respect to earlier PCI intervention, it is important to recognize that door-to-balloon times in the AMIHOT control groups were already at the optimized levels seen in clinical practice today, as evidenced by the requirement in the AMIHOT trials to perform successful PCI within 6 hours of symptom onset, and the adherence to prompt door-to-balloon times in the PCI centers that participated in the study. Accordingly, the applicant asserted that the AMIHOT control group accurately reflects the current standard of care in this manner. The applicant asserted that other refinements have resulted in better PCI results, but have not improved mortality or heart failure rates. For example, the migration from bare metal stents to drug-eluting stents reduced target vessel revascularization rate by 46% but did not reduce cardiac death. The applicant referenced the Medicare Longitudinal Analysis, which saw an increase in the one-year mortality rate from 7.8% in 2005 to 10.8% in 2018. The applicant noted that, in the same analysis, the trend in two-year mortality rate also increased from 11.4% in 2005 to 15.3% in 2017. Similarly, two-year heart failure rate increased from 7.8% in 2005 to 10.6% in 2018.

The applicant concluded that both the clinical literature and Medicare's own anterior STEMI patient data demonstrate refinements to the PCI standard of care have not resulted in improved heart failure or mortality for anterior STEMI patients since the conduct of the AMIHOT trials, and that the AMIHOT I and II control group continues to be relevant. The applicant reiterated that, without a therapy to address microvascular injury in the heart muscle following an anterior STEMI, outcomes that are strongly correlated to microvascular injury are unlikely to improve. The applicant stated that in contrast to PCI refinements, SSO₂ Therapy is specifically designed to address microvascular injury and improves anterior STEMI outcomes related to the development of heart failure and heart failure mortality.

With respect to the concern that the results presented in the seven studies submitted with the applicant's FY 2021 application were based on patients with all types of STEMI and are not specific to the FDA-approved indicated use of SSO₂ Therapy for the treatment of anterior STEMI, the applicant responded that the studies presented are relevant even though they were not specific to the FDA approved indication. The applicant stated that the AMIHOT II and IC-HOT studies targeted the anterior STEMI population after the pre-defined anterior STEMI subgroup in AMIHOT I saw the greatest benefit from SSO₂ Therapy. To further confirm these results, the applicant referenced the Medicare Mortality Analysis, which included only anterior STEMI patients. The new analysis showed that the IC-HOT treatment group had no mortality over 30-day and 1-year follow-up periods. In contrast, the propensity-matched population from 2018 Medicare inpatient data had a 30-day mortality of 5 percent, and 1-year mortality of 7.3 percent. The differences in mortality between the IC-HOT sample and the matched Medicare sample were statistically significant at a 5 percent significance level, while the differences in re-hospitalization rate for CHF between the IC-HOT sample and the matched Medicare sample were statistically insignificant.

The applicant noted that its FY 2021 application included a wide array of data demonstrating the absence of progress in mortality or heart failure outcomes in all types of STEMI patients, since large, longitudinal STEMI studies reported by infarct location are limited. As seen in AMIHOT I and the Medicare Mortality Analysis, clinical outcomes are worse in anterior STEMI patients and this population drives overall STEMI mortality and heart failure rates. The applicant again referenced the Medicare Longitudinal Analysis, which is derived from CMS data and specific to the anterior STEMI and matched population to support their assertion that there is a lack of progress in improving mortality and heart failure outcomes in anterior STEMI patients between 2005 and 2018. The applicant explained that anterior STEMI carries a higher heart failure and mortality risk and thus any data presented that is not specific to the anterior STEMI population would tend to cause a bias towards underestimating adverse outcomes with anterior STEMI and therefore underestimate the clinical benefit from SSO₂ Therapy by comparison. The applicant maintained that all clinical data reported showing a benefit of SSO₂ Therapy are among patients with anterior STEMI, so this bias can only exist for comparison data. The applicant stated as such, comparisons of SSO₂ Therapy data in patients with anterior STEMI to data among patients with STEMI overall would tend to understate the benefits of SSO₂ Therapy.

With respect to CMS' third concern that the current data does not support a sufficient association between the outcome measures of heart failure, rehospitalization, and mortality with the use of SSO₂ Therapy specifically to determine that the technology represents a substantial clinical improvement over existing available options, the applicant submitted new supporting analyses while disagreeing with CMS' assessment. The applicant submitted the newly published Chen Paper which compares the outcomes of the most recent trial data from IC-HOT to an appropriate comparator population of subjects receiving the standard of care. As noted above, results demonstrated clinically and statistically lower one-year rates of mortality and heart failure in anterior STEMI patients treated with SSO₂ Therapy as compared to a propensity matched population treated with only PCI. Per the applicant, the Medicare Mortality Analysis replicated these findings and demonstrated a clinically and statistically significant one-year mortality reduction in anterior STEMI patients treated with SSO₂ Therapy as compared to matched control patients treated with only PCI.

Finally, the applicant also compared outcomes of this same matched IC-HOT population to outcomes from the PCI standard of care control group from the CONDI-2/ERIC PPCI study, which to the commenter's knowledge is the most recently reported study with a large PCI control group. Per the applicant, this trial included 974 anterior STEMI control patients with outcomes very similar to those presented from the matched INFUSE-AMI population. The applicant stated that the one-year mortality and heart failure rates for the anterior STEMI patients analyzed were 5.2% and 11.6%, respectively. The applicant noted that these outcomes are consistent with the matched control populations above and substantially worse than the IC-HOT SSO₂-treated group.

The applicant reiterated that, as seen in the AMIHOT I, AMIHOT II, and IC-HOT trials, SSO₂ Therapy reduces infarct size. The applicant asserted that preserving heart tissue and reducing infarct size in patients who have had an anterior STEMI leads to heart function improvement, and patients experience fewer heart failure episodes, fewer heart failure symptoms, and lower incidence of death. The applicant maintained that this is a substantial clinical improvement beyond standard anterior STEMI care, not only because infarct size is itself clinically important, but also because, per the applicant, research has shown that use of SSO₂ Therapy reduces rates of death and heart failure in the intended use population. The applicant asserted that, consistently, across multiple control groups, large and small, randomized and matched, SSO₂ Therapy outperformed PCI alone in the critical outcomes of mortality and heart failure. The applicant further asserted that these results support the benefit of employing a treatment strategy of effective PCI first, then healing the injured myocardium with SSO₂ Therapy administration.

In conclusion, the commenter stated that the data presented in the FY2021 new technology add-on payment application supplemented by the data presented in its comment letter show that SSO₂ Therapy meets the substantial clinical improvement criterion in addition to meeting the newness and cost criteria and merits approval for new technology add-on payments for FY 2021. The commenter stated that denial of new technology add-on payments would limit use of this beneficial technology in many hospitals, and disproportionately hinder improvements in anterior STEMI outcomes in economically disadvantaged communities, including rural areas, and prolong treatment for critical care.

We also received comments from several other commenters asserting that SSO₂ Therapy filled an unmet medical need while also being superior to the current standard of care, PCI with stenting. These commenters stated that there have been no significant advancements in anterior STEMI treatment that have impacted infarct size or heart failure since the AMIHOT I and AMIHOT II trials were conducted. According to these commenters, other drugs and therapies have not been able to reduce infarct size and had limited impact on reducing death and heart failure hospitalization rates. Additionally, several commenters reviewed the clinical data from the AMIHOT I, AMIHOT II, and IC-HOT trials for reductions in infarct size and improved ejection fraction and other indications of improved patient outcomes, which they believe correlate to reduced heart failure and improved mortality beyond the benefit of PCI and stenting alone.

Several commenters cited their personal experience treating patients with SSO₂ Therapy and noted the positive results in these patients, including signs of clinical recovery such as restored normal heart functions and improved ejection fraction that they believe would not have occurred under PCI with stenting alone. One such commenter claimed to have treated three patients who all showed normal heart functions within one month of being treated with SSO₂ Therapy. Overall, these commenters expressed their support of the applicant's claim that SSO₂ Therapy has a measurable improved impact on patient outcomes and quality of life measurements.

Response: We appreciate the commenters' input, including the additional information and analysis submitted by the applicant to address CMS' concerns. With respect to the original studies, we note that the AMIHOT I was a Phase II study designed to test efficacy. We also note that, while AMIHOT I and AMIHOT II were randomized, they were designed to show that SSO₂ Therapy reduces infarct size but were not designed to demonstrate improved outcomes among anterior STEMI patients.

The IC-HOT study was a single-arm study that recruited a treatment-only group to confirm an objective safety performance goal, and was not statistically powered to look at any efficacy endpoint. The applicant compared one-year clinical outcomes to a propensity-matched control group of similar patients with anterior STEMI enrolled in the INFUSE-AMI trial. We recognize that the results show all-cause mortality, driven by cardiovascular mortality, and new-onset heart failure or heart failure hospitalization, were each individually lower in patients treated with SSO₂ Therapy. However, there may be variability from the types of patients enrolled in a single-arm registry such as IC-HOT and those in a comparator control group drawn from the randomized INFUSE-AMI trial. We note that the IC-HOT trial included more patients in Killip Class I (individuals with no clinical signs of heart failure), with 95.2 percent of patients compared to 85.5 percent of patients enrolled in INFUSE-AMI. We also note that IC-HOT had fewer patients in Killip Class II (individuals with rales or crackles in the lungs, an S₃, and elevated jugular venous pressure), with 3.6 percent of patients compared to 13.2 percent in INFUSE-AMI.

As stated by the applicant and summarized above, the Chen paper was an analysis of mortality and heart failure rates found in IC-HOT patients as compared to a propensity-matched population enrolled in the INFUSE-AMI trial. Chen et al. noted the following study limitations: (1) The population represents a selected cohort of patients and, therefore, its findings may not apply to all patients with STEMI, such as those with cardiogenic shock, nonanterior MI, and others who did not undergo pPCI with stenting within six hours of symptom onset; (2) because patients from the comparator control group were drawn from the randomized INFUSE-AMI trial, there may be variability from the types of patients enrolled in a single-arm registry such as IC-HOT; and (3) they could not rule out the possibility that its analysis was confounded by other unmeasured factors that are correlated with SSO₂ Therapy treatment. Chen et al. concluded that based on the overall review of the data and study limitations that its results should be considered only hypothesis-generating. Finally, Chen et al. noted that the study results were an analysis from a modest-sized propensity-matched cohort and recommended appropriately powered randomized controlled trials to demonstrate the effect of SSO₂ Therapy treatment on outcomes in patients with anterior STEMI after successful PCI.

We also reviewed two additional studies the applicant submitted, the Medicare Mortality Analysis and the Medicare Longitudinal Analysis. Per the applicant, these studies show that there is an unmet medical need in the population of anterior STEMI patients, as well as the superiority of SSO₂ Therapy over PCI with stenting alone in mortality and heart failure outcomes among anterior STEMI patients. However, these analyses used results from the IC-HOT study, a study designed to look at safety only, to reach an efficacy endpoint. Similarly, though they state that the design of the Medicare Mortality Analysis used a propensity-matched population of anterior STEMI patients from Medicare inpatient data, and the Medicare Longitudinal Analysis also used matching to ensure appropriate comparison populations, it is unclear if baseline morbidity and other confounding factors were matched between arms.

We also note that the FDA ordered a post-approval study to confirm the safety and effectiveness of SSO₂ Therapy. The FDA specified that the new enrollment study should be a prospective global, multicenter, randomized (1:1), confirmatory study with patients randomized to either standard therapy or post-procedure infusion of SSO₂ Therapy for a duration of 60 minutes and followed for 12 months. The FDA also specified that the primary effectiveness endpoint of infarct size would be evaluated with a superiority test, and that the powered primary safety composite endpoint, which includes death, stent thrombosis, major bleeding, reinfarction, new onset severe heart failure and possibly other adverse events, would be developed with an appropriate non-inferiority margin. We note that this study has not begun enrollment nor been completed.

In summary, while the applicant has submitted additional data to respond to our concerns, we do not believe that this data provides sufficient evidence that use of SSO₂ Therapy specifically results in improved mortality and heart failure outcomes among anterior STEMI patients. While there is room for outcomes improvement in mortality and heart failure rates post-PCI and stenting, we believe additional data is needed to demonstrate the effects of SSO₂ Therapy in improving these outcomes as compared to currently available therapies.

After consideration of all the information from the applicant, as well as the comments we received, we are unable to determine that SSO₂ Therapy represents a substantial clinical improvement over existing technologies, and we are not approving new technology add-on payments for SSO₂ Therapy for FY 2021.

e. Eluvia^TM Drug-Eluting Vascular Stent System (Eluvia)

Boston Scientific submitted an application for new technology add-on payments for the Eluvia^TM Drug-Eluting Vascular Stent System for FY 2021. Eluvia^TM, a drug-eluting stent for the treatment of lesions in the femoropopliteal arteries, received FDA premarket approval (PMA) September 18, 2018. The applicant asserted that Eluvia^TM was first commercially available on the market on October 4, 2018 and the first procedure with Eluvia^TM following FDA approval in the U.S. occurred on October 5, 2018. We note that the applicant submitted an application for new technology add-on payments for FY 2020. In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42231), we stated that we remain concerned that we do not have enough information to determine that the Eluvia^TM device represents a substantial clinical improvement over existing technologies. Therefore, we did not approve the Eluvia^TM device for FY 2020 new technology add-on payments. We refer the reader to the FY 2020 IPPS/LTCH PPS final rule (84 FR 42220 through 42231) for a complete discussion regarding the Eluvia^TM device's FY 2020 new technology application.

According to the applicant, the Eluvia^TM system is a sustained release drug-eluting stent indicated for the treatment of lesions in the femoropopliteal arteries and is designed to restore blood flow in the peripheral arteries above the knee—specifically the superficial femoral artery (SFA) and proximal popliteal artery (PPA). The applicant asserted that this device/drug combination product for endovascular treatment of peripheral artery disease (PAD) utilizes a polymer that carries and protects the drug before and during the procedure and ensures that the drug is released into the tissue in a controlled, sustained manner to prevent the restenosis of the vessel. The applicant further asserted that Eluvia^TM system's stent platform is purpose-built to address the mechanical challenges of the SFA with an optimal amount of strength, flexibility and fracture resistance. According to the applicant, Eluvia^TM's polymer-based drug delivery system is uniquely designed to sustain the release of paclitaxel beyond 1 year to match the restenotic process in the SFA. The Eluvia^TM system is indicated for improving luminal diameter in the treatment of symptomatic de-novo or restenotic lesions in the native SFA and/or PPA with reference vessel diameters (RVD) ranging from 4.0 to 6.0 mm and total lesion lengths up to 190 mm, according to the applicant.

The applicant asserted that the Eluvia^TM system is comprised of the implantable endoprosthesis and the stent delivery system. The stent is a laser cut self-expanding stent composed of a nickel titanium alloy (nitinol). On both the proximal and distal ends of the stent, radiopaque markers made of tantalum increase visibility of the stent to aid in placement. The triaxial designed delivery system consists of an outer shaft to stabilize the stent delivery system, a middle shaft to protect and constrain the stent, and an inner shaft to provide a guidewire lumen. The delivery system is compatible with 0.035 in (0.89 mm) guidewires. The Eluvia^TM stent is available in a variety of diameters and lengths. The delivery system is offered in two working lengths including 75 and 130 cm.

Peripheral artery disease (PAD) is a circulatory problem in which narrowed arteries reduce blood flow to the limbs, usually in the legs. Symptoms of PAD may include lower extremity pain due to varying degrees of ischemia and claudication, which is characterized by pain induced by exercise and relieved with rest. Risk factors for PAD include age ≥70 years; age 50 to 69 years with a history of smoking or diabetes; age 40 to 49 with diabetes and at least one other risk factor for atherosclerosis; leg symptoms suggestive of claudication with exertion, or ischemic pain at rest; abnormal lower extremity pulse examination; known atherosclerosis at other sites (for example, coronary, carotid, renal artery disease); smoking; hypertension, hyperlipidemia, and homocysteinemia. PAD is primarily caused by atherosclerosis—the buildup of fatty plaque in the arteries. PAD can occur in any blood vessel, but it is more common in the legs than the arms. Approximately 8.5 million people in the United States have PAD, including 12-20% of individuals older than age 60.

A diagnosis of PAD is established with the measurement of an ankle-brachial index (ABI) ≤0.9. The ABI is a comparison of the resting systolic blood pressure at the ankle to the higher systolic brachial pressure. Duplex ultrasonography is commonly used in conjunction with the ABI to identify the location and severity of arterial obstruction.

Management of PAD is aimed at improving symptoms, improving functional capacity, and preventing amputations and death. Management of patients with lower extremity PAD may include medical therapies to reduce the risk for future cardiovascular events related to atherosclerosis, such as myocardial infarction, stroke, and peripheral arterial thrombosis. Such therapies may include antiplatelet therapy, smoking cessation, lipid-lowering therapy, and treatment of diabetes and hypertension. For patients with significant or disabling symptoms unresponsive to lifestyle adjustment and pharmacologic therapy, intervention (percutaneous, surgical) may be needed. Surgical intervention includes angioplasty, a procedure in which a balloon-tip catheter is inserted into the artery and inflated to dilate the narrowed artery lumen. The balloon is then deflated and removed with the catheter. For patients with limb-threatening ischemia (for example pain while at rest and or ulceration), revascularization is a priority to reestablish arterial blood flow. According to the applicant, treatment of the SFA is problematic due to multiple issues, including high rate of restenosis and significant forces of compression.

The applicant asserted that the Eluvia^TM Drug-Eluting Vascular Stent System is a sustained-release drug-eluting self-expanding, nickel titanium alloy (nitinol) mesh stent used to reestablish blood flow to stenotic arteries. According to the applicant, the Eluvia^TM system is the first stent specifically designed for deployment in the SFA and/or PPA that utilizes the anti-restenotic drug paclitaxel in conjunction with a polymer. Eluvia^TM is built on the Innova^TM Stent System platform, consisting of a self-expanding nitinol stent and an advanced, 6F low-profile triaxial delivery system for added support and placement accuracy. The Eluvia^TM stent is coated with the drug paclitaxel, which helps prevent the artery from restenosis. The Eluvia^TM Stent System is comprised of the implantable endoprosthesis and the stent delivery system (SDS).

According to the applicant, there are four principal treatment options for PAD, including two endovascular approaches (angioplasty and stenting):

• Medical therapy, typically for those with mild to medium symptoms. This may include pharmacotherapy (for example, cilostazil) and exercise therapy.
• Angioplasty, a procedure in which a catheter with a balloon on the tip is inserted into an artery and inflated to expand the artery and reduce the blockage. The balloon is then deflated and removed with the catheter. Some procedures use drug coated balloons, in which a drug is applied to the lesion at the time of balloon inflation.
• Stenting via a procedure in which a stent is placed in the artery to keep the artery open and prevent it from re-narrowing. This can be done with a bare metal stent or with a drug-eluting stent, which also releases a drug that helps slow the re-narrowing of the vessel.
• For patients with severe narrowing that is blocking blood flow, bypass surgery may be warranted. In the procedure, a healthy vein is used to make a new path around the narrowed or blocked artery.

The applicant further asserted that aside from Eluvia^TM, the alternative existing endovascular approaches (angioplasty and stenting) do not provide a sustained release application of a drug and that Eluvia^TM is the first polymer-based, drug-eluting stent designed to treat and restore blood flow in the peripheral arteries above the knee, and the eluted medication helps to prevent tissue regrowth during the entire period most commonly associated with restenosis. According to the applicant, the sustained release of the anti-restenotic drug is intentionally designed to elute over a 12-15-month period delivering the drug when restenosis is most likely to occur, which the applicant stated is a significantly longer period than the two-month duration of drug eluted from drug-coated balloons and the paclitaxel-coated Zilver PTX drug eluting stent.

The Eluvia^TM stent system was granted approval for the following ICD-10-PCS procedure codes effective October 1, 2019:

As discussed previously, if a technology meets all three of the substantial similarity criteria, it would be considered substantially similar to an existing technology and would therefore not be considered “new” for purposes of new technology add-on payments. We note that in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42227), we stated that after consideration of the applicant's comments, we believe that the Eluvia^TM device uses a unique mechanism of action to achieve a therapeutic outcome when compared to existing technologies such as the paclitaxel-coated stent. Therefore, we stated that the Eluvia^TM device meets the newness criterion. We refer the reader to the FY 2020 final rule for the complete discussion of how the Eluvia^TM device meets the newness criterion. The applicant noted in its FY 2021 application that for FY 2020, CMS concluded that the Eluvia^TM device met the newness criterion. The applicant stated that it believes there is no basis for CMS to reach a contrary conclusion with regard to whether the Eluvia^TM system meets the newness criterion for FY 2021. The applicant also reiterated that the Eluvia^TM device uses a unique mechanism of action because it utilizes a sustained-release of a low-dose of paclitaxel. In the proposed rule, we invited public comments on whether the Eluvia^TM device is substantially similar to an existing technology and whether it meets the newness criterion for purposes of its application for new technology add-on payments for FY 2021.

Comment: A commenter stated that total paclitaxel dose, not just dose density should be considered when comparing the Eluvia^TM device to the Zilver® PTX for newness. The commenter noted the applicant's comparison of the dose density of paclitaxel for the polymer matrix vs the paclitaxel coated stent which as described by the applicant is 0.167ug/mm2 vs 3ug/mm2 respectively. The commenter stated that on the surface this statement may be technically accurate. However, according to the commenter, the Eluvia^TM drug-eluting stent (DES) is coated on all surfaces with a permanent, non-degradable, polymer matrix containing paclitaxel. In comparison, the Zilver PTX DES is coated only on the abluminal (outer) surface of the stent that is in contact with the vessel wall after implantation. As a result, according to the commenter, when comparing the paclitaxel dose of the devices, the total dose should also be considered, not just the dose density. The commenter further stated that whereas the dose density suggests a ~18x decrease in the amount of paclitaxel used, the actual paclitaxel dose is only decreased <3x, and reporting only the dose density could lead the reader into underestimating the amount of paclitaxel contained on the Eluvia DES.

The commenter also noted that the applicant stated that “Paclitaxel is released directly to the target lesion with the polymer matrix stent and that paclitaxel release is non-specific to the target lesion with paclitaxel-coated stents.” According to the commenter, the clinical, scientific, or logical basis for this statement is unclear. The commenter further stated that the Eluvia^TM DES is coated circumferentially with a paclitaxel-containing polymer matrix. The commenter stated that as a result of this historic coating technology that has been used on coronary stents initially approved by the FDA more than 15 years ago, the Eluvia stent releases paclitaxel circumferentially and nonspecific to the target lesion, which is only in contact with the abluminal surface of the stent. In contrast, as described above, the commenter stated that the Zilver PTX DES is only coated on the abluminal surface of the stent that is in contact with the treated vessel wall. Therefore, according to the commenter, the Zilver PTX releases paclitaxel directly to the target lesion in contrast with the nonspecific release of Eluvia.

The commenter further stated that avoiding the use of a polymer, if possible, is a preferred stent design. Additionally, the commenter noted that the applicant reiterates that the Eluvia^TM device uses a unique mechanism of action because it utilizes a sustained release of a low-dose of paclitaxel. However, according to the commenter, this mechanism of action is neither new nor unique and has been used on coronary stents since approval of the first device in 2004. The commenter stated that newer technologies have advanced to use biodegradable polymer coatings or, like the Zilver PTX DES, eliminated the risk of a polymer coating altogether. According to the commenter, the ability to provide similar clinical outcomes without the need for a permanent, and potentially thrombogenic, polymer would seem to be the preferred technology. The commenter stated that research published in 2013 by authors from Boston Scientific, manufacturer of the Eluvia^TM DES, have reported that the polymer of vinylidene fluoride-hexafluoropropylene (PVDF-HFP) polymer used on the Eluvia^TM DES results in increased thrombogenicity compared with a bare metal stent: “PVDF-HFP-coated struts exposed to blood flow offer a more thrombogenic surface compared with a bare luminal platinum-chromium (PtCr) stent, resulting in more initial thrombus and subsequently more neointima from thrombus organization.” The commenter concluded by supporting the benefits of short-term and polymer-free drug delivery like that offered by the Zilver PTX DES: “our data suggest that short-term drug elution while polymer absorption occurs is biologically preferable to maintaining a continuous and permanent polymeric surface once drug elution has occurred. This approach offers the benefits of minimizing polymeric load, while avoiding chronic inflammatory reactions but maintaining the beneficial anti-proliferative effect.” The commenter stated that based on this published research by the manufacturer of the Eluvia^TM DES, it is surprising that the Eluvia^TM technology would be considered to meet newness standards as compared to the polymer-free Zilver PTX DES.

The applicant commented that the Eluvia^TM system satisfies the newness criterion because it is recently FDA-approved and is not substantially similar to existing devices due to its new and unique polymer carrier-enabled mechanism of action. The applicant asserted that Eluvia^TM is the first and only sustained-release drug-eluting stent for the treatment of lesions in the superficial femoral artery (SFA) and proximal popliteal artery (PPA). The applicant reiterated that Eluvia^TM is significantly different from existing drug-coated stent technology, which lacks a mechanism for sustained and controlled release of paclitaxel. According to the applicant, the sustained-release mechanism the Eluvia^TM system offers enables the use of significantly less paclitaxel compared to current stent technology to inhibit restenosis. The applicant also commented that in addition, Eluvia's stent platform is purpose-built to address the mechanical challenges of the SFA, balancing strength, flexibility and fracture resistance.

The applicant also noted CMS's concerns regarding newness expressed in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42228) and provided the following reiteration of their FY2020 comments which compared the Eluvia^TM to the Zilver® PTX (Zilver® drug-eluting peripheral stent). The applicant commented that the Eluvia^TM device's mechanism of action is different from that of Zilver® PTX because the Eluvia^TM device's polymer matrix layer allows for targeted, localized, sustained, low-dose amorphous paclitaxel delivery with minimal systemic distribution or particulate loss. The applicant provided a comparison of the polymer matrix stent vs the paclitaxel-coated stent. According to the applicant, the polymer matrix stent is encased in a polymer matrix, the paclitaxel-coated stent is not. The dose density of paclitaxel for the polymer matrix vs the paclitaxel coated stent is 0.167ug/mm2 vs 3ug/mm2. Paclitaxel is delivered to the lesion via a diffusion gradient with the polymer matrix stent whereas the paclitaxel-coated stent has no diffusion gradient. Paclitaxel is released directly to the target lesion with the polymer matrix stent. Paclitaxel release is non-specific to the target lesion with paclitaxel-coated stent. Paclitaxel is released over approximately 12-15 months with the polymer matrix stent. Paclitaxel release is complete at two months with paclitaxel coated stents.

The applicant also commented that CMS determined that Eluvia satisfied the newness and cost criteria in the FY2020 Final Rule and committed to “monitor new information and recommendations as they become available.”

Response: We appreciate the comments received regarding the comparison of the polymer matrix Eluvia^TM vs the paclitaxel-coated Zilver PTX with regard to the mechanism of action and newness. After consideration of the information provided by both the applicant and the commenter as to whether the Eluvia^TM should be considered new for purposes of new technology add on payments, we agree with the applicant that Eluvia^TM uses a unique mechanism of action because the sustained release of paclitaxel combats restenosis for 12-15 months as compared to other drug-coated balloons or drug-coated stents that deliver drug to the artery for about two months. Accordingly, after consideration of the comments, we believe that the Eluvia^TM device uses a unique mechanism of action to achieve a therapeutic outcome when compared to existing technologies such as the paclitaxel-coated stent and therefore meets the newness criterion. As previously stated, the Eluvia^TM device received FDA approval under a PMA on September 18, 2018. The device was first available on the U.S. market on October 4, 2018. We consider the beginning of the newness period to commence when Eluvia was first available on the U.S. market on October 4, 2018.

With regard to the cost criterion, the applicant conducted two analyses based on 100 percent of identified claims and 76 percent of identified claims. To identify potential cases where Eluvia^TM could be utilized, the applicant searched the FY 2018 MedPAR file for ICD-10-PCS codes from the Peripheral Drug Eluting Stent and Peripheral Bare Metal Stent categories. For the analysis using 100 percent of cases, the applicant identified a total of 11,051 cases spanning 150 MS-DRGs. The applicant then removed charges for the technology being replaced. The applicant stated that because it was unable to determine a more specific percentage reduction, it chose the most conservative approach for calculation purposes and removed 100% of charges associated with service category Medical/Surgical Supply Charge Amount, which included revenue center 027x. The applicant then standardized the charges and applied an inflation factor of 11.1%, which is the same inflation factor used by CMS to update the outlier threshold in the FY 2020 IPPS/LTCH PPS final rule, to update the charges from FY 2018 to FY 2020 (84 FR 42629). The applicant added charges for the new technology by multiplying the cost of the technology by the national CCR for implantable devices (0.299) from the FY 2020 IPPS final rule. Under the analysis based on 100% of identified claims, the applicant determined an average case-weighted threshold amount of $100,851 and a final average inflated standardized charge per case of $157,343.

Under the analysis based on 76 percent of identified claims, the applicant used the same methodology, which identified 8,335 cases across 8 MS-DRGs. The applicant determined the average case-weighted threshold amount of $98,196 and a final inflated average standardized charge per case of $147,343. Because the final inflated average standardized charge per case exceeded the case-weighted threshold amount under both analyses, the applicant asserted that the technology meets the cost criterion. In the proposed rule, we invited public comments on whether Eluvia^TM meets the cost criterion.

Comment: The applicant commented that the cost analysis, as summarized in the proposed rule, demonstrates that Eluvia^TM meets the new technology add-on payment cost criterion. The applicant further commented that it analyzed the cost criterion associated with Eluvia in various scenarios utilizing different assumptions and that in each of these analyses, the cost criterion was achieved. The applicant noted that CMS did not express any concerns regarding any of the analyses provided and as such, the applicant maintained that Eluvia^TM meets the cost criterion.

Response: We appreciate the applicant's comments concerning the cost criterion. Based on the cost analysis as summarized previously and after consideration of the public comments we received, we agree that the Eluvia^TM device meets the cost criterion.

With regard to the substantial clinical improvement criterion, the applicant asserted that Eluvia^TM represents a substantial clinical improvement over existing technologies because it achieves superior primary patency; reduces the rate of subsequent therapeutic interventions; decreases the number of future hospitalizations or physician visits; reduces hospital readmission rates; reduces the rate of device related complications; and achieves similar functional outcomes and EQ-5D index values while associated with half the rate of TLRs.

As stated above, Boston Scientific submitted an application for new technology add-on payments for the Eluvia^TM device for FY 2020 that was not approved. In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42231), we noted the FDA's preliminary review of data that identified a potentially concerning signal of increased long-term mortality in study subjects treated with paclitaxel-coated products compared to patients treated with uncoated devices, and stated that we remained concerned that we did not have enough information to determine that the Eluvia^TM device represents a substantial clinical improvement over existing technologies. The applicant resubmitted its application for new technology add-on payments for FY 2021 with updated two-year primary patency results to demonstrate that the Eluvia^TM device represents a substantial clinical improvement over existing technologies. Below we summarize the studies the applicant submitted with both its FY 2020 and FY 2021 applications, followed by the new information the applicant submitted with its FY 2021 application to support that the technology represents a substantial clinical improvement.

The applicant submitted the results of the MAJESTIC study, a single-arm first-in-human study of Eluvia^TM. The MAJESTIC study is a prospective, multicenter single-arm, open label study. Per the applicant, the MAJESTIC study demonstrated long-term treatment durability among patients whose femoropopliteal arteries were treated with the Eluvia^TM stent. The MAJESTIC study enrolled 57 patients with symptomatic lower limb ischemia and lesions in the superficial femoral artery or proximal popliteal artery. Efficacy measures at 2 years included primary patency, defined as duplex ultrasound peak systolic velocity ratio of <2.5 and the absence of target lesion revascularization (TLR) or bypass. Safety monitoring through 3 years included adverse events and TLR. The 24-month clinic visit was completed by 53 patients; 52 had Doppler ultrasound evaluable by the core laboratory, and 48 patients had radiographs taken for stent fracture analysis. The 3-year follow-up was completed by 54 patients. At 2 years, 90.6% (48/53) of patients had improved by one or more Rutherford categories as compared with the pre-procedure level without the need for TLR (when those with TLR were included, 96.2% sustained improvement); only one patient exhibited a worsening in level, 66.0% (35/53) of patients exhibited no symptoms (category 0) and 24.5% (13/53) had mild claudication (category 1) at the 24-month visit. Mean ABI improved from 0.73 ± 0.22 at baseline to 1.02 ± 0.20 at 12 months and 0.93 ± 0.26 at 24 months. At 24 months, 79.2% (38/48) of patients had an ABI increase of at least 0.1 compared with baseline or had reached an ABI of at least 0.9. According to the applicant, the primary patency rate at 12 months was 96.4%. With regard to the Eluvia^TM stent achieving superior primary patency, the applicant submitted the results of the IMPERIAL trial in which the Eluvia^TM stent is compared, head-to-head, to the Zilver® PTX® drug-eluting stent. The IMPERIAL study is a global, multi-center, randomized controlled trial consisting of 465 subjects. Eligible patients were aged 18 years or older and had symptomatic lower-limb ischemia, defined as Rutherford category 2, 3, or 4 and stenotic, restenotic (treated with a drug-coated balloon >12 months before the study or standard percutaneous transluminal angioplasty only), or occlusive lesions in the native superficial femoral artery or proximal popliteal artery, with at least one infrapopliteal vessel patent to the ankle or foot. Patients had to have stenosis of 70% or more (via angiographic assessment), vessel diameter between 4 mm and 6 mm, and total lesion length between 30 mm and 140 mm.

Subjects who had previously stented target lesion/vessels treated with drug-coated balloon <12 months prior to randomization/enrollment and subjects who had undergone prior surgery of the SFA/PPA in the target limb to treat atherosclerotic disease were excluded from the study. Two concurrent single-group (Eluvia^TM only) sub studies were done: a non-blinded, non-randomized pharmacokinetic sub study and a non-blinded, non-randomized study of patients with long lesions (>140 mm). The IMPERIAL study is a prospective, multicenter, single-blinded randomized, controlled (RCT) non-inferiority trial. Patients were randomized (2:1) to implantation of either a paclitaxel-eluting polymer stent (Eluvia^TM) or a paclitaxel-coated stent (Zilver® PTX®) after the treating physician had successfully crossed the target lesion with a guide wire. The primary endpoints of the study are Major Adverse Events defined as all causes of death through 1 month, Target Limb Major Amputation through 12 months and/or TLR through 12 months, and primary vessel patency at 12 months post-procedure. Secondary endpoints included the Rutherford categorization, Walking Impairment Questionnaire, and EQ-5D assessments at 1 month and 6 months post-procedure. Patient demographic and characteristics were balanced between Eluvia^TM stent and Zilver® PTX® stent groups.

The applicant noted that lesion characteristics for the Eluvia^TM stent vs Zilver® PTX® stent arms were comparable. Clinical follow-up visits related to the study were scheduled for 1 month, 6 months, and 12 months after the procedure, with follow-up planned to continue through 5 years, including clinical visits at 24 months and 5 years and clinical or telephone follow-up at 3 and 4 years.

The applicant asserted that in the IMPERIAL study, the Eluvia^TM stent demonstrated superior primary patency over the Zilver® PTX® stent, with 86.8% vs. 77.5% respectively (p=0.0144). The non-inferiority primary efficacy endpoint was also met. The applicant asserted that the SFA presents unique challenges with respect to maintaining long-term patency. There are distinct pathological differences between the SFA and coronary arteries. The SFA tends to have higher levels of calcification and chronic total occlusions when compared to coronary arteries. Following an intervention within the SFA, the SFA produces a healing response which often results in restenosis or re-narrowing of the arterial lumen. This cascade of events leading to restenosis starts with inflammation, followed by smooth muscle cell proliferation and matrix formation. Because of the unique mechanical forces in the SFA, this restenotic process of the SFA can continue well beyond 300 days from the initial intervention. Primary patency at 12 months, by Kaplan-Meier estimate, was significantly greater for Eluvia^TM than for Zilver® PTX®, with 88.5% and 79.5% respectively (p=0.0119). According to the applicant, these results are consistent with the 96.4% primary patency rate at 12 months in the MAJESTIC study, the single-arm first-in-human study of Eluvia^TM.

The IMPERIAL study included two concurrent single-group (Eluvia^TM only) sub studies: a non-blinded, non-randomized pharmacokinetic sub study and a non-blinded, non-randomized study of patients with long lesions (>140 mm). For the pharmacokinetic sub study, patients had venous blood drawn before stent implantation, at intervals ranging from 10 minutes to 24 hours post implantation, and then at either 48 hours or 72 hours post implantation. The pharmacokinetics sub study confirmed that plasma paclitaxel concentrations after Eluvia^TM implantation were well below thresholds associated with toxic effects in studies in patients with cancer (0·05 μM or ~43 ng/mL).

The IMPERIAL sub study long lesion subgroup consisted of 50 patients with average lesion length of 162.8 mm that were each treated with two Eluvia^TM stents. Twelve-month outcomes for the long lesion subgroup are 87% primary patency and 6.5% TLR. In a subgroup analysis of patients 65 years and older (Medicare population), the primary patency rate in the Eluvia^TM stent group is 92.6%, compared to 75.0% for the Zilver® PTX® stent group (p=0.0386).

With regard to reducing the rate of subsequent therapeutic interventions, secondary outcomes in the IMPERIAL study included repeat re-intervention on the same lesion, TLR. The rate of subsequent interventions, or TLRs, in the Eluvia^TM stent group was 4.5% compared to 9.0% in the Zilver® PTX® stent group. The applicant asserted that TLR rate in the Eluvia^TM group represents a substantial reduction in re-intervention on the target lesion compared to that of the Zilver® PTX® stent group.

With regard to decreasing the number of future hospitalizations or physician visits, the applicant asserted that the substantial reduction in the lesion revascularization rate led to a reduced need to provide additional intensive care, distinguishing the Eluvia^TM group from the Zilver® PTX® group. In the IMPERIAL study, Eluvia^TM-treated patients required fewer days of re-hospitalization. There were 13.9 post procedure in-hospital days in the Eluvia^TM group for all adverse events compared to 17.7 post procedure in-hospital days in the Zilver® PTX® group. There were 2.8 post procedure in-hospital days in the Eluvia^TM group for TLR/Total Vessel Revascularization (TVR) compared to 7.1 post procedure in-hospital days in the Zilver® PTX® group. And lastly, there were 2.7 post-procedure in-hospital days from the Eluvia^TM group for procedure/device related adverse events compared to 4.5 post procedure in-hospital days for the Zilver® PTX® group.

With regard to reducing hospital readmission rates, the applicant asserted that patients treated in the Eluvia^TM group experienced reduced rates of hospital readmission following the index procedure compared to those in the Zilver® PTX® group. Hospital readmission rates at 12 months were 3.9% for the Eluvia^TM group compared to 7.1% for the Zilver® PTX® group. Similar results were noted at 1 and 6 months; 1.0% vs 2.6% and 2.4% vs 3.8% respectively.

With regard to reducing the rate of device related complications, the applicant asserted that while the rates of adverse events were similar in total between treatment arms in the IMPERIAL study, there were measurable differences in device-related complications. Device-related adverse-events were reported in 8% of patients in the Eluvia^TM group compared to 14% of patients in the Zilver® PTX® group.

Lastly, with regard to achieving similar functional outcomes and EQ-5D index values, while associated with half the rate of TLRs, the applicant asserted that narrowed or blocked arteries within the SFA can limit the supply of oxygen-rich blood throughout the lower extremities, causing pain or discomfort when walking. The applicant further asserted that performing physical activities is often challenging because of decreased blood supply to the legs, typically causing symptoms to become more challenging overtime unless treated. The applicant asserted that while functional outcomes appear similar between the Eluvia^TM and Zilver® PTX® groups at 12 months, these improvements for the Zilver® PTX® group are associated with twice as many TLRs to achieve similar EQ-5D index values. At 12 months, of the patients with complete Rutherford assessment data, 241 (86 percent) of 281 patients in the Eluvia^TM group and 120 (85 percent) of 142 patients in the Zilver® PTX® group had symptoms reported as Rutherford Category 0 or 1 (none to mild claudication). The mean ankle-brachial index was 1·0 (SD 0·2) in both groups at 12 months (baseline mean ankle-brachial index 0·7 [SD 0·2] for Eluvia^TM; 0·8 [0·2] for Zilver® PTX®), with sustained hemodynamic improvement for approximately 80 percent of the patients in both groups. Walking function improved significantly from baseline to 12 months in both groups, as measured with the Walking Impairment Questionnaire and the 6-minute walk test. In both groups, the majority of patients had sustained improvement in the mobility dimension of the EQ-5D and roughly half had sustained improvement in the pain or discomfort dimension. No significant between-group differences were observed in the Walking Impairment Questionnaire, 6-minute walk test, or EQ-5D. Secondary endpoint results for the Eluvia^TM stent and Zilver® PTX® stent groups are as follows:

• Hemodynamic improvement in walking—80.8 percent versus 78.7 percent;
• Walking impairment questionnaire scores (change from baseline)—40.8 (36.5) versus 35.8 (39.5);
• Distance (change from baseline)—33.2 (38.3) versus 29.5 (38.2);
• Speed (change from baseline)—18.3 (29.5) versus 18.1 (28.7);
• Stair climbing (change from baseline)—19.4 (36.7) versus 21.1 (34.6); and
• 6-Minute walk test distance (m) (change from baseline)—44.5 (119.5) versus 51.8 (130.5).

As summarized in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42230), in our discussion of the comments received regarding substantial clinical improvement with respect to the new technology add-on payment application for Eluvia^TM for FY 2020, we received a comment expressing safety concerns with paclitaxel-coated devices used to treat PAD. The commenter stated they were aware of an FDA alert concerning paclitaxel-coated devices. The commenter stated the applicant and other manufacturers of devices using paclitaxel should consider an alternative to paclitaxel.

We stated in response that we were aware of FDA's March 15, 2019 letter to healthcare providers regarding the “Treatment of Peripheral Arterial Disease with Paclitaxel-Coated Balloons and Paclitaxel-Eluting Stents Potentially Associated with Increased Mortality”. We noted that in March 2019, FDA conducted a preliminary analysis of long-term follow-up data (up to 5 years in some studies) of the pivotal premarket randomized trials for paclitaxel-coated products indicated for PAD. We stated that while the analyses are ongoing, according to FDA, the preliminary review of the data had identified a potentially concerning signal of increased long-term mortality in study subjects treated with paclitaxel-coated products compared to patients treated with uncoated devices. Of the three trials with 5-year follow-up data, each showed higher mortality in subjects treated with paclitaxel-coated products than subjects treated with uncoated devices. In total, among the 975 subjects in these 3 trials, there was an approximately 50 percent increased risk of mortality in subjects treated with paclitaxel-coated devices versus those treated with control devices (20.1 percent versus 13.4 percent crude risk of death at 5 years).

We also noted that FDA stated that the data should be interpreted with caution for several reasons. First, there is large variability in the risk estimate of mortality due to the limited amount of long-term data. Second, the studies were not originally designed to be pooled, introducing greater uncertainty in the results. Third, the specific cause and mechanism of the increased mortality is unknown.

We further stated that based on the preliminary review of available data, FDA made the following recommendations regarding the use of paclitaxel-coated balloons and paclitaxel-eluting stents: That health care providers consider the following until further information is available; continue diligent monitoring of patients who have been treated with paclitaxel-coated balloons and paclitaxel-eluting stents; when making treatment recommendations and as part of the informed consent process, consider that there may be an increased rate of long-term mortality in patients treated with paclitaxel-coated balloons and paclitaxel-eluting stents; discuss the risks and benefits of all available PAD treatment options with your patients; for most patients, alternative treatment options to paclitaxel-coated balloons and paclitaxel-eluting stents should generally be used until additional analysis of the safety signal has been performed; for some individual patients at particularly high risk for restenosis, clinicians may determine that the benefits of using a paclitaxel-coated product may outweigh the risks; ensure patients receive optimal medical therapy for PAD and other cardiovascular risk factors as well as guidance on healthy lifestyles including weight control, smoking cessation, and exercise.

We also noted that FDA further stated that paclitaxel-coated balloons and stents are known to improve blood flow to the legs and decrease the likelihood of repeat procedures to reopen blocked blood vessels. However, because of this concerning safety signal, FDA stated that it believes alternative treatment options should generally be used for most patients while FDA continues to further evaluate the increased long-term mortality signal and its impact on the overall benefit-risk profile of these devices. FDA stated it intends to conduct additional analyses to determine whether the benefits continue to outweigh the risks for approved paclitaxel-coated balloons and paclitaxel-eluting stents when used in accordance with their indications for use. FDA stated it will also evaluate whether these analyses impact the safety of patients treated with these devices for other indications, such as treatment of arteriovenous access stenosis or critical limb ischemia.

Furthermore, we stated that because of concerns regarding this issue, FDA convened an Advisory Committee meeting of the Circulatory System Devices Panel on June 19 and 20, 2019 to: Facilitate a public, transparent, and unbiased discussion on the presence and magnitude of a long-term mortality signal; discuss plausible reasons, including any potential biological mechanisms, for a long-term mortality signal; re-examine the benefit-risk profile of this group of devices; consider modifications to ongoing and future U.S. clinical trials evaluating devices containing paclitaxel, including added surveillance, updated informed consent, and enhanced adjudication for drug-related adverse events and deaths; and guide other regulatory actions, as needed. The June 19 and 20, 2019 Advisory Committee meeting of the Circulatory System Devices Panel concluded that analyses of available data from FDA-approved devices show an increase in late mortality (between 2 and 5 years) associated with paclitaxel-coated devices intended to treat femoropopliteal disease. However, causality for the late mortality rate increase could not be determined. Additional data may be needed to further assess the magnitude of the late mortality signal, determine any potential causes, identify patient sub-groups that may be at greater risk, and to update benefit-risk considerations of this device class.

We stated that FDA continues to recommend that health care providers report any adverse events or suspected adverse events experienced with the use of paclitaxel-coated balloons and paclitaxel-eluting stents. FDA stated that it will keep the public informed as any new information or recommendations become available.

In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42231), after consideration of the public comments we received and the latest available information from the FDA advisory panel, we noted the FDA panel's preliminary review of the data had identified a potentially concerning signal of increased long-term mortality in study subjects treated with paclitaxel-coated products compared to patients treated with uncoated devices. We stated that additionally, since FDA has stated that it believes alternative treatment options should generally be used for most patients while it continues to further evaluate the increased long-term mortality signal and its impact on the overall benefit-risk profile of these devices, we remained concerned that we did not have enough information to determine that the Eluvia^TM device represents a substantial clinical improvement over existing technologies. Therefore, we stated that we were not approving the Eluvia^TM device for FY 2020 new technology add-on payments. We also stated that we would monitor any new information or recommendations as they become available.

Since the FY 2020 IPPS/LTCH PPS final rule, the FDA issued an August 7, 2019 update: “Treatment of Peripheral Arterial Disease with Paclitaxel-Coated Balloons and Paclitaxel-Eluting Stents Potentially Associated with Increased Mortality”. In its update, the FDA included recommendations to healthcare providers for assessing and treating patients with PAD using paclitaxel-coated devices. Based on the FDA's review of available data and the Advisory Panel conclusions, the FDA recommends that healthcare providers consider the following:

• Continue diligent monitoring of patients who have been treated with paclitaxel-coated balloons and paclitaxel-eluting stents.
• When making treatment recommendations, and as part of the informed consent process, consider that there may be an increased rate of long-term mortality in patients treated with paclitaxel-coated balloons and paclitaxel-eluting stents.
• Discuss the risks and benefits of all available PAD treatment options with your patients. For many patients, alternative treatment options to paclitaxel-coated balloons and paclitaxel-eluting stents provide a more favorable benefit-risk profile based on currently available information.
• For individual patients judged to be at particularly high risk for restenosis and repeat femoropopliteal interventions, clinicians may determine that the benefits of using a paclitaxel-coated device outweigh the risk of late mortality.
• In discussing treatment options, physicians should explore their patients' expectations, concerns and treatment preferences.
• Ensure patients receive optimal medical therapy for PAD and other cardiovascular risk factors as well as guidance on healthy lifestyles including weight control, smoking cessation, and exercise.
• Report any adverse events or suspected adverse events experienced with the use of paclitaxel-coated balloons and paclitaxel-eluting stents.

In addition, the August 7, 2019 update noted the following. Based on the conclusions of its analysis and recommendations of the advisory panel, FDA stated that it is taking additional steps to address this signal, including working with manufacturers on updates to device labeling and clinical trial informed consent documents to incorporate information about the late mortality signal. FDA also stated that it is continuing to actively work with the manufacturers and investigators on additional clinical evidence development for assessment of the long-term safety of paclitaxel-coated devices. FDA noted that paclitaxel-coated balloons and stents improve blood flow to the legs and decrease the likelihood of repeat procedures to reopen blocked blood vessels compared to uncoated devices. The update stated that the panel concluded that the benefits of paclitaxel-coated devices (for example, reduced reinterventions) should be considered in individual patients along with potential risks (for example, late mortality).

The applicant stated in its FY 2021 application that while CMS denied the application for new technology add-on payments for Eluvia^TM for FY 2020 because of its concerns about paclitaxel, the available evidence and policymaking from the FDA would suggest that this device is safe, effective and a substantial clinical improvement. To address the substantial clinical improvement concerns stated in the FY 2020 final rule, the applicant stated that Eluvia^TM is not associated with increased all-cause mortality and that two-year all-cause mortality data are consistent with FDA-published rates for uncoated angioplasty devices. The applicant further asserted that most recent publications on peripheral paclitaxel-coated devices do not replicate the strong mortality signal identified in the meta-analysis. The applicant stated that it submitted information on Eluvia^TM to the FDA for the June 19-20 Circulatory System Devices Panel of the Medical Devices Advisory Committee meeting. The applicant further asserted that the FDA continues to find that paclitaxel devices are effective, specifically that “Paclitaxel-coated balloons and stents improve blood flow to the legs and decrease the likelihood of repeat procedures to reopen blocked blood vessels compared to uncoated devices”. The applicant stated that the FDA, following months of investigation, multiple letters to health care providers and an advisory panel meeting, has not changed the marketed status of peripheral paclitaxel devices. Therefore, the applicant respectfully requested that CMS consider that Eluvia^TM satisfies the substantial clinical improvement criterion in light of this information. The applicant referred to the FDA's meta-analysis of long-term follow-up data from the pivotal premarket randomized trials for paclitaxel-coated devices used to treat PAD. The FDA's meta-analysis of these trials identified a late mortality signal in study subjects treated with paclitaxel-coated devices compared to patients treated with uncoated devices. Specifically, in three randomized trials which enrolled a total of 1,090 patients, the crude mortality rate at 5 years was 19.8% (range 15.9%-23.4%) in patients treated with paclitaxel-coated devices compared to 12.7% (range 11.2%-14.0%) in subjects treated with uncoated devices. The relative risk for increased mortality at 5 years was 1.57 (95% confidence interval 1.16-2.13), which corresponds to a 57% relative increase in mortality in patients treated with paclitaxel-coated devices.

In its application for FY 2021, the applicant stated that they respectfully disagree with CMS's conclusion that Eluvia^TM did not satisfy the substantial clinical improvement criterion as the IMPERIAL randomized controlled trial demonstrates superiority over the closest comparative device. In its application for FY 2021, in response to these concerns related to peripheral paclitaxel devices, the applicant referred to the updated bulletin FDA issued in August 2019 to provide the latest information on its analysis of long-term follow-up data from premarket trials and to provide summary information from its June 2019 advisory panel meeting. Specifically, the applicant noted that FDA stated that paclitaxel-coated balloons and stents improve blood flow to the legs and decrease the likelihood of repeat procedures to reopen blocked blood vessels compared to uncoated devices. The June 2019 advisory panel concluded that the benefits of paclitaxel-coated devices (for example, reduced reinterventions) should be considered in individual patients along with potential risks (for example, late mortality).

The applicant also noted that it has worked closely with FDA to address questions about the late mortality signal associated with some peripheral paclitaxel-coated devices, as identified in the meta-analysis. The applicant noted that Eluvia^TM was not included in the meta-analysis.

Additionally, the applicant stated that it has demonstrated (a) the absence of a mortality signal with Eluvia^TM and (b) the absence of a mortality signal with sustained-release drug eluting paclitaxel stent technology in the large long-term data for the TAXUS coronary stent.

With regard to the absence of a mortality signal with Eluvia^TM, the applicant further stated that Eluvia^TM is not associated with increased all-cause mortality. The applicant explained that Eluvia^TM shows no mortality signal at 2 years in over 300 patients. Additionally, the applicant noted that its parent company Boston Scientific has extensive experience with sustained-release paclitaxel-eluting stent technology and noted that TAXUS has over 10 years of clinical data, with long-term mortality in clinical trials following approximately 2,800 patients, without an observed mortality signal.

As it relates to Eluvia^TM, the applicant stated that findings of the FDA analysis should be interpreted with caution for several reasons. First, Eluvia^TM was not included in the FDA meta-analysis. Second, the applicant stated the analysis failed to find any plausible mechanism that could explain the observed mortality signal. Third, the applicant asserted that the analysis contained structural flaws that may have contributed to its findings, including small sample size, presence of ascertainment bias and lack of patient level data.

The applicant added that additional analyses have been conducted since the publication of the meta-analysis. In a Medicare claims analysis of over 150,000 patients who underwent femoropopliteal artery revascularization, the applicant noted that no mortality signal was seen in the group treated with paclitaxel-coated devices. According to the applicant, this finding was echoed by other studies.

Finally, the applicant stated that it believes the FDA recognized the value of allowing physicians to treat their PAD patients with paclitaxel devices in its letter published on August 7, 2019, acknowledging the signal in the meta-analysis and recognizing the benefits that paclitaxel devices offer for these patients.

In summary, the applicant stated that Eluvia^TM should be approved for new technology add-on payments based on the following:

• Updated August 2019 FDA letter to providers issued after the FY 2020 IPPS/LTCH PPS final rule, maintaining peripheral paclitaxel devices on the market;
• Multiple recently published studies demonstrating the absence of increased mortality associated with peripheral paclitaxel devices;

• An analysis of over 150,000 Medicare beneficiaries, designed with FDA input, demonstrating no difference in mortality between patients treated with peripheral paclitaxel devices compared to those treated without paclitaxel devices;
• Confounding factors in the 2018 JAHA Katsanos et al. meta-analysis (meta-analysis) and ascertainment bias, as highlighted at the 2019 Vascular Leaders Forum, and no plausible mechanism has been identified for increased mortality;

• The rate of mortality for patients treated with Eluvia^TM at 2 years is consistent with the rate of non-paclitaxel-based peripheral devices.

Although the Eluvia^TM system was not included in the meta-analysis, in the proposed rule we stated that we were concerned with the conclusion of the meta-analysis results. Specifically, we stated that we were concerned with the conclusion that there is an increased risk of death following application of paclitaxel‐coated balloons and stents in the femoropopliteal artery of the lower limb and how it impacts substantial clinical improvement for the Eluvia^TM system.

We also noted the FDA's statement in the August 2019 letter that because of the demonstrated short-term benefits of the devices, the limitations of the available data, and uncertainty regarding the long-term benefit-risk profile of paclitaxel-coated devices, the FDA believes clinical studies of these devices may continue and should collect long-term safety (including mortality) and effectiveness data. Per the FDA, these studies require appropriate informed consent and close safety monitoring to protect enrolled patients.

Comment: A commenter stated that the design of the MAJESTIC clinical study is inadequate to support a claim of substantial clinical improvement due to its small size, strict inclusion/exclusion criteria, and lack of a comparator group. According to the commenter, the MAJESTIC study is inadequate to demonstrate substantial clinical improvement and that use of this single arm study to support substantial clinical improvement should be considered with care due to the small (n=57) and highly selected patient population (for example, lesion length limited to a maximum of 11 cm). The commenter stated that although the applicant reports a very high primary patency rate of 96.4% at 12 months, this rate drops substantially to 77.9% at just 25 months, suggesting the potential of a late catch-up phenomenon as previously observed with other polymer-coated peripheral DES. The commenter also noted that the TLR rate appears to double each year (that is quadruple from year 1 to year 3), increasing from 3.6% at 1 year to 7.2% at 2 years to 14.7% at 3 years.

The commenter also stated that there are errors in the published 1-year IMPERIAL study primary patency results, which is the primary endpoint of the study which require a correction of the 1-year publication and results. The commenter stated that although the errors have been identified, to their knowledge no correction to the paper has yet been published. As such, according to the commenter, the ability to understand the outcomes of this study, particularly patency, which is the primary endpoint of the study, is hindered.

The commenter also stated that patency results are inconsistently presented. The primary endpoint of 12-month patency was reported after the required sample size of 409 patients completed 12-month follow-up or had an endpoint event; these results indicate primary patency of 86.8% (231/266) for Eluvia vs. 81.5% (106/130) for Zilver PTX. However, a post-hoc analysis reports a larger difference of 86.8% (243/280) for Eluvia vs. 77.5% (110/142) for Zilver PTX. This represents an additional 14 Eluvia patients and 12 Zilver PTX patients compared to the primary analysis. While the results for the Eluvia patients are consistent between the primary and post-hoc analyses (86.8% [231/266] vs. 85.7% [12/14]), the results for the final 12 Zilver PTX patients added to the post-hoc analysis appear to be outliers who had significantly worse outcomes than the primary patient cohort (patency 77.5% [110/142] in primary cohort vs. 33.3% [4/12] in post-hoc cohort, p=0.002); according to the commenter, this raises questions about the pooling of data between the primary cohort and the post-hoc cohort that is used in the post-hoc analysis and reporting.

The commenter further stated that claims of “superior primary patency” and “highest reported” two-year primary patency are misleading. From the most recently presented two-year results (with data correction), there is no significant difference in patency between Eluvia and Zilver PTX at two years (83.0% vs. 77.1%, p=0.10, not significant). Based on these results, a claim of superior primary patency cannot be maintained, according to the commenter. The commenter also expressed concerns regarding the claim of “highest reported” two-year patency. The commenter stated that by its very nature, this claim can only be made by comparing results across numerous distinct clinical trials, each enrolling patients and analyzing outcomes based on study-specific criteria and variable definitions. For example, the commenter noted that the Zilver PTX randomized trial included the enrollment of patients with critical limb ischemia, a group with known poor outcomes that were excluded from the IMPERIAL trial. The Zilver PTX trial also had a more stringent definition for patency, requiring the peak systolic velocity ratio (PSVR) to be <2.0 for a lesion to be considered patent. In comparison, in the IMPERIAL trial, the requirement for patency was a more lenient criterion of PSVR ≤2.4. The commenter stated that more concerning is that the definition of patency at two years in the IMPERIAL trial has been redefined to eliminate any patency failures that may have occurred prior to 730 days and is now defined as “clinically-driven TLR up to 730 days and duplex ultrasound data at 24 months.” This change in the definition can be observed by comparing the one-year Kaplan-Meier curves to the two-year curves and noting that patency at 24 months is actually increased compared with what was previously reported at 13 months; that is, patency failures occurring on imaging, but not resulting in a re-intervention have been eliminated prior to 730 days. The commenter stated that this modified definition is inconsistent with other studies, further highlighting the inability to appropriately compare data across studies.

The commenter also stated that the secondary randomization (that is, the provisional DES arm) of the Zilver PTX RCT was specifically excluded from this comparison. These Zilver PTX patients actually had a higher two-year primary patency rate of 83.4% compared with 83.0% for Eluvia. According to the commenter, this blanket claim of superiority appears to be in stark contrast to traditionally accepted criteria established by FDA to allow such superiority claims. The commenter further stated that the FDA has not indicated that Eluvia provides a substantial clinical improvement.

We also received a comment stating that section § 412.87(b) describes the eligibility criteria associated with the substantial clinical improvement criterion, specifically that it “improves clinical outcomes relative to services or technologies previously available...” The commenter stated that CMS' conclusions that there is insufficient evidence to determine substantial clinical improvement included in both the FY 2020 and 2021 rules does not articulate why the clinical trial information provided by the applicant is not sufficient. Instead, CMS relies on the potential signal described in the meta-analysis and the FDA review of the data on paclitaxel-coated devices.

The commenter further stated that despite the various deliberations by the FDA, it has not limited the use of paclitaxel devices and more importantly, CMS has not limited coverage of paclitaxel devices. Per the language in § 412.87(b), the substantial clinical improvement criterion is to be evaluated “relative to services or technologies previously available.” The commenter stated that it appears the applicant has provided a comparison of the Eluvia device to existing, comparable devices for the treatment of peripheral arterial disease. The commenter contended this is the data that should be utilized to determine if the technology represents a SCI.

The commenter also asserted that if the FDA had removed existing paclitaxel devices from the market, or CMS had issued non-coverage for paclitaxel devices at the national or local level based on the FDA analyses, they would concur that there would be insufficient data to determine SCI. The commenter stated that since the FDA has not materially changed the label for paclitaxel devices nor has CMS issued non-coverage policies for any paclitaxel devices, existing paclitaxel devices represent an appropriate comparison when evaluating substantial clinical improvement in the new technology add-on payment application as they represent a medically reasonable medical option for Medicare patients.

The commenter contended that the Eluvia^TM device meets the substantial clinical improvement criterion as it showed superiority over the only other paclitaxel peripheral stent in a head-to-head randomized controlled trial, and that the results have been sustained based on longest follow up clinical data published to date for the Eluvia^TM device.

The applicant commented that the IMPERIAL trial was designed as a non-inferiority study, as are many head-to-head trials of medical devices. Boston Scientific defined a pre-specified, post-hoc superiority analysis before evaluation of the clinical trial results; therefore, the non-inferiority and subsequent superiority testing methodology and results were not subjected to bias. The superiority testing was performed after the 12-month follow-up window for all enrolled subjects had closed.

According to the applicant, from a statistical perspective, the pre-specified success criteria for superiority used the same logic as the pre-specified success criteria for non-inferiority: “ELUVIA will be concluded to be superior to Zilver PTX for device effectiveness if the one-sided lower 95% confidence bound on the difference between treatment groups in 12-month primary patency is greater than zero.” The commenter stated that a more stringent one-sided lower 97.5% confidence bound (shown as two-sided 95% confidence interval) on the difference between treatment groups was observed to be greater than zero and the corresponding p-value was 0.0144.

In addition to the internal analysis performed by Boston Scientific, these data were published in The Lancet following its peer-review process. As stated in The Lancet, “The superiority analysis of primary patency in the full-analysis cohort was a pre-specified post-hoc analysis” and “In this head-to-head randomized trial, the primary non-inferiority endpoints for efficacy and safety at 12 months were met, and post-hoc analysis of the 12-month patency rate showed superiority for Eluvia over Zilver PTX.” According to the applicant, these claims are non-misleading and supported by valid scientific evidence.

The applicant also provided a comment in response to CMS' request for comments on the implications of the recent meta-analysis addressing paclitaxel-coated balloons and stents. The applicant maintained that Eluvia^TM is different from the devices evaluated in the meta-analysis. The applicant stated that as CMS noted, Eluvia^TM was not addressed in the meta-analysis. Further, the applicant maintained that Eluvia^TM delivers paclitaxel in much lower doses than the products discussed in the meta-analysis and is the only peripheral device to deliver paclitaxel through a sustained-release mechanism of action where delivery of paclitaxel is controlled and focused on the target lesion. Thus, according to the applicant, the suggestion in the meta-analysis of a late-term mortality risk associated with paclitaxel coated devices is not directly applicable to the Eluvia^TM device. Boston Scientific submitted information (available at https://www.fda.gov/media/127704/download ) to the FDA on paclitaxel relative to Eluvia^TM in advance of FDA's June 19-20 Circulatory System Devices Panel of the Medical Devices Advisory Committee Meeting.

Consequently, the applicant does not believe that the findings of limited generalizability suggested in the meta-analysis should inhibit CMS from determining that Eluvia^TM satisfies the substantial clinical improvement criterion.

The applicant further commented that given the differences between Eluvia^TM and other peripheral paclitaxel coated devices, it would be more appropriate to examine safety considerations for Eluvia^TM relative to products with similar mechanisms of action and dose levels, such as the Taxus coronary stent indicated in the treatment of lesions in native coronary arteries. Boston Scientific asserted that it has more experience with sustained-release drug-eluting stents than any other manufacturer. According to the applicant, Boston Scientific developed coronary sustained-release drug-eluting stent technology, first with its Taxus coronary drug-eluting stent. According to the applicant, the Eluvia^TM and Taxus stents are similar in design intent and mechanism of action. We note that the Taxus stent involves the treatment of a different patient population. According to the applicant, with the same drug and comparable low-dose controlled drug elution profiles achieved via a polymer matrix, the Eluvia^TM peripheral stent bears greater similarity to the Taxus coronary stent than to any peripheral paclitaxel-coated balloon or non-polymeric paclitaxel-coated stent with respect to design features and drug release kinetics. The applicant asserted that given the similarity in disease presentation for coronary and peripheral atherosclerotic lesions and the same anti-proliferative impact of paclitaxel on the lesions regardless of vessel bed, signals for any potential long-term systemic effects of targeted paclitaxel eluted from a stent polymer matrix would be apparent in patients treated with Taxus. Therefore, the applicant asserted that data on the controlled, localized and low dose paclitaxel elution by Taxus in the coronary or infrapopliteal vasculature can be used to gauge potential systemic effects of paclitaxel eluted from Eluvia^TM. According to the applicant, Taxus stent use has been extensively studied with more than 14 years of commercial experience and clinical trial data out to 10 years in patients with coronary implants and 5 years for those with infrapopliteal implants.

The applicant commented that in the Taxus stent family series of coronary studies, paclitaxel-based treatment showed consistent benefits compared to bare metal stenting and did not differentially affect long-term all-cause mortality as compared to bare stent treatment. Stone et al. report 5-year patient-level pooled results from nearly 2800 patients in randomized studies showing that all-cause mortality for patients treated with Taxus was similar to that of patients treated with the bare metal platform (9.8% vs 9.1%, p=0.53). The event rate analysis of mortality through 5 years for patients treated with Taxus (n=1400) compared to patients treated with the bare metal platform (n=1397) log-rank p=0.5283.

These analyses represent approximately triple the sample size of the studies with >2 year data included in the Katsanos meta-analysis and in FDA's analysis of 5-year data from paclitaxel-coated devices. In addition, long-term data from more than 4000 patients who received coronary Taxus in randomized and nonrandomized studies show mortality rates consistent with those expected for this patient population.

The applicant also commented that it remains questionable and unproven that the root cause of the observed higher mortality in certain retrospective meta-analyses has a direct relationship to the presence of paclitaxel in the evaluated devices. In the March 15 Letter to Health Care Providers, the FDA observed, “These data should be interpreted with caution for several reasons. First, there is large variability in the risk estimate of mortality due to the limited amount of long-term data. Second, these studies were not originally designed to be pooled, introducing greater uncertainty in the results. Third, the specific cause and mechanism of the increased mortality is unknown.”

The applicant commented that notably, the number of studies, patients, and devices contributing to the mortality calculations significantly decreased with the longer follow-up time frames. In addition, the applicant asserted that understanding possible effects of paclitaxel exposure is not possible without complete analysis of uniformly re-adjudicated patient level data, particularly with treatment arm crossover and previous interventions or subsequent re-interventions with paclitaxel-coated devices, which occurred in the analyzed studies.

The applicant commented that explanations unrelated to drug exposure may account for the signal observed in the meta-analysis by Katsanos et al. These include preferential follow-up for control-arm patients (that is, more physician visits, closer monitoring, enhanced comorbidity management), which may improve survival in these arms. Not adjusting for between-arm imbalance of predisposing conditions or comorbidities associated with increased mortality risk in the cohort-level analysis could also contribute to a false signal.

The applicant further commented that currently, no plausible mechanistic link between paclitaxel and death has been postulated or established. To the contrary, the applicant stated that systemic paclitaxel infusions are known to improve survival among cancer patients. The periodically-repeated systemic doses of paclitaxel for chemotherapy are multiple orders of magnitude greater than the doses following treatment with either paclitaxel-coated devices or Eluvia^TM. The applicant stated that it is extremely unlikely that localized micro-doses associated with peripheral device use would have a negative effect on long-term survival.

The applicant commented that as no local vascular-based causes of mortality have been identified, any paclitaxel effect on mortality would occur via a systemic or non-vascular mechanism and would be apparent following paclitaxel exposure regardless of the administration route or implant location. The applicant asserted that no such effect on mortality was seen among thousands of patients who received a TAXUS paclitaxel-eluting coronary stent with a design very similar to that of Eluvia^TM, and no systemic effect should be expected with peripheral application.

Response: We appreciate the comments received from the applicant and other commenters.

CMS has always considered all evidence in its decision whether a technology represents a substantial clinical improvement over existing technologies. We refer the commenter to the regulations at § 412.87 which states a new medical service or technology represents an advance that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries. Some highlights of what we consider includes the following but not limited to are:

• The totality of the circumstances when making a determination that a new medical service or technology represents an advance that substantially improves, relative to services or technologies previously available, the diagnosis or treatment of Medicare beneficiaries.
• The totality of the information otherwise demonstrates that the new medical service or technology substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries.
• Evidence from published or unpublished information sources from within the United States or elsewhere such as clinical trials, peer reviewed journal articles, study results, meta-analyses, consensus statements and white papers may be sufficient to establish that a new medical service or technology represents an advance that substantially improves, relative to services or technologies previously available, the diagnosis or treatment of Medicare beneficiaries. Information sources we consider are listed including “other appropriate information sources may be considered”.

We believe the IMPERIAL and MAJESTIC trials show a number of improved outcomes such as primary patency rates and decreased need for subsequent interventions. As stated above, the applicant provided the following two-year results from the IMPERIAL global randomized controlled clinical trial, comparing Eluvia^TM to Zilver® PTX®:

• Eluvia^TM maintains higher primary patency than Zilver® PTX® at 2 years, 83.0% compared to 77.1%. The applicant contended that guidelines recognize the importance of primary patency in assessing the efficacy of peripheral endovascular therapies.

• Eluvia^TM's tw2-year primary patency is the highest reported in a superficial femoral artery US pivotal trial for a drug-eluting stent or drug-coated balloon. Per the applicant, the 2-year primary patency results are consistent with the 2-year TLR results released earlier in 2019. According to the applicant, Eluvia^TM sustained a statistically significant reduction in TLR at 2 years compared to Zilver PTX, 12.9% vs. 20.5% (p=0.0472).

• In a subgroup analysis of patients 65 years and older (Medicare population), the primary patency rate in the Eluvia^TM stent group is 92.6%, compared to 75.0% for the Zilver® PTX® stent group (p=0.0386).

Additionally, after the FY 2020 IPPS/LTCH final rule last year, as noted above, in its August 7, 2019 update, the FDA stated that “Paclitaxel-coated balloons and stents improve blood flow to the legs and decrease the likelihood of repeat procedures to reopen blocked blood vessels compared to uncoated devices. The Panel concluded that the benefits of paclitaxel-coated devices (for example, reduced reinterventions) should be considered in individual patients along with potential risks (for example, late mortality).” Furthermore, per the FDA August 2019 update, “for individual patients judged to be at particularly high risk for restenosis and repeat femoropopliteal interventions, clinicians may determine that the benefits of using a paclitaxel-coated device outweigh the risk of late mortality.” We expect that clinicians will discuss the risks and benefits of all available PAD treatment options with patients and that they will continue to diligently monitor patients who have been treated with paclitaxel-coated balloons and paclitaxel-eluting stents. We will continue to monitor the data and any further information provided by the FDA regarding the Eluvia^TM system. Therefore, based on the above, we believe the Eluvia^TM system represents a substantial clinical improvement over existing technologies.

After consideration of the public comments we received and for the reasons discussed, including the IMPERIAL and MAJESTIC trials which show a number of improved outcomes and the FDA August 7, 2019 update which concluded that the benefits of paclitaxel-coated devices (for example, reduced reinterventions) should be considered in individual patients along with potential risks (for example, late mortality) as well as for individual patients judged to be at particularly high risk for restenosis and repeat femoropopliteal interventions, clinicians may determine that the benefits of using a paclitaxel-coated device outweigh the risk of late mortality, we believe Eluvia^TM represents a substantial clinical improvement over existing technologies. Therefore, we have determined that the Eluvia^TM system meets all of the criteria for approval of new technology add-on payments for FY 2021. Cases involving Eluvia^TM that are eligible for new technology add-on payments will be identified by the following ICD-10-PCS procedure codes:

According to the applicant, the cost per case for the Eluvia^TM device is $5,610. Under § 412.88(a)(2), we limit new technology add-on payments to the lesser of 65 percent of the costs of the new medical service or technology, or 65 percent of the amount by which the costs of the case exceed the MS-DRG payment. As a result, the maximum new technology add-on payment for a case involving the use of the Eluvia^TM device is $3,646.50 for FY 2021.

f. GammaTile

GT Medical Technologies, Inc. submitted an application for new technology add-on payments for FY 2021 for the GammaTile^TM. We note that Isoray Medical, Inc. and GammaTile, LLC previously submitted an application for new technology add-on payments for GammaTile^TM for FY 2018, which was withdrawn, and also for FY 2019; however, the technology did not receive FDA marketing authorization by July 1, 2018 and, therefore, was not eligible for consideration for new technology add-on payments for FY 2019. GT Medical Technologies, Inc. submitted an application for FY 2020, which was not approved as CMS was unable to make a determination that GammaTile^TM technology represents a substantial clinical improvement over existing therapies.

The GammaTile^TM is a brachytherapy device for use in the treatment of patients who have been diagnosed with recurrent intracranial neoplasms, which uses cesium-131 radioactive sources embedded in a collagen matrix. GammaTile^TM is designed to provide adjuvant radiation therapy to eliminate remaining tumor cells in patients who required surgical resection of recurrent brain tumors. According to the applicant, the GammaTile^TM constitutes a new form of internal radiation, with collagen tile structural offsets acting as an internal compensator for the delivery of cesium-131 brachytherapy sources embedded within the product. The applicant stated that the technology has been manufactured for use in the setting of a craniotomy resection site where there is a high chance of local recurrence of a Central Nervous System (CNS) or dual-based tumor. The applicant asserted that the use of the GammaTile^TM technology provides a new, unique modality for treating patients who require radiation therapy to augment surgical resection of malignancies of the brain. By offsetting the radiation sources with a 3mm gap of a collagen matrix, the applicant asserted that the use of the GammaTile^TM technology resolves issues with “hot” and “cold” spots associated with brachytherapy, improves safety, and potentially offers a treatment option for patients with limited or no other available options. The GammaTile^TM is biocompatible and bioabsorbable, and is left in the body permanently without need for future surgical removal. The applicant asserted that the commercial manufacturing of the product will significantly improve on the process of constructing customized implants with greater speed, efficiency, and accuracy than is currently available, and requires less surgical expertise in placement of the radioactive sources, allowing a greater number of surgeons to utilize brachytherapy techniques in a wider variety of hospital settings.

The GammaTile^TM technology received FDA Section 510(k) clearance as a medical device on July 6, 2018. According to the applicant, due to finalization of design and manufacturing activities, the technology was not commercially available until January of 2019. Subsequently, the FDA cleared GammaTile^TM as a Class II medical device under the corporate name of GT Medical Technologies, Inc. on March 13, 2019. The cleared indications for use state that GammaTile^TM is intended to deliver radiation therapy (brachytherapy) in patients who have been diagnosed with recurrent intercranial neoplasms. The applicant submitted a request for approval for a unique ICD-10-PCS code for the use of the GammaTile^TM technology, which was approved effective October 1, 2017 (FY 2018). The ICD-10-PCS procedure code used to identify procedures involving the use of the GammaTile^TM technology is 00H004Z (Insertion of radioactive element, cesium-131 collagen implant into brain, open approach).

As discussed previously, if a technology meets all three of the substantial similarity criteria, it would be considered substantially similar to an existing technology and would therefore not be considered “new” for purposes of new technology add-on payments. We note that in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42261), we stated that after consideration of comments, we believe that the GammaTile^TM mechanism of action is different from current forms of radiation therapy and brachytherapy as it is the first FDA cleared device to use a manufactured collagen matrix which offsets radiation sources for use for the treatment of recurrent intracranial neoplasms. Therefore, we stated that the GammaTile^TM is not substantially similar to existing brachytherapy technology and meets the newness criterion. We refer the reader to the FY 2020 final rule for the complete discussion of how the GammaTile^TM meets the newness criterion. We invited public comments on whether the GammaTile^TM is substantially similar to an existing technology and whether it meets the newness criterion for purposes of its application for new technology add-on payments for FY 2021, but did not receive any additional comments. We continue to believe that the GammaTile^TM is not substantially similar to existing brachytherapy technology and meets the newness criterion for purposes of its application for new technology add-on payments for FY 2021.

With regard to the cost criterion, the applicant conducted the following analysis. The applicant worked with the Barrow Neurological Institute at St. Joseph's Hospital and Medical Center (St. Joseph's) to obtain actual claims from mid-2015 through mid-2016 for craniotomies that did not involve placement of the GammaTile^TM technology. The cases were assigned to MS-DRGs 025, 026, and 027 (Craniotomy and Endovascular Intracranial Procedures with MCC, with CC, and without CC/MCC, respectively). For the 460 claims, the average case-weighted unstandardized charge per case was $143,831. The applicant standardized the charges for each case and inflated each case's charges by applying the outlier charge inflation factor of 1.054 included in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42629) by the age of each case (that is, the factor was applied to 2015 claims 4 times and 2016 claims 3 times). The applicant then calculated an estimate for ancillary charges associated with placement of the GammaTile^TM device, as well as standardized charges for the GammaTile^TM device itself. The applicant determined it meets the cost criterion because the final inflated average caseweighted standardized charge per case (including the charges associated with the GammaTile^TM device) of $270,445 exceeds the average case-weighted threshold amount of $151,193 for MS-DRG 023 (Craniotomy with Major Device Implant or Acute Complex CNS PDX with MCC or Chemotherapy Implant or Epilepsy with Neurostimulator), the MS-DRG that would be assigned for cases involving the GammaTile^TM device.

The applicant stated that its analysis does not include a reduction in costs due to reduced operating room times. According to the applicant, the cost analysis reflects the time associated with a craniotomy and device placement. The applicant does not anticipate any reduction in operating room time relative to prior operative methods. We invited public comments on whether the GammaTile^TM technology meets the cost criterion. We did not receive any additional comments. Based on the analysis above, we believe that GammaTile^TM meets the cost criterion.

With regard to substantial clinical improvement, the applicant stated that the GammaTile^TM technology offers a treatment option for a patient population unresponsive to, or ineligible for, currently available treatments for recurrent CNS malignancies and significantly improves clinical outcomes when compared to currently available treatment options. The applicant explained that therapeutic options for patients who have been diagnosed with large or recurrent brain metastases are limited (for example, stereotactic radiotherapy, additional EBRT, or systemic immunochemotherapy). However, according to the applicant, the GammaTile^TM technology provides a treatment option for patients who have been diagnosed with radiosensitive recurrent brain tumors that are not eligible for treatment with any other currently available treatment options. Specifically, the applicant stated that the GammaTile^TM device may provide the only radiation treatment option for patients who have been diagnosed with tumors located close to sensitive vital brain sites (for example, brain stem) and patients who have been diagnosed with recurrent brain tumors who may not be eligible for additional treatment involving the use of external beam radiation therapy. There is a lifetime limit for the amount of radiation therapy a specific area of the body can receive. Patients whose previous treatment includes external beam radiation therapy may be precluded from receiving high doses of radiation associated with subsequent external beam radiation therapy, and the GammaTile^TM technology can also be used to treat tumors that are too large for treatment with external beam radiation therapy. According to the applicant, patients who have been diagnosed with these large tumors are not eligible for treatment with external beam radiation therapy because the radiation dose to healthy brain tissue would be too high.

The applicant summarized how the GammaTile^TM technology improves clinical outcomes compared to existing treatment options, including external beam radiation therapy and other forms of brain brachytherapy as: (1) Providing a treatment option for patients with no other available treatment options; (2) reducing the rate of mortality compared to alternative treatment options; (3) reducing the rate of radiation necrosis; (4) reducing the need for re-operation; (5) reducing the need for additional hospital visits and procedures; and (6) providing more rapid beneficial resolution of the disease process treatment.

The applicant cited several sources of data to support these assertions. The applicant referenced a paper by Brachman, Dardis et al., which was published in the Journal of Neurosurgery on December 21, 2018. This study, a follow-up on the progress of 20 patients with recurrent previously irradiated meningiomas, is a feasibility or superior progression-free survival study comparing the patient's own historical control rate against subsequent treatment with GammaTile^TM.

An additional source of clinical data is from Gamma Tech's internal review of data from two centers treating brain tumors with GammaTile; the two centers are the Barrow Neurological Institute (BNI) at St. Joseph's Hospital and St. Joseph's Medical Center, Phoenix, AZ, and this internal review is referred to here as the “BNI” study. The BNI study summarized Gamma Tech's experience with the GammaTile^TM technology. The applicant also included a reference to its updated study, described on ClinicalTrials.gov under NCT03088579, which includes 79 recurrent, previously irradiated intracranial neoplasms.

Another source of data that the applicant cited to support its assertions regarding substantial clinical improvement is an abstract by Pinnaduwage, D., et al. Also submitted in the application were abstracts from 2014 through 2018 in which updates from the progression-free survival study and the BNI study were presented at specialty society clinical conferences. The following summarizes the findings cited by the applicant to support its assertions regarding substantial clinical improvement.

Regarding the assertion of local control, the 2018 article which was published in the Journal of Neurosurgery found that, with a median followup of 15.4 months (range 0.03-47.5 months), there were 2 reported cases of recurrence out of 20 meningiomas, with median treatment site progression time after surgery and brachytherapy with the GammaTile precursor and prototype devices not yet being reached, compared to 18.3 months in prior instances. Median overall survival after resection and brachytherapy was 26 months, with 9 patient deaths. In a presentation at the Society for Neuro-Oncology in November 2014, the outcomes of 20 patients who were diagnosed with 27 tumors covering a variety of histological types treated with the GammaTile^TM prototype were presented. The applicant noted the following with regard to the patients: (1) All tumors were intracranial, supratentorial masses and included low and high-grade meningiomas, metastases from various primary cancers, high-grade gliomas, and others; (2) all treated masses were recurrent following treatment with surgery and/or radiation and the group averaged two prior craniotomies and two prior courses of external beam radiation treatment; and (3) following surgical excision, the prototype GammaTile^TM were placed in the resection cavity to deliver a dose of 60 Gray to a depth of 5 mm of tissue; and (4) all patients had previously experienced regrowth of their tumors at the site of treatment and the local control rate of patients entering the study was 0 percent.

With regard to outcomes, the applicant stated that, after their initial treatment, patients had a median progression-free survival time of 5.8 months; post treatment with the prototype GammaTile^TM, at the time of this analysis, only 1 patient had progressed at the treatment site, for a local control rate of 96 percent; and median progression-free survival time, a measure of how long a patient lives without recurrence of the treated tumor, had not been reached (as this value can only be calculated when more than 50 percent of treated patients have failed the prescribed treatment).

The applicant stated that it received two peer-reviewed awards for comprehensive clinical trial reporting on the treatment of 79 recurrent brain tumors treated with GammaTile. The applicant provided a recent summary presentation titled: “Surgically Targeted Radiation Therapy: A Prospective Trial in 79 Recurrent, Previously Irradiated Intracranial Neoplasms” at The American Brachytherapy Society. The clinical endpoints included time to tumor progression and survival, which the applicant stated provided objective, clinically important measures. The median local control after GammaTile therapy versus prior treatment was 12.0 versus 9.5 months for high-grade glioma patients (p=0.13) and 48.8 months versus 23.3 months for meningioma patients (p=0.01). For the metastasis patients, the median local control had not been reached versus 5.1 months with prior treatment (p=0.02). The median overall survival was 12.0 months for high grade glioma patients, 12.0 months for brain metastasis patients, and 49.2 months for the meningioma patients. According to the applicant, these data demonstrate dramatic, clinically meaningful difference in Kaplan-Meier curves comparing time to local recurrence at same site in the same patients. The applicant stated that GammaTile^TM is significantly outperforming the initial therapies attempted in this patient population.

The applicant also cited the findings from Brachman, et al. to support local control of recurrent brain tumors. At the Society for Neuro-Oncology Conference on Meningioma in June 2016, a second set of outcomes on the prototype GammaTile^TM was presented. This study enrolled 16 patients with 20 recurrent Grade II or III meningiomas, who had undergone prior surgical excision and external beam radiation therapy. These patients underwent surgical excision of the tumor, followed by adjuvant radiation therapy with the prototype GammaTile^TM. The applicant noted the following outcomes: (1) Of the 20 treated tumors, 19 showed no evidence of radiographic progression at last follow-up, yielding a local control rate of 95 percent; 2 of the 20 patients exhibited radiation necrosis (1 symptomatic, 1 asymptomatic); and (2) the median time to failure from the prior treatment with external beam radiation therapy was 10.3 months and after treatment with the prototype GammaTile^TM only 1 patient failed at 18.2 months. Therefore, according to the applicant, the median treatment site progression-free survival time after the prototype GammaTile^TM treatment had not yet been reached (average follow-up of 16.7 months, range 1 to 37 months).

A third prospective study was accepted for presentation at the November 2016 Society for Neuro-Oncology annual meeting. In this study, 13 patients who were diagnosed with recurrent high-grade gliomas (9 with glioblastoma and 4 with Grade III astrocytoma) were treated in an identical manner to the cases previously described. Previously, all patients had failed the international standard treatment for high-grade glioma, a combination of surgery, radiation therapy, and chemotherapy referred to as the “Stupp regimen.” For the prior therapy, the median time to failure was 9.2 months (range 1 to 40 months). After therapy with a prototype GammaTile^TM, the applicant noted the following: (1) The median time to same site local failure had not been reached and 1 failure was seen at 18 months (local control 92 percent); and (2) with a median follow-up time of 8.1 months (range 1 to 23 months) 1 symptomatic patient (8 percent) and 2 asymptomatic patients (15 percent) had radiation-related MRI changes. However, no patients required re-operation for radiation necrosis or wound breakdown. Dr. Youssef was accepted to present at the 2017 Society for Neuro-Oncology annual meeting, where he provided an update of 58 tumors treated with the GammaTile^TM technology. At a median whole group follow-up of 10.8 months, 12 patients (20 percent) had a local recurrence at an average of 11.33 months after implant. 6- and 18-month recurrence-free survival was 90 percent and 65 percent, respectively. Five patients had complications, at a rate that was equal to or lower than rates previously published for patients without access to the GammaTile^TM technology.

In support of its assertion of a reduction in radiation necrosis, the applicant also included discussion of a presentation by D.S. Pinnaduwage, Ph.D., at the August 2017 annual meeting of the American Association of Physicists in Medicine. Dr. Pinnaduwage compared the brain radiation dose of the GammaTile^TM technology with other radioactive seed sources. Iodine-125 and palladium-103 were substituted in place of the cesium-131 seeds. The study reported findings that other radioactive sources reported higher rates of radiation necrosis and that “hot spots” increased with larger tumor size, further limiting the use of these isotopes. The study concluded that the larger high-dose volume with palladium-103 and iodine-125 potentially increases the risk for radiation necrosis, and the inhomogeneity becomes more pronounced with increasing target volume. The applicant also cited a presentation by Dr. Pinnaduwage at the August 2018 annual meeting of the American Association of Physicists in Medicine, in which research findings demonstrated that seed migration in collagen tile implantations was relatively small for all tested isotopes, with Cesium-13 showing the least amount of seed migration.

The applicant asserted that, when considered in total, the data reported in these presentations and studies and the intermittent data presented in their abstracts support the conclusion that a significant therapeutic effect results from the addition of GammaTile^TM radiation therapy to the site of surgical removal. According to the applicant, the fact that these patients had failed prior best available treatments (aggressive surgical and adjuvant radiation management) presents the unusual scenario of a salvage therapy outperforming the current standard of care. The applicant noted that follow-up data continues to accrue on these patients.

Regarding the assertion that GammaTile^TM reduces mortality, the applicant stated that the use of the GammaTile^TM technology reduces rates of mortality compared to alternative treatment options. The applicant explained that studies on the GammaTile^TM technology have shown improved local control of tumor recurrence. According to the applicant, the results of these studies showed local control rates of 92 percent to 96 percent for tumor sites that had local control rates of 0 percent from previous treatment. The applicant noted that these studies also have not reached median progression-free survival time with follow-up times ranging from 1 to 37 months. Previous treatment at these same sites resulted in median progression-free survival times of 5.8 to 10.3 months.

The applicant further stated that the use of the GammaTile^TM technology reduces rates of radiation necrosis compared to alternative treatment options. The applicant explained that the rate of symptomatic radiation necrosis in the GammaTile^TM clinical studies of 5 to 8 percent is substantially lower than the 26 percent to 57 percent rate of symptomatic radiation necrosis requiring re-operation historically associated with brain brachytherapy, and lower than the rates reported for initial treatment of similar tumors with modern external beam and stereotactic radiation techniques. The applicant indicated that this is consistent with the customized and ideal distribution of radiation therapy provided by the GammaTile^TM technology.

The applicant also asserted that the use of the GammaTile^TM technology reduces the need for re-operation compared to alternative treatment options. The applicant explained that patients receiving a craniotomy, followed by external beam radiation therapy or brachytherapy, could require re-operation in the following three scenarios:

• Tumor recurrence at the excision site could require additional surgical removal;
• Symptomatic radiation necrosis could require excision of the affected tissue; and
• Certain forms of brain brachytherapy require the removal of brachytherapy sources after a given period of time.

However, according to the applicant, because of the high local control rates, low rates of symptomatic radiation necrosis, and short half-life of cesium-131, the GammaTile^TM technology will reduce the need for re-operation compared to external beam radiation therapy and other forms of brain brachytherapy.

Additionally, the applicant stated that the use of the GammaTile^TM technology reduces the need for additional hospital visits and procedures compared to alternative treatment options. The applicant noted that the GammaTile^TM technology is placed during surgery, and does not require any additional visits or procedures. The applicant contrasted this improvement with external beam radiation therapy, which is often delivered in multiple fractions that must be administered over multiple days. The applicant provided an example where whole brain radiotherapy (WBRT) is delivered over 2 to 3 weeks, while the placement of the GammaTile^TM technology occurs during the craniotomy and does not add any time to a patient's recovery.

Based on consideration of all of the previously presented data, the applicant believed that the use of the GammaTile^TM technology represents a substantial clinical improvement over existing technologies. We noted in the proposed rule that the clinical data submitted as of that time in connection with its application for new technology add-on payments for FY 2021 is essentially identical to what was submitted in connection with its application for new technology add-on payments for FY 2020. As we indicated in previous rulemaking (84 FR 42260 through 42265), the findings presented appear to be derived from relatively small case-studies and not data from clinical trials conducted under an FDA-approved investigational device exemption application. We noted that the study performed on 74 patients with 79 tumors was a single-arm and single-institution study, where each patient functioned as their own control and the study goal was to compare the time to local recurrence after GammaTile^TM treatment to the time of local recurrence after initial treatment of intracranial tumors. That is, the control arm were patients treated for initial intracranial brain tumors, and the treatment arm or the GammaTile^TM treatment arm were the same control patients now experiencing local recurrent intracranial brain tumors in the same site with the same brain tumor type. In this clinical trial, the applicant compared the time from initial treatment to first local recurrence (control arm) vs. time from GammaTile^TM treatment of first local recurrence to second local recurrence of the same brain tumor site and tumor type. There was a statistically significant difference between the control arm treatment and GammaTile^TM treatment for patients with recurrent meningioma and brain metastases and no statistically significant difference between the control arm treatment and GammaTile^TM treatment for patients with recurrent high-grade glioma.

We stated in the proposed rule that we continue to have concerns that, while the applicant described increases in median time to disease recurrence for certain intra-cranial tumors (in a small number of patients with different histologies) in support of clinical improvement, the lack of analysis, meta-analysis, or statistical tests indicates that the clinical efficacy and safety data for seeded brachytherapy is limited. While we acknowledged the difficulty in establishing randomized control groups in studies involving recurrent brain tumors, we stated that we are concerned that GammaTile^TM technology does not represent a substantial clinical improvement over existing therapies and requires additional clinical data to demonstrate substantial clinical improvement. We noted that the applicant has stated its intention to provide additional clinical data and information in connection with its application for new technology add-on payments for FY 2021, potentially including an update on patient outcomes from the completed clinical trial (ClinicalTrials.gov, NCT03088579), additional clinical data from early adopting locations, and additional meta-analysis to address the concerns previously raised by CMS.

We invited public comments on whether the GammaTile ^TM technology meets the substantial clinical improvement criterion.

Comment: The applicant submitted a comment providing additional clinical data and information to support a determination of substantial clinical improvement, including updated clinical data from the pivotal clinical trial on GammaTile ^TM, additional clinical data from early adopting clinical locations, and results from a systematic literature review, meta-analyses, and analyses of historic controls. The applicant submitted new data and analyses as evidence to support GammaTile ^TM's substantial clinical improvement for the treatment of three types of brain tumors: Recurrent high-grade gliomas; recurrent meningiomas; and recurrent metastatic brain tumors. According to the applicant, the single arm pivotal clinical trial on GammaTile ^TM limited enrollment to patients who were unable to receive other forms of radiation therapy.

The applicant included new data to show substantial clinical improvement using GammaTile^TM for recurrent high-grade gliomas. They reported updated data from the pivotal trial demonstrating a median overall survival (OS) of 16.7 months and a median progression free survival (PFS) of 12.9 months for 40 patients with high-grade gliomas receiving GammaTile ^TM plus bevacizumab, with a mean follow-up time of 10.7 months. The applicant also reported results from a meta-analysis comparing median overall survival for recurrent high-grade gliomas with a range of comparators, and noted the median OS using GammaTile ^TM plus bevacizumab, external beam radiotherapy plus bevacizumab, bevacizumab, resection, Optune®, and best supportive care were 16.7 months, 10.1 months, 9.7 months, 7.3 months, 6.6 months, and 4.8 months, respectively. The applicant stated there was a statistically significant difference for GammaTile ^TM plus bevacizumab versus surgical resection alone (p<0.001), as well as for GammaTile ^TM plus bevacizumab versus best supportive care (p<0.001). The applicant noted there was insufficient publicly available information to perform statistical comparisons of GammaTile ^TM plus bevacizumab versus either external beam radiotherapy plus bevacizumab or bevacizumab alone. The applicant also conducted a systematic literature review and selected a total of 16 articles with 695 patients for analysis. According to the applicant, the literature review and meta-analysis included a total of nine articles involving the treatment of recurrent high-grade gliomas in 522 patients. Of these nine studies, three utilized interstitial high-dose rate brachytherapy (HDR), one utilized interstitial low-dose rate brachytherapy (LDR), one utilized intracavitary HDR, and four utilized intracavitary LDR techniques. The applicant stated it could not perform statistical analyses on these outcomes due to the small number of studies and inconsistent reporting of OS and PFS. According to the applicant, the pooled meta-analysis for high-grade gliomas showed the mean rate of radiation necrosis requiring surgical intervention using traditional brachytherapy was 3.0 percent (standard error [SE]=1.0 percent), whereas in the pivotal trial involving GammaTile ^TM, 0 percent of patients treated with GammaTile ^TM for recurrent glioblastoma reported radiation necrosis requiring surgical intervention.

The applicant cited two abstracts submitted to the 2020 annual Congress of Neurological Surgeons and 2020 annual meeting of the Society for Neuro-Oncology to report updated data on GammaTile ^TM treatment for recurrent meningiomas. According to the applicant, the updated data from the single arm pivotal clinical trial on GammaTile ^TM with a median follow-up of 25 months demonstrated a 6-month PFS rate of 100 percent for the 28 patients with 35 recurrent, previously-irradiated meningioma tumors treated with surgical resection plus GammaTile ^TM treatment. Additionally, the applicant asserted that the 3-year PFS rate matches the 2-year PFS rate (72 percent and 72 percent, respectively) for the patients included in the trial. The applicant noted that median time to progression had not been reached (95 percent CI > 35.6 months). The applicant also noted that individuals with recurrent meningioma tumors treated with chemotherapeutic agents without radiation have a 6-month PFS rate of 26 percent, and those who received stereotactic radiosurgery have 3-year PFS of 55%. The applicant stated GammaTile ^TM treatment provides a substantial clinical improvement for recurrent meningioma tumors over existing treatment options considering the differences between reported 6-month, 2-year, and 3-year PFS rates.

The applicant noted that in the update of the GammaTile ^TM pivotal trial which included 29 recurrent meningiomas, there were statistically significant improvements in treatment site local control achieved with resection plus GammaTile ^TM versus the prior most recent treatments in the same patients. The applicant stated local control at 24 months was 51.7 percent with prior treatment versus 89.7 percent with GammaTile ^TM (hazard ratio [HR]=0.2 [p=0.0008]). The applicant noted that the pivotal trial showed significant improvement in prognosis for patients with recurrent meningiomas. According to the applicant, the Cox's regression comparing the time-to-progression of the prior therapy to that of the GammaTile ^TM therapy produced a log-rank test with a p-value of 0.0008. The applicant stated that the median time to progression was 18.3 months in the prior period, but with a median study follow-up time of 15.4 months and only 2 failures, the median time to progression in the GammaTile ^TM period had not been reached, nor was it close. According to the applicant, it performed a pooled meta-analysis of 16 articles with 695 patients, and included four articles involved in the treatment of recurrent meningioma tumors in 87 patients. The applicant stated that results from the meta-analysis showed a mean rate of radiation necrosis of 17.3 percent (SE=5.0 percent) and a mean rate of radiation necrosis requiring surgical intervention of 11.9 percent (SE=5.3 percent), whereas in the pivotal trial involving treatment of recurrent meningioma using GammaTile ^TM, 6% of patients had radiation necrosis and 0 percent of patients had radiation necrosis requiring surgical intervention.

The applicant cited two abstracts submitted to the 2020 annual meeting of the Society for Neuro-Oncology Metastases and 2020 annual Congress of Neurological Surgeons as well as an unpublished manuscript submitted to World Neurosurgery to report updated data on GammaTile ^TM treatment for recurrent brain metastases. The applicant reported updated data from the single arm pivotal clinical trial on GammaTile ^TM for 12 previously-irradiated brain metastases treated with surgery and re-irradiation via permanently implanted GammaTile ^TM brachytherapy. The applicant reported that, with a median follow-up of 9.5 months, the median time to progression after the prior standard of care treatments was 4.8 months (95 percent CI; 1.9-22.0 months) and has not yet been reached after GammaTile ^TM therapy (95 percent CI gives a lower limit of at least 10.9 months). The applicant stated that when looking at all patients by tumor size, Kaplan-Meier estimated local control at 1 year for all tumors, tumors <2.5 cm, and >2.5 cm was 83 percent, 100 percent, and 75 percent, respectively. The applicant stated that with site-level frailty term, the HR=0.052 (p=0.0073; 95 percent CI = 0.006-0.452). Following a systematic review of the clinical literature, the applicant cited an MD Anderson Cancer Center postoperative resection cavity study, which evaluated 64 patients with completed resected brain metastases who were randomized to stereotactic radiosurgery (SRS) versus observation, at median follow-up of 11.1 months. According to the applicant, in the SRS arm, 1-year local control for all metastases, small metastases (<2.5cm), and large metastases (>2.5cm) were 72 percent, 91 percent, and 40-46 percent, respectively. The applicant asserted that compared to the MD Anderson Cancer Center study, which was a primary cited example in guidance from the RANO Brain Metastases Working Group, GammaTile ^TM treatment offers a clear and substantial clinical improvement.

According to the applicant, it performed a pooled meta-analysis of 16 articles with 695 patients, and included three articles involved in the treatment of recurrent brain metastases in 86 patients. The applicant stated it could not perform statistical analyses on these outcomes due to the small number of studies and inconsistent reporting of PFS and OS. The applicant stated that results from the meta-analysis showed mean rates of symptomatic radiation necrosis and radiation necrosis requiring surgical intervention of 22.4 percent (SE=7.0 percent) and 10.0 percent (SE=7.3 percent), respectively, whereas in the pivotal trial involving GammaTile ^TM, 8 percent and 0 percent of patients treated with GammaTile ^TM for recurrent brain metastases reported symptomatic radiation necrosis and radiation necrosis requiring surgical intervention, respectively.

The applicant noted that in the update of the GammaTile ^TM pivotal trial which included 12 recurrent brain metastases, there were statistically significant improvements in treatment site local control achieved with resection plus GammaTile ^TM versus the prior most recent treatments in the same patients. The applicant stated local control at 6 months was 41.7 percent with prior treatment versus 100 percent with resection plus GammaTile ^TM; at 12 months, local control was 33.3 percent with prior treatment versus 83.3 percent with resection plus GammaTile ^TM (HR=0.052 [p = 0.0073]). The applicant noted that the pivotal trial showed significant improvement in prognosis for patients with recurrent brain metastases. According to the applicant, the Cox's regression comparing the time-to-progression of the prior therapy to that of the GammaTile ^TM therapy produced a log-rank test with a p-value of 0.0073. The applicant stated that the median time to progression was 4.8 months in the prior period, but with a median study follow-up time of 9.5 months and only 1 failure, the median time to progression in the GammaTile ^TM period had not been reached, nor was it close.

The applicant stated that it conducted a survey of 27 early adopters at 14 institutions who were involved in 51 commercial cases involving use of the GammaTile ^TM device for treatment of recurrent brain tumors. The applicant asserted that the survey reported an overall adverse event/complication rate occurring during the 30 days following surgery of 3.8 percent, below the expected complication rate ranging from 9-40 percent that has been reported for intracranial neoplasm surgery.

The applicant also claimed that GammaTile ^TM therapy provides a substantial clinical improvement because use of GammaTile ^TM therapy leads to a substantially decreased number of future visits to radiation oncology centers and to more rapid resolution of adjuvant radiation therapy treatment. According to the applicant, as the only truly available adjuvant radiation therapy for recurrent brain tumors that can be administered at the time of surgical excision, GammaTile ^TM provides individuals access to adjuvant radiation therapy who otherwise are unable or unlikely to return for multiple follow-up visits for other forms of radiation therapy. According to the applicant, this substantial clinical improvement is critically important for many Medicare beneficiaries who live in distant rural areas and individuals in low-income households who are unlikely to return for follow-up due to socio-economic factors, and for individuals who are fearful or at high-risk if exposed to COVID-19 while traveling on public transportation, staying in hotels, or otherwise participating in follow-up radiation therapy visits.

The applicant further stated that CMS data demonstrates the unique ICD-10-PCS code for GammaTile^TM that maps to MS-DRG 023 results in significantly more reimbursement for large, urban academic institutions as compared to smaller, community-based non-academic hospitals. The applicant asserted that approving new technology add-on payments for GammaTile^TM will enable adoption in community and non-urban hospitals, improving both access to care and outcomes for patients by leveling the playing field for all institutions.

Other commenters expressed their support for GammaTile^TM meeting the substantial clinical improvement criterion. Several commenters noted that GammaTile^TM provides a safe and effective treatment option for a patient population that is in great need of new treatment options, especially given that individuals with recurrent brain cancer often are poor candidates for other forms of repeat same-site irradiation. Several commenters stated there was a growing body of evidence confirming that GammaTile^TM therapy is well tolerated and improves local tumor control and survival.

Some commenters stated their direct experience with GammaTile^TM therapy has been positive, and that they have seen lower complication rates than would otherwise be expected in these complex patients who are at higher risk for complications due to their prior treatments. A commenter referenced studies demonstrating the clinical outcomes involving the recurrent tumor (treated with GammaTile^TM) exceeded the outcomes achieved during the prior attempt to treat the tumor in the same patient. The commenter noted the superior outcomes with GammaTile^TM occurred despite the fact that recurrent tumors are known to be more aggressive and faster moving, and also despite the fact that the patients were older at the time of recurrence.

Some commenters suggested that GammaTile^TM therapy reduces the physical and financial burden of treatment for brain tumor patients by reducing the number of physician visits required for radiation therapy. Some commenters also noted that the “one-and-done” aspect of GammaTile^TM therapy reduces caregiver burden and provides a radiation treatment option that minimizes the need for exposure to other individuals during travel and participation in follow-up visits, which is especially important during the ongoing COVID-19 public health emergency. Several commenters asserted that GammaTile^TM therapy ensures 100 percent patient compliance since it is implanted at the time of surgery. A commenter noted their support for patient access to GammaTile^TM because of the large proportion of their cancer center patients who travel well over an hour from their home to receive post-resection radiation treatments, and having to travel that far has a negative impact on patient compliance.

Response: We thank the commenters for their comments, including the updated data and additional analyses provided by the applicant to address the concerns discussed in the proposed rule.

After further review, including review of the additional clinical data and information submitted by the applicant, CMS continues to have concerns with respect to whether GammaTile^TM meets the substantial clinical improvement criterion for approval for new technology add-on payments. While the updated pivotal trial data provided by the applicant in its comment compared the treatment of the recurrent tumor with GammaTile^TM to the prior most recent treatments in the same patients for all three tumor types, we have concerns that a primary tumor and tumor recurrence may not be comparable diseases and therefore question whether the pivotal trial data is appropriate for the purposes of evaluating substantial clinical improvement. Furthermore, the applicant provided data from abstracts and an unpublished manuscript submitted for publication to report updated data on the GammaTile^TM pivotal trial for recurrent meningiomas and recurrent brain metastases, but did not provide statistical data or meta-analyses that demonstrate significant efficacy of GammaTile^TM when compared to conventional radiation therapy. The applicant also performed a meta-analysis for each of the 3 cancer sub-types, which showed the only improvement in overall survival for patients treated with GammaTile^TM was for those with high-grade gliomas when treated in combination with bevacizumab when compared to surgery alone, but not other modalities. The meta-analyses looking at recurrent meningiomas and recurrent brain metastases did not show statistically significant improvements in clinical outcomes. Furthermore, the authors of the systematic literature review and meta-analyses noted the limitations of the study, including the small number of studies available on same site reirradiation using brachytherapy for recurrent brain tumors. Moreover, the vast majority of studies included in the literature review and meta-analyses included no randomization and no control group in their study designs. While the applicant provided summary results for the meta-analyses showing outcomes for GammaTile^TM when compared to existing treatments (as well as the studies used), we have concerns that we are unable to determine superiority for GammaTile^TM without any data analysis and methods for these meta-analyses.

After review of all data received to date, we continue to have the same concerns as noted in the FY 2020 final rule and the FY 2021 proposed rule, discussed previously. Therefore, based on the information stated above, we are unable to make a determination that GammaTile^TM technology represents a substantial clinical improvement over existing therapies, and we are not approving new technology add-on payments for the GammaTile^TM for FY 2021.

g. Hemospray® Endoscopic Hemostat

Cook Medical submitted an application for new technology add-on payments for the Hemospray ® Endoscopic Hemostat (Hemospray) for FY 2021. According to the applicant, Hemospray is indicated by the FDA for hemostasis of nonvariceal gastrointestinal bleeding. Using an endoscope to access the gastrointestinal tract, the Hemospray delivery system is passed through the accessory channel of the endoscope and positioned just above the bleeding site without making contact with the GI tract wall. The Hemospray powder, bentonite, is propelled through the application catheter, either a 7 or 10 French polyethylene catheter, by release of CO₂ from the cartridge located in the device handle and sprayed onto the bleeding site. According to the applicant, bentonite can rapidly absorb 5 to 10 times its weight in water and swell up to 15 times its dry volume, becoming cohesive to itself and adhesive to tissue forming a physical barrier to aqueous fluid (for example, blood). Hemospray powder is not absorbed by the body and does not require removal as it passes through the GI tract within 72 hours. Hemospray is single-use and disposable.

According to the applicant, current standard of care hemostatic modalities used for the management of nonvariceal gastrointestinal bleeding have a failure rate of 8 to 15 percent and a rebleeding rate of 10 to 25 percent, or worse, depending on patient etiology and morbidity. The applicant asserted that the risk of morbidity, mortality, and rebleeding can be predicted using validated scoring methods such as the Rockall Score (RS). Cancerous lesions, which are more frequently identified as a result of advances in locating and determining the cause of bleeding, have lower rates of hemostasis (as low as 40 percent), with higher recurrent bleeding rates (over 50 percent within 1 month), with high 3 month mortality. Continued bleeding that is not controlled by conventional techniques, or recurrent bleeding from the same lesion, may be treated by repeated attempts at endoscopic hemostasis, interventional radiology hemostasis (IRH) with guided transarterial embolization (TAE), or surgery. According to the applicant, a recent systematic review found minimally invasive rescue options like TAE had re-bleeding rates that were higher than those from surgery with no significant difference in mortality. According to the applicant, patients who are not surgical candidates have very few options for “rescue” when conventional hemostasis techniques fail.

The applicant asserted that, in addition to increased morbidity and mortality, the financial impact of failure to achieve hemostasis is considerable. Based on a retrospective claims analysis by the applicant of the 2012 MedPAR file and the Provider of Services file, 13,501 cases were identified which showed all-cause mortality for patients requiring more than 1 endoscopy (6%), IRH (9%), or surgery (14%) was significantly higher than for patients requiring only 1 endoscopy (3%). The median hospital costs for these patients were considerable, with costs for patients requiring over 1 endoscopy of $20,055, for patients requiring IRH of $34,730, and for patients requiring surgery of $47,589. According to the applicant, Hemospray is an alternative to IRH and surgery and the applicant asserts it would avoid the costs associated with these procedures.

With respect to the newness criterion, the applicant for Hemospray was granted a FDA de novo classification request on May 7, 2018. The applicant stated revisions to the instructions for use were required by the FDA and therefore the device was not commercially available until July 1, 2018. The FDA has classified Hemospray as a Class II device for intraluminal gastrointestinal use. The applicant submitted a request for approval for a unique ICD-10-PCS code for the administration of Hemospray beginning in FY 2021 and was granted approval for the following procedure codes: XW0G886 (Introduction of mineral-based topical hemostatic agent into upper GI, via natural or artificial opening endoscopic, new technology group 6) and XW0H886 (Introduction of mineral-based topical hemostatic agent into lower GI, via natural or artificial opening endoscopic, new technology group 6).

According to information submitted by the applicant, Cook Medical recalled Hemospray ® Endoscopic Hemostat due to complaints received that the handle and/or activation knob on the device in some cases has cracked or broken when the device is activated and in some cases has caused the carbon dioxide cartridge to exit the handle. The applicant stated that Cook Medical received 1 report of a superficial laceration to the user's hand that required basic first aid; however, there have been no reports of laceration, infection, or permanent impairment of a body structure to users or to patients due to the carbon dioxide cartridge exiting the handle. The applicant stated that Cook Medical initiated an investigation to determine the appropriate corrective action(s) to prevent recurrence of this issue. According to the applicant, although the recall did restrict availability of the device, they wished to continue their application for new technology add-on payment as they believe the use of Hemospray significantly improves clinical outcomes for certain patient populations compared to currently available treatments.

As discussed earlier, if a technology meets all three of the substantial similarity criteria, it would be considered substantially similar to an existing technology and would not be considered “new” for purposes of new technology add-on payments. The applicant identified three treatment options currently available for the treatment of bleeding of the gastrointestinal system, which were thermal modalities, injection needles, and mechanical modalities. The applicant stated that thermal modalities are those endoscopic methods that treat gastrointestinal hemorrhage by means of bipolar electrocautery, hemostatic graspers, and argon plasma coagulation. These devices generate heat resulting in edema, coagulation of tissue protein, and contraction of vessels and indirect activation of the coagulation cascade. The applicant stated that injection needles treat gastrointestinal hemorrhage through the injection of various materials including epinephrine, saline, histoacryl, ethanolamine, and ethanol. This method achieves hemostasis by both mechanical tamponade and cytochemical mechanisms. The applicant stated that mechanical modalities including hemostatic endoclips, detachable loop ligators and multi-band ligators control gastrointestinal hemorrhage by applying mechanical pressure to the bleeding site. The applicant claimed these treatment options (thermal modalities, injection needles, and mechanical modalities) are insufficient in achieving hemostasis as evidenced by rates of failed hemostasis of 8 to 15 percent. The applicant stated that all the current treatments result in injury to the tissue, which in some cases can result in a worsening of the severity of the bleeding or perforation. Furthermore, it stated that with the exception of argon plasma coagulation, the current hemostatic modalities require precise targeting of the source of the bleed, which may limit their utility when diffuse or non-precise bleeding occurs. According to the applicant, the primary benefit of all endoscopic hemostasis procedures, including Hemospray, is the achievement of hemostasis without conversion to interventional radiology or surgery, both of which carry higher risk of mortality and morbidity.

With regard to the first criterion, whether a product uses the same or similar mechanism of action to achieve a therapeutic outcome, the application asserted that Hemospray is a novel device in which the mechanism of action differs from alternative treatments by creating a diffuse mechanical barrier over the site of bleeding with a non-thermal, non-traumatic, noncontact modality.

With respect to the second criterion, whether a product is assigned to the same or different MS-DRG, the applicant did not specifically comment. The applicant stated that cases involving the use of Hemospray would span a wide variety of MS-DRGs, but that the technology would most likely be used for cases in MS-DRGs 377, 378, and 379 (G.I. Hemorrhage with MCC, with CC, and without CC/MCC, respectively). We believe that cases involving the use of the technology would be assigned to the same MS-DRG as cases involving the current standard of care treatments.

With respect to the third criterion, whether the new use of the technology involves the treatment of the same or similar type of disease and the same or similar patient population, we noted that the applicant also did not comment specifically on this criterion. However, we noted that we believed that this technology would be used to treat the same or similar type of disease and the same or similar patient population as the current standard of care treatments.

Based on the applicant's statements as summarized previously, the applicant believed that Hemospray was not substantially similar to other currently available therapies and/or technologies and met the “newness” criterion. However, we stated in the proposed rule that we were concerned that the mechanism of action of Hemospray may be similar to existing endoscopic hemostatic treatments. Specifically, we noted that as described in literature provided by the applicant, technologies such as Ankaferd Bloodstopper and EndoClot Polysaccharide Hemostatic System appeared to utilize a similar mechanism of action as Hemospray to achieve hemostasis. Based on the literature provided by the applicant, EndoClot, a device developed in California, USA, “. . . consists of absorbable modified polymer . . . [which is] biocompatible, non-pyogenic, and starch-derived compound that rapidly absorbs water from serum and concentrates platelets, red blood cells, and coagulation proteins at the bleeding site to accelerate the clotting cascade.” EndoClot received 510(k) premarket notification January 18, 2017 and is indicated by the FDA to assist the delivery of a powdered hemostatic agent to the treatment site in endoscopic surgeries. Therefore, we were concerned with the similarity of this mechanism of action. Moreover, as previously noted, the applicant asserted generally it did not meet the substantial similarity criteria, but did not specifically address the second and third substantial similarity criteria. We believed that cases involving the use of the Hemospray would be assigned to the same MS-DRG as cases involving the current standard of-care treatments and that the technology would be used to treat the same or similar type of disease and the same or similar patient population as the current standard-of-care treatments. We invited public comments on whether Hemospray is substantially similar to other currently available therapies and/or technologies and whether this technology meets the newness criterion.

Comment: The applicant reasserted that Hemospray meets the newness criterion because of the FDA de Novo classification, which according to the applicant confirms there is no comparable predicate hemostasis device cleared for use in the United States. The applicant stated that both the Ankaferd Blood Stopper (ABS) and EndoClot systems are not cleared for use in the United States with the latter only having clearance for the delivery system and for a product intended for submucosal injection.

In regard to the first substantial similarity criterion, the applicant stated that Hemospray has a different mechanism of action as compared to ABS and the EndoClot systems which are, according to the applicant, comprised of biologically active materials or absorbable polysaccharides. The applicant stated that ABS uses an active process related to proteins, via the formation of an encapsulated protein network that provides focal points for vital erythrocyte aggregation, that is substantially different from Hemospray. The applicant then stated with regard to EndoClot that the product produces a gelled matrix that adheres to and seals bleeding tissue; according to the applicant EndoClot substantially differs from Hemospray in its composition and properties that permit dissolution and degradation. Furthermore, the applicant stated that labeling in markets where EndoClot is commercially available limits its use to non-bleeding wounds within the GI tract, while Hemospray is indicated for active bleeding.

With regard to the second substantial similarity criterion, the applicant maintained that currently all control of GI bleeding no matter the treatment is typically grouped to MS-DRGs 377, 378, and 379.

With regard to the third substantial similarity criterion, the applicant stated that Hemospray will treat the same or similar type of disease and a similar patient population. They added that the unique features of the product differ substantially from other treatments and therefore, Hemospray meets the newness criterion.

Response: After consideration of the public comments we received and information submitted by the applicant in its application, we believe that while potential cases representing patients who may be eligible for treatment involving Hemospray would be assigned to the same MS-DRGs as cases representing patients who receive SOC treatment for a diagnosis of nonvariceal gastrointestinal bleeding, and that Hemospray is used to treat the same or similar type of disease (a diagnosis of nonvariceal gastrointestinal bleeding) and a similar patient population as currently available treatment options, we agree with the applicant that Hemospray does not use the same or similar mechanism of action as other technologies used for the treatment of nonvariceal gastrointestinal bleeding. We believe that Hemospray's mechanism of action, which creates a diffuse mechanical barrier over the site of bleeding with a non-thermal, non-traumatic, non-contact modality, is unique and distinct from other forms of treatment available in the U.S. for nonvariceal gastrointestinal bleeding and, therefore, we believe that Hemospray meets the newness criterion. We consider the beginning of the newness period to commence on the first date Hemospray was commercially available, July 1, 2018.

With regard to the cost criterion, the applicant provided the following analysis to demonstrate the technology meets the cost criterion. The applicant asserted patients who would use Hemospray are identified by using a combination of one ICD-10-PCS procedure code and one ICD-10-CM diagnosis code. The applicant provided a list of 39 ICD-10-PCS procedure codes that included 21 Non O.R. digestive system procedures and 18 Extensive O.R. digestive system procedures. The applicant provided a list of 32 ICD-10-CM diagnosis codes that included 29 principal diagnoses in MS-DRGs 377, 378, and 379 (G.I. Hemorrhage with MCC, with CC, and without CC/MCC, respectively) and 3 principal diagnoses in MDC 06 (Diseases and Disorders of the Digestive System) across 10 MS-DRG classifications. The applicant extracted claims from the FY 2018 MedPAR final rule dataset based on the presence of one procedure and one diagnosis code in the list provided. The applicant stated MS-DRGs 377, 378, and 379 made up 3 of the top 4 MS-DRGs by volume and about 64 percent of cases were grouped to these 3 MS-DRGs. The applicant stated consequently they limited their analysis to the cases assigned to MS-DRGs 377, 378, and 379 and those claims that would be used for IPPS rate setting. The applicant identified a total of 40,012 cases.

The applicant first calculated a case weighted threshold of $46,568 based upon the dollar threshold for each MS-DRG grouping and the proportion of cases in each MS-DRG. The applicant then calculated the average charge per case. The applicant stated Hemospray may not replace other therapies occurring during an inpatient stay and therefore chose to not remove charges for the prior technology or technology being replaced. Next the applicant calculated the average standardized charge per case using the FY 2018 IPPS Final Rule Impact file. The 2-year inflation factor of 11.1% (1.11100) was obtained from the FY 2020 IPPS/LTCH PPS final rule and applied to the average standardized charge per case. To determine the charges for Hemospray, the applicant used the inverse of the FY 2020 IPPS/LTCH PPS final rule supplies and equipment national average CCR of 0.299, based on an assumption that hospitals would use the inverse of the national average CCR for supplies and equipment to mark-up charges, and therefore assumed an average charge for Hemospray of $8,361.20. The applicant calculated the final inflated average case-weighted standardized charge per case by adding the charges for the new technology to the inflated average standardized charge per case. The applicant determined a final inflated average case-weighted standardized charge per case of $60,193, which exceeds the average case-weighted threshold amount of $46,568. We invited public comments on whether Hemospray meets the cost criterion.

Comment: The applicant maintained that Hemospray meets the cost criterion as the inflated average case-weighted standardized charge per case of $60,193 exceeds the average case-weighted threshold amount of $46,568. The applicant stated that they did not remove the costs for other devices because some physicians may choose to use Hemospray in conjunction with endoscopic clips or thermal coagulation.

Response: We appreciate the applicant's comment in response to the proposed rule. Based on the cost analysis as described previously and after consideration of public comments we received, we believe Hemospray meets the cost criterion.

With respect to the substantial clinical improvement criterion, the applicant asserted that Hemospray represents a substantial clinical improvement over existing technologies. According to the applicant, Hemospray is a topically applied mineral powder that offers a novel primary treatment option for endoscopic bleeding management, serves as an option for patients who fail conventional endoscopic treatments, and serves as an alternative to interventional radiology hemostasis (IRH) and surgery. Broadly, the applicant outlined two treatment areas in which it asserted Hemospray would provide a substantial clinical improvement: (1) As a primary treatment or a rescue treatment after the failure of a conventional method, and (2) for the treatment of malignant lesions.

The applicant provided eight articles specifically for the purpose of addressing the substantial clinical improvement criterion. Three articles are systematic reviews, three are prospective studies, and two are retrospective studies.

The first article provided by the applicant was a prospective single armed multicenter phase two safety and efficacy study performed in France. From March 2013 to January 2015, 64 endoscopists in 20 centers enrolled 202 patients in the study in which Hemospray was used as either a first line treatment (46.5%) or as salvage therapy (53.5%) following the unsuccessful treatment with another method. The indication for Hemospray as a first-line therapy or salvage therapy was at the discretion of the endoscopist. Of the 202 patients the mean age was 68.9, 69.3 percent were male, and all patients were classified into four primary etiologic groups: Ulcers (37.1%), malignant lesions (30.2%), post-endoscopic bleeding (17.3%), and other (15.3%). Patients were further classified by the American Society of Anesthesiologist (ASA) physical status scores with 4.5 percent as a normal healthy patient, 24.3 percent as a patient with mild systemic disease, 46 percent as a patient with severe systemic disease, 22.8 percent as a patient with severe systemic disease that is a constant threat to life, and 2.5 percent as a moribund patient who is not expected to survive without an operation. Immediate hemostasis was achieved in 96.5 percent across all patients; among treatment subtypes immediate hemostasis was achieved in 96.8 percent of first-line treated patients and 96.3 percent of salvage therapy patients. At day 30 the overall rebleeding was 33.5 percent of 185 patients with cumulative incidences of 41.4 percent for ulcers, 37.7 percent for malignant lesions, 17.6 percent for post-endoscopic bleedings, and 25 percent for others. When Hemospray was used as a first-line treatment, rebleeding at day 30 occurred in 26.5 percent (22/83) of overall lesions, 30.8 percent of ulcers, 33.3 percent of malignant lesions, 13.6 percent of post-endoscopic bleedings, and 22.2 percent of other. When Hemospray was used as a salvage therapy, rebleeding at day 30 occurred in 39.2 percent (40/102) of overall lesions, 43.9 percent of ulcers, 50.0 percent of malignant lesions, 25.0 percent of post-endoscopic bleedings, and 26.3 percent for others. According to the article, the favorable hemostatic results seen from Hemospray are due to its threefold mechanism of action: Formation of a mechanical barrier; concentration of clotting factors at the bleeding site; and enhancement of clot formation. No severe adverse events were noted; however, the authors note the potential for pain exists due to the use of carbon dioxide. Lastly, the authors stated that while Hemospray was found to reduce the need for radiological embolization and surgery as salvage therapies, it was not found to be better than other hemostatic methods in terms of preventing rebleeding of ulcers.

A second article provided by the applicant contained a systematic review of published Hemospray case data summarizing 17 human and 2 animal studies. The authors do not provide the total number of articles reviewed but do provide search terms and engines used to conduct the review. The studies included in this review included 6 case reports and 13 case series taking place in North America, Europe, Hong Kong, and Egypt up until August 2014. A total of 234 cases were identified of which 28.2 percent involved gastric bleeding, 6.4 percent esophageal bleeding, 26.5 percent duodenal bleeding, 3.85 percent bleeding of the gastroesophageal junction, and 11 percent bleeding of the lower gastrointestinal tract. (We note it is unclear what form of bleeding the remaining 24.1 percent of cases addressed.) The mean size of the bleeding source was 37.4 mm ranging from 8 mm to 350 mm. Hemospray was used as a primary and sole treatment in 83 percent of cases while 17 percent of cases used Hemospray as a follow-up treatment. Hemospray achieved hemostasis in 88.5 percent of all reviewed cases. Within the 72 hour post-treatment period, rebleeding occurred in 16.2 percent of patients and 27.3 percent of animal models. The authors acknowledge the potential for rare adverse events such as embolism, intestinal obstruction, and allergic reaction, but state no procedure related adverse events were associated with Hemospray-.

The applicant provided a third article consisting of an abstract from another systematic review article. The abstract purports to cover a review of prospective, retrospective, and randomized control trials evaluating Hemospray as a rescue therapy. Eighty-five articles were initially identified and 23 were selected for review. Of those, 5 studies were selected which met the inclusion criteria of the analysis. The median age of patients was 69, 68 percent were male. The abstract concludes that when used as a rescue therapy after the failure of conventional endoscopic modalities, in nonvariceal gastrointestinal bleeding, Hemospray seems to have significantly higher rates of immediate hemostasis.

A fourth article provided by the applicant described a single-arm retrospective analytical study of 261 enrolled patients conducted at 21 hospitals in Spain. The mean age was 67 years old, 69 percent of patients were male, and the overall technical success, defined as correct assembly and delivery of Hemospray to a bleeding lesion, was 97.7 percent (95.1%-99.2%). The most common causes of bleeding in patients were peptic ulcer (28%), malignancy (18.4%), therapeutic endoscopy-related (17.6%), and surgical anastomosis (8.8%). Overall, 93.5 percent (89.5%-96%) of procedures achieved hemostasis. Recurrent bleeding, defined as (1) a new episode of bleeding symptoms, (2) a decrease in hemoglobin of >2 g/dL within 48 hours of an index endoscopy or > 3g/dL in 24 hours, or 3) direct visualization of active bleeding at the previously treated lesion on repeat endoscopy, had a cumulative incidence at 3 and 30 days of 16.1 percent (11.9%-21%) and 22.9 percent (17.8%-28.3%) respectively. The overall risk of Hemospray failure at 3 and 30 days was 21.1 percent (16.4%-26.2%) and 27.4 percent (22.1%-32.9%) respectively with no statistically significant differences (p = 0.07) between causes at 30 days (for example peptic ulcer, malignancy, anastomosis, therapeutic endoscopy-related, and other causes). With the use of multivariate analysis, spurting bleeding vs. nonspurting bleeding (subdistribution hazard ratio [sHR] 1.97 (1.24-3.13)), hypotension vs. normotensive (sHR 2.14 (1.22-3.75)), and the use of vasoactive drugs (sHR 1.80 (1.10-2.95)) were independently associated with Hemospray failure. The overall 30-day survival was 81.9 percent (76.5%-86.1%) with 46 patients dying during follow-up and 22 experiencing bleeding related deaths; 20 patients (7.6%) with intraprocedural hemostasis died before day 30. The authors indicated the majority of Hemospray failures occurred within the first 3 days and the rate of immediate hemostasis was similar to literature reports of intraprocedural success rates of over 90 percent. The authors stated that the hemostatic powder of Hemospray is eliminated from the GI tract as early as 24 hours after use, which could explain the wide ranging recurrent bleeding percentage. The authors reported that importantly, adverse events are rare, but cases of abdominal distension, visceral perforation, transient biliary obstruction, and splenic infarct have been reported; one patient involved in this study experienced an esophageal perforation without a definitive causal relationship.

A fifth article provided by the applicant described a single-arm multicenter prospective registry involving 314 patients in Europe which collected data on days 0, 1, 3, 7, 14, and 30 after endotherapy with Hemospray. The outcomes of interest in this study were immediate endoscopic hemostasis (observed cessation of bleeding within 5 minutes post Hemospray application) with secondary outcomes of rebleeding immediately following treatment and during follow-up, 7 and 30 day all-cause mortality, and adverse events. The sample was 74 percent male with a median age of 71 with the most common pathologies of peptic ulcer (53%), malignancy (16%), post-endoscopic bleeding (16%), bleeding from severe inflammation (11%), esophageal variceal bleeding (2.5%), and cases with no obvious cause (1.6%). The median baseline Blatchford score (BS) and RS were 11 and 7 respectively. The BS ranges from 0 to 23 with higher scores indicating increasing risk for required endoscopic intervention and is based upon the blood urea nitrogen, hemoglobin, systolic blood pressure, pulse, presence of melena, syncope, hepatic disease, and/or cardiac failure. The RS ranges from 0 to 11 with higher scores indicating worse potential outcomes and is based upon age, presence of shock, comorbidity, diagnosis, and endoscopic stigmata of recent hemorrhage. Immediate hemostasis was achieved in 89.5 percent of patients following the use of Hemospray; only the BS was found to have a positive correlation with treatment failure in multivariate analysis (OR 1.21 (1.10-1.34)). Rebleeding occurred in 10.3 percent of patients who achieved immediate hemostasis again with only the BS having a positive correlation with rebleeding (OR: 1.13 (1.03-1.25)). At 30 days the all-cause mortality was 20.1 percent with 78 percent of these patients having achieved immediate endoscopic hemostasis and a cause of death resulting from the progression of other comorbidities. A subgroup analysis of treatment type (monotherapy, combination therapy, and rescue therapy groups) was performed showing no statistically significant difference in immediate hemostasis across groups (92.4 percent, 88.7 percent, and 85.5 percent respectively). Higher all-cause mortality rates at 30 days were highest in the monotherapy group (25.4%, p=0.04) as compared to all other groups. According to the authors, in comparison to major recent studies, they were able to show lower rebleeding rates overall and in all subgroups despite the high-risk population. The authors further note limitations in that the inclusion of patients was nonconsecutive and at the discretion of the endoscopist, at the time of the endoscopy, which allows for the potential introduction of selection bias which may have affected these study results.

The fifth article also described the utility of Hemospray in the treatment of malignant lesions. According to the applicant, malignant lesions pose a significant clinical challenge as successful hemostasis rates are as low as 40 percent with high recurrent bleeding over 50 percent within 1 month following standard treatments. The applicant added that bleeding from tumors is often diffuse and consists of friable mucosa decreasing the utility of traditional treatments (for example, ligation, cautery). From the fifth article, the applicant noted that 50 patients were treated for malignant bleeding with overall immediate hemostasis in 94 percent of patients. Of the 50 patients, 33 were treated with Hemospray alone, 11 were treated with Hemospray as the final treatment, and 4 were treated with Hemospray as rescue therapy of which 100 percent, 84.6 percent and 75 percent experienced immediate hemostasis respectively. Similarly, from the first discussed article, the applicant noted that among malignant bleeding patients, 95.1 percent achieved immediate hemostasis with lower rebleeding rates at 8 days when Hemospray was used as a primary treatment as compared to when used as a rescue therapy (17.1 percent vs. 46.7 percent respectively). The applicant concluded that Hemospray may provide an advantage as a primary treatment to patients with malignant bleeding.

A sixth article provided by the applicant consisted of a systematic review from January 1950 to August 2014 concerning all available powdered topical hemostatic agents. Of an initial 3,799 articles, 105 were initially reviewed and after excluding nonendoscopic data, review articles, in vitro studies, and animal models 61 articles were ultimately included in the study. Three primary hemostatic agents were identified in this review, the Ankaferd Blood Stopper (ABS), Hemospray, and EndoClot. The applicant noted the authors of this article identified 131 high risk patients treated with Hemospray, of which 28 had tumor bleeding. According to the applicant, all 28 patients achieved immediate hemostasis with 25 percent experiencing rebleeding at 7-day follow-up. The overall immediate hemostasis in this particular study was 91.6 percent and 7-day rebleeding was 25.8 percent among high-risk rebleeding patients.

The applicant provided a seventh article which consisted of a journal pre-proof article detailing a 1:1 randomized control trial of 20 patients treated with Hemospray versus the standard of care (for example, thermal and injection therapies) in the treatment of malignant gastrointestinal bleeding. The goals of this pilot study were to determine the feasibility of a definitive trial. The primary outcome of the study was immediate hemostasis (absence of bleeding after 3 minutes) with secondary outcomes of recurrent bleeding at days 1, 3, 30, 90, and 180 and adverse events at days 1, 30, and 180. The mean age of patients was 67.2, 75 percent were male, and on average patients presented with 2.9 ± 1.7 comorbidities. All patients had active bleeding at endoscopy and the majority of patients had an ASA score of 2 (45%) or 3 (40%). Immediate hemostasis was achieved in 90 percent of Hemospray patients and 40 percent of standard of care patients (5 injection alone, 3 thermal, 1 injection with clips, and 1 unknown). Of those patients in the control group, 83.3 percent crossed over to the Hemospray treatment. One patient died while being treated with Hemospray from exsanguination; post-mortem examination demonstrated that bleeding was caused by rupture of a malignant inferior mesenteric artery aneurysm. Overall, 86.7 percent of patients treated with Hemospray initially or as crossover treatment achieved hemostasis. Recurrent bleeding was lower in the Hemospray group (20%) as compared to the control group (60%) at 180 days. Forty percent of the treated group received blood transfusions as compared to 70 percent of the control group. The overall length of stay was 14.6 days among treated patients as compared to 9.4 in the control group. Mortality at 180 days was 80 percent in both the treated and control groups. The authors noted the potential for operator bias in the use of Hemospray prior to switching to another method when persistent bleeding exists. Lastly, the authors noted that while they did not occur during this study, there are concerns around the risks of perforation, obstruction, and systemic embolization with the use of Hemospray.

An eighth article provided by the applicant described a single-arm multicenter retrospective study from 2011 to 2016 involving 88 patients who bled as a result of either a primary GI tumor or metastases to the GI tract. In this study the authors define immediate hemostasis as no further bleeding at least one minute after treatment with Hemospray and recurrent bleeding was suspected if one of seven criteria were met: (1) Hematemesis or bloody nasogastric tube >6 hours after endoscopy; (2) melena after normalization of stool color; (3) hematochezia after normalization of stool color or melena; (4) development of tachycardia or hypotension after >1 hour of vital sign stability without other cause; (5) decrease in hemoglobin level greater than or equal to 3 hours apart; (6) tachycardia or hypotension that does not resolve within 8 hours after index endoscopy; or (7) persistent decreasing hemoglobin of >3 g/dL in 24 hours associated with melena or hematochezia). The sample for this study consisted of 88 patients (with a mean age of 65 years old and 70.5 percent male) of which 33.3 percent possessed no co morbid illness, and 25 percent were on current antiplatelet/anticoagulant medication. The mean BS was 8.7 plus or minus 3.7 with a range from 0 to 18. Overall, 72.7 percent of patients had a stage 4 adenocarcinoma, squamous cell carcinoma, or lymphoma. Immediate hemostasis was achieved in 97.7 percent of patients. Recurrent bleeding occurred among 13 of 86 (15%) and 1 of 53 (1.9%) at 3 and 30 days, respectively. A total of 25 patients (28.4%) died during the 30-day follow up period. Overall, 27.3 percent of patients re-bled within 30 days after treatment of which half were within 3 days. Using multivariate analysis, the authors found that patients with good performance status, no end-stage cancer, or receiving any combination of definitive hemostasis treatment modalities had significantly greater survival. The authors acknowledged the recurrent bleeding rate post Hemospray treatment at 30 days of 38 percent is comparable with that seen in sole conventional hemostatic techniques (40-50%) and state this implies that the long-term effect of Hemospray does not differ from conventional techniques and remains unsatisfactory for upper GI tumor-related bleeding. However, they state that Hemospray is more predictably effective in providing initial hemostasis for tumor-related GI bleeding than conventional methods as SOC methods provide variable immediate hemostasis rates of 31 to 93 percent while Hemospray had a 97.7% success rate in this study. They further conclude that though Hemospray may provide only a temporary hemostatic effect in this group of patients, its strong efficacy in the short-term allows patients to subsequently receive definitive hemostatic treatment that may translate into higher 6-month survival rates.

Ultimately, the applicant concluded nonvariceal gastrointestinal bleeding is associated with significant morbidity and mortality in older patients with multiple co-morbid conditions. Inability to achieve hemostasis and early rebleeding are associated with increased cost and greater resource utilization. According to the applicant, patients with bleeding from malignant lesions have few options that can provide immediate hemostasis without further disrupting fragile mucosal tissue and worsening the active bleed. The applicant asserted Hemospray is an effective agent that provides immediate hemostasis in patients with GI bleeding as part of multimodality treatment, as well as when used to rescue patients who have failed more conventional endoscopic modalities. Furthermore, the applicant stated that in patients with malignant bleeding in the GI tract, Hemospray provides a high rate of immediate hemostasis and fewer recurrent bleeding episodes, which in combination with definitive cancer treatment may lead to improvements in long term survival. Lastly, the applicant asserted Hemospray is an important new technology that permits immediate and long-term hemostasis in GI bleeding cases where standard of care treatment with clip ligation or cautery are not effective.

We noted in the proposed rule that the majority of studies provided lack a comparator when assessing the effectiveness of Hemospray. Three of the articles provided were systematic reviews of the literature. We noted that while we found these articles helpful in establishing a background for the use of Hemospray, we were concerned that they may not provide strong evidence of substantial clinical improvement. Four studies appeared to be single-armed studies assessing the efficacy of Hemospray in the patient setting. We stated that in all of these articles, comparisons were made between Hemospray and standard of care treatments; however, without the ability to control for factors such as study design, patient characteristics, etc., it was difficult to determine if any differences seen result from Hemospray or confounding variables. Furthermore, within the retrospective and prospective studies lacking a control subset, some level of selection bias appeared to potentially be introduced in that providers may be allowed to select the manner and order in which patients are treated, thereby potentially influencing outcomes seen in these studies.

Additionally, one randomized control trial provided by the applicant appeared to be in the process of peer-review and was not yet published. Furthermore, we noted that this article was written as a feasibility study for a potentially larger randomized control trial and contains a sample of only 20 patients. This small sample size left us concerned that the results are not representative of any larger population. Lastly, as described, we were concerned the control group can receive one of multiple treatments which lack a clear designation methodology beyond physician choice. For instance, 50 percent of the control patients received injection therapy alone, which according to the literature provided by the applicant was not an acceptable treatment for endoscopic bleeding. Accordingly, it was not clear whether performance seen in the treated group as compared to the control group is due to Hemospray itself or due to confounding factors.

Third, we were concerned with the samples chosen in many of the studies presented. Firstly, we noted that the Medicare population is a diverse group of men and women. Many of the samples provided by the applicant were overwhelmingly male. Secondly, many of the studies provided were performed in European and other settings outside of the United States. We were therefore concerned that the samples chosen within the literature provided may not represent the Medicare population.

Lastly, we were concerned about the potential for adverse events resulting from Hemospray. It was unclear from the literature provided by the applicant what the likelihood of these events were and whether or not an evaluation for the safety of Hemospray was performed. About one-third of the articles submitted specifically addressed adverse events with Hemospray. However, the evaluation of adverse events was limited and most of the patients in the studies died of disease progression. A few of the provided articles stated the potential for severe adverse reactions (for example, abdominal distension, visceral perforation, biliary obstruction, splenic infarct). Specifically, one article recorded adverse events related to Hemospray, including abdominal distention and esophageal perforation. We invited public comments on whether Hemospray meets the substantial clinical improvement criterion.

Comment: According to the applicant, a recently published study randomized Hemospray against dual therapy as first treatment and demonstrated Hemospray is a viable alternative to dual therapy. This multicenter non-inferiority randomized controlled trial assigned patients with active non-variceal upper GI bleeding to receive either Hemospray or standard dual modality treatment. A total of 224 patients were randomized. With intention-to-treat analysis, the re-bleeding free probability over 30 days was 89.8% in the TC-325 group and 81.1% in the standard treatment group (difference in proportions, 95% CI; 8.7%, −1.3%, 18,7%). There were fewer failures in the control of bleeding during index endoscopy with the use of Hemospray (3 vs. 11, OR, 95% CI, 3.88, 1.05-14.32), although 30-day re-bleeding and mortality was not different between groups.

The applicant agreed with CMS that the use of single arm and retrospective studies potentially suffer from selection bias. The applicant asserted that while this bias is inevitable, the retrospective studies specifically exclude those cases successfully treated with conventional dual therapy. According to the applicant, this therefore ensured the bias was toward the patients with the highest risk of treatment failure, morbidity, and mortality, and representing the most challenging hemostasis cases. The applicant stated that in both the Rodriguez de Santiago et al. and Alzoubaidi et al. articles, there was an overall treatment success with no rebleeding in 70% of cases where Hemospray was used after all other conventional treatments failed.

In response to CMS' concerns about the randomized control trial (RCT), the applicant stated that the study evaluated patients with bleeding from malignant lesions and has now been published. According to the applicant, the comparator treatment used in this study, injection only, is consistent with the 2016 guidelines of the European Society of Gastrointestinal Endoscopy for the treatment of bleeding from upper GI malignancies which recommends, “endoscopic monotherapy with epinephrine injection . . . or saline injection . . .”. The applicant stated that while the study was a small sample size pilot study, the results are representative of the general population with malignant GI bleeding. Further, the applicant stated that in the study by Alzoubaidi et al. 50 patients with symptomatic bleeding secondary to malignancy were treated. Hemospray monotherapy was the most common mode of treatment (33/50 = 66 percent) with a hemostasis rate of 100 percent. In the remaining patients, Hemospray was used in combination with conventional methods or as a rescue, with a lower aggregate rate of immediate hemostasis.

In response to CMS' concerns about the study samples presented, the applicant acknowledged that the majority of data came from outside of the United States due to commercial availability. The applicant stated that the FDA considered the outside of the United States data to be representative of the US population when granting a de novo classification request for the product. In response to CMS' concern that the provided literature showed a predominance of males, the applicant stated that the 2016 Healthcare Cost and Utilization Project (HCUP) showed that 60% of patients that underwent endoscopic control of bleeding were male. Lastly, the applicant stated that from the three studies representing 777 patients, the median or average age ranged from 67-71 which they believed to be representative of the Medicare population.

In response to CMS' concerns about potential adverse events, the applicant stated that the FDA determined the product is safe and effective for its intended use and has an acceptable risk/benefit ratio when it granted de Novo classification request and authorization to market in the United States. According to the applicant, any procedure is associated with risks. The applicant stated that they understand the potential risks associated with Hemospray and that they clearly labeled their product with such information. The applicant also conducts physician training to ensure physicians understand the risks and select patients who they believe would benefit most from Hemospray. In addition, the applicant conveyed that they diligently monitor reported complaints or complications related to a device once it is in the real world. According to the applicant, the same will be done with Hemospray and if the risk ratio increases to an unacceptable level; the applicant will take appropriate steps to correct it. According to the applicant, these are the standard processes with any device and the applicant does not see a reason to divert from these processes for Hemospray.

The applicant acknowledged that it had initiated a voluntary recall of Hemospray due to complaints received that the handle and/or activation knob on the device in some cases had cracked or broken when the device was activated and in some cases had caused the carbon dioxide cartridge to exit the handle. According to the applicant, as of June 10, 2020, the FDA cleared Hemospray to return to the market (K200972) after the applicant sufficiently addressed the issue that led to the cartridge exiting the handle. As such, Hemospray will return to the US market in July 2020.

One commenter stated that they frequently use Hemospray and believe it is irreplaceable in the role of controlling tumor bleeding. The commenter added that Hemospray has a critical role in rescue bleeding in cases that preclude contact hemostatic methods due to the risk of perforation. They stated that Hemospray's ability to buy time to resuscitate during challenging bleeding cases is the most understated benefit of the device. Lastly, the commenter stated that there are currently no hemostatic powder alternatives on the market in the United States.

Response: We appreciate the commenters' input in response to the concerns discussed in the proposed rule regarding the substantial clinical improvement criterion. We agree with the applicant that the control therapy in the RCT, injection only as compared to dual therapy, was appropriate based on the 2016 guidelines of the European Society of Gastrointestinal Endoscopy for the treatment of bleeding from upper GI malignancies. In the commenter's response to CMS regarding potential selection bias in single arm and retrospective studies, the applicant stated that based on the study design, any potential bias introduced was toward the patients with the highest risk of negative outcomes. We appreciate the applicant's response to our concerns and agree that this potential bias is no longer a concern. Regarding the applicant's comment on study samples, we agree with the applicant that these samples are adequately representative of the Medicare population. We also appreciate the comment response to the potential for adverse events. We will continue to monitor available data for Hemospray in regard to any potential risk of adverse events. Finally, we appreciate the applicant's update on the status of their voluntary recall of the Hemospray system.

While we acknowledge the limitations of some of the data, we believe that Hemospray represents a substantial clinical improvement for the treatment of gastrointestinal bleeding for the following reasons. We believe that given the results from the RCT trials and the single-armed studies Hemospray provides a treatment benefit particularly for those with bleeding from GI malignancies. We also see the clinical importance of Hemospray as an alternative to invasive treatments traditionally used as salvage therapy. Lastly, we note that Hemospray provides treatment for bleeding without requiring tissue trauma or precise targeting.

After consideration of the public comments we received and the information included in the applicant's new technology add-on payment application, we have determined that Hemospray meets the criteria for approval of the new technology add-on payment. Therefore, we are approving new technology add-on payments for this technology for FY 2021. Cases involving the use of Hemospray that are eligible for new technology add-on payments will be identified by procedure codes XW0G886 (Introduction of mineral-based topical hemostatic agent into upper GI, via natural or artificial opening endoscopic, new technology group 6) and XW0H886 (Introduction of mineral-based topical hemostatic agent into lower GI, via natural or artificial opening endoscopic, new technology group 6).

In its application, the applicant estimated that the cost of Hemospray is $2,500.00 per patient. Under § 412.88(a)(2), we limit new technology add-on payments to the lesser of 65 percent of the average cost of the technology, or 65 percent of the costs in excess of the MS-DRG payment for the case. As a result, the maximum new technology add-on payment for a case involving the use of Hemospray is $1,625.00 for FY 2021.

h. IMFINZI® (durvalumab) and TECENTRIQ® (atezolizumab)

Two manufacturers, AstraZeneca PLC and Genentech, Inc., submitted separate applications for new technology add-on payments for FY 2021 for IMFINZI® (durvalumab) and TECENTRIQ® (atezolizumab), respectively. Both of these technologies are programmed death-ligand 1 (PD-L1) blocking antibodies used for the treatment of patients with extensive-stage small cell lung cancer (ES-SCLC). In the proposed rule, we discussed these applications as two separate technologies. After further consideration and as discussed below, we believe IMFINZI® and TECENTRIQ® are substantially similar to each other and that it is appropriate to evaluate both technologies as one application for new technology add-on payments under the IPPS. We refer the reader below for a complete discussion regarding our analysis of the substantial similarity of IMFINZI® and TECENTRIQ®.

In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32631) we noted, and as summarized in the following table, the FDA initially approved IMFINZI® on May 1, 2017 for the indicated treatment of patients with locally advanced or metastatic urothelial carcinoma who have disease progression during or following platinum-containing chemotherapy or who have disease progression within 12 months of neoadjuvant or adjuvant treatment with platinum containing chemotherapy. The FDA subsequently approved IMFINZI® on February 16, 2018 for a second indication, treatment of patients with unresectable, Stage III non-small cell lung cancer (NSCLC) whose disease has not progressed following concurrent platinum-based chemotherapy and radiation therapy. IMFINZI® in combination with etoposide and either carboplatin or cisplatin was approved by the FDA as first-line treatment of patients with extensive-stage small cell lung cancer (ES-SCLC) on March 27, 2020, the indication for which the applicant is seeking new technology add-on payments. With regard to TECENTRIQ®, and as summarized in the following table, the applicant stated TECENTRIQ® was initially approved by FDA on May 18, 2016, for treatment of patients with locally advanced or metastatic urothelial carcinoma, and subsequently for patients with metastatic non-small cell lung cancer who have disease progression during or following platinum-containing chemotherapy on October 18, 2016; for the first-line treatment of patients with metastatic non-squamous NSCLC with no EGFR or ALK genomic tumor aberrations on December 6, 2018; and for metastatic triple negative breast cancer on March 8, 2019. TECENTRIQ® received FDA approval on March 18, 2019 in combination with carboplatin and etoposide for the first-line treatment of adult patients with ES-SCLC, the indication for which the applicant is seeking new technology add-on payments. The applicant stated that TECENTRIQ® is the first cancer immunotherapy to be approved in the first-line treatment of ES-SCLC. The applicant stated that the National Comprehensive Cancer Network (NCCN) recommends TECENTRIQ® + carboplatin + etoposide as the only category 1 preferred initial treatment for patients with ES-SCLC.²¹⁵

In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32663), we noted that the applicant for TECENTRIQ® submitted a request for a unique ICD-10-PCS code for TECENTRIQ® beginning in FY 2021. The following ICD-10-PCS codes, effective October 1, 2020, were approved for procedures involving the administration of TECENTRIQ®: XW033D6 (Introduction of atezolizumab antineoplastic into peripheral vein, percutaneous approach, new technology group 6) and XW043D6 (Introduction of atezolizumab antineoplastic into central vein, percutaneous approach, new technology group 6). In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32632), we noted that the applicant for IMFINZI® submitted a request for a unique ICD-10-PCS code for IMFINZI® beginning in FY 2021. The following ICD-10-PCS codes, effective October 1, 2020, were approved for procedures involving the administration of IMFINZI®: XW03336 (Introduction of durvalumab antineoplastic into peripheral vein, percutaneous approach, new technology group 6) and XW04336 (Introduction of durvalumab antineoplastic into central vein, percutaneous approach, new technology group 6).

According to the applicant for TECENTRIQ®, lung cancer is the second most commonly diagnosed cancer and the leading cause of cancer-related death among men and women in the United States. SCLC is a high-grade neuroendocrine tumor comprising small cells with minimal cytoplasm, poorly defined cell borders, and either no nucleoli or unremarkable nucleoli. The most aggressive of all lung cancers, it accounts for about 10-15 percent of lung cancer cases. Key characteristics of SCLC include its rapid doubling time and the early development of widespread metastases. About 72 percent of SCLC cases are diagnosed at the extensive stage, which is associated with a 5-year survival rate of 2.9 percent. According to the applicant for IMFINZI®, 75 percent of patients are diagnosed in the late/metastatic stage described as ES-SCLC and are considered incurable, with a median overall survival of 9-11 months with standard of care (SOC). The median overall survival for ES-SCLC has remained the same for the past 20 years with essentially no improvements or new therapies.

According to the applicant for TECENTRIQ®, the current SOC treatment for ES-SCLC is a combination of etoposide, which is FDA-approved in SCLC only in combination with cisplatin, and carboplatin, which is used in preference to cisplatin for toxicity reasons, despite being off-label. Although ES-SCLC is highly sensitive to platinum/etoposide in the first-line setting with response rates of 50-60 percent, the majority of patients will relapse within the first year of treatment, with a median progression-free survival (PFS) of 4-6 months. The applicant for IMFINZI® also asserted that overall, responses to SOC are short-lived and long-term outcomes remain poor.

The applicant for IMFINZI® further stated that diagnosis often occurs at later stages and SCLC patients may be sicker at the time of diagnosis, presenting with comorbidities. For these reasons, the applicant asserted that a significant number of patients present and are diagnosed in the hospital inpatient setting. According to the applicant, ES-SCLC is very responsive to chemotherapy treatment, with response rates to platinum/etoposide ranging from 44 percent to 78 percent, and given the severity of symptoms, it is recommended to initiate treatment within two weeks of diagnosis. According to the applicant, many patients have a clinical response and improvement of symptoms with the initiation of platinum/etoposide, confirming the clinical observation that many SCLCs are highly sensitive to platinum/etoposide in the first-line setting. According to the applicant for TECENTRIQ®, despite SOC chemotherapy regimens using etoposide and carboplatin, the majority of patients with ES-SCLC will experience recurrence within 1 year. Median progression-free survival (PFS) and overall survival (OS) rates are 2 months and 10 months, respectively, after initial chemotherapy.

According to the applicant for TECENTRIQ®, progress in the treatment of ES-SCLC has been limited. Over the past 40 years, the 2-year OS has increased from 3.4 percent to 5.6 percent, and the median OS has remained at about 10 months since the 1980s. One paper submitted by the applicant noted that more than 40 phase III trials evaluating other regimens in SCLC have failed since 1970.

As stated earlier and for the reasons discussed further later in this section, we believe that IMFINZI® and TECENTRIQ® are substantially similar to each other such that it is appropriate to analyze these two applications as one technology for purposes of new technology add-on payments, in accordance with our policy. Below we discuss the information provided by the applicants, as summarized in the proposed rule, regarding whether IMFINZI® and TECENTRIQ® are substantially similar to existing technologies prior to their approval by the FDA and their release onto the U.S. market. As discussed earlier, if a technology meets all three of the substantial similarity criteria, it would be considered substantially similar to an existing technology and would not be considered “new” for purposes of new technology add-on payments.

With regard to the first criterion, whether a product uses the same or a similar mechanism of action to achieve a therapeutic outcome, the applicant for TECENTRIQ® asserted that the mechanism of action of ES-SCLC is not the same as or similar to an existing technology. The applicant described TECENTRIQ® as a programmed PD-L1 blocking antibody, and as the first and only blocking antibody to target the PD-L1/PD-1 pathway that is FDA-approved for the treatment of ES-SCLC. The applicant explained that PD-L1 is a protein expressed on the surface of cancer cells, which allows them to inactivate the T-cells of the patient's immune system which would normally attack the cancer cells. The applicant asserted that TECENTRIQ® blocks the PD-L1 protein, rendering the cancer cells susceptible to attack. The applicant indicated that the current standard of care drugs etoposide, carboplatin, and cisplatin impart their cytotoxic effects by interfering with the processes of DNA replication. Therefore, the applicant stated the mechanism of action of TECENTRIQ® is unique and distinct from other available forms of treatment for ES-SCLC.

The applicant for IMFINZI® asserted that IMFINZI® offers a novel mechanism of action for the treatment of ES-SCLC compared to the SOC chemotherapy. The applicant for IMFINZI® stated that first line SOC treatment of ES-SCLC is standard chemotherapy, including a platinum agent (typically carboplatin or cisplatin) plus etoposide. The mechanism of action of platinum chemotherapy agents (including cisplatin and carboplatin) is based on the agent's ability to crosslink with the purine bases on the DNA; crosslinking interferes with DNA repair mechanisms, causes DNA damage, and subsequently induces apoptosis in cancer cells.

The applicant for IMFINZI® asserted that etoposide phosphate is a plant alkaloid prodrug that is converted to its active moiety, etoposide, by dephosphorylation. Further, the applicant explained etoposide causes the induction of DNA strand breaks by an interaction with DNA-topoisomerase II or the formation of free radicals, leading to cell cycle arrest, primarily at the G2 stage of the cell cycle, and cell death.

The applicant stated IMFINZI® is a selective, high-affinity, human IgG1κ monoclonal antibody that blocks PD-L1 binding to programmed cell death-1 and CD80 without antibody-dependent cell-mediated cytotoxicity. The applicant asserted that IMFINZI®, in combination with chemotherapy, demonstrated a statistically and clinically significant improvement in overall survival in a randomized Phase III study (CASPIAN), which is discussed later in this section.

With regard to the second criterion, whether IMFINZI® and TECENTRIQ® will be assigned to the same or a different MS-DRG, the applicant for TECENTRIQ® referenced the FY 2016 IPPS/LTCH PPS Final Rule (80 FR 49445) to support that this criterion is not met in cases where the subject technology is treating a disease for which the current SOC involves non-FDA-approved therapies that are also associated with different MS-DRGs. As previously noted, the applicant stated that the current SOC treatment for ES-SCLC is a combination of etoposide, which is FDA-approved in SCLC only in combination with cisplatin, and carboplatin, which is used in preference to cisplatin for toxicity reasons, despite being off-label. The applicant for TECENTRIQ® also pointed out that irinotecan, a topoisomerase inhibitor indicated in colon and rectal cancers, is sometimes used in place of etoposide.

The applicant for TECENTRIQ® also stated that the MS-DRG payment system cannot differentiate between patients with NSCLC and ES-SCLC and noted that MS-DRGs 180 (Respiratory Neoplasms with MCC) and 181 (Respiratory Neoplasms with CC) are applicable to both diseases. The applicant for TECENTRIQ® also noted that category C34 (Malignant neoplasm of bronchus and lung) of the ICD-10-CM diagnosis coding classification system can be used to identify NSCLC and SCLC cases but does not differentiate between them. As a result, the applicant for TECENTRIQ® suggested both TECENTRIQ® and an existing technology (such as one used to treat NSCLC) may be assigned to either of these MS DRGs, even though, as previously noted, the NSCLC and SCLC patient populations are different.

The applicant for IMFINZI® asserted that extensive stage small cell lung cancer patients are identified under category C34 (Malignant neoplasm of bronchus and lung) of the ICD-10-CM coding classification system. According to the applicant for IMFINZI®, category C34 is all encompassing and does not distinguish between the lung cancer subtypes. The applicant also stated that both non-small cell lung cancer patients as well as earlier stages of small cell lung cancer (that is, limited stage) are captured under category C34, all of which have differing epidemiological considerations and treatment interventions. The applicant for IMFINZI® concluded that patients diagnosed with ES-SCLC, identified using category C34, map to MS-DRGs 180, 181, and 182 (Respiratory Neoplasms with MCC, with CC, and without CC/MCC, respectively). The applicant for IMFINZI® stated that the existing ICD-10-PCS coding system does not allow for visibility into the different MS-DRGs that ES-SCLC patients map to versus NSCLC patients, making it difficult to show that ES-SCLC patients receiving IMFINZI® would map to a unique MS-DRG from NSCLC cases, where IMFINZI® and other immuno-oncology therapies are already being used.

To further identify the patient population of interest, the applicant for IMFINZI® searched charge level data from the Premier Hospital Database to determine which MS-DRGs these cases are mapping to, beyond relying on the broad lung cancer category C34. The applicant asserted that the Premier Hospital database is a large U.S. hospital-based, all payer database that contains discharge information from geographically diverse non-governmental, community, and teaching hospitals and health systems across both rural and urban areas. The applicant for IMFINZI® stated that this database contains data from standard hospital discharge files providing access to all procedures, diagnoses, drugs, and devices received for each patient regardless of the insurance or disease state. The applicant for IMFINZI® used charge level hospital data from the Premier Hospital Database to identify cases that used category C34 as well as carboplatin or cisplatin plus etoposide, the chemotherapy doublet specifically used for ES-SCLC patients. The applicant also looked for the use of prophylactic cranial irradiation (PCI), a type of radiation therapy used for ES-SCLC patients to address the frequent occurrence of multiple brain metastases associated with SCLC. Based on this assessment of hospital charge-level data, the applicant for IMFINZI® stated that over 60 percent of ES-SCLC patients map to MS-DRGs 180 (Respiratory Neoplasms with MCC), 181 (Respiratory Neoplasms with CC), and 164 (Major Chest Procedures with CC). We agreed with the applicant that patients receiving IMFINZI® would map to the same DRGs as patients receiving standard therapy for ES-SCLC.

With regard to the third criterion, whether IMFINZI® and TECENTRIQ® will be used to treat the same or similar disease in the same or similar patient population when compared to existing therapies, the applicant for IMFINZI® stated that IMFINZI®, in combination with standard chemotherapy, represents a new treatment option for patients with extensive stage small cell lung cancer, demonstrating statistically and clinically significant improved overall survival as compared to standard chemotherapy (Hazard ratio [HR] 0.73; 95 percent CI 0.59-0.91; p=0.0047). The applicant for IMFINZI® asserted that IMFINZI® in combination with chemotherapy represents a new treatment option for ES-SCLC patients. The applicant for TECENTRIQ® stated the use of TECENTRIQ® in ES-SCLC does not involve the treatment of the same or a similar type of disease and the same or similar patient population when compared to an existing technology.

We invited public comments on whether IMFINZI® or TECENTRIQ® is substantially similar to an existing technology and whether they meet the newness criterion.

In the proposed rule we stated that both IMFINZI® and TECENTRIQ® seem to be intended for similar patient populations and would involve the treatment of the same conditions: Patients with locally advanced or metastatic urothelial carcinoma and patients with SCLC. We stated that we were interested in information on how these two technologies may differ from each other with respect to the substantial similarity criteria and newness criterion, to inform our analysis of whether IMFINZI® and TECENTRIQ® are substantially similar to each other and therefore should be considered as a single application for purposes of new technology add-on payments.

Comment: The applicants for TECENTRIQ® and IMFINZI® each provided comments regarding whether TECENTRIQ® and IMFINZI® were substantially similar to the other, or to any existing technology.

The applicant for TECENTRIQ® (Genentech) commented that TECENTRIQ® is a humanized programmed death-ligand 1 (PD-L1) blocking antibody (which binds to PD-L1 and blocks its interactions with both PD-1 and B7.1 receptors) with multiple oncology indications, including one in combination with carboplatin and etoposide for the first-line treatment of adult patients with ES-SCLC. According to the commenter, TECENTRIQ® has a total of nine indications—two in urothelial carcinoma, four in NSCLC, one in triple-negative breast cancer, one in ES-SCLC, and one in hepatocellular carcinoma. The commenter stated that, in addition, TECENTRIQ® was the first cancer immunotherapy to be approved for the first line treatment of ES-SCLC, on March 18, 2019; and the first drug to improve median OS in ES-SCLC which has remained at ~10 months or less since the 1980s. The commenter explained that over 40 Phase III trials evaluating 60+ other regimens have been attempted since 1970, none of which led to additional FDA approvals in first-line ES-SCLC. Furthermore, the applicant stated that the use of TECENTRIQ® to treat ES-SCLC also amounts to a paradigm shift that was validated by the subsequent approval of IMFINZI® for an almost identical indication. According to the applicant, the combination of TECENTRIQ® with carboplatin and etoposide is also the first FDA approval for the first-line treatment of ES-SCLC since the approval of carboplatin and etoposide alone in 1999 and prior to that, the most recent approval was that of cisplatin and etoposide, in 1985. The applicant asserted that, whereas TECENTRIQ® in combination with carboplatin and etoposide is associated with a statistically significant increase in overall survival and progression-free survival compared to placebo plus carboplatin and etoposide, this was not the case for the combination of KEYTRUDA (pembrolizumab), another well-known PD-1 blocking antibody, with either carboplatin or cisplatin, and etoposide. According to the applicant, since March 2019, TECENTRIQ® in combination with carboplatin and etoposide has become the standard of care for first-line ES-SCLC, with over 60% of newly diagnosed patients receiving the regimen according to the applicant.

The applicant for TECENTRIQ® stated that IMFINZI® is a human PD-L1 blocking antibody (that blocks the interaction of PD-L1 with both PD-1 and CD80 receptors). According to the applicant for TECENTRIQ®, IMFINZI® has indications in urothelial carcinoma, NSCLC, and, most recently, ES-SCLC. The applicant explained that IMFINZI® was the second cancer immunotherapy to be approved for the first-line treatment of ES-SCLC, a little over a year after TECENTRIQ® and after the deadline for the submission of the FY 2021 new technology add-on payment application, on March 27, 2020. The commenter stated that although there are slight molecular differences between TECENTRIQ® and IMFINZI®, they both fall into the same class of PD-L1 blocking antibodies. The applicant noted that if CMS believes that TECENTRIQ® and IMFINZI® are similar, then they presume CMS will consider them as a single application for purposes of new technology add-on payments in a way that was analogous to what was done for KYMRIAH and YESCARTA in FY 2019 in which both were approved for new technology add-on payments.

The applicant for IMFINZI® (AstraZeneca) commented that the addition of IMFINZI® to the standard of care—etoposide and platinum-based chemotherapy (either carboplatin or cisplatin)—offers a novel mechanism of action for the first-line treatment of ES-SCLC. Therefore, the applicant stated that IMFINZI® is not substantially similar to the standard of care because it does not have the same or similar mechanism of action. The applicant for IMFINZI® stated that it offers a new, unique treatment option for the specific patient population facing this much more aggressive form of lung cancer, small cell cancer.

The applicant for IMFINZI® asserted that IMFINZI® and TECENTRIQ® are unique molecular entities, with unique active ingredients and should be considered separately for new technology add-on payments. According to the commenter, IMFINZI® is a selective, high-affinity, human IgG1 monoclonal antibody. The commenter explained that in comparison, TECENTRIQ® is a humanized monoclonal antibody. According to the commenter, theoretically, human antibodies, which have no non-human genetic material as humanized antibodies do, should have less immunogenicity and therefore induce less development of anti-drug antibodies (ADA). Also according to the commenter, in the CASPIAN study, of those who received IMFINZI®, none of the 201 patients tested positive for treatment-emergent ADA. The commenter indicated, comparatively, 18.6% of patients were reported to have treatment-emergent ADA in the TECENTRIQ® IMPower 133 study. The applicant for IMFINZI® stated that the two new drugs IMFINZI® and TECENTRIQ® were evaluated in distinct and differently structured clinical trials. The commenter explained that the CASPIAN trial with IMFINZI® was studied in combination with etoposide and either carboplatin or cisplatin whereas the TECENTRIQ® study omitted cisplatin as an option. The applicant also noted that the inclusion of patients with asymptomatic brain metastases is another aspect of the CASPIAN trial that differentiated the expected IMFINZI® patient population according to the applicant.

The applicant further stated that IMFINZI®'s unique ICD-10 procedure code which has an October 1, 2020 effective date, is distinct from that of TECENTRIQ®, to enable data to be collected specific to each technology for specific uses and patient populations, supporting a conclusion that the technologies should be considered separately for new technology add-on payments. Therefore, the manufacturer for IMFINZI® requested that CMS discretely grant new technology add-on payments for IMFINZI®, stating that current evidence does not support consideration of new technology add-on payments for IMFINZI® jointly with another applicant.

Response: We thank the applicants for their comments. After consideration of the public comments we received, although we recognize that there may be slight molecular differences, we believe IMFINZI® and TECENTRIQ® both fall into the same class of PD-L1 blocking antibodies. Also, we are not convinced that these differences result in the use of a different mechanism of action and, therefore, we believe that the two technologies' mechanisms of action are the same. Furthermore, we believe that IMFINZI® and TECENTRIQ® are substantially similar to one another because the technologies are intended to treat the same or similar disease in the same or similar patient population—patients with ES-SCLC, and are purposed to achieve the same therapeutic outcome using the same or similar mechanism of action using PD-L1 blocking antibodies.

We also believe IMFINZI® and TECENTRIQ® are not substantially similar to any other existing technologies because, as both applicants asserted in their FY 2021 new technology add-on payment applications and in their comments the technologies do not use the same or similar mechanism of action to achieve a therapeutic outcome as any other existing drug or therapy assigned to the same or different MS-DRG. Based on the information described in this section, we believe IMFINZI® and TECENTRIQ® meet the newness criterion.

We also note that proposals to create, delete, or revise codes under the ICD-10-PCS structure are referred to the ICD-10 Coordination and Maintenance Committee. The decisions of this committee are independent from any decision for new technology add on payments. Therefore, we do not agree with the commenter that the fact that IMFINZI® and TECENTRIQ® have separate codes supports a conclusion that the technologies should be considered separately for new technology add-on payments.

Based on the above, we are making one determination regarding approval for new technology add-on payments that will apply to both applications, and in accordance with our policy, we use the earliest market availability date submitted as the beginning of the newness period for both IMFINZI® and TECENTRIQ®.

We believe our current policy for evaluating new technology payment applications for two technologies that are substantially similar to each other is consistent with the authority and criteria in section 1886(d)(5)(K) of the Act. We note that CMS is authorized by the Act to develop criteria for the purposes of evaluating new technology add-on payment applications. For the purposes of new technology add-on payments, when technologies are substantially similar to each other, we believe it is appropriate to evaluate both technologies as one application for new technology add-on payments under the IPPS, for the reasons we discussed above and consistent with our evaluation of substantially similar technologies in prior rulemaking (82 FR 38120).

With respect to the newness criterion, as previously stated, IMFINZI® received FDA approval on March 27, 2020 and TECENTRIQ® received FDA approval on March 18, 2019. In accordance with our policy, because these technologies are substantially similar to each other, we use the earliest market availability date submitted as the beginning of the newness period for both technologies. Therefore, based on our policy, with regard to both technologies, if the technologies are approved for new technology add-on payments, we believe that the beginning of the newness period would be March 18, 2019.

The applicants submitted separate cost and clinical data, and in the proposed rule, we reviewed and discussed each set of data separately. However, as stated above, for this final rule, we will make one determination regarding new technology add-on payments that will apply to both applications. We believe that this is consistent with our policy statements in the past regarding substantial similarity. Specifically, we have noted that approval of new technology add-on payments would extend to all technologies that are substantially similar (66 FR 46915), and we believe that continuing our current practice of extending new technology add-on payments without a further application from the manufacturer of the competing product, or a specific finding on cost and clinical improvement if we make a finding of substantial similarity among two products is the better policy because we avoid—

• Creating manufacturer-specific codes for substantially similar products;
• Requiring different manufacturers of substantially similar products to submit separate new technology add-on payment applications;
• Having to compare the merits of competing technologies on the basis of substantial clinical improvement; and
• Bestowing an advantage to the first applicant representing a particular new technology to receive approval (70 FR 47351).

If substantially similar technologies are submitted for review in different (and subsequent) years, rather than the same year, we evaluate and make a determination on the first application and apply that same determination to the second application. However, because the technologies have been submitted for review in the same year, and because we believe they are substantially similar to each other, we consider both sets of cost data and clinical data in making a determination, and we do not believe that it is possible to choose one set of data over another set of data in an objective manner.

As we discussed in the proposed rule and as stated above, each applicant submitted separate analyses regarding the cost criterion for each of their products, and both applicants maintained that their product meets the cost criterion. We summarize each analysis below.

With respect to the cost criterion, the applicant for IMFINZI® conducted the following analysis to demonstrate that IMFINZI® meets the cost criterion. To identify cases that may be eligible for the use of IMFINZI®, the applicant searched the FY 2018 MedPAR LDS file for claims reporting an ICD-10-CM code of category C34 in combination with Z51.11 (Encounter for antineoplastic chemotherapy) or Z51.12 (Encounter for antineoplastic immunotherapy). The applicant also included any cases within MS-DRGs 180, 181, 182 with an ICD-10-CM diagnosis code from category C34 as the applicant suggested hospitals may not always capture the encounter for chemotherapy. Based on the FY 2018 MedPAR LDS file, the applicant identified a total of 24,193 cases. Of the MS-DRGs with more than 11 cases, the applicant found 23,933 cases which were mapped to 12 unique MS-DRGs. The applicant excluded MS-DRGs with case volume less than 11 total cases.

Using these 23,933 cases, the applicant for IMFINZI® then calculated the unstandardized average charges per case for each MS-DRG. The applicant determined that it did not need to remove any charges as IMFINZI® is not expected to offset historical charges already included within the MS-DRGs. The applicant asserted that ES-SCLC patients will receive their initial dose of IMFINZI® in the inpatient setting. The applicant for IMFINZI® then standardized the charges and inflated the charges by 1.11100 or 11.10 percent, the same inflation factor used by CMS to update the outlier threshold in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42629). The applicant then added the charges for IMFINZI® by converting the costs to a charge by dividing the cost by the national average cost-to-charge ratio of 0.189 for drugs from the FY 2020 IPPS/LTCH PPS final rule (84 FR 42179).

Based on the FY 2020 IPPS/LTCH PPS final rule correction notice data file thresholds, the average case-weighted threshold amount for IMFINZI® was $53,209. In the applicant's analysis, the final inflated average case-weighted standardized charge per case was $111,093. Because the final inflated average case-weighted standardized charge per case exceeds the average case-weighted threshold amount, the applicant for IMFINZI® maintained that the technology meets the cost criterion.

To identify cases that may be eligible for TECENTRIQ®, the applicant searched the FY 2018 MedPAR LDS file for claims reporting an ICD-10-CM code from category C34 and considered only cases where the diagnosis codes were in the primary or admitting position to differentiate ES-SCLC from limited-stage SCLC. Cases classified with one or more of 48 surgical lung procedure codes were not considered to differentiate ES-SCLC from NSCLC. This resulted in 33,404 cases, which the applicant for TECENTRIQ® indicated constitute what it defines as an ES-SCLC case through the reconciliation of clinical presentation, applicable ICD-10-CM and ICD-10-PCS codes, and MedPAR data fields, which mapped to 264 MS-DRGs.

Using these 33,404 cases, the applicant for TECENTRIQ® then calculated the unstandardized average charges per case for each MS-DRG. The applicant determined that it did not need to remove any charges because TECENTRIQ® is administered as a combination therapy with carboplatin and etoposide to treat ES-SCLC.

The applicant for TECENTRIQ® then standardized the charges and inflated the charges by 1.11100 or 11.10 percent, the same inflation factor used by CMS to update the outlier threshold in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42629). The applicant then added the estimated cost of an ES-SCLC TECENTRIQ® administration to the MedPAR cases. The applicant then added the charges for TECENTRIQ® by converting the costs to a charge by dividing the cost by what the applicant described as a conservative cost-to-charge ratio of 0.5.

Based on the FY 2020 IPPS/LTCH PPS final rule correction notice data file thresholds, the average case-weighted threshold amount for TECENTRIQ® was $65,738. In the applicant's analysis, the final inflated average case-weighted standardized charge per case for TECENTRIQ® was $88,561. Because the final inflated average case-weighted standardized charge per case exceeds the average case-weighted threshold amount, the applicant maintained that the technology meets the cost criterion.

The applicant for TECENTRIQ® also provided a sensitivity analysis using this same methodology but considered only the MS-DRGs representing 1 percent of case volume, producing a list of 10 MS-DRGs that cumulatively represent 88.31 percent of case volume, or 29,500 cases. Based on the FY 2020 IPPS/LTCH PPS final rule correction notice data file thresholds, the average case weighted threshold amount was $56,987. In the applicant's analysis, the final inflated average case-weighted standardized charge per case for TECENTRIQ® was $88,404. Because the final inflated average case-weighted standardized charge per case exceeds the average case-weighted threshold amount, the applicant maintained that the technology meets the cost criterion.

The ICD-10-CM diagnosis codes and MS-DRGs in the cost analysis for IMFINZI® differ from those used in the cost analysis for TECENTRIQ®. Specifically, as noted previously, the applicant for TECENTRIQ® searched for claims with ICD-10-CM diagnosis codes from category C34 while the applicant for IMFINZI® searched for ICD-10-CM diagnosis codes from category C34 in combination with Z51.11 or Z51.12. As noted in the proposed rule, we were concerned as to why the diagnosis codes would differ between the cost analysis for IMFINZI® and for TECENTRIQ® as one analysis may lend more accuracy to the calculation depending on which is more reflective of the applicable patient population.

We invited public comment on whether IMFINZI® or TECENTRIQ® meet the cost criterion.

Comment: Genentech, the applicant for TECENTRIQ®, commented that while the cost analysis approaches taken for TECENTRIQ® and IMFINZI® are different, both independently concluded that the cost criterion was met. Regarding the contrast in selection of diagnostic codes, Genentech considered AstraZeneca's decision to include patient cases of the ICD-10-CM category C34 in combination with the ICD-10-CM codes Z51.11 (Encounter for antineoplastic chemotherapy) or Z51.12 (Encounter for antineoplastic immunotherapy) to be reasonable. However, the real-world scenario where the patient is diagnosed with ES-SCLC in the inpatient setting and then treated there due to their immediate need for treatment may not result in Z51.11 and/or Z51.12 appearing in the corresponding claim, because the inpatient stay was not solely or primarily for the administration of chemotherapy. Regarding the contrasting cost-to-charge ratios, Genentech stated that the one used by Genentech (0.5) is more conservative than that used by AstraZeneca (0.189), but both can be justified.

1. Genentech (CCR of 0.5): This was noted by CMS in the FY 2016 IPPS Final Rule, with reference to the successful application for NTAP of BLINCYTO.

2. AstraZeneca (CCR of 0.189): This figure was calculated by CMS, specifically for drugs, from FY 2017 cost report data.

The applicant for IMFINZI® also commented that both applicants utilized the “C34 Malignant neoplasm of bronchus and lung” ICD-10-CM code series (85 FR 32633).

Although the same primary diagnosis code was used, each applicant further refined the patient population using different subsequent methods. The applicant for IMFINZI® stated that the case-weighted threshold amount published in the proposed rule, using their methodology, is $65,738. Although this threshold presented in the proposed rule and the inflated case-weighted standardized charges from analyses AstraZeneca performed were calculated using different methodologies, the applicant stated that comparing them suggests that IMFINZI® would meet the cost criterion if this analysis was performed with IMFINZI® charges.

Response: We thank the applicants for their comments. We agree that both IMFINZI® and TECENTRIQ® meet the cost criterion.

With respect to the substantial clinical improvement criterion, the applicant for IMFINZI® asserted that IMFINZI® represents a substantial clinical improvement over existing technologies because it offers a treatment option for a patient population unresponsive to currently available treatments. The applicant for IMFINZI® also stated that it represents a substantial clinical improvement because the technology reduces mortality, decreases disease progression, and improves quality of life.

The CASPIAN clinical trial for IMFINZI® was a randomized, open-label, phase 3 trial at 209 sites across 23 countries. Eligible patients were adults with untreated ES-SCLC, with World Health Organization (WHO) performance status 0 or 1 and measurable disease as per Response Evaluation Criteria in Solid Tumors (RECIST). Patients were randomly assigned (in a 1:1:1 ratio) to durvalumab plus platinum-etoposide; durvalumab plus tremelimumab plus platinum-etoposide; or platinum-etoposide alone. All drugs were administered intravenously. Platinum-etoposide consisted of etoposide 80-100 mg/m2 on days 1-3 of each cycle with investigator's choice of either carboplatin area under the curve 5-6 mg/mL per min or cisplatin 75-80 mg/m2 (administered on day 1 of each cycle). Patients received up to four cycles of platinum-etoposide plus durvalumab 1500 mg with or without tremelimumab 75 mg every 3 weeks followed by maintenance durvalumab 1500 mg every 4 weeks in the immunotherapy groups and up to 6 cycles of platinum-etoposide every 3 weeks plus prophylactic cranial irradiation (investigator's discretion) in the platinum-etoposide group. The primary endpoint was overall survival in the intention-to-treat population. The applicant for IMFINZI® stated that the median OS was 13.0 months (95 percent CI, 11.5-14.8) for patients treated with IMFINZI® plus chemotherapy vs. 10.3 months (95 percent CI, 9.3-11.2) for SOC chemotherapy. The results also showed a sustained OS benefit with 34 percent survival at 18 months following treatment with IMFINZI® plus chemotherapy vs. 25 percent following SOC chemotherapy. No data was provided on patients treated with durvalumab plus tremelimumab plus platinum-etoposide in the interim analysis submitted in the application.

The applicant for IMFINZI® further stated that other key secondary endpoints demonstrated consistent and durable improvement for IMFINZI® plus chemotherapy, including a higher progression-free survival (PFS) rate at 12 months (17.5 percent vs. 4.7 percent), a 10 percent increase in confirmed objective response rate (ORR) (67.9 percent vs. 57.6 percent), and improved duration of response at 12 months (22.7 percent vs. 6.3 percent). The median progression-free Survival was 5.1 months with IMFINZI® versus 5.4 months for the control arm, which was not significantly different.

The applicant for IMFINZI® stated that in combination with etoposide and platinum-based chemotherapy, IMFINZI® provided a significant improvement in survival and notable changes in patient reported outcomes. According to the applicant, patients receiving IMFINZI® plus etoposide and platinum-based chemotherapy experienced reduced symptom burden over 12 months for pre-specified symptoms of fatigue, appetite loss, cough, dyspnea, and chest pain (based on adjusted mean change from baseline, MMRM). The applicant stated a large difference over 12 months was observed for appetite loss in favor of IMFINZI® plus etoposide and platinum-based chemotherapy compared to standard of care etoposide and platinum-based chemotherapy. The applicant further stated that patients receiving IMFINZI® plus etoposide and platinum-based chemotherapy also experienced longer time to deterioration in a broad range of patient-reported symptoms (dyspnea, appetite loss, chest pain, arm/shoulder pain, other pain, insomnia, constipation, diarrhea), functioning (physical, cognitive, role, emotional, social), and Health Related Quality of Life (HRQoL) indicators, compared to cisplatin (EP).

As stated previously, the applicant asserted that IMFINZI® represents a substantial clinical improvement over existing technologies because it offers a treatment option for a patient population unresponsive to currently available treatments. The applicant explained that the CASPIAN study demonstrated the following endpoints: Patient population baseline characteristics, treatment exposure, overall survival (including pre-specified subgroups), progression-free survival, sites of progression, objective response rate, duration of response, and detailed safety analysis. All results provided comparison of the active IMFINZI® plus SOC chemotherapy arm to the SOC chemotherapy alone arm.

In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32634), we had concerns that the CASPIAN study is ongoing, and the information is preliminary. Specifically, the three arms in the study had not yet been analyzed at time of application. Additionally, while the data show a median survival benefit of about 3 months with treatment with IMFINZI®, we stated that we did not see any data that demonstrates significant improvement in median progression-free survival. Also, while we recognized that the trials are ongoing and that the analysis of the three study arms is not complete, we stated that we were interested in any updates and additional information concerning adverse events to help us better understand the safety profile of IMFINZI®.

The applicant for TECENTRIQ® asserted that TECENTRIQ® plus standard of care represents a substantial clinical improvement over existing technologies because it offers a treatment option for a patient population unresponsive to, or ineligible for currently available treatments. The applicant also maintained that TECENTRIQ® represents a substantial clinical improvement because the technology demonstrates statistically significant improvement in overall survival, statistically significant improvement in progression-free survival, as well as improved HRQoL (Health-related quality of life, which is an individual's or a group's perceived physical and mental health over time) and reduced symptomatology.

According to the applicant, the use of TECENTRIQ® in cases of ES-SCLC was evaluated in IMpower133, a phase III (efficacy) and phase I (safety), double-blind, placebo-controlled, randomized, multicenter study designed to compare the efficacy and safety of TECENTRIQ® vs. placebo in combination with carboplatin and etoposide in patients with ES-SCLC who did not receive prior systemic therapy. Over 40 percent of the population of the IMpower133 clinical trial were of Medicare age.

Key inclusion criteria were as follows: Histologically or cytologically confirmed ES-SCLC as defined by the VA Lung Study Group staging system; measurable ES-SCLC according to RECIST version 1.1; ECOG PS of 0-1; no prior systemic treatment for ES-SCLC; and treated asymptomatic CNS metastases. Key exclusion criteria were as follows: History of autoimmune disease and prior treatment with CD137 agonists or immune checkpoint inhibitors.

A total of 403 patients were enrolled. Patients were stratified by gender, ECOG PS (0 or 1), and the presence of brain metastases. Baseline characteristics were comparable across both treatment arms. The following table summarizing baseline patient characteristics indicates that more than 40 percent of the patients in both treatment arms were of Medicare age.

At the time of data cutoff (April 24, 2018), the median follow-up was 13.9 months. The applicant stated that patients treated with TECENTRIQ® + carboplatin + etoposide experienced a significantly longer OS and PFS compared with patients treated with placebo + carboplatin + etoposide in the ITT population. The 1-year OS with TECENTRIQ® + carboplatin + etoposide, compared with the placebo + carboplatin + etoposide rate, was approximately 13 percent higher; the 1-year PFS was approximately 7 percent higher, as shown in the following table that summarizes Landmark Overall Survival and Progression-free Survival Rates (Data Cutoff: April 24, 2018).

The incidence of treatment-related AEs was similar in both treatment arms. The following table provides information about the safety profiles (Data Cutoff: April 24, 2018) (safety population)—IMpower133. The most common treatment-related Grade 3/4 AEs for TECENTRIQ® + carboplatin + etoposide and for placebo + carboplatin + etoposide was neutropenia (22.7 percent vs. 24.5 percent, respectively), anemia (14.1 percent vs. 12.2 percent), and decreased neutrophil count (14.1 percent vs. 16.8 percent). Treatment-related deaths occurred in three patients in the TECENTRIQ® group (due to neutropenia, pneumonia, and unspecified cause) and three patients in the placebo group (due to pneumonia, septic shock, and cardiopulmonary failure).

More patients in the TECENTRIQ® group than in the placebo group experienced immune-related AEs, with rash and hypothyroidism being the most common. The following table summarizes immune-related AEs occurring in ≥5 patients in any treatment arm (data cutoff: April 24, 2018) (safety population).

The median treatment duration of TECENTRIQ® was 4.7 months (range: 0-1), and the median number of TECENTRIQ® doses administered was 7 (range: 1-30). The median dose intensity, total cumulative dose, and median number of chemotherapy doses (four doses of carboplatin, 12 doses of etoposide) were similar in the two treatment groups.

The addition of TECENTRIQ® to carboplatin + etoposide demonstrated a statistically significant improvement in OS and PFS compared with placebo + carboplatin + etoposide for the first-line treatment of ES-SCLC. Overall, the safety profiles of TECENTRIQ® + carboplatin + etoposide and placebo + carboplatin + etoposide were comparable to the safety profiles of each individual agent; no new safety signals were identified with the combinations.

The applicant asserted that TECENTRIQ® plus standard of care therapy represents a substantial clinical improvement over existing technologies because it offers a treatment option for a patient population unresponsive to or ineligible for currently available treatments. The applicant also asserted that TECENTRIQ® represents a significant clinical improvement over existing technologies because the technology produces a statistically significant improvement in overall survival, a statistically significant improvement in progression-free survival, as well as improved HRQoL and reduced symptomatology.

In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32667), we stated we were concerned that the survival benefit of the addition of TECENTRIQ® was a median duration of only 2 months over standard therapy and the improvement on the median progression-free survival was less than one month. We were also concerned that the short survival and progression-free survival may not be clinically significant. Additionally, we were concerned that the participants did not have a clinically significant improvement in their quality of life given the number of AEs in the TECENTRIQ® treatment arm combined with the number of treatments given in that arm.

We invited public comments on whether IMFINZI® or TECENTRIQ® meet the substantial clinical improvement criterion.

Comment: Multiple commenters, including the applicant for TECENTRIQ®, remarked that outcomes in ES-SCLC have been poor for decades and that the current standard therapy of platinum + etoposide chemotherapy was introduced in the 1970's. The commenters referenced multiple unsuccessful studies in the intervening decades and that TECENTRIQ® was the first advance to change that standard of care. The commenters cited the results from IMpower133, a randomized, placebo-controlled, phase III trial, which showed that the addition of atezolizumab to standard chemotherapy significantly improved survival (Horn et al, N Engl J Med 2018). The commenters also cited that adding atezolizumab to standard chemotherapy did not significantly worsen toxicity and also improved symptom control (Mansfield et al, Ann Oncol 2019).

Multiple commenters, including the applicant for TECENTRIQ®, remarked that SCLC is the most aggressive type of lung cancer, accounting for 10-15% of lung cancer cases. The commenters explained that the majority of these (72%) are diagnosed at the extensive stage, which is associated with a 5-year survival rate of only 2.9%. According to the commenters, ES-SCLC necessitates immediate treatment, and TECENTRIQ® is FDA-approved to be administered to Medicare beneficiaries on the very first day of treatment. The commenters stated that ideally, this would be with the current best therapy, atezolizumab plus chemotherapy, but without the new technology add-on payment, the commenters stated that some patients will be treated with inferior therapy. The applicant stated that delaying immunotherapy is suboptimal—as a phase III study exploring immunotherapy after chemotherapy (CheckMate 451) did not improve survival (Owonikoko, ELCC 2019).

The applicant for IMFINZI® commented that the final analysis of the CASPIAN trial was presented on May 29, 2020 at the 2020 ASCO Annual Meeting. According to the commenter, the final evidence supporting this indication demonstrated clinical and meaningful improvement in PFS and OS in the completed and final first experimental arm of the CASPIAN trial. According to the applicant, results from the CASPIAN trial continued to demonstrate improvement in OS vs EP, with a HR of 0.75 (95% CI 0.62-0.91; nominal p=0.0032); median OS 12.9 vs 10.5 mo, respectively. 22.2% of pts were alive at 2 y with durvalumab + cisplatin or carboplatin vs 14.4% of pts with cisplatin or carboplatin. The study concluded that the addition of durvalumab to cisplatin or carboplatin continued to demonstrate improvement in OS compared with a robust control arm, further supporting this regimen as a new standard of care for 1L ES-SCLC offering the flexibility of platinum choice.

Response: We appreciate the commenters' input and the applicants' submission of additional information to address the concerns presented in the proposed rule.

After consideration of the public comments we received, we agree that both IMFINZI® and TECENTRIQ® represent a substantial clinical improvement over existing technologies because the technologies significantly improve clinical outcomes. These two treatments are the first to show improved overall survival in the treatment of ES-SCLC, an aggressive and deadly disease, in more than 20 years. In summary, we have determined that IMFINZI® and TECENTRIQ® meet all of the criteria for approval of new technology add-on payments. Therefore, we are approving new technology add-on payments for IMFINZI® and TECENTRIQ® for FY 2021. As previously stated, cases involving IMFINZI® that are eligible for new technology add-on payments will be identified by ICD-10-PCS procedure codes XW03336 (Introduction of durvalumab antineoplastic into peripheral vein, percutaneous approach, new technology group 6) or XW04336 (Introduction of durvalumab antineoplastic into central vein, percutaneous approach, new technology group 6). Cases involving TECENTRIQ® that are eligible for new technology add-on payments will be identified by ICD-10-PCS procedure codes XW033D6 (Introduction of atezolizumab antineoplastic into peripheral vein, percutaneous approach, new technology group 6) or XW043D6 (Introduction of atezolizumab antineoplastic into central vein, percutaneous approach, new technology group 6), respectively.

Each of the applicants submitted cost information for its application. The manufacturer of IMFINZI® stated that the cost of its technology is $10,833. The applicant projected that 6,073 cases will involve the use of IMFINZI® in FY 2021. The manufacturer of TECENTRIQ® stated that the cost of its technology is $9,013.75. The applicant projected that 806 cases will involve the use of TECENTRIQ® in FY 2021. Because the technologies are substantially similar to each other, we believe using a single cost for purposes of determining the new technology add-on payment amount is appropriate for IMFINZI® and TECENTRIQ® even though each applicant has its own set of codes. We also believe using a single cost provides predictability regarding the add on payment when using IMFINZI® or TECENTRIQ® for the treatment of patients with ES-SCLC. As such, we believe that the use of a weighted average of the cost of IMFINZI® and TECENTRIQ® based on the projected number of cases involving each technology to determine the maximum new technology add-on payment would be most appropriate. To compute the weighted cost average, we summed the total number of projected cases for each of the applicants, which equaled 6,879 cases (6,073 plus 806). We then divided the number of projected cases for each of the applicants by the total number of cases, which resulted in the following case-weighted percentages: 86 Percent for IMFINZI® and 14 percent for TECENTRIQ®. We then multiplied the cost per case for the manufacturer specific drug by the case-weighted percentage (0.86 * $10,833 = $9,316.38 for IMFINZI® and 0.14 * $9,013.75 = $1,261.93 for TECENTRIQ®). This resulted in a case-weighted average cost of $10,578.53 for the technology. Under § 412.88(a)(2), we limit new technology add-on payments to the lesser of 65 percent of the average cost of the device or 65 percent of the costs in excess of the MS-DRG payment for the case. As a result, the maximum new technology add-on payment for a case involving IMFINZI® or TECENTRIQ® is $6,875.90 for FY 2021.

i. Soliris

Alexion, Inc, submitted an application for new technology add-on payments for Soliris® (eculizumab) for FY 2021. Soliris® is approved for the treatment of neuromyelitis optica spectrum disorder (NMOSD) in adult patients who are anti-aquaporin-4 (AQP4) antibody positive.

According to the applicant, NMOSD is a rare and severe condition that attacks the central nervous system without warning. The applicant explained that NMOSD attacks, also referred to as relapses, can cause progressive and irreversible damage to the brain, optic nerve and spinal cord, which may lead to long-term disability, and in some instances, the damage may result in death. According to the applicant, the serious nature of an NMOSD relapse frequently requires inpatient hospitalization and treatment should be initiated as quickly as possible.

According to the applicant, in patients with AQP4 antibody-positive NMOSD, the body's own immune system can turn against itself to produce auto-antibodies against AQP4, a protein on certain cells in the eyes, brain and spinal cord that are critical for the survival of nerve cells. The applicant explained that the binding of these anti-AQP4 auto-antibodies activates the complement cascade, another part of the immune system.

According to the applicant, complement activation by anti-AQP4 auto-antibodies is one of the primary causes of NMOSD. The applicant explained that formation of membrane attack complex (MAC) is the end product of the activated complement system which is directly responsible for the damage to astrocytes leading to astrocytopathy (astrocyte death) and ensuing neurologic damage associated with NMOSD and relapses. According to the applicant, the primary goal of NMOSD treatment is to prevent these relapses, which over time lead to irreversible neurologic damage.

According to the applicant, Soliris® is a first-in-class complement inhibitor that works by selectively inhibiting the complement system, a central part of the immune system involved in inflammatory processes, pathogen elimination, activation of the adaptive immune response, and maintenance of homeostasis. The applicant explained that the complement system distinguishes between healthy host cells, cell debris, apoptotic cells, and external pathogens. The applicant further explained that the complement system triggers a modulated immune response, and functions through a combination of effector proteins, receptors, and regulators. The applicant asserted that when the complement system detects a threat, an initial protease is activated. This protease (either alone or in a complex) then cleaves its target, which in turn becomes active and starts to cleave the next target in the chain, and so on, leading to a cascade.

Per the applicant, initial activation of the complement system occurs via three different pathways, which all ultimately lead to the formation of the membrane attack complex (MAC) and release of the anaphylatoxins: (1) The classical pathway is activated by antibody-antigen complexes; (2) The alternative pathway is activated at a constant low level via “tick-over” (spontaneous hydrolysis) of Complement component 3 (C3), a protein of the immune system; (3) The lectin pathway is activated by carbohydrates frequently found on the surface of microbes. According to the applicant, all pathways of complement activation result in the formation of C3 convertase (“proximal complement”), and converge at the cleavage of C5 leading to the generation of C5a and C5b by the C5 convertase enzyme complexes (“Terminal complement”). The applicant explained that C3 is the most abundant complement protein in plasma, occurring at a concentration of 1.2 mg/mL and C3 cleavage products bridge the innate and the adaptive immune systems. The applicant also explained that C3a acts as an anaphylatoxin and is a mediator of inflammatory processes and C3b opsonizes the surface of recognized pathogens and facilitates phagocytosis and binds C3 convertase to form C5 convertase. The applicant also explained that C5 convertase cleaves C5 into C5a and C5b; C5a is chemotactic agent and anaphylatoxin, causing leukocyte activation, endothelial cell activation, and proinflammatory and prothrombotic effects.

According to the applicant, imbalance between complement activation and regulation leads to host tissue damage, and congenital deficiencies in the complement system can lead to an increased susceptibility to infection. The applicant explained that the complement system is also associated with the pathogenesis of non-infectious diseases such as chronic inflammation, autoimmune diseases, thrombotic microangiopathy, transplant rejection reactions, ischemic, neurodegenerative age-associated diseases, and cancer. According to the applicant, the complement system is also recognized as important in the antibody-mediated autoimmune disease AQP4 antibody-positive NMOSD. The applicant stated that Soliris® is the first and only FDA approved treatment for adult patients with NMOSD who are AQP4 antibody-positive that is proven to reduce the risk of relapse.

The incidence of NMOSD in the United States is 0.7/100,000 while the prevalence is 3.9/100,000 population. The median onset of NMOSD is 39 years of age and 83 percent of cases are female. NMOSD was commonly misdiagnosed as multiple sclerosis (MS) in the past. According to the applicant, at least two-thirds of NMOSD cases are associated with aquaporin-4 antibodies (AQP4-IgG) and complement-mediated damage to the central nervous system.

According to the applicant, Soliris® is administered via an IV infusion by a healthcare professional. The applicant explained that for adult patients with neuromyelitis optica spectrum disorder, Soliris® therapy consists of 900 mg weekly for the first 4 weeks, followed by 1200 mg for the fifth dose 1 week later, then 1200 mg every 2 weeks thereafter. According to the applicant, Soliris® should be administered at the recommended dosage regimen time points, or within 2 days of these time points. The applicant also explained that for adult and pediatric patients with NMOSD, supplemental dosing of Soliris® is required in the setting of concomitant plasmapheresis or plasma exchange, or fresh frozen plasma infusion (PE/PI).

The applicant explained that Soliris® has a boxed warning for risk of serious meningococcal infections. According to the applicant, life-threatening and fatal meningococcal infections have rarely occurred in patients treated with Soliris® and can be mitigated with proper vaccination. The applicant explained that by blocking the terminal complement system, Soliris® increases the risk of meningococcal and encapsulated bacterial infection. According to the applicant, all the patients in a pivotal trial received meningococcal vaccination, and no cases of meningococcal infection were reported. The applicant also noted that Soliris® is available only through a restricted program under a Risk Evaluation and Mitigation Strategy (REMS) and under the Soliris® REMS, prescribers must enroll in the program.

With respect to the newness criterion, FDA approved Soliris® for the indication of treatment of NMOSD in adult patients who are AQP4 antibody positive on June 27, 2019. Soliris® was first approved by FDA on March 19, 2007 for the treatment of patients with paroxysmal nocturnal hemoglobinuria (PNH) to reduce hemolysis, followed by approvals for the treatment of patients with atypical hemolytic uremic syndrome (aHUS) to inhibit complement mediated thrombotic microangiopathy, and for an efficacy supplement to add the indication of treatment of generalized myasthenia gravis (gMG) in adult patients who are anti-acetylcholine receptor (AChR) antibody positive. The applicant has applied for new technology add-on payments for use of Soliris® only for the indication of treatment of NMOSD in adult patients who are AQP4 antibody positive. The applicant stated that FDA granted Soliris® Orphan Drug Designation for the treatment of neuromyelitis optica on June 24, 2014. Additionally, the applicant stated that Soliris® was filed as a supplemental biologics license application (sBLA; BLA125166/S-431) for the treatment of NMOSD in adult patients who are AQP4 antibody positive, which FDA assigned Priority Review status.

According to the applicant, patients with NMOSD are currently identified by ICD-10-CM diagnosis code: G36.0 Neuromyelitis optica (Devic's syndrome). The applicant submitted a request for approval for a unique ICD-10-PCS procedure code for the administration of Soliris® beginning in FY 2021 and was granted approval for the following ICD-10-PCS procedure codes effective October 1, 2020: XW033C6 (Introduction of eculizumab into peripheral vein, percutaneous approach, new technology group 6) and XW043C6 (Introduction of eculizumab into central vein, percutaneous approach, new technology group 6).

As stated previously, if a technology meets all three of the substantial similarity criteria, it would be considered substantially similar to an existing technology and, therefore, would not be considered “new” for purposes of new technology add-on payments.

With regard to the first criterion, whether a product uses the same or similar mechanism of action to achieve a therapeutic outcome, according to the applicant, Soliris® is the only treatment for NMOSD that works by specifically inhibiting the complement cascade as described previously. According to the applicant, Soliris® is the only FDA approved treatment for NMOSD, although several off-label products are used to treat relapse prevention in NMOSD. As mentioned previously, the applicant explained that the formation of the membrane attack complex (MAC) is the end product of the activated complement system which is directly responsible for the damage to astrocytes leading to astrocytopathy (astrocyte death) and the ensuing neurologic damage associated with NMOSD and relapses.

With respect to the second criterion, whether a product is assigned to the same or a different MS-DRG, the applicant stated that cases involving the administration of Soliris® will likely be assigned to the same MS-DRGs as other therapies that are currently used but not indicated to treat NMOSD. These therapies that are used off-label include axiothiprine, rituximab, low-dose steroids (prednisone), mycophenolate mofetil, methotrexate, mitoxantrone, cyclophosphamide, tacrolimus, tocilizumab, cyclosporin A, and plasma exchange. As stated previously, the applicant asserted that Soliris® is the first approved treatment for NMOSD in adult patients who are AQP4 antibody positive.

With respect to the third criterion, whether the new use of the technology involves the treatment of the same or similar type of disease and the same or similar patient population, the applicant maintained that although Soliris® will be treating the same disease and patient population as currently available therapies, it will improve the treatment of NMOSD as there were previously no FDA labeled treatments. As stated previously, the applicant asserted that Soliris® is the first approved treatment for NMOSD in adult patients who are AQP4 antibody positive.

In summary, the applicant asserted that Soliris® meets the newness criterion because it is the only FDA approved treatment for NMOSD that works by specifically inhibiting the complement cascade. We invited public comments on whether Soliris® is substantially similar to other technologies and whether Soliris® meets the newness criterion.

Comment: One commenter asserted that the mechanism of action for Soliris® does meet the newness criterion. A second commenter observed that Soliris® was the first FDA-approved complement inhibitor indicated for the treatment of adults with AQP4 antibody-positive NMOSD, and that this is a novel therapy for NMOSD.

Response: We thank the commenters for their input concerning the application of the newness criterion to Soliris®.

Based on these comments and on information submitted by the applicant as part of its FY 2021 new technology add-on payment application for Soliris®, as discussed in the proposed rule (85 FR 32653) and previously summarized, we believe that Soliris® has a unique mechanism of action in the treatment of patients with AQP4 antibody-positive NMOSD. Therefore, we believe Soliris® is not substantially similar to existing treatment options and does meet the newness criterion. We consider the beginning of the newness period to commence when Soliris® was approved by FDA for the indication of treatment of NMOSD, on June 27, 2019.

With regard to the cost criterion, the applicant conducted the following analysis to demonstrate that the technology meets the cost criterion. The applicant searched claims in the FY 2018 MedPAR final rule dataset reporting an ICD-10-CM diagnosis code of G36.0.

This search identified 1,151 cases primarily spanning 14 MS-DRGs. According to the applicant, cases representing patients who may be eligible for treatment with Soliris® for NMOSD would most likely map to MS-DRGs 058, 059 and 060 (Multiple Sclerosis and Cerebellar Ataxia with MCC, with CC and without CC/MCC, respectively)—the family of MS-DRGs for multiple sclerosis & cerebellar ataxia. According to the applicant, these three MS-DRGs were three of the top four MS-DRGs by volume to which cases reporting a diagnosis code G36.0 were assigned, and together these MS-DRGs accounted for about 32 percent of the 1,151 originally identified cases reporting a diagnosis code G36.0. Consequently, the applicant limited its analysis to the 376 cases that grouped to these three MS-DRGs (058, 059 and 060).

The applicant performed its cost analysis based on the 376 claims assigned to MS-DRGs 058, 059 and 060. The applicant first removed charges for other technologies. According to the applicant, Soliris® would replace other drug therapies, such as azathioprine, methotrexate, and rituximab, among others. Because it is generally not possible to differentiate between different drugs on inpatient claims, the applicant removed all charges in the drug cost center. The applicant also removed all charges from the blood cost center, because Soliris® will replace plasma exchange procedures. Lastly, the applicant removed an additional $12,000 of cost for the plasma exchange procedural costs, based on an internal analysis of the average cost of plasma exchange. To convert these costs to charges, the applicant used the “other services” national average cost-to-charge ratio (0.346). According to the applicant, this was likely an overestimate of the charges that would be replaced by using Soliris®.

After removing charges for the prior technology to be replaced, the applicant standardized the charges. The applicant then used the 2-year inflation factor of 11.1 percent, as published in the FY 2020 IPPS final rule (84 FR 42629), to inflate the charges from FY 2018 to FY 2020. To determine the charges for Soliris®, the applicant assumed hospitals would use the inverse of the national average cost to charge ratio for pharmacy costs (0.189) from the FY 2020 IPPS/LTCH PPS final rule to mark-up charges.

Based on the aforementioned analysis, the applicant computed a final inflated average case-weighted standardized charge per case of $72,940, as compared to a calculated threshold value of $44,420. Because the final inflated average case-weighted standardized charge per case exceeded the average case-weighted threshold amount, the applicant asserted that the technology meets the cost criterion.

We note that, in the proposed rule, we inadvertently omitted the charges for Soliris® in the applicant's cost analysis. After accounting for these charges, the applicant computed a final inflated average case-weighted standardized charge per case of $172,867, which exceeds the calculated threshold value of $44,420. However, as previously noted, the final inflated average case-weighted standardized charge per case exceeded the average case-weighted threshold amount even without the addition of charges for Soliris®. We invited public comments on whether Soliris® meets the cost criterion.

We did not receive any public comments on whether Soliris® meets the cost criterion. Based on the information submitted by the applicant as part of its FY 2021 new technology add-on payment application for Soliris®, as discussed in the proposed rule (85 FR 32652 through 32655) and previously summarized, the final inflated average case-weighted standardized charge per case exceeded the average case-weighted threshold amount. Therefore, Soliris® meets the cost criterion.

With respect to the substantial clinical improvement criterion, the applicant asserted that Soliris® represents a substantial clinical improvement over existing technologies because it significantly improves clinical outcomes relative to services or technologies previously available, as demonstrated by the applicant's clinical data and patient outcomes, such as the prevention of relapses in patients with NMOSD.

The applicant provided a randomized, controlled trial in support of its claims of reduction of first-adjudicated on-trial relapse with Soliris® (PREVENT). The PREVENT study enrolled 143 adults who were randomly assigned in a 2:1 ratio to receive intravenous eculizumab (at a dose of 900 mg weekly for the first four doses starting on day 1, followed by 1200 mg every 2 weeks starting at week 4) or a matched placebo. The continued use of stable-dose immunosuppressive therapy was permitted. The primary endpoint studied was the first adjudicated relapse. Secondary outcomes included the adjudicated annualized relapse rate, quality-of-life measures, and the score on the Expanded Disability Status Scale (EDSS), which ranges from 0 (no disability) to 10 (death). Adjudicated relapses occurred in 3 of 96 patients (3 percent) in the Soliris® group and 20 of 47 (43 percent) in the placebo group (hazard ratio, 0.06; 95 percent confidence interval [CI], 0.02 to 0.20; P<0.001). The adjudicated annualized relapse rate was 0.02 in the eculizumab group and 0.35 in the placebo group (rate ratio, 0.04; 95 percent CI, 0.01 to 0.15; P<0.001). The applicant also explained that 97.9 percent of patients on Soliris® remained NMOSD relapse free at 48 weeks, 96.4 percent at 96 weeks and 96.4 percent at 144 weeks. There was no significant between-group difference in measures of disability progression. The mean change in the EDSS score was −0.18 in the eculizumab group and 0.12 in the placebo group (least-squares mean difference, −0.29; 95% CI, −0.59 to 0.01).

The applicant also submitted a poster presentation of post hoc efficacy analyses in pre-specified subgroups from the PREVENT study. Pre-specified subgroup summaries for time to first adjudicated relapse were based on immunosuppressive therapies (IST) use (five subgroups for concomitant IST use; two subgroups according to whether or not rituximab was previously used), geographic region, age, sex, race and randomization stratum. Time to first adjudicated relapse was increased with eculizumab compared with placebo in all subgroups analyzed. Significant treatment effects were observed in all subgroups for IST use, region, age, sex and race, except for the smallest subgroups in which the differences were similar to the others but did not reach nominal significance owing to small sizes (patients using other ISTs, n = 7; Black/African American patients, n = 17, among whom none of the nine patients receiving eculizumab experienced a relapse), and in patients from the Americas owing to the performance of the placebo arm. In patients who had received rituximab more than 3 months before the study, the adjudicated relapse risk reduction was 90.7 percent with eculizumab compared with placebo (p = 0.0055). The proportion of patients who were relapse-free at week 48 was consistently higher with eculizumab than with placebo in all pre-specified IST subgroups.

As stated previously, the applicant asserted that Soliris® represents a substantial clinical improvement over existing technologies because it reduces relapses in patients with NMOSD. The applicant explained that the PREVENT study demonstrated several endpoints. The applicant explained that Soliris® reduced first adjudicated on-trial relapse with eculizumab in comparison to placebo with a 94 percent relative risk reduction (Hazard Ratio, 0.006; 95% CI, 0.02-0.20). The applicant also explained that 97.9 percent of Soliris® patients were relapse free at 48 weeks, compared to 63.2 percent for the placebo group. The applicant further noted that in a subgroup of patients utilizing monotherapy (patients on eculizumab or placebo only, without concomitant immunosuppressant agents), 100 percent of Soliris® patients were relapse free at 48 weeks compared to 60.6 percent for placebo. The applicant also explained that in the PREVENT subgroup analysis presented as a poster, the treatment effect was observed regardless of whether it was used as a monotherapy or with concomitant ISTs (corticosteroids alone, azathioprine, mycophenolate mofetil); previous IST use (including rituximab); geographical region; age; sex; and race.

The applicant also explained that the Soliris® U.S. Prescribing Information contains the following information on resource utilization in the applicant's phase III trials (corticosteroid use, plasma exchange treatment, and hospitalizations): Compared to placebo-treated patients, the PREVENT study showed that Soliris®-treated patients had reduced annualized rates of (1) hospitalizations (0.04 for Soliris® versus 0.31 for placebo), (2) of corticosteroid administration to treat acute relapses (0.07 for Soliris® versus 0.42 for placebo), and (3) of plasma exchange treatments (0.02 for Soliris® versus 0.19 for placebo). The applicant explained that annualized rates were calculated by dividing the total number of on-trial relapses requiring acute treatment during the study period for all patients by the number of patient-years in the study period.

After reviewing the information submitted by the applicant as part of its FY 2021 new technology add-on payment application for Soliris, we stated in the proposed rule that we are concerned that the applicant provided only one study in support of its assertions of substantial clinical improvement, which is the PREVENT trial, with additional supporting documents all based on the same trial. We noted that the study compared Soliris to placebo but that there was no comparison of Soliris to currently available treatments to gauge real world efficacy, nor was there information about how these current treatments work and why they are ineffective. Furthermore, in the PREVENT trial, the applicant did not provide the dosage amounts for the patients on continuing medication in addition to placebo or Soliris. We stated that it is not clear to us if the patients receiving Soliris had higher dosages of continuing medications than those in the placebo group. We stated that we would be interested in more information about the dosage amounts in the treatment and control groups in the PREVENT trial. We invited public comment on whether Soliris® technology meets the substantial clinical improvement criterion.

Comment: The applicant submitted comments in response to CMS's concerns in the proposed rule regarding whether Soliris® meets the substantial clinical improvement criterion.

With respect to the concern that the applicant provided only one study in support of its assertions of substantial clinical improvement, the PREVENT trial, the applicant responded that although evidence from two or more well-controlled studies is a common benchmark for demonstrating efficacy, regulatory agencies (including FDA) have acknowledged that a single adequate and well-controlled study can, in some circumstances, constitute sufficient basis for a demonstration of clinical efficacy. According to the applicant, reliance on single studies is typically limited to situations in which the trial has demonstrated a clinically meaningful effect on mortality or irreversible morbidity, and confirmation of the result with a second trial would be practically or ethically difficult to carry out. The applicant noted in this context that clinical trials for NMOSD in particular present challenges due to the rarity of the disease, ethical concerns regarding placebo-controlled designs, and a lack of validated outcome measures or biomarkers.

According to the applicant, the PREVENT study was an adequately designed and well-controlled trial based on general FDA guidance on rare disease clinical trials and on specific recommendations made by the Center for Drug Evaluation and Research. The applicant reiterated that the PREVENT study was a large, multicenter study, involved a double-blind randomized design, and enrolled patients who demonstrated a large unmet medical need (≥2 relapses in previous 12 months, or ≥3 relapses in previous 24 months with a least one relapse in the previous 12 months). The applicant also pointed out that many of these patients were on corticosteroids and immunosuppressive therapies (ISTs), which are used off-label in patients with NMOSD. Finally, the applicant repeated several of the core findings from the PREVENT trial, with regard to the comparative effectiveness of Soliris.

With respect to the concern that the PREVENT trial compared Soliris to placebo, but that there was no comparison of Soliris to currently available treatments to gauge real world efficacy, the applicant responded that at the start of the PREVENT trial, there were no other FDA-approved therapies for managing NMOSD. The applicant further asserted that even today, the other off-label immunosuppressant therapies (ISTs) used in the treatment of NMOSD (including corticosteroids, mycophenolate mofetil, azathioprine, tacrolimus, and rituximab) are employed primarily based on empiric evidence, but there is no uniform consensus on appropriate standard of care. Given this, in order to evaluate the efficacy of Soliris in NMOSD, a randomized, placebo-controlled trial was necessary, according to the applicant.

The applicant also noted that the PREVENT trial included comparisons involving several of the available IST treatments, when used with Soliris, to use of the same IST treatments with placebo. The PREVENT trial included an eculizumab arm and a placebo arm, and patients in both arms could continue to receive ISTs (including corticosteroids, azathioprine, and/or mycophenolate mofetil) at stable dosages throughout the study. According to the applicant, the PREVENT trial demonstrated statistically persuasive findings showing the effectiveness of Soliris in preventing NMOSD relapses, including among the subset of study patients who also received maintenance treatment with ISTs.

With respect to the concern that the applicant did not provide information about how the alternative IST treatments for NMOSD work, and why these are ineffective, the applicant asserted that it cannot explain how these current, off-label treatments work, but the available data, which are primarily from case reports and small prospective or retrospective studies, suggest that these alternatives are not effective.

According to the applicant, current treatment goals for NMOSD rely on long-term stabilization of disease course by preventing relapses and relapse-associated symptoms. The available efficacy and safety data for the use of non-FDA-approved therapies in patients with NMOSD is primarily from case reports and small prospective or retrospective studies. In addition, despite increasingly common use of rituximab off-label as a preferred therapy in NMOSD, experience in patients with NMOSD is mostly derived from retrospective analyses. According to the applicant, approximately one-third of patients enrolled in PREVENT had previously received rituximab, but not within 3 months before enrolling in PREVENT.

The applicant then asserted that available data show that current IST treatments are not effective in the long-term control of NMOSD. The applicant noted data from a study showing that the five-year prognosis of patients with AQP4-IgG seropositive NMOSD is:

• 55% relapse within one year of onset;
• 22% required canes, crutches, or braces to walk (95% CI 15%-29%);
• 8% restricted to bed, chair, or wheelchair (95% CI 3%-13%);
• 41% legally blind in one or both eyes (95% CI 33%-50%); and
• 9% legally blind in both eyes (95% CI 4%-14%)

The applicant concluded that in the PREVENT trial, the hazard ratio based on a stratified Cox proportional hazards model for relapse was 0.06 (95% CI, 0.02 to 0.20) indicating that Soliris-treated patients experienced a 94% relative relapse risk reduction (p <0.0001) compared to patients on placebo. The time to the first adjudicated on-trial relapse was significantly longer in eculizumab-treated patients compared to placebo-treated patients (p <0.0001).

With regard to the concern that it was not clear if the patients in the PREVENT study who received Soliris had higher dosages of continuing IST medications than those in the placebo group, the applicant provided additional information on the dosage of those medications. The applicant acknowledged that the inclusion of patients receiving concomitant ISTs in PREVENT raised the possibility that the treatment effect ascribed to Soliris might have resulted from one of the other background therapies instead. However, the applicant asserted that several approaches were taken in PREVENT to mitigate the potentially confounding influence of concomitant ISTs. In particular, background IST dosages were not permitted to change during the trial, to ensure that increased IST dosages did not confound efficacy evaluations. Also, the total daily corticosteroid dose should not have exceeded 20 mg/day of prednisone or equivalent, to ensure that no significant imbalance between groups in regards to corticosteroid use could exist.

The applicant also provided additional data showing that the average doses of concomitant ISTs (Azathioprine; Corticosteroids; Mycophenolate Mofetil) in patients randomized to the eculizumab and placebo groups in PREVENT were similar, thereby arguing against any imbalance between treatment groups that may have influenced the efficacy results.

In addition, several other commenters wrote letters of support for the Soliris® new technology add-on payment application, in which they asserted that Soliris® had been shown effective in the PREVENT trial, and therefore that Soliris® meets the substantial clinical improvement criterion. A few of the commenters cited their own clinical experience in working with NMOSD patients, and either described the potential value of Soliris® based on their own experience, or based on the unique mechanism of action of Soliris®.

Response: We appreciate the commenters' input, including the additional information and analysis provided by the applicant in response to our concerns regarding substantial clinical improvement. After reviewing the information submitted by the applicant addressing our concerns raised in the proposed rule, we agree with the applicant that Soliris® represents a substantial clinical improvement over existing technologies because, based on the information provided by the applicant, the technology offers a treatment option for preventing relapses and improving long-term outcomes in the treatment of NMOSD, for which it is the first and only FDA approved treatment.

After consideration of the public comments we received, we have determined that Soliris® meets all of the criteria for approval for new technology add-on payments. Therefore, we are approving new technology add-on payments for Soliris® for FY 2021. Cases involving the use of Soliris® that are eligible for new technology add-on payments will be identified by ICD-10-PCS procedure codes XW033C6 and XW043C6.

In its application, the applicant stated that Soliris® is available in a 30ml package with a strength of 10mg/1ml. According to the applicant, the WAC per package of Soliris® is $6,523. The applicant stated that the typical patient will receive a 900mg dose each week the patient is in the hospital, which is equivalent to three packages for a cost of $19,569 per week. Based on the cases in the applicant's sample, the applicant calculated that the average cost per hospital visit per patient for Soliris® is $28,416.69, which is approximately 1.45 doses per hospital stay. However, according to FDA labeling, all packages of Soliris® are single-dose. Therefore, we have determined that cases involving Soliris® would incur an average cost of $32,615, which is the equivalent of 5 packages (900mg per dose × 1.45 doses per hospital stay = 1,305mg per hospital stay/300mg per package = 4.35 vials). Under § 412.88(a)(2), we limit new technology add-on payments to the lesser of 65 percent of the costs of the new medical service or technology, or 65 percent of the amount by which the costs of the case exceed the MS-DRG payment. As a result, the maximum new technology add-on payment for a case involving the use of Soliris® is $21,199.75 for FY 2021.

k. The SpineJack® System

Stryker, Inc., submitted an application for new technology add-on payments for the SpineJack® Expansion Kit (hereinafter referred to as the SpineJack® system) for FY 2021. The applicant described the SpineJack® system as an implantable fracture reduction system, which is indicated for use in the reduction of painful osteoporotic vertebral compression fractures (VCFs) and is intended to be used in combination with Stryker VertaPlex and VertaPlex High Viscosity (HV) bone cement.

The applicant explained that the SpineJack® system is designed to be implanted into a collapsed vertebral body (VB) via a percutaneous transpedicular approach under fluoroscopic guidance. According to the applicant, once in place, the intravertebral implants are expanded to mechanically restore VB height and maintain the restoration. The applicant explained that the implants remain within the VB and, together with the delivered bone cement, stabilize the restoration, provide pain relief and improve patient mobility. According to the applicant, the SpineJack® system further reduces the risk of future adjacent level fractures (ALFs).

The applicant explained that the SpineJack® system is available in three sizes (4.2, 5.0 and 5.8 mm), and implant size selection is based upon the internal cortical diameter of the pedicle. According to the SpineJack® system Instructions for Use, the use of two implants is recommended to treat a fractured VB. According to the applicant, multiple VBs can also be treated in the same operative procedure as required.

The applicant explained that using a bilateral transpedicular approach, the SpineJack® implants are inserted into the fractured VB. The applicant stated that the implants are then progressively expanded though actuation of an implant tube that pulls the two ends of the implant towards each other in situ to mechanically restore VB height. The applicant explained that the mechanical working system of the implant allows for a progressive and controlled reduction of the vertebral fracture. The applicant stated that when expanded, each SpineJack® system implant exerts a lifting pressure on the fracture through a mechanism that may be likened to the action of a scissor car jack, and that the longitudinal compression on the implant causes it to open in a craniocaudal direction. The applicant explained that the implant is locked into the desired expanded position as determined and controlled by the treating physician.

The applicant further explained that once the desired expansion has been obtained, polymethylmethacrylate (PMMA) bone cement is injected at low pressure into and around the implant to stabilize the restored vertebra, which leads the implant to become encapsulated with the delivered bone cement. According to the applicant, restoration of the anatomy and stabilization of the fracture results in pain relief as well as improved mobility for the patient.

According to the applicant, osteoporosis is one of the most common bone diseases worldwide that disproportionately affects aging individuals. The applicant explained that in 2010, approximately 54 million Americans aged 50 years or older had osteoporosis or low bone mass, which resulted in more than 2 million osteoporotic fragility fractures in that year alone. The applicant stated it has been estimated that more than 700,000 VCFs occur each year in the United States (U.S.), and of these VCFs, about 70,000 result in hospital admissions with an average length of stay of 8 days per patient. Furthermore, the applicant noted that in the first year after a painful vertebral fracture, patients have been found to require primary care services at a rate 14 times greater than the general population. The applicant explained that medical costs attributed to VCFs in the U.S. exceeded $1 billion in 2005 and are predicted to surpass $1.6 billion by 2025.

The applicant explained that osteoporotic VCFs occur when the vertebral body (VB) of the spine collapses and can result in chronic disabling pain, excessive kyphosis, loss of functional capability, decreased physical activity and reduced quality of life. The applicant stated that as the spinal deformity progresses, it reduces the volume of the thoracic and abdominal cavities, which may lead to crowding of internal organs. The applicant noted that the crowding of internal organs may cause impaired pulmonary function, abdominal protuberance, early satiety and weight loss. The applicant indicated that other complications may include bloating, distention, constipation, bowel obstruction, and respiratory disturbances such as pneumonia, atelectasis, reduced forced vital capacity and reduced forced expiratory volume in 1 second.

The applicant stated that if VB collapse is >50 percent of the initial height, segmental instability will ensue. As a result, the applicant explained that adjacent levels of the VB must support the additional load and this increased strain on the adjacent levels may lead to additional VCFs. Furthermore, the applicant summarized that VCFs also lead to significant increases in morbidity and mortality risk among elderly patients, as evidenced by a 2015 study by Edidin et al., in which researchers investigated the morbidity and mortality of patients with a newly diagnosed VCF (n=1,038,956) between 2005 to 2009 in the U.S. Medicare population. For the osteoporotic VCF subgroup, the adjusted 4-year mortality was 70 percent higher in the conservatively managed group than in the balloon kyphoplasty procedures (BKP)-treated group, and 17 percent lower in the BKP group than in the vertebroplasty (VP) group. According to the applicant, when evaluating treatment options for osteoporotic VCFs, one of the main goals of treatment is to restore the load-bearing bone fracture to its normal height and stabilize the mechanics of the spine by transferring the adjacent level pressure loads across the entire fractured vertebra and in this way, the intraspinal disc pressure is restored and the risk of adjacent level fractures (ALFs) is reduced.

The applicant explained that treatment of osteoporotic VCFs in older adults most often begins with conservative care, which includes bed rest, back bracing, physical therapy and/or analgesic medications for pain control. According to the applicant, for those patients that do not respond to conservative treatment and continue to have inadequate pain relief or pain that substantially impacts quality of life, vertebral augmentation (VA) procedures may be indicated. The applicant explained that VP and BKP are two minimally invasive percutaneous VA procedures that are most often used in the treatment of osteoporotic VCFs and another VA treatment option includes the use of a spiral coiled implant made from polyetheretherketone (PEEK), which is part of the Kiva® system.

According to the applicant, among the treatment options available, BKP is the most commonly performed procedure and the current gold standard of care for VA treatment. The applicant stated that it is estimated that approximately 73 percent of all vertebral augmentation procedures performed in the United States between 2005 and 2010 were BKP. According to the applicant, the utilization of the Kiva® system is relatively low in the U.S. and volume information was not available in current market research data.

The applicant stated that VA treatment with VP may alleviate pain, but it cannot restore VB height or correct spinal deformity. The applicant stated that BKP attempts to restore VB height, but the temporary correction obtained cannot be sustained over the long-term. The applicant stated that the Kiva® implant attempts to mechanically restore VB height, but it has not demonstrated superiority to BKP for this clinical outcome.

With respect to the newness criterion, the SpineJack® Expansion Kit received FDA 510(k) clearance on August 30, 2018, based on a determination of substantial equivalence to a legally marketed predicate device. We note, except for this paragraph summarizing FDA clearance documentation and market availability, we refer to the SpineJack® Expansion Kit in this final rule as the SpineJack® system. The applicant explained that although the SpineJack® Expansion Kit received FDA 510(k) clearance on August 30, 2018, due to the time required to prepare for supply and distribution channels, it was not available on the U.S. market until October 11, 2018. As we discussed previously, the SpineJack® Expansion Kit is indicated for use in the reduction of painful osteoporotic VCFs and is intended to be used in combination with Stryker VertaPlex and VertaPlex High Viscosity (HV) bone cements. In the FY 2021 IPPS/LTCH PPS proposed rule, we noted that the applicant submitted a request for approval for a unique ICD-10-PCS procedure code for the implantation of the SpineJack® Expansion Kit beginning in FY 2021. The applicant was granted approval for the following procedure codes: XNU0356 (Supplement lumbar vertebra with mechanically expandable (paired) synthetic substitute, percutaneous approach, new technology group 6) and XNU4356 (Supplement thoracic vertebra with mechanically expandable (paired) synthetic substitute, percutaneous approach, new technology group 6).

As discussed previously, if a technology meets all three of the substantial similarity criteria, it would be considered substantially similar to an existing technology and therefore would not be considered “new” for purposes of new technology add-on payments.

With regard to the first criterion, whether a product uses the same or similar mechanism of action to achieve a therapeutic outcome, according to the applicant, there are several factors that highlight the different mechanism of action in treating osteoporotic VCFs with the SpineJack® system compared to other BKP implants to reduce the incidence of ALFs and improve midline VB height restoration. According to the applicant, these differences include implant construction, mechanism of action, bilateral implant load support and >500 Newtons (N) of lift pressure.

The applicant described the SpineJack® system as including two cylindrical implants constructed from Titanium-6-Aluminum-4-Vanadium (Ti6Al4V) with availability in three sizes 4.2 mm (12.5 mm expanded), 5.0 mm (17 mm expanded) and 5.8 mm (20 mm expanded).

According to the applicant, the SpineJack® system implant exerts lifting pressure on the fracture through a mechanism that may be likened to the action of a scissor car jack. The applicant explained that following the insertion of the implant into the vertebral body (VB), it is progressively expanded though actuation of an implant tube that pulls the two ends of the implant towards each other and the longitudinal compression on the implant causes it to open in a craniocaudal direction. According to the applicant, the force generated by the bilateral the SpineJack® system implants varies according to implant size, ranging from 500-1,000 Newtons for fracture reduction and superior endplate lift. In addition, the applicant explained that the SpineJack® system implant provides symmetric, broad load support under the fractured endplate and spinal column which differentiates the mechanism of action from BKP.

The applicant stated that the SpineJack® system implant is uniquely constructed from a titanium alloy, which the applicant claims allows for plastic deformation when it encounters the hard cortical bone of the endplate yet still provides the lift force required to restore midline VB height in the fractured vertebra. The applicant stated that the SpineJack® system notably contains a self-locking security mechanism that restricts further expansion of the device when extreme load forces are concentrated on the implant. As a result, the applicant asserted that this feature significantly reduces the risk of vertebral endplate breakage while it further allows functional recovery of the injured disc.

According to the applicant, the expansion of the SpineJack® system implants creates a preferential direction of flow for the bone cement; PMMA bone cement is deployed from the center of the implant into the VB. The applicant stated that when two implants are symmetrically positioned in the VB, this allows for a more homogenous spread of PMMA bone cement. The applicant asserted that the interdigitation of bone cement creates a broad supporting ring under the endplate, which is essential to confer stability to the VB.

The applicant explained that the SpineJack® system implants provide symmetric, broad load support for osteoporotic vertebral collapse, which is based upon precise placement of bilateral “struts” that are encased in PMMA bone cement, whereas BKP and vertebroplasty (VP) do not provide structural support via an implanted device. The applicant explained that the inflatable balloon tamps utilized in BKP are not made from titanium and are not a permanent implant. According to the applicant, the balloon tamps are constructed from thermoplastic polyurethane, which have limited load bearing capacity. The applicant noted that although the balloon tamps are expanded within the VB to create a cavity for bone cement, they do not remain in place and are removed before the procedure is completed. The applicant explained that partial lift to the VB is obtained during inflation, resulting in kyphotic deformity correction and partial gains in anterior VB height restoration, but inflatable balloon tamps are deflated prior to removal so some of the VB height restoration obtained is lost upon removal of the bone tamps. According to the applicant, BKP utilizes the placement of PMMA bone cement to stabilize the fracture and does not include an implant that remains within the VB to maintain fracture reduction and midline VB height restoration.

According to the applicant, the Kiva® system is constructed of a nitinol coil and PEEK-OPTIMA sheath, with sizes including a 4-loop implant (12 mm expanded) and a 5-loop implant (15 mm expanded), and unlike the SpineJack® system, is not made of titanium and does not include a locking scissor jack design. The applicant stated that the specific mechanism of action for the Kiva® system is different from the SpineJack® system. The applicant explained that during the procedure that involves implanting the Kiva® system, nitinol coils are inserted into the VB to form a cylindrical columnar cavity. The applicant stated that the PEEK-OPTIMA is then placed over the nitinol coil. The applicant explained that the nitinol coil is removed from the VB and the PEEK material is filled with PMMA bone cement. The applicant stated that the deployment of 5 coils equates to a maximum of height of 15 mm. The applicant stated that the lifting direction of the Kiva® system is caudate and unidirectional. According to the applicant, in the KAST (Kiva Safety and Effectiveness Trial) pivotal study, it was reported that osteoporotic VCF patients treated with the Kiva® system had an average of 2.6 coils deployed. Additionally, in a biomechanical comparison conducted for the Kiva® system and BKP using a loading cycle of 200-500 Newtons in osteoporotic human cadaver spine segments filled with bone cement, there were no statistically significant differences observed between the two procedures for VB height restoration, stiffness at high or low loads, or displacement under compression.

The applicant summarized the differences and similarities of the SpineJack® system, BKP, and PEEK coiled implant as follows: (1) With respect to construction, the SpineJack® system is made of Titanium-6-Aluminum-4-Vanadium compared to thermoplastic polyurethanes for BKP and nitinol and PEEK for the PEEK coiled implant; (2) with respect to mechanism of action, the SpineJack® system uses a locking scissor jack encapsulated in PMMA bone cement compared to hydrodynamic cavity creation and PMMA cavity filler for BKP and coil cavity creation and PEEK implant filled with PMMA bone cement for the PEEK coiled implant; (3) with respect to plastic deformation, the SpineJack® system and BKP allow for plastic deformation while the PEEK coiled implant does not; (4) with respect to craniocaudal expansion, the SpineJack® system allows for craniocaudal expansion, whereas BKP and the PEEK coiled implant do not; (5) with respect to bilateral load support, the SpineJack® system provides bilateral load support whereas BKP and the PEEK coiled implant do not; and (6) with respect to lift pressure of >500 N, the SpineJack® system provides lift pressure of >500 N whereas BKP and the PEEK coiled implant do not. The applicant summarized that the SpineJack® system is uniquely constructed and utilizes a different mechanism of action than BKP, which is the gold standard of treatment for osteoporotic VCFs, and that the construction and mechanism of action of the SpineJack® system is further differentiated when compared with the PEEK coiled implant.

With respect to the second criterion, whether a product is assigned to the same or a different MS-DRG, the applicant did not specify whether it believed cases involving the SpineJack® system would be assigned to the same MS-DRG as existing technology. However, we note that the MS-DRGs the applicant included in its cost analysis were the same MS-DRGs to which cases involving BKP procedures are typically assigned.

With respect to the third criterion, whether the new use of the technology involves the treatment of the same or similar type of disease and the same or similar patient population, the applicant did not specifically address whether the technology meets this criterion. However, the applicant generally summarized the disease state that the technology treats as osteoporotic VCFs, and described other treatment options for osteoporotic VCFs as including VP, BKP and the PEEK coiled implant.

In summary, the applicant asserted that the SpineJack® system is not substantially similar to any existing technology because it utilizes a different mechanism of action, when compared to existing technologies, to achieve a therapeutic outcome.

We invited public comments on whether the SpineJack® system is substantially similar to other currently available technologies and whether the SpineJack® system meets the newness criterion.

Comment: Several commenters expressed their specific and general support for approval of the SpineJack® system for new technology add-on payment. Many of these commenters shared their academic knowledge of and first-hand clinical experience with vertebral augmentation procedures, including claims of familiarity and expertise with the use of the Kiva® system, BKP and the SpineJack® system. According to many of these commenters, the SpineJack® system provides a significant benefit beyond that which is achieved by other vertebral augmentation technology. Many commenters also indicated that the price compared to the reimbursement rate has been an impediment to use of the SpineJack® system in some cases. Finally, several of these commenters expressed their belief that the SpineJack® system may reduce costs to hospitals and the U.S. health system overall by preventing the onset of additional adjacent fractures in patients.

Response: We thank the commenters for the analysis and feedback provided.

Comment: The applicant submitted a comment restating information that was previously provided in their application for new technology add-on payment and described in the proposed rule and previously in this final rule. According to the applicant, the SpineJack® system meets the newness criterion, because it received FDA 510(k) clearance on August 30, 2018, and was commercially available in the United States on October 11, 2018. The applicant also explained that based on the information submitted in the application for new technology add-on payment, specifically regarding implant construction, mechanism of action, bilateral implant load support and lift pressure, the SpineJack® system has a unique mechanism of action to achieve a therapeutic outcome, compared to other VCF treatments.

In response to CMS' concern that the applicant did not specify whether it believed cases involving the SpineJack® system would be assigned to the same MS-DRGs as existing technology, the applicant provided additional clarification, and acknowledged that the SpineJack® system would be assigned to the same MS-DRGs as existing technology for vertebral augmentation.

In response to CMS' concern that the applicant did not specifically address whether the new use of the technology involves the treatment of the same or similar type of disease and the same or similar patient population, the applicant stated that the SpineJack® system is used in the reduction of osteoporotic VCFs, and does target the same or similar type of disease and the same or similar patient population as targeted by VP, BKP and other mechanical vertebral augmentation systems.

Two commenters asserted that the applicant's description of the mechanism of action of the SpineJack® system relative to other implant devices (including BKP and the Kiva® system) contained important inaccuracies, including with regard to the claims that the SpineJack® system acts uniquely to achieve craniocaudal expansion, bilateral load support, and lift pressure >500 Newtons. The commenters stated that BKP does offer craniocaudal expansion while creating a void for safer cement fill. Furthermore, with respect to bilateral load support, according to the commenters, BKP has been offered since 1998 as a bilateral procedure option to maximize lift potential and reduce stress exerted on endplates. The commenters went on to explain that BKP provides bilateral symmetric load support to fractured endplates by providing a larger surface area when restoring height. Finally, the commenters asserted that several of the commenter's claims of superiority for the SpineJack® system were misleading, and furthermore that the newest generation of BKP implants is capable of inflating to 700 psi and generating a lift force of 1200 Newtons.

Another commenter made a different substantial similarity argument, with regard to the SpineJack® system and the Kiva® system. The commenter asserted that both the Kiva® system and SpineJack® systems use a similar mechanism of action (mechanical lift) to achieve a therapeutic outcome (reducing osteoporotic VCFs). The commenter noted that although the way the implant provides mechanical expansion within the vertebral body is different between the Kiva® and SpineJack® systems, both processes still qualify as mechanical expansion. The commenter described several other functional similarities in regard to the effect achieved by the Kiva® and SpineJack® systems, and further pointed out that the Kiva® system served as the predicate device for the SpineJack® system, with regard to the FDA 510(k) clearance process for the SpineJack® system. On this basis, the commenter asserted that the Kiva® and the SpineJack® system are substantially similar technologies.

One commenter expressed their general belief that the SpineJack® system meets the new technology add-on payment newness criterion because it utilizes a distinct mechanism of action, especially in comparison to the mechanisms of action utilized by the Kiva® system and balloon kyphopasty.

Response: We thank the commenters for their input and technical comments with regard to the SpineJack® system and the newness criterion. We note that some of these comments rest on conflicting factual assertions made by commenters and the applicant, which we are unable directly to resolve. After consideration of the comments received, however, we believe that the physical construction and mechanism of action by which the SpineJack® system implant exerts a lift force is mechanically different from either the Kiva® system (coil) implant, or from the inflation mechanism of a BKP implant. In our view, these differences support that the SpineJack® system does not use the same or similar mechanism of action to achieve a therapeutic outcome and therefore is not substantially similar to prior technology.

After consideration of the public comments we received and information submitted by the applicant as part of its FY 2021 new technology add-on payment application for the SpineJack® system, as discussed in the proposed rule (85 FR 32656) and previously in this final rule, we believe that the SpineJack® system has a unique mechanism of action in the treatment of patients with osteoporotic VCFs. Therefore, we believe that the SpineJack® system is not substantially similar to existing treatment options and meets the newness criterion. We consider the beginning of the newness period to commence following the approval of the SpineJack® system by the FDA, on the date when it became commercially available on the U.S. market, which was October 11, 2018.

With regard to the cost criterion, the applicant conducted the following analysis to demonstrate that the technology meets the cost criterion. The applicant searched the FY 2018 MedPAR file for inpatient hospital claims that reported the following ICD-10-PCS procedure codes: 0PS43ZZ (Reposition thoracic vertebra, percutaneous approach) in combination with 0PU43JZ (Supplement thoracic vertebra with synthetic substitute, percutaneous approach) and 0QS03ZZ (Reposition lumbar vertebra, percutaneous approach) in combination with 0QU03JZ (Supplement lumbar vertebra with synthetic substitute, percutaneous approach). According to the applicant, the results included cases involving BKP procedures. This resulted in 15,352 cases spanning approximately 130 MS-DRGs, with approximately 77 percent of those cases (n=11,841) mapping to the following top 6 MS-DRGs:

The applicant performed two separate analyses with regard to the cost criterion, one based on 100 percent of the claims reporting the specified ICD-10-PCS procedure codes, and the second based on the 77 percent of claims mapping to the top six MS-DRGs.

The applicant used the following methodology for both analyses. The applicant first removed the charges for the prior technology being replaced by the SpineJack® system. The applicant explained that it estimated charges associated with the prior technology as 50 percent of the charges associated with the category Medical Surgical Supply Charge Amount (which included revenue centers 027x). The applicant stated that use of the SpineJack® system would replace some but not all of the device charges included in these claims, as some currently used medical and surgical supplies and devices would still be required for patients during their hospital stay, even after substituting the SpineJack® system for BKP and other surgical interventions. The applicant stated that it was unable to determine a more specific percentage for the appropriate amount of prior medical and surgical supply charges to remove from the relevant patient claims, but asserted that removing 50 percent of the charges was a conservative approach for calculation purposes. The applicant then standardized the charges and inflated the charges from FY 2018 to FY 2020. The applicant reported using an inflation factor of 11.1 percent, as published in the FY 2020 IPPS final rule (84 FR 42629).

The applicant then calculated and added the charges for the SpineJack® system technology by taking the estimated per patient cost of the device, and converting it to a charge by dividing the costs by the national average CCR (cost-to-charge ratio) of 0.299 for implantable devices from the FY 2020 IPPS/LTCH PPS final rule (84 FR 42179).

We stated in the proposed rule that in the analysis based on 100 percent of claims, the applicant computed a final inflated average case-weighted standardized charge per case of $108,760, as compared to an average case-weighted threshold amount of $77,395. In the analysis based on 77 percent of claims from only the top six MS-DRGs, the applicant computed a final inflated average case-weighted standardized charge per case of $92,904, as compared to an average case-weighted threshold amount of $72,273.

Because the final inflated average case-weighted standardized charge per case exceeded the average case-weighted threshold amount under both analyses described previously, the applicant asserted that the technology meets the cost criterion. We invited public comments on whether the SpineJack® system meets the cost criterion.

Comment: The applicant offered a minor typographic correction in regard to the charge threshold analysis that was included in the proposed rule for the SpineJack® system. The applicant explained that in its new technology add-on payment application submission for the SpineJack® system, the inflated case-weighted standardized charge per case was reported as $108,670 for the analysis based on 100 percent of claims. The applicant noted that a transposition error was made in the proposed rule, such that this figure was incorrectly reported as $108,760. The applicant concluded that the difference between these figures is negligible and does not impact the result of the average case-weighted standardized charge per case exceeding the average case-weighted threshold amount. Therefore, the applicant maintained that the SpineJack® system does meet the cost criterion.

Response: We thank the applicant for this correction and clarification with regard to the cost analysis for the SpineJack® system.

Comment: We received comments that were not directly related to the cost analysis, including that the different mechanism of action, time, and expertise involved in the use of the SpineJack® system uses warrants a separate billable code.We also received comments questioning the costs associated with the SpineJack® system, including that the estimated $100,000 cost per case appears high compared to the approximately $3,500 cost of other treatment options like kyphoplasty.

Response: We appreciate the commenters' feedback. We also note that proposals to create, delete, or revise codes under the ICD-10-PCS structure are referred to the ICD-10 Coordination and Maintenance Committee. The decisions of this committee are independent from any decision for new technology add on payments.

After consideration of the public comments we received and based on the information included in the applicant's new technology add-on payment application, we believe that the SpineJack® system meets the cost criterion.

With regard to the substantial clinical improvement criterion, the applicant asserted that the treatment of osteoporotic vertebral compression fracture (VCF) patients with the SpineJack® system represents a substantial clinical improvement over existing technologies because clinical research supports that it reduces future interventions, hospitalizations, and physician visits through a decrease in adjacent level fractures (ALFs), which the applicant asserted are clinically significant adverse events associated with osteoporotic VCF. The applicant also asserted that treatment with the SpineJack® system greatly reduces pain scores and pain medication use when compared to BKP, which the applicant stated is the current gold standard in vertebral augmentation (VA) treatment. The applicant submitted eight studies to support that its technology represents a substantial clinical improvement over existing technologies.

The applicant explained that the SpineJack® system has been available for the treatment of patients with osteoporotic VCFs for over 10 years in Europe. The applicant explained that, as a result, the SpineJack® system implant has been extensively studied, and claims from smaller studies are supported by the results from a recent, larger prospective, randomized study known as the SAKOS (SpineJack® versus Kyphoplasty in Osteoporotic Patients) study. The applicant cited the SAKOS study in support of multiple clinical improvement claims. The applicant explained that the SAKOS study was the pivotal trial conducted in support of the FDA 510(k) clearance for the SpineJack® system and that the intent of the study was to compare the safety and effectiveness of the SpineJack® system with the KyphX Xpander Inflatable Bone Tamp (BKP) for treatment of patients with painful osteoporotic VCFs in order to establish a non-inferiority finding for use of the SpineJack® system versus balloon kyphoplasty procedure (BKP).

The SAKOS study is a prospective, international, randomized, non-inferiority study comparing a titanium implantable vertebral augmentation device (TIVAD), the SpineJack® system, versus BKP in the reduction of vertebral compression fractures with a 12-month follow-up. The primary endpoint was a 12-month responder rate based on a composite of three components: (1) Reduction in VCF fracture-related pain at 12 months from baseline by >20 mm as measured by a 100-mm Visual Analog Scale (VAS) measure, (2) maintenance or functional improvement of the Oswestry Disability Index (ODI) score at 12 months from baseline, and (3) absence of device-related adverse events or symptomatic cement extravasation requiring surgical reintervention or retreatment at the index level. If the primary composite endpoint was successful, a fourth component (absence of ALF) was added to the three primary components for further analysis. If the analysis of this additional composite endpoint was successful, then midline target height restoration at 6 and 12 months was assessed. According to the applicant, freedom from ALFs and midline VB height restoration were two additional superiority measures that were tested. According to the SAKOS study, secondary clinical outcomes included changes from baseline in back pain intensity, ODI score, EuroQol 5-domain (EQ-5D) index score (to evaluate quality of life), EQ-VAS score, ambulatory status, analgesic consumption, and length of hospital stay. Radiographic endpoints included restoration of vertebral body height (mm), and Cobb angle at each follow-up visit. Adverse events (AEs) were recorded throughout the study period. The applicant explained that researchers did not blind the treating physicians or patients, so each group was aware of the treatment allocation prior to the procedure; however, the three independent radiologists that performed the radiographic reviews were blinded to the personal data of the patients, study timepoints and results of the study.

The SAKOS study recruited patients from 13 hospitals across 5 European countries and randomized 152 patients with osteoporotic vertebral compression fractures (OVCFs) (1:1) to either the SpineJack® system or BKP procedures. Specifically, patients were considered eligible for inclusion if they met a number of criteria, including (1) at least 50 years of age, (2) had radiographic evidence of one or two painful VCF between T7 and L4, aged less than 3 month, due to osteoporosis, (3) fracture(s) that showed loss of height in the anterior, middle, or posterior third of the VB ≥15% but ≤40%, and (4) patient failed conservative medical therapy, defined as either having a VAS back pain score of ≥50 mm at 6 weeks after initiation of fracture care or a VAS pain score of ≥70% mm at 2 weeks after initiation of fracture care. Eleven of the originally recruited patients were subsequently excluded from surgery (9 randomized to the SpineJack® system and 2 to BKP). A total of 141 patients underwent surgery, and 126 patients completed the 12-month follow-up period (61 TIVAD and 65 BKP). The applicant contended that despite the SAKOS study being completed outside the U.S., results are applicable to the Medicare patient population, noting that 82 percent (116 of 141) of the patients in the SAKOS trial that received treatment (the SpineJack® system or BKP) were age 65 or older.

The applicant explained further that the FDA evaluated the applicability of the SAKOS clinical data to the U.S. population and FDA concluded that although the SAKOS study was performed in Europe, the final study demographics were very similar to what has been reported in the literature for U.S.-based studies of BKP. The applicant also explained that FDA determined that the data was acceptable for the SpineJack® system 510(k) clearance including two clinical superiority claims versus BKP.

The SAKOS study reported that analysis on the intent to treat population using the observed case method resulted in a 12-month responder rate of 89.8 percent and 87.3 percent, for the SpineJack® system and BKP respectively (p=0.0016). The additional composite endpoint analyzed in observed cases resulted in a higher responder rate for the SpineJack® system compared to BKP at both 6 months (88.1% vs. 60.9%; p<0.0001) and 12 months (79.7% vs. 59.3%; p<0.0001). Midline VB height restoration, tested for superiority using a t test with one-sided 2.5 percent alpha in the ITT population, was greater with the SpineJack® system than BKP at 6 months (1.14±2.61 mm vs 0.31±2.22 mm; p=0.0246) and at 12 months (1.31±2.58 mm vs. 0.10±2.23 mm; p=0.0035), with similar results in the per protocol (PP) population.

Also, according to the SAKOS study, decrease in pain intensity versus baseline was more pronounced in the SpineJack® system group compared to the BKP group at 1 month (p=0.029) and 6 months (p=0.021). At 12 months, the difference in pain intensity was no longer statistically significant between the groups, and pain intensity at 5 days post-surgery was not statistically different between the groups. The SAKOS study publication also reported that at each timepoint, the percentage of patients with reduction in pain intensity >20 mm was ≥90% in the SpineJack® system group and ≥80% in the BKP group, with a statistically significant difference in favor of SpineJack® at 1 month post-procedure (93.8% vs 81.4%; p=0.03). The study also reported—(1) no statistically significant difference in disability (ODI score) between groups during the follow-up period, although there was a numerically greater improvement in the SpineJack® system group at most time points; (2) at each time point, the percentage of patients with maintenance or improvement in functional capacity was at or close to 100 percent; and (3) in both groups, a clear and progressive improvement in quality of life was observed throughout the 1-year follow-up period without any statistically significant between-group differences.

In the SAKOS study, both groups had similar proportions of VCFs with cement extravasation outside the treated VB (47.3% for TIVAD, 41.0% for BKP; p=0.436). No symptoms of cement leakage were reported. The SAKOS study also reported that the BKP group had a rate of adjacent fractures more than double the SpineJack® system group (27.3% vs. 12.9%; p=0.043). The SAKOS study also reported that the BKP group had a rate of non-adjacent subsequent thoracic fractures nearly 3 times higher than the SpineJack® system group (21.9% vs. 7.4%) (a p-value was not reported for this result). The most common AEs reported over the study period were back pain (11.8 percent with the SpineJack® system, 9.6 percent with BKP), new lumbar vertebral fractures (11.8 percent with the SpineJack® system, 12.3 percent with BKP), and new thoracic vertebral fractures (7.4 percent with the SpineJack® system, 21.9 percent with BKP). The most frequent SAEs were lumbar vertebral fractures (8.8 percent with the SpineJack® system; 6.8 percent with BKP) and thoracic vertebral fractures (5.9 percent with the SpineJack® system, 9.6 percent with BKP). We also note that the length of hospital stay (in days) for osteoporotic VCF patients treated in the SAKOS trial was 3.8 ± 3.6 days for the SpineJack® system group and 3.3 ±2.4 days for the BKP group (p=0.926, Wilcoxon test).

The applicant also submitted seven additional studies, which are described in more detail in this section, related to the applicant's specific assertions regarding substantial clinical improvement.

As stated previously, the applicant asserted that the SpineJack® system represents a substantial clinical improvement over existing technologies because it will reduce future interventions, hospitalizations, and physician visits through a decrease in ALFs. The applicant explained that ALFs are considered clinically significant adverse events associated with osteoporotic VCFs, citing studies by Lindsay et al. and Ross et al. The applicant explained that these studies reported, respectively, that having one or more VCFs (irrespective of bone density) led to a 5-fold increase in the patient's risk of developing another vertebral fracture, and the presence of two or more VCFs at baseline increased the risk of ALF by 12-fold. The applicant asserted that analysis of the additional composite endpoint in the SAKOS study demonstrated statistical superiority of the SpineJack® system over BKP (p<0.0001) for freedom from ALFs at both 6 months (88.1 percent vs. 60.9 percent) and 12 months (79.7 percent vs. 59.3 percent) post-procedure. The applicant noted that the results were similar on both the intent to treat and PP patient populations. In addition, the applicant asserted the SpineJack® system represents a substantial clinical improvement because in the SAKOS study, compared to patients treated with the SpineJack® system, BKP-treated patients had more than double the rate of ALFs (27.3 percent vs. 12.9 percent; p=0.043) and almost triple the rate of non-adjacent thoracic VCFs (21.9 percent vs. 7.4 percent).

The applicant also asserted superiority with respect to mid-vertebral body height restoration with the SpineJack® system. The applicant explained that historical treatments of osteoporotic VCFs have focused on anterior VB height restoration and kyphotic Cobb angle correction; however, research indicates that the restoration of middle VB height may be as important as Cobb angle correction in the prevention of ALFs.

According to the applicant, the depression of the mid-vertebral endplate leads to decreased mechanics of the spinal column by transferring the person's weight to the anterior wall of the level adjacent to the fracture, and as a result the anterior wall is the most common location for ALFs. The applicant further asserted that by restoring the entire fracture, including mid-VB height, the vertebral disc above the superior vertebral endplate is re-pressurized and transfers the load evenly, preventing ALFs. The applicant stated that the SpineJack® system showed superiority over BKP with regard to midline VB height restoration at both 6 and 12 months, pointing to the SAKOS study results in the intent to treat population at 6 months (1.14±2.61 mm vs 0.31±2.22 mm; p=0.0246) and 12 months (1.31±2.58 mm vs. 0.10±2.23 mm; p=0.0035) post-procedure. The applicant noted that similar results were also observed in the PP population (134 patients in the intent-to-treat population without any major protocol deviations).

The applicant also provided two prospective studies, a retrospective study, and two cadaveric studies in support of its assertions regarding superior VB height restoration. The applicant stated that in a prospective comparative study by Noriega D., et al., VB height restoration outcomes utilizing the SpineJack® system were durable out to 3 years. This study was a safety and clinical performance pilot that randomized 30 patients with painful osteoporotic vertebral compression fractures to the SpineJack® system (n=15) or BKP (n=15). Twenty-eight patients completed the 3-year study (14 in each group). The clinical endpoints of analgesic consumption, back pain intensity, ODI, and quality of life were recorded preoperatively and through 36-months post-surgery. Spine X-rays were also taken 48 hours prior to the procedure and at 5 days, 6, 12, and 36 months post-surgery. The applicant explained that over the 3-year follow-up period, VB height restoration and kyphosis correction was better compared to BKP, specifically that VB height restoration and kyphotic correction was still evident at 36 months with a greater mean correction of anterior VB height (10 ± 13% vs 2 ± 8% for BKP, p=0.007) and midline VB height (10 ± 11% vs 3 ± 7% for BKP, p=0.034), while there was a larger correction of the VB angle (−4.97° ± 5.06° vs 0.42° ± 3.43°; p=0.003) for the SpineJack® system group. The applicant stated that this study shows superiority with regards to VB height restoration.

The applicant asserted that Arabmotlagh M., et al., also supported superiority with regard to VB height restoration. Arabmotlagh M., et al. reported a single-arm observational case series of the SpineJack® system. They enrolled 42 patients with osteoporotic vertebral compression fracture of the thoracolumbar, who were considered for kyphoplasty, 31 of whom completed the clinical and radiological evaluations up to 12 months after the procedure. According to materials provided by the applicant, the purpose of the study was to evaluate the efficacy of kyphoplasty with the SpineJack® system to correct the kyphotic deformity and to analyze parameters affecting the restoration and maintenance of spinal alignment. The applicant explained that the mean VB height calculated prior to fracture was 2.8 cm (standard deviation (SD) of 0.47), which decreased to 1.5 cm (SD of 0.59) after the fracture. According to the applicant, following the procedure performed with the SpineJack® system device, the VB height significantly increased to 1.9 cm (SD of 0.64; p<0.01), but was reduced to 1.8 cm (SD of 0.61; p<0.01) at 12 months post-procedure. We note that according to Arabmotlagh M., et al. (2018), these results were specifically for mean anterior VB height. The study does not appear to report results for midline VB height. The applicant also stated that the mean kyphotic angle (KA) calculated prior to fracture was -1° (SD of 5.8), which increased to 13.4° (SD of 8.1) after the fracture. The applicant also stated that following the procedure performed with the SpineJack® system device, KA significantly decreased to 10.8° (SD of 9.1; p<0.01); however, KA correction was lost at 12 months post-procedure with an increase to 13.3° (SD of 9.5; p<0.01).

The applicant provided a Lin et al., retrospective study of 75 patients that compared radiologic and clinical outcomes of kyphoplasty with the SpineJack® system to vertebroplasty (VP) in treating osteoporotic vertebral compression fractures to support its assertions regarding superiority with regard to midline VB height restoration. The applicant stated that the radiologic outcomes from this study were: (1) The mean KA and mean KA restoration was more efficient after the SpineJack® system than VP at all time points (up to 1 year), except for mean KA observed postoperatively at 1 week; and (2) the mean middle VB heights and mean VB height restoration was more favorable after the SpineJack® system than VP. We note that this study did not compare the SpineJack® system to BKP, which the applicant stated is the gold-standard in vertebral augmentation.

In the two cadaveric studies, Kruger A., et al. (2013) and Kruger A., et al. (2015), wedge compression fractures were created in human cadaveric vertebrae by a material testing machine and the axial load was increased until the height of the anterior edge of the VB was reduced by 40 percent. The VBs were fixed in a clamp and loaded with 100 N in a custom made device. In Kruger A., et al. (2013), vertebral heights were measured at the anterior wall as well as in the center of the vertebral bodies in the medial sagittal plane in 36 human cadaveric vertebrae pre- and post-fracture as well as after treatment and loading in (27 vertebrae were treated with the SpineJack® system with different cement volumes (maximum, intermediate, and no cement), and 9 vertebrae were treated with BKP). In Kruger A., et al. (2015), anterior, central, and posterior height as well as the Beck index were measured in 24 vertebral bodies pre-fracture and post-fracture as well as after treatment (twelve treated with the SpineJack® system and twelve treated with BKP).

The applicant asserted that Kruger A., et al. (2013) showed superiority on VB height restoration and height maintenance, and summarized that: (1) Height restoration was significantly better for the SpineJack® system group compared to BKP; (2) height maintenance was dependent on the cement volume used; and (3) the group with the SpineJack® system without cement nevertheless showed better results in height maintenance, yet the statistical significance could not be demonstrated.

The applicant asserted that Kruger A., et al. (2015) showed superiority on VB height restoration, because the height restoration was significantly better in the SpineJack® system group compared with the BKP group. The applicant explained that the clinical implications include a better restoration of the sagittal balance of the spine and a reduction of the kyphotic deformity, which may relate to clinical outcome and the biological healing process.

The applicant also asserted that use of the SpineJack® system represents a substantial clinical improvement with respect to pain relief. According to the applicant, pain is the first and most prominent symptom associated with osteoporotic VCFs, which drives many elderly patients to seek hospital treatment and negatively impacts on their quality of life. The applicant provided the SAKOS randomized controlled study, a prospective consecutive observational study, and a retrospective case series to support its assertions regarding pain relief with the SpineJack® system.

The applicant cited the SAKOS trial for statistically significant greater pain relief achieved at 1 month and 6 months after surgery with the SpineJack® system. The applicant summarized that in the SAKOS trial (1) progressive improvement in pain relief was observed over the follow-up period in the SpineJack® system group only; (2) the decrease in pain intensity versus baseline was more pronounced in the SpineJack® system group compared to the BKP group at 1 month (p=0.029) and 6 months (p=0.021); and (3) at each time point, the percentage of patients with reduced pain intensity >20 mm was ≥90 percent in the SpineJack® system group and ≥80 percent in the BKP group, with a statistically significant difference in favor of the SpineJack® system at 1 month post-procedure (93.8% vs 81.5%; p=0.030). The applicant also noted that although continued pain score improvements were seen out to 1 year for patients treated with the SpineJack® system, the difference between the treatment groups did not meet statistical significance (p=0.061).

The applicant also explained that in the SAKOS study, at 5 days after surgery, there were significantly fewer patients taking central agent medications in the SpineJack® system implant-treated group as compared to those in the BKP-treated group (SJ 7.4% vs. BKP 21.9%, p=0.015). According to the applicant, central analgesic agents included medications such as non-steroidal anti-inflammatory drugs (NSTATEDS), salicylates, or opioid analgesics.

The applicant also cited a prospective consecutive observational study by Noriega D., et al. for statistically significant pain relief immediately after surgery and at both 6 and 12 months. Noriega D., et al. was a European multicenter, single-arm registry study that aimed to confirm the safety and clinical performance of the SpineJack® system for the treatment of vertebral compression fractures of traumatic origin (no comparison procedure). The study enrolled 103 patients (median age: 61.6 years) with 108 VCFs due to trauma (n=81), or traumatic VCF with associated osteoporosis (n=22) who had the SpineJack® system procedure. Twenty-three patients withdrew from the study before the 12-month visit.

The study reported a significant improvement in back pain at 48 hours after the SpineJack® system procedure, with the mean VAS pain score decreasing from 6.6 ± 2.6 cm at baseline to 1.4 ± 1.3 cm (mean change: −5.2 ± 2.7 cm; p<0.001) (median relative decrease in pain intensity of 81.5 percent) for the total study population. Noriega D., et al. also reported that the improvement was maintained over the 12-month follow-up period and similar results were observed with both pure traumatic VCF and traumatic VCF in patients with osteoporosis. The traumatic VCF with osteoporosis sub-group had a mean change of −5.5 (SD=1.9) (median relative change of 81.0%) (p<0.001) at 48 hours post-surgery (n=22), and −5.7 (SD=2.3) mean change (90.3% median relative change) (p<0.001) at 12 months (n=16). The applicant stated that this study supported a claim of statistically significant pain relief immediately after surgery and at both 6 and 12 months.

The applicant summarized that (1) pain relief and improvements in pain scores were statistically significant immediately after treatment (48-72 hours) and at 6 and 12 months following surgery (p<0.001); and (2) the mean improvement between baseline and at 48-72 hours after the procedure (n=31) was −4.6 (2.6) (p<0.001), while the mean improvement between baseline and at the 12-month follow-up (n=22) was −6.0 (3.4) (p<0.001). We note that Noriega D., et al. did not report results for 6 months (although it does include results for 3 months versus baseline) and does not include the results of mean improvement stated by the applicant. It is also unclear if the applicant intended to rely on the overall results of the study or the subgroup of traumatic VCF with osteoporosis.

The applicant also cited a retrospective case series, Renaud C., et al., for statistically significant pain relief after surgery with the SpineJack® system. Renaud C., et al., included 77 patients with a mean age of 60.9 years and 83 VCFs (51 due to trauma and 32 to osteoporosis) treated with 164 SpineJack® system devices (no comparison procedure). The applicant summarized that—(1) pain relief was statistically significant (p<0.001), with a pain score decrease from 7.9 pre-operatively to 1.8 at 1 month after the procedure; (2) the pain score improvement was 77 percent at hospital discharge and gradually increased to 86 percent after 1 year following surgery; and (3) the study outcomes demonstrated that the SpineJack® system provided both immediate and long-lasting pain relief.

After reviewing the information submitted by the applicant as part of its FY 2021 new technology add-on payment application for the SpineJack® system, we noted that the results of the SAKOS trial did not appear to have been corroborated in any other randomized controlled study. Additionally, although the applicant stated that BKP is the gold standard in VA, we noted that there appeared to be a lack of data comparing the SpineJack® system to other existing technology, such as the PEEK coiled implant (the Kiva® system), particularly since the PEEK coiled system was considered the predicate device for the SpineJack® system FDA 510(k) clearance. Furthermore, we noted that there appeared to be a lack of data comparing the SpineJack® system to conservative medical therapy, although there was an active study posted on clinicaltrials.gov comparing the SpineJack® system to conservative orthopedic management, the latter consisting of brace and pain medication in acute stable traumatic vertebral fractures in subjects aged 18 to 60 years old. The clinicaltrials.gov entry indicated that findings should be forthcoming in 2020.

Additionally, we noted that two recent systematic reviews of the management of vertebral compression fracture (Buchbinder et al. for Cochrane (2018), Ebeling et al. (2019) for the American Society for Bone and Mineral Research (ASBMR)) did not support vertebral augmentation procedures due to lack of evidence compared to conservative medical management. The ASBMR recommended more rigorous study of treatment options including “larger sample sizes, inclusion of a placebo control and more data on serious AEs (adverse events).” We invited public comment on whether the SpineJack® system meets the substantial clinical improvement criterion.

Comment: The applicant submitted comments in response to CMS's concerns in the FY 2021 IPPS/LTCH PPS proposed rule regarding whether the SpineJack® system meets the substantial clinical improvement criterion.

With respect to the FY 2021 IPPS/LTCH PPS proposed rule concern that recent systematic reviews of the management of VCF for Cochrane and ASBMR did not support vertebral augmentation procedures due to lack of evidence compared to conservative medical management, the applicant responded that the latest clinical evidence and a policy statement from the International Society for the Advancement of Spine Surgery (ISASS) do provide robust support for the use of vertebral augmentation (VA) over non-surgical management (NSM) in the treatment of osteoporotic VCFs.

According to the applicant, a recent systematic review and meta-analysis by Beall et al. (2018) included 25 prospective studies (either level 1 or level 2 evidence), comparing vertebral augmentation over NSM for the treatment of thoracic and lumbar VCFs. Again according to the applicant, the Beall meta-analysis reportedly found that both balloon kyphoplasty (BKP)-treated patients and vertebroplasty (VP)-treated patients had significantly greater pain reduction over those treated with NSM.

Relatedly, the applicant pointed to a policy statement released by the ISASS in 2018, the medical society concluded that, based upon the body of clinical evidence available for the international spine community, it could “confidently advocate that there is strong support for vertebral augmentation in the treatment of symptomatic VCFs.”

The applicant also pointed to recent Local Coverage Determinations on percutaneous vertebral augmentation (PVA) for osteoporotic VCF, published by the seven regional Medicare Administrative Contractors (MACs). According to the applicant, the LCD for Noridian in particular stated that the preponderance of evidence (including empirical studies) favors consideration of PVA in select osteoporotic VCF patients.

Finally, the applicant asserted that the SAKOS trial for the SpineJack® system was specifically designed to address the ASBMR recommendations for more rigorous study of VCF treatments, through larger study sample sizes, inclusion of a placebo control, and more data on serious adverse events.

With respect to the FY 2021 IPPS/LTCH PPS proposed rule concern that the results of the SAKOS trial have not been corroborated in any other randomized controlled trial, and regarding the lack of data comparing the SpineJack® system to technologies other than BKP (like the Kiva® system PEEK coiled implant), the applicant responded that multiple randomized trials are often not conducted to corroborate level one evidence that has been published in a peer-reviewed journal, such as the SAKOS trial data for the SpineJack® system.

The applicant also stated that at least 16 supporting journal articles had been cited in its new technology add-on payment application, highlighting the significant clinical benefit of the SpineJack® system for osteoporotic VCFs.

With regard to the Kiva® system, the applicant stated that the Kiva® system was found to be non-inferior to BKP, but not superior to BKP, in the Kiva® system's own randomized clinical trial study. According to the applicant, because the Kiva® system was not found superior to BKP, has not been widely adopted in the United States, and because the SpineJack® system was found superior to BKP on some outcomes in the SAKOS trial, the applicant concluded that the Kiva® system was not an appropriate clinical comparator for study.

With respect to the FY 2021 IPPS/LTCH PPS proposed rule concern that there is a lack of data comparing the SpineJack® system to conservative medical therapy (or non-surgical management, NSM), the applicant asserted that substantial clinical evidence may be found throughout the published medical literature on improved outcomes with BKP compared to NSM when treating patients with osteoporotic VCFs. According to the applicant, examples of publications that highlight the benefits of BKP treatment include those from the FREE (Fracture Reduction Evaluation) trial, which describe rapid pain reduction and clinical improvements in function and quality of life, as well as radiologic improvements in VB height and kyphotic angulation, among BKP-treated patients vs. NSM-treated patients. A publication from the EVOLVE trial also illustrates significant improvements in pain scores, functional capability, and quality of life among osteoporotic patients treated with BKP.

The applicant then cited to several additional studies showing mortality and survival benefits associated with BKP and VP procedures in the treatment of VCF, as compared to NSM. According to the applicant, based upon the body of evidence available, the use of NSM as a comparator treatment to the SpineJack® system for a new clinical study would not be in the best interest of osteoporotic VCF patients. This is primarily due to the increased risk of morbidity and mortality that has been reported in this patient population, particularly among the elderly.

With regard to the active study noted by CMS listed on ClinicalTrials.gov (NCT02657265) that compares the SpineJack® system to conservative orthopedic management, the applicant noted that this is an ongoing trial in Europe that has been designed to treat patients with acute traumatic VCFs, rather than osteoporotic VCFs. Patients enrolled in this study are between the ages of 18 to 60, which reflects the younger age demographic found among traumatic VCF patients. Since patients 65 years and older are not included in the study population, the results from this European trial will not be applicable to the Medicare patient population with osteoporotic VCFs. Finally, the applicant provided additional clarifications or minor corrections with regard to several specific studies that were cited in the new technology add-on payment application, for which CMS noted an interpretive question or concern. The clarifications provided by the applicant addressed each of Lin et al. (2016), Arabmotlagh et al. (2018), and Noriega et al. (2015). The applicant also requested the correction of a minor typographical error in the FY 2021 IPPS proposed rule regarding the SAKOS study results for one of the values concerning VB height restoration at 12 months. Specifically, according to the applicant, for the midline VB height restoration reported at 12 months for the SpineJack® system compared to BKP in the SAKOS trial, an inadvertent error appears in the standard deviation value for the BKP data reported in the proposed rule. The applicant stated this value should be revised as follows to match the SAKOS trial publication: “12 months (1.31 ± 2.58 mm vs. 0.10 ± 2.34 mm; p=0.0035) post-procedure.”

One commenter who is a manufacturer of BKP implants made several criticisms of the evidence put forward by the applicant, with regard to whether the SpineJack® system meets the substantial clinical improvement criterion. The commenter emphasized that although the applicant cited the SAKOS study as the basis for concluding that the SpineJack® system meets the substantial clinical improvement criterion, the SAKOS study compared the SpineJack® system to older BKP technology (KyphX), rather than to the most current BKP technology available at the time of the study (Xpander II and Express II). According to the commenter, these second-generation balloons have been available since 2014, generate lift force in excess of 1200 Newtons, and are the only BKP products indicated for the cement resistance technique, whereby one bone tamp is left in place during cement injection and curing to maximize height restoration in a collapsed vertebral body. The commenter suggested that if the SAKOS study had compared the SpineJack® system to these second-generation BKP implants, then the SpineJack® system might not have demonstrated superior performance on secondary outcome measures.

The commenter also offered several additional criticisms of the SAKOS study. The commenter pointed out that the SAKOS study design did not involve an even distribution of the spine levels treated across study arms, and that it is possible that a difference in the levels treated could have contributed to the reduction of ALFs in the SpineJack® system group. The commenter asserted that the vertebral levels T11-L1 are commonly known for higher number of fractures, and that these spinal segments had 14 more levels treated with BKP than with the SpineJack® system in the SAKOS study. According to the commenter, further analysis would be needed to determine if the location of fractures had an effect on the occurrence of ALFs between the two study arms in SAKOS. The commenter also pointed out that it was unclear whether there was any difference in the two treatment groups' bone density metrics, as this was not disclosed in the SAKOS study.

The commenter went on to emphasize that the clinical comparison in the SAKOS study demonstrated the SpineJack® system was non-inferior to BKP at the time of the primary endpoint (12 months); however, there was no significant difference between groups in pain intensity visual analog scale (VAS) score at the final time point, and no difference in Oswestry Disability Index (ODI) or the EQ-5D health status questionnaire at any time point during the study. The commenter acknowledged that SAKOS demonstrated superiority for the SpineJack® system for mid-vertebral height restoration, but emphasized that measures of anterior height, posterior height, and cobb angle showed no difference across the study arms, within the secondary endpoints. The commenter also observed that the SAKOS study showed a similar number of adverse events between study arms, with the SpineJack® system population seeing a higher percentage of serious adverse events.

Finally, the commenter disputed the applicant's assertion that vertebral augmentation treatment with vertebroplasty may alleviate pain, but cannot restore vertebral body height or correct spinal deformity. The commenter likewise disputed the applicant's assertion that BKP attempts to restore vertebral body height, but the temporary correction obtained cannot be sustained over the long-term (85 FR 32656). In countering the applicant's assertions, the commenter referenced three published articles with empirical evidence regarding the impact of BKP on kyphotic angle and VB height restoration.

Another commenter provided a detailed technical criticism of several aspects of the SAKOS trial, and asserted that the SpineJack® system does not meet the substantial clinical improvement criterion. This commenter also stated that the BKP arm of the SAKOS study used an older generation of balloon implants with less ability to deliver lift force and to improve VB height. The commenter asserted that in order to claim superiority for the SpineJack® system, the SAKOS trial should have used the newer generation balloon implants, and that the failure to do so calls into question the SAKOS findings of improved height restoration and reduced ALFs for the SpineJack® system.

The commenter also noted that the SAKOS study reported an exceedingly high 40% rate of disc space extravasation in the balloon kyphoplasty arm. The commenter disputed that this high rate of disc space extravasation is typical based on the literature on BKP, and the commenter cited to two BKP trials which found much lower rates of disc space extravasation. According to the commenter, the high rate of disc extravasation in the BKP arm of the SAKOS trial calls into question the claims that the SpineJack® system reduced the occurrence of ALFs, since disc extravasation has itself been shown to induce ALFs in other empirical studies. The commenter also suggested that the difference in ALFs across the two SAKOS study arms could also help to explain the finding of improved pain intensity scores for the SpineJack® system at different secondary time points.

The commenter offered several additional criticisms with regard to the SAKOS study, including that fractures in the T11-L1 junctional zone were not evenly distributed across study arms, and might have mediated the observed difference in the occurrence of ALFs. The commenter also raised questions about whether the degree of osteoporosis was held consistent across the SAKOS study arms, and whether the inclusion criteria for SAKOS (requiring an initial period of at least 6 weeks of conservative medical therapy) might make the study findings less applicable to the American Medicare population generally. The commenter challenged the applicant's assertion that BKP does not sustain VB height recovery over the long term, and the commenter provided several citations to empirical studies stating the contrary.^{348 349 350 351 352 353} The commenter challenged the importance of the SAKOS finding of superiority for the SpineJack® system on mid-vertebral height restoration, and reiterated that the SAKOS study findings on measures of anterior VB height, posterior VB height, and Cobb Angle measurements showed no differences between the SpineJack® system and BKP.

The commenter further noted that the applicant only cited one study to support the statement that “research indicates that the restoration of middle VB height may be as important as Cobb angle correction in the prevention of ALFs,” and the commenter asserted that the cited study does not actually support that statement.

The commenter concluded that the current medical standard for prevention of ALFs remains the Cobb angle and anterior VB height measurements. Finally, the commenter also challenged the applicant's assertion that “by restoring the entire fracture, including mid-VB height, the vertebral disc above the superior vertebral endplate is re-pressurized and transfers the load evenly, preventing ALFs,” based on results from a single cadaveric study.

Several commenters agreed that the SpineJack® system provides pain reduction based on their clinical experiences. Several commenters also agreed that patients are either pain-free or nearly pain-free based on their clinical experiences. One commenter agreed that the SpineJack® system would theoretically decrease pain based on the study provided. Several commenters believed that decreased pain enhances activities of daily living (ADLs) and overall quality of life for older patients, which may further reduce long term care resource consumption. Several commenters also expressed their belief that the pain reduction the SpineJack® system provides causes patients to require less opioid prescriptions for pain. The commenters cited both the inability of the older adult population to tolerate opioids, the abuse or dependency potential for patients, and potential for misuse by persons other than the prescribed as benefits of a reduction in opioid prescriptions written and dispensed.

Many commenters agreed that they have seen evidence of increased VB height restoration in their clinical experience, and many commenters believed based on their clinical experiences that the SpineJack® system is superior to other product options for these fractures. Commenters cited improved posture, sagittal alignment, improved pulmonary function, and/or better disc health. Several commenters also noted that the SpineJack® system is especially useful in certain subsets of patients, with commenters citing various subgroups including older patients, patients who have already experienced previous compression fractures, who have complex fractures, who have fractures under 3 months old, who have older fractures, who have greater than 25% vertebral body height loss, and/or who have mild to moderate retropulsion of the posterior endplate. Several commenters further noted that in their clinical experience the SpineJack® system requires less cement for stabilization, leading to less risk of cement leakage.

Many commenters believed that the SpineJack® system will reduce ALFs based on their clinical experience, or on review of the SAKOS study. A few commenters believed that the SpineJack® system allows patients to have increased posture correction and locomotion, and that, combined with the reduced ALFs, will lead to a higher quality of life in the future. Many commenters asserted that the SpineJack® system is their preferred treatment option generally.

One commenter believed that the literature regarding vertebral augmentation techniques is inconsistent because of multiple guidelines from various societies that are inconsistent with each other. The commenter believed this disagreement leads to variation in the methodology of research papers to evaluate this technique. The commenter asserted that as a result, the large Cochrane and ASBMR reviews are conglomerations of heterogeneous data which will invariably show no statistical difference.

A few commenters believed that conservative medical management as an option for patients with VCFs is no longer an accepted standard of care. One commenter stated the ASBMR view is inconsistent with multiple Medicare Administrative Contractor local coverage determinations, which indicate that earlier intervention in some patients is supported by the literature.

A few commenters believed that the SAKOS study was well designed despite the lack of a control arm, and supported its claims, including with regard to ALFs, VB height, and superior pain relief. One commenter believed that BKP was the correct comparator for the SAKOS study as the Kiva® system was unable to demonstrate improvement over BKP in a separate study.

Response: We appreciate all the comments received related to the SpineJack® system, and we have taken them into consideration in making our determination, including the applicant's submission of additional information to address the concerns presented in the proposed rule and the comments expressing concerns with the design and results of the SAKOS study.

After consideration of the public comments received, we believe that commenters have addressed our concerns regarding whether the SpineJack® system meets the substantial clinical improvement criterion and that the SpineJack® system represents a substantial clinical improvement over existing technologies based on the data received from commenters. The data provided from the commenters with clinical experience with vertebral augmentation procedures and the SpineJack® system which included improved pain, VB height restoration and ALF outcomes for patients with osteoporotic VCFs when compared with existing treatments demonstrates substantial clinical improvement.

After consideration of the public comments we received, we have determined that the SpineJack® system meets all of the criteria for approval for new technology add-on payments. Therefore, we are approving new technology add-on payments for the SpineJack® system for FY 2021. Cases involving the use of the SpineJack® system that are eligible for new technology add-on payments will be identified by ICD-10-PCS procedure codes XNU0356 (Supplement lumbar vertebra with mechanically expandable (paired) synthetic substitute, percutaneous approach, new technology group 6) and XNU4356 (Supplement thoracic vertebra with mechanically expandable (paired) synthetic substitute, percutaneous approach, new technology group 6).

In its application, the applicant estimated that the average cost of the SpineJack® system is $5,622.64 per patient. Under § 412.88(a)(2), we limit new technology add-on payments to the lesser of 65 percent of the average cost of the technology, or 65 percent of the costs in excess of the MS-DRG payment for the case. As a result, the maximum new technology add-on payment for a case involving the use of the SpineJack® system is $3,654.72 for FY 2021.

j. WavelinQ^TM (4F) EndoAVF System

Becton Dickinson & Company (BD) submitted an application for new technology add-on payments for the WavelinQ^TM (4F) EndoAVF System for FY 2021. According to the applicant, the predicate device, the WavelinQ^TM (6F) EndoAVF System (formerly named the everlinQ endoAVF system) received FDA marketing authorization on June 22, 2018 for the indication of the creation of an arteriovenous fistula (AVF) using concomitant ulnar artery and ulnar vein or concomitant radial artery and radial vein in patients with minimum artery and vein diameters of 2.0 mm at the fistula creation site who have chronic kidney disease and need hemodialysis. On February 6, 2019 the FDA cleared the WavelinQ^TM (4F) EndoAVF System via its 510(k) (premarket notification). The WavelinQ^TM 4F EndoAVF System is indicated for the creation of an AVF using concomitant ulnar artery and ulnar vein or concomitant radial artery and radial vein in patients with minimum artery and vein diameters of 2.0 mm at the fistula creation site who have chronic kidney disease and need hemodialysis. It is our understanding that the WavelinQ^TM (4F) EndoAVF System replaces the WavelinQ^TM (6F) EndoAVF System. The applicant noted that it is applying for new technology add-on payments for the WavelinQ^TM (4F) EndoAVF System and not the WavelinQ^TM (6F) EndoAVF System. The applicant also noted that the WavelinQ^TM (4F) EndoAVF System has been cleared to treat both the radial arteries and veins and the ulnar arteries and veins. Per the applicant, the only difference between the two technologies and their respective approvals is the size of the catheters (6F vs. 4F) and the expanded indication to treat the radial arteries and veins for the WavelinQ^TM (4F) EndoAVF System.

Hemodialysis, a form of treatment for kidney failure patients, is a procedure that removes wastes, salts, and fluid from a patient's blood when the kidneys can no longer perform these functions. To receive dialysis, patients require a vascular access, such as an arteriovenous (AV) fistula, to connect to the dialysis machine.

The applicant asserted that Endovascular AV fistula creation with the WavelinQ^TM (4F) EndoAVF System is achieved using flexible magnetic-guided arterial and venous catheters that utilize radiofrequency energy and includes vascular embolization of the brachial vein, fistulogram, angiography (to fluoroscopically guide placement of the arterial magnetic catheter), and venography (to fluoroscopically guide placement and alignment of the venous magnetic radiofrequency [RF] catheter), ultrasound, and final fistulogram to document AV fistula creation).

The applicant asserted that the following ICD-10-CM diagnosis codes are applicable to the WavelinQ^TM (4F) EndoAVF System: N18.4 (Chronic kidney disease, stage 4), N18.5 (Chronic kidney disease, stage 5), and N18.6 (End stage renal disease). The applicant also asserted that the following ICD-10-PCS procedure codes identify cases involving use of the WavelinQ^TM (4F) EndoAVF System: 03193ZF (Bypass right ulnar artery to lower arm vein, percutaneous approach), 031A3ZF (Bypass left ulnar artery to lower arm vein, percutaneous approach), 031B3ZF (Bypass right radial artery to lower arm vein, percutaneous approach), and 031C3ZF (Bypass left radial artery to lower arm vein, percutaneous approach).

As stated previously, if a technology meets all three of the substantial similarity criteria, it would be considered substantially similar to an existing technology and, therefore, would not be considered “new” for purposes of new technology add-on payments.

With regard to the first criterion, whether a product uses the same or a similar mechanism of action to achieve a therapeutic outcome, the applicant asserted that the WavelinQ^TM (4F) EndoAVF System uses a different mechanism of action than any commercially available technology on the market for hemodialysis fistula creation. The applicant stated the WavelinQ^TM (4F) EndoAVF System is not an open surgical approach, and that this is the first differentiating factor from previous methods used to create an arteriovenous fistula. The applicant also explained that WavelinQ^TM (4F) EndoAVF System consists of flexible magnetic-guided arterial and venous catheters that utilize radiofrequency energy to create a communicating channel between the arterial and venous system via an endovascular approach. Additionally, the applicant explained that as part of the procedure, the WavelinQ^TM (4F) EndoAVF System also requires vascular embolization of the brachial vein, fistulogram, angiography, venography, and ultrasound, as discussed above. The applicant asserted that in summary, the endovascular creation of an AV fistula using radiofrequency energy delivered through magnetic-guided catheters is a unique mechanism of action.

The applicant indicated the Ellipsys® Vascular Access System (Avenu Medical) has recently been granted marketing authorization by the FDA (January 25, 2019). The applicant asserted that while Ellipsys® is also an endovascular method of creating an AV fistula, there are several important points of differentiation between the two devices and their corresponding procedures. According to the applicant, there are different mechanisms of action, procedural processes, and anatomical locations of fistula creation as follows:

• Fistula creation: WavelinQ^TM utilizes radiofrequency ablation; Ellipsys® utilizes thermal resistance (heat).
• Embolization: WavelinQ^TM requires coil embolization of the brachial vein at the time of EndoAVF creation; Ellipsys® does not.
• Guidance: WavelinQ^TM utilizes magnetic catheters to guide and align the location of the EndoAVF creation site and Ellipsys® does not have a mechanism for aligning the fistula creation site.
• Fistula location: WavelinQ^TM offers two options for fistula creation compared to Ellipsys®: First, the WavelinQ^TM can create a fistula between the concomitant ulnar artery and ulnar vein. According to the applicant, this is an unused vascular bed for traditional surgical fistula options which does not interfere with necessary blood flow for hemodialysis purposes, thus preserving all future surgical AV fistula options such as radiocephalic, brachiocephalic, and brachiobasilic fistulas. Second, the WavelinQ^TM can create a fistula between the concomitant radial artery and radial vein. This method eliminates the ability to perform a future radiocephalic fistula. In comparison, the Ellipsys® device is only able to create a fistula from the proximal radial artery to the perforating vein, thus eliminating any future use of a radiocephalic fistula.
• Access methods: WavelinQ^TM accesses both the arterial system and venous system and Ellipsys® utilizes only the venous system.
• Imaging: There are different methods of visualization in that WavelinQ^TM uses including ultrasound and fluoroscopy, whereas Ellipsys® only uses ultrasound.
• Subsequent procedures: Ellipsys® requires a secondary balloon angioplasty procedure at a later date, while WavelinQ^TM does not.
• Procedure Times and Complexity: EndoAVF creation with WavelinQ^TM is an 85-minute procedure, whereas EndoAVF creation with Ellipsys® is a 23-minute procedure, which the applicant states represents a marked difference in procedure complexities.

With regard to the second criterion, whether a product is assigned to the same or a different MS-DRG, the applicant asserted that its MS-DRG analysis showed that cases using the WavelinQ^TM (4F) EndoAVF System will most often be mapped to MS-DRG 264 (Other Circulatory System O.R. Procedures), per the assignment of recently created ICD-10-PCS codes for endovascular fistula creation. The applicant anticipated that cases using the Ellipsys® Vascular Access System will also be frequently mapped to this MS-DRG as MS-DRG 264 is the most common MS-DRG for patients with surgical AV fistula creations. As such, the applicant does not see a difference in MS-DRG assignment between WavelinQ^TM (4F) EndoAVF procedures, other endovascular AVF systems, and traditional surgical AV fistula creation procedures.

With regard to the third criterion, whether the use of the new technology involves the treatment of the same or similar type of disease and the same or similar patient population when compared to an existing technology, the applicant stated the WavelinQ^TM (4F) EndoAVF System is indicated for the creation of an arteriovenous fistula using concomitant ulnar artery and ulnar vein or concomitant radial artery and radial vein in patients with minimum artery and vein diameters of 2.0 mm at the fistula creation site who have chronic kidney disease and need hemodialysis. The applicant further explained that the diagnoses associated with this treatment and the patient population are similar to those treated by existing procedures and technologies that are commercially available, such as surgical AV fistula creation and the Ellipsys® Vascular Access System.

As stated above, the WavelinQ^TM (6F) EndoAVF System received FDA approval on June 22, 2018 for use in the ulnar arteries and veins. The WavelinQ^TM (4F) EndoAVF System is an expanded access of the WavelinQ^TM (6F) EndoAVF System and received FDA clearance on February 6, 2019 for use in the radial arteries and veins as well as the ulnar arteries and veins. In the proposed rule, we stated that it seems that for purposes of use in the ulnar arteries and veins, the WavelinQ^TM (4F) EndoAVF System would be considered substantially similar to the WavelinQ^TM (6F) EndoAVF System as there are only minor differences (the size of the catheters) between the two devices as explained previously. As a result, we stated that we believe the newness period for the use in the ulnar arteries and veins would begin with the FDA approval of the WavelinQ^TM (6F) EndoAVF System (formerly named the everlinQ endoAVF system), which occurred on June 22, 2018, rather than the FDA clearance of the WavelinQ^TM (4F) EndoAVF System, which occurred on February 6, 2019. Finally, because the WavelinQ^TM (4F) EndoAVF System received FDA clearance on February 6, 2019 for use in the radial arteries and veins, we stated that it seems the newness period for the use of the device in the radial arteries and veins would begin on February 6, 2019.

We also noted that as summarized previously, the applicant provided an explanation for why it believes the WavelinQ^TM (4F) EndoAVF System is not substantially similar to the Ellipsys®, specifically with regard to mechanism of action. In the proposed rule we welcomed additional comments on whether the WavelinQ^TM (4F) EndoAVF System and the Ellipsys® are substantially similar to each other. We also invited public comments on whether the WavelinQ^TM (4F) EndoAVF System is substantially similar to existing technologies and whether it meets the newness criterion.

Comment: The applicant submitted public comments. The applicant stated WavelinQ^TM uses an entirely different mechanism of action than any commercially available product or surgical technique.

The applicant also stated that the predicate device, the WavelinQ^TM (6F) EndoAVF System received FDA approval on June 22, 2018 for AVFs of the ulnar arteries and ulnar veins. The applicant also agreed that the newness period for the WavelinQ^TM 4F EndoAVF System for the radial arteries and radial veins would begin on February 6, 2019.

Another commenter agreed that the creation of endovascular AVFs clearly differs in method of action from surgical AVF creation. However, the commenter stated that while WavelinQ^TM and Ellipsys® exhibit differences from each other in their technical characteristics, they do not have fundamentally different mechanisms of action. The commenter further stated that the main differences between the two endovascular systems include the use of two catheters with WavelinQ^TM and one with Ellipsys® and the technical characteristics of the catheters, differences in the fistula sites, differences in imaging requirements, and in the source of energy. The commenter added that key similarities include the percutaneous “side-to-side” technique, treatment of the same population of patients, and the requirement of additional procedures for blood flow control such as coil embolization with WavelinQ^TM and angioplasty with Ellipsys®. They further stated the two technologies could be best described as having a substantially similar mechanism of action and should be considered jointly for purposes of new technology add-on payments eligibility.

Response: We thank the applicant and commenter for their comments. After consideration of the comments received, we agree with the applicant that the WavelinQ^TM uses a unique mechanism of action with its dual catheter access of both venous and arterial systems, magnetic linking of the vessels, and additional fistula site, which differs from that of other commercially available devices. Therefore, we believe the WavelinQ^TM meets the newness criterion.

With regard to the cost criterion, the applicant conducted the following analysis to demonstrate that the technology meets the cost criterion. The applicant searched the FY 2018 MedPAR database for claims reporting an ICD-10-CM diagnosis code of N18.4, N18.5, or N18.6 to identify cases that may be eligible for the WavelinQ^TM (4F) EndoAVF System. The applicant limited their analysis to the following five most common MS-DRGs that the cases mapped to, which accounted for 66 percent of all cases: MS-DRG 252 (Other Vascular Procedures with MCC), 264 (Other Circulatory System O.R. Procedures), 673 (Other Kidney and Urinary Tract Procedures with MCC), 674 (Other Kidney and Urinary Tract Procedures with CC), and 981 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC). This resulted in 2,472 cases across these five MS-DRGs.

The applicant first removed supply charges with a revenue code of 027X and also removed charges for the operating room. Then the applicant standardized the charges. The applicant noted that in order to provide a conservative estimate it did not inflate the charges. The applicant then added charges for the new technology as well as procedure related charges which included operating room charges.

Based on the FY 2020 IPPS/LTCH PPS final rule correction notice data file thresholds, the average case-weighted threshold amount was $83,372. In the applicant's analysis, the final inflated average case-weighted standardized charge per case was $121,749. Because the final inflated average case-weighted standardized charge per case exceeds the average case-weighted threshold amount, the applicant maintained that the technology meets the cost criterion.

We invited public comments on whether the WavelinQ^TM (4F) EndoAVF System meets the cost criterion.

Comment: The applicant commented that a conservative approach was taken when calculating WavelinQ^TM procedure costs. For example, all supply and operating room charges were backed out and inflation was not accounted for in the final calculation. The applicant stated that analysis clearly demonstrates WavelinQ^TM (4F) EndoAVF System meets the new technology add-on payments cost criterion.

Response: We appreciate the applicant's comments concerning the cost criterion. After consideration of the public comments we received and based on the cost analysis as described previously, we agree that the WavelinQ^TM (4F) EndoAVF System meets the cost criterion.

With regard to the substantial clinical improvement criterion, the applicant asserted that the WavelinQ^TM (4F) EndoAVF System represents a substantial clinical improvement over existing technologies because it offers a treatment option for a patient population unresponsive to or ineligible for currently available treatments. The applicant also stated that WavelinQ^TM (4F) EndoAVF System represents a substantial clinical improvement over existing technologies because the WavelinQ^TM (4F) EndoAVF System significantly improves clinical outcomes for patients requiring hemodialysis in comparison to arteriovenous surgical fistula creation and the Ellipsys® Vascular Access System; offers higher patient satisfaction; provides a beneficial resolution to disease process treatment; and provides additional vascular access options for dialysis.

Surgical arteriovenous fistulae are the recommended type of vascular access for hemodialysis. Despite initiatives to increase AVF use, fistulas are still underutilized with only 17 percent of patients initiating dialysis with an AVF and 67 percent of patients still using a central venous catheter (CVC) at 3 months after dialysis initiation. Failure rates (failure to mature and become usable) for surgical AVF range from 20-60 percent. AVFs also take a long time to mature—approximately 132 days. Furthermore, >83 percent of AVF patients need at least one intervention in the first year, typically receiving 1.5 to 3.3 additional interventions per year to mature and maintain patency.

According to the applicant, in contrast, results of AVFs created using the WavelinQ^TM 4F EndoAVF System have shown that endovascular AVFs (endoAVFs) have better results than surgical AVF. The applicant stated that these results include higher patency with fewer post-creation interventions and higher fistula maturation as compared to the surgical AVF results reported in the literature. For example, a recent meta-analysis included four clinical studies with pooled efficacy and safety data from 157 patients using the WavelinQ^TM EndoAVF System. According to the applicant, the results include high procedure success of 96.8 percent and higher cannulation success than surgical AVF—82.4 percent of patients were successfully used for dialysis by 6 months. Also, the applicant asserted that the results include higher patency than surgical AVF, demonstrated by 74.8 percent primary patency (unobstruction without additional intervention) at 12 months, 79.0 percent secondary patency (unobstruction) at 12 months, and 98.12 percent functional patency (durability post-cannulation) at 12 months. The FLEX study was a prospective, single arm safety and feasibility study (using the WavelinQ^TM (6F) EndoAVF System) that reported a procedure success rate of 97 percent and that 96 percent of endoAVFs were used for dialysis and remained patent after 6 months.

The applicant indicated that a second study, the Novel Endovascular Access Trial (NEAT), which was a statistically powered, prospective, single-arm, multi-center study of 60 evaluable patients and 20 roll-ins using the WavelinQ^TM (6F) EndoAVF System, confirmed previous results with high procedure and cannulation success of 98 percent and 67 percent (within 12 months), respectively. Additionally, the study demonstrated a low thrombosis rate of 10.5 percent, low intervention rate of 0.46 per patient-year, and high 12-month primary and secondary patency of 69 percent and 84 percent, respectively.

The applicant stated that additional analyses comparing endoAVF (using the WavelinQ^TM (6F) EndoAVF System) to surgical AVF showed that patients with an endoAVF had fewer secondary interventions in the first year as compared to patients with a surgical AVF, resulting in overall cost savings to payers. According to the applicant, 67 percent of endoAVF patients were free from intervention after 1 year compared to only 18 percent of surgical AVF patients.

The applicant also included a third study, the EASE study, which was a single-center, single-arm prospective study of 32 patients that evaluated the safety and efficacy of the WavelinQ^TM (4F) EndoAVF System. The applicant stated that results from EASE were consistent with previous studies, demonstrating 100 percent procedure success with a low adverse event rate, 1/32 (3.1 percent). The lower adverse event rate was attributed to arterial access from the wrist, which was utilized in 79 percent of patients. We note that arterial wrist access is not approved in the U.S. 6-month primary patency was 83 percent. At 6 months, 86 percent of patients were successfully cannulated for dialysis using the WavelinQ^TM (4F) EndoAVF System.

Additionally, the applicant noted that a fourth study, the EndoAVF EU Study (using the WavelinQ^TM (4F) EndoAVF System), is still enrolling. Outcomes for the first 32 patients were tabulated and included in the meta-analysis and showed consistent results to previous studies.

The applicant asserted the FLEX, NEAT, EASE, and EndoAVF EU Study support that the WavelinQ^TM (4F) EndoAVF System results in much lower maintenance and morbidity than the traditional surgical AVF in end-stage renal failure patients, with intervention rates for endoAVF ranging from 0.21-0.6 per patient-year and fistula maturation rates up to 86 percent at 6 months.

The applicant also asserted the reduction in interventions with the WavelinQ^TM (4F) EndoAVF System is a result of the unique procedure that minimizes vessel trauma. According to the applicant, the system creates a fistula by using radiofrequency to vaporize tissue between the artery and concomitant vein with minimal vessel trauma or manipulation of the vessels, potentially lessening the stimulus for negative remodeling that leads to frequent interventions.

The applicant stated the WavelinQ^TM (4F) EndoAVF System offers higher patient satisfaction and beneficial resolution to disease process treatment compared to surgical AVF. According to the applicant, the team Lok, C et al. was interested in patient acceptance of an endoAVF (based on the WavelinQ^TM (6F) EndoAVF System) because up to 30 percent of patients refuse a surgically created AV fistula according to the reported literature. Therefore, the team collected data on patient satisfaction using a validated patient questionnaire to learn more about the patient experience with this new technology using responses from patients in the NEAT trial. The applicant asserted that results indicate patients are very satisfied with their endoAVF and would not change to another type of access.

The applicant explained some of the clinical and patient benefits of the WavelinQ^TM (4F) EndoAVF System. The applicant asserts, for example, that endoAVF allows the patient to avoid open surgery, scarring, and arm disfigurement, which is important to many patients. The applicant further asserted that the endoAVF procedure improves the process of administering hemodialysis as the endoAVF matures faster compared to a surgical AVF, allowing the patient to more quickly transition away from a central venous catheter, which the applicant stated has a high rate of complication including infection. In addition, the applicant stated that WavelinQ^TM (4F) EndoAVF requires less follow-on maintenance such that patients are not in and out of the hospital for additional interventions to maintain the primary patency of the fistula. The applicant stated that this has the potential to increase patient acceptance of an AVF as surgical fatigue is cited as the primary reason patients elect a permanent CVC over a surgical AVF. The applicant also suggested the WavelinQ^TM (4F) EndoAVF System provides additional vascular access options for dialysis in comparison to surgical AVF and the Ellipsys® Vascular Access System.

The applicant asserted the WavelinQ^TM (4F) EndoAVF System creates additional options for establishing arteriovenous access, that is another anatomic site for creating a fistula that neither traditional surgical AVFs nor the Ellipsys® Vascular Access System can offer. According to the applicant, patients are given an extra location in the mid-arm for a fistula because the WavelinQ^TM (4F) EndoAVF System uses vessels deep in the arm that are not used in surgical fistula creation and are only accessible endovascularly via the unique mechanism of WavelinQ^TM consisting of action using magnetically-guided arterial and venous catheters. The applicant suggested this additional access creation site extends the potential time a patient can undergo dialysis with an autogenous fistula before exhausting vessels and requiring an AV graft or CVC.

The applicant asserted the WavelinQ^TM (4F) EndoAVF System is indicated for the creation of an arteriovenous fistula using concomitant ulnar artery and ulnar vein or concomitant radial artery and radial vein in patients with minimum artery and vein diameters of 2.0 mm at the fistula creation site who have chronic kidney disease and need hemodialysis. According to the applicant, the ulnar artery to ulnar vein fistula is unique to the WavelinQ^TM (4F) EndoAVF System in comparison to both traditional surgical fistula creation and the Ellipsys® Vascular Access System. The applicant stated that it enables the preservation of all future surgical AVF options such as a radiocephalic, brachiocephalic and brachiobasilic fistula as it utilizes an entirely different vascular bed for both arterial and venous blood flow.

With regard to the information previously summarized, we stated in the proposed rule that we are concerned that there is no study directly comparing WavelinQ^TM (4F) EndoAVF System to surgical AVF or Ellipsys® Vascular Access System; rather, the studies provided compare historical data for surgical AVF to data on the results of AVF created using both the WavelinQ^TM EndoAVF (6F) and (4F) systems. We stated that we are also concerned as to whether the data demonstrates if the WavelinQ^TM (4F) EndoAVF System significantly improves clinical outcomes for patients requiring hemodialysis in comparison to surgical AVF and the Ellipsys® Vascular Access System due to the limited number of participants in the clinical trials, and whether the results are generalizable to the entire Medicare population due to the limited number of participants.

We invited public comments on whether the WavelinQ^TM (4F) EndoAVF System meets the substantial clinical improvement criterion.

Comment: The applicant submitted public comments regarding CMS' concerns. The applicant asserted that the peer-reviewed, published data from controlled clinical studies demonstrates that the WavelinQ^TM (4F) EndoAVF system offers multiple clinical advantages over surgical AVFs for patients in end-stage renal disease who require hemodialysis via an arteriovenous fistula.

The applicant also addressed a question regarding available randomized, controlled studies comparing the WavelinQ^TM (4F) EndoAVF System to surgical AVFs. The applicant asserted, that as stated during the Town Hall, while there are no current head-to-head RCTs comparing the two fistula types, there are two published retrospective studies that utilize a Propensity Score Matching Analysis to compare WavelinQ^TM data from the NEAT study with two separate data sources for AVF patients.

The applicant stated that the first study was conducted by Yang et al. and was published in the Journal of Vascular Access in 2017. This study compared AVF post-creation procedures and their associated costs for patients with surgical AV fistulas to patients with fistulas created using WavelinQ^TM. A random 5 percent sample from Medicare's Standard Analytic Files was extracted and used in comparison to patients from the NEAT study. Patients were matched 1:1 using propensity score matching of baseline demographic and clinical characteristics. Patient follow up data from inpatient, outpatient, and physician claims were used to identify post-creation procedures and to estimate average procedure costs. Of 3,764 Medicare surgical AVF patients, 60 successfully matched 1:1 with patients from the NEAT study. Key results were as follows:

• Post-creation procedural event rate was 3.43 per patient year and 0.59 per patient-year (p<0.05) for surgical and WavelinQ^TM fistulas, respectively.
• Average first year post-AVF creation costs per patient-year for patients who received a WavelinQ^TM fistula were $11,240 USD lower than costs for a surgical fistula.

The second study was conducted by Arnold et al. and was published in the Journal of Vascular Interventional Radiology in 2018. This study compared the rate of AVF interventions in both incident and prevalent end-stage kidney disease patients, their associated costs, and intervention-free survival between patients with surgically created AVFs vs. patients with an endoAVF created using WavelinQ^TM. Data from the USRDS was abstracted and matched 1:1 with patients from the NEAT study using propensity score matching. Post fistula creation event rates, intervention-free survival, and costs were compared between patients with surgically created fistulas and patients with a WavelinQ^TM fistula. The applicant stated that key results were as follows:

• In incident patients, post-creation event rates were 7.22 per patient-year and 0.74 per patient-year (p<0.0001) for surgical and WavelinQ^TM fistulas, respectively.
• In prevalent patients, post-creation event rates were 4.10 per patient-year and 0.46 per patient-year (p<0.0001) for surgical and WavelinQ^TM fistulas, respectively.
• Expenditures for post-creation interventions were $16,494 and $13,389 less in incident and prevalent patients with a WavelinQ^TM fistula, respectively.

The applicant also provided written comments addressing the availability of data from the EU Post-Market Study. The applicant stated that while there are no plans at this time to publish the EU Post-Market Study in a medical journal, the data have been made available to the public via WavelinQ^TM's Instructions for Use (IFU). The applicant also provided a PDF copy of the most recent IFU which contained a summary of the study safety and effectiveness measures.

The applicant also explained the peer-reviewed, published data from controlled clinical studies. The applicant stated that the studies demonstrate that the WavelinQ^TM 4F EndoAVF System offers multiple clinical advantages over surgical AVFs for patients suffering from end-stage renal disease who require hemodialysis via an arteriovenous fistula.

The applicant included a JVA 2020 publication to address concerns raised by CMS in the proposed rule that there is no study directly comparing WavelinQ^TM 4F EndoAVF System to surgical AVF. The applicant provided the recent Inston et al. publication, which outlines a single center study that compared 30 WavelinQ^TM 4F EndoAVF procedures with a matched cohort of 40 surgical AVFs. The applicant further pointed out that prospective data was collected on both cohorts from 2016-2019 and analyzed to evaluate outcomes. The applicant provided the following highlights from the publication:

• Outcomes from Inston et al. demonstrated that the WavelinQ^TM group provided better results as compared to the surgical radiocephalic AVF (sAVF) group in every major clinical category:

○ Procedural success rate, time to cannulation, primary and secondary patency

○ These metrics were used to evaluate efficacy in the other major WavelinQ^TM publications such as EASE, EASE-2, FLEX, NEAT and the EU Post-Market Study

• Procedural success was 96.7% in WavelinQ^TM group, and 92.6% in sAVF group
• Mean time to cannulation was 130 days (±86) in the WavelinQ^TM group, and 141 days (±118) in the sAVF group
• Primary patency at 6 and 12 months:

○ WavelinQ^TM group was 65.5% and 56.5% respectively

○ sAVF group was 53.4% and 44%, respectively (p = 0.69 and 0.63)

• Mean primary patency was significantly better for the WavelinQ^TM group (362 ± 240 days) vs. the sAVF group (235 ± 210 days) (p <0.05)
• Secondary patency at 6 and 12 months:

○ WavelinQ^TM group at 6 and 12 months was 75.8% and 69.5%, respectively

○ sAVF group was lower at 66.7% and 57.6% at 6 and 12 months, respectively

• The ages in both groups in the study were also generally consistent with other published literature: 57 ± 15 in the WavelinQ^TM group, and 54 ± 17 in the sAVF group.

The applicant stated that patients that received the WavelinQ^TM EndoAVF demonstrated superior outcomes when compared to a contemporaneous group of patients that received surgical AVFs. The applicant asserted these data not only support that the WavelinQ^TM 4F EndoAVF System is effective, but that it may be considered as a first treatment option over surgical AVF, particularly if vessels at the wrist are absent or less than ideal. The applicant stated that it is important to note that the Inston et al., published clinical data on WavelinQ^TM are similar to other results in published literature.

The applicant asserted that Inston et al. also provides an alternative to retrospective propensity-matched analyses (Yang and Arnold, et al.), and is a new, positive contribution to the overall body of evidence in that it is more reflective of the real-world setting. The applicant claimed these data further support the efficacy of endoAVF with WavelinQ^TM and demonstrate substantial clinical improvement of endoAVF with WavelinQ^TM over surgical AVFs.

The applicant claimed that in addition to demonstrating significant improvements in efficacy vs. a surgically created fistula, WavelinQ^TM endoAVFs provide a significant improvement in patients' quality of life. The study by Lok et al. evaluated end-stage renal disease (ESRD) patients with a WavelinQ^TM EndoAVF for dialysis to determine patient satisfaction with vascular access-related issues that impact quality of life at baseline, 6 months and 12 months post-procedure. The applicant asserted the study results showed that 96 percent of patients were satisfied with the WavelinQ^TM EndoAVF, 72 percent would recommend the WavelinQ^TM EndoAVF to a friend, 88 percent found it easy to use, and only 16 percent would change their AVF access type if possible.

The applicant also provided a clinical comparison of the WavelinQ^TM 4F EndoAVF System to the Ellipsys® Vascular Access System. The applicant stated that CMS noted the lack of a study directly comparing WavelinQ^TM to Ellipsys®. The applicant explained there are several reasons why a head-to-head study was not conducted. According to the applicant, the first reason is the WavelinQ^TM 6F EndoAVF System, and the Ellipsys® Vascular Access System were both approved by FDA on June 22, 2018. According to the applicant, the FDA would not allow a study comparing two unapproved technologies to each other. The second reason, according to the applicant, is both WavelinQ^TM and Ellipsys® were studied/compared to surgical AVFs, the current standard of care, which is generally the recommended approach. Given the timeline for planning, enrolling, and completing a study and then having a journal article published, it would have been logistically impossible to conduct and publish a robust, multi-center head-to-head study (WavelinQ ^TM vs. Ellipsys®) in the short period of time from FDA approval of the two devices to date. The applicant further explained any such study results would likely be available only after expiration of WavelinQ^TM's new technology add-on payment newness eligibility.

The applicant further stated that the clinical, technological, and procedural differences between WavelinQ^TM and Ellipsys® would contribute to the complexity of structuring a head-to-head study. The applicant claimed any direct comparison would need to account for the subsequent procedure(s) that are needed when the Ellipsys® system is used. Ellipsys® typically requires balloon angioplasty to assist with maturation. The applicant stated that additionally, the limited access points and visualization options of Ellipsys® are different from WavelinQ^TM. The applicant stated these differences would make it extremely challenging to find physicians with adequate ultrasound skills, and because Ellipsys® allows only one site for a creation of an AVF, patient enrollment would have been very difficult. Thus, the applicant stated the differences in both products, product indications, and the procedures would provide significant hurdles to designing and completing such a study.

The applicant also commented in response to CMS's concern regarding whether the composition of clinical trial enrollees is generalizable to the Medicare population. The applicant asserted that an analysis of the 2018 USRDS data shows that patients enrolled in the WavelinQ^TM clinical trials are representative of the Medicare population, based on the average age in the studies. Additionally, the applicant asserted ESRD patients commonly access the Medicare program outside of traditional age-based enrollment.

The applicant noted that according to the 2018 USRDS report, 47.9 percent of all incident hemodialysis patients are under the age of 65 (52,201/108,895) and that 52.6 percent of all prevalent hemodialysis patients are also under the age of 65 (241,037/457,957).

The applicant asserted that before WavelinQ^TM was cleared by the FDA, industry discussed the WavelinQ^TM procedure and initial data with CMS medical officers and the Coverage and Analysis Group. The applicant stated CMS medical officers indicated current Medicare ESRD patients had more comorbidities as compared to ESRD populations studied 20 years ago. CMS' recommendations from this meeting were to (1) compare WavelinQ^TM study data to the current data available in the USRDS database to determine if WavelinQ^TM study populations were representative of the current Medicare population, and (2) compare the number of re-interventions with surgical and WavelinQ^TM endoAVFs. As a result of these discussions, the applicant compared a contemporaneous patient cohort to USRDS data to demonstrate that the WavelinQ^TM endoAVF patient population was representative of Medicare population. The applicant stated that while fewer African-American patients were enrolled in the early study, later studies included more diverse patient populations including more patients who are Hispanic and Asian.

The applicant stated the Arnold et al. analysis also demonstrated that WavelinQ^TM patients had fewer subsequent re-interventions and therefore created cost-savings for Medicare. The applicant stated that the published results from this analysis comparing surgical and endoAVFs clearly demonstrate that the existing published study results from WavelinQ^TM are generalizable to the Medicare population in that these patients have ESRD and require dialysis.

The applicant also stated that a propensity score matched analysis was conducted by Yang et al. that compared patients with a WavelinQ^TM endoAVF fistula from the Novel Endovascular Access Trial (NEAT) with a 5 percent random sample of patients with surgically created AVFs from the Medicare Standard Analytic files. The applicant further stated post-fistula creation procedures and their associated costs were analyzed. The applicant added that of the 3,764 Medicare surgical AVF (sAVF) patients, 60 successfully matched to the endoAVF patients from the NEAT study using 1:1 propensity score matching of baseline demographic and clinical characteristics. The applicant concluded that after propensity score-matching, there were no statistical differences baseline demographic or clinical characteristics between groups.

The applicant asserted the study by Yang et al. demonstrated that a WavelinQ^TM EndoAVF outperformed a surgical AVF in a propensity score-matched U.S. population with similar baseline demographics and clinical characteristics. The applicant also asserted that the WavelinQ^TM EndoAVF demonstrated a monetary savings for the health system due to a reduced post-AVF creation procedure event rate.

The applicant also stated that Arnold et al. conducted a second propensity score matched analysis comparing the patients from the NEAT study to a sample of patients from the USRDS database. Patients were matched 1:1 according to baseline demographics and clinical characteristics. Both incident and prevalent patients were evaluated separately. Results for both groups were as follows:

Incident Patients

The applicant stated in the incident patient population, WavelinQ^TM EndoAVF demonstrated 6.472 fewer events per patient-year compared to a surgically created fistula. Correspondingly, the total cost difference to treat these patients was $16,494.50 less expensive in the WavelinQ^TM EndoAVF group.

Prevalent Patients

The applicant further stated that in the prevalent patient population, WavelinQ^TM EndoAVF demonstrated 3.639 fewer events per patient-year compared to a surgically created fistula. Correspondingly, the total cost difference to treat these patients was $13,388.92 less expensive in the WavelinQ^TM EndoAVF group.

The applicant also stated that a voluntary recall of WavelinQ^TM 4F was initiated in April 2019 that was specific to one lot (150 units) of catheters. Of these, 136 units were never sold or were successfully returned to BD prior to use. Of the 14 remaining catheters that were not returned to BD, there have been no reported patient injuries. This lot of catheters was found to have magnets that did not meet BD's requirements for magnetic strength. The magnets are used to pull the arterial and venous vessels into close approximation to create the endovascular fistula using RF energy. Without the necessary coaptation of the magnets, endoAVF cannot be performed. BD was able to identify the root cause of the weak magnets and implemented corrective actions that were completed in June 2019 and submitted to the FDA. The applicant stated that they have not received any additional complaints of a similar nature.

We also received another public comment regarding whether WavelinQ^TM provides a substantial clinical improvement over existing technologies. The commenter asserted that Ellipsys® is not clinically inferior to WavelinQ^TM, and in fact the evidence available shows that the Ellipsys® has a better record of a number of key outcomes, including technical success and cumulative patency. The commenter cited a recently published abstract which reported on a retrospective review of a single-center, single-operator case series of 100 pAVFs created from December 2017 to July 2019, 65 with Ellipsys® and 35 with WavelinQ^TM. The study reported technical success with Ellipsys® was 100 percent vs. 97 percent with WavelinQ^TM. Maturation at four weeks was 68.3 percent vs. 54.3 percent; median time to cannulation was 60 vs. 90 days. Successful dialysis access was achieved in 79.5 percent of Ellipsys® cases vs. 58 percent for WavelinQ^TM cases. Interventions were performed in approximately 27 percent of cases for both technologies, and the number of interventions per patient-year was 0.96 vs. 0.46. At 12 months, secondary patency was significantly higher for Ellipsys® patients (82 percent) vs. WavelinQ^TM patients (60 percent), according to the study.

The commenter stated that percutaneous AVF technology represents a significant clinical improvement relative to surgical AVFs, for patients for which this approach is anatomically suitable. The commenter asserted that WavelinQ^TM has not demonstrated a significant clinical improvement relative to Ellipsys®.

Response: After consideration of the comments we received and upon further review, we continue to have concerns with respect to whether WavelinQ^TM meets the substantial clinical improvement criterion for new technology add-on payments. In our proposed rule, we stated that we were concerned there is no study directly comparing the WavelinQ^TM 4F EndoAVF System to surgical AVF or the Ellipsys® Vascular Access System; rather, the studies provided compare historical data for surgical AVF to data on the results of AVF created using both the WavelinQ^TM EndoAVF (6F) and (4F) systems. The applicant cited a recent study by Inston et al. which outlines a single-center study that compared 30 WavelinQ^TM 4F EndoAVF procedures with a matched cohort of 40 surgical AVFs. The study reported that the mean primary patency was significantly better for the WavelinQ^TM group (362 ± 240 days) vs. the sAVF group (235 ± 210 days) (p <0.05) which was a statistically significant difference. However, all other parameters reported in the study did not demonstrate statistically significant differences, including procedural success rate, time to cannulation, 6 and 12 month primary patency, and secondary patency with WavelinQ^TM. In addition, the number of interventions per patient year were higher in the WavelinQ^TM arm than in the sAVF arm (0.402 vs 0.273). Another study comparing the use of WavelinQ^TM and Ellipsys® showed Ellipsys outperformed WavelinQ at multiple endpoints, with 12 month secondary patency significantly higher for Ellipsys® (82 percent vs 60 percent).

We appreciate the comments and additional information regarding whether the WavelinQ^TM represents a significant clinical improvement.

In addition to the comments we received, CMS also reviewed a published study on the real-world usage of the WavelinQ^TM EndoAVF System. This study examined a single center's success rates and short-term follow-up using the WavelinQ^TM EndoAVF. Study subjects included patients who underwent placement of a fistula using the WavelinQ^TM EndoAVF system from October 2018 to July 2019. Preoperative/intraoperative variables including demographics, preoperative/postoperative duplex ultrasonography, success rate of procedure, and subsequent endovascular/surgical procedures were obtained. Descriptive statistics and comparison of groups requiring subsequent intervention were performed.

Thirty-five patients underwent placement of the WavelinQ^TM AVF, with 32 patients (91 percent) having at least one documented follow-up. These patients were predominantly male (23/32, 72 percent) with an average age of 60.2 and 23 of 32 patients (72 percent) were on dialysis. Initial fistula creation success rate was 100 percent. Average procedural length was 120 minutes, fluoroscopy time 9.6 minutes, and contrast usage 52.2 mL. Eight of 32 patients (25 percent) had perioperative complications (3 hematomas, 3 contrast extravasations, 1 resolved vessel spasm all resolving spontaneously, and 1 pseudoaneurysm requiring surgical repair). Thirteen of 32 patients (41 percent) underwent subsequent endovascular interventions to assist with maturation [9/32 (28 percent) branch coiling, 5/32 (16 percent) angioplasty/stenting, and 3/32 (9 percent) access thrombectomy] and 4 of 32 patients (13 percent) required subsequent surgical interventions (1 pseudoaneurysm repair, 1 revision of fistula, and 2 definitive AVF creation in thrombosed grafts). The majority of accesses (30/32, 94 percent) were ulnar-ulnar fistulas and overall patency at average follow-up of 73 days was 88 percent (28/32) with average brachial artery inflow volume of 1,078 cc/min and average cephalic vein (18/32) outflow volume of 447 cc/min. Eleven of 23 patients (48 percent) on dialysis were successfully using the endoAVF at follow-up.

The study concluded that the WavelinQ^TM EndoAVF System has a high initial procedural success rate (100 percent), although a significant portion of patients require subsequent endovascular procedures to aid in maturation. According to the study's conclusion, further work is needed on determining factors predictive of the need for re-intervention for patients with fistulas created using the WavelinQ^TM EndoAVF System. In follow-up, 15 of 32 patients (47 percent) underwent surgical and/or endovascular procedures, with 4 of 32 patients (13 percent) requiring subsequent surgical interventions. This included 1 pseudoaneurysm repair, 1 revision of fistula, and 2 definitive AVF creation in thrombosed grafts. In 13 of 32 patients (41 percent), an endovascular procedure was performed subsequent to the fistula placement, most of which were needed to aid in fistula maturation. This included 3 of 32 (9 percent) graft thrombectomies (2 ultimately unsuccessful requiring definitive AVF creation), 5 of 32 (16 percent) angioplasties/stenting of outflow veins, and 9 of 32 (28 percent) vein branch coiling.

After consideration of the public comments we received and based on the information stated above, we believe additional data is needed to demonstrate that WavelinQ^TM represents a substantial clinical improvement over existing therapies. Therefore, we are not approving new technology add-on payments for the WavelinQ^TM 4F EndoAVF System for FY 2021.

l. Zulresso ^TM

Sage Therapeutics submitted an application for new technology add-on payments for ZULRESSO ^TM for FY 2021. ZULRESSO ^TM (brexanolone) is a neuroactive steroid gamma-aminobutyric acid (GABA)_A receptor positive modulator indicated for the treatment of postpartum depression (PPD) in adults that is administered via a continuous intravenous infusion.

According to the applicant, PPD is a major depressive episode that occurs following delivery, though onset of symptoms may occur during pregnancy. Per the applicant, mothers with PPD may present with a variety of symptoms, which must be present most of the time for 2 weeks or more in order for PPD to be diagnosed. These depressive symptoms may persist throughout and beyond the first postnatal year if PPD is left untreated. As described by the applicant, these symptoms may include trouble bonding with, and doubt in ability to care for, their baby; thoughts of self-harm or harm to the baby; feelings of worry, anxiety, sadness, moodiness, irritability, and/or restlessness; crying more often or without apparent reason; experiencing anger or rage; sleep disturbances; changes in appetite; difficulty concentrating; and withdrawal from friends and family. According to the applicant, PPD may affect the mother's ability to function with potential considerable risks such as self-harm, and PPD may also be associated with suicidal ideation.

The applicant stated that PPD is one of the most common complications during and after pregnancy, affecting more than 400,000 women in the United States. The applicant noted that women diagnosed with PPD who are disabled may be otherwise eligible for Medicare, and some may be eligible for Medicaid as well. While the studies summarized did not specifically target Medicare patients, the applicant believes that these results can be generalized to Medicare patients diagnosed with PPD.

The applicant stated that the precise cause of PPD is unknown, though there are multiple hypotheses about the mechanism of disease of PPD. The applicant reported that levels of allopregnanolone, the predominant metabolite of progesterone, increase during pregnancy and decrease substantially after childbirth. Per the applicant, preclinical evidence indicated that rapid changes in levels of allopregnanolone confer dramatic behavioral changes and may trigger PPD in some women.

As reported in a study submitted by the applicant, the GABAergic deficit hypothesis of depression states that a deficit of GABAergic transmission in defined neural circuits is causal for depression. According to the study, conversely, an enhancement of GABA transmission, including that triggered by selective serotonin reuptake inhibitors or ketamine, has antidepressant effects. The study reported that ZULRESSO ^TM , an intravenous formulation of the endogenous neurosteroid allopregnanolone, showed clinically significant antidepressant activity in postpartum depression. According to the study, by allosterically enhancing GABA_A receptor function, the antidepressant activity of allopregnanolone is attributed to an increase in GABAergic inhibition. In addition, allopregnanolone may stabilize normal mood by decreasing the activity of stress-responsive dentate granule cells and thereby sustain resilience behavior. The researchers concluded that therefore, allopregnanolone may augment and extend its antidepressant activity by fostering resilience.

The applicant stated that prior to FDA approval of ZULRESSO ^TM , there were no medications specifically indicated for PPD. The applicant indicated that the regimens historically employed for the treatment of patients who have been diagnosed with PPD have generally consisted of medications typically used for major depression or other mood disorders. As described by the applicant, these pharmacological therapies include—

• Selective serotonin reuptake inhibitors (SSRIs), such as sertraline, fluoxetine, and paroxetine, which selectively block the reuptake of serotonin;
• Serotonin and norepinephrine reuptake inhibitors (SNRIs) such as venlafaxine, duloxetine, and milnacipran, which selectively block the reuptake of serotonin and norepinephrine;
• Monoamine oxidase inhibitors (MAOIs) such as phenelzine, which cause an accumulation of amine neurotransmitters and are not commonly used, owing to the adverse reactions with concomitant medications and various food groups; and
• Tricyclic antidepressants (TCAs), like nortriptyline, which are antimuscarinic drugs that block the reuptake of both serotonin and norepinephrine and have variable sedative properties.

The applicant indicated that non-pharmacological treatments, such as psychotherapies, including cognitive behavioral therapy, psychosocial community-based intervention, and dynamic therapy have also been used to treat PPD.

Based on market research conducted by the applicant, the applicant asserted that current treatment options for patients who have been diagnosed with PPD present potential challenges for patients such as: Long wait times for an appointment and difficulties scheduling follow-up appointments with providers; insurance coverage challenges; delays or interruptions in treatment; changes in medications or doses (which may or may not be effective): And the lengths of the treatment plan being longer than expected.

With respect to the newness criterion, FDA granted ZULRESSO ^TM Priority Review and Breakthrough Therapy designations, and on March 19, 2019, approved ZULRESSO ^TM for the treatment of PPD in adult women. On June 17, 2019, the Drug Enforcement Administration (DEA) placed ZULRESSO ^TM into Schedule IV of the Controlled Substances Act (84 FR 27938 through 27943), after which it became commercially available. The applicant submitted a request for approval for two unique ICD-10-PCS procedure codes for the administration of ZULRESSO ^TM beginning in FY 2021 and was granted approval for the following procedure codes effective October 1, 2020: XW03306 (Introduction of Brexanolone into peripheral vein, percutaneous approach, new technology group 6) and XW04306 (Introduction of Brexanolone into central vein, percutaneous approach, new technology group 6).

As discussed previously, if a technology meets all three of the substantial similarity criteria, it would be considered substantially similar to an existing technology and would not be considered “new” for purposes of new technology add-on payments.

With regard to the first criterion, whether a product uses the same or a similar mechanism of action to achieve a therapeutic outcome, according to the applicant, ZULRESSO^TM does not use the same or a similar mechanism of action when compared to existing treatments. The applicant indicated that prior to the approval of ZULRESSO^TM, certain antidepressants were prescribed for the treatment of PPD; however, these antidepressants are not specifically indicated for PPD. In addition, the applicant asserted that ZULRESSO^TM does not use the same or a similar mechanism of action as current antidepressants, including SSRIs, SNRIs, MAOIs, and TCAs. The applicant stated that ZULRESSO^TM works differently because it does not directly affect monoaminergic systems, with the mechanism of action believed to be related to ZULRESSO^TM's positive allosteric modulation of GABA_A receptors. Therefore, the applicant asserted that ZULRESSO^TM utilizes a different mechanism of action than currently available treatment options.

With respect to the second criterion, whether a product is assigned to the same or a different MS-DRG, the applicant stated that the antidepressants and non-pharmacological treatments historically used to treat PPD are traditionally used in the outpatient setting; however, patients with more severe symptoms of PPD who are hospitalized would likely have the same diagnosis (F53.0—Postpartum depression) and be assigned to the same MS-DRG as ZULRESSO^TM patients, MS-DRG 881 (Depressive Neuroses).

With respect to the third criterion, whether the new use of the technology involves the treatment of the same or similar type of disease and the same or similar patient population, according to the applicant, the use of ZULRESSO^TM for treating PPD would involve treatment of a similar patient population as compared to other therapies historically used to treat PPD. However, the applicant noted that there are no other treatments or technologies that are specifically indicated for the treatment of PPD.

As summarized previously, the applicant maintains that ZULRESSO^TM meets the newness criterion and is not substantially similar to existing technologies because it has a unique mechanism of action for treating PPD and is the only therapy specifically indicated for the treatment of PPD. We invited public comments on whether ZULRESSO^TM is substantially similar to any existing technologies and whether ZULRESSO^TM meets the newness criterion.

Comment: The applicant submitted a comment reiterating that ZULRESSO^TM meets the newness criterion and is not substantially similar to existing technologies because ZULRESSO^TM does not use the same or a similar mechanism of action as the antidepressants commonly prescribed to treat PPD. The applicant stated that ZULRESSO^TM works differently than these antidepressants because it does not directly affect monoaminergic systems, with the mechanism of action believed to be related to ZULRESSO^TM's positive allosteric modulation of GABA_A receptors. The applicant also asserted that ZULRESSO^TM meets the newness criterion because it does not involve the treatment of the same or similar type of disease and the same or similar patient population because ZULRESSO^TM is the first and only therapy specifically indicated to treat adult patients with PPD.

Response: Based on the applicant's comment and information submitted by the applicant as part of its FY 2021 new technology add-on payment application for ZULRESSO^TM, as discussed in the proposed rule (85 FR 32673) and previously summarized, we disagree that the use of the technology does not involve the treatment of the same or similar type of disease and the same or similar patient population as existing technologies. As noted by the authors of the Phase III study submitted by the applicant, PPD is considered a subtype of major depression in the DSM-5 and the International Classification of Diseases. Given that there are antidepressants indicated for treating major depressive disorders (of which PPD is a subtype) that are currently being used to treat PPD, we believe there are existing technologies available to treat patients with PPD. However, we agree with the applicant that ZULRESSO^TM does not use the same or a similar mechanism of action to achieve a therapeutic outcome when compared to existing treatments. Therefore, we believe that ZULRESSO^TM is not substantially similar to an existing technology and meets the newness criterion. We consider the beginning of the newness period to commence when the DEA placed ZULRESSO^TM into Schedule IV of the Controlled Substances Act on June 17, 2019, after which it became commercially available.

With regard to the cost criterion, the applicant used the FY 2018 MedPAR Hospital Limited Data Set (LDS) to determine the MS-DRGs to which cases representing potential patient hospitalizations that may be eligible for treatment involving ZULRESSO^TM may be assigned. The applicant identified these potential cases as those with a principal or secondary diagnosis code of F53 (Puerperal psychosis), excluding MA cases and claims submitted only for GME payment. The applicant noted that ICD-10-CM diagnosis code F53.0 (Postpartum depression) became effective October 1, 2018, and was not found on any FY 2018 inpatient claims. The applicant identified 76 cases reporting ICD-10-CM diagnosis code F53.0 spanning 26 different MS-DRGs, with approximately 58 percent of these potential cases mapping to the following 3 MS-DRGs, out of which approximately 49 percent of those potential cases mapped to the top 2 MS-DRGs:

The applicant did not remove charges for the prior technology or the technology being replaced because the historical treatment regimens, such as oral anti-depressants, do not need to be stopped during treatment with ZULRESSO^TM. The applicant also noted that ZULRESSO^TM is the first and only FDA-approved treatment specifically indicated for PPD so there are no prior technology charges to remove. The applicant then standardized the FY 2018 charges using the FY 2018 impact file and inflated the charges to FY 2020 using the 2-year inflation factor of 11.1 percent (1.11100) published in the FY 2020 IPPS/LTCH PPS final rule (see 84 FR 42629). The applicant then added charges for ZULRESSO^TM, based on the average per discharge cost of ZULRESSO^TM inflated by the inverse of the national average CCR for pharmacy costs of 0.189. The applicant calculated a final average case-weighted standardized charge per case of $225,056. Based on the FY 2020 IPPS/LTCH PPS final rule correction notice data file thresholds, the applicant calculated an average case-weighted threshold amount of $33,012. The applicant stated that ZULRESSO^TM exceeded the average-case-weighted threshold amount and, therefore, meets the cost criterion.

As noted previously, the 76 cases reporting ICD-10-CM diagnosis code F53.0 span 26 different MS-DRGs, with very few observations in most of these MS-DRGs. We noted in the proposed rule that a sub-analysis of the top 2 MS-DRGs—which represent 49 percent of the cases—would still exceed the threshold. We also noted that a sub-analysis assigning 100 percent of the cases to the highest paying of these 26 MS-DRGs would also still exceed the threshold.

We stated in the proposed rule that we are concerned with the limited number of cases in the sample the applicant analyzed. However, we acknowledged the difficulty in obtaining cost data for a condition that has low prevalence in the Medicare population. We invited public comments on whether ZULRESSO^TM meets the cost criterion.

Comment: The applicant submitted a comment asserting that, as demonstrated in its application, ZULRESSO^TM meets the cost criterion, despite the low volume, and the applicant noted that CMS has approved new technology add-on payment for other low volume procedures. The applicant also raised the possibility that the implementation of a new ICD-10-CM code for PPD in October 2018 might have led to underreporting of the diagnosis code in the data available for analysis.

Response: Based on the applicant's comment and information submitted by the applicant as part of its FY 2021 new technology add-on payment application for ZULRESSO^TM, as discussed in the proposed rule (85 FR 32673 through 32674) and previously summarized, the average case-weighted standardized charge per case exceeded the average case-weighted threshold amount. Therefore, ZULRESSO^TM meets the cost criterion.

With regard to substantial clinical improvement, the applicant asserted that, because there is no other treatment option specifically approved by FDA to treat PPD, ZULRESSO^TM represents a substantial clinical improvement over existing technologies. In support of this statement, the applicant submitted the FDA approval letter and news release indicating that the approval of ZULRESSO^TM marks the first time a drug has been specifically approved to treat PPD. The applicant also asserted that ZULRESSO^TM represents a substantial clinical improvement because the technology significantly reduces depressive symptoms and improves patients' functioning. The applicant submitted three studies to support its assertion that ZULRESSO^TM represents a substantial clinical improvement over existing technologies by improving depressive symptoms and patients' functioning.

The first study submitted (202A) was a Phase II, multicenter, randomized, double-blind, parallel-group, placebo-controlled clinical trial with 30-day follow-up in women diagnosed with severe PPD. Patients with severe PPD (n=21) were randomized to receive a single, continuous intravenous infusion of ZULRESSO^TM or placebo for 60 hours. The primary endpoint was the change from baseline in the 17-item Hamilton Depression Rating Scale (HAM-D) total score at the end of the 60-hour treatment period, compared to placebo. At the end of the 60-hour intravenous infusion, the least-squared (LS) mean reduction in HAM-D total score from baseline was 21.0 points in the ZULRESSO^TM group compared with 8.8 points in the placebo group. The researchers concluded that in women with severe PPD, infusion of ZULRESSO^TM resulted in a significant and clinically meaningful reduction in HAM-D total score, compared with placebo.

The second and third studies submitted (202B and 202C) were Phase III, multicenter, randomized, double-blind, parallel-group, placebo-controlled clinical trials with 30-day follow-up conducted at 30 clinical research centers and specialized psychiatric units in the United States. The studies included women between the ages of 18-45 years, 6 months postpartum or less at screening, with PPD and a qualifying score on the HAM-D. In both studies, patients were randomly assigned to receive a single, continuous 60-hour intravenous infusion of ZULRESSO^TM or matching placebo. The primary endpoint in both studies was the change from baseline in the 17-item HAM-D total score at 60 hours, compared with placebo. Study 202B consisted of patients who were diagnosed with severe PPD (HAM-D score ≥26) who were randomly assigned to receive a single intravenous infusion of either ZULRESSO^TM 90 μg/kg per h (BRX90), ZULRESSO^TM 60 μg/kg per hour (BRX60), or matching placebo for 60 hours. Study 202C consisted of patients who were diagnosed with moderate PPD (HAM-D score of 20 to 25) who were randomly assigned to BRX90 or matching placebo for 60 hours. Three hundred and seventy-five women were simultaneously screened across both studies, of whom 138 were randomly assigned to receive either BRX90 (n=45), BRX60 (n=47), or placebo (n=46) in Study 202B, and 108 were randomly assigned to receive BRX90 (n=54) or placebo (n=54) in Study 202C. In study 202B, at hour 60, the LS mean reduction in HAM-D total score from baseline was 19.5 points in the BRX60 group and 17.7 points in the BRX90 group, compared with 14.0 points in the placebo group. In Study 202C, at hour 60, the LS mean reduction in HAM-D total score from baseline was 14.6 points in the BRX90 group compared with 12.1 points for the placebo group. The researchers concluded that administration of ZULRESSO^TM for PPD resulted in significant and clinically meaningful reductions in HAM-D total score at hour 60 compared with placebo, with rapid onset of action and durable treatment response during the study period of 30 days.

The applicant provided data from the clinical studies cited previously to support that ZULRESSO^TM improves patients' depressive symptoms as measured by a reduction in the HAM-D score at hour 60, and sustained at day 30. The applicant cited data from the Phase II study (202A) that, at the end of the 60-hour infusion, the LS mean reduction in HAM-D total score was significantly larger for the ZULRESSO^TM (90 μg/kg/h) group compared with the placebo group (21.0 vs 8.8 points, respectively). Prespecified secondary analyses showed a mean difference of -11.3 points between groups as early as 24 hours after infusion, with significant improvements also seen for the ZULRESSO^TM group at 36, 48, 60, and 72 hours, as well as days 7 and 30. A greater percentage of patients in the ZULRESSO^TM group achieved a treatment response (defined as ≥50% reduction from baseline in HAM-D total score) compared to the placebo group, with a significant difference observed at hour 72 (80% vs. 27%) and day 7 (80% vs. 20%). At hour 60, 70 percent of patients in the ZULRESSO^TM group and 36 percent of patients in the placebo group had a treatment response. A greater percentage of patients treated with ZULRESSO^TM achieved remission (HAM-D total score ≤7) at hour 60 compared with the placebo group (70.0% vs. 9.1%). The difference was significant at hours 24, 48, 60, and 72, and days 7 and 30.

The applicant cited data from the Phase III multicenter study of patients with severe PPD (202B) that at hour 60, and sustained at day 30, the LS mean reduction in HAM-D total score was significantly greater for the ZULRESSO^TM groups, compared to the placebo groups. At hour 60, the LS mean reduction in HAM-D total score was 17.7 points in the BRX90 group and 19.5 points in the BRX60 group, compared to 14.0 points in the placebo group. At all-time points from hour 24 to day 30, the percentage of patients achieving HAM-D response (≥50% reduction from baseline in HAM-D total score) was higher in both ZULRESSO^TM groups compared with placebo, with statistical significance achieved for both ZULRESSO^TM groups across multiple timepoints compared with placebo. The percentage of patients achieving HAM-D remission (total score ≤7) was numerically higher in both ZULRESSO^TM groups between 24 and 72 hours and at day 30 compared with the placebo group.

The applicant cited data from the Phase III multicenter study of patients with moderate PPD (202C) that at the end of the 60 hour infusion, the LS mean reduction in HAM-D total score was significantly greater in the ZULRESSO^TM BRX90 group compared with the placebo group (14.6 vs 12.1, respectively). At all time points from hour 8 through day 14, the percentage of patients achieving HAM-D remission (total score ≤7) was numerically higher for the ZULRESSO^TM BRX90 group compared with the placebo group, with statistical significance achieved at multiple time points, including at the end of the 60 hour infusion.

The applicant cited pooled data from the ZULRESSO^TM BRX90 groups in the Phase II (202A) and Phase III (202B and 202C) studies showing a significant LS mean reduction in HAM-D total score compared with the placebo group at hour 60 (17.0 vs 12.8 points). Similar to the individual studies, the integrated BRX90 analysis showed a rapid decrease in HAM-D scores (that is, depressive symptoms) in the BRX90 group compared with the placebo groups, which was sustained until day 30. At the end of the 60 hour infusion, the LS mean reduction in HAM-D total score from baseline was significantly larger in the BRX90 group than the placebo group (LS mean difference -4.1), which was also observed at 24 hours (LS mean difference −3.0) and was sustained at day 30 (LS mean difference −2.6).

The applicant provided data from the clinical studies cited previously to support that ZULRESSO^TM improves patients' functioning scores, as measured by the Clinical Global Impressions Scale-Improvement (CGI-I). The applicant cited data from the Phase II study (202A) that the observed improvement in symptoms of postpartum depression following ZULRESSO^TM administration was evidenced by the significant treatment difference observed for CGI-I response. At day 30, 3 (27.3%) patients in the placebo group vs. 8 (80.0%) patients treated with ZULRESSO^TM were considered CGI-I responders with a score of “1—very much improved” or “2—much improved”.

The applicant cited data from the Phase III study of patients with severe PPD (202B) that patients' functioning scores, as measured by CGI-I, improved at hour 60, and sustained at day 30. The proportion of patients who achieved a CGI-I response (score of “1—very much improved,” or “2—much improved”) at 60 hours was significantly higher in both ZULRESSO^TM groups. The proportion of BRX90 patients who achieved a CGI-I response was also significantly higher than the placebo group at hour 72 and day 30 and significantly higher in the BRX60 group compared to placebo at timepoints from hours 36 to 72 and days 7 and 30.

The applicant cited data from the Phase III study of patients with moderate PPD (202C) that the proportion of patients who achieved a CGI-I response was significantly higher for the BRX90 group compared with the placebo group at hour 60. These significant increases in CGI-I response occurred as early as 36 hours and were sustained at day 7.

The applicant provided data from the clinical studies cited previously to support that ZULRESSO^TM improves patients' depressive symptoms, as measured by the Montgomery-Asberg Depression Rating Scale (MADRS). The applicant cited data from the Phase II study (202A) that ZULRESSO^TM improved patients' depressive symptoms, as measured by the MADRS, at hour 60 and sustained at day 30. Through the study period, patients in the ZULRESSO^TM (90 μg/kg/h) group showed significant differences in MADRS score compared with the placebo group (hour 24, P=0.004; hour 60, P=0.01; day 30, P=0.01).

The applicant cited data from the Phase III study of patients with severe PPD (202B) that ZULRESSO^TM improved patients' depressive symptoms, as measured by the MADRS, at hour 60. Numerically greater improvement from baseline in MADRS total score was observed for both ZULRESSO^TM (60 μg/kg/h and 90 μg/kg/h) treatment groups compared with the placebo group at hour 60 and day 30. This difference was statistically significant at hour 60 for ZULRESSO 60 μg/kg/h (LS mean difference vs placebo, −6.9).

The applicant cited data from the Phase III study of patients with moderate PPD (202C) that ZULRESSO^TM improved patients' depressive symptoms, as measured by the MADRS, at hour 60. There was a statistically significant improvement from baseline in the MADRS total score for the ZULRESSO^TM (90 μg/kg/h) group compared to placebo at hour 60 (LS mean difference vs. placebo, −4.9).

The applicant cited data from the Phase II study (202A) cited previously that ZULRESSO^TM improves patients' depressive symptoms as measured by the Bech-6 Subscale, a secondary endpoint. In the Phase II study (202A), significant improvement in the core depressive symptoms of the HAM-D Bech-6 Subscale score were observed at day 30 in the ZULRESSO^TM (90 μg/kg/h) group compared with the placebo group.

We stated in the proposed rule that after reviewing the information submitted by the applicant as part of its FY 2021 new technology add-on payment application for ZULRESSO^TM, we are concerned that the patients in the clinical trials were followed up for only 30 days, and the durability of the effects of ZULRESSO^TM, including whether patients in remission relapse after 30 days, is not clear. We also noted that the small sample sizes of the trials and the demographic characteristics of the patients recruited for these studies may not have included or sufficiently represented populations that may be at high-risk to develop PPD, such as women who are financially or socially vulnerable and individuals with pre-existing mental illness, and it is not clear whether the study participants had time-limited PPD that might have resolved with the passage of time. We stated that it is also unclear whether the outcomes chosen for these studies (for example, test scores) translate into clinically significant observable improvements in maternal functioning and child interactions; for example, has maternal-child bonding been shown to improve as a result of the infusion. We also noted that these studies compare the effects of ZULRESSO^TM to placebo, and not current regimens being used to treat PPD, and do not seem to include patients who were unresponsive to existing therapies. In addition, we stated that we are concerned whether results of studies of otherwise healthy women with PPD would be generalizable to the Medicare population, in which women with PPD would likely be eligible for Medicare based on disabilities that could potentially present comorbidities for which ZULRESSO^TM would not be appropriate or effective. We also noted that because of possible side effects of excessive sedation or sudden loss of consciousness, ZULRESSO^TM is only available through a restricted Risk Evaluation and Mitigation (REMS) program, and stated that we are concerned whether these or other adverse events associated with ZULRESSO^TM would be unsafe for women with PPD in the Medicare population. We invited public comments on whether ZULRESSO^TM meets the substantial clinical improvement criterion, including with respect to the concerns we have raised.

Comment: We received public comments, including additional information submitted by the applicant, in response to CMS's concerns in the proposed rule regarding whether ZULRESSO^TM meets the substantial clinical improvement criterion.

With respect to the concern that the patients in the clinical trials were followed up for only 30 days, and the durability of the effects of ZULRESSO^TM, including whether patients in remission relapse after 30 days, is not clear, the applicant stated that the 30-day follow-up period was accepted by FDA as an appropriate follow-up period for women with PPD enrolled in the ZULRESSO^TM studies. The applicant explained further that the clinical trials were designed to enroll women diagnosed with PPD, and DSM-5 defines PPD as a major depressive episode with symptom onset during pregnancy or in the first 4 weeks following delivery. As such, if a patient achieves remission after being successfully treated in the postpartum and then experiences a relapse episode beyond 4 weeks, this may no longer meet the DSM-5 definition of PPD. The applicant also stated that due to the rapidity of the treatment effect observed with ZULRESSO^TM at 60 hours in the phase 2 trial (202A), it was determined in conjunction with FDA that 30 days was an appropriate follow-up period for the ZULRESSO^TM studies. The applicant acknowledged that the efficacy and safety of ZULRESSO^TM beyond 30 days has not been evaluated. The applicant also acknowledged that there is limited data in PPD, though the applicant referenced studies that per the applicant show that an improvement of depressive symptoms as early as 2 weeks after treatment initiation may be a predictor of achieving stable response and remission for patients with major depressive disorders, and referenced other studies that per the applicant suggest that failure to treat depressive episodes rapidly and effectively to remission may have long-term negative effects. The applicant noted that the effects of ZULRESSO^TM were sustained through Day 30, and the applicant cited data from the integrated Phase III analysis that 94% of patients who received BRX90 and had a HAM-D response at hour 60 did not relapse at Day 30. One commenter asserted that the 30-day timeframe is an essential component of preserving the immediate long-term health and wellbeing of many postpartum women and their infants, as per the commenter it is around this timeframe that postpartum women bond with their infants, initiate or choose to continue breastfeeding, and navigate and receive treatment for other postpartum health complications.

With respect to the concern that the small sample sizes of the trials and the demographic characteristics of the patients recruited for these studies may not have included or sufficiently represented populations that may be at high-risk to develop PPD, the applicant stated that the sample sizes were developed in conjunction with FDA based on FDA guidelines for designing trials with sufficient statistical power to detect the anticipated treatment effect and safety of drugs being developed to treat major depressive disorders. The applicant also stated that in the Phase III studies, ZULRESSO^TM demonstrated a statistically significant improvement in depressive symptoms at hour 60 across a diverse patient population, and the applicant highlighted some of the subgroups who are at high-risk of developing PPD that were represented in the Phase III studies. Further, the applicant stated that in study 202B of patients with severe PPD, 47% of patients treated with BRX90 had a personal history of depression, and 47% had a history of anxiety. The applicant noted that in study 202C of patients with moderate PPD, patients with a personal history of depression and anxiety accounted for 24% and 31% of patients respectively. The applicant also noted that, in both Phase III studies, approximately 1/3 of patients had a family history of PPD, with 27% in 202B and 35% in 202C experiencing a previous episode of PPD. Per the applicant, subgroup analyses showed greater LS mean differences in HAM-D total score at hour 60 in the BRX90 group compared with the placebo group from baseline in all subgroups examined for ethnicity, personal history of PPD, a family history of PPD or major depressive disorders.

With respect to the concern whether study participants had time-limited PPD that might have resolved with the passage of time, the applicant stated that untreated PPD may not resolve with time. The applicant referenced studies of major depressive disorders that, per the applicant, show that duration of untreated depression correlates with worse outcomes. The applicant also referenced studies that, per the applicant, suggest that symptoms that may have begun as PPD may persist throughout and beyond the first postnatal year if left untreated.

With respect to the concern whether the outcomes chosen for these studies translate into clinically significant observable improvements in maternal functioning and child interaction, the applicant explained that they selected change in baseline HAM-D scale as the primary endpoint because it is validated, reliable, and accepted by FDA as a primary efficacy endpoint in a patient population with depression, and they selected the CGI-I scale because is accepted by FDA as a secondary endpoint to measure other domains of symptom improvement. The applicant acknowledged that there is no specific data related to ZULRESSO^TM with respect to maternal functioning and long term child development. However, the applicant asserted that improving depressive symptoms in mothers with PPD may translate into clinically significant and observable improvements in maternal functioning and child interactions, and the applicant referenced various studies that found associations between maternal PPD symptoms and impairments to maternal bonding and multiple aspects of child development and functioning. The applicant also referenced studies that, per the applicant, show significant improvements in child development and functioning after successfully treating women with maternal depression.

With respect to the concern that these studies compare the effects of ZULRESSO^TM to placebo, and not current regimens being used to treat PPD, and do not seem to include patients who were unresponsive to existing therapies, the applicant stated that the ZULRESSO^TM clinical development program was designed in accordance with FDA and aligns to current guidance related to developing drugs to treat major depressive disorders. In referencing these guidelines, the applicant noted that these guidelines provide that the standard for such trials include randomized, double-blinded, placebo controlled, parallel short-term efficacy trials in patients with depression. The applicant also noted that patients with a history of PPD and non-PPD depression were included across all placebo-controlled studies. Patients who were taking antidepressants at a stable dose for at least 14 days prior to enrollment were allowed to participate in the ZULRESSO^TM clinical trials if they met other inclusion/exclusion criteria. The applicant noted that across both phase III trials 22% of patients had baseline antidepressant use and either a HAM-D score between 20-25 (moderate depression) or greater than 26 (severe depression). Per the applicant, subgroup analyses at hour 60 also showed statistically significant LS mean differences in change from baseline in all subgroups examined, including baseline antidepressant use. One commenter agreed that the existing evidence base for the use of ZULRESSO^TM as a treatment for PPD is limited but believes that the existing studies on ZULRESSO^TM satisfy the clinical improvement criteria. The commenter stated that there is a dearth of evidence available on the effectiveness of other treatments for PPD, and the commenter noted that the studies demonstrated that improvements for those who received ZULRESSO^TM were significantly greater than the improvements shown by the placebo group.

With respect to the concern whether the results of the studies would be generalizable to the Medicare population, the applicant believes that these results can be generalized to the patient population that qualifies for Medicare due to disability. The applicant stated that two of the first patients that were treated with ZULRESSO^TM since it became commercially available were dual-eligible beneficiaries. The applicant also observed that as with any drug or procedure, ZULRESSO^TM may not be appropriate for every patient, and decisions regarding its use should be made between the patient and their healthcare provider based on the risks and benefits of treatment.

With respect to the concern whether the adverse events associated with ZULRESSO^TM would be unsafe for women with PPD in the Medicare population, the applicant stated that the safety precautions that are in place for women with PPD being treated with ZULRESSO^TM, including the restrictive program requirements of the ZULRESSO^TM REMS, would apply to patients from both the general and Medicare population. The applicant also stated that as with any treatment, the prescriber should use his or her clinical judgment whether ZULRESSO^TM is an appropriate treatment option for PPD and discuss the risks and benefits, including reviewing the Patient Information Guide with the patient.

We also received other public comments urging CMS to approve the application for new technology add-on payment for ZULRESSO^TM, stating it alleviates symptoms of PPD within hours or days, rather than the weeks that may be required to relieve symptoms using other regimens that are prescribed to treat post-partum women with PPD. One commenter stated that mothers and providers have reported positive outcomes from the use of ZULRESSO^TM and submitted examples of these reports. Commenters noted that ZULRESSO^TM is not currently widely available to women despite being FDA-approved, and they suggested that hospitals may be unwilling to provide this treatment due to its cost. Commenters observed that state Medicaid programs and private health insurers often base their coverage and payment policies off of those established by CMS for Medicare. Commenters expressed concern that without approval of the new technology add-on payment application for ZULRESSO^TM, women could be denied access to the only FDA-approved treatment specifically indicated to treat PPD, with some commenters adding that all FDA-approved treatments should be readily accessible to women experiencing PPD.

Response: We thank the commenters for their input and responses to our concerns, and we appreciate the additional information the applicant provided with regard to the safety and efficacy of ZULRESSO^TM in reducing depressive symptoms rapidly and significantly when compared to placebo. Although commenters asserted that ZULRESSO^TM starts to work more rapidly than other treatments, we remain concerned that the studies and additional information submitted by commenters do not provide sufficient evidence to determine that the use of ZULRESSO^TM represents a substantial clinical improvement when compared to existing treatments.

We remain concerned that all of the studies submitted by the applicant used placebo as control and did not compare the use of ZULRESSO^TM to the use of existing treatments. As noted by the applicant in their comments, patients who were taking antidepressants at a stable dose for at least 14 days prior to enrollment were allowed to participate in the ZULRESSO^TM clinical trials if they met other inclusion/exclusion criteria, and analysis of this subgroup showed statistically significant LS mean differences in change in HAM-D at hour 60 compared to baseline. Given that these Phase III studies were not designed to compare the use of ZULRESSO^TM to currently available treatments, we do not believe that the analysis of a subgroup is sufficient evidence that the use of ZULRESSO^TM provides a substantial clinical improvement over the use of existing technologies, especially since traditional antidepressants may take 4-6 weeks to have full therapeutic effect (not 14 days). We also note that there are multiple medications approved to treat major depressive disorders (of which PPD is a subtype), and it is unclear whether there was uniformity in the type or dosage of antidepressant used by this subgroup in the Phase III studies that could suggest that the use of ZULRESSO^TM represents a substantial clinical improvement over a specific regimen of antidepressant medications used to treat PPD.

With regard to the superiority of ZULRESSO^TM versus placebo, the primary endpoint of improvement in HAM-D scores from baseline at the conclusion of the 60-hour infusion was met in both Phase III studies submitted by the applicant, demonstrating the efficacy of the use of ZULRESSO^TM in rapidly reducing depressive symptoms compared with placebo at this timepoint (60-hour infusion). However, we note that the study authors observed variable placebo response across the three placebo-controlled trials, with robust placebo response in studies 2 and 3. For example, in the third study, placebo had a stronger effect than treatment at 30 days. We also note that the secondary endpoint of HAM-D remission at 30 days was not statistically significant in any of the treatment groups or in the integrated analysis when compared to placebo.

We also remain concerned over the durability of the effects of ZULRESSO^TM beyond the 30-day follow-up period. As noted by the study authors, an important limitation of these trials is that the effects of ZULRESSO^TM after the 30-day follow-up period are unknown. We believe that this is particularly important since ZULRESSO^TM is a one-time infusion while other antidepressants are continued long-term. In addition, data on the effectiveness of current antidepressants in post-partum women are scarce so the long-term efficacy of the use of ZULRESSO^TM compared with currently available oral antidepressants is unclear.

We also remain concerned as to whether study participants had time-limited PPD that might have resolved with the passage of time and whether the outcomes chosen for these studies translate into clinically significant observable improvements in maternal functioning and child interaction.

After consideration of all the information from the applicant, as well as the public comments we received, we are unable to determine that ZULRESSO^TM represents a substantial clinical improvement over existing technologies, and we are not approving new technology add-on payments for ZULRESSO^TM for FY 2021.

6. FY 2021 Applications for New Technology Add-On Payments (Alternative Pathways)

As discussed previously, for applications received for new technology add-on payments for FY 2021 and subsequent fiscal years, if a medical device is part of FDA's Breakthrough Devices Program or a product is designated by FDA as a Qualified Infectious Disease Product (QIDP), and received FDA marketing authorization, it will be considered new and not substantially similar to an existing technology for purposes of the new technology add-on payment under the IPPS, and will not need to meet the requirement that it represent an advance that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries. These technologies must still meet the cost criterion.

We received 10 applications for new technology add-on payments for FY 2021 under this alternative new technology add-on payment pathway. One applicant withdrew its application prior to the issuance of the proposed rule. Of the remaining nine applications, three of the technologies received a Breakthrough Device designation from FDA and six have been designated as a QIDP by FDA. In accordance with the regulations under § 412.87(e), applicants for new technology add-on payments must have FDA approval or clearance by July 1 of the year prior to the beginning of the fiscal year for which the application is being considered. While we do not typically address in the final rule those applications for which the technology has not received FDA approval for the relevant indication by the July 1 deadline, we are summarizing and responding to comments we received regarding whether the applicant for the NanoKnife System® received the required FDA marketing authorization for this product by July 1. A discussion of these remaining nine applications is presented in this final rule.

Typically, in the annual proposed rule, we provide a summary of each application and describe any concerns we may have regarding whether the technology meets a specific new technology add-on payment criterion. As we discussed in the FY 2020 IPPS/LTCH PPS final rule, we believe it is appropriate to facilitate access to these transformative new technologies and antimicrobials as part of the Administration's commitment to addressing barriers to healthcare innovation and ensuring Medicare beneficiaries have access to critical and life-saving new cures and technologies that improve beneficiary health outcomes. To that end, to provide additional transparency and predictability with respect to these technologies, in the FY 2021 IPPS/LTCH PPS proposed rule we proposed to approve or disapprove each of these nine applications based on whether the technology met the cost criterion. In this section of this final rule, we discuss whether or not each technology will be eligible for the new technology add-on payment for FY 2021. We refer readers to section II.H.8. of the preamble of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42292 through 42297) for a complete discussion of the alternative new technology add-on payment pathways for these technologies.

a. Alternative Pathway for Breakthrough Devices

(1) BAROSTIM NEO® System

CVRx submitted an application for the BAROSTIM NEO® System. According to the applicant, the BAROSTIM NEO® System is indicated for the improvement of symptoms of heart failure—quality of life, six-minute hall walk and functional status—for patients who remain symptomatic despite treatment with guideline-directed medical therapy, are NYHA Class III or Class II (who had a recent history of Class III), have a left ventricular ejection fraction ≤35%, a NT-proBNP <1600 pg/ml and excluding patients indicated for Cardiac Resynchronization Therapy (CRT) according to AHA/ACC/ESC guidelines.

The BAROSTIM NEO® System received FDA approval on August 16, 2019 and is a Breakthrough Device designated by FDA. Additionally, according to the applicant, the device was available on the market immediately upon FDA approval. Currently, the following ICD-10-PCS procedure codes can be used to uniquely identify the BAROSTIM NEO® System: 0JH60MZ (Insertion of stimulator generator into chest subcutaneous tissue and fascia, open approach) in combination with 03HK0MZ (Insertion of stimulator lead into right internal carotid artery, open approach) or 03HL0MZ (Insertion of stimulator lead into left internal carotid artery, open approach).

With regard to the cost criterion, the applicant used the FY 2018 MedPAR Limited Data Set (LDS) to assess the MS-DRGs to which potential cases representing hospitalized patients who may be eligible for treatment involving the BAROSTIM NEO® System would mapped. The applicant searched for cases with the following combination of existing ICD-10-PCS codes: 0JH60MZ in combination with 03HK0MZ or 03HL0MZ. The applicant determined its search using these procedure codes mapped to MS-DRGs 252, 253, and 254 (Other Vascular Procedures with MCC, with CC, and without CC/MCC, respectively), resulting in 71,431 total claims across these three MS-DRGs.

The applicant then removed charges for the prior technology since the BAROSTIM NEO® System will replace all of the current device charges included in the claims. The applicant explained that it removed all charges associated with the service category Medical/Surgical Supply Charge Amount, which include revenue centers 027x.

The applicant then standardized the charges and inflated the charges by applying the FY 2020 IPPS/LTCH PPS final rule outlier charge inflation factor of 1.11100 (84 FR 42629). The applicant then added the charges for the new technology by converting the cost of the device to charges by dividing the costs by the national average cost-to-charge ratio of 0.299 for implantable devices from the FY2020 IPPS Final Rule (84 FR 42179).

Based on the previous information, the applicant calculated a final average case-weighted standardized charge per case of $194,393 and an average case-weighted threshold of $85,559. Because the final inflated average case-weighted standardized charge per case exceeded the average case-weighted threshold amount, the applicant asserted that the technology meets the cost criterion.

According to the applicant, since the BAROSTIM NEO® System is used in heart failure patients, the applicant submitted an additional analysis to demonstrate that the technology meets the cost criterion. The applicant revised its first analysis by assessing MS-DRG 291 (Heart Failure and Shock with MCC), 292 (Heart Failure and Shock with CC), and 293 (Heart Failure and Shock without CC/MCC), 242 (Permanent Cardiac Pacemaker Implant with MCC), 243 (Permanent Cardiac Pacemaker Implant with CC), 244 (Permanent Cardiac Pacemaker Implant without CC/MCC), 222 (Cardiac Defibrillator Implant with Cardiac Catheterization with AMI/HF/Shock with MCC), 223 (Cardiac Defibrillator Implant with Cardiac Catheterization with AMI/HF/Shock without MCC), 224 (Cardiac Defibrillator Implant with Cardiac Catheterization without AMI/HF/Shock with MCC), 225 (Cardiac Defibrillator Implant with Cardiac Catheterization without AMI/HF/Shock without MCC), 226 (Cardiac Defibrillator Implant without Cardiac Catheterization with MCC) and 227 (Cardiac Defibrillator Implant without Cardiac Catheterization without MCC) using the same aforementioned ICD-10-PCS codes. The applicant used the same methodology, as previously indicated and calculated a final inflated average case-weighted standardized charge per case of $161,332 and an average case-weighted threshold amount of $55,697. Because the final inflated average case-weighted standardized charge per case exceeded the average case-weighted threshold amount, the applicant asserted that the technology meets the cost criterion.

In the proposed rule, we stated that we agree with the applicant that the BAROSTIM NEO® System meets the cost criterion and therefore proposed to approve the BAROSTIM NEO® System for new technology add-on payments for FY 2021. As previously noted, there is a combination of ICD-10-PCS procedure codes that can uniquely identify cases involving the BAROSTIM NEO® System.

Based on information from the applicant at the time of the proposed rule, the cost of the BAROSTIM NEO® System is $35,000. Under § 412.88(a)(2), we limit new technology add-on payments to the lesser of 65 percent of the average cost of the technology, or 65 percent of the costs in excess of the MS-DRG payment for the case. As a result, we proposed that the maximum new technology add-on payment for a case involving the use of the BAROSTIM NEO® System would be $22,750 for FY 2021(that is 65 percent of the average cost of the technology).

We invited public comments on whether the BAROSTIM NEO® System meets the cost criterion and our proposal to approve new technology add-on payments for the BAROSTIM NEO® System for FY 2021.

Comment: A commenter, the applicant, supported CMS' proposal to approve new technology add-on payments for FY 2021 for BAROSTIM NEO® System.

Response: We appreciate the applicant's support.

Based on the information provided in the application for new technology add-on payments, and after consideration of the public comments we received, we believe the BAROSTIM NEO® System meets the cost criterion. The BAROSTIM NEO® System received marketing authorization from the FDA on August 16, 2019 for the indication covered by its Breakthrough Device designation.

Therefore, we are finalizing our proposal to approve new technology add-on payments for BAROSTIM NEO® System for FY 2021, and we consider the beginning of the newness period to commence on August 16, 2019 which is when the technology received FDA marketing authorization for the indication covered by its Breakthrough Device designation. Under § 412.88(a)(2)(ii)(A), we limit new technology add-on payments to the lesser of 65 percent of the average cost of the technology, or 65 percent of the costs in excess of the MS-DRG payment for the case. As a result, we are finalizing a maximum new technology add-on payment of $22,750 for a case involving the use of the BAROSTIM NEO® System for FY 2021 (that is 65 percent of the average cost of the technology). Cases involving the use of BAROSTIM NEO® System that are eligible for new technology add-on payments will be identified by ICD-10-PCS codes: 0JH60MZ in combination with 03HK0MZ or 03HL0MZ.

(2) The NanoKnife® System

Angiodynamics submitted an application for new technology add-on payments for the NanoKnife® System for FY 2021. The applicant is seeking new technology-add on payments for the use of the NanoKnife® System with six outputs for the treatment of Stage III pancreatic cancer. We noted in the proposed rule that FDA has not yet granted market approval of the NanoKnife® System for use in the treatment of pancreatic cancer. We also noted that the NanoKnife® System has been previously approved by FDA for the use for surgical ablation of soft tissue. Per the applicant, the Nanoknife® System is a medical device consisting of a dedicated generator and specialized electrode probes currently used for inpatient hospital ablation procedures for surgical treatment of soft tissue ablation procedures. The NanoKnife® System is considered a FDA class II device when indicated for soft tissue ablation.

The applicant stated that the NanoKnife® System delivers a series of high voltage direct current electrical pulses between at least two electrode probes placed within a target area of tissue. The electrical pulses produce an electric field which induces electroporation on cells within the target area. The number of electrodes used is dependent on the size and shape of the tumor, and the individual patient's clinical needs.

According to the applicant, electroporation is a technique in which an electrical field is applied to cells in order to increase the permeability of the cell membranes through the formation of nanoscale defects in the lipid bilayer. The result is creation of nanopores in the cell membrane and disruption of intracellular homeostasis, ultimately causing cell death. The applicant stated that after delivering a sufficient number of high voltage pulses, the cells surrounded by the electrodes will be irreversibly damaged. This mechanism, which causes permanent cell damage, is referred to as Irreversible Electroporation (IRE). Per the applicant, benefits of IRE over other ablation methods include: (1) Localized ablation of targeted tissue; (2) lack of damaging heat-sink effect often seen with traditional thermal ablation techniques; and (3) preservation of critical anatomic structures in the vicinity of the ablation. Furthermore, according to the applicant, in studies to date, the NanoKnife® System has been shown to be safe and effective in patients presenting with unresectable tumors, who, given current treatment standards, have few viable treatment options.

The NanoKnife® System with six outputs for the treatment of Stage III pancreatic cancer received FDA Breakthrough Device designation on January 18, 2018 and approval of an FDA investigational device exemption (IDE G180278) on March 28, 2019. We noted in the proposed rule, as discussed previously, that although the NanoKnife® System received FDA Breakthrough Device designation for treatment of pancreatic cancer, FDA has not yet market approved or cleared the NanoKnife® System for use in the treatment of pancreatic cancer. The NanoKnife® System is currently being used for the treatment of Stage III pancreatic cancer in the DIRECT clinical trial in which the first patient was enrolled on May 13, 2019. Completion of the clinical trial is not expected until approximately December 2023.

The applicant noted that earlier iterations of the NanoKnife® System indicated for the surgical ablation of soft tissue were available on the market after FDA clearances in 2008 and 2015. According to the applicant, NanoKnife 3.0®, the most recent iteration of the NanoKnife® System device consisting of improvements and advancements as compared to prior versions of the device, was cleared by FDA on June 19, 2019 for the surgical ablation of soft tissue and per the applicant became commercially available on the U.S. market in June 2019. Consistent with prior versions of the device, NanoKnife 3.0® is labeled for soft tissue ablation. We note that since the earlier versions of the NanoKnife® System have been available commercially on the U.S. market following FDA clearances in 2008 and 2015, these versions are not considered new. As noted previously, under the first criterion, a specific medical service or technology will be considered “new” for purposes of new medical service or technology add-on payments until such time as Medicare data are available to fully reflect the cost of the technology in the MS-DRG weights through recalibration. Therefore, the indication associated with the device during that timeframe, soft tissue ablation, would not be relevant for purposes of the new technology add-on payment application for FY 2021. Only the use of the NanoKnife® System with six outputs for the treatment of Stage III pancreatic cancer, for which the applicant submitted its application for new technology-add on payments for FY 2021, and the FDA Breakthrough Device designation it received for that use, are relevant for purposes of the new technology add-on payment application for FY 2021.

According to the applicant, ICD-10- PCS procedure codes 0F5G0ZF (Destruction of pancreas using irreversible electroporation, open approach), 0F5G3ZF (Destruction of pancreas using irreversible electroporation, percutaneous approach), and 0F5G4ZF (Destruction of pancreas using irreversible electroporation, percutaneous endoscopic approach) may be used to distinctly identify cases involving the NanoKnife® System because the NanoKnife® System is currently the only device used for irreversible electroporation in the United States.

The applicant conducted the following analysis to demonstrate that the technology meets the cost criterion. The applicant used the FY 2018 MedPAR Limited Data Set (LDS) to identify the MS-DRGs to which potential cases representing hospitalized patients who may be eligible for treatment involving the NanoKnife® System would be mapped. The applicant searched for cases reporting the following predecessor ICD-10-PCS codes: 0F5G0ZZ (Destruction of pancreas, open approach), 0F5G3ZZ (Destruction of pancreas, percutaneous approach) and 0F5G4ZZ (Destruction of pancreas, percutaneous endoscopic approach). According to the applicant, this resulted in 40 cases mapped to MS-DRGs 405, 406, and 407 (Pancreas, Liver and Shunt Procedures with MCC, with CC, and without CC/MCC, respectively). The applicant noted that cases eligible for use of the NanoKnife® System would likely map to MS-DRGs 628, 629, or 630 (Other Endocrine, Nutritional and Metabolic O.R. procedures with MCC, with CC, and without CC/MCC, respectively) as well but none of the 40 cases mapped to these MS-DRGs. However, the applicant stated that had there been cases assigned to MS-DRGs 628, 629, or 630, these would have been selected as well. The applicant also noted that cases where the open approach Whipple procedure (ICD-10- PCS code 0FBG0ZZ (Excision of pancreas, open approach)) was coded were removed, as according to the applicant it is unlikely this procedure would be performed in conjunction with IRE because the Whipple procedure is an extensive surgical procedure that may not be necessary with IRE. The applicant only disclosed the percentage of cases assigned to MS- DRG 406 because, according to the applicant, the number of cases assigned to MS-DRGs 405 and 407 was less than 12 for each MS-DRG, making the exact percentage for these two MS-DRGs unavailable.

The applicant examined associated charges per MS-DRG. According to the applicant, since the 40 cases mapped to MS-DRGs 405, 406 and 407 could include charges for various technologies for destruction of pancreatic tumors, and in order to exclude charges for prior technology, the applicant removed all charges billed to the medical supplies cost center for MS-DRGs 405, 406 and 407, as this cost center could include charges associated with use of various predecessor technologies for destruction of pancreatic tumors. The applicant noted it did not remove charges related to the predecessor technology as it believes that remaining charges associated with the cases would stay the same. According to the applicant, related charges consist of operating room, routine, intensive care, drug, radiology and Computed Tomography charges. The applicant then standardized the charges for each case and inflated each case's charges by applying the FY 2020 IPPS/LTCH PPS final rule outlier charge inflation factor of 1.11100 (84 FR 42629). The applicant then added the charges for the Nanoknife® System by dividing the costs of the device and required ancillary supplies per patient by the national average cost-to-charge ratio of 0.299 for implantable devices from the FY 2020 IPPS Final Rule (84 FR 42179). The applicant calculated a final inflated average case-weighted standardized charge per case of $175,836 and an average case-weighted threshold amount of $102,842. Because the final inflated average case-weighted standardized charge per case exceeded the average case-weighted threshold amount, the applicant maintained that the technology met the cost criterion.

In the proposed rule, we agreed with the applicant that it meets the cost criterion. We also stated that, as noted previously, subject to our proposed conditional approval process for technologies for which an application is submitted under the alternative pathway for certain antimicrobial products, applicants for new technology add-on payments must have FDA approval or clearance by July 1 of the year prior to the beginning of the fiscal year for which the application is being considered. As also summarized previously, the applicant is seeking new technology-add on payments for the use of the NanoKnife® System with six outputs for the treatment of Stage III pancreatic cancer, and it is only that use, and the FDA Breakthrough Device designation it received for that use, that are relevant for purposes of the new technology add-on payment application for FY 2021. Therefore, subject to the NanoKnife® System receiving FDA clearance or approval for use in the treatment of Stage III pancreatic cancer by July 1, 2020, we proposed to approve the NanoKnife® System for new technology add-on payments for FY 2021.

Based on preliminary information from the applicant at the time of the proposed rule, the cost of the NanoKnife® System is $11,086. Under § 412.88(a)(2), we limit new technology add-on payments to the lesser of 65 percent of the average cost of the technology, or 65 percent of the costs in excess of the MS-DRG payment for the case. As a result, we proposed that the maximum new technology add-on payment for a case involving the use of the NanoKnife® System would be $7,205.90 for FY 2021.

We invited public comments on whether the NanoKnife® System meets the cost criterion and our proposal to approve new technology add-on payments for the NanoKnife® System for FY 2021, subject to the NanoKnife® System receiving FDA clearance or approval for use in the treatment of Stage III pancreatic cancer by July 1, 2020.

Comment: We received a few comments expressing general support for the approval of the NanoKnife® System for new technology add-on payment for FY 2021.

We also received two comments from the applicant. (The applicant and its consultant submitted individual comments. We consider these comments to be from the applicant and on behalf of the applicant). The applicant stated, the new technology add on payment regulation applicable to medical devices that are part of FDA's Breakthrough Devices Program, 42 CFR 412.87(c)(1), has no explicit limit to the type of marketing authorization and no mandate that the marketing authorization indication be the same as Breakthrough Device Designation indication. According to the applicant, the NanoKnife® System has sufficient FDA market authorization under the broad regulatory provision in that it has a 510(k) clearance for surgical ablation of soft tissue. The applicant also stated that the NanoKnife® System has FDA Breakthrough Designation for treatment of pancreatic cancer. According to the commenter, based on the 510(k) clearance and FDA Breakthrough Designation, the NanoKnife® System should be approved for new technology add-on payment for FY 2021. Furthermore, the applicant conveyed that an FDA approved indication should reflect both regulatory and medical factors, explaining that medical authorities confirm that pancreatic cancer tissue is a form of soft tissue. According to the applicant, scientific articles describe the NanoKnife® System studies including the pancreas as, “Early Results of Irreversible Electroporation (IRE) for Tumor Ablation in Soft Tissue Tumors.” The applicant concluded that the 510(k) clearance indication covers the Breakthrough Device indication and medical facts reinforce a straightforward application of “marketing authorization” to recognize the overlapping the NanoKnife® System indications.

The applicant commented that even if CMS were to reject the 510(k) clearance indication, FDA has approved the NanoKnife® System's investigational device exemption (IDE) for treatment of pancreatic cancer and that in the absence of an explicit regulatory definition that limits marketing authorization to only 510(k) clearances or pre-market approvals (PMA), CMS should allow an IDE indication to satisfy the marketing authorization standard. According to the applicant, an approved IDE is an FDA authorization to; (1) advertise, promote and use the device for the indication under the clinical trial and (2) notify patients, physicians and hospitals of the availability of the device for the particular indication under the clinical trial.

According to the applicant, FDA approval of an IDE signals that the device is safe enough and offers enough potential for effectiveness to be available under the controls of the IDE. Furthermore, the applicant stated that even if limited to the clinical trial, an IDE is clearly marketing authorization and that the regulation does not exclude an IDE as market authorization. According to the applicant, if CMS wanted or looks ahead to specific types of authorizations, CMS must make those explicit in the regulation.

According to the applicant, in addition to the NanoKnife® System's 510(k) clearance and IDE, CMS has approved a number of Medicare reimbursement policies recognizing the NanoKnife® System's use for treatment of pancreatic cancer through the following:

• Approval of national Medicare coverage for treatment of pancreatic cancer under the IDE;
• Approval of ICD-10-PCS codes for treatment of the pancreas: 0F5G0ZF Destruction of pancreas using irreversible electroporation, open approach; and
• Assignment of the ICD-10-PCS codes into pancreas MS DRGs: MS DRG 405 Pancreas, liver and shunt procedures w mcc.

According to the applicant, these CMS coverage, coding and payment approvals recognizing the NanoKnife® System for pancreatic cancer, together with the 510(k) clearance and IDE indications certainly fulfill the marketing authorization new technology requirement.

Finally, the applicant asserted that there would be an inconsistency if CMS approved of national coverage under the clinical trial, allowing reimbursement for the device and the routine costs of patient care, but denied new technology add-on payment during this clinical trial. According to the applicant, the current new technology add-on payment regulation should be applied to harmonize CMS coverage, coding and payment, along with FDA policies to ensure Medicare patient access to life-saving breakthrough devices and is fully in line with the statutory authority for Breakthrough Devices under the 21st Century Cures Act. Public Law 114-255, Section 3051.

Response: We thank the applicant for their recommendations and feedback.

Regarding the applicant's comment that based on the 510(k) clearance for soft tissue ablation and FDA Breakthrough Device designation for treatment of Stage III pancreatic cancer, the NanoKnife® System should be approved for new technology add-on payment for FY 2021 under the alternative pathway for certain transformative devices, we disagree. As discussed in response to comments in section II.G.8, we believe the applicant is asking CMS to evaluate this technology inconsistent with longstanding policy and to start the newness period prior to the time a product receives marketing authorization. As discussed in the proposed rule and elsewhere in this final rule, in the September 7, 2001 final rule that established the new technology add-on payment regulations (66 FR 46915), we indicated that an existing technology can receive new technology add on payments for a new use or indication. As we stated in the proposed rule, while we recognize that a technology can have multiple indications, each indication has its own newness period and must meet the new technology add on payment criteria. The applicable criteria will depend on whether the technology is eligible for an alternative new technology add-on payment pathway. However, each indication for the technology is evaluated separately from any other indication, including with respect to the start of the newness period, to determine whether the technology is eligible for new technology add-on payments when used for that indication. CMS did not modify this longstanding policy for evaluating whether a technology with multiple indications has received the required marketing authorization when it adopted the alternative pathway for certain transformative new devices in FY 2020.

Regarding the applicant's comment that the 510(k) clearance indication for soft tissue covers the Breakthrough Device designation indication for treatment of Stage III pancreatic cancer and that the medical facts reinforce a straightforward application of “marketing authorization” to recognize the overlapping the NanoKnife® System indications should result in the approval of the NanoKnife® System for FY 2021 under the alternative pathway for certain transformative devices, we also disagree. First, as previously discussed, each indication for the technology is evaluated separately from any other indication, including with respect to the start of the newness period, to determine whether the technology is eligible for new technology add-on payments when used for that indication. Also as explained previously, and in the FY 2005 IPPS final rule (69 FR 49002), the intent of section 1886(d)(5)(K) of the Act and regulations under § 412.87(b)(2) is to pay for new medical services and technologies for the first 2 to 3 years that a product comes on the market, during the period when the costs of the new technology are not yet fully reflected in the DRG weights. Therefore, as discussed in the proposed rule, since the earlier versions of the NanoKnife® System, indicated for soft tissue ablation, have been available commercially on the U.S. market following FDA clearances in 2008 and 2015 and are not considered new, the 510(k) clearance indication for soft tissue ablation would not be relevant for purposes of the new technology add-on payment application for FY 2021. Also as discussed in the proposed rule, only the indication with six outputs for the treatment of Stage III pancreatic cancer is relevant for purposes of the new technology add-on payment application for FY 2021 under the alternative pathway for certain transformative devices. We refer readers to our response to comments in section II.G.8 of the preamble of this final rule for further discussion of these existing policies.

Regarding the suggestion that an IDE can qualify as marketing authorization and that the IDE determination can match the Breakthrough Designation indication for new technology add-on payment eligibility, we disagree. It is our understanding that an IDE allows the investigational device to be used in a clinical study in order to collect safety and effectiveness data prior to the device receiving FDA marketing authorization (that is, received PMA approval, 510(k) clearance, or the granting of De Novo classification request). Therefore, we do not believe that an IDE qualifies as marketing authorization.

For these same reasons, we disagree that any separate policies relating to coverage, coding and payment, combined with the 510(k) clearance for the separate indication of soft tissue ablation and IDE indication for treatment of Stage III pancreatic cancer, should allow for the approval of new technology add-on payments for the NanoKnife® System for FY 2021 when used for treatment of Stage III pancreatic cancer. Regarding the comments about national coverage determinations, payment and coding, we note that the new technology add-on payment policy is separate and distinct from the specific processes for coverage, coding, and payment. As discussed previously, those with further questions about Medicare's coverage, coding, and payment processes, or those who want further guidance about how they can navigate these processes, can contact The Council on Technology and Innovation (CTI) at CTI@cms.hhs.gov.

Therefore, for the reasons stated in the proposed rule and in this final rule, because the NanoKnife® System did not receive FDA clearance or approval by July 1, 2020 for use in the treatment of Stage III pancreatic cancer, which is the indication for which it received FDA Breakthrough Device Designation and for which it applied for new technology add-on payments for FY 2021, we are not approving new technology add-on payments for the NanoKnife® System for FY 2021. The applicant for the NanoKnife® System would remain eligible to apply for the new technology add on payment under the alternative pathway for certain transformative new devices for a future fiscal year.

(3) Optimizer System

Impulse Dynamics submitted an application for The Optimizer® System (QFV). The Optimizer® System is intended for the treatment of chronic heart failure in patients with advanced symptoms that have normal QRS duration and are not indicated for cardiac resynchronization therapy.

Per the applicant, the Optimizer System consists of three components. First, the Optimizer Rechargeable Implantable Pulse Generator (IPG) is designed for subcutaneous implant and delivers cardiac contractility modulation to the heart via two standard pacing leads attached to the right ventricular septum. Second, the Optimizer Mini Charger recharges the Optimizer IPG. Finally, the Omni II Programmer with Omni SMART Software gives a qualified healthcare professional the ability to program the Optimizer IPG over a large range of clinical settings.

The applicant explained that the Optimizer IPG is implanted in the right pre-pectoral region, similar to cardiac rhythm management devices. According to the applicant, the procedure is performed in a cardiac catheterization laboratory under fluoroscopic guidance with the patient under light sedation. The applicant stated that since three intracardiac leads are used, subclavian venous access is preferred over access via the axillary or cephalic vein. The applicant stated that the Optimizer IPG is connected to the heart via two standard implantable pacing leads that are each placed into the right ventricular septum.

With respect to the newness criterion, the applicant indicated that FDA granted Breakthrough Device designation for the Optimizer System on March 21, 2019. The applicant received FDA premarket approval for the two-lead Optimizer System, which included placement of the two leads in the right ventricular septum, on October 23, 2019. The device was available in the market immediately following FDA approval.

The applicant asserted that the current ICD-10-PCS codes 0JH60AZ (Insertion of contractility modulation device into chest subcutaneous tissue and fascia, open approach), 0JH63AZ (Insertion of contractility modulation device into chest subcutaneous tissue and fascia, percutaneous approach), 0JH80AZ (Insertion of contractility modulation device into abdomen subcutaneous tissue and fascia, open approach) and 0JH83AZ (Insertion of contractility modulation device into abdomen subcutaneous tissue and fascia, percutaneous approach) identify the Optimizer System.

With regard to the cost criterion, the applicant conducted an analysis using the FY 2018 MedPAR Limited Data Set (LDS) to demonstrate that the Optimizer System meets the cost criterion.

The applicant first searched the FY 2018 MedPAR data for cases reporting the procedure codes listed in this section to identify potential cases representing hospitalized patients who may be eligible for treatment using the Optimizer® System. The applicant limited its search to MS-DRG 245 (AICD Generator Procedures), which it asserts is the typical MS-DRG assignment for implanting a contractility modulation device. The applicant identified 2,049 cases that met the criterion of having at least one of the following relevant ICD-10-PCS procedure codes:

The applicant determined an average unstandardized charge per case of $180,319. The applicant then removed all charges for prior technology by removing charges associated with the service categories Prosthetic/Orthotic (revenue center 0274), Pacemakers (revenue center 0275) and other implantables (revenue center 0278), as the applicant believed the Optimizer® System will typically not be implanted concomitantly with other devices during the hospital admission. The applicant then standardized the charges and applied the FY 2020 IPPS/LTCH PPS final rule outlier charge inflation factor of 1.11100 (84 FR 42629) to update the charges from FY 2018 to FY 2020.

The applicant added the charges for the new technology by dividing its cost per patient by the national average cost-to-charge ratio of 0.299 for implantable devices from the FY2020 IPPS Final Rule (84 FR 42179).

The applicant calculated a final inflated average case-weighted standardized charge per case of $190,167, which it stated exceeded the average case-weighted threshold amount of $148,002 by $42,165.

The applicant also conducted a subsequent analysis that only included patients with a diagnosis of heart failure. The applicant once again limited its search to MS-DRG 245 and refined its sample by including only cases with one of the ICD-10-PCS procedure codes listed previously and an ICD-10-CM diagnosis code from Category I50 (Heart Failure) on the claim. This resulted in 1,698 cases with an average unstandardized charge per case of $183,243. After following the same order of operations as the first analysis, the final inflated average case weighted standardized charge per case was $192,237, which exceeded the average case weighted threshold amount of $148,002. Because the final inflated average case-weighted standardized charge per case exceeded the average case-weighted threshold amount under both analyses described previously, the applicant maintains that the technology meets the cost criterion.

In the proposed rule, we stated that we agree with the applicant that the technology meets the cost criterion and therefore proposed to approve the Optimizer® System for new technology add-on payments for FY 2021. As previously noted, the applicant asserted that ICD-10-PCS codes 0JH60AZ, 0JH63AZ, 0JH80AZ and 0JH83AZ identify the Optimizer® System.

Based on preliminary information from the applicant at the time of the proposed rule, the cost of the Optimizer® System is $23,000. Under § 412.88(a)(2), we limit new technology add-on payments to the lesser of 65 percent of the average cost of the technology, or 65 percent of the costs in excess of the MS-DRG payment for the case. As a result, we proposed that the maximum new technology add-on payment for a case involving the use of the Optimizer® System would be $14,950 for FY 2021.

We invited public comments on whether the Optimizer® System meets the cost criterion and our proposal to approve new technology add-on payments for the Optimizer® System for FY 2021.

Comment: Commenters supported CMS' intent to improve beneficiary's access to new technology and supported CMS' proposal to approve new technology add-on payments for FY 2021 for Optimizer® System.

Response: We appreciate the commenters' support.

Based on the information provided in the applicant's new technology add-on payment application and after consideration of the public comments we received, we believe that Optimizer® System meets the cost criterion. The Optimizer® System received marketing authorization from the FDA on October 23, 2019 for the indication covered by its Breakthrough Device designation.

Therefore, we are finalizing our proposal to approve new technology add-on payments for Optimizer® System for FY 2021, and we consider the newness period to commence on October 23, 2019 when the technology received FDA marketing authorization for the indication covered by its Breakthrough Device designation. Under § 412.88(a)(2)(ii)(A), we limit new technology add-on payments to the lesser of 65 percent of the average cost of the technology, or 65 percent of the costs in excess of the MS-DRG payment for the case. As a result, we are finalizing a maximum new technology add-on payment of $14,950 for a case involving the use of the Optimizer® System for FY 2021(that is 65 percent of the average cost of the technology). Cases involving the use of Optimizer® System that are eligible for new technology add-on payments will be identified by ICD-10-PCS codes 0JH60AZ, 0JH63AZ, 0JH80AZ or 0JH83AZ.

b. Alternative Pathways for Qualified Infectious Disease Products (QIDPs)

(1) Cefiderocol (Fetroja)

Shionogi & Co. Ltd (Company) submitted an application for Cefiderocol (Fetroja), a β-lactam antibiotic indicated for the treatment of complicated urinary tract infections (cUTI), including pyelonephritis, caused by the following susceptible Gram-negative (GN) pathogens: Escherichia coli (including with concurrent bacteremia), Klebsiella pneumoniae, Proteus mirabilis, Pseudomonas aeruginosa, Citrobacter freundii, Enterobacter cloacae, Morganella morganii, and Serratia marcescens. Per the applicant, Cefiderocol should be used to treat infections where limited or no alternative treatment options are available and where cefiderocol is likely to be an appropriate treatment option, which may include use in patients with infections caused by documented or highly suspected carbapenem-resistant (CR) and/or multidrug-resistant GN pathogens.

The applicant describes Cefiderocol as an injectable siderophore cephalosporin. The applicant asserts that the principal antibacterial/bactericidal activity of Cefiderocol occurs with inhibiting GN bacterial cell wall synthesis by binding to penicillin-binding proteins. The applicant contends that Cefiderocol is unique in that it can enter the bacterial periplasmic space (in addition to the typical entry point via porin channels) as a result of its siderophore-like property, has enhanced stability to β-lactamases, and has activity limited to GN aerobic bacteria only.

Per the applicant, cUTIs are the second leading cause of hospitalization in the elderly and have substantial morbidity and worse outcomes if the causative pathogens are carbapenem-resistant (CR). According to the applicant, bloodstream infection (BSI) is often associated with cUTI, known as urosepsis, with an associated mortality rate of 9 to 31 percent. The applicant asserts that patients who develop cUTI due to a CR pathogen are at greater risk for prolonged hospital stays and progression to a BSI or urosepsis. The applicant stated that CR is a growing problem in the US and around the world, with increasing infections due to strains that are resistant to most or all currently available antibiotics. The applicant further states that, compared to susceptible pathogens, CR pathogens cause prolonged hospital and intensive care unit (ICU) stays, worse discharge status, and greater mortality.

Cefiderocol is designated as a QIDP and received FDA approval on November 19, 2019. However, according to the applicant, Cefiderocol was not commercially available until February 24, 2020 due to the finalization of the materials associated with the commercial launch of a drug, which could not be completed until the final label with FDA was determined. The applicant submitted a request for approval of unique ICD 10 PCS procedure codes for the administration of Cefiderocol beginning in FY 2021 and was granted approval for the following procedure codes effective October 1, 2020: XW03366 or XW04366.

With regard to the cost criterion, the applicant conducted two analyses based on 100% and 75% of identified claims. For both scenarios, the applicant used the FY 2018 MedPAR Limited Data Set (LDS) to assess the MS-DRGs to which potential cases representing hospitalized patients who may be eligible for Cefiderocol treatment would be mapped. The applicant identified eligible cases by searching the FY 2018 MedPAR for cases reporting one of the following ICD-10-CM codes:

Under the first scenario of 100 percent of cases, the applicant identified 1,461,784 cases mapping to 656 MS-DRGs. Under the second scenario of 75 percent of cases, the applicant identified 1,097,594 cases mapping to 53 MS-DRGs. The applicant standardized the charges after calculating the average case-weighted unstandardized charge per case for both scenarios and removing 50 percent of charges associated with the drug revenue centers 025x, 026x, and 063x under both scenarios. (Per the applicant, Cefiderocol is expected to replace some of the drugs that would otherwise be utilized to treat these patients. The applicant stated that it believes 50 percent of these total charges to be a conservative estimate as other drugs will still be required for these patients during their hospital stay.) The applicant then applied an inflation factor of 11.1 percent, which was the two-year outlier charge inflation factor used in the FY 2020 IPPS/LTCH PPS final rule, to update the charges from FY 2018 to FY 2020. The applicant then added charges for Cefiderocol by dividing the total average hospital cost of Cefiderocol by the national average cost-to-charge ratio (0.189) for drugs published in the FY 2020 IPPS/LTCH PPS final rule.

The applicant calculated a final inflated average case-weighted standardized charge per case of $116,131 for the first scenario and $106,037 for the second scenario and an average case-weighted threshold amount of $55,885 for the first scenario and $50,887 for the second scenario. Because the final inflated average case-weighted standardized charge per case for each scenario exceeds the average case-weighted threshold amount for each scenario, the applicant asserted that the technology meets the cost criterion.

In the proposed rule we stated that we agree with the applicant that Cefiderocol meets the cost criterion and therefore proposed to approve Cefiderocol for new technology add-on payments for FY 2021. As previously noted, the applicant has received unique ICD-10-PCS procedure codes to identify cases involving the administration of Cefiderocol.

In its application, the applicant stated that the cost of Cefiderocol is $10,559.81. Under 412.88(a)(2), we limit new technology add-on payments for QIDPs to the lesser of 75 percent of the costs of the new medical service or technology, or 75 percent of the amount by which the costs of the case exceed the MS-DRG payment. As a result, we proposed that the maximum new technology add-on payment for a case involving the administration of Cefiderocol would be $7,919.86 for FY 2021 (that is 75 percent of the average cost of the technology).

We invited public comments on whether Cefiderocol meets the cost criterion and our proposal to approve new technology add-on payments for Cefiderocol for FY 2021.

Comment: Several commenters, including the applicant, supported CMS' proposal to approve new technology add-on payments for FY 2021 for Cefiderocol Infusion. The applicant also further confirmed CMS' methodology of arriving at the maximum new technology add-on payment as stated in the FY 2021 proposed rule for Cefiderocol as appropriate.

Response: We appreciate the commenters' support.

Based on the information provided in the applicant's new technology add-on payment application and after consideration of the public comments we received, we believe that Cefiderocol meets the cost criterion. As previously discussed, Cefiderocol received FDA approval on November 19, 2019 for use in the treatment of (cUTI) but was not commercially available until February 24, 2020. Therefore, we are finalizing our proposal to approve new technology add-on payments for Cefiderocol for FY 2021, and we consider the beginning of the newness period to commence when the technology became commercially available on February 24, 2020. Under § 412.88(a)(2)(ii)(B), we limit new technology add-on payments for QIDPs to the lesser of 75 percent of the average cost of the technology, or 75 percent of the amount by which the costs of the case exceed the standard MS-DRG payment. As a result, we are finalizing a maximum new technology add-on payment of $7,919.86 for a case involving the use of Cefiderocol for FY 2021(that is 75 percent of the average cost of the technology). Cases involving the use of Cefiderocol that are eligible for new technology add-on payments will be identified by ICD-10-PCS procedure codes XW03366 or XW04366.

(2) Contepo

CONTEPO^TM (fosfomycin for injection), is intended for treatment of complicated urinary tract infections (cUTI) and is designated by FDA as a QIDP. In October 2018, Nabriva Therapeutics submitted a New Drug Application (NDA) to the US-FDA seeking marketing approval of IV fosfomycin for injection (ZTI-01) for the treatment of patients 18 years and older with cUTI including acute pyelonephritis (AP) caused by designated susceptible bacteria. The applicant noted that once approved, CONTEPO will represent the first FDA-approved IV epoxide antibiotic in the United States.

On April 30, 2019, Nabriva received a Complete Response Letter (CRL) from FDA for the NDA seeking marketing approval of CONTEPO (fosfomycin) for injection. The applicant stated that the CRL from FDA requests that Nabriva address issues related to facility inspections and manufacturing deficiencies at one of Nabriva's contract manufacturers prior to FDA approving the NDA. Nabriva had resubmitted its NDA to FDA with FDA setting a Prescription Drug User Fee Act (PDUFA) goal date of June 19, 2020 for the completion of its review of the NDA.

The applicant applied for and received a unique ICD-10-PCS procedure code to identify cases involving the administration of CONTEPO^TM in 2019. Effective October 1, 2019, CONTEPO^TM administration can be identified by ICD-10-PCS procedure codes XW033K5, (Introduction of Fosfomycin anti-infective into peripheral vein, percutaneous approach, new technology group 5) and XW043K5 (Introduction of Fosfomycin anti-infective into central vein, percutaneous approach, new technology group 5), which the applicant states are unique to CONTEPO administration.

With regard to the cost criterion, the applicant used the FY 2018 MedPAR Limited Data Set (LDS) to assess the MS-DRGs to which potential cases representing hospitalized patients who may be eligible for treatment involving CONTEPO^TM would most likely be mapped. According to the applicant, CONTEPO^TM is anticipated to be indicated for the treatment of hospitalized patients who have been diagnosed with complicated urinary tract infections (cUTIs). The applicant identified 199 ICD-10-CM diagnosis code combinations that identify hospitalized patients who have been diagnosed with a cUTI. Searching the FY 2018 MedPAR data file for these ICD-10-CM diagnosis codes resulted in a total of 684,664 potential cases that span 570 unique MS-DRGs, 522 of which contained more than 10 cases. The applicant excluded MS-DRGs with minimal volume (that is, 10 cases or less) from the cohort of the analysis (a total of 252 cases and 48 MS-DRGs), and this resulted in a total of 684,412 cases across 522 MS-DRGs.

The applicant examined associated charges per MS-DRG and removed charges for potential antibiotics that may be replaced by the use of CONTEPO^TM. Specifically, the applicant identified 5 antibiotics currently used for the treatment of patients who have been diagnosed with a cUTI and calculated the cost of each of these drugs for administration over 14 day inpatient hospitalization. Because patients who have been diagnosed with a cUTI would typically only be treated with one of these antibiotics at a time, the applicant estimated an average of the 14-day cost for the 5 antibiotics. The applicant then converted the cost to charges by dividing the costs by the national average CCR of 0.189 for drugs from the FY 2020 IPPS/LTCH PPS final rule (84 FR 42179).

The applicant then standardized the charges for each case and inflated each case's charges by applying the FY 2020 IPPS/LTCH PPS final rule outlier charge inflation factor of 1.11100 (84 FR 42629). The applicant then added the charges for the new technology by calculating the per-day cost per patient. The applicant noted that the duration of therapy of up to 14 days (patients that had a cUTI with concurrent bacteremia) is consistent with the prospective prescribing information, and that it used this 14-day duration of therapy to calculate total inpatient cost. The applicant then converted these costs to charges by dividing the costs per patient by the national average cost-to charge ratio of 0.189 for drugs from the FY 2020 IPPS/LTCH PPS final rule (84 FR 42179). The applicant calculated a final inflated average case-weighted standardized charge per case of $75,533 and a case weighted threshold of $55,447. Because the final inflated average case-weighted standardized charge per case for CONTEPO^TM exceeded the average case-weighted threshold amount, the applicant maintained it meets the cost criterion.

As summarized, the applicant used a 14-day duration of therapy to calculate total inpatient cost for purposes of its cost analysis. However, the applicant noted that the average number of days a patient would be administered CONTEPO^TM will most likely fall between 10-14 days of therapy given the current guideline recommendations. Of these treatment days, the applicant noted that nearly all would occur during the inpatient hospital stay. Consistent with our historical practice, we stated in the proposed rule that we believe the new technology add-on payment for CONTEPO^TM, if approved, would be based on the average cost of the technology and not the maximum. For example, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53358), we approved new technology add-on payments for DIFICID^TM based on the average dosage of 6.2 days rather than the maximum 10 day dosage. Without further information from the applicant regarding the average number of days CONTEPO^TM is administered, we stated that we believe using the middle ground of 12.5 days, based on the 10-14 day period indicated by the applicant, is appropriate for this analysis to determine the average number of days CONTEPO^TM is administered in the hospital. To assess whether the technology would meet the cost criterion using an average cost for the technology based on this 12.5-day period for CONTEPO^TM administration, we converted the costs to charges by dividing the costs per patient by the national average cost-to charge ratio of 0.189 for drugs from the FY 2020 IPPS/LTCH PPS final rule (84 FR 42179). Based on data from the applicant, this resulted in a final inflated average case-weighted standardized charge per case of $73,548 which exceeds the case weighted threshold of $55,447.

Because of the large number of cases included in this cost analysis, the applicant supplemented the analysis as described previously with additional sensitivity analyses. In these analyses, the previous cost analysis was repeated using only the top 75 percent of cases, the top 20 MS-DRGs, and the top 10 MS-DRGs. In these three additional sensitivity analyses, the final inflated average case-weighted standardized charge per case for CONTEPO^TM of $64,019, $62,486 and $61,158 exceeded the average case-weighted threshold amount of $51,085, $50,704 and $49,889, respectively. We note that the applicant did not use the thresholds from the correction notice to case weight the charges, however the variance is minimal with the final inflated average case-weighted standardized charge per case well in excess of the case weighted threshold amounts. Because the final inflated average case-weighted standardized charge per case for CONTEPO^TM exceeded the average case-weighted threshold amount, the applicant asserts that CONTEPO^TM meets the cost criterion.

In the proposed rule, we stated that we believe that CONTEPO^TM meets the cost criterion and therefore proposed to approve CONTEPO^TM for new technology add-on payments for FY 2021. As previously noted, the applicant has received a unique ICD-10-PCS procedure code to identify cases involving the administration of CONTEPO^TM.

As discussed previously, we stated in the proposed rule that without further information from the applicant regarding the average number of days CONTEPO^TM is administered, we believe using a 12.5 day duration of therapy is a reasonable approach for estimating the average cost of the technology. Based on preliminary information from the applicant at the time of the proposed rule, the cost of CONTEPO^TM administered over 12.5 days is $3,125. Under § 412.88(a)(2), we limit new technology add-on payments for QIDPs to 75 percent of the costs of the new medical service or technology, or 75 percent of the amount by which the costs of the case exceed the MS-DRG payment. As a result, we proposed that the maximum new technology add-on payment for a case involving the administration of CONTEPO^TM would be $2,343.75 for FY 2021 (that is 75 percent of the average cost of the technology).

We invited public comments on whether CONTEPO^TM meets the cost criterion and our proposal to approve new technology add-on payments for CONTEPO^TM for FY 2021.

Comment: Several commenters supported CMS' proposal to approve new technology add-on payments for FY 2021 for CONTEPO^TM infusion.

Response: We appreciate the commenters' support.

Comment: A commenter, the applicant, supported CMS' proposal to approve new technology add-on payments for FY 2021 for CONTEPO^TM and notified CMS that the applicant plans to request a Type A meeting with FDA to discuss appropriate next steps and FDA's plans for completing foreign facility inspections. The applicant stated that it will inform CMS on the status of the CONTEPO NDA once the application is resubmitted and a new PDUFA date is confirmed. The applicant also agrees with CMS of using 12.5-day duration of therapy for estimating the average cost of the technology. The applicant further agrees that using the thresholds from the FY 2020 final rule as opposed to the correction notice to case weight the charges for CONTEPO^TM has no impact on meeting the cost criterion (final inflated average case-weighted standardized charges per case are well in excess of the case weighted threshold).

Response: We appreciate the applicant's comments. We agree that CONTEPO^TM meets the cost criterion.

As discussed later in this section of this rule, we are finalizing our proposal to provide for conditional approval for a technology for which an application is submitted under the alternative pathway for certain antimicrobial products at § 412.87(d) that does not receive FDA marketing authorization by the July 1 deadline specified in § 412.87(e)(2), provided that the technology receives FDA marketing authorization by July 1 of the particular fiscal year for which the applicant applied for new technology add-on payments. We refer the reader to the later discussion in this section of this rule for complete details regarding this final policy. Therefore, because CONTEPO^TM otherwise meets the new technology add-on payment criteria under the alternative pathway for products designated as QIDPs, we are granting a conditional approval for CONTEPO^TM for new technology add-on payments, subject to the technology receiving FDA marketing authorization by July 1, 2021 (that is, by July 1 of the fiscal year for which the applicant applied for new technology add-on payments (2021)). If CONTEPO^TM receives FDA marketing authorization before July 1, 2021, the new technology add-on payment for cases involving the use of this technology would be made effective for discharges beginning in the first quarter after FDA marketing authorization is granted. If the FDA marketing authorization is received on or after July 1, 2021, no new technology add-on payments will be made for cases involving the use of CONTEPO^TM for FY 2021.

After consideration of the comments received, we are also finalizing our proposal to use a 12.5 day duration of therapy to estimate the average cost of the technology. Under § 412.88(a)(2)(ii)(B), we limit new technology add-on payments for QIDPs to the lesser of 75 percent of the average cost of the technology, or 75 percent of the amount by which the costs of the case exceed the standard MS-DRG payment. If CONTEPO^TM receives FDA approval prior to July 1, 2021, the maximum new technology add-on payment for a case involving the administration of CONTEPO^TM is $2,343.75 for FY 2021 (that is 75 percent of the average cost of the technology). Cases involving the use of CONTEPO^TM that would be eligible for new technology add-on payments will be identified by ICD-10-PCS procedure codes XW033K5, (Introduction of Fosfomycin anti-infective into peripheral vein, percutaneous approach, new technology group 5) or XW043K5 (Introduction of Fosfomycin anti-infective into central vein, percutaneous approach, new technology group 5).

(3) NUZYRA® for Injection

Paratek Pharmaceuticals submitted an application for new technology add-on payments for NUZYRA® (omadacycline) for Injection for FY 2021. According to the applicant, NUZYRA® for Injection is a tetracycline class antibacterial indicated for the treatment of adult patients with the following infections caused by susceptible microorganisms:

• Community-acquired bacterial pneumonia (CABP) caused by the following susceptible microorganisms: Streptococcus pneumoniae, Staphylococcus aureus (methicillin-susceptible isolates), Haemophilus influenzae, Haemophilus parainfluenzae, Klebsiella pneumoniae, Legionella pneumophila, Mycoplasma pneumoniae, and Chlamydophila pneumoniae.
• Acute bacterial skin and skin structure infections (ABSSSI) caused by the following susceptible microorganisms: Staphylococcus aureus (methicillin susceptible and resistant isolates), Staphylococcus lugdunensis, Streptococcus pyogenes, Streptococcus anginosus grp. (includes S. anginosus, S. intermedius, and S. constellatus), Enterococcus faecalis, Enterobacter cloacae, and Klebsiella pneumoniae.

The applicant explained that NUZYRA® for Injection is supplied as a lyophilized powder in a single-dose colorless glass vial, with each vial containing 100 mg of NUZYRA® (equivalent to 131 mg omadacycline tosylate). 100-mg single dose vials are packaged in cartons of 10. The NDC number is 71715-001-02. Additionally, the applicant noted that while an oral formulation of NUZYRA® is available, NUZYRA® can also be administered through intravenous infusion. Providers may determine which method of administration is clinically appropriate for each patient. Adult patients with CABP must receive their initial loading dose of NUZYRA® via intravenous infusion. The applicant specified that NUZYRA® for Injection should not be administered with any solution containing multivalent cations, for example, calcium and magnesium, through the same intravenous line. Co-infusion with other medications has not been studied. The applicant conveyed that for treatment of adults with CABP, the recommended dosage regimen of NUZYRA® for Injection is as follows (Use NUZYRA for injection administered by intravenous infusion for the loading dose in CABP patients):

For treatment of adults with ABSSSI, the recommended dosage regimen of NUZYRA® for injection is as follows (Use NUZYRA® for injection administered by intravenous infusion or NUZYRA® tablets orally administered for the loading dose in ABSSSI patients):

Finally, the applicant indicated that no dose adjustment is warranted in patients with renal or hepatic impairment.

According to the applicant, NUZYRA® for Injection was submitted for FDA approval under a New Drug Application (identified as NDA 209817). After Fast Track and Priority Review consideration, NUZYRA® for Injection received FDA approval on October 2, 2018. According to information provided by the applicant, NUZYRA® for Injection was designated as a QIDP and granted priority review. According to the applicant, NUZYRA® for Injection became commercially available in February 2019. The applicant explained that the delay in commercial availability was due to an effort to prepare the distribution and supply channel (pharmacies and wholesalers) and to prepare for a full promotional launch.

The applicant submitted a request for approval of unique ICD-10-PCS procedure codes for the administration of NUZYRA® for Injection beginning in FY 2021 and was granted approval for the following ICD-10-PCS procedure codes effective October 1, 2020: XW033B6 (Introduction of omadacycline anti-infective into peripheral vein, percutaneous approach, new technology group 6) or XW043B6 (Introduction of omadacycline anti-infective into peripheral vein, percutaneous approach, new technology group 6).

With regard to the cost criterion, the applicant used the FY 2018 MedPAR Limited Data Set (LDS) to identify potential cases that may be eligible for treatment involving NUZYRA® for Injection. To ensure appropriate discharges were used from the dataset, the following edits were made:

• Claims paid by a Managed Care Organization were removed.
• Duplicated records with the same beneficiary ID, provider, admission data, and discharge date were removed.
• Interim claims were combined into discharge records.
• Discharges with covered charges of zero dollars and discharges with zero covered days were removed.
• Discharges from IPPS hospitals, as determined by the FY 2020 IPPS Impact File and discharges with discharge dates from October 1, 2017 to September 30, 2018 were included.
• Statistical outliers with standard charges that were outside of the range of +/−3 standard deviations from the geometric mean standardized charge by MS-DRG were removed.

After these edits were made, the applicant selected discharges that had a primary or secondary diagnosis for ABSSSI or CABP, using a wide list of ICD-10-PCS codes, which resulted in a total of 1,745,649 discharges. Using these 1,745,649 discharges, 37 MS-DRGs were selected based on one of the following criteria:

• MS-DRGs with the highest volume of discharges with a primary or secondary diagnosis for ABSSSI or CABP (which represent 70 percent of all discharges with ABSSSI or CABP).
• MS-DRGs with at least two-thirds of discharges with a primary or secondary diagnosis of ABSSSI or CABP.

Using this method, the applicant identified 1,226,429 total cases which mapped to the following 37 unique MS-DRGs:

Next, using the cases mapping to these selected MS-DRGs, the applicant removed pharmacy charges for other drugs and standardized the charges. Then, the applicant inflated the standardized charges from FY 2018 to FY 2020 using a 2-year charge inflation factor of 11.1 percent, based on the FY 2020 IPPS/LTCH PPS final rule (84 FR 42629).

The applicant estimated the cost of NUZYRA® for Injection based on an average inpatient stay of 5 days in the clinical trial. Some patients may be required to stay longer than 5 days, resulting in increased charges. Using a loading dose for day 1 and maintenance doses in days 2 through 5 results in use of 6 vials. Each vial costs $345, resulting in a total cost for the new technology of $2,070. The applicant estimated charges for the drug by dividing the cost by the national average cost-to-charge (CCR) for drugs of 0.189, as set forth in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42179). This resulted in estimated charges of $10,952. The applicant then added $10,952 of charges for the drug which resulted in a final inflated average case-weighted standardized charge per case of $58,922. The applicant determined an average case-weighted threshold amount of $53,899. Because the final inflated average case-weighted standardized charge per case exceeded the average case-weighted threshold amount, the applicant maintained that the technology met the cost criterion.

In the proposed rule we stated that we agreed with the applicant that it meets the cost criterion and therefore proposed to approve NUZYRA® for Injection for new technology add-on payments for FY 2021. As previously noted, the applicant has received unique ICD-10-PCS procedure codes to identify cases involving the administration of NUZYRA® for Injection.

Based on preliminary information from the applicant at the time of the proposed rule, the cost of NUZYRA® for Injection is $2,070. Under § 412.88(a)(2), we limit new technology add-on payments for QIDPs to 75 percent of the costs of the new medical service or technology, or 75 percent of the amount by which the costs of the case exceed the MS-DRG payment. As a result, we proposed that the maximum new technology add-on payment for a case involving the use of NUZYRA® for Injection would be $1,552.50 for FY 2021 (that is 75 percent of the average cost of the technology).

We invited public comments on whether NUZYRA® for Injection meets the cost criterion and our proposal to approve new technology add-on payments for NUZYRA® for Injection for FY 2021.

Comment: A commenter supported CMS' proposal to approve new technology add-on payments for FY 2021 for NUZYRA® for Injection.

Response: We appreciate the commenter's support.

Based on the information included in the applicant's new technology add-on payment application and after consideration of the public comments we received, we believe that NUZYRA® for Injection meets the cost criterion. As previously discussed, NUZRYRA for Injenction received FDA approval on October 2, 2018, but was not commercially available until February 1, 2019. Therefore, we are finalizing our proposal to approve new technology add-on payments for NUZRYA for Injection for FY 2021, and we consider the beginning of the newness period to commence when the technology became commercially available on February 1, 2019. Under § 412.88(a)(2)(ii)(B), we limit new technology add-on payments for QIDPs to the lesser of 75 percent of the average cost of the technology, or 75 percent of the amount by which the costs of the case exceed the standard MS-DRG payment. Therefore, we are finalizing a maximum new technology add-on payment of $1,552.50 for a case involving the use of NUZYRA® for Injection for FY 2021(that is 75 percent of the average cost of the technology). Cases involving the use of NUZYRA® for Injection that are eligible for new technology add-on payments will be identified by ICD-10-PCS procedure codes XW033B6 or XW043B6.

(4) RECARBRIO^TM

Merck submitted an application for new technology add-on payments for RECARBRIO^TM for FY 2021. RECARBRIO^TM is a fixed-dose combination of imipenem, a penem antibacterial; cilastatin, a renal dehydropeptidase inhibitor; and relebactam, a novel β-lactamase inhibitor (BLI). According to the applicant, RECARBRIO^TM is intended for the treatment of complicated urinary tract infections (cUTI) and complicated intra-abdominal infections (cIAI) for patients 18 years of age and older. RECARBRIO^TM is administered via intravenous infusion.

The applicant explained that the recommended dose of RECARBRIO^TM is 1.25 grams administered by intravenous infusion over 30 minutes every 6 hours in patients 18 years of age and older with creatinine clearance (CLcr) 90 mL/min or greater. According to the applicant, the recommended treatment course suggests that a patient will receive 1 vial per dose and 4 doses per day. Per RECARBRIO^TM's prescribing information, the recommended duration of treatment with RECARBRIO^TM is 4 days to 14 days.

According to information provided by the applicant, RECARBRIO^TM is designated by FDA as a QIDP and received FDA approval on July 16, 2019 for injection in patients 18 years of age and older who have limited or no alternative treatment options for the treatment of the following infections caused by certain susceptible gram-negative bacteria: cUTI including pyelonephritis and cIAI. According to the applicant, RECARBRIO^TM became commercially available on the U.S. market on January 6, 2020. The applicant stated that the delay in commercial availability was due to manufacturing considerations. According to the applicant, RECARBRIO^TM can be identified with ICD-10-PCS codes XW033U5 (Introduction of imipenem-cilastatin-relebactam anti-infective into peripheral vein, percutaneous approach, new technology group 5) or XW043U5 (Introduction of imipenem-cilastatin-relebactam antiinfective-into central vein, percutaneous approach, new technology group 5).

To demonstrate that the technology meets the cost criterion, the applicant searched the FY 2018 MedPAR Limited Data Set (LDS) for cases reporting ICD-10-CM diagnosis codes for either cUTI or cIAI with ICD-10-PCS codes XW033U5 (Introduction of imipenem-cilastatin-relebactam anti-infective into peripheral vein, percutaneous approach, new technology group 5 or XW043U5 (Introduction of imipenem-cilastatin-relebactam anti-infective into central vein, percutaneous approach, new technology group 5) to identify the MS-DRGs to which potential cases representing hospitalized patients who may be eligible for treatment involving RECARBRIO^TM would be mapped. The applicant identified a total 25,379 cases which were mapped to 453 unique MS-DRGs. There were 299 MS-DRGs with minimal frequencies (fewer than 11 cases), with a total of 1,140 cases associated with such low-volume MS-DRGs. After excluding the cases that were mapped to these low-volume MS-DRGs, the applicant identified 24,239 cases that were mapped to 153 unique MS-DRGs. The applicant examined associated charges per MS-DRG and removed all pharmacy charges that will be replaced through the use of RECARBRIO^TM. The applicant standardized the charges and inflated the charges by applying the FY 2020 IPPS/LTCH PPS final rule outlier charge inflation factor of 1.11100 (84 FR 42629). The applicant estimated an average cost of RECARBRIO^TM for the treatment of cUTI or cIAI in the inpatient setting based on the recommended dose of 1.25 grams (imipenem 500 mg, cilastatin 500 mg, relebactam 250 mg) administered by intravenous infusion over 30 minutes every 6 hours in patients 18 years of age and older with creatinine clearance (CLcr) 90 mL/min or greater. As previously stated, according to the applicant, the recommended treatment course suggests that a patient will receive 1 vial per dose, 4 doses per day within a recommended treatment duration of 4 to 14 days. To determine the cost per patient, the applicant stated it used the FY 2018 MedPAR analysis of total cases representing hospitalized patients who may be eligible for treatment involving RECARBRIO^TM to identify a percentage of total cases per indication: cUTI equaled 88.6 percent of cases and cIAI equaled 11.4 percent. According to the applicant, it next identified the average length of stay per indication: cUTI 6.4 days and cIAI 9.7 days. According to the applicant, it also assumed that 70 percent of patients would receive RECARBRIO^TM beginning on the fourth day after admission while the remaining 30 percent of these patients would receive RECARBRIO^TM beginning on the second day of their hospitalization. According to the applicant, it multiplied the daily dose cost by the two scenarios for each cUTI and cIAI indication to determine the cost per stay for each indication by days of drug use. According to the applicant, next it multiplied the cost per stay for each indication by the share of cases by days in use (70/30 percent split) to determine the weighted cost for days in use estimation. According to the applicant, it summed the 70/30 percent case breakdown (weighted cost) for patients initiating on day 2 and 4 to determine the average cost per indication for cUTI and cIAI. Finally, according to the applicant, it multiplied the average cost per indication by the percent of total cases for cUTI and cIAI, then summed them to get the overall average cost. The applicant converted this cost to a charge by dividing the costs by the national average cost-to-charge ratio of 0.189 for drugs from the FY 2020 IPPS/LTCH PPS final rule (84 FR 42179) and added the resulting charges to determine the final inflated average caseweighted-standardized charge per case. The applicant calculated a final inflated average caseweighted-standardized charge per case of $75,122 and an average case-weighted threshold amount of $52,216.

The applicant also calculated an average case-weighted standardized charge per case for cUTI and cIAI separately using the same methodology previously described and determined final inflated average case-weighted standardized charges per case of $70,765 for cUTI and $109,403 for cIAI and average case-weighted thresholds of $50,210 for cUTI and $67,531 for cIAI. Because the final inflated average case-weighted standardized charge per case exceeded the average case-weighted threshold amount in each scenario, the applicant maintained that the technology met the cost criterion.

We agreed with the applicant that it meets the cost criterion and therefore proposed to approve RECARBRIO^TM for new technology add-on payments for FY 2021. As previously noted, the applicant stated that RECARBRIO^TM can be identified by ICD-10-PCS codes XW033U5 (Introduction of imipenem-cilastatin-relebactam anti-infective into peripheral vein, percutaneous approach, new technology group 5) or XW043U5 (Introduction of imipenem-cilastatin-relebactam antiinfective-into central vein, percutaneous approach, new technology group 5).

Based on preliminary information from the applicant at the time of the proposed rule, the cost of RECARBRIO^TM is $4,710.37 (which is based on the cost per patient determined using the methodology as previously described in the analysis of the cost criterion). Under § 412.88(a)(2), we limit new technology add-on payments for QIDPs to 75 percent of the costs of the new medical service or technology, or 75 percent of the amount by which the costs of the case exceed the MS-DRG payment. As a result, we proposed that the maximum new technology add-on payment for a case involving RECARBRIO^TM would be $3,532.78 for FY 2021 (that is 75 percent of the average cost of the technology).

We invited public comments on whether RECARBRIO^TM meets the cost criterion and our proposal to approve new technology add-on payments for the RECARBRIO^TM for FY 2021.

Comment: A commenter supported CMS' proposal to approve new technology add-on payments for FY 2021 for RECARBRIO^TM infusion. The commenter also encouraged CMS to extend the duration of eligibility of new technology add-on payment from three to five years, as well as streamline the overall new technology add-on payment process (including submission, tracking, usage and education).

Response: We appreciate the commenter's support for the proposal and other suggestions. We note that the period of time that a technology may receive the new technology add-on payment is limited by statute.

Comment: According to the applicant, RECARBRIO^TM was approved by FDA on June 5, 2020 and granted QIDP status for the additional indications of hospital-acquired bacterial pneumonia (HABP) and ventilator-associated bacterial pneumonia (VABP) caused by susceptible gram-negative microorganisms in patients 18 years of ages and older. (As previously noted, RECARBRIO^TM received FDA approval on July 16, 2019 for injection in patients 18 years of age and older who have limited or no alternative treatment options for the treatment of the following infections caused by certain susceptible gram-negative bacteria: cUTI including pyelonephritis and cIAI.) Accordingly, the applicant provided an updated cost analysis to incorporate the additional indications to demonstrate that both indications meet the cost criterion.

Response: We appreciate the updated information submitted by the applicant. However, the applicant did not apply for new technology add-on payments for the additional indications of HABP and VABP caused by susceptible gram-negative microorganisms in patients 18 years of ages and older. Therefore, we are unable to consider these additional indications for new technology add on payments for FY 2021.

Based on the information in the applicant's new technology add-on payment application and after consideration of the public comments we received, we believe that RECARBRIO^TM meets the cost criterion. As previously discussed, RECARBRIO^TM received FDA approval for the treatment of cUTI including pyelonephritis and cIAI for patients 18 years of age and older on July 16, 2019, but was not commercially available until January 6, 2020. Therefore, we are finalizing our proposal to approve new technology add-on payments for RECARBRIO^TM for FY 2021, and we consider the beginning of the newness period to commence when the technology became commercially available on January 6, 2020. Under § 412.88(a)(2)(ii)(B), we limit new technology add-on payments for QIDPs to the lesser of 75 percent of the average cost of the technology, or 75 percent of the amount by which the costs of the case exceed the standard MS-DRG payment. As a result, we are finalizing as proposed a maximum new technology add-on payment for a case involving the use of RECARBRIO^TM as indicated for the treatment of cUTI and cIAI for patients 18 years of age and older of $3,532.78 for FY 2021 (that is 75 percent of the average cost of the technology). Cases involving the use of RECARBRIO^TM that are eligible for new technology add-on payments will be identified by ICD-10-PCS codes XW033U5 or XW043U5.

(5) XENLETA

Nabriva Therapeutics submitted an application for XENLETA, a pleuromutilin antibacterial agent representing the first intravenous (IV) and oral treatment option from a novel class of antibiotics for community-acquired bacterial pneumonia (CABP). XENLETA is indicated for the treatment of adults with CABP caused by the following susceptible microorganisms: Streptococcus pneumoniae, Staphylococcus aureus (methicillin-susceptible isolates), Haemophilus influenzae, Legionella pneumophila, Mycoplasma pneumoniae, and Chlamydophila pneumoniae. Per the applicant, XENLETA also has in vitro activity against methicillin resistant Staphylococcus aureus.

Per the applicant, pleuromutilins inhibit bacterial protein synthesis by binding to the A- and P-sites of the peptidyl transferase center (PTC) in the large ribosomal subunit of the bacterial ribosome. The applicant asserts that this unique binding site in the highly conserved core of the ribosomal PTC is specific to pleuromutilins, and it confers a lack of cross-resistance with other classes, as well as a low propensity for developing bacterial resistance.

The applicant noted that there are two methods of administering XENLETA. As a tablet containing 600 mg of XENLETA, it is administered orally every 12 hours for a duration of 5 days. As an injection, XENLETA contains 150 mg of the drug and is administered every 12 hours by IV infusion over 60 minutes for a duration of 5 to 7 days, with the option to switch to XENLETA tablets administered every 12 hours to complete the treatment course.

With respect to the newness criterion, the applicant indicated that XENLETA was approved by FDA under the QIDP designation, and granted fasttrack- designation. XENLETA received FDA approval on August 19, 2019 for a new drug application indicated for the oral and IV formulations of XENLETA for the treatment of CABP in adults. The applicant indicated that XENLETA was commercially available on the U.S. market on September 10, 2019 and the slight delay from approval to availability was due to the shipment of drug to the distribution channels.

The applicant's submitted a request for approval of a unique ICD-10-PCS procedure code to identify the administration of XENLETA and was granted approval for the following procedure codes effective October 1, 2020: XW03366 (Introduction of lefamulin anti-infective into peripheral vein, percutaneous approach, new technology group 6), XW04366 (Introduction of lefamulin anti-infective into central vein, percutaneous approach, new technology group 6) or XW0DX66 (Introduction of efamulin anti-infective into mouth and pharynx, external approach, new technology group 6).

With respect to the cost criterion, the applicant presented three scenarios varying in the assumptions regarding the form of XENLETA used to treat the patient and the duration of treatment. For the first analysis, the applicant assumed that a patient population with CABP received 7 days of IV treatment with XENLETA. For the second analysis, the applicant assumed the patient population received 3.2 days of IV treatment with XENLETA before switching to oral XENLETA for 3.8 days. For the third analysis, the applicant assumed the patient population received oral XENLETA for 5 days. The applicant explained that patients receiving XENLETA in the inpatient hospital setting would receive it through IV treatment. However, some patients may be switched to oral form during care, which was observed for some patients in clinical trial. While the applicant does not expect many patients to be treated with only oral XENLETA in the inpatient setting, they conducted a sensitivity analysis based on 5 days of treatment with oral XENLETA, as oral treatment is possible in hospital.

Across all three analyses, the applicant first searched the FY 2018 MedPAR Final Rule Limited Data Set for potential cases representing patients diagnosed with CABP and eligible for treatment with XENLETA. The applicant limited the cohort to cases that had an indication on the claim that the pneumonia was present on admission. The applicant searched for claims that had one of the following ICD-10-CM diagnosis codes as a principal or secondary diagnosis:

The applicant identified 1,225,713 cases from the FY 2018 MedPAR LDS file spanning 357 MS-DRGs. The applicant then excluded cases that mapped to MS-DRGs with a volume of 10 cases or fewer, resulting in a total of 1,225,561 cases spanning 319 unique MS-DRGs. The applicant considered these cases to be the primary cohort of the cost analysis. The applicant noted that the most common MS-DRGs in the cohort are 871, 193, 194, 291, and 190, which account for 61 percent of cases. The applicant presented the following table of the top 20 MS-DRGs in the primary cohort with more than 10 cases:

For all three scenarios, the applicant calculated an average case-weighted unstandardized charge per case of $73,911. The applicant then removed charges for the prior technology being replaced, which included the average charge associated with the cost of antibiotics that are the current standard of care. The applicant varied assumptions by scenario to reflect appropriate substitute treatments for the different forms of XENLETA, as noted previously. For each scenario, the applicant calculated the cost of therapy for each standard of care drug using dosing information, the duration of treatment, and wholesale acquisition costs and converted them to charges using the national pharmacy cost-to-charge ratio published in the FY 2020 IPPS final rule (84 FR 42179). After adjusting for prior technology, the applicant standardized the charges and applied an inflation factor of 11.1 percent, which is the 2-year inflation factor used by CMS to calculate outlier threshold charges in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42629), to update the charges from FY 2018 to FY 2020. The applicant added charges for the new technology, which it again calculated using the national pharmacy cost-to-charge ratio.

For all three scenarios, the applicant conducted a sensitivity analysis testing alternative assumptions regarding the charges associated with prior technology that could be replaced by XENLETA. The applicant acknowledged that it is possible for some patients with CABP to receive more than one antibiotic. The applicant examined the cost criterion for each scenario after doubling the charges associated with prior technology to account for multiple antibiotics. Furthermore, the applicant tested alterative assumptions regarding the MS-DRGs that cases representing patients eligible for treatment with XENLETA mapped. Specifically, the applicant examined the cost criterion for the top 10 MS-DRGs, the top 20 MS-DRGs, and the top MS-DRGs that accounted for 75 percent of cases.

Across all three scenarios and the sensitivity analyses testing alternative assumptions, the applicant determined that the final inflated average standardized charge per case exceeded the case-weighted threshold, with the difference ranging from $4,547 to $17,907. The following table summarizes the results of the applicant's cost analyses. The applicant maintained that XENLETA meets the cost criterion.

In the proposed rule, we stated that we agreed with the applicant that XENLETA meets the cost criterion and therefore proposed to approve XENLETA for new technology add-on payments for FY 2021. As previously noted, the applicant has received unique ICD-10-PCS procedure codes to identify cases involving the administration of XENLETA.

In its application, the applicant stated that XENLETA is commercially available in two dosage forms (Intravenous and Oral). According to the applicant, the pricing for each dosage form is $102.50 per single use vial of XENLETA and $137.50 for one tablet of XENLETA. The recommended dosage per the applicant is 150 mg every 12 hours by intravenous (IV) infusion for 5 to 7 days or one 600 mg tablet every 12 hours for 5 days. The applicant estimates that the cost per patient of XENLETA is $1,701 based on the combination of IV and oral usage in two of the applicants' clinical trials. Under § 412.88(a)(2), we limit new technology add-on payments for QIDPs to 75 percent of the costs of the new medical service or technology, or 75 percent of the amount by which the costs of the case exceed the MS-DRG payment. As a result, we proposed that the maximum new technology add-on payment for a case involving the use of XENLETA would be $1,275.75 for FY 2021 (that is 75 percent of the average cost of the technology).

We invited public comments on whether XENLETA meets the cost criterion and our proposal to approve new technology add-on payments for XENLETA for FY 2021.

Comment: Commenters supported our proposal to approve XENLETA for new technology add-on payments for FY 2021.

Response: We appreciate the commenters' support for our proposal.

Based on the information in the applicant's new technology add-on payment application and after consideration of the public comments, we believe that XENLETA meets the cost criterion. As previously discussed, XENLETA received FDA approval for use in the treatment of community-acquired bacterial pneumonia (CABP) in adults on August 19, 2019 but was not commercially available until September 10, 2019. Therefore, we are finalizing our proposal to approve new technology add-on payments for XENLETA for FY 2021, and we consider the beginning of the newness period to commence on September 10, 2019, which is the date that XENLETA became commercially available. Under § 412.88(a)(2)(ii)(B), we limit new technology add-on payments for QIDPs to the lesser of 75 percent of the average cost of the technology, or 75 percent of the amount by which the costs of the case exceeds the standard MS-DRG payment. As a result, we are finalizing as proposed a maximum new technology add-on payment for a case involving the use of XENLETA of $1,275.75 for FY 2021 (that is 75 percent of the average cost of the technology). Cases involving the use of XENLETA that are eligible for new technology add-on payments will be identified by ICD-10-PCS procedure codes: XW03366, XW04366 or XW0DX66.

(6) ZERBAXA®

Merck submitted an application for new technology add-on payments for ZERBAXA® for FY 2021. ZERBAXA® (ceftolozane and tazobactam) is a combination of ceftolozane, a cephalosporin antibacterial; and tazobactam, a β-lactamase inhibitor (BLI), indicated in patients 18 years or older for the treatment of the following infections caused by designated susceptible microorganisms:

• Complicated Intra-abdominal Infections (cIAI), used in combination with metronidazole;
• Complicated Urinary Tract Infections (cUTI), Including Pyelonephriti;
• Hospital-acquired Bacterial Pneumonia and Ventilator-associated Bacterial Pneumonia (HABP/VABP).

According to the applicant, FDA initially approved ZERBAXA® on December 19, 2014 for the treatment of complicated intra-abdominal infections (cIAI) and for complicated urinary tract infections (cUTI) under a New Drug Application (NDA). ZERBAXA® was then approved on June 3, 2019 for the indication of hospital-acquired bacterial pneumonia and ventilator-associated bacterial pneumonia (HABP/VABP), also under a NDA. The applicant noted that ZERBAXA® was designated as a Quality Infectious Disease Product (QIDP) as well as provided Fast Track and Priority Review consideration by FDA. The applicant also indicated that ZERBAXA® was commercially available on the U.S. market upon FDA approval. We believe only the indication approved in 2019 for treatment of hospital-acquired bacterial pneumonia and ventilator-associated bacterial pneumonia (HABP/VABP) is eligible for new technology add on payments for FY 2021 because the first indication was approved in 2014 and is therefore beyond the 3-year newness period.

The applicant submitted a request for approval for a unique ICD-10-PCS procedure code to identify the administration of ZERBAXA® and was granted approval for FY 2021 for the following procedure codes effective October 1, 2020: XW03396 or XW04396.

According to the applicant, to reduce the development of drug-resistant bacteria and maintain the effectiveness of ZERBAXA® and other antibacterial drugs, ZERBAXA® should be used only to treat or prevent infections that are proven or strongly suspected to be caused by susceptible bacteria. According to the applicant, when culture and susceptibility information are available, they should be considered in selecting or modifying antibacterial therapy. In the absence of such data, local epidemiology and susceptibility patterns may contribute to the empiric selection of therapy.

The applicant explained that the recommended dosage of ZERBAXA® for injection when used for HABP/VABP is 3 g (ceftolozane 2 g and tazobactam 1 g) administered every 8 hours by intravenous infusion over 1 hour in patients 18 years or older and with a creatinine clearance (CrCl) greater than 50 mL/min. The duration of therapy should be guided by the severity and site of infection and the patient's clinical and bacteriological progress. Dose adjustment is required for patients with CrCl 50 mL/min or less. All doses of ZERBAXA® are administered over 1 hour. For patients with changing renal function, CrCl is monitored at least daily and dosage of ZERBAXA® adjusted accordingly.

With regard to the cost criterion, the applicant used the FY 2018 MedPAR Limited Data Set (LDS) to identify the MS-DRGs to which potential cases representing hospitalized patients who may be eligible for treatment involving ZERBAXA® would be mapped. According to the applicant, ZERBAXA® is indicated for the treatment of hospitalized patients who have been diagnosed with cUTI, cIAI, VABP, or HABP conditions. The applicant conducted multiple analyses based on ICD-10-CM diagnosis codes for various scenarios involving patients diagnosed with cUTI, cIAI, VABP, or HABP. The applicant stated that cases representing patients who may be eligible to receive treatment through the administration of ZERBAXA® are identified with ICD-10-PCS codes 3E03329 (Introduction of other anti-infective into peripheral vein, percutaneous approach) or 3E04329 (Introduction of other antiinfective—into central vein, percutaneous approach). For the purposes of analyzing the cost criterion for this technology for new technology add-on payment for FY 2021, we are only discussing the applicant's cost analysis related to the HABP and VABP indications because, as we noted previously, the first indications (cUTI, cIAI) were approved in 2014 and are therefore beyond the 3-year newness period. For the HABP and VABP scenarios, the applicant submitted the following three cost analysis scenarios: Cases with a HABP diagnosis only, cases with a VABP diagnosis only and cases with either a HABP or VABP diagnosis. For all three scenarios, the applicant calculated the average charges per case for each MS-DRG without standardizing the charges. Next, the applicant removed 100 percent of the drug charges from the relevant cases to conservatively estimate the charges for drugs that potentially may be replaced by or avoided through use of ZERBAXA®. After removing these drug charges from unstandardized average charge amounts, the applicant calculated the average standardized charge per case for each MS-DRG. Then, the applicant inflated the standardized average charges by 11.1 percent, which is the 2-year inflation factor used by CMS to calculate outlier threshold charges in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42629), to update the charges from FY 2018 to FY 2020. The applicant added charges for the new technology, which it again calculated using the national pharmacy cost-to-charge ratio. Finally, the applicant calculated the final inflated average case-weighted standardized charge per case as well as the case-weighted threshold amount. The following table summarizes the results of the applicant's cost analyses. The applicant maintained that ZERBAXA® meets the cost criterion.

As stated in the proposed rule, we agree with the applicant that ZERBAXA® meets the cost criterion and therefore proposed to approve ZERBAXA® for new technology add-on payments for FY 2021. As previously noted, the applicant has received unique ICD-10-PCS procedure codes to identify cases involving the administration of ZERBAXA®.

Based on preliminary information from the applicant at the time of the proposed rule, the cost of ZERBAXA® is $2,449.31. Under § 412.88(a)(2), we limit new technology add-on payments for QIDPs to 75 percent of the costs of the new medical service or technology, or 75 percent of the amount by which the costs of the case exceed the MS-DRG payment. As a result, we proposed that the maximum new technology add-on payment for a case involving the use of ZERBAXA® would be $1,836.98 for FY 2021 (that is 75 percent of the average cost of the technology).

We invited public comments on whether ZERBAXA® meets the cost criterion and our proposal to approve new technology add-on payments for ZERBAXA® for FY 2021.

Comment: Commenters agreed that ZERBAXA® meets the cost criterion and supported CMS's proposal to approve ZERBAXA® for new technology add-on payments for FY 2021.

Response: We thank the commenters for their support.

Based on the information in the applicant's new technology add-on payment application and after consideration of the public comments, we believe that ZERBAXA® meets the cost criterion. As previously discussed, ZERBAXA® received FDA approval on June 3, 2019 for the indication of HABP/VABP and was commercially available on the U.S. market upon FDA approval. Therefore, we are finalizing our proposal to approve new technology add-on payments for ZERBAXA® for FY 2021, and we consider the beginning of the newness period to commence when the technology received FDA approval on June 3, 2019. Under § 412.88(a)(2)(ii)(B), we limit new technology add-on payments for QIDPs to the lesser of 75 percent of the average cost of the technology, or 75 percent of the amount by which the costs of the case exceed the standard MS-DRG payment. As a result, we are finalizing as proposed a maximum new technology add-on payment for a case involving the use of ZERBAXA® of $1,836.98 for FY 2021 (that is 75 percent of the average cost of the technology). Cases involving the use of ZERBAXA® that are eligible for new technology add-on payments will be identified by ICD-10-PCS procedure codes XW03396 or XW04396.

7. Technical Revision to the New Technology Add-On Payment Regulations at 42 CFR 412.88

In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42297 through 42300, and 42612), we finalized an increase in the new technology add-on payment percentage. Specifically, for a new technology other than a medical product designated by FDA as a QIDP, beginning with discharges on or after October 1, 2019, if the costs of a discharge involving a new technology (determined by applying CCRs as described in § 412.84(h)) exceed the full DRG payment (including payments for IME and DSH, but excluding outlier payments), Medicare will make an add-on payment equal to the lesser of: (1) 65 percent of the costs of the new medical service or technology; or (2) 65 percent of the amount by which the costs of the case exceed the standard DRG payment. We also finalized a separate increase in the new technology add-on payment percentage to 75 percent for a new technology that is a medical product designated by FDA as a QIDP. Under this finalized policy, unless the discharge qualifies for an outlier payment, the additional Medicare payment will be limited to the full MS-DRG payment plus 65 percent (or 75 percent for a medical product designated by FDA as a QIDP) of the estimated costs of the new technology or medical service. We also finalized revisions to paragraphs (a)(2) and (b) under § 412.88 to reflect these changes to the calculation of the new technology add-on payment amount beginning in FY 2020, including the finalized percentage for a medical product designated by FDA as a QIDP. Specifically, the new technology add-on payment percentage of 65 percent for a new technology other than a medical product designated by FDA as a QIDP is set forth in § 412.88(a)(2)(ii)(A). The new technology add-on payment percentage of 75 percent for a medical product designated by FDA as a QIDP is set forth at § 412.88(a)(2)(ii)(B). However, in our revision to paragraph (a)(2)(ii), in setting forth the new technology add-on payment amounts for discharges occurring on or after October 1, 2019, we made an inadvertent error when referencing the separate new technology add-on payment percentage for QIDPs under § 412.88(a)(2)(ii)(B). Specifically, in referencing the add-on percentage for QIDPs, § 412.88(a)(2)(ii)(A) refers to “paragraph (a)(2)(ii)(2) of this section” when the correct citation should be “paragraph (a)(2)(ii)(B) of this section”. In the FY 2021 IPPS/LTCH PPS proposed rule, we proposed to revise § 412.88(a)(2)(ii)(A) to correct this technical error. No comments were received regarding this proposal. Therefore, in this final rule, we are finalizing this revision as proposed.

8. Technical Clarification to the Alternative Pathway for Certain Transformative New Devices

As described previously, in the FY 2020 IPPS/LTCH PPS final rule, we finalized an alternative pathway for new technology add-on payments for certain transformative new devices. Under the existing regulations at § 412.87(c), to be eligible for approval under this alternative pathway, the device must be part of FDA's Breakthrough Devices Program and have received FDA marketing authorization.

We have received questions from the public regarding CMS's intent with respect to the “marketing authorization” required for purposes of approval under the alternative pathway for certain transformative new devices at § 412.87(c). Some of the public appear to assert that so long as a technology has received marketing authorization for any indication, even if that indication differs from the indication for which the technology was designated by FDA as part of the Breakthrough Devices Program, the technology would meet the marketing authorization requirement at § 412.87(c). For example, consider a device that received FDA marketing authorization in 2019 for use in the heart. The same device is then designated by FDA as part of the Breakthrough Devices Program for use in the liver in 2020, but has not yet received marketing authorization for indicated use in the liver. Some of the public have asserted that in such a scenario, the original marketing authorization for use in the heart could be used with FDA's Breakthrough Device indication for use in the liver to qualify under the alternative pathway for certain transformative new devices and receive new technology add-on payments for use in the liver in FY 2021. Because of this potential confusion, we clarified in the proposed rule that, consistent with our existing policies for determining newness where a product has more than one indication, an applicant cannot combine a marketing authorization for an indication that differs from the technology's indication under the Breakthrough Device Program, and for which the applicant is seeking to qualify for the new technology add-on payment, for purposes of approval under the alternative pathway for certain transformative devices.

Section 1886(d)(5)(K)(ii)(II) of the Act provides for the collection of data with respect to the costs of a new medical service or technology described in subclause (I) for a period of not less than 2 years and not more than 3 years beginning on the date on which an inpatient hospital code is issued with respect to the service or technology. As explained in the FY 2005 IPPS final rule (69 FR 49002), the intent of section 1886(d)(5)(K) of the Act and regulations under § 412.87(b)(2) is to pay for new medical services and technologies for the first 2 to 3 years that a product comes on the market, during the period when the costs of the new technology are not yet fully reflected in the DRG weights. Generally, we use FDA approval (that is, marketing authorization) as the indicator of the time when a technology begins to become available on the market and data reflecting the costs of the technology begin to become available for recalibration of the DRGs. In some specific circumstances, we have recognized a date later than FDA approval as the appropriate starting point for the 2-year to 3-year period. The costs of the new medical service or technology, once paid for by Medicare for this 2-year to 3-year period, are accounted for in the MedPAR data that are used to recalibrate the DRG weights on an annual basis. Therefore, we limit the add-on payment window for those technologies that have passed this 2-to 3-year timeframe. In the September 7, 2001 final rule that established the new technology add-on payment regulations (66 FR 46915), we also indicated that an existing technology can receive new technology add on payments for a new use or indication. While we recognize that a technology can have multiple indications, each indication has its own newness period and must meet the new technology add on payment criteria. The applicable criteria will depend on whether the technology is eligible for an alternative new technology add-on payment pathway. However, each indication for the technology is evaluated separately from any other indication, including with respect to the start of the newness period, to determine whether the technology is eligible for new technology add-on payments when used for that indication.

Based on this policy, using the previous example, the newness period for the heart indication began in 2019 when the technology received marketing authorization from FDA for that indication, while the newness period for the liver indication would begin when the device receives marketing authorization specifically indicated for the liver. These are two distinct newness periods. Consistent with this policy, the newness period that began with the original marketing authorization for indicated use in the heart cannot be combined with FDA's Breakthrough Device indication for use in the liver for purposes of the marketing authorization required for approval under the alternative pathway to receive new technology add-on payments in FY 2021.

In the FY 2021 IPPS/LTCH PPS proposed rule, we stated that to address this potential confusion, we are clarifying our policy that a new medical device under this alternative pathway must receive marketing authorization for the indication covered by the Breakthrough Devices Program designation and making a conforming change to the regulations at § 412.87(c)(1). Specifically, with regard to the eligibility criteria for approval under the alternative pathway for certain transformative new devices, we proposed to amend the regulations in § 412.87(c)(1) to state that “A new medical device is part of FDA's Breakthrough Devices Program and has received marketing authorization for the indication covered by the Breakthrough Device designation.” We also proposed to make similar amendments to the regulations at § 412.87(d) for the alternative pathway for certain antimicrobial products, as discussed in section II.G.9.b. of this preamble of this final rule.

Comment: Commenters were mostly supportive of the policy clarification. Commenters supportive of the clarification indicated that they support CMS's efforts to recognize devices that are part of the FDA Breakthrough Devices Program and applauded CMS for providing revisions to these regulations to provide clarification to the “market authorization” component.

One commenter requested clarification if a device that received FDA Breakthrough designation and was approved for marketing under the Humanitarian Device Exemption (HDE) pathway for a HUD (Section 520(m) of the Federal Food, Drug, and Cosmetic Act (FD&C Act)), would still be eligible for the alternative new technology add-on payment pathway based on the FDA Breakthrough designation.

Furthermore, two commenters (including the applicant for the Nanoknife, which did not meet the deadline of July 1 for FDA approval or clearance, as discussed previously) did not support this policy clarification. According to these commenters, if the proposed conforming changes are finalized, an otherwise broad eligibility standard would become limited. These commenters stated that the requirement that a new medical device must have received FDA marketing authorization sets a broad standard and the current regulation has no explicit limit to the type of marketing authorization and no mandate that the FDA marketing authorization indication be the same as the indication covered by the Breakthrough Device designation.

According to the same two commenters, the policy clarification also constitutes a new regulatory provision that will limit new technology add-on payment eligibility to only those devices where the marketing authorization indication matched exactly the Breakthrough Device indication. The commenters stated that although it was described as a technical clarification, the denial of access to new-technology add-on payment for Medicare beneficiaries makes the proposed amendment a significant regulatory change. According to the commenters, consistent with the Administrative Procedure Act, the proposed new regulatory language must first go through a full notice and comment period prior to finalizing any new changes. Then, according to the commenters, the earliest the new regulation could be applied is in the next regulatory cycle, beginning with applications submitted for new technology add-on payments for FY 2022. Finally, they asserted that with what they described as CMS' application of the proposal retroactively, applicants for new technology add-on payment for FY 2021 had no prior notice in either the regulations or CMS' new technology add-on payment application, which caused the denial of new technology add-on payment to applicants and Medicare beneficiaries.

The same two commenters also suggested that CMS should align eligibility for new technology add-on payment with FDA's IDE determination which supports hospitals providing innovative care early in product development. According to the commenters, CMS should include in the regulation at § 412.87(c)(1) that an IDE can qualify as marketing authorization and that the IDE determination can match the Breakthrough Designation indication for new technology add-on payment eligibility criteria. According to the commenters, waiting until traditional PMA or 510(k) marketing authorization will delay the availability of new technology add-on payment for years which can have a serious adverse impact on patients.

Response: We appreciate commenters' support regarding the clarification that a new medical device under the alternative pathway for certain transformative new devices must receive marketing authorization for the indication covered by the Breakthrough Devices Program designation.

We disagree with the commenters that asserted this technical clarification is instead a significant change in our new technology add-on payment policy and that the associated conforming revisions are a significant regulatory change. This technical clarification, and the proposed conforming change to the regulations, are consistent with CMS's longstanding policy to require marketing authorization for the specific indication for which the applicant is seeking the new technology add-on payment. As discussed in the proposed rule and previously in this final rule, in the September 7, 2001 final rule that established the new technology add-on payment regulations (66 FR 46915), we indicated that an existing technology can receive new technology add-on payments for a new use or indication. As we also discussed in the proposed rule, while we recognize that a technology can have multiple indications, each indication has its own newness period and must meet the new technology add-on payment criteria. This is consistent with how we have evaluated prior applications for the new technology add-on payment, as discussed in prior rulemaking (InFUSE^TM Bone Graft (Bone Morphogenetic Proteins (BMPs) for Tibia Fractures 69 FR 49010, VERASENSE^TM Knee Balancer System 80 FR 49471, Stelara® 82 FR 38216, KYMRIAH and YESCARTA 83 FR 41285, Titan Spine nanoLock® 83 FR 41322, ZEMDRI^TM83 FR 41327). The applicable criteria will depend on whether the technology is eligible for an alternative new technology add-on payment pathway, however the submission of an application under such an alternative pathway does not change that each indication for the technology will be evaluated separately from any other indication, including with respect to the start of the newness period, to determine whether the technology is eligible for new technology add-on payments when used for that indication. CMS did not modify this longstanding policy for evaluating whether a technology with multiple indications has received the required marketing authorization when it adopted the alternative pathway for certain transformative new devices in FY 2020. We believe the commenter is asking CMS to evaluate a technology inconsistent with this longstanding policy and to start the newness period prior to the time a product receives marketing authorization. As previously explained, and in the FY 2005 IPPS final rule (69 FR 49002), the intent of section 1886(d)(5)(K) of the Act and regulations under § 412.87(b)(2) is to pay for new medical services and technologies for the first 2 to 3 years that a product comes on the market, during the period when the costs of the new technology are not yet fully reflected in the DRG weights. Our longstanding policy explained previously has applied this intent to new technology add-on payment applications for new indications of an existing technology and initial uses of a new technology. The device would remain eligible to apply for the new technology add-on payment under this alternative pathway for the indication covered by the Breakthrough Devices Program for a future fiscal year.

For these reasons, we disagree with the commenters that our clarification and proposed conforming amendment are a change to the existing eligibility standards for new technology add-on payments. However, even if this were to be considered a change in policy rather than a clarification, CMS would not be applying the proposal retroactively, as asserted by the commenters, because the policy would apply only prospectively to future payments beginning with the start of the next fiscal year, after finalization of the policy through notice and comment rulemaking.

Regarding the request for clarification on whether a device that received FDA Breakthrough Device designation and was approved for marketing under the HDE pathway for a HUD (Section 520(m) of the FD&C Act), would still be eligible for the alternative new technology add-on payment pathway based on the FDA Breakthrough Device designation, we are unsure what specifically the commenter is requesting clarification on, and refer the commenter to the eligibility criteria for approval under the alternative pathway for certain transformative new devices at § 412.87(c)(1). Additionally, as previously stated and in the FY 2005 IPPS final rule (69 FR 49002), the intent of section 1886(d)(5)(K) of the Act and regulations under § 412.87(b)(2) is to pay for new medical services and technologies for the first 2 to 3 years that a product comes on the market, during the period when the costs of the new technology are not yet fully reflected in the DRG weights. If a product was on the market for 5 years and then the device became part of FDA's Breakthrough Devices Program, it would not be eligible for new technology add-on payments since the device is already reflected in the DRG weights and is beyond the 2-3 year newness period. Conversely, if a product received marketing authorization for the indication covered by the Breakthrough Devices Program designation within the past 2 to 3 years, it may be eligible for new technology add-on payments under the alternative pathway for certain transformative new devices; however, we would encourage any prospective applicant to review the eligibility criteria for approval under the alternative pathway for certain transformative new devices to evaluate whether they should apply for the new technology add-on payment. We also refer the commenter the FY 2010 IPPS Final Rule (74 FR 43819) which discusses the Spiration® IBV® Valve System which received a HDE approval from the FDA and was approved for new technology add-on payments for FY 2010.

Regarding the suggestion that CMS should include in the regulation at § 412.87(c)(1) that an IDE can qualify as marketing authorization and that the IDE determination can match the Breakthrough Designation indication for new technology add-on payment eligibility criteria, we disagree. As discussed previously, it is our understanding that an IDE allows the investigational device to be used in a clinical study in order to collect safety and effectiveness data prior to the device receiving FDA marketing authorization (that is, received PMA approval, 510(k) clearance, or the granting of De Novo classification request). Therefore, we do not believe it would be appropriate to update the regulations to reflect that an IDE qualifies as marketing authorization.

After consideration of the comments received and for the reasons discussed, we are finalizing our proposed conforming change to the regulations at § 412.87(c)(1) to reflect our policy that a new medical device under this alternative pathway must receive marketing authorization for the indication covered by the Breakthrough Devices Program designation. Specifically, with regard to the eligibility criteria for approval under the alternative pathway for certain transformative new devices, we are finalizing our proposal to amend the regulations in § 412.87(c)(1) to state that “A new medical device is part of FDA's Breakthrough Devices Program and has received marketing authorization for the indication covered by the Breakthrough Device designation.” We note that we are also finalizing our proposal to make similar amendments to the regulations at § 412.87(d) for the alternative pathway for certain antimicrobial products, as discussed in section II.G.9.b. of this preamble of this final rule.

9. Revisions to New Technology Add-On Payments for Certain Antimicrobial Products

a. Background

In the FY 2020 IPPS/LTCH PPS final rule, after consideration of public comments, we finalized changes to the new technology add-on payment policy related to certain antimicrobial products. These changes were finalized in recognition of the significant concerns related to antimicrobial resistance and its serious impact on Medicare beneficiaries and public health overall, and consistent with the Administration's commitment to address issues related to antimicrobial resistance, in order to help secure access to antibiotics, and improve health outcomes for Medicare beneficiaries in a manner that is as expeditious as possible. Firstly, as described earlier in this section, we finalized an alternative new technology add-on payment pathway for a product that is designated by FDA as a QIDP. Under this alternative pathway, at existing § 412.87(d), for applications received for new technology add-on payments for FY 2021 and subsequent fiscal years, if a technology receives FDA's QIDP designation and received FDA marketing authorization, it will be considered new and not substantially similar to an existing technology for purposes of new technology add-on payments and will not need to meet the requirement that it represent an advance that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries. Under this pathway, a medical product that has received FDA marketing authorization and is designated by FDA as a QIDP will need to meet the cost criterion under § 412.87(b)(3), as reflected in § 412.87(d)(3) (84 FR 42292 through 42297).

In addition, beginning with FY 2020, we adopted a general increase in the maximum new technology add-on payment amount from 50 percent to 65 percent; however, we adopted a higher increase to 75 percent for a product that is designated by FDA as a QIDP. Therefore, under existing § 412.88(a)(2)(ii)(B), for a new technology that is a medical product designated by FDA as a QIDP, the new technology add-on payment is equal to the lesser of: (1) 75 percent of the costs of the new medical service or technology; or (2) 75 percent of the amount by which the costs of the case exceed the standard DRG payment (84 FR 42297 through 42300).

We stated that we believe Medicare beneficiaries may be disproportionately impacted by antimicrobial resistance, due in large part to the elderly's unique vulnerability to drug-resistant infections (for example, due to age-related and/or disease-related immunosuppression and greater pathogen exposure via catheter use). As such, antimicrobial resistance results in a substantial number of additional hospital days for Medicare beneficiaries, resulting in significant unnecessary health care expenditures. In November 2019, the CDC released its updated “Antibiotic Resistance Threats in the United States” (AR Threats Report) indicating that antibiotic-resistant bacteria and fungi cause more than 2.8 million infections and 35,000 deaths in the United States each year. This report also shows that there were nearly twice as many annual deaths from antibiotic resistance as CDC originally reported in 2013, and underscores the continued threat of antibiotic resistance in the U.S. This recent information highlights the significant concerns and impacts related to antimicrobial resistance and emphasizes the continued importance of this issue both with respect to Medicare beneficiaries and public health overall. In this section of the final rule, we discuss our proposals and final policies for FY 2021 regarding new technology add-on payments and certain antimicrobials, including QIDPs.

b. Changes and Technical Clarification to the Alternative Pathway for Certain Antimicrobial Products

As described previously, in the FY 2020 IPPS/LTCH PPS final rule, we finalized an alternative pathway for new technology add-on payments for certain antimicrobial products. Under the existing regulations at § 412.87(d), to be eligible for approval under this alternative pathway, the antimicrobial product must be designated by FDA as a QIDP and have received FDA marketing authorization. Under this alternative pathway, such a QIDP will be considered new and not substantially similar to an existing technology for purposes of new technology add-on payments and will not need to meet the requirement that it represent an advance that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries.

FDA also has the Limited Population Pathway for Antibacterial and Antifungal Drugs (LPAD pathway), which encourages the development of safe and effective drug products that address unmet needs of patients with serious bacterial and fungal infections. Specifically, an antibacterial or antifungal drug approved under the LPAD pathway is used to treat a serious or life-threatening infection in a limited population of patients with unmet needs. We stated in the proposed rule that we believe that in order to address the continued issues related to antimicrobial resistance discussed previously, as well as further help to support access to antibiotics and improve health outcomes for Medicare beneficiaries, it is appropriate to expand our policy for an alternative new technology add-on payment pathway for a product that is designated by FDA as a QIDP to include products approved as a LPAD as well. Therefore, in the FY 2021 IPPS/LTCH PPS proposed rule, we proposed to expand our current alternative new technology add-on payment pathway for QIDPs to include products approved under the LPAD pathway as well to further address the continued issues related to antimicrobial resistance discussed previously. Under this proposed policy, for applications received for new technology add-on payments for FY 2022 and subsequent fiscal years, if an antimicrobial drug is approved by FDA under the LPAD pathway it will be considered new and not substantially similar to an existing technology for purposes of the new technology add-on payment under the IPPS, and not need to meet the requirement that it represent an advance that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries. Under this proposal, an antimicrobial product that is approved by FDA under the LPAD pathway will need to meet the cost criterion under § 412.87(b)(3).

We proposed to revise § 412.87(d)(1) to reflect this proposal, by adding drugs approved under FDA's LPAD pathway to the current alternative new technology add-on payment pathway for QIDPs at proposed new § 412.87(d)(1)(ii), beginning with discharges occurring on or after October 1, 2021. We also proposed to revise the title of existing § 412.87(d) to refer more broadly to “certain antimicrobial products” rather than specifying in this title the particular FDA programs for antimicrobial products (that is, QIDPs and LPADs) that are the subject of this alternative new technology add-on payment pathway.

As we noted in the proposed rule, FDA may approve a drug under the LPAD pathway if it meets certain statutory standards for approval, as applicable, including that FDA receives a written request from the sponsor to approve the drug as a limited population drug. Sponsors seeking approval of a drug under the LPAD pathway are not precluded from seeking designation or approval under any other applicable provision for which the drug otherwise qualifies (for example, fast track designation, breakthrough therapy designation, regenerative medicine advanced therapy designation, accelerated approval, priority review designation). A sponsor who seeks approval of a drug under the LPAD pathway may also seek designation, as applicable, for other programs, including QIDP or orphan drug designation. Although FDA may provide advice on potential eligibility, FDA intends to make the determination of whether a drug meets the criteria for the LPAD pathway at the time of the drug's approval. (For additional information, see https://www.fda.gov/media/113729/download .)

We stated in the proposed rule that as such, an applicant that has not received FDA approval and which has requested approval under the LPAD pathway may not know with certainty at the time it applies for new technology add-on payments under the proposed expanded alternative pathway for certain antimicrobial products whether it will qualify for approval under that pathway. As noted previously in section II.G.1.d. of the preamble of this final rule, CMS will review the application based on the information provided by the applicant under the alternative pathway specified by the applicant. If the applicant drug ultimately does not receive approval under the LPAD pathway (but receives FDA approval otherwise) and is not designated as a QIDP, the technology would not be eligible for the alternative pathway for certain antimicrobial products and the applicant would need to re-apply for new technology add-on payments under the traditional pathway at § 412.87(b) for the following fiscal year in order to seek approval for new technology add-on payments.

Comment: Several commenters supported this proposal. These commenters described the proposal as a common-sense solution that will address concerns from hospitals regarding inadequate payment for new antimicrobial products. Commenters also indicated that the proposal works hand-in-hand with the policy change finalized in the FY 2020 IPPS/LTCH PPS final rule regarding the alternative pathway for QIDPs.

However, other commenters were not supportive of this proposal. MedPAC expressed that it did not support the use of FDA's LPAD for qualification for new technology add-on payment unless the drug in question also meets the current substantial clinical improvement criterion and there is some evidence that the new drug results in improved care for beneficiaries. According to MedPAC, the FDA approval process may or may not include the new device or pharmaceutical's safety or effectiveness with regard to the Medicare population and Medicare should not pay more for technological advances that have not yet been proven to provide better outcomes for beneficiaries. MedPAC also stated that it is concerned that, if this proposal is adopted, the additional payment would also provide an incentive for increased use (including off-label use) of drugs approved under the LPAD pathway. MedPAC explained that the drugs approved under the LPAD pathway are for a limited population, based on a more flexible risk-benefit assessment, and prescribing these products outside of the targeted approved indication could endanger patients unnecessarily. Finally, MedPAC conveyed that if CMS finalizes its proposal to expand the alternative pathway to include products approved under the LPAD pathway, CMS could attempt to mitigate incentives for off-label use by limiting new technology add-on payments to cases that meet FDA's approved and targeted indications.

According to a commenter, current and proposed reforms are insufficient to ensure patients have access to effective antimicrobial treatments and lack significant impact on the AMR crisis. The commenter stated that while the increase in new technology add-on payment for QIDPs from 50 percent to 75 percent in the FY 2020 IPPS/LTCH PPS final rule was appreciated and a step in the right direction, the change has proven to be ineffective in promoting increased use of the new technology add-on payment pathway, thereby limiting the impact of this reform on patient access to novel antimicrobials, the sustainability of the antimicrobial marketplace, and the crisis of AMR generally. This commenter, in addition to a few other commenters, went on to say that the proposal to expand our current alternative new technology add-on payment pathway for QIDPs to include products approved under the LPAD pathway will not effectively broaden or increase the impact of the new technology add-on payment program for antimicrobials, as drugs that qualify for LPAD will likely also have QIDP designation and are therefore already eligible for the alternative new technology add-on payment pathway. Instead, the commenters suggested the expansion of the alternative new technology add-on payment pathway so that it may be applied more broadly to achieve greater overall impact. Specifically, these commenters suggested the expansion include eligible products beyond LPAD and QIDP such as biologics, other non-traditional therapies that treat or prevent infections caused by a qualifying pathogen, as well as drugs that are approved by FDA to treat COVID-19.

Similar to the comments received in response to the FY 2020 IPPS/LTCH PPS proposed rule, commenters requested that CMS extend or develop similar alternative new technology add-on payment pathways for all expedited FDA pathways (for example, Fast Track, Accelerated Approval, Breakthrough Therapy, and Priority Review, including other categories of technologies such as those with a Regenerative Medicine Advanced Therapy (RMAT) designation, devices granted a HDE.

Response: We appreciate the commenters' support of the proposed expansion of the current alternative new technology add-on payment pathway for QIDPs to include products approved under the LPAD pathway.

In response to comments that requested that the alternative inpatient new technology add-on payment pathway be extended to, or an alternative pathway similarly be created for, drugs and biologicals (that is, Priority Review, Accelerated Approval, Fast Track, and Breakthrough Therapy, including other categories of technologies such as those with a RMAT designation, devices granted a HDE, we continue to recognize that the goal of facilitating access to new technologies for Medicare beneficiaries could also apply to other special designations for drugs or devices. However, as we discussed in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42295 through 42296), we continue to believe that making this policy applicable to drugs more generally would further increase incentives for innovation but without decreasing cost, a key priority of this Administration. We also continue to believe that, in general, it is prudent to gain experience under the alternative pathway for certain transformative new devices before expanding it to other special designations to allow us to evaluate the benefits of this alternative pathway to facilitate beneficiary access to transformative new medical devices as well as any other considerations that may come to light after implementation of this new pathway. We will continue to consider these issues for future rulemaking, including the suggestions to develop additional criteria to qualify under an alternative pathway for technologies that receive FDA marketing authorization under or are designated for an FDA expedited program for drugs or devices.

In response to the commenter that did not support the use of FDA's LPAD for qualification for new technology add-on payment unless the drug in question also meets the current substantial clinical improvement criterion and unless there is some evidence that the new drug results in improved care for beneficiaries, and expressed concern regarding the potential for additional Medicare program expenditures, as we stated in response to similar concerns in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42295), we believe that with respect to these technologies, even though, as the commenter may assert, there may be less certainty of clinical benefit or data representing the Medicare beneficiary population as compared to the evidence standard for substantial clinical improvement under the current new technology add-on payment policy, the benefits of providing early access to critical and life-saving new cures and technologies that improve beneficiary health outcomes support expanding this alternative pathway. Additionally, while we continue to appreciate the commenter's concern regarding additional Medicare program expenditures, for the previously stated reasons, in order to address the significant ongoing concerns related to the public health crisis represented by antimicrobial resistance, consistent with the Administration's commitment to address issues related to antimicrobial resistance, and to continue to help secure access to antibiotics and improve health outcomes for Medicare beneficiaries in a manner that is as expeditious as possible, we believe it is appropriate to further facilitate beneficiary access to antimicrobial resistant products by expanding this alternative pathway to include products approved through FDA's LPAD pathway.

In response to the comment suggesting that CMS mitigate incentives for off-label use by limiting new technology add-on payment to cases that meet FDA's approved and targeted indications, we note that when CMS approves a new technology add-on payment for any technology, it is based on the applicant's FDA indicated market authorization use, and payment is limited to cases involving the use of technology for the indication for which the new technology add-on payment application was approved.

Finally, in response to the commenters' concern that the proposal will not effectively broaden or increase the impact of the new technology add-on payment program for antimicrobials, as drugs that qualify for LPAD will likely also have QIDP designation and are therefore already eligible for the alternative new technology add-on payment pathway, we disagree. As we discussed in the proposed rule, although FDA may provide advice on potential eligibility, FDA intends to make the determination of whether a drug meets the criteria for the LPAD pathway at the time of the drug's approval. As such, an applicant that has not received FDA approval and which has requested approval under the LPAD pathway may not know with certainty at the time it applies for new technology add-on payments under the proposed expanded alternative pathway for certain antimicrobial products whether it will qualify for approval under that pathway. Although we acknowledge, as we also discussed in the proposed rule, that a sponsor who seeks approval of a drug under the LPAD pathway may also seek designation, as applicable, for other programs including QIDP or orphan drug designation, resulting in more than one FDA designation (LPAD and QIDP) for the same drug, there may also be instances where a drug receives only one of these two designations or one earlier than the other. Therefore, CMS believes this proposed expansion of the alternative new technology add-on payment pathway for QIDPs to include products approved under the LPAD pathway is a reasonable approach to broadening, rather than minimizing, access to antimicrobial products.

Regarding the requests to expand the alternative new technology add-on payment pathway to include eligible products beyond LPAD and QIDP such as biologics, other non-traditional therapies that treat or prevent infections caused by a qualifying pathogen, as well as drugs that are approved by FDA to treat COVID-19, while we recognize that the goal of facilitating access to antimicrobial products for Medicare beneficiaries could also apply to other designations, similar to our discussion previously, in general we believe it is prudent to gain experience under this newly expanded alternative pathway for certain antimicrobial products, before further expanding it to other special designations, to allow us to evaluate the benefits of this expansion to facilitate beneficiary access to antimicrobial products as well as any other considerations that may come to light after implementation of this expanded pathway. We will keep these suggestions in mind for consideration in future rulemaking.

After consideration of the comments received and for the reasons explained previously, we are finalizing our proposal to expand our current alternative new technology add-on payment pathway for certain antimicrobial products to include products approved under the LPAD pathway. Under this final policy, for applications received for new technology add-on payments for FY 2022 and subsequent fiscal years, if an antimicrobial drug receives market authorization from FDA under the LPAD pathway it will be considered new and not substantially similar to an existing technology for purposes of the new technology add-on payment under the IPPS, and not need to meet the requirement that it represent an advance that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries. Under this final policy, an antimicrobial product that receives market authorization by FDA under the LPAD pathway will need to meet the cost criterion under § 412.87(b)(3).

We received no comments on our proposed amendments to the regulations to reflect this policy. Therefore we are finalizing our proposal to revise § 412.87(d)(1) to reflect this final policy, by adding drugs approved under FDA's LPAD pathway to the current alternative new technology add-on payment pathway for QIDPs at new § 412.87(d)(1)(ii), beginning with discharges occurring on or after October 1, 2021. We are also finalizing our proposal to revise the title of existing § 412.87(d) to refer more broadly to “certain antimicrobial products” rather than specifying in this title the particular FDA programs for antimicrobial products (that is, QIDPs and LPADs) that are the subject of this alternative new technology add-on payment pathway.

We also proposed to increase the maximum new technology add-on payment percentage for a product approved under FDA's LPAD pathway, from 65 percent to 75 percent, consistent with the new technology add-on payment percentage that currently applies for a product that is designated by FDA as a QIDP. As previously noted, an antibacterial or antifungal drug approved under the LPAD pathway is used to treat a serious or life-threatening infection in a limited population of patients with unmet needs, and therefore we stated in the proposed rule that we believe increasing the add-on payment amount for these products would further the goal of helping secure access to antibiotics and improving health outcomes for Medicare beneficiaries to address the continued significant concerns related to antimicrobial resistance as discussed previously. Therefore, we proposed to revise § 412.88(a)(2)(ii)(B) and (b)(2) by adding products approved under FDA's LPAD pathway, beginning with discharges occurring on or after October 1, 2020.

We did not receive any comments on our proposal to increase the maximum new technology add-on payment percentage for products approved under FDA's LPAD pathway. Therefore, we are also finalizing our proposal to increase the maximum new technology add-on payment percentage for a product approved under FDA's LPAD pathway, from 65 percent to 75 percent, consistent with the new technology add-on payment percentage that currently applies for a product that is designated by FDA as a QIDP. Therefore, we are revising § 412.88(a)(2)(ii)(B) and (b)(2) by adding products approved under FDA's LPAD pathway, beginning with discharges occurring on or after October 1, 2020.

In addition to adding drugs approved under FDA's LPAD pathway to the alternative new technology add-on payment pathway for certain antimicrobial products, we stated in the proposed rule that we are clarifying our policy regarding marketing authorization for QIDPs. As discussed previously, we stated that we have received questions from the public regarding the “marketing authorization” required for purposes of approval under the alternative pathway for certain transformative new devices, and are therefore clarifying our policy regarding the marketing authorization requirement under this pathway and proposing conforming amendments to the regulations at § 412.87(c)(1). We refer the reader to the previous discussion in section II.G.8. of this preamble of this final rule for complete details regarding this clarification.

The current regulations at § 412.87(d)(1) regarding the alternative pathway for new technology add-on payments for certain antimicrobial products also require marketing authorization for a QIDP to be eligible for approval under this pathway. Therefore, similar to the clarification regarding the transformative new devices alternative pathway, we stated in the proposed rule that we are clarifying that a new medical product seeking approval for the new technology add-on payment under the alternative pathway for QIDPs must receive marketing authorization for the indication covered by the QIDP designation. We proposed to amend the regulations at § 412.87(d)(1) describing the alternative pathway for QIDPs (which, as amended, would appear at § 412.87(d)(1)(i)) to state that “A new medical product is designated by FDA as a Qualified Infectious Disease Product and has received marketing authorization for the indication covered by the Qualified Infectious Disease Product designation.”

We did not receive comments on our proposal to amend the regulations at § 412.87(d)(1) to clarify that a new medical product seeking approval for the new technology add-on payment under the alternative pathway for QIDPs must receive marketing authorization for the indication covered by the QIDP designation. Therefore, we are finalizing this amendment as proposed.

c. Change to Announcement of Determinations and Deadline for Consideration of New Medical Service or Technology Applications for Certain Antimicrobial Products

As noted previously, in the FY 2009 IPPS final rule (73 FR 48562), we amended § 412.87(c) (now § 412.87(e) of the existing regulations) to specify that all applicants for new technology add-on payments must have FDA approval or clearance by July 1 of the year prior to the beginning of the fiscal year for which the application is being considered. We stated that this deadline would provide us with enough time to fully consider all of the new medical service or technology add-on payment criteria for each application and maintain predictability in the IPPS for the coming fiscal year. We also stated and further explained that we believe that July 1 of each year provides an appropriate balance between the necessity for adequate time to fully evaluate the applications, the requirement to publish the IPPS final rule by August 1 of each year, and the commenters' concerns that potential new technology applicants have some flexibility with respect to when their technology receives FDA approval or clearance.

We continue to believe that our policy of requiring FDA approval or clearance by July 1 of the year prior to the beginning of the fiscal year for which the application is being considered appropriately balances the length of time required to fully consider all of the new medical service or technology add-on payment criteria for each application while also providing flexibility to potential new technology add-on payment applicants. As we stated in the proposed rule, at the same time, we also believe the significant ongoing concerns regarding antimicrobial resistance, and the need to help secure access to antibiotics for Medicare beneficiaries in a manner that is as expeditious as possible, may warrant additional flexibility with respect to applications for new technology add-on payments for certain antimicrobial products. Further, we noted that under the new alternative pathway for certain antimicrobial products, upon FDA marketing authorization, such products are considered new and not substantially similar to an existing technology and do not need to demonstrate substantial clinical improvement, resulting in a difference in the amount of information and time required for CMS to complete its evaluation as compared to technologies for which it must fully consider of all of the new medical service or technology add-on payment criteria. For these reasons, and for the reasons stated previously regarding the significant ongoing concerns related to the public health crisis represented by antimicrobial resistance, consistent with the Administration's commitment to address issues related to antimicrobial resistance, and to continue to help secure access to antibiotics and improve health outcomes for Medicare beneficiaries in a manner that is as expeditious as possible, we proposed a process by which a technology that meets the new technology add-on payment criteria under the alternative pathway for products designated as QIDPs or, as proposed and finalized, approved under FDA's LPAD pathway, would receive conditional approval for such payment even if the product has not been granted FDA marketing authorization by July 1 (the existing deadline by which any technology must be granted FDA marketing authorization in order to be eligible for a new technology add-on payment). (We note that for the remainder of this discussion, we refer to the alternative pathway at § 412.87(d), which, as finalized, will also include products approved under the LPAD pathway beginning with applications submitted for new technology add-on payments for FY 2022, as the “alternative pathway for certain antimicrobial products”).

Under our proposal, a technology eligible for the new technology add-on payment alternative pathway for certain antimicrobial products would begin receiving the new technology add-on payment effective for discharges the quarter after FDA marketing authorization is granted. We proposed that the cutoff or deadline for this conditional approval would be FDA marketing authorization by July 1 of the fiscal year for which the applicant is applying for new technology add-on payments. We would consider July 1 to be the cutoff for conditional approval because under this proposal, if the FDA marketing authorization is received on or after July 1, the new technology add-on payment would not be effective for discharges until the beginning of the next quarter on October 1, which would be the start of the next fiscal year. For example, an eligible antimicrobial product is conditionally approved for the new technology add-on payment in the FY 2021 IPPS final rule. However, FDA marketing authorization is not granted until February 1, 2021. The new technology add-on payment for such an antimicrobial product would be made for discharges that use the technology on or after April 1, 2021 (the beginning of the quarter after the FDA marketing authorization was granted). Using the same example, if the eligible antimicrobial product received FDA marketing authorization on or after July 1, 2021, no new technology add-on payments would be made for FY 2021, because the beginning of the next quarter would be October 1, which is the beginning of FY 2022, the next fiscal year. As we discuss further, to be eligible for new technology add-on payments for FY 2022, the applicant would have needed to re-apply for such payments for FY 2022 by the applicable deadline.

In the FY 2009 IPPS final rule (73 FR 48562), we also stated that applications that receive FDA approval of the medical service or technology after July 1 would be able to reapply for the new medical service or technology add-on payment the following year (at which time they would be given full consideration in both the IPPS proposed and final rules). Consistent with this policy, an applicant for an eligible antimicrobial product that does not receive FDA marketing authorization during the conditional approval period described previously would need to evaluate whether it believes it is necessary to re-apply for new technology add-on payments for the following fiscal year. For example, an applicant for an eligible antimicrobial product for FY 2021 that receives conditional approval for FY 2021 (with a conditional approval period of on or after July 1, 2020 and before July 1, 2021) would still need to submit an application for FY 2022 in order to be eligible for new technology add-on payments in FY 2022. The applicant would need to evaluate whether it believes it is necessary to re-apply for new technology add-on payments for the next fiscal year based on when the applicant anticipates receiving FDA marketing authorization. However, we stated that we would encourage eligible antimicrobial product applicants to reapply for new technology add-on payments for the next fiscal year in case they do not receive FDA marketing authorization prior to July 1 of the fiscal year for which they initially applied. We also noted, as discussed previously, although FDA may provide advice on potential eligibility, FDA intends to make the determination of whether a drug meets the criteria for the LPAD pathway at the time of the drug's approval. As such, an applicant may not know with certainty at the time it applies for new technology add on payments under the alternative pathway for certain antimicrobial products whether it qualifies for that pathway. If the applicant drug ultimately does not receive approval under the LPAD pathway (but receives FDA approval otherwise) and is not designated as a QIDP, the applicant would not be eligible for approval under the alternative pathway for certain antimicrobial products, and therefore, even if the product received conditional approval under this proposal, no new technology add-on payments would be made for that fiscal year. As described previously, the applicant would need to re-apply for new technology add on payments under the traditional pathway at § 412.87(b) for the following fiscal year if the applicant wishes to continue to seek approval for new technology add-on payments.

We proposed to revise § 412.87(e) to reflect this proposal by adding a new paragraph (3) which would provide for conditional approval for a technology for which an application is submitted under the alternative pathway for certain antimicrobial products at § 412.87(d) that does not receive FDA marketing authorization by the July 1 deadline specified in § 412.87(e)(2), provided that the technology receives FDA marketing authorization by July 1 of the particular fiscal year for which the applicant applied for new technology add-on payments. We also proposed related revisions to the paragraph (e) introductory text and to paragraph (e)(2) to reflect this proposed new policy.

Comment: We received supportive comments for this proposal. According to these commenters, the proposal will be beneficial to manufacturers because it will prevent circumstances where products approved shortly after the fiscal year deadline have to wait until the next fiscal year to receive the new technology add-on payment. These commenters also noted that the drug development process does not always follow a consistent schedule and this change would ensure that all QIDP-designated antibiotics receive the same benefits upon approval.

Other commenters indicated the agency should consider establishing a subregulatory process to recognize products that qualify for a new technology add-on payment under the alternative pathway, rather than adopting the process for conditional approval described in the proposed rule. According to these commenters, providing conditional approval through an accelerated subregulatory process will allow alternative pathway products to rapidly receive new technology add-on payment designation after FDA approval and will maximize the new technology add-on payment eligibility period for those products. These commenters also stated that this access will be particularly important to drugs indicated for COVID-19 for which a new technology add-on payment application was most likely not submitted in the current year and that under the conditional approval process described in the proposed rule, could not receive new technology add-on payments until October 1, 2021 at the earliest.

In recommending a faster review process for medical devices that are part of FDA's Breakthrough Devices Program, commenters recommended that at a minimum, CMS should conduct a bi-annual review rather than the current annual review timeline. However, the commenters asserted that it is more appropriate that CMS instead review new technology add-on payment applications for medical devices that are part of FDA's Breakthrough Devices Program on the same quarterly timeline as it reviews traditional pass-through (TPT) applications for Breakthrough Designated technologies. The commenters acknowledged that although there would be increased burden on CMS associated with holding required public meetings and soliciting public comment for a more frequent review cycle, the need for earlier access to medical devices that are part of FDA's Breakthrough Devices Program outweighed considerations of administrative burden.

Similar to the comments received in response to the proposal to expand our current alternative new technology add-on payment pathway for QIDPs to include products approved under the LPAD pathway, many commenters requested expansion of the proposal to include conditional new technology add-on payment approval for products outside of the QIDP definition, but that have received fast track designation, breakthrough therapy designation, RMAT designation, are intended to treat a serious or life-threatening infection caused by a qualifying pathogen as listed in Section 505E(f) of the FD&C Act and include innovative non-antibiotic treatments for serious or life-threatening infections. Another commenter requested expansion of this proposal to generally include novel therapies that address an unmet medical need—a condition whose treatment or diagnosis is not addressed adequately by available therapy. According to this commenter, an unmet medical need includes an immediate need for a defined population (that is, to treat a serious condition with no or limited treatment) or a longer-term need for society (for example, to address the development of resistance to antibacterial drugs).

Finally, other commenters pointed to the justification CMS provided in the FY 2021 IPPS/LTCH PPS proposed rule for why certain antimicrobial products should receive conditional approval for NTAP, specifically the statement that, “such products are considered new and not substantially similar to an existing technology and do not need to demonstrate substantial clinical improvement, resulting in a difference in the amount of information and time required for CMS to complete its evaluation as compared to technologies for which it must fully consider of all of the new medical service or technology add-on payment criteria.” According to the commenters, this justification also applies to medical devices that are part of FDA's Breakthrough Devices Program. The commenters explained that while antimicrobial resistance is a critical need for the Medicare program, many products approved under FDA's Breakthrough Devices Program also fill critical needs for the Medicare population and may reduce administrative burden on CMS. According to the commenters, based on this justification, CMS should expand the proposed policy to provide for conditional new technology add-on payment approval for certain antimicrobial products that do not receive FDA marketing authorization by July 1 but otherwise meet the applicable add-on payment criteria to also include medical devices that are part of FDA's Breakthrough Devices Program that do not receive FDA marketing authorization by July 1 but otherwise meet the applicable add-on payment criteria.

Response: We appreciate the commenters' support for our proposal. We also appreciate the commenters' suggestions for other modifications to the new technology add-on payment policy, such as developing a more frequent approval process, which we will consider for future rulemaking.

In response to comments that requested expansion of the proposal to include conditional new technology add-on payment approval for products that fall outside of the QIDP definition, including products intended to treat a serious or life-threatening infection caused by a qualifying pathogen as listed in section 505E(f) of the FD&C Act, innovative non-antibiotic treatments for serious or life-threatening infections, novel therapies that address an unmet medical need and products that have received fast track designation, breakthrough therapy designation, or RMAT designation, as we discuss in section II.G.9.a. of this final rule with regard to our proposal to expand our current alternative new technology add-on payment pathway for QIDPs to include products approved under the LPAD pathway, we continue to recognize that the goal of facilitating access to new technologies for Medicare beneficiaries could also apply to other special designations. We will continue to consider this issue for future rulemaking. As we stated in the proposed rule and previously in this final rule, we believe that in order to address the significant ongoing concerns related to the public health crisis represented by antimicrobial resistance, consistent with the Administration's commitment to address issues related to antimicrobial resistance, and to continue to help secure access to antibiotics and improve health outcomes for Medicare beneficiaries in a manner that is as expeditious as possible, additional flexibility regarding new technology add-on payment applications for certain antimicrobial products is warranted and should be considered. We believe the alternative pathway for certain antimicrobials allows for this additional flexibility. Therefore, for the reasons discussed in this final rule, at this time we believe it would be appropriate to limit this proposed process for conditional approval to products designated as QIDPs or approved under FDA's LPAD pathway.

In response to the commenters that suggested expansion of the proposed policy to also include medical devices that are part of FDA's Breakthrough Devices Program that do not receive FDA marketing authorization by July 1 but otherwise meet the applicable add-on payment criteria, we agree that, as noted by the commenter, medical devices that are part of FDA's Breakthrough Device Program are evaluated under the alternative pathway for certain transformative new devices similar to how antimicrobial products are evaluated under the alternative pathway for certain antimicrobials with respect to the newness and substantial clinical improvement criteria. However, as we discussed in the proposed rule and in this final rule, in order to continue to help secure access to antibiotics and improve health outcomes for Medicare beneficiaries in a manner that is as expeditious as possible, we believe that additional flexibility is warranted with respect to the new technology payment applications for antimicrobial products to address the particular ongoing concerns relating to antimicrobial resistance. For these reasons, at this time we are not expanding our proposed process for conditional approval to include medical devices that are part of FDA's Breakthrough Devices Program that do not receive FDA marketing authorization by July 1 but otherwise meet the applicable add-on payment criteria. We may consider this further in the future as we gain more experience with this conditional approval process for a technology for which an application is submitted under the alternative pathway for certain antimicrobial products that does not receive FDA marketing authorization by the July 1 deadline.

After consideration of the comments received and for the reasons stated previously, we are finalizing our policy, as proposed, to establish a process by which a technology that meets the new technology add-on payment criteria under the alternative pathway for products designated as QIDPs or, as finalized in this final rule, approved under FDA's LPAD pathway, would receive conditional approval for such payment even if the product has not been granted FDA marketing authorization by July 1 but otherwise meets the applicable add-on payment criteria. Under this final policy, cases involving eligible antimicrobial products would begin receiving the new technology add-on payment effective for discharges the quarter after the date of FDA marketing authorization provided that the technology receives FDA marketing authorization by July 1 of the particular fiscal year for which the applicant applied for new technology add-on payments.

We received no comments on our proposed amendments to the regulations to reflect this policy. Therefore, we are finalizing our proposal to revise 412.87(e) by adding a new paragraph (3) which provides for conditional approval for a technology for which an application is submitted under the alternative pathway for certain antimicrobial products at § 412.87(d) that does not receive FDA marketing authorization by the July 1 deadline specified in § 412.87(e)(2), provided that the technology receives FDA marketing authorization by July 1 of the particular fiscal year for which the applicant applied for new technology add-on payments. We are also finalizing our proposal to make related revisions to the paragraph (e) introductory text and to paragraph (e)(2) to reflect this new policy.

In addition, we proposed to make technical clarifications to the regulations in paragraph (e)(2) of § 412.87 by replacing the words “FDA approval or clearance” with “FDA marketing authorization” which conforms to the existing regulations in paragraphs (c)(1) and (d)(1) of § 412.87. We believe this more precisely describes the current policy and does not change or modify the policy set forth in existing § 412.87(e)(2). For example, under our current policy, in evaluating whether a technology is eligible for new technology add-on payment for a given fiscal year, we consider whether the technology has received marketing authorization by July 1 (such as Premarket Approval (PMA); 510(k) clearance; the granting of a De Novo classification request; or approval of a New Drug Application (NDA)). Therefore, we believe the term “marketing authorization” would more precisely describe the various types of potential FDA approvals, clearances and classifications that we currently consider under our new technology add-on payment policy.

We received no comments on our proposal to make technical clarifications to the regulations in paragraph (e)(2) of § 412.87 by replacing the words “FDA approval or clearance” with “FDA marketing authorization”. Therefore, we are finalizing as proposed.

III. Changes to the Hospital Wage Index for Acute Care Hospitals

A. Background

1. Legislative Authority

Section 1886(d)(3)(E) of the Act requires that, as part of the methodology for determining prospective payments to hospitals, the Secretary adjust the standardized amounts for area differences in hospital wage levels by a factor (established by the Secretary) reflecting the relative hospital wage level in the geographic area of the hospital compared to the national average hospital wage level. We currently define hospital labor market areas based on the delineations of statistical areas established by the Office of Management and Budget (OMB). A discussion of the FY 2021 hospital wage index based on the statistical areas appears under section III.A.2. of the preamble of this final rule.

Section 1886(d)(3)(E) of the Act requires the Secretary to update the wage index annually and to base the update on a survey of wages and wage-related costs of short-term, acute care hospitals. (CMS collects these data on the Medicare cost report, CMS Form 2552-10, Worksheet S-3, Parts II, III, and IV. The OMB control number for approved collection of this information is 0938-0050, which expires on March 31, 2022.) This provision also requires that any updates or adjustments to the wage index be made in a manner that ensures that aggregate payments to hospitals are not affected by the change in the wage index. The adjustment for FY 2021 is discussed in section II.B. of the Addendum to this final rule.

As discussed in section III.I. of the preamble of this final rule, we also take into account the geographic reclassification of hospitals in accordance with sections 1886(d)(8)(B) and 1886(d)(10) of the Act when calculating IPPS payment amounts. Under section 1886(d)(8)(D) of the Act, the Secretary is required to adjust the standardized amounts so as to ensure that aggregate payments under the IPPS after implementation of the provisions of sections 1886(d)(8)(B), 1886(d)(8)(C), and 1886(d)(10) of the Act are equal to the aggregate prospective payments that would have been made absent these provisions. The budget neutrality adjustment for FY 2021 is discussed in section II.A.4.b. of the Addendum to this final rule.

Section 1886(d)(3)(E) of the Act also provides for the collection of data every 3 years on the occupational mix of employees for short-term, acute care hospitals participating in the Medicare program, in order to construct an occupational mix adjustment to the wage index. A discussion of the occupational mix adjustment that we proposed to apply to the FY 2021 wage index appears under sections III.E.3. and F. of the preamble of this final rule.

2. Core-Based Statistical Areas (CBSAs) for the FY 2021 Hospital Wage Index

a. General

The wage index is calculated and assigned to hospitals on the basis of the labor market area in which the hospital is located. Under section 1886(d)(3)(E) of the Act, beginning with FY 2005, we delineate hospital labor market areas based on OMB-established Core-Based Statistical Areas (CBSAs). The current statistical areas (which were implemented beginning with FY 2015) are based on revised OMB delineations issued on February 28, 2013, in OMB Bulletin No. 13-01. OMB Bulletin No. 13-01 established revised delineations for Metropolitan Statistical Areas, Micropolitan Statistical Areas, and Combined Statistical Areas in the United States and Puerto Rico based on the 2010 Census, and provided guidance on the use of the delineations of these statistical areas using standards published in the June 28, 2010 Federal Register (75 FR 37246 through 37252). We refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 49951 through 49963 and 49973 through 49982) for a full discussion of our implementation of the OMB statistical area delineations beginning with the FY 2015 wage index.

Generally, OMB issues major revisions to statistical areas every 10 years, based on the results of the decennial census. However, OMB occasionally issues minor updates and revisions to statistical areas in the years between the decennial censuses through OMB Bulletins. On July 15, 2015, OMB issued OMB Bulletin No. 15-01, which provided updates to and superseded OMB Bulletin No. 13-01 that was issued on February 28, 2013. The attachment to OMB Bulletin No. 15-01 provided detailed information on the update to statistical areas since February 28, 2013. The updates provided in OMB Bulletin No. 15-01 were based on the application of the 2010 Standards for Delineating Metropolitan and Micropolitan Statistical Areas to Census Bureau population estimates for July 1, 2012 and July 1, 2013. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56913), we adopted the updates set forth in OMB Bulletin No. 15-01 effective October 1, 2016, beginning with the FY 2017 wage index. For a complete discussion of the adoption of the updates set forth in OMB Bulletin No. 15-01, we refer readers to the FY 2017 IPPS/LTCH PPS final rule. In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38130), we continued to use the OMB delineations that were adopted beginning with FY 2015 to calculate the area wage indexes, with updates as reflected in OMB Bulletin No. 15-01 specified in the FY 2017 IPPS/LTCH PPS final rule.

On August 15, 2017, OMB issued OMB Bulletin No. 17-01, which provided updates to and superseded OMB Bulletin No. 15-01 that was issued on July 15, 2015. The attachments to OMB Bulletin No. 17-01 provided detailed information on the update to statistical areas since July 15, 2015, and were based on the application of the 2010 Standards for Delineating Metropolitan and Micropolitan Statistical Areas to Census Bureau population estimates for July 1, 2014 and July 1, 2015. In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41362 through 41363), we adopted the updates set forth in OMB Bulletin No. 17-01 effective October 1, 2018, beginning with the FY 2019 wage index. For a complete discussion of the adoption of the updates set forth in OMB Bulletin No. 17-01, we refer readers to the FY 2019 IPPS/LTCH PPS final rule. In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42300 through 42301), we continued to use the OMB delineations that were adopted beginning with FY 2015 (based on the revised delineations issued in OMB Bulletin No. 13-01) to calculate the area wage indexes, with updates as reflected in OMB Bulletin Nos. 15-01 and 17-01.

On April 10, 2018 OMB issued OMB Bulletin No. 18-03 which superseded the August 15, 2017 OMB Bulletin No. 17-01. On September 14, 2018, OMB issued OMB Bulletin No. 18-04 which superseded the April 10, 2018 OMB Bulletin No. 18-03. Typically, interim OMB bulletins (those issued between decennial censuses) have only contained minor modifications to labor market delineations. However the April 10, 2018 OMB Bulletin No. 18-03 and the September 14, 2018 OMB Bulletin No. 18-04 included more modifications to the labor market areas than are typical for OMB bulletins issued between decennial censuses, including some material modifications that have a number of downstream effects, such as reclassification changes (as discussed later in this preamble). CMS was unable to complete an extensive review and verification of the changes made by these bulletins until after the development of the FY 2020 IPPS/LTCH PPS proposed rule. These bulletins established revised delineations for Metropolitan Statistical Areas, Micropolitan Statistical Areas, and Combined Statistical Areas, and provided guidance on the use of the delineations of these statistical areas. A copy of OMB Bulletin No. 18-04 may be obtained at https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf . According to OMB, “[t]his bulletin provides the delineations of all Metropolitan Statistical Areas, Metropolitan Divisions, Micropolitan Statistical Areas, Combined Statistical Areas, and New England City and Town Areas in the United States and Puerto Rico based on the standards published on June 28, 2010 (75 FR 37246), and Census Bureau data.” (We noted in the proposed rule that, on March 6, 2020, OMB issued OMB Bulletin 20-01 (available on the web at https://www.whitehouse.gov/wp-content/uploads/2020/03/Bulletin-20-01.pdf ), but that it was not issued in time for development of the FY 2021 IPPS/LTCH PPS proposed rule.)

As noted previously and in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32967), while OMB Bulletin No. 18-04 is not based on new census data, it includes some material changes to the OMB statistical area delineations. Specifically, under the revised OMB delineations, there would be some new CBSAs, urban counties that would become rural, rural counties that would become urban, and some existing CBSAs would be split apart. In addition, as we stated in the proposed rule, the revised OMB delineations would affect various hospital reclassifications, the out-migration adjustment (established by section 505 of Pub. L. 108-173), and treatment of hospitals located in certain rural counties (that is, “Lugar” hospitals) under section 1886(d)(8)(B) of the Act. We discuss the revised OMB delineations and the effects of these revisions in this section of this rule. As previously noted, the March 6, 2020 OMB Bulletin 20-01 was not issued in time for development of the proposed rule. We stated in the proposed rule that we did not believe the updates included in OMB Bulletin 20-01 would impact the changes discussed in the proposed rule, and that if appropriate, we would propose any updates from this bulletin in the FY 2022 IPPS/LTCH PPS proposed rule.

b. Implementation of Revised Labor Market Area Delineations

We stated in the proposed rule (85 FR 32697) that we believe that using the revised delineations based on OMB Bulletin No. 18-04 will increase the integrity of the IPPS wage index system by creating a more accurate representation of geographic variations in wage levels. Therefore, we proposed to implement the revised OMB delineations as described in the September 14, 2018 OMB Bulletin No. 18-04, effective October 1, 2020 beginning with the FY 2021 IPPS wage index. We proposed to use these revised delineations to calculate area wage indexes in a manner that is generally consistent with the CBSA-based methodologies. Because of the previously described material changes, we also proposed a wage index transition applicable to hospitals that experience a significant decrease in their FY 2021 wage index compared to their final FY 2020 wage index. This transition is discussed in more detail in this section of this rule.

Comment: We received multiple comments supporting CMS's proposed adoption of the revised OMB delineations. MedPAC supported the adoption of the revised delineations in conjunction with the continuation of policies to reduce wage index disparities and mitigate the impact of changes to the wage index.

Several commenters opposed CMS's proposed implementation of the revised OMB delineations. Several commenters argued the CMS is not bound to adopt the revised delineations, and urged CMS to delay adoption of the revised delineations until the completion of the 2020 decennial census. Several comments specifically cited the lack of advance notice and the significant negative financial impacts to hospitals in several counties in the New York-Newark-Jersey City MSA resulting from the adoption of the revised delineations. These commenters cited past examples where CMS exercised discretion in modifying or delaying the implementation of OMB definitions and delineations in order to review and verify the impacts and ramifications. For instance, the revised delineations posted in February of 2012 (OMB Bulletin No: 13-01) were not adopted by CMS until FY 2015. One commenter presented the following considerations they consider compelling reasons for CMS to alter or postpone the adoption of the revised delineations. First, the commenter cites the effect of the COVID-19 pandemic, which has caused extraordinary increases in costs and revenue losses, particularly for hospitals in this New York-Newark-Jersey City, NY-NY MSA. The commenter contends that, given the timing of when the FY 2021 IPPS/LTCH proposed rule was in development, the proposed policies could not have fully considered the effect of the crisis. Second, the commenter contends that adopting the proposed delineation changes is inconsistent with prior agency action because, as referenced by the agency in the proposed rule, CMS has typically only made minor changes to delineations between decennial census periods. The commenter stated that it is unprecedented for CMS to establish a new CBSA (the New Brunswick-Lakewood, NJ CBSA) based on OMB's delineation of a new Metropolitan Division outside of a decennial census. The commenter contends that OMB Bulletin 18-04 warned that comparing Metropolitan Divisions with entire MSAs would be inappropriate and further contend that neither CMS, nor OMB, have presented any evidence that the counties that constitute the New Brunswick-Lakewood, NJ CBSA function as a distinct area within the larger New York-Newark-Jersey City, NY-NJ MSA. Third, the commenter contends that while CMS cites an increase in the integrity of the IPPS wage index system as a rationale for implementing the revised OMB delineations, CMS has neither provided an explanation as to the integrity shortcomings within the current delineations, nor how they would be corrected by implementing the new delineations. The commenter highlights OMB's statement in Bulletin 18-04 instructing any agency using these delineations to seek public comment on their proposed use. They further explain that the New Brunswick-Lakewood Metropolitan Division was created because an OMB commuting threshold between Monmouth and Middlesex Counties was narrowly exceeded, meeting the criteria for Middlesex, Monmouth, and Ocean Counties to be deemed a separate division within the larger New York-Newark-Jersey City MSA, leading to their fourth point that the underlying commuting data used to create the delineations is fundamentally flawed. They specifically cite the effects of Superstorm Sandy, which came ashore in New York and New Jersey in late October of 2012 and caused many months of severe disruption to the area. Since the commuting patterns data utilized by OMB were based on the 2011-2015 5-Year ACS Commuting Flows dataset, the commenter states it is unreasonable to assume that Superstorm Sandy did not affect the commute-to-work data that OMB used to create Bulletin No. 18-04. Given this event, they believe relying on the commuting data used by OMB actually distorts the integrity of wage index system, rather than improving it.

Given these considerations discussed by this commenter and generally cited by several additional commenters, commenters urged CMS to delay implementation of the revised OMB delineations. Commenters warned that the adoption would create a “downward spiral” effect when hospitals may not have sufficient Medicare payments to meet future wage costs. One commenter specifically cited CMS's FY 2020 wage index “compression” policy as an additional financial challenge placed on hospitals the New York City metropolitan area, which will only be compounded through adopting the revised delineations. Another commenter stated, that while some affected hospitals may be eligible to obtain MGCRB reclassifications as early as FY 2022, the negative financial impacts for hospitals unable to reclassify would only further create competitive inequalities between hospitals within the same labor market area. Additional commenters urged CMS to engage further with stakeholders to develop a more comprehensive wage index reform to address the disparities that exist within the current wage index system.

Response: We appreciate the comments supporting adoption of the revised OMB delineations, including the supportive comment from MedPAC, and refer commenters to section III.G.3 of this final rule for additional discussion of the continuation of the policies CMS finalized in the FY 2020 IPPS/LTCH PPS final rule to reduce wage index disparities, including the low wage index hospital policy. In response to commenters who urged CMS to engage further with stakeholders to develop a more comprehensive wage index reform to address wage index disparities, we appreciate the continued interest in wage index reform. We note that, as a first step toward comprehensive wage index reform, the FY 2021 President's Budget proposes the Secretary conduct and report on a demonstration to improve the Medicare inpatient hospital wage index.

We have closely reviewed all the comments received. While we understand implementing revisions to labor market area delineations may have either positive or negative effects on payment rates for some hospitals, we believe it is important for the IPPS to use the updated labor market area delineations in order to maintain a more accurate and up-to date payment system that reflects the reality of current labor market conditions. We believe that the updated OMB delineations increase the integrity of the IPPS wage index by creating a more accurate, updated representation of variations in area wage levels as compared to the current OMB delineations. In particular, while the revised delineations do not reflect the results of a new decennial census, they do incorporate the results from updated commuting survey data, the 2011-2015 American Commuting Survey (ACS). As such, we believe that the revised OMB delineations would help ensure more accurate and appropriate payments as compared to the current OMB delineations. We concur with commenters that CMS is not bound by statute to adhere to OMB definitions or delineations in calculating the IPPS wage index. However, because we believe we have broad authority under section 1886(d)(3)(E) of the Act to determine the labor market areas used for the IPPS wage index, and because we believe the updated delineations reflected in OMB Bulletin No. 18-04 better reflect the local economies and wage levels of the areas in which hospitals are currently located, we believe it is appropriate to implement the revised OMB delineations as described in the September 14, 2018 OMB Bulletin No. 18-04, for the IPPS wage index effective beginning in FY 2021. In response to commenters who stated that we have in the past delayed implementation of revised delineations in order to better evaluate their impacts on the IPPS wage index, we note that we have reviewed our findings and impacts relating to the revised OMB delineations set forth in OMB Bulletin No. 18-04, and for the reasons discussed above, we find no compelling reason to further delay implementation. Furthermore, as explained in section III.A.2.c of this final rule, we are implementing a wage index transition for FY 2021 under which we will apply a 5 percent cap on any decrease in a hospital's wage index compared to its wage index for FY 2020 to mitigate significant negative impacts of, and provide time for hospitals to adapt to, the revised OMB delineations. We believe that the transition described in Section III.A.2.c will provide negatively affected hospitals the necessary time to adjust and explore newly available reclassification options (please note, we address comments regarding this proposed transition in section III.A.2.c). Thus, for these reasons, we do not believe it is necessary or appropriate to delay or alter implementation of the revised delineations.

With regard to the comments that would seek a delay in adopting the revised delineations given the effects of the COVID-19 related public health emergency, because the revised OMB delineations would help ensure more accurate payments than under the current OMB delineations, we believe it is important to adopt the revised delineations as soon as possible. Nothing about the COVID-19 related public health emergency would diminish the importance of ensuring that payments are as accurate as possible. In addition, we note that CMS has taken unprecedented steps to provide the healthcare community, including hospitals, with flexibilities and support to respond to the COVID-19 public health emergency (for example, see https://www.cms.gov/files/document/covid-accomplishments.pdf ). While we continue our critical work in this area, for the reasons discussed previously, we believe it is appropriate to implement the updated OMB delineations effective beginning in FY 2021.

In response to the comment that contends that adopting the revised delineations would be inconsistent with prior agency action because CMS has typically only made minor changes to labor market areas between decennial censuses, we note that CMS has routinely adopted revised delineations issued by OMB between decennial censuses (for example, the revised delineations issued in OMB Bulletin Nos. 15-01 and 17-01). Thus, consistent with past agency practice, we proposed to adopt the revised delineations in OMB Bulletin No. 18-04. As stated in the proposed rule (85 FR 32696 through 32697), we acknowledge that the changes outlined in OMB Bulletin No. 18-04 are more significant than typical OMB delineation revisions issued between decennial censuses; however, the overall impacts of these revised delineations are still more limited in scope than revisions that accompany the release of decennial censuses. In addition, as we discuss earlier, we believe that the updated OMB delineations increase the integrity and accuracy of the IPPS wage index by creating a more accurate, updated representation of variations in area wage levels as compared to the current OMB delineations.

In response to commenters that contend that CMS should not establish a new CBSA based on OMB's delineation of a new Metropolitan Division between decennial census results and that comparing Metropolitan Divisions with entire MSAs would be inappropriate, we acknowledge that when OMB implemented the Statistical Area Definitions, including the “Metropolitan Division” definitions, OMB included guidance in Bulletin 04-02 and subsequent updates that these delineations should be evaluated by any Agency before use in program funding formulas. As we stated in the FY 2005 IPPS/LTCH final rule (69 FR 49027), while we recognize that CBSA-based delineations were not specifically designed to define labor market areas, we believe they do serve as useful proxies for this purpose. In that rule (69 FR 49029), we further articulated our finding that Metropolitan Divisions of MSAs most closely resembled the labor market configuration of the previous OMB “Primary Metropolitan Statistical Areas” delineations. That is, by treating Metropolitan Divisions of MSAs as separate labor market areas, the resulting configuration in FY 2005 would more closely resemble the labor market map in place prior to FY 2005. Therefore, we finalized our current policy to treat Metropolitan Divisions of MSAs as separate labor market areas when calculating wage index values. For sake of consistency, it has been CMS's longstanding practice to refer to Metropolitan Divisions, undivided MSAs, and State's rural area as CBSAs. Because, as discussed above, we believe that OMB's Statistical Area Definitions, including Metropolitan Division definitions, serve as useful proxies in defining labor market areas for purposes of the IPPS wage index, and that the revised OMB delineations, including Metropolitan Division delineations, based on updated commuting data create a more accurate representation of variations in area wage levels, and given our long history of adopting updated OMB revisions to Metropolitan Division delineations, and our consistent treatment of Metropolitan Divisions as separate labor market areas, we believe it is appropriate to adopt the revised delineations in OMB Bulletin No. 18-04, including the revised Metropolitan Division definitions, beginning with the FY 2021 wage index.

We note that the configuration of the New York-Newark-Jersey City MSA in 2005 (then titled New York-Northern New Jersey, Long Island) consisted of 5 metropolitan divisions. Broadly speaking, the divisions consisted of a New York City division (New York-White Plains-Wayne), a Long Island division (Nassau-Suffolk), a Mid-Hudson NY division (Poughkeepsie-Newburgh-Middletown), a North-Central, NJ division (Newark-Union), and a Central NJ-NJ Shore division (Edison). These delineations remained in effect until FY 2015 when CMS adopted revised delineations based OMB Bulletin No.13-01 (published February 28, 2013). This bulletin eliminated the Edison, NJ division, moving 3 of its 4 counties to the New York City division, and one to the North-Central, NJ division. Also in this bulletin, Orange County, NY (in the New York City division) and Putnam County, NY (in the Mid-Hudson division) swapped division assignments. Under the revised delineations in OMB Bulletin No. 18-04, the changes adopted in FY 2015 to the New York-Newark-Jersey City MSA have reverted back to the CBSA delineations in place from FY 2005 through FY 2014. The 4 counties of the former Edison, NJ metropolitan division are again joined together in the New Brunswick-Lakewood, NJ metropolitan division, and Orange and Putnam County, NY once again swapped division assignment. We note that, prior to FY 2005, CMS used OMB “Primary Metropolitan Statistical Areas” delineations (OMB Bulletin 95-04) to define labor market areas. Under those delineations, none of the 4 counties of the Edison, NJ/New Brunswick-Lakewood, NJ metropolitan division nor Orange County, NY were considered part the same labor market area as any county in the New York City labor market. Per OMB definitions, it is true that relatively small deviations in commuting interchange statistics may cause some counties to move between CBSAs if they are close to a specific threshold definition; however, we believe that including such changes in defining labor market areas would allow the wage index to more accurately reflect variations in area wage levels. Based upon our analysis of the 2011-2015 5-Year ACS Commuting Flows and Employment dataset and the 2010 OMB Standards for Delineating Metropolitan and Micropolitan Statistical Areas (75 FR 37249-37252), the New Brunswick-Lakewood, NJ metropolitan division was created from the larger New York-Newark-Jersey City NY-NJ MSA because two contiguous “secondary counties” (Middlesex County and Monmouth County) had an Employment Interchange Measure (EIM) greater than 15. The EIM, as defined by OMB (75 FR 37251), between these two counties was 14.8 based of the previous 2006-2010 ACS Commuting Flow dataset, and therefore did not qualify as a separate metropolitan division. In the updated 2011-2015 commuting dataset, the EIM between these two counties is 16.1. While the commenters claimed the 2011-2015 dataset results in these counties only narrowly meeting the threshold to be defined as a separate metropolitan division, because the EIM (16.1) based on the updated commuting dataset does clearly exceed the threshold, we believe it is appropriate to take this into account in updating the labor market area delineations. We note that the EIM measure of 14.8 based on the older 2006-2010 commuting dataset was far closer to the threshold. We are not convinced that the proposed delineation changes are unwarranted or that there is evidence of any distortion or exceptional statistical anomaly, such as the impacts of Superstorm Sandy, as suggested by commenters. In fact, by comparing the most recent combined three year average hourly wages for all hospitals in the counties being removed from the New York-Jersey City-White Plains, NY-NJ CBSA ($47.79) to the hospitals remaining in the proposed New York City-Jersey City-White Plains, NY-NJ CBSA ($59.21), it is evident that labor costs are significantly lower for most hospitals in the counties removed from the CBSA.

As far as comments regarding the lack of notice provided to hospitals regarding the proposed adoption of the revised delineations, we note that the delineation files produced by OMB have been public for nearly 2 years, and OMB definitions and criteria are subject to separate notice and comment rulemaking. In the past, we have delayed implementation of delineations in order to fully evaluate their impacts on IPPS wage index values, and as previously discussed, we have fully assessed the impacts of the revised delineations in OMB Bulletin No. 18-04. As discussed previously, we believe it would be appropriate to adopt the revised delineations to reflect a more accurate, updated representation of variations in area wage levels as compared to the current OMB delineations.

After consideration of the public comments we received, for the reasons set forth in this final rule and in the FY 2021 IPPS/LTCH PPS proposed rule, we are finalizing, without modification, our proposed implementation of the revised OMB delineations as described in the September 14, 2018 OMB Bulletin No. 18-04, effective beginning with the FY 2021 IPPS wage index.

i. Micropolitan Statistical Areas

As discussed in the FY 2005 IPPS final rule (69 FR 49029 through 49032), OMB defines a “Micropolitan Statistical Area” as a CBSA “associated with at least one urban cluster that has a population of at least 10,000, but less than 50,000” (75 FR 37252). We refer to these areas as Micropolitan Areas. Since FY 2005, we have treated Micropolitan Areas as rural and include hospitals located in Micropolitan Areas in each State's rural wage index. We refer the reader to the FY 2005 IPPS final rule (69 FR 49029 through 19032) and the FY 2015 IPPS/LTCH PPS final rule (79 FR 49952) for a complete discussion regarding this policy and our rationale for treating Micropolitan Areas as rural. We stated in the proposed rule (85 FR 32967) that, for the reasons discussed in the FY 2005 IPPS final rule and in the FY 2015 IPPS final rule, we believed that the best course of action would be to continue this policy and include hospitals located in Micropolitan Areas in each State's rural wage index. Therefore, in conjunction with our proposal to implement the new OMB statistical area delineations beginning in FY 2021, we proposed to continue to treat Micropolitan Areas as “rural” and to include Micropolitan Areas in the calculation of each state's rural wage index. We did not receive any comments specific to this proposal, and therefore, for the reasons set forth in this final rule and in the FY 2021 IPPS/LTCH PPS proposed rule, we are finalizing our proposal, without modification, to continue to treat Micropolitan Areas as “rural” and to include Micropolitan Areas in the calculation of each state's rural wage index.

ii. Urban Counties That Would Become Rural Under the Revised OMB Delineations

As previously discussed, we proposed to implement the revised OMB statistical area delineations (based upon OMB Bulletin No. 18-04) beginning in FY 2021. In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32697), we stated that our analysis shows that a total of 34 counties (and county equivalents) and 10 hospitals that were once considered part of an urban CBSA would be considered to be located in a rural area, beginning in FY 2021, under these revised OMB delineations. In the proposed rule (85 FR 32698 through 32699), we included the following chart listing the 34 urban counties that would be rural if we finalized our proposal to implement the revised OMB delineations.

We proposed that the wage data for all hospitals located in the counties listed in this chart would now be considered rural when calculating their respective State's rural wage index. We stated in the proposed rule (85 FR 32699) that we recognize that rural areas typically have lower area wage index values than urban areas, and hospitals located in these counties may experience a negative impact in their IPPS payment due to the adoption of the revised OMB delineations. We referred readers to our discussion of our proposed wage index transition policy to apply a 5 percent cap in FY 2021 for hospitals that may experience any decrease in their final wage index from the prior fiscal year. We also referred readers to the discussion of our proposed revisions to the list of counties deemed urban under section 1886(d)(8)(B) of the Act that would affect the hospitals located in these proposed rural counties.

In addition, we noted in the proposed rule that the provisions of § 412.102 of the regulations would continue to apply with respect to determining DSH payments. Specifically, we stated that in the first year after a hospital loses urban status, the hospital will receive an adjustment to its DSH payment that equals two-thirds of the difference between the urban DSH payments applicable to the hospital before its redesignation from urban to rural and the rural DSH payments applicable to the hospital subsequent to its redesignation from urban to rural. In the second year after a hospital loses urban status, the hospital will receive an adjustment to its DSH payment that equals one third of the difference between the urban DSH payments applicable to the hospital before its redesignation from urban to rural and the rural DSH payments applicable to the hospital subsequent to its redesignation from urban to rural.

We did not receive any comments specific to the proposed list of counties that would become rural under the revised OMB delineations. Thus, for the reasons set forth in this final rule and in the FY 2021 IPPS/LTCH PPS proposed rule, we are finalizing, without modification, our proposed reassignment of the 34 counties set forth in the chart from urban areas to rural areas for purposes of the IPPS wage index based on the revised OMB delineations in OMB Bulletin No. 18-04, effective beginning with the FY 2021 IPPS wage index.

iii. Rural Counties That Would Become Urban Under the Revised OMB Delineations

As previously discussed, we proposed to implement the revised OMB statistical area delineations (based upon OMB Bulletin No. 18-04) beginning in FY 2021. In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32699), we indicated that analysis of these OMB statistical area delineations shows that a total of 47 counties (and county equivalents) and 17 hospitals that were located in rural areas would be located in urban areas under the revised OMB delineations. In the proposed rule, we included the following chart listing the 47 rural counties that would be urban if we finalized our proposal to implement the revised OMB delineations.

We proposed that when calculating the area wage index, the wage data for hospitals located in these counties would be included in their new respective urban CBSAs. We stated in the proposed rule (85 FR 32701) that, typically, hospitals located in an urban area would receive a wage index value higher than or equal to hospitals located in their State's rural area. We referred readers to our discussion of our proposed wage index transition policy to apply a 5 percent cap in FY 2021 for hospitals that may experience any decrease in their final wage index from the prior fiscal year.

In the proposed rule, we also noted that due to the adoption of the revised OMB delineations, some CAHs that were previously located in rural areas may be located in urban areas. The regulations at §§ 412.103(a)(6) and 485.610(b)(5) provide affected CAHs with a two-year transition period that begins from the date the redesignation becomes effective. We stated that the affected CAHs must reclassify as rural during this transition period in order to retain their CAH status after the two-year transition period ends. We referred readers to the FY 2015 IPPS/LTCH final rule (79 FR 50162 and 50163) for further discussion of the two-year transition period for CAHs.

Comment: We received a comment regarding a hospital in Harnett County, NC. Harnett County is a rural county under the current OMB delineations. Under the “Lugar” policy at section 1886(d)(8)(B) of the Act, all hospitals in the county are currently deemed to be reclassified as urban to Raleigh, NC (CBSA 39580). Under the revised OMB delineations, Harnett County would be considered urban, part of Fayetteville, NC (CBSA 22180). The commenters stated that this change in status will have a significant financial impact on the hospital. The commenter questions how the county-based commuting patterns, which supported the county's continued Lugar status in the FY 2019 IPPS/LTCH proposed rule, could have changed in such a manner that Harnett is now considered an outlying county of the Fayetteville, NC CBSA. The commenter requested CMS reconsider the placement of Harnett County, NC in the Fayetteville, NC CBSA, believing the data included in the upcoming 2020 decennial census would appropriately place Harnett County in the Raleigh-Cary, NC CBSA.

Response: As the commenter recognizes, based on the updated OMB delineations in OMB Bulletin No. 18-04, Harnett County is considered urban, part of Fayetteville, NC (CBSA 22180). In OMB Bulletin No. 18-04, OMB is using an updated commuting data set to determine statistical area delineations, specifically the 2011-2015 5-Year ACS Commuting Flows and Employment, which is available on the internet at https://www.census.gov/topics/employment/commuting/guidance/flows.html . As discussed earlier, we believe the updated OMB delineations in OMB Bulletin No. 18-04, which are based on this updated commuting data, provide a more updated and accurate representation of variations in area wage levels. As such, we believe that adoption of the revised OMB delineations would increase the integrity of the IPPS wage index and help ensure more accurate and appropriate payments as compared to the current OMB delineations. Under section 1886(d)(8)(B) of the Act, only hospitals located in rural counties (that meet the criteria in section 1886(d)(8)(b)) can be designated as “Lugar” hospitals. Since Harnett County, NC would be considered an urban county located in the Fayetteville, NC CBSA under the updated OMB delineations, hospitals located in Harnett County would no longer be considered “Lugar” hospitals under section 1886(d)(8)(b) of the Act and would no longer be considered reclassified under that statute to the Raleigh-Cary, NC (CBSA 39580). Based on the updated delineations in OMB Bulletin No. 18-04, we believe that Harnett County is appropriately classified as urban, part of the Fayetteville, NC CBSA; however, we may consider proposing future revisions to the county's geographic classification if warranted based on future updates to the OMB delineations.

Comment: One commenter requested CMS consider a 2-year extension of rural status for Medicare Dependent Hospitals (MDH) and Sole Community Hospitals (SCH) located in counties that are gaining urban status. Since SCH and MDH statuses are dependent upon a hospital being considered rural, the commenter states they should be allotted additional time to obtain a rural status. The commenter suggested CMS adopt a similar transition period policy for SCHs and MDHs as what is granted to Critical Access Hospitals at § 412.103(a)(6).

Response: We appreciate these comments. However, we do not believe it would be appropriate to extend rural status for MDHs and SCHs for a period of time after implementation of the revised OMB delineations to provide additional time to obtain rural reclassification through § 412.103. As discussed in the FY 2015 IPPS/LTCH final rule (79 FR 49983), we believe the payment consequences for CAHs of losing rural status are generally greater than for other provider types. In addition, given the different Conditions of Participation (CoPs) for CAHs, and that it would be generally more difficult for a CAH to have to meet the hospital CoPs instead of the CAH CoPs, only a CAH also faces the potential loss of its ability to continue to participate in the Medicare and Medicaid programs if such rural status is lost. We believe that the combination of the generally greater payment consequences for CAHs relative to other provider types combined with the unique consequences for CAHs with respect to the CoPs make it appropriate for CAHs to be afforded a 2-year transition period in which to reclassify not afforded to other provider types. Furthermore, of the 17 hospitals located in newly urban counties, fewer than half appear to have either SCH or MDH status. We believe all could readily obtain rural reclassification under the current criteria in § 412.103 in order to retain their status as MDHs and SCHs. We remind hospitals that § 412.103 reclassification requests are effective as of the date of application. If the application is filed with the appropriate regional office by October 1, 2020, when approved, the hospital would experience no gap in rural status. We believe that the relatively few SCHs and MDHs affected by the revised delineations will have adequate time to submit a complete application. Therefore, for the reasons explained above, we are not modifying existing regulations to extend rural status for MDHs and SCHs for a period of time after implementation of the revised OMB delineations.

After consideration of the public comments we received, for the reasons set forth in this final rule and in the FY 2021 IPPS/LTCH PPS proposed rule, we are finalizing, without modification, our proposed reassignment of the 47 counties (and county equivalents) listed in the chart from rural areas to urban areas for purposes of the IPPS wage index based on the revised OMB delineations in OMB Bulletin No. 18-04, effective beginning with the FY 2021 IPPS wage index.

iv. Urban Counties That Would Move to a Different Urban CBSA Under the Revised OMB Delineations

As we stated in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32702), in addition to rural counties becoming urban and urban counties becoming rural, some urban counties would shift from one urban CBSA to another urban CBSA under our proposal to adopt the new OMB delineations. We stated that, in other cases, adopting the revised OMB delineations would involve a change only in CBSA name and/or number, while the CBSA continues to encompass the same constituent counties. For example, we noted that CBSA 19380 (Dayton, OH) would experience both a change to its number and its name, and become CBSA 19430 (Dayton-Kettering, OH), while all of its three constituent counties would remain the same. In other cases, only the name of the CBSA would be modified, and none of the currently assigned counties would be reassigned to a different urban CBSA. In the proposed rule (85 FR 32703 through 32704), we provided the following list of such CBSAs where we proposed to change the name and/or CBSA number only.

In the proposed rule, we did not further discuss these changes because we stated that they were inconsequential changes with respect to the IPPS wage index. However, we stated that in other cases, if we adopted the revised OMB delineations, counties would shift between existing and new CBSAs, changing the constituent makeup of the CBSAs. For example, we noted that Kendall County, IL would be moved from the current CBSA 16974 (Chicago-Naperville-Arlington Height, IL) into CBSA 20994 (Elgin, IL). We further noted that the remaining counties in the current CBSA 16974 would be assigned to the CBSA 16984 (Chicago-Naperville-Evanston, IL). The constituent counties of CBSA 16974 would therefore be split into two different urban CBSAs. We also stated that there would be a significant rearrangement in the constituent counties among the New York City Area Metropolitan Divisions. Most notably, Monmouth, Middlesex, and Ocean Counties in NJ would move from the current CBSA 35614 (New York-Jersey City-White Plains, NY-NJ) to the CBSA 35154 (New Brunswick-Lakewood, NJ). Also, Somerset County, NJ would move from current CBSA 35084 (Newark, NJ-PA) to CBSA 35154. In the proposed rule, we included the following chart listing the urban counties that would move from one urban CBSA to a new or modified CBSA if we adopted the revised OMB delineations.

In the proposed rule (85 FR 32705), we stated that if hospitals located in these counties move from one CBSA to another under the revised OMB delineations, there may be impacts, both negative and positive, upon their specific wage index values. We referred readers to our discussion of our proposed wage index transition policy to apply a 5 percent cap in FY 2021 for hospitals that may experience any decrease in their final wage index from the prior fiscal year. We also referred readers to our discussion of our proposals to reassign MGCRB wage index reclassifications for hospitals currently assigned to these modified CBSAs.

We did not receive any comments on the CBSAs that would undergo a change in name and/or CBSA number only. The comments we received regarding the list of urban counties that would move from one urban CBSA to a new or modified CBSA are discussed in section III.I.2.c.(1) of this final rule. As discussed in that section, we are finalizing, without modification, our proposal to implement the revised OMB delineations as described in the September 14, 2018 OMB Bulletin No. 18-04, effective beginning with the FY 2021 IPPS wage index. After consideration of the public comments we received, for the reasons set forth in this final rule and in the FY 2021 IPPS/LTCH PPS proposed rule, we are finalizing, without modification, our proposed list of CBSAs that would move from one urban CBSA to a new or modified CBSA for purposes of the IPPS wage index based on the revised OMB delineations in OMB Bulletin No. 18-04, effective beginning with the FY 2021 IPPS wage index.

c. Transition for Hospitals Negatively Impacted

We stated in the proposed rule (85 FR 32706) that, overall, we believe implementing the revised OMB statistical area delineations would result in wage index values being more representative of the actual costs of labor in a given area. However, we recognized that some hospitals would experience decreases in wage index values as a result of our implementation of the revised labor market area delineations. We also stated that we realize that some hospitals would have higher wage index values due to our implementation of the new labor market area delineations.

In the past, we have proposed and finalized budget neutral transition policies to help mitigate negative impacts on hospitals of certain wage index proposals. For example, in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49960 through 49963) when we implemented new OMB delineations based on the 2010 decennial census data, we finalized budget neutral transitions for certain situations. Specifically, in the FY 2015 IPPS/LTCH PPS final rule, for a period of 3 fiscal years, we allowed urban hospitals that became rural under the new delineations (and that had no form of wage index reclassification or redesignation) to maintain the wage index value of the CBSA in which they were physically located for FY 2014; and for hospitals that experienced a decrease in wage index values due to the change in labor market area definitions, we implemented a 1-year blended wage index where hospitals received 50 percent of their wage index based on the new OMB delineations that went into effect in FY 2015, and 50 percent of their wage index based on their FY 2014 labor market area. As we stated in the proposed rule, this blended wage index required us to calculate wage indexes for all hospitals using both old and new labor market definitions even though it only applied to hospitals that experienced a decrease in wage index values due to a change in labor market area definitions. More recently, in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42336 through 42338), we finalized a wage index transition to help mitigate any significant decreases in the wage index values of hospitals compared to their final wage index value from the prior fiscal year due to the combined effect of the changes to the FY 2020 wage index. Specifically, for FY 2020, we implemented a 5-percent cap on any decrease in a hospital's wage index from the hospital's final wage index in FY 2019.

As previously mentioned in this final rule and in the proposed rule (85 FR 32706), while the revised OMB delineations in OMB Bulletin 18-04 are not based on new census data, there were some material changes in the OMB delineations. Also, as previously mentioned, the revisions in this OMB bulletin are updates to the CBSA delineations already adopted in FY 2015 based on the 2010 census data. For these reasons, we stated in the proposed rule that, for FY 2021, we do not believe it is necessary to implement the multifaceted transitions we established in FY 2015 for the adoption of the new OMB delineations based on the new decennial census data. However, in accordance with our past practice of implementing transition policies to help mitigate negative impacts on hospitals of certain wage index proposals, we stated in the proposed rule that if we adopt the revised OMB delineations, we believe it would be appropriate to implement a transition policy since, as previously mentioned, some of these revisions are material, and may negatively impact payments to hospitals. For example, we explained that changes in the county makeup of a CBSA, by adding or removing a constituent county, may change the pool of hospitals contributing average hourly wage data, potentially resulting in lower wage index values for certain areas. We noted that when CMS implemented various changes to the hospital wage index in prior rulemaking, commenters frequently supported transition policies that ensured wage index values maintain a degree of year-to-year consistency (see comments to our FY 2015 IPPS/LTCH PPS final rule transition policies at 79 FR 49959 through 49961). Thus, we stated in the proposed rule that we believe applying a 5-percent cap on any decrease in a hospital's wage index from the hospital's final wage index from the prior fiscal year, as we did for FY 2020, would be an appropriate transition for FY 2021 for the revised OMB delineations as it provides predictability in payment levels from FY 2020 to the upcoming FY 2021. We stated that the FY 2021 5-percent cap on wage index decreases would be applied to all hospitals that have any decrease in their wage indexes, mitigating significant negative decrease in wage index values. Given the significant portion of Medicare IPPS payments that are adjusted by the wage index and how relatively few hospitals generally see wage index declines in excess of 5 percent, hospitals may have difficulty adapting to changes in the wage index of this magnitude all at once. For these reasons, we proposed that, for FY 2021, we would place a 5 percent cap on any decrease in a hospital's wage index from the hospital's final wage index for FY 2020, such that a hospital's final wage index for FY 2021 would not be less than 95 percent of its final wage index for FY 2020. We stated that this transition would allow the effects of our adoption of the revised CBSA delineations to be phased in over 2 years with no estimated reduction in the wage index of more than 5 percent in FY 2021 (that is, no cap would be applied the second year). As we explained in the proposed rule, we continue to believe 5 percent is a reasonable level for the cap because it would effectively mitigate any significant decreases in the wage index for FY 2021. We also stated that we believe this transition would afford hospitals adequate time to fully assess any additional reclassification options available to them (we refer the reader to section III.I.2.c. of the preamble of this final rule for a complete discussion regarding the revised OMB delineations and their effects regarding hospital reclassification). Therefore, for FY 2021, we proposed to again provide for a transition of a 5-percent cap on any decrease in a hospital's wage index from the hospital's final wage index from the prior fiscal year (FY 2020). We stated that, consistent with the application of the 5 percent cap in FY 2020, the FY 2021 5-percent cap on wage index decreases would be applied to all hospitals that have any decrease in their wage indexes, regardless of the circumstance causing the decline, so that a hospital's final wage index for FY 2021 would not be less than 95 percent of its final wage index for FY 2020. As we explained in the proposed rule, we believe applying the cap on wage index decreases for all hospitals, regardless of the circumstance causing the decrease, allows CMS to mitigate any significant negative impacts of adopting the new OMB delineations in a manner that is readily identifiable in the wage index tables and promotes greater wage index predictability.

Comment: We received several comments regarding the proposed 5 percent cap transition policy. Some commenters, while opposing the proposed adoption of revised OMB delineations, generally supported the concept of the transition cap for FY 2021 (if the delineations are finalized). Another commenter supported the 5 percent transition cap as a means to reduce overall wage index volatility. Several commenters requested that CMS reduce the amount of potential reduction in FY 2021, and extend transition adjustments to affected hospitals in future years. Other commenters, citing CMS' FY 2015 policy of phasing in transitions when adopting revised OMB delineations, suggested a multiple year transition period. One set of commenters, citing the significant financial losses faced by hospitals and the limited amount of time hospitals have had to prepare, suggested CMS adopt the transition over a multiple year period, with no reduction in 2021, a 2.5 percent cap on losses in FY2022, and a 5 percent cap for FY 2022. Other commenters requested CMS limit individual hospitals' potential losses to 3 percent in FY 2021 and again in FY 2022 to give hospitals a fairer chance to adjust to this unexpected proposal.

Response: We thank all commenters for their suggestions. We note that the last time we adopted significantly revised OMB delineations in FY 2015, CMS finalized an extended transition policy (79 FR 49957-49960) for certain hospitals. We allowed urban hospitals that became rural under the new delineations (and that had no form of wage index reclassification or redesignation) to maintain the wage index value of the CBSA in which they were physically located for FY 2014 for a period of 3 years. A similar policy was adopted for rural hospitals located in counties that lost “Lugar” status under section 1886(d)(8)(B) of the Act that would no longer be deemed urban and would revert back to rural status. Since rural areas of States typically have lower wage index values, and given the potentially significant payment impacts for these hospitals, we believed additional considerations should be extended to this limited number of hospitals. However, as described in section III.I.3.b of the preamble of this final rule, all the hospitals that would shift from urban to rural in FY 2021 under the revised delineations would also be deemed reclassified as urban under section 1886(d)(8)(B) of the Act to the urban area they currently are assigned. Under the revised OMB delineations, no hospital located in a rural county is losing its “Lugar” status under section 1886(d)(8)(B) of the Act and reverting back to rural status. Therefore, the special considerations granted to urban hospitals that became rural in FY 2015 would not be applicable to any hospital in FY 2021.

The other transition adjustment we finalized in FY 2015 was for hospitals that experienced a decrease in wage index values due to the change in labor market area definitions. We implemented a 1-year blended wage index where hospitals received 50 percent of their wage index based on the new OMB delineations that went into effect in FY 2015, and 50 percent of their wage index based on their FY 2014 labor market area. We believe our proposed 5 percent cap transition policy for FY 2021 accomplishes the same policy goal as the transition policy we finalized in FY 2015; limiting potential losses for the upcoming fiscal year, while providing adequate time adjust and evaluate reclassification options. We believe the level of the cap amount, providing that FY 2021 wage index values are at least 95 percent of a hospital's FY 2020 wage index value, would adequately mitigate significant wage index decreases and provide wage index stability for affected hospitals for FY 2021. While we acknowledge that some providers will see negative impacts based upon the adoption of the revised OMB delineations, we also point out that some providers will experience increases in their wage index values due to the adoption of the revised OMB delineations. As we stated previously, CMS has in the past provided temporary adjustments to mitigate significant negative impacts from the adoption of new policies or procedures. However, we do not think it is necessary or appropriate to extend the transition period to additional years, as suggested by some commenters, to allow additional time to adjust to the revised OMB delineations in OMB Bulletin No. 18-04. The revised delineations adopted in FY 2015 were significantly more complex and wide ranging than those we proposed for FY 2021. Although the changes outlined in OMB Bulletin No. 18-04 are more significant than typical OMB delineation revisions issued between decennial censuses, the overall impacts of these revised delineations are still more limited in scope than revisions that accompany the release of decennial censuses. Given this, we do not think it is necessary or appropriate extend the transition period to additional years.

Comment: Another commenter, while supportive of the proposed 5 percent cap for FY 2021, cited that some hospitals obtained rural reclassifications during FY 2020 and requested that that CMS apply the 5 percent cap using the wage index being paid in FY 2020 (which would be based on any such mid-year reclassifications) rather than the one that was included in the FY 2020 IPPS final rule.

Response: We appreciate the commenter's support of the proposed 5 percent cap on wage index decreases for FY 2021. Similar to the policy we applied for the 5 percent cap in FY 2020 (see discussion in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42337)), for purposes of applying the 5 percent cap for FY 2021, we are clarifying that the prior year “final” wage index value refers to the final amount published in the FY 2020 IPPS/LTCH PPS final rule. We believe that using the publicly available wage indexes from the FY 2020 IPPS final rule facilitates transparency. A hospital can contact its MAC for assistance if it believes the incorrect wage index value was used as the basis for its transition and the MAC can make any appropriate correction.

After consideration of the public comments we received, for the reasons discussed in this final rule and the FY 2021 IPPS/LTCH PPS proposed rule, we are finalizing, without modification, our proposal to place a 5 percent cap, for FY 2021, on any decrease in a hospital's wage index from the hospital's final wage index in FY 2020 so that a hospital's final wage index for FY 2021 will not be less than 95 percent of its final wage index for FY 2020.

d. Transition Budget Neutrality

For FY 2021, we proposed to apply a budget neutrality adjustment to the standardized amount so that our transition described in section III.A.2.c. is implemented in a budget neutral manner under our authority in section 1886(d)(5)(I) of the Act. In the proposed rule (85 FR 32706), we noted that implementing the transition wage index in a budget neutral manner is consistent with past practice (for example, 79 FR 50372 and 84 FR 42338) where CMS has used its exceptions and adjustments authority under section 1886(d)(5)(I)(i) of the Act to budget neutralize transition wage index policies when such policies allow for the application of a transitional wage index only when it benefits the hospital. We stated that we believed, and continue to believe, that it would be appropriate to ensure that such policies do not increase estimated aggregate Medicare payments beyond the payments that would be made had we never proposed these transition policies (79 FR 50372 and 84 FR 42337 through 42338). Therefore, for FY 2021, we proposed to use our exceptions and adjustments authority under section 1886(d)(5)(I)(i) of the Act to apply a budget neutrality adjustment to the standardized amount so that our transition (described in section III.A.2.c.) is implemented in a budget neutral manner.

Specifically, we proposed to apply a budget neutrality adjustment to ensure that estimated aggregate payments under our transition (described in section III.A.2.c. of the preamble of this final rule) for hospitals that have any decrease in their wage indexes for FY 2021 would equal what estimated aggregate payments would have been without the transition. To determine the associated budget neutrality factor, we compared estimated aggregate IPPS payments with and without the transition.

In the proposed rule, we calculated a budget neutrality adjustment factor (0.998580) based on proposed rule data that we stated would be applied to the FY 2021 standardized amount to achieve budget neutrality for the proposed transition. We noted that this number would be updated, as appropriate, based on final rule data.

We noted in the proposed rule that, consistent with past practice (69 FR 49034 and 79 FR 49963), we were not adopting the revised OMB delineations themselves in a budget neutral manner. We do not believe that the revision to the labor market areas in and of itself constitutes an “adjustment or update” to the adjustment for area wage differences, as provided under section 1886(d)(3)(E) of the Act.

We did not receive any comments regarding our proposal to apply a budget neutrality adjustment to the FY 2021 standardized amount to achieve budget neutrality for the transition described in section III.A.2.c. of the preamble of this final rule. Thus, for the reasons set forth in the final rule and in the FY 2021 IPPS/LTCH PPS proposed rule, we are finalizing this proposal without modification. Please see the table in section II.4.h. of the addendum of this final rule which contains the final transition budget neutrality factor (which is based on final rule data) that will be applied to the FY 2021 standardized amount to achieve budget neutrality for the transition.

3. Codes for Constituent Counties in CBSAs

CBSAs are made up of one or more constituent counties. Each CBSA and constituent county has its own unique identifying codes. There are two different lists of codes associated with counties: Social Security Administration (SSA) codes and Federal Information Processing Standard (FIPS) codes. Historically, CMS has listed and used SSA and FIPS county codes to identify and crosswalk counties to CBSA codes for purposes of the hospital wage index. As we discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38129 through 38130), we have learned that SSA county codes are no longer being maintained and updated. However, the FIPS codes continue to be maintained by the U.S. Census Bureau. We believe that using the latest FIPS codes will allow us to maintain a more accurate and up-to-date payment system that reflects the reality of population shifts and labor market conditions.

The Census Bureau's most current statistical area information is derived from ongoing census data received since 2010; the most recent data are from 2015. The Census Bureau maintains a complete list of changes to counties or county equivalent entities on the website at: https://www.census.gov/geo/reference/county-changes.html . We believe that it is important to use the latest counties or county equivalent entities in order to properly crosswalk hospitals from a county to a CBSA for purposes of the hospital wage index used under the IPPS.

In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38129 through 38130), we adopted a policy to discontinue the use of the SSA county codes and began using only the FIPS county codes for purposes of crosswalking counties to CBSAs. In addition, in the same rule, we implemented the latest FIPS code updates which were effective October 1, 2017, beginning with the FY 2018 wage indexes. These updates have been used to calculate the wage indexes in a manner generally consistent with the CBSA-based methodologies finalized in the FY 2005 IPPS final rule and the FY 2015 IPPS/LTCH PPS final rule.

For FY 2021, we are continuing to use only the FIPS county codes for purposes of crosswalking counties to CBSAs. For FY 2021, Tables 2 and 3 associated with this final rule and the County to CBSA Crosswalk File and Urban CBSAs and Constituent Counties for Acute Care Hospitals File posted on the CMS website reflect the latest FIPS code updates.

B. Worksheet S-3 Wage Data for the FY 2021 Wage Index

The FY 2021 wage index values are based on the data collected from the Medicare cost reports submitted by hospitals for cost reporting periods beginning in FY 2017 (the FY 2020 wage indexes were based on data from cost reporting periods beginning during FY 2016).

1. Included Categories of Costs

The FY 2021 wage index includes all of the following categories of data associated with costs paid under the IPPS (as well as outpatient costs):

• Salaries and hours from short-term, acute care hospitals (including paid lunch hours and hours associated with military leave and jury duty);
• Home office costs and hours;
• Certain contract labor costs and hours, which include direct patient care, certain top management, pharmacy, laboratory, and nonteaching physician Part A services, and certain contract indirect patient care services (as discussed in the FY 2008 final rule with comment period (72 FR 47315 through 47317)); and
• Wage-related costs, including pension costs (based on policies adopted in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51586 through 51590)) and other deferred compensation costs.

2. Excluded Categories of Costs

Consistent with the wage index methodology for FY 2020, the wage index for FY 2021 also excludes the direct and overhead salaries and hours for services not subject to IPPS payment, such as skilled nursing facility (SNF) services, home health services, costs related to GME (teaching physicians and residents) and certified registered nurse anesthetists (CRNAs), and other subprovider components that are not paid under the IPPS. The FY 2021 wage index also excludes the salaries, hours, and wage-related costs of hospital-based rural health clinics (RHCs), and Federally qualified health centers (FQHCs) because Medicare pays for these costs outside of the IPPS (68 FR 45395). In addition, salaries, hours, and wage-related costs of CAHs are excluded from the wage index for the reasons explained in the FY 2004 IPPS final rule (68 FR 45397 through 45398). For FY 2020 and subsequent years, other wage-related costs are also excluded from the calculation of the wage index. As discussed in the FY 2019 IPPS/LTCH final rule (83 FR 41365 through 41369), other wage-related costs reported on Worksheet S-3, Part II, Line 18 and Worksheet S-3, Part IV, Line 25 and subscripts, as well as all other wage-related costs, such as contract labor costs, are excluded from the calculation of the wage index.

3. Use of Wage Index Data by Suppliers and Providers Other Than Acute Care Hospitals Under the IPPS

Data collected for the IPPS wage index also are currently used to calculate wage indexes applicable to suppliers and other providers, such as SNFs, home health agencies (HHAs), ambulatory surgical centers (ASCs), and hospices. In addition, they are used for prospective payments to IRFs, IPFs, and LTCHs, and for hospital outpatient services. We note that, in the IPPS rules, we do not address comments pertaining to the wage indexes of any supplier or provider except IPPS providers and LTCHs. Such comments should be made in response to separate proposed rules for those suppliers and providers.

4. Proper Documentation of Physician Time Spent in Part A Administrative Versus Part B Billable Activities

In the last few years, we have received wage index data appeals related to MACs' disallowances of wages and hours that hospitals believe are associated with Part A administrative physician time, but the MACs believe are not properly documented as such, or are in fact, associated with Part B billable activities, which are not included in the wage index. For physicians employed by a hospital, their salaries and hours associated with Part A administrative time, which are included in the wage index, are reported on CMS-2552-10 Worksheet S-3, Part II, line 4, and the salaries and hours of hospital employed physicians associated with billable Part B patient care activities, which are NOT included in the wage index, are reported on Worksheet S-3, Part II, line 5. Specifically, the instructions for lines 4 and 5 state the following:

• Line 4—Enter the physician Part A administrative salaries, (excluding teaching physician salaries), that are included in line 1. Also do not include intern and resident (I & R) salary on this line. Report I & R salary on line 7. Subscript this line and report salaries for Part A teaching physicians on line 4.01.
• Line 5—Enter the total physician, physician assistant, nurse practitioner and clinical nurse specialist on-call salaries and salaries billed under Part B that are included in line 1. Under Medicare, these services are related to direct patient care and billed separately under Part B. Also include physician salaries for patient care services reported for rural health clinics (RHC) and FQHCs included on Worksheet A, column 1, lines 88 and/or 89 as applicable. Do not include on this line amounts that are included on lines 9 and 10 for the SNF or excluded area salaries. Refer to CMS Pub. 15-1, sections 2313.2.E. and 2182.3.E., for instructions related to keeping time studies to track time spent in Part A versus Part B activities. However, although section 2313.2.E.2. states that, “A minimally acceptable time study must encompass at least one full week per month of the cost reporting period,” the contractor makes the final determination on the adequacy of the records maintained. A 2-week semi-annual (every 6 months) time study can be adequate unless the contractor believes that a significant change in the pattern of physician time is likely to occur from one quarter to the next, in which case, the contractor may require more frequent time studies. Adequate documentation must be maintained to support total hours in a manner that is verifiable, and to serve as a condition of payment under Part A.

In addition, for physicians that are not employed by the hospital but are under contract, the wages and hours associated with contract Physician Part A administrative activities are reported on Worksheet S-3, Part II, line 13. No salaries and hours related to Part B activities are allowed. Line 13 states the following:

Line 13—Enter from your records the amount paid under contract (in accordance with the general instructions for contract labor) for Part A physician services—administrative, excluding teaching physician services. DO NOT include contract I & R services (to be included on line 7). DO NOT include the costs for Part A physician services from the home office allocation and/or from related organizations (to be reported on line 15). Do not include wages or hours associated with Part B services. As stated in the General Instructions for Contract Labor, “the minimum requirement for supporting documentation is the contract itself. If the wage costs, hours, and non-labor costs are not clearly specified in the contract, other supporting documentation is required, such as a representative sample of invoices that specify the wage costs, hours, and non-labor costs.” Refer to CMS Pub. 15-1, sections 2313.2E and 2182.3.E, for instructions related to keeping time studies to track time spent in Part A versus Part B activities. Adequate documentation must be maintained to support total hours in a manner that is verifiable.

In order to accurately report the wages and hours associated with Part A and Part B activities on lines 4 and 5 and 13 respectively, the providers are required to maintain records as to the allocation of physicians' time between various services to keep track of the amount of time the physicians spend on Part A versus Part B activities. 42 CFR 415.60(b) and CMS Pub. 15-1, chapter 21, section 2182.3.B. Specifically, 42 CFR 415.60(b) states, except as provided in paragraph (d) of the section, each provider that incurs physician compensation costs must allocate those costs, in proportion to the percentage of total time that is spent in furnishing each category of services, among—

• Physician services to the provider (as described in § 415.55);
• Physician services to patients (as described in § 415.102); and
• Activities of the physician, such as funded research, that are not paid under either Part A or Part B of Medicare.

To facilitate the MAC's review of whether physician wages and hours have been reported correctly, hospitals must submit the physician allocation agreements to the MAC. (See CMS Pub. 15-1, Section 2182.3.E.3. which states that allocation agreements are to be submitted annually as part of the cost report filing process.) In the absence of a written allocation agreement (such as Exhibit 1 in CMS Pub. 15-II, Chapter 40, Section 4004.2 and related instructions for this exhibit on Line 34 of Section 4004.2—that is, instructions for Form CMS-2552-10, Worksheet S-2, Part II, line 34), the MAC assumes that 100 percent of the physician compensation cost is allocated to Part B services (see 42 CFR 415.60(f)(2)). The hospital must maintain the information used to complete the physician allocation agreements as directed in CMS Pub. 15-1 section 2182.3.E. in order to track time spent in Part A versus Part B activities. This section specifies that the hospital may choose to employ the methodology described in subsection 2313.2.E for a time study but may not be required by the MAC to utilize that specific methodology. Therefore, although section 2313.2.E. states that “a minimally acceptable time study must encompass at least one full week per month of the cost reporting period,” the MAC makes the final determination on the adequacy of the records maintained for the allocation of physicians' compensation. A 2-week semi-annual (every 6 months) time study can be adequate unless the MAC believes that a significant change in the pattern of physician time is likely to occur from one quarter to the next, in which case, the MAC may require more frequent time studies (see CMS-2552-10, Worksheet S-3, Part II line 5 instructions). Adequate documentation must be maintained to support total hours in a manner that is verifiable, and to serve as a condition of payment under Part A, that is, total hours worked by the physicians must be based on actual data accumulated during the cost reporting period and may not be imputed (consistent with 42 CFR 413.24 and 415.60(f)(1) and (g)). Non-allowable services that are neither Part A nor Part B services (for example, research, teaching of residents in non-approved programs, teaching and supervision of medical students, writing for medical journals, reasonable availability services in departments/cost centers other than Emergency Room, etc.) are reported as non-reimbursable activities in the designated non-reimbursable cost centers of the Medicare cost report, CMS-2552-10 (for example, Worksheet A, lines 190-194, see 42 CFR 415.60(b)(3)). Reasonable availability services for emergency rooms can be considered Part A in certain circumstances (see PRM-I, section 2109.3.A. through C. for instances when emergency department physician availability services costs are allowable, and for the associated required documentation).

We did not receive any comments on the discussion in this section.

C. Verification of Worksheet S-3 Wage Data

The wage data for the FY 2021 wage index were obtained from Worksheet S-3, Parts II and III of the Medicare cost report (Form CMS-2552-10, OMB Control Number 0938-0050 with expiration date March 31, 2022) for cost reporting periods beginning on or after October 1, 2016, and before October 1, 2017. For wage index purposes, we refer to cost reports during this period as the “FY 2017 cost report,” the “FY 2017 wage data,” or the “FY 2017 data.” Instructions for completing the wage index sections of Worksheet S-3 are included in the Provider Reimbursement Manual (PRM), Part 2 (Pub. 15-2), Chapter 40, Sections 4005.2 through 4005.4. The data file used to construct the final FY 2021 wage index includes FY 2017 data submitted to us as of the end of June 2020. As in past years, we performed an extensive review of the wage data, mostly through the use of edits designed to identify aberrant data.

We asked our MACs to revise or verify data elements that result in specific edit failures. For the proposed FY 2021 wage index, we identified and excluded 84 providers with aberrant data that should not be included in the wage index. However, we stated that if data elements for some of these providers were corrected, we intended to include data from those providers in the final FY 2021 wage index. We also adjusted certain aberrant data and included these data in the wage index. For example, in situations where a hospital did not have documentable salaries, wages, and hours for housekeeping and dietary services, we imputed estimates, in accordance with policies established in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49965 through 49967). We instructed MACs to complete their data verification of questionable data elements and to transmit any changes to the wage data no later than March 19, 2020. For the final FY 2021 wage index, we restored 29 hospitals to the wage index because their data was either verified or improved, but we also removed the data of one hospital for the first time after the proposed rule due to its data being aberrant. Thus, 56 hospitals with aberrant data remain deleted from the final FY 2021 wage index (84−29 + 1 = 56).

In constructing the proposed FY 2021 wage index, we included the wage data for facilities that were IPPS hospitals in FY 2017, inclusive of those facilities that have since terminated their participation in the program as hospitals, as long as those data did not fail any of our edits for reasonableness. We stated in the proposed rule (85 FR 32709) that we believe including the wage data for these hospitals is, in general, appropriate to reflect the economic conditions in the various labor market areas during the relevant past period and to ensure that the current wage index represents the labor market area's current wages as compared to the national average of wages. However, we excluded the wage data for CAHs as discussed in the FY 2004 IPPS final rule (68 FR 45397 through 45398); that is, any hospital that is designated as a CAH by 7 days prior to the publication of the preliminary wage index public use file (PUF) is excluded from the calculation of the wage index. For the proposed FY 2021 wage index, we removed 8 hospitals that converted to CAH status on or after January 24, 2019, the cut-off date for CAH exclusion from the FY 2020 wage index, and through and including January 24, 2020, the cut-off date for CAH exclusion from the FY 2021 wage index. Since the proposed rule, we learned of 1 more hospital that converted to CAH status on or after January 24, 2019, and through and including January 24, 2020, the cut-off date for CAH exclusion from the FY 2021 wage index, for a total of 9 hospitals that were removed from the FY 2021 wage index due to conversion to CAH status. In summary, we calculated the final FY 2021 wage index using the Worksheet S-3, Parts II and III wage data of 3,222 hospitals.

For the FY 2021 wage index, we allotted the wages and hours data for a multicampus hospital among the different labor market areas where its campuses are located using campus full-time equivalent (FTE) percentages as originally finalized in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51591). Table 2, which contains the FY 2021 wage index associated with this final rule (available via the internet on the CMS website), includes separate wage data for the campuses of 16 multicampus hospitals. The following chart lists the multicampus hospitals by CSA certification number (CCN) and the FTE percentages on which the wages and hours of each campus were allotted to their respective labor market areas:

We note that, in past years, in Table 2, we have placed a “B” to designate the subordinate campus in the fourth position of the hospital CCN. However, for the FY 2019 IPPS/LTCH PPS proposed and final rules and subsequent rules, we have moved the “B” to the third position of the CCN. Because all IPPS hospitals have a “0” in the third position of the CCN, we believe that placement of the “B” in this third position, instead of the “0” for the subordinate campus, is the most efficient method of identification and interferes the least with the other, variable, digits in the CCN.

D. Method for Computing the FY 2021 Unadjusted Wage Index

As we stated in the proposed rule (85 FR 32710), the method used to compute the FY 2021 wage index without an occupational mix adjustment follows the same methodology that we used to compute the wage indexes without an occupational mix adjustment in the FY 2020 IPPS/LTCH PPS final rule (see 84 FR 42304 through 42307, August 16, 2019), and we did not propose any changes to this methodology. We have restated our methodology in this section of this rule.

Step 1.—We gathered data from each of the non-Federal, short-term, acute care hospitals for which data were reported on the Worksheet S-3, Parts II and III of the Medicare cost report for the hospital's cost reporting period relevant to the wage index (in this case, for FY 2021, these were data from cost reports for cost reporting periods beginning on or after October 1, 2016, and before October 1, 2017). In addition, we included data from some hospitals that had cost reporting periods beginning before October 2016 and reported a cost reporting period covering all of FY 2017. These data were included because no other data from these hospitals would be available for the cost reporting period as previously described, and because particular labor market areas might be affected due to the omission of these hospitals. However, we generally describe these wage data as FY 2017 data. We note that, if a hospital had more than one cost reporting period beginning during FY 2017 (for example, a hospital had two short cost reporting periods beginning on or after October 1, 2016, and before October 1, 2017), we include wage data from only one of the cost reporting periods, the longer, in the wage index calculation. If there was more than one cost reporting period and the periods were equal in length, we included the wage data from the later period in the wage index calculation.

Step 2.—Salaries.—The method used to compute a hospital's average hourly wage excludes certain costs that are not paid under the IPPS. (We note that, beginning with FY 2008 (72 FR 47315), we included what were then Lines 22.01, 26.01, and 27.01 of Worksheet S-3, Part II of CMS Form 2552-96 for overhead services in the wage index. Currently, these lines are lines 28, 33, and 35 on CMS Form 2552-10. However, we note that the wages and hours on these lines are not incorporated into Line 101, Column 1 of Worksheet A, which, through the electronic cost reporting software, flows directly to Line 1 of Worksheet S-3, Part II. Therefore, the first step in the wage index calculation is to compute a “revised” Line 1, by adding to the Line 1 on Worksheet S-3, Part II (for wages and hours respectively) the amounts on Lines 28, 33, and 35.) In calculating a hospital's Net Salaries (we note that we previously used the term “average” salaries in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51592), but we now use the term “net” salaries) plus wage-related costs, we first compute the following: Subtract from Line 1 (total salaries) the GME and CRNA costs reported on CMS Form 2552-10, Lines 2, 4.01, 7, and 7.01, the Part B salaries reported on Lines 3, 5 and 6, home office salaries reported on Line 8, and exclude salaries reported on Lines 9 and 10 (that is, direct salaries attributable to SNF services, home health services, and other subprovider components not subject to the IPPS). We also subtract from Line 1 the salaries for which no hours were reported. Therefore, the formula for Net Salaries (from Worksheet S-3, Part II) is the following:

((Line 1 + Line 28 + Line 33 + Line 35)−(Line 2 + Line 3 + Line 4.01 + Line 5 + Line 6 + Line 7 + Line 7.01 + Line 8 + Line 9 + Line 10)).

To determine Total Salaries plus Wage-Related Costs, we add to the Net Salaries the costs of contract labor for direct patient care, certain top management, pharmacy, laboratory, and nonteaching physician Part A services (Lines 11, 12 and 13), home office salaries and wage-related costs reported by the hospital on Lines 14.01, 14.02, and 15, and nonexcluded area wage-related costs (Lines 17, 22, 25.50, 25.51, and 25.52). We note that contract labor and home office salaries for which no corresponding hours are reported are not included. In addition, wage-related costs for nonteaching physician Part A employees (Line 22) are excluded if no corresponding salaries are reported for those employees on Line 4. The formula for Total Salaries plus Wage-Related Costs (from Worksheet S-3, Part II) is the following: ((Line 1 + Line 28 + Line 33 + Line 35)−(Line 2 + Line 3 + Line 4.01 + Line 5 + Line 6 + Line 7 + Line 7.01 + Line 8 + Line 9 + Line 10)) + (Line 11 + Line 12 + Line 13 + Line 14.01 + 14.02 + Line 15) + (Line 17 + Line 22 + 25.50 + 25.51 + 25.52).

Step 3.—Hours.—With the exception of wage-related costs, for which there are no associated hours, we compute total hours using the same methods as described for salaries in Step 2. The formula for Total Hours (from Worksheet S-3, Part II) is the following:

((Line 1 + Line 28 + Line 33 + Line 35)−(Line 2 + Line 3 + Line 4.01 + Line 5 + Line 6 + Line 7 + Line 7.01 + Line 8 + Line 9 + Line 10)) + (Line 11 + Line 12 + Line 13 + Line 14.01 + 14.02 + Line 15).

Step 4.—For each hospital reporting both total overhead salaries and total overhead hours greater than zero, we then allocate overhead costs to areas of the hospital excluded from the wage index calculation. First, we determine the “excluded rate”, which is the ratio of excluded area hours to Revised Total Hours (from Worksheet S-3, Part II) with the following formula: (Line 9 + Line 10)/(Line 1 + Line 28 + Line 33 + Line 35)−(Lines 2, 3, 4.01, 5, 6, 7, 7.01, and 8 and Lines 26 through 43). We then compute the amounts of overhead salaries and hours to be allocated to excluded areas by multiplying the above ratio by the total overhead salaries and hours reported on Lines 26 through 43 of Worksheet S-3, Part II. Next, we compute the amounts of overhead wage-related costs to be allocated to excluded areas using three steps:

• We determine the “overhead rate” (from Worksheet S-3, Part II), which is the ratio of overhead hours (Lines 26 through 43 minus the sum of Lines 28, 33, and 35) to revised hours excluding the sum of lines 28, 33, and 35 (Line 1 minus the sum of Lines 2, 3, 4.01, 5, 6, 7, 7.01, 8, 9, 10, 28, 33, and 35). We note that, for the FY 2008 and subsequent wage index calculations, we have been excluding the overhead contract labor (Lines 28, 33, and 35) from the determination of the ratio of overhead hours to revised hours because hospitals typically do not provide fringe benefits (wage-related costs) to contract personnel. Therefore, it is not necessary for the wage index calculation to exclude overhead wage-related costs for contract personnel. Further, if a hospital does contribute to wage-related costs for contracted personnel, the instructions for Lines 28, 33, and 35 require that associated wage-related costs be combined with wages on the respective contract labor lines. The formula for the Overhead Rate (from Worksheet S-3, Part II) is the following: (Lines 26 through 43−Lines 28, 33 and 35)/((((Line 1 + Lines 28, 33, 35)−(Lines 2, 3, 4.01, 5, 6, 7, 7.01, 8, and 26 through 43))−(Lines 9 and 10)) + (Lines 26 through 43−Lines 28, 33, and 35)).
• We compute overhead wage-related costs by multiplying the overhead hours ratio by wage-related costs reported on Part II, Lines 17, 22, 25.50, 25.51, and 25.52.
• We multiply the computed overhead wage-related costs by the previously described excluded area hours ratio.

Finally, we subtract the computed overhead salaries, wage-related costs, and hours associated with excluded areas from the total salaries (plus wage-related costs) and hours derived in Steps 2 and 3.

Step 5.—For each hospital, we adjust the total salaries plus wage-related costs to a common period to determine total adjusted salaries plus wage-related costs. To make the wage adjustment, we estimate the percentage change in the employment cost index (ECI) for compensation for each 30-day increment from October 14, 2016 through April 15, 2018, for private industry hospital workers from the BLS' Compensation and Working Conditions. We use the ECI because it reflects the price increase associated with total compensation (salaries plus fringes) rather than just the increase in salaries. In addition, the ECI includes managers as well as other hospital workers. This methodology to compute the monthly update factors uses actual quarterly ECI data and assures that the update factors match the actual quarterly and annual percent changes. We also note that, since April 2006 with the publication of March 2006 data, the BLS' ECI uses a different classification system, the North American Industrial Classification System (NAICS), instead of the Standard Industrial Codes (SICs), which no longer exist. We have consistently used the ECI as the data source for our wages and salaries and other price proxies in the IPPS market basket, and we did not propose to make any changes to the usage of the ECI for FY 2021. The factors used to adjust the hospital's data are based on the midpoint of the cost reporting period, as indicated in this rule.

Step 6.—Each hospital is assigned to its appropriate urban or rural labor market area before any reclassifications under section 1886(d)(8)(B), 1886(d)(8)(E), or 1886(d)(10) of the Act. Within each urban or rural labor market area, we add the total adjusted salaries plus wage-related costs obtained in Step 5 for all hospitals in that area to determine the total adjusted salaries plus wage-related costs for the labor market area.

Step 7.—We divide the total adjusted salaries plus wage-related costs obtained under Step 6 by the sum of the corresponding total hours (from Step 4) for all hospitals in each labor market area to determine an average hourly wage for the area.

Step 8.—We add the total adjusted salaries plus wage-related costs obtained in Step 5 for all hospitals in the Nation and then divide the sum by the national sum of total hours from Step 4 to arrive at a national average hourly wage.

Step 9.—For each urban or rural labor market area, we calculate the hospital wage index value, unadjusted for occupational mix, by dividing the area average hourly wage obtained in Step 7 by the national average hourly wage computed in Step 8.

Step 10.—For each urban labor market area for which we do not have any hospital wage data (either because there are no IPPS hospitals in that labor market area, or there are IPPS hospitals in that area but their data are either too new to be reflected in the current year's wage index calculation, or their data are aberrant and are deleted from the wage index), we finalized in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42305) that, for FY 2020 and subsequent years' wage index calculations, such CBSA's wage index would be equal to total urban salaries plus wage-related costs (from Step 5) in the State, divided by the total urban hours (from Step 4) in the State, divided by the national average hourly wage from Step 8 (see 84 FR 42305 and 42306) August 16, 2019). We stated that we believe that, in the absence of wage data for an urban labor market area, it is reasonable to use a statewide urban average, which is based on actual, acceptable wage data of hospitals in that State, rather than impute some other type of value using a different methodology. For calculation of the FY 2021 wage index, we note there is one urban CBSA for which we do not have IPPS hospital wage data. In Table 3 (which is available via the internet on the CMS website) which contains the area wage indexes, we include a footnote to indicate to which CBSAs this policy applies. These CBSAs' wage indexes would be equal to total urban salaries plus wage-related costs (from Step 5) in the respective State, divided by the total urban hours (from Step 4) in the respective State, divided by the national average hourly wage (from Step 8) (see 84 FR 42305 and 42306) August 16, 2019). Under this step, we also apply our policy with regard to how dollar amounts, hours, and other numerical values in the wage index calculations are rounded, as discussed in this section of this rule.

We refer readers to section II. of the Appendix of the final rule for the policy regarding rural areas that do not have IPPS hospitals.

Step 11.—Section 4410 of Public Law 105-33 provides that, for discharges on or after October 1, 1997, the area wage index applicable to any hospital that is located in an urban area of a State may not be less than the area wage index applicable to hospitals located in rural areas in that State. The areas affected by this provision are identified in Table 2 listed in section VI. of the Addendum to the final rule and available via the internet on the CMS website.

Following is our policy with regard to rounding of the wage data (dollar amounts, hours, and other numerical values) in the calculation of the unadjusted and adjusted wage index, as finalized in the FY 2020 IPPS/LTCH final rule (84 FR 42306; August 16, 2019). For data that we consider to be “raw data,” such as the cost report data on Worksheets S-3, Parts II and III, and the occupational mix survey data, we use such data “as is,” and do not round any of the individual line items or fields. However, for any dollar amounts within the wage index calculations, including any type of summed wage amount, average hourly wages, and the national average hourly wage (both the unadjusted and adjusted for occupational mix), we round the dollar amounts to 2 decimals. For any hour amounts within the wage index calculations, we round such hour amounts to the nearest whole number. For any numbers not expressed as dollars or hours within the wage index calculations, which could include ratios, percentages, or inflation factors, we round such numbers to 5 decimals. However, we continue rounding the actual unadjusted and adjusted wage indexes to 4 decimals, as we have done historically.

As discussed in the FY 2012 IPPS/LTCH PPS final rule, in “Step 5,” for each hospital, we adjust the total salaries plus wage-related costs to a common period to determine total adjusted salaries plus wage-related costs. To make the wage adjustment, we estimate the percentage change in the employment cost index (ECI) for compensation for each 30-day increment from October 14, 2016, through April 15, 2018, for private industry hospital workers from the BLS' Compensation and Working Conditions. We have consistently used the ECI as the data source for our wages and salaries and other price proxies in the IPPS market basket, and we did not propose any changes to the usage of the ECI for FY 2021. The factors used to adjust the hospital's data were based on the midpoint of the cost reporting period, as indicated in the following table.

For example, the midpoint of a cost reporting period beginning January 1, 2017, and ending December 31, 2017, is June 30, 2017. An adjustment factor of 1.01306 was applied to the wages of a hospital with such a cost reporting period.

Previously, we also would provide a Puerto Rico overall average hourly wage. As discussed in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56915), prior to January 1, 2017, Puerto Rico hospitals were paid based on 75 percent of the national standardized amount and 25 percent of the Puerto Rico-specific standardized amount. As a result, we calculated a Puerto Rico specific wage index that was applied to the labor-related share of the Puerto Rico-specific standardized amount. Section 601 of the Consolidated Appropriations Act, 2016 (Pub. L. 114-113) amended section 1886(d)(9)(E) of the Act to specify that the payment calculation with respect to operating costs of inpatient hospital services of a subsection (d) Puerto Rico hospital for inpatient hospital discharges on or after January 1, 2016, shall use 100 percent of the national standardized amount. As we stated in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56915 through 56916), because Puerto Rico hospitals are no longer paid with a Puerto Rico specific standardized amount as of January 1, 2016, under section 1886(d)(9)(E) of the Act, as amended by section 601 of the Consolidated Appropriations Act, 2016, there is no longer a need to calculate a Puerto Rico specific average hourly wage and wage index. Hospitals in Puerto Rico are now paid 100 percent of the national standardized amount and, therefore, are subject to the national average hourly wage (unadjusted for occupational mix) and the national wage index, which is applied to the national labor-related share of the national standardized amount. Therefore, for FY 2021, there is no Puerto Rico-specific overall average hourly wage or wage index.

Based on the previously described methodology, we stated in the proposed rule (85 FR 32712) that the proposed FY 2021 unadjusted national average hourly wage was the following:

We did not receive any comments regarding the discussion of our method for computing the FY 2021 unadjusted wage index. Based on the previously described methodology, the final FY 2021 unadjusted national average hourly wage is the following:

E. Occupational Mix Adjustment to the FY 2021 Wage Index

As stated earlier, section 1886(d)(3)(E) of the Act provides for the collection of data every 3 years on the occupational mix of employees for each short-term, acute care hospital participating in the Medicare program, in order to construct an occupational mix adjustment to the wage index, for application beginning October 1, 2004 (the FY 2005 wage index). The purpose of the occupational mix adjustment is to control for the effect of hospitals' employment choices on the wage index. For example, hospitals may choose to employ different combinations of registered nurses, licensed practical nurses, nursing aides, and medical assistants for the purpose of providing nursing care to their patients. The varying labor costs associated with these choices reflect hospital management decisions rather than geographic differences in the costs of labor.

1. Use of 2016 Medicare Wage Index Occupational Mix Survey for the FY 2019, FY 2020, and FY 2021 Wage Indexes

Section 304(c) of the Consolidated Appropriations Act, 2001 (Pub. L. 106- 554) amended section 1886(d)(3)(E) of the Act to require CMS to collect data every 3 years on the occupational mix of employees for each short-term, acute care hospital participating in the Medicare program. As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19903) and final rule (82 FR 38137), we collected data in 2016 to compute the occupational mix adjustment for the FY 2019, FY 2020, and FY 2021 wage indexes.

The FY 2021 occupational mix adjustment is based on the calendar year (CY) 2016 survey. Hospitals were required to submit their completed 2016 surveys (Form CMS-10079, OMB number 0938-0907, expiration date September 31, 2022) to their MACs by July 3, 2017. The preliminary, unaudited CY 2016 survey data were posted on the CMS website on July 12, 2017. As with the Worksheet S-3, Parts II and III cost report wage data, as part of the FY 2021 desk review process, the MACs revised or verified data elements in hospitals' occupational mix surveys that resulted in certain edit failures.

2. Deadline for Submitting the 2019 Medicare Wage Index Occupational Mix Survey for Use Beginning With the FY 2022 Wage Index

A new measurement of occupational mix is required for FY 2022. The FY 2022 occupational mix adjustment will be based on a new calendar year (CY) 2019 survey. The CY 2019 survey (CMS Form CMS-10079, OMB number 0938-0907, expiration date September 31, 2022) received OMB approval on October 18, 2019. The final CY 2019 Occupational Mix Survey Hospital Reporting Form is available on the CMS website at: https://www.cms.gov/medicaremedicare-fee-service-paymentacuteinpatientppswage-index-files/2019-occupational-mix-survey-hospital-reporting-form-cms-10079-wage-index-beginning-fy-2022 . Hospitals were required to submit their completed 2019 surveys to their MACs (not directly to CMS), on the Excel hospital reporting form, by July 1, 2020 via email attachment or overnight delivery. CMS granted an extension until August 3, 2020 for hospitals nationwide that may be unable to meet the July 1, 2020 deadline amidst the Novel Coronavirus Disease (COVID-19) national emergency. Hospitals should please see the CMS website at the previously mentioned link for information on this extension. As with the Worksheet S-3, Parts II and III cost report wage data, as part of the FY 2022 desk review process, the MACs will revise or verify data elements in hospitals' occupational mix surveys that result in certain edit failures.

Comments: We received comments concerning the deadline for submitting the CY 2019 Occupational Mix Survey. Commenters appreciated the extension but requested CMS further extend the deadline for submission of CY 2019 Occupational Mix Surveys to assist hospitals amidst COVID-19. Commenters suggested various deadlines, including September 3rd or after to allow sufficient time for CMS to incorporate the 2019 occupational mix data into the FY 2022 IPPS rates while supporting accurate responses as hospitals dedicate resources to the ongoing public health emergency. Two commenters emphasized that it is vital to ensure accuracy since survey results will be used to adjust the wage index for three years.

One commenter noted that the Occupational Mix Survey has historically been due one month after cost reports are due for hospitals with calendar year (CY) cost reporting year ends, and therefore should be extended consistent with the extension of the cost report due date until August 31 for hospitals with a December 31 Fiscal Year End (FYE). According to this commenter, requiring hospitals to complete the occupational mix survey before their cost reports are due would increase provider burden because hospitals with CY cost reporting periods use the process of completing their Medicare cost reports to complete the occupational mix survey.

Two commenters also asked that if CMS further extends the August 3rd, 2020 deadline, CMS should publicize the extension prior to the publication of the final rule via an update to the Emergency Declaration Blanket Waivers and other vehicles such as list-serve messages or the Tuesday “Office Hours” national teleconference.

Response: We value the commenters' input. Due to continued COVID-19 related concerns from hospitals about meeting the August 3 deadline, CMS is further extending this deadline to September 3, 2020. Hospitals must submit their occupational mix surveys along with complete supporting documentation to their MACs by no later than September 3, 2020. The preliminary CY 2019 unaudited occupational mix survey data will be released on the CMS website by September 8, 2020. Hospitals should review their occupational mix survey data in the Public Use File (PUF) on the CMS website to confirm it is correct and may submit revisions to their occupational mix survey data to their MACs, if needed, by no later than September 10, 2020. These revised deadlines are contained in the updated FY 2022 Hospital Wage Index Development Time Table available at https://www.cms.gov/medicaremedicare-fee-service-paymentacuteinpatientppswage-index-files/fy-2022-wage-index-home-page .

We believe that this deadline, suggested by one commenter, is the most appropriate because it grants one additional month to the current extension, which will allow hospitals more time to accurately complete the survey while still allowing adequate time for CMS to review the data in time for inclusion in the FY 2022 wage index. Any further delay would jeopardize the FY 2022 wage index timeline and threaten timely implementation of the FY 2022 wage index.

CMS publicized this additional extension prior to the display of the final rule by updating the Emergency Declaration Blanket Waivers at https://www.cms.gov/files/document/summary-covid-19-emergency-declaration-waivers.pdf and the Hospitals: CMS Flexibilities to Fight COVID-19 Fact sheet at https://www.cms.gov/files/document/covid-hospitals.pdf , by updating the final CY 2019 Occupational Mix Survey Hospital Reporting Form on the CMS website at https://www.cms.gov/medicaremedicare-fee-service-paymentacuteinpatientvppswage-index-files/2019-occupational-mix-survey-hospital-reporting-form-cms-10079-wage-index-beginning-fy-2022 , by instructing the MACs to contact their hospitals, and by notifying hospitals through a Medicare Learning Network (MLN) Connects list-serve message on July 30, 2020.

In summary, hospitals must submit their occupational mix surveys along with complete supporting documentation to their MACs by no later than September 3, 2020. Hospitals may then submit revisions to their occupational mix survey data as set forth on the CMS website to their MACs, if needed, by no later than September 10, 2020.

3. Calculation of the Occupational Mix Adjustment for FY 2021

For FY 2021, we proposed to calculate the occupational mix adjustment factor using the same methodology that we have used since the FY 2012 wage index (76 FR 51582 through 51586) and to apply the occupational mix adjustment to 100 percent of the FY 2021 wage index. In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42308), we modified our methodology with regard to how dollar amounts, hours, and other numerical values in the unadjusted and adjusted wage index calculation are rounded, in order to ensure consistency in the calculation. According to the policy finalized in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42308 and 42309), for data that we consider to be “raw data,” such as the cost report data on Worksheets S-3, Parts II and III, and the occupational mix survey data, we continue to use these data “as is”, and not round any of the individual line items or fields. However, for any dollar amounts within the wage index calculations, including any type of summed wage amount, average hourly wages, and the national average hourly wage (both the unadjusted and adjusted for occupational mix), we round such dollar amounts to 2 decimals. We round any hour amounts within the wage index calculations to the nearest whole number. We round any numbers not expressed as dollars or hours in the wage index calculations, which could include ratios, percentages, or inflation factors, to 5 decimals. However, we continue rounding the actual unadjusted and adjusted wage indexes to 4 decimals, as we have done historically.

Similar to the method we use for the calculation of the wage index without occupational mix, salaries and hours for a multicampus hospital are allotted among the different labor market areas where its campuses are located. Table 2 associated with this final rule (which is available via the internet on the CMS website), which contains the final FY 2021 occupational mix adjusted wage index, includes separate wage data for the campuses of multicampus hospitals. We refer readers to section III.C. of the preamble of this final rule for a chart listing the multicampus hospitals and the FTE percentages used to allot their occupational mix data.

Because the statute requires that the Secretary measure the earnings and paid hours of employment by occupational category not less than once every 3 years, all hospitals that are subject to payments under the IPPS, or any hospital that would be subject to the IPPS if not granted a waiver, must complete the occupational mix survey, unless the hospital has no associated cost report wage data that are included in the FY 2021 wage index. For the proposed FY 2021 wage index, we used the Worksheet S-3, Parts II and III wage data of 3,196 hospitals, and we used the occupational mix surveys of 3,113 hospitals for which we also had Worksheet S-3 wage data, which represented a “response” rate of 97 percent (3,113/3,196). For the proposed FY 2021 wage index, we applied proxy data for noncompliant hospitals, new hospitals, or hospitals that submitted erroneous or aberrant data in the same manner that we applied proxy data for such hospitals in the FY 2012 wage index occupational mix adjustment (76 FR 51586). As a result of applying this methodology, the proposed FY 2021 occupational mix adjusted national average hourly wage was the following:

We did not receive any comments on our proposed calculation of the occupational mix adjustment to the FY 2021 wage index. Thus, for the reasons discussed in this final rule and in the FY 2021 IPPS/LTCH PPS proposed rule, we are finalizing our proposal, without modification, to calculate the occupational mix adjustment factor using the same methodology that we have used since the FY 2012 wage index and to apply the occupational mix adjustment to 100 percent of the FY 2021 wage index.

For the final FY 2021 wage index, we are using the Worksheet S-3, Parts II and III wage data of 3,223 hospitals, and we are using the occupational mix surveys of 3,140 hospitals for which we also have Worksheet S-3 wage data, which represented a “response” rate of 97 percent (3,140/3,223). For the final FY 2021 wage index, we are applying proxy data for noncompliant hospitals, new hospitals, or hospitals that submitted erroneous or aberrant data in the same manner that we applied proxy data for such hospitals in the FY 2012 wage index occupational mix adjustment (76 FR 51586). As a result of applying this methodology, the final FY 2021 occupational mix adjusted national average hourly wage is the following:

F. Analysis and Implementation of the Occupational Mix Adjustment and the FY 2021 Occupational Mix Adjusted Wage Index

As discussed in section III.E. of the preamble of this final rule, for FY 2021, we are applying the occupational mix adjustment to 100 percent of the FY 2021 wage index. We calculated the occupational mix adjustment using data from the 2016 occupational mix survey data, using the methodology described in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51582 through 51586).

The FY 2021 national average hourly wages for each occupational mix nursing subcategory as calculated in Step 2 of the occupational mix calculation are as follows.

The national average hourly wage for the entire nurse category is computed in Step 5 of the occupational mix calculation. Hospitals with a nurse category average hourly wage (as calculated in Step 4) of greater than the national nurse category average hourly wage receive an occupational mix adjustment factor (as calculated in Step 6) of less than 1.0. Hospitals with a nurse category average hourly wage (as calculated in Step 4) of less than the national nurse category average hourly wage receive an occupational mix adjustment factor (as calculated in Step 6) of greater than 1.0.

Based on the 2016 occupational mix survey data, we determined (in Step 7 of the occupational mix calculation) that the national percentage of hospital employees in the nurse category is 42 percent, and the national percentage of hospital employees in the all other occupations category is 58 percent. At the CBSA level, the percentage of hospital employees in the nurse category ranged from a low of 27 percent in one CBSA to a high of 82 percent in another CBSA.

We compared the FY 2021 occupational mix adjusted wage indexes for each CBSA to the unadjusted wage indexes for each CBSA. Applying the occupational mix adjustment to the wage data resulted in the following:

These results indicate that a larger percentage of urban areas (57.5 percent) would benefit from the occupational mix adjustment than would rural areas (44.7 percent).

G. Application of the Rural Floor, Application of the State Frontier Floor, and Continuation of the Low Wage Index Hospital Policy

1. Rural Floor

Section 4410(a) of Public Law 105-33 provides that, for discharges on or after October 1, 1997, the area wage index applicable to any hospital that is located in an urban area of a State may not be less than the area wage index applicable to hospitals located in rural areas in that State. This provision is referred to as the “rural floor”. Section 3141 of Public Law 111-148 also requires that a national budget neutrality adjustment be applied in implementing the rural floor. Based on the FY 2021 wage index associated with this final rule (which is available via the internet on the CMS website) and based on the calculation of the rural floor without the wage data of hospitals that have reclassified as rural under § 412.103, we estimate that 285 hospitals would receive an increase in their FY 2021 wage index due to the application of the rural floor.

Comments: Some commenters noted that several hospitals redesignated as rural under § 412.103 had a wage index in the proposed rule that was lower than the rural floor for their state. The commenters inquired whether this was the result of a calculation error, as CMS has never allowed a hospital within a State to be paid less than the rural floor. If this calculation was intentional, the commenters opposed this policy because (1) the rural reclassification provisions do not create the authority to create a lesser wage index for rural reclassified hospitals as opposed to physically rural hospitals, and (2) CMS did not subject this policy to notice-and-comment rulemaking as required by Azar v. Allina Health Services, 587 US__, 139 S. Ct. 1804, 1811 (2019).

Response: We thank the commenters for pointing out this inadvertent error and acknowledge that some wage indexes in Table 2 associated with the IPPS/LTCH PPS Proposed Rule were incorrect. We have fixed this error for the final rule so that Table 2 contains the corrected wage index values for FY 2021.

Comment: One commenter recognized the need for a rural floor that is calculated separately from a reclassified rural wage index, but disagreed with the current method of calculating the rural wage index because it could result in a § 412.103 reclassified hospital receiving a rural wage index below that of their original CBSA. To address this issue, the commenter suggested that CMS should calculate each rural reclassified hospital wage index independently by excluding all other reclassified hospitals from the calculation instead of CMS blending the data of all § 412.103 reclassified hospitals with data from geographically rural hospitals.

Response: We agree with the commenter that there is a need for a rural floor that is calculated separately (without the data of hospitals with § 412.103 redesignations) from a reclassified rural wage index, which is calculated including the data of hospitals with § 412.103 redesignations if including that wage data raises the state's rural wage index. In response to the commenter's concern that a hospital may receive a lower wage index as a result of its § 412.103 reclassification if the rural wage index is lower than the wage index of the hospital's geographic CBSA, we note that obtaining a § 412.103 redesignation is a completely voluntary process that hospitals may undertake for a variety of reasons. It behooves a hospital to consider all payment implications, including those on their wage index, prior to reclassifying under § 412.103. We further note that a hospital may mitigate the wage index impact of a § 412.103 rural reclassification by obtaining an MGCRB reclassification, including to its geographic area, which it can decide to keep or withdraw depending on the proposed rule wage indexes for its reclassified or geographic area compared to their state's rural area. Finally, we are aware of many hospitals that obtain § 412.103 redesignations in order to raise their state's rural wage index. In such cases, it is a reasonable assumption that hospitals consider prior to reclassifying under § 412.103 whether potentially lowering their own wage indexes is worthwhile in order to raise the state's rural wage index. For these reasons, we do not believe that it is necessary to change the calculation of the rural reclassified hospital wage index, as the commenter suggests, in an attempt to mitigate possible wage index reductions that hospitals may experience as a result of reclassifying under § 412.103.

2. State Frontier Floor for FY 2021

Section 10324 of Public Law 111-148 requires that hospitals in frontier States cannot be assigned a wage index of less than 1.0000. (We refer readers to the regulations at 42 CFR 412.64(m) and to a discussion of the implementation of this provision in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50160 through 50161).) In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32715), we did not propose any changes to the frontier floor policy for FY 2021. In the proposed rule, we stated that 45 hospitals would receive the frontier floor value of 1.0000 for their FY 2021 wage index. These hospitals are located in Montana, North Dakota, South Dakota, and Wyoming.

We did not receive any public comments on the application of the State frontier floor for FY 2021. In this final rule, 44 hospitals will receive the frontier floor value of 1.0000 for their FY 2021 wage index. These hospitals are located in Montana, North Dakota, South Dakota, and Wyoming. We note that while Nevada meets the criteria of a frontier State, all hospitals within the State currently receive a wage index value greater than 1.0000.

The areas affected by the rural and frontier floor policies for the final FY 2021 wage index are identified in Table 2 associated with this final rule, which is available via the internet on the CMS website.

3. Continuation of the Low Wage Index Hospital Policy

To help mitigate wage index disparities, including those resulting from the inclusion of hospitals with rural reclassifications under 42 CFR 412.103 in the rural floor, in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42325 through 42339), we finalized policies to reduce the disparity between high and low wage index hospitals by increasing the wage index values for certain hospitals with low wage index values and doing so in a budget neutral manner through an adjustment applied to the standardized amounts for all hospitals, as well as by changing the calculation of the rural floor. We also provided for a transition in FY 2020 for hospitals experiencing significant decreases in their wage index values as compared to their final FY 2019 wage index, and made these changes in a budget neutral manner.

We increase the wage index for hospitals with a wage index value below the 25th percentile wage index value for a fiscal year by half the difference between the otherwise applicable final wage index value for a year for that hospital and the 25th percentile wage index value for that year across all hospitals. We stated in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42326 through 42328) that this policy will be effective for at least 4 years, beginning in FY 2020, in order to allow employee compensation increases implemented by these hospitals sufficient time to be reflected in the wage index calculation. Therefore, we stated in the proposed rule that this policy will continue in FY 2021. Based on data for the proposed rule, we stated that, for FY 2021, the 25th percentile wage index value across all hospitals would be 0.8420. In order to offset the estimated increase in IPPS payments to hospitals with wage index values below the 25th percentile wage index value, we proposed to apply the budget neutrality adjustment in the same manner as we applied it in FY 2020, as a uniform budget neutrality factor applied to the standardized amount.

In addition, in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42332 through 42336), we removed urban to rural reclassifications from the calculation of the rural floor to prevent inappropriate payment increases under the rural floor due to rural reclassifications, such that, beginning in FY 2020, the rural floor is calculated without including the wage data of hospitals that have reclassified as rural under section 1886(d)(8)(E) of the Act (as implemented in the regulations at § 412.103). Also, for the purposes of applying the provisions of section 1886(d)(8)(C)(iii) of the Act, effective beginning in FY 2020, we remove the data of hospitals reclassified from urban to rural under section 1886(d)(8)(E) of the Act (as implemented in the regulations at § 412.103) from the calculation of “the wage index for rural areas in the State in which the county is located” as referred to in section 1886(d)(8)(C)(iii) of the Act. As previously mentioned in section III.G.1. of this final rule, the rural floor for this FY 2021 final rule is calculated without the wage data of hospitals that have reclassified as rural under § 412.103.

Lastly, for FY 2020, we placed a 5-percent cap on any decrease in a hospital's wage index from the hospital's final wage index in FY 2019 (84 FR 42336 through 42338). We applied a budget neutrality adjustment to the standardized amount so that this transition policy was implemented in a budget neutral manner. We clarified in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42337 through 42338) that this 5-percent cap on wage index decreases applied to all hospitals that have any decrease in their wage indexes, regardless of the circumstance causing the decline, so that a hospital's final wage index for FY 2020 will not be less than 95 percent of its final wage index for FY 2019. In light of the recent OMB updates described in section III.B.2. of this final rule, for FY 2021 we proposed to again cap any decreases in the wage index at 5 percent so that a hospital's final wage index for FY 2021 will not be less than 95 percent of its final wage index for FY 2020, and to apply a budget neutrality adjustment for this transition policy in the same manner as in FY 2020. As previously mentioned, on September 14, 2018, OMB issued OMB Bulletin No. 18-04 which established revised delineations. Consistent with our past practice of implementing transition policies to help mitigate negative impacts on hospitals of certain wage index proposals, due to the revised OMB delineations, for FY 2021 we proposed to again provide for a transition of a 5-percent cap on any decrease in a hospital's wage index from the hospital's final wage index from the prior fiscal year which would be FY 2020. We refer readers to section III.B.2.c. and d. of the preamble of this final rule for a complete discussion of the wage index transition policy.

Comments: We received comments supporting and opposing the continuation of the low wage index hospital policy. Many commenters thanked CMS for implementing this policy in FY 2020 in response to rural and other health care stakeholders' requests that CMS address “circularity” in the wage index (the cyclical effect of hospitals with relatively high wages receiving higher reimbursement due to relatively high wage indexes, which allows them to afford paying higher wages) and halt the “death spiral” perpetuating wage index disparities where relatively low wage index hospitals are forced to keep wages low due to low Medicare reimbursements that lag behind areas with higher wage indexes.

Other commenters opposed continuing the low wage index hospital policy in FY 2021. The commenters expressed that the policy fails to recognize the legitimate differences in geographic labor markets. Commenters also noted that there is no requirement for hospitals to use the increased reimbursement to boost employee compensation, and suggested CMS begin evaluating the cost report data filed by hospitals in the lowest quartile to ascertain whether the increased funds are being used to raise employee compensation in deciding whether to continue this policy for FY 2022. Some commenters stated that the data lag CMS described in its rationale applies equally to all hospitals, not only those in the lowest quartile. Commenters questioned CMS's statutory authority to promulgate this policy under 42 U.S.C. 1395ww(d)(3)(E), which requires the agency to adjust payments to reflect area difference in wages, because it artificially inflates wage index values and creates a wage index system not based on actual data. These commenters expressed that CMS is using the wage index as a policy vehicle, not as a technical correction, and needs Congressional authority to provide additional funding to low‐wage hospitals.

Response: We appreciate the many comments received in support of our policy to provide an increase in the wage index for hospitals with wage index values below the 25th percentile wage index value for a year (referred to as the low wage index hospital policy). We note that we did not propose any changes to this policy in the FY 2021 IPPS/LTCH PPS proposed rule. As we stated in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42331), the intent of the low wage index hospital policy is to increase the accuracy of the wage index as a technical adjustment and not to use the wage index as a policy vehicle. As we explained in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42327 through 42328), we believe our low wage index hospital policy increases the accuracy of the wage index as a relative measure because it allows low wage index hospitals to increase their employee compensation in ways that we would expect if there were no lag in reflecting compensation adjustments in the wage index.

In response to the commenters opposing our policy because the policy fails to recognize differences in geographic labor markets, we continue to believe, for the reasons stated in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42327-42328), that by preserving the rank order in wage index values, our policy continues to reflect meaningful distinctions between the employee compensation costs faced by hospitals in different geographic areas. Furthermore, as stated in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42327 through 42328), and as noted above, we believe that the low wage index hospital policy increases the accuracy of the wage index as a relative measure of wages across different geographic regions because it allows low wage index hospitals to increase their employee compensation in ways that we would expect if there were no lag in reflecting compensation adjustments in the wage index. Thus, under the low wage index hospital policy, we believe the wage index for low wage index hospitals appropriately reflects the relative hospital wage level in those areas compared to the national average hospital wage level. As explained in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42331), because the low wage index hospital policy is based on the actual wages that we expect low wage hospitals to pay, it falls within the scope of the authority in section 1886(d)(3)(E) of the Act. We appreciate the commenters' suggestions that CMS evaluate whether hospitals in the lowest quartile increased employee compensation as a result of our low wage policy. As we stated in the FY 2020 final rule (84 FR 42327), the future wage data from those hospitals will help us assess our reasonable expectation that low wage hospitals would increase employee compensation as a result of our low wage index hospital policy. We intend to assess whether the low wage index hospital policy has been effective in allowing hospitals to make adjustments in employee compensation, as the commenter suggested, based on wage data collected on hospitals' cost reports for the years during which this policy is in effect. In response to the commenters asserting that the data lag applies equally to all hospitals, we agree that the 4 year data lag does not apply only to hospitals in the lowest quartile; however, we believe that circularity inherent in the data lag poses a particular problem for low wage hospitals. As we explained in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42326 through 42328, 42331), we believe many low wage index hospitals have been prevented from increasing compensation because of the lag under our cost reporting process between the time hospitals increase employee compensation and the time these increases are reflected in the wage index.

We refer readers to our discussion in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42326-42332) for further discussion of the low wage index hospital policy and our responses to similar comments.

Comment: Many commenters supported increasing the wage index values of low-wage hospitals, but urged CMS to do so in a non-budget-neutral manner. Commenters asserted that this redistribution is counterproductive to CMS's larger goals of high quality care and healthcare access because it forces high-wage, mostly urban hospitals to bear the cost of supporting lower-wage hospitals. Some commenters stated that 42 U.S.C. 1395ww(d)(5)(I) does not authorize budget neutrality adjustments to the national standardized amount, except for transfer cases. Commenters stated that the budget neutrality adjustment penalizes many hospitals, including rural hospitals.

Other commenters asked that CMS ensure that the budget neutrality adjustment factor not apply to hospitals falling below the 25th percentile or revert to its FY 2020 proposal to decrease the wage index for hospitals with values above the 75th percentile. One commenter specifically pointed out that hospitals between the 22nd and the 25th percentile are receiving an overall reduction because the amount of benefit received from the wage index boost is less than the reduction to the standardized rate. This commenter suggested CMS explore slightly reducing the labor share of those hospitals who have a wage index greater than 1.0000, or a graduated reduction to the standardized rate based on wage index percentile.

Response: We disagree with the commenters that the low wage index hospital policy should be implemented in a non-budget neutral manner. As we stated in response to similar comments in the FY 2020 IPPS/LTCH PPS final rule, (84 FR 42331 and 42332), under section 1886(d)(3)(E) of the Act, the wage index adjustment is required to be implemented in a budget neutral manner. However, even if the wage index were not required to be budget neutral under section 1886(d)(3)(E) of the Act, we would consider it inappropriate to use the wage index to increase or decrease overall IPPS spending. As we stated in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42331), the wage index is not a policy tool but rather a technical adjustment designed to be a relative measure of the wages and wage-related costs of subsection (d) hospitals. As a result, as we explained in the FY 2020 IPPS/LTCH PPS final rule, if it were determined that section 1886(d)(3)(E) of the Act does not require the wage index to be budget neutral, we invoke our authority at section 1886(d)(5)(I) of the Act in support of such a budget neutrality adjustment. We have considered the commenters' suggestion that we do not have authority under section 1886(d)(5)(I) of the Act to implement a budget neutrality adjustment to the national standardized amount, including the argument that such authority exists only with respect to transfer cases. Contrary to the commenters' suggestion, and consistent with our response to a similar comment in the FY 2020 IPPS/LTCH PPS final rule, we believe that we have broad authority under section 1886(d)(5)(I) of the Act to promulgate a budget neutrality adjustment to the national standardized amount and that this authority is not limited to transfer cases. We refer readers to the full discussion of budget neutrality for the low wage index hospital policy in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42328-42332). Regarding the commenters' suggested alternatives, as we explained in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42331), stakeholders raised reasonable policy arguments that we think we should consider further regarding the relationship between a budget neutrality adjustment targeting high wage index hospitals and the design of the wage index to be a relative measure of the wages and wage-related costs of subsection (d) hospitals in the United States. For similar reasons, we believe the effects of other suggestions made by commenters, including suggestions to apply budget neutrality or to revise the labor related share or standardized amount in a way that targets certain subsets of hospitals, would need to be assessed further. With regard to the commenter's assertion about a possible reduction to overall payment if the amount of benefit received from the wage index boost is less than the reduction to the standardized rate, we believe we have applied both the quartile policy and the budget neutrality policy appropriately. The quartile adjustment is applied to the wage index, which resulted in an increase to the wage index for hospitals below the 25th percentile. The budget neutrality adjustment is applied to the standardized amount in order to ensure that the low wage index hospital policy is implemented in a budget neutral manner. Thus, consistent with our current methodology for implementing wage index budget neutrality under section 1886(d)(3)(E) of the Act and with how we implemented budget neutrality for the low wage index hospital policy in FY 2020, we think it is appropriate to continue to apply a budget neutrality adjustment to the national standardized amount for all hospitals so that the low wage index hospital policy is implemented in a budget neutral manner for FY 2021.

Comment: Many commenters urged CMS to develop a comprehensive, long-term approach to wage index reform in place of the policy finalized in the FY 2020 rule. Several commenters suggested alternative solutions to address wage index disparities, including: Solutions to help hospitals with wages that are not rising at the pace of the national average; a national wage index floor for all hospitals; an urban wage index floor of 1.0000 for CBSAs located in a metropolitan area with a population of at least 5 million (funded by an adjustment to wage indexes of other similar metropolitan areas with substantially higher wage indexes); wage data audits to verify local labor prices; and limiting “reclassification stacking” so that hospitals cannot reclassify as rural and then use the more relaxed requirements afforded to rural hospitals to reclassify to a higher wage index. Other commenters recommended that CMS proactively address the effects of COVID-19, which the commenters believed would exacerbate wage index disparities, by excluding wage data collected during the public health emergency from future wage index calculations. Another commenter asked that an imputed rural floor be included in any effort to address disparities in the wage index, and that CMS reinstate the imputed floor immediately to more equitably reimburse hospitals in all-urban states considering the extensive time and effort involved in broader wage index reform.

Response: We appreciate the commenters' suggested alternatives. Because we consider these comments to be outside the scope of the FY 2021 IPPS/LTCH PPS proposed rule, we are not addressing them in this final rule but may consider them in future rulemaking.

Comment: Several commenters specifically supported CMS's continuation of the policy from FY 2020 to exclude the wage data of urban hospitals that reclassify to rural when calculating each state's rural floor. Commenters expressed that the change to the calculation of the rural floor limits the ability of hospitals to game the system and supports the overall goal of making the wage index reflective of variances in labor markets. One commenter stated that excluding hospitals reclassified under § 412.103 from the rural floor calculation narrows a loophole used by hospitals in some states to artificially increase the rural floor, which is paid for by hospitals in all states, and urged CMS to find more ways to use regulations to curtail the adverse effects of section 3141 of the Affordable Care Act. This commenter also requested that CMS publish an assessment of the state-specific effects of the rural floor on the IPPS wage index and on all prospective payment systems that are affected by the rural floor.

Response: We appreciate the commenters' support of our policy to exclude the wage data of hospitals reclassified under § 412.103 from the rural floor calculation. As stated in the FY 2020 IPPS/LTCH PPS final rule, we believe this policy is necessary and appropriate to address the unanticipated effects of rural reclassifications on the rural floor and the resulting wage index disparities, including the effects of the manipulation of the rural floor by certain hospitals (84 FR 42333 through 42334). Regarding the commenter's suggestion that CMS find ways to use regulations to curtail the adverse effects of nationwide budget neutrality, we believe this would be difficult to achieve without legislative action, as section 3141 of Public Law 111-148 requires a national budget neutrality adjustment in implementing the rural floor. Finally, in response to the commenter's request that CMS publish an assessment of the state-specific effects of the rural floor on the IPPS wage index and on all prospective payment systems that are affected by the rural floor, we refer the commenter to the impact analysis in Appendix A to this FY 2021 IPPS/LTCH PPS final rule. CMS specifically provides the impacts of the rural floor in section I.G.2 of Appendix A of this final rule, in Table 1 “Impact Analysis of Final Changes to the IPPS for Operating Costs for FY 2021” in Column (5) “Rural Floor with Application of National Rural Floor Budget Neutrality”, including the impact by geographic region separately for rural and urban hospitals. In addition, CMS provides the rural floor wage index value for each state in Table 3 of the proposed and final rules, as well as the national rural floor budget neutrality factor so that hospitals and public are aware of the impact of the rural floor on individual hospitals. CMS also provides public use data files in conjunction with the proposed and final rules that allow for additional analyses by different hospital characteristics, including at the state level. Analysis of the effects of the rural floor for all other payment systems besides IPPS and LTCH that are affected by the rural floor is outside the scope of the IPPS/LTCH PPS final rule. After consideration of the public comments received, for the reasons discussed in this final rule and in the FY 2021 IPPS/LTCH PPS proposed rule, we are finalizing our proposal, without modification, to apply a budget neutrality adjustment for our low wage index hospital policy in the same manner as we applied it in FY 2020, as a uniform budget neutrality factor applied to the standardized amount.

As we stated in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32715), we will continue to apply the policies we finalized in the FY 2020 IPPS/LTCH PPS final rule (84 FR 32715) to address wage index disparities—that is, the low wage index hospital policy, and the exclusion of the wage data of hospitals reclassified under section 1886(d)(8)(E) of the Act (as implemented in § 412.103) from the rural floor and from the calculation of “the wage index for rural areas in the State in which the county is located” as referred to in section 1886(d)(8)(C)(iii) of the Act. For purposes of the low wage index hospital policy, based on the data for this final rule, for FY 2021, the 25th percentile wage index value across all hospitals is 0.8465.

H. FY 2021 Wage Index Tables

In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49498 and 49807 through 49808), we finalized a proposal to streamline and consolidate the wage index tables associated with the IPPS proposed and final rules for FY 2016 and subsequent fiscal years. Prior to FY 2016, the wage index tables had consisted of 12 tables (Tables 2, 3A, 3B, 4A, 4B, 4C, 4D, 4E, 4F, 4J, 9A, and 9C) that were made available via the internet on the CMS website. Effective beginning FY 2016, with the exception of Table 4E, we streamlined and consolidated 11 tables (Tables 2, 3A, 3B, 4A, 4B, 4C, 4D, 4F, 4J, 9A, and 9C) into 2 tables (Tables 2 and 3). As discussed in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41380), beginning with FY 2019, we added Table 4 which was titled and included a “List of Counties Eligible for the Out-Migration Adjustment under Section 1886(d)(13) of the Act” for the relevant fiscal year. In this FY 2021 IPPS/LTCH PPS final rule, we have included Table 4A which is titled “List of Counties Eligible for the Out-Migration Adjustment under Section 1886(d)(13) of the Act” and Table 4B titled “Counties redesignated under section 1886(d)(8)(B) of the Act (Lugar Counties).” We refer readers to section VI. of the Addendum to this final rule for a discussion of the wage index tables for FY 2021.

I. Revisions to the Wage Index Based on Hospital Redesignations and Reclassifications

1. General Policies and Effects of Reclassification and Redesignation

Under section 1886(d)(10) of the Act, the Medicare Geographic Classification Review Board (MGCRB) considers applications by hospitals for geographic reclassification for purposes of payment under the IPPS. Hospitals must apply to the MGCRB to reclassify not later than 13 months prior to the start of the fiscal year for which reclassification is sought (usually by September 1). However, we note that this deadline has been extended for applications for FY 2022 reclassifications to 15 days after the public display date of the FY 2021 IPPS/LTCH final rule at the Office of the Federal Register, using our authority under Section 1135(b)(5) the Act due to the COVID-19 Public Health Emergency. Generally, hospitals must be proximate to the labor market area to which they are seeking reclassification and must demonstrate characteristics similar to hospitals located in that area. The MGCRB issues its decisions by the end of February for reclassifications that become effective for the following fiscal year (beginning October 1). The regulations applicable to reclassifications by the MGCRB are located in 42 CFR 412.230 through 412.280. (We refer readers to a discussion in the FY 2002 IPPS final rule (66 FR 39874 and 39875) regarding how the MGCRB defines mileage for purposes of the proximity requirements.) The general policies for reclassifications and redesignations and the policies for the effects of hospitals' reclassifications and redesignations on the wage index are discussed in the FY 2012 IPPS/LTCH PPS final rule for the FY 2012 final wage index (76 FR 51595 and 51596). We note that rural hospitals reclassifying under the MGCRB to another state's rural area are not eligible for the rural floor, because the rural floor may apply to urban, not rural, hospitals.

In addition, in the FY 2012 IPPS/LTCH PPS final rule, we discussed the effects on the wage index of urban hospitals reclassifying to rural areas under 42 CFR 412.103. In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42332 through 42336), we finalized a policy to exclude the wage data of urban hospitals reclassifying to rural areas under 42 CFR 412.103 from the calculation of the rural floor. Hospitals that are geographically located in States without any rural areas are ineligible to apply for rural reclassification in accordance with the provisions of 42 CFR 412.103.

On April 21, 2016, we published an interim final rule with comment period (IFC) in the Federal Register (81 FR 23428 through 23438) that included provisions amending our regulations to allow hospitals nationwide to have simultaneous § 412.103 and MGCRB reclassifications. For reclassifications effective beginning FY 2018, a hospital may acquire rural status under § 412.103 and subsequently apply for a reclassification under the MGCRB using distance and average hourly wage criteria designated for rural hospitals. In addition, we provided that a hospital that has an active MGCRB reclassification and is then approved for redesignation under § 412.103 will not lose its MGCRB reclassification; such a hospital receives a reclassified urban wage index during the years of its active MGCRB reclassification and is still considered rural under section 1886(d) of the Act and for other purposes.

We discussed that when there is both a § 412.103 redesignation and an MGCRB reclassification, the MGCRB reclassification controls for wage index calculation and payment purposes. We exclude hospitals with § 412.103 redesignations from the calculation of the reclassified rural wage index if they also have an active MGCRB reclassification to another area. That is, if an application for urban reclassification through the MGCRB is approved, and is not withdrawn or terminated by the hospital within the established timelines, we consider the hospital's geographic CBSA and the urban CBSA to which the hospital is reclassified under the MGCRB for the wage index calculation. We refer readers to the April 21, 2016 IFC (81 FR 23428 through 23438) and the FY 2017 IPPS/LTCH PPS final rule (81 FR 56922 through 56930) for a full discussion of the effect of simultaneous reclassifications under both the § 412.103 and the MGCRB processes on wage index calculations. For a discussion on the effects of reclassifications under § 412.103 on the rural area wage index and the calculation of the rural floor, we refer readers to the FY 2020 IPPS/LTCH PPS final rule (84 FR 42332 through 42336).

2. MGCRB Reclassification and Redesignation Issues for FY 2021

a. FY 2021 Reclassification Application Requirements and Approvals

As previously stated, under section 1886(d)(10) of the Act, the MGCRB considers applications by hospitals for geographic reclassification for purposes of payment under the IPPS. The specific procedures and rules that apply to the geographic reclassification process are outlined in regulations under 42 CFR 412.230 through 412.280. At the time this final rule was constructed, the MGCRB had completed its review of FY 2021 reclassification requests. Based on such reviews, there are 392 hospitals approved for wage index reclassifications by the MGCRB starting in FY 2021. Because MGCRB wage index reclassifications are effective for 3 years, for FY 2021, hospitals reclassified beginning in FY 2019 or FY 2020 are eligible to continue to be reclassified to a particular labor market area based on such prior reclassifications for the remainder of their 3-year period. There were 245 hospitals approved for wage index reclassifications in FY 2019 that will continue for FY 2021, and 269 hospitals approved for wage index reclassifications in FY 2020 that will continue for FY 2021. Of all the hospitals approved for reclassification for FY 2019, FY 2020, and FY 2021, based upon the review at the time of this final rule, 895 hospitals are in a MGCRB reclassification status for FY 2021 (with 90 of these hospitals reclassified back to their geographic location).

Under the regulations at 42 CFR 412.273, hospitals that have been reclassified by the MGCRB are permitted to withdraw their applications if the request for withdrawal is received by the MGCRB any time before the MGCRB issues a decision on the application, or after the MGCRB issues a decision, provided the request for withdrawal is received by the MGCRB within 45 days of the date that CMS' annual notice of rulemaking is issued in the Federal Register concerning changes to the inpatient hospital prospective payment system and payment rates for the fiscal year for which the application has been filed. For information about withdrawing, terminating, or canceling a previous withdrawal or termination of a 3-year reclassification for wage index purposes, we refer readers to § 412.273, as well as the FY 2002 IPPS final rule (66 FR 39887 through 39888) and the FY 2003 IPPS final rule (67 FR 50065 through 50066). Additional discussion on withdrawals and terminations, and clarifications regarding reinstating reclassifications and “fallback” reclassifications were included in the FY 2008 IPPS final rule (72 FR 47333) and the FY 2018 IPPS/LTCH PPS final rule (82 FR 38148 through 38150).

Comment: Several commenters requested additional time or an additional opportunity for hospitals to revise decisions to withdraw an approved MGCRB reclassification. The commenters explained that if the proposed labor market changes are not finalized, the provider may have inadvertently reduced the wage index that they would receive for FY 2021. One commenter acknowledged that this is a challenge every year as providers may or may not know the actions of other providers, however, the commenter asked for more time for hospitals to make MGCRB elections after the final rule given the challenges that many providers are currently facing financially and the potential for CMS to not finalize the revised labor markets.

Response: We maintain that information provided in the proposed rule constitutes the best available data to assist hospitals in making reclassification decisions. In addition, section 1886(d)(8)(D) of the Act requires the Secretary to adjust the standardized amounts to ensure that aggregate payments under the IPPS after implementation of the provisions of certain sections of the Act, including section 1886(d)(10) of the Act for geographic reclassifications by the MGCRB, are equal to the aggregate prospective payments that would have been made absent these provisions. If hospitals were to withdraw or terminate reclassification statuses after the publication of the final rule, as the commenter suggested CMS permit, any resulting changes in the wage index would not have been taken into account when calculating the IPPS standardized amounts in the final rule in accordance with the statutory budget neutrality requirement. Therefore, it is necessary that the values published in the final rule represent the final wage index values reflective of reclassification decisions.

Comment: Commenters pointed out that if CMS does not publish the IPPS final rule until September 1, 2020, the 3-year average hourly wage information that hospitals will need to submit an FY 2022 MGCRB application will be unavailable by the statutory deadline of September 1, 2020 for applications to be submitted for FY 2022 to the MGCRB. The commenters urged CMS to make the final rule data available by August 1 or provide guidance by that date, use its authority under section 1135 of the Act to extend the deadline for hospitals to submit geographic reclassification applications, or allow hospitals to submit incomplete applications to the MGCRB by September 1 that could be supplemented later when the final 3-year average hourly wage data is available.

Response: The commenters are correct that under section 1886(d)(10)(C)(ii) of the Act, geographic reclassification applications for FY 2022 are due to the Medicare Geographic Classification Review Board (MGCRB) by September 1, 2020. Under 42 CFR 412.230(d)(2), the 3-year average hourly wage provided in the FY 2021 IPPS final rule is used for FY 2022 geographic reclassification applications. We understand that hospitals need the 3-year average hourly wage data to complete their MGCRB reclassification applications. Therefore, we made the 3-year average hourly wage file available on August 5, 2020, in advance of the final rule at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files and notified hospitals that this file is available via a Medicare Learning Network (MLN) Connects list-serve message on August 13, 2020 as well as by contacting national hospital associations.

Additionally, we used our authority under section 1135 of the Act to extend the deadline for hospitals to submit geographic reclassification applications for reclassifications beginning in FY 2022, as the commenters suggested. Due to the COVID-19 Public Health Emergency (PHE), under the authority of section 1135(b)(5) the Act, CMS modified the September 1 deadline to be 15 days after the public display date of the FY 2021 IPPS/LTCH final rule at the Office of the Federal Register. We notified hospitals about this extension via the CMS MGCRB Application website, https://www.cms.gov/Regulations-and-Guidance/Review-Boards/MGCRB , and by updating the Emergency Declaration Blanket Waivers at https://www.cms.gov/files/document/summary-covid-19-emergency-declaration-waivers.pdf .

Comment: We received a comment requesting CMS to revise its interpretation of section 1886(d)(8)(C)(ii) of the Act. Section 1886(d)(8)(C)(ii) of the Act requires CMS to evaluate the effects of wage index reclassification on a State's rural wage index, and to not exclude the data of hospitals reclassified under section 1886(d)(8)(B) or (d)(10) of the Act from the calculation of the rural wage index if excluding such data would reduce the rural wage index. The commenter pointed to the FY 2010 IPPS/LTCH PPS final rule (74 FR 43838) in which CMS states that its longstanding policy is to consider reclassified hospitals as a group in deciding whether to include or exclude their data from the rural wage index calculation pursuant to section 1886(d)(8)(C)(ii) of the Act. The commenter claimed that CMS's interpretation of section 1886(d)(8)(C)(ii) of the Act is inconsistent with the plain reading of the statute, and results in the reduction of wage index values for rural hospitals in the State of New Hampshire. The commenter contended that the statute's use of “or” in listing the types of reclassification considered under the statute requires CMS to evaluate the effects of MGCRB reclassifications under section 1886(d)(10) of the Act separately and independently from the effects of reclassifications under section 1886(d)(8)(B) of the Act before determining whether any hospital's data should or should not be excluded from the rural wage index. The commenter stated that excluding rural hospitals with MGCRB reclassifications and not excluding “Lugar” hospitals (including hospitals deemed urban under section 601(g) of Pub. L. 98-21) from the rural wage index would result in a greater wage index value than would be calculated by excluding all reclassified rural hospitals. Therefore, the commenter contended that the rural wage index should be based on average hourly wage data for three hospitals (two rural hospitals with no form of reclassification, and one deemed urban hospital) while excluding the data for a fourth geographically rural hospital with an active MGCRB reclassification. The commenter also questioned CMS' wage index calculation methodologies in response to an email exchange with CMS earlier in the year.

Response: We do not agree that our interpretation of section 1886(d)(8)(C)(ii) of the Act is inconsistent with the plain reading of the statute. As we stated in the FY 2010 IPPS/LTCH PPS final rule (74 FR 43838), given the statutory language referring to “hospitals” in the plural under section 1886(d)(8)(C)(i) and 1886(d)(8)(C)(ii) of the Act, our longstanding policy is to consider reclassified hospitals as a group in deciding whether to include or exclude their data from both the urban and rural wage index calculations. For the FY 2021 New Hampshire rural wage index calculation, we excluded the wage index for the two reclassified hospitals located in rural counties, since doing so would not reduce the rural wage index. We believe that CMS's longstanding policy in applying this statute is both a permissible and reasonable interpretation of the statute. Both reclassification under sections 1886(d)(10) and 1886(d)(8)(B) of the Act serve the same essential wage index functions, that is, assigning a hospital a wage index value for a nearby labor market area, and thus we think our current application of section 1886(d)(8)(C)(ii) of the Act is reasonable. We do not believe section 1886(d)(8)(C)(ii) of the Act requires that such reclassifications be considered separately and independently for purposes of applying the rural wage index “hold harmless” policy in that section. Therefore, we are not altering our current application of that statute. Finally, in regards to the commenter's questions in response to an email exchange with CMS earlier in the year, CMS previously clarified an error included in that initial email exchange, which we believe resolved the commenter's question regarding the rural wage index calculation methodology.

b. Hospitals With One or Two Years of Wage Data Seeking MGCRB Reclassification

We proposed to modify the regulation at § 412.230(d)(2)(ii)(A) to clarify that a hospital may qualify for an individual wage index reclassification by the MGCRB under § 412.230 to another labor market area if the hospital only has 1 or 2 years of wage data. Section 412.230(d)(2)(ii)(A) provides that, for hospital-specific wage data, a hospital must provide a weighted 3-year average of its average hourly wages using data from the CMS hospital wage survey used to construct the wage index. In the proposed rule (85 FR 32717), we noted that in certain circumstances, such as that of a new hospital, a hospital may not have 3 years of published wage data within the applicable 3-year average hourly wage period used by the MGCRB. In such cases, it has been CMS's longstanding policy that a hospital must accumulate at least 1 year of wage data within the applicable 3-year average hourly wage period used by the MGCRB, in order to apply for individual reclassification. In the proposed rule, we stated that we were concerned that this policy may not be clear in the current regulation text at § 412.230(d)(2)(ii)(A), and we proposed to revise § 412.230(d)(2)(ii)(A) to clarify this. For hospitals that have accumulated fewer than 3 years of wage data within the applicable 3-year average hourly wage period used by the MGCRB, the appropriate hospital-specific wage data to be used by an applicant under § 412.230(d) is either the single year of published wage data (if the hospital has accumulated just 1 year of wage data), or, if applicable, the weighted average of its 2 years of wage data within the 3-year period reviewed by the MGCRB. Although § 412.230(d)(2)(iv) reflects this longstanding policy as it pertains to new providers, we noted that this policy has not been limited to new providers. Section 412.230(d)(2)(iv) specifies that if a new owner does not accept assignment of the hospital's provider agreement, the hospital is considered a new provider with a new provider number, and the wage data associated with the previous hospital's provider number cannot be used to calculate the new hospital's 3-year average hourly wage. Section 412.230(d)(2)(iv) further states that, in this case, the new hospital would be eligible to apply for an individual MGCRB reclassification after accumulating at least 1 year of wage data (we refer readers to the FY 2003 IPPS/LTCH final rule (67 FR 50066) for further discussion of this policy). As previously noted, however, we have not limited this wage data policy to new providers, and thus we proposed to revise § 412.230(d)(2)(ii)(A) to clarify this. Specifically, we proposed to reformat § 412.230(d)(2)(ii)(A) so that it consists of two paragraphs (paragraphs (d)(2)(ii)(A)(1) and (2)), and to include new language in new § 412.230(d)(2)(ii)(A)(2) stating that once a hospital has accumulated at least 1 year of wage data in the applicable 3-year average hourly wage period used by the MGCRB, the hospital is eligible to apply for reclassification based on those data. We further stated in the proposed rule that, consistent with our current policy, hospitals without wage data or that have accumulated less than 1 year of wage data would not be eligible for individual wage index reclassification.

Comment: We received multiple comments in support of this proposal.

Response: We appreciate commenters' support of our proposed revisions to § 412.230(d)(2)(ii)(A).

After consideration of comments received, for the reasons discussed in this final rule and in the FY 2021 IPPS/LTCH PPS proposed rule, we are finalizing our proposed revisions to § 412.230(d)(2)(ii)(A) without modification. Specifically, we are reformatting § 412.230(d)(2)(ii)(A) so that it consists of two paragraphs (paragraphs (d)(2)(ii)(A)(1) and (2)), and including new language in new § 412.230(d)(2)(ii)(A)(2) stating that once a hospital has accumulated at least 1 year of wage data in the applicable 3-year average hourly wage period used by the MGCRB, the hospital is eligible to apply for reclassification based on those data.

c. Effects of Implementation of Revised OMB Labor Market Area Delineations on Reclassified Hospitals

(1) Assignment Policy for Hospitals Reclassified to CBSAs Where One or More Counties Move to a New or Different Urban CBSA

We stated in the proposed rule (85 FR 32717) that because hospitals that have been reclassified beginning in FY 2019, 2020, or 2021 were reclassified based on the current labor market delineations, if we adopt the revised OMB delineations based on the OMB Bulletin No. 18-04 beginning in FY 2021, the areas to which they have been reclassified, or the areas where they are located, may change. We stated that under the revised OMB delineations, some existing CBSAs would be reconfigured. Hospitals with current reclassifications were encouraged to verify area wage indexes on Table 2 in the appendix of proposed rule, and confirm that the areas to which they have been reclassified for FY 2021 would continue to provide a higher wage index than their geographic area wage index. We stated that hospitals could withdraw or terminate their FY 2021 reclassifications by contacting the MGCRB within 45 days from the date the proposed rule was issued in the Federal Register (§ 412.273(c)).

As we stated in the proposed rule, in some cases, adopting the revised OMB delineations would result in counties splitting apart from CBSAs to form new CBSAs, or counties shifting from one CBSA designation to another CBSA. We noted that reclassifications granted under section 1886(d)(10) of the Act are effective for 3 fiscal years so that a hospital or county group of hospitals would be assigned a wage index based upon the wage data of hospitals in a nearby labor market area for a 3-year period. We explained that if CBSAs are split apart, or if counties shift from one CBSA to another under the revised OMB delineations, we must determine which reclassified area to assign to the hospital for the remainder of a hospital's 3-year reclassification period if the area to which the hospital reclassified split or had counties shift to another new or modified urban CBSA.

Consistent with the policy CMS implemented in the FY 2005 IPPS final rule (69 FR 49054 through 49056) and in the FY 2015 IPPS final rule (79 FR 49973 through 49977), for FY 2021, we stated in the proposed rule (85 FR 32717) that if a CBSA would be reconfigured due to adoption of the revised OMB delineations and it would not be possible for the reclassification to continue seamlessly to the reconfigured CBSA, we believe it would be appropriate for us to determine the best alternative location to reassign current reclassifications for the remaining 3 years. Therefore, to maintain the integrity of a hospital's 3-year reclassification period, we proposed that current geographic reclassifications (applications approved effective for FY 2019, FY 2020, or FY 2021) that would be affected by CBSAs that are split apart or counties that shift to another CBSA under the revised OMB delineations, would ultimately be assigned to a CBSA under the revised OMB delineations that contains at least one county from the reclassified CBSA under the current FY 2020 definitions, and would be generally consistent with rules that govern geographic reclassification. That is, consistent with the policy finalized in FY 2015 (79 FR 49973), we proposed a policy that affected reclassified hospitals be assigned to a CBSA that would contain the most proximate county that—(1) is located outside of the hospital's FY 2021 geographic labor market area, and (2) is part of the original CBSA (as of FY 2020) to which the hospital is reclassified. (We also noted that we made a minor modification to this proposed assignment policy for certain hospitals currently reclassified to their current geographic CBSA (that is, we stated that we would not require these reclassifications to be assigned to a CBSA outside the hospital's FY 2021 geographic labor market area)). As we explained in the proposed rule, we believe that assigning reclassifications to the CBSA that contains the nearest county that meets the aforementioned criteria satisfies the statutory requirement at section 1886(d)(10)(v) of the Act by maintaining reclassification status for a period of 3 fiscal years, while generally respecting the longstanding principle of geographic proximity in the labor market reclassification process. For county group reclassifications, we stated that we would follow our proposed policy, as previously discussed, except that, for county group reclassifications, we proposed to reassign hospitals in a county group reclassification to the CBSA under the revised OMB delineations that contains the county to which the majority of hospitals in the group reclassification are geographically closest. We also proposed to allow such hospitals, or county groups of hospitals, to submit a request to the wageindex@cms.hhs.gov mailbox for reassignment to another CBSA that would contain a county that is part of the current FY 2020 CBSA to which it is reclassified if the hospital or county group of hospitals can demonstrate compliance with applicable reclassification proximity rules, as described later in this section.

In the proposed rule (85 FR 32718), we recognized that the proposed reclassification reassignment policy, as previously described, for hospitals that are reclassified to CBSAs that would split apart or to counties that would shift to another CBSA under the revised OMB delineations may result in the reassignment of the hospital for the remainder of its 3-year reclassification period to a CBSA having a lower wage index than the wage index that would have been assigned for the reclassified hospital in the absence of the adoption of the revised OMB delineations. Therefore, as discussed in section III.B.2.e. of the preamble of the proposed rule, as a transition, we proposed to continue to apply for FY 2021 a 5-percent cap on any decrease in a hospital's wage index from the hospital's final wage index for the prior fiscal year. In other words, we stated we would apply a 5 percent cap in FY 2021 on any decrease in a hospital's wage index compared to its final wage index for FY 2020. We explained that we believe that this transitional wage index would mitigate significant negative payment impacts for FY 2021, and would afford hospitals adequate time to fully assess any additional reclassification options available to them.

We noted that if the CBSA to which a hospital is reclassified experiences only a change in name and/or number, (in other words, a county (or county equivalent) did not move to a new or different CBSA), we considered the CBSA, and associated reclassifications, to remain unchanged. For example, we noted that any hospital reclassified to current CBSA 19380 (Dayton, OH), 39140 (Prescott, AZ) or 43524 (Silver Spring-Frederick-Rockville, MD) would have its reclassification transferred to the equivalent CBSA 19430 (Dayton-Kettering, OH), 39150 (Prescott Valley-Prescott, AZ), and 23224 (Frederick-Gaithersburg-Rockville, MD), respectively.

In the proposed rule (85 FR 32718), we provided the following Table 1 which sets forth a list of current FY 2020 CBSAs (column 1) where one or more counties would be relocated to a new or different urban CBSA. We stated that hospitals with MGCRB reclassifications into the CBSAs in column 1 would be subject to the proposed reclassification assignment policy. The third column of “eligible” CBSAs lists all revised CBSAs that contain at least one county that is part of the current FY 2020 CBSA (in column 1).

In the proposed rule, we provided the following Table 2 which lists all hospitals subject to our proposed reclassification assignment policy and where their reclassifications would be assigned for FY 2021 under this policy. We stated in the proposed rule that the table lists reclassifications that would be in effect for FY 2021 under our proposed policy, and included in Table 2 in the addendum of the proposed rule. We stated that the table also includes reclassifications (noted by an asterisk on the “MGCRB Case Number”) that were approved in FY 2019 or FY 2020 and are superseded by a new FY 2021 reclassification. We explained that these prior year reclassifications, frequently referred to as “fallback” reclassifications, may become active if the subsequent FY 2021 reclassification is withdrawn. (We noted that the table did not include hospitals currently reclassified to their “home” geographic area, which were discussed in a separate section of the proposed rule).

We stated in the proposed rule (85 FR 32720) that if a hospital that is subject to the proposed reclassification assignment policy discussed earlier in this section wished to be reassigned to another eligible CBSA (that is, to a CBSA other than the CBSA to which their reclassification would be assigned under the proposed reclassification assignment policy and that contains at least one county from the CBSA to which they are reclassified for FY 2020) for which they meet the applicable proximity criteria, they could request reassignment within 45 days from the date the proposed rule is placed on display at the Federal Register. We stated that hospitals must send a request to WageIndex@cms.hhs.gov and provide documentation establishing that they meet the requisite proximity criteria for reassignment to an another eligible CBSA that contains one or more counties from the CBSA to which they are currently reclassified for FY 2020. For purposes of clarification, we note that the phrase “CBSA to which they are currently reclassified for FY 2020” refers to the CBSA to which the hospital currently has an approved reclassification as that CBSA was configured in FY 2020. We explained that we believe this option of allowing these hospitals to submit a request to CMS would provide hospitals with greater flexibility with respect to their reclassification reassignment, while ensuring that the proximity requirements are met. We further explained that we believe that where the proximity requirements are met, the reclassified wage index would be consistent with the labor market area to which the hospitals were originally approved for reclassification. Thus, we stated that a hospital that is subject to our proposed reclassification assignment policy may request to reassign an individual reclassification to any CBSA that contains a county from the CBSA to which it is currently reclassified. However, we noted that to be reassigned to an area that is not the most proximate to the hospital, we believe it is necessary that the hospital demonstrates that it complies with the applicable proximity criteria. We stated that if a hospital cannot demonstrate proximity to a different eligible CBSA, the hospital would not be considered for reclassification to that labor market area, and the reclassification would remain with the CBSA assigned under the proposed reclassification assignment policy described earlier in this section. We stated that in the case of a county group reclassification, all requests for reassignment must include all active hospitals (that is, excluding any hospital that has since closed or converted to a different provider type) included on the original MGCRB reclassification application. We further explained that county groups must also demonstrate that they meet the appropriate proximity requirements, including, for rural county groups, being adjacent to the MSA to which they seek redesignation (§ 412.232(a)(1)(ii)), and for urban county groups, being in the same Combined Statistical Area or Core-Based Statistical Area as the urban area to which they seek redesignation (§ 412.234(a)(3)(iv)).

We stated that all hospital requests for reassignment should contain the hospital's name, address, CCN, and point of contact information, and all requests must be sent to WageIndex@cms.hhs.gov. We stated that changes to a hospital's CBSA assignment on the basis of a hospital's disagreement with our determination of closest county, or on the basis of being granted a reassignment due to meeting applicable proximity criteria to an alternate eligible CBSA would be announced in the FY 2021 IPPS/LTCH PPS final rule.

We received three timely requests for reassignment to the WageIndex@cms.hhs.gov mailbox. CCN 310051 requested reassignment of MGCRB case 19C0135 from CBSA 35154 to 35614. CCN 390162 requested reassignment of MGCRB case 21C0350 from CBSA 35084 to 35154. Both these requests included adequate documentation to determine that the hospitals met the applicable proximity requirements for reassignment to an eligible CBSA. These requests are approved, and are listed in final Table 2 provided later in this section and reflected in Table 2 of the addendum to the this final rule. We note these reassignments will be in effect for FY 2021 and any remaining years the reclassification. A third request was received from CCN 390027 (MGCRB case number 21C0393) to be reassigned to either CBSA 35614 or to CBSA 12100. The request did not provide adequate documentation to determine that the hospital met applicable proximity requirements to CBSA 35614, and as described in final Table 1 provided later in this section, CBSA 12100 is not an eligible CBSA for a reclassification approved to CBSA 35614. Therefore, this request is denied.

Comment: Multiple commenters noted that hospitals that were approved for reclassification to the current CBSA 35614 (New York City-Jersey City-White Plains, NY-NJ) were assigned to a different CBSA under CMS's proposed reclassification assignment policy. These commenters contended that if the revised delineations are finalized, the approved reclassifications to CBSA 35614 would be inappropriately modified by CMS. The commenters further contended that hospitals that have been approved for reclassification to that CBSA must be reclassified to that specific CBSA. The commenters stated that section 1886(d)(10)(D)(v) of the Act, requires that a reclassification “shall be effective for a period of 3 fiscal years.” A commenter stated that through this provision, Congress specifically removed CMS' discretion to terminate or modify the approved reclassification. Another commenter stated that by assigning an approved reclassification from CBSA 35614 to the CBSA 35154 (New Brunswick-Lakewood, NJ), CMS is violating its own regulations since § 412.230(a)(5)(i) prohibits hospitals from reclassifying to a CBSA with a lower 3-year hourly wage. Citing the severe financial implications for these hospitals, commenters requested CMS to reinstate the reclassifications to CBSA 35614 or provide hospitals with the opportunity to reapply to a different CBSA, effective for FY 2021.

Response: As we discussed in the proposed rule, under the revised OMB delineations, some existing CBSAs would be reconfigured by counties splitting apart from CBSAs to form new CBSAs, or counties shifting from one CBSA designation to another CBSA. As we further explained in the proposed rule, if a hospital is reclassified to a CBSA that would be reconfigured in this manner under the revised delineations, such that the CBSA, as configured in FY 2020, no longer exists, we must determine which reclassified area to assign to the hospital for the remainder of the hospital's 3 year reclassification period. We believe that our proposal to assign affected reclassified hospitals to the CBSA that would contain the most proximate county that (1) is located outside the hospital's proposed FY 2021 geographic labor market area, and (2) is part of the CBSA to which the hospital currently has an approved reclassification (as configured in FY 2020) satisfies the requirement of section 1886(d)(10)(D)(v) of the Act by allowing the hospital to retain reclassification status for a period of three fiscal years, while generally respecting the longstanding principle of geographic proximity in the geographic reclassification process. The New York-Jersey City-White Plains, NY-NJ metropolitan division of the New York-Newark-Jersey City, NY-NJ MSA is listed as CBSA 35614 in both the current and the revised labor market delineations. However, CMS has determined that the configuration of the CBSA would be fundamentally altered between FY 2020 and FY 2021 under the revised OMB delineations. As discussed in section III.A.2.b of this final rule, under the revised OMB delineations, three counties in New Jersey (Ocean, Monmouth, and Middlesex Counties) and one county in NY (Orange County, NY) were split off from CBSA 35614 into a different urban CBSA. While the modifications to CBSA 35614 did not result in a name or number change, as discussed previously in this section, CBSA names and identification numbers are not the basis for determining whether the proposed reclassification assignment policy applies. Because the configuration of CBSA 35614 would be altered under the revised OMB delineations, we believe current reclassifications to this CBSA are appropriately subject to our proposed reclassification assignment policy as discussed above. We agree with commenters that CMS is obligated by the statute to maintain reclassification status for a period of 3 years after approval. However, since the CBSA to which the hospitals were approved has been reconfigured, we believe the FY 2020 CBSA 35614 is not the same entity as the revised FY 2021 CBSA. Consistent with the policy CMS implemented in the FY 2005 IPPS final rule (69 FR 49054 through 49056) and in the FY 2015 IPPS final rule (79 FR 49973 through 49977), for FY 2021, we believe our proposed reclassification assignment policy appropriately satisfies the requirement of section 1886(d)(10)(D)(v) of the Act by allowing the hospital to retain reclassification status for a period of three fiscal years, while generally respecting the longstanding principle of geographic proximity in the geographic reclassification process. This proposed reclassification assignment policy allows the hospital to continue its three year reclassification where, under the revised OMB delineations, the reclassified CBSA originally approved by the MGCRB no longer exists. Of the hospitals with a current approved reclassification to CBSA 35614 that were assigned to a CBSA other than CBSA 35614 (excluding CCN 310051 that was reassigned to CBSA 35614, as discussed previously), none meet the applicable proximity criteria under the revised OMB delineations to be approved to CBSA 35614. For example, one hospital that was originally approved for reclassification to CBSA 35614 by being located 14.8 miles from the border of CBSA 35614, is now located over 80 miles from the revised CBSA. If such a reclassification was assigned to CBSA 35614, we believe this outcome would be inconsistent with the proximity rules that govern reclassifications.

Regarding the comment that our policy violates the regulations at § 412.230(a)(5)(i) that prohibit hospitals from reclassifying to a CBSA with a lower pre-reclassified average hourly wage, we do not agree that this regulation would be violated through application of our proposed reclassification assignment policy. The regulations at § 412.230 apply at the time individual hospitals initially seek reclassification to another area via application to the MGCRB. The reclassification assignment policy, as described in this section, is not an initial reclassification based on an application. Rather, we are assigning already existing approved reclassifications to other appropriate areas in a consistent manner in response to adopting revised OMB delineations. We acknowledge that the new OMB delineations may, in some cases, result in a hospital being assigned a wage index in its reclassified CBSA that is lower than its geographic area wage index. However, this result (a hospital receiving a wage index in its reclassified area that is lower than the wage index in its home area) is not a unique situation and often occurs due to the effects of hold harmless policies at section 1886(d)(8)(C) of the Act. We believe that the most appropriate remedy in these situations would be for hospitals to evaluate their reclassification wage index and, if necessary, withdraw or terminate their reclassifications per regulations at § 412.273. In fact, in the proposed rule, we encouraged hospitals with current reclassifications to verify area wage indexes as set forth in Table 2 of the proposed rule and confirm that the areas to which they have been reclassified for FY 2021 would continue to provide a higher wage index than their geographic area wage index. We stated that hospitals could withdraw or terminate their FY 2021 reclassifications, if necessary, in accordance with § 412.273(c). We note, one commenter did withdraw their reclassification to CBSA 35614.

Finally, in response to comments requesting CMS allow affected hospitals to submit expedited applications effective for FY 2021 to obtain a different wage index reclassification, we believe this action is unnecessary and would not be permitted under the statute. Under section 1886(d)(10)(C)(ii) of the Act, a hospital must submit a reclassification application to the MGCRB not later than 13 months before the fiscal year in which the reclassification is to take effect. Thus, applications for reclassifications effective in FY 2021 were due to the MGCRB on September 1, 2019. We note that in the proposed rule, hospitals were offered an opportunity to request assignment to an another eligible CBSA (other than the one to which they were assigned under our proposed reassignment policy) for which they met the applicable proximity criteria within 45 days from the date the proposed rule was placed on display at the Federal Register. In addition, as stated in section III.A.2.c of this final rule, we have finalized a transition policy that will help mitigate significant negative payment impacts for FY 2021 and provide hospitals additional time to evaluate other potential reclassification options.

After consideration of the public comments received, for the reasons set forth in this final rule and in the FY 2021 IPPS/LTCH PPS proposed rule, we are finalizing the reclassification assignment policy as proposed, without modification.

The following final Table 1 sets forth a list of current FY 2020 CBSAs (column 1) where one or more counties will be relocated to a new or different urban CBSA beginning in FY 2021. Hospitals that are currently approved for MGCRB reclassification into the CBSAs in column 1 are subject to our final reclassification assignment policy. The third column of “eligible” CBSAs lists all revised CBSAs that contain at least one county that is part of the current FY 2020 CBSA (in column 1). Reclassifications to one of the seven CBSAs identified in Table 1 will be assigned, effective October 1, 2020, to the revised CBSA listed in Table 2. We note that these assignments will remain in effect for the remaining years of the reclassification.

The following Table 2 lists all hospitals subject to our final reclassification assignment policy and where their reclassifications will be assigned beginning FY 2021 under this policy. This table lists reclassifications that will be in effect beginning FY 2021 under our final policy, and are included in Table 2 in the addendum of this final rule. This table also lists reclassifications (marked with an asterisk), that have been withdrawn or terminated for FY 2021, but could be reinstated for future years. Reclassifications in the proposed Table 2 set forth earlier that were withdrawn or terminated effective for FY 2021 and cannot be reinstated in FY 2022 have been removed from this final table. We note that two hospitals (marked with **) were approved for reassignment to a different eligible CBSA than the CBSA they would be assigned to under our reclassification assignment policy, as discussed earlier in this section.

(2) Treatment for Hospitals Reclassified to Their Geographic CBSA

Under the previous assignment policy implemented in FY 2015 IPPS/LTCH PPS final rule, a hospital reclassified to a CBSA that had one or more counties moved to a new of different urban CBSA was required to be assigned a new or revised CBSA that is different than its geographic CBSA (79 FR 49974 and 49975). We adopted the policy that the assigned CBSA must be different than the hospital's geographic area to ensure that a hospital that qualified for reclassification to a different area continued to be eligible to receive a different wage index than its home area. We stated in the proposed rule (85 FR 32720) that we continue to believe this is the appropriate policy for hospitals that originally reclassified to a different area. However, as noted in the prior section, for hospitals currently reclassified to their current geographic CBSA, we proposed to implement a reclassification assignment policy consistent with the policy implemented in FY 2015, with a minor modification in that we would not require these reclassifications to be assigned to a CBSA outside the hospital's FY 2021 geographic labor market area. In the proposed rule (85 FR 32721), we explained that since the FY 2015 IPPS/LTCH final rule was issued, CMS has allowed, under certain circumstances, a hospital to seek an MGCRB wage index reclassification to its own geographic CBSA. We referred readers to a comment response in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56925) discussing such a scenario. We further explained that in these cases, the hospitals are assigned the same wage index value as other hospitals located in its geographic labor market area, not the wage index assigned to hospitals reclassified to that area. We proposed to assign “home area” reclassifications to the hospital's proposed geographic CBSA. We noted that the assigned “home area” reclassification CBSA may be different from previous years if the hospital is located in a county that was relocated to a new or different urban CBSA. In the proposed rule, we provided the following table listing hospitals with current “home area” reclassifications to one of the seven CBSAs (identified in Table 1 of the proposed rule) where one or more counties would move to a new or different urban CBSA, and each hospital's assigned CBSA (column 4).

We also noted that in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49977), CMS terminated reclassifications when, as a result of adopting the revised OMB delineations, a hospital's geographic county was reassigned to the CBSA for which it was approved for MGCRB reclassification. At that time, “home area” reclassifications were not possible. However, we stated in the proposed rule that since CMS now allows “home area” reclassifications, as discussed previously, we would consider this scenario to be a “home area” reclassification and we do not believe it is necessary to terminate these reclassifications as we did in FY 2015. We noted that hospitals with a “home area” reclassification (or any other form of reclassification) are not eligible to receive an outmigration adjustment determined under section 1886(d)(13) of the Act. We stated in the proposed rule that if such an adjustment is available, a hospital could consider withdrawing or terminating its reclassification by contacting the MGCRB within 45 days of the date the proposed rule was issued in the Federal Register (§ 412.273(c)).

We did not receive any comment specific to these proposals. Therefore, for the reasons set forth in this final rule and in the FY 2021 IPPS/LTCH PPS proposed rule, we are finalizing these policies as proposed, without modification. The “home area” reclassifications listed in Table 3 of this section will be assigned to the revised CBSA listed in column 4 of that table for the remainder of the three year reclassification period.

3. Redesignations Under Section 1886(d)(8)(B) of the Act

a. Lugar Status Determinations

In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51599 through 51600), we adopted the policy that, beginning with FY 2012, an eligible hospital that waives its Lugar status in order to receive the out-migration adjustment has effectively waived its deemed urban status and, thus, is rural for all purposes under the IPPS effective for the fiscal year in which the hospital receives the outmigration adjustment. In addition, in that rule, we adopted a minor procedural change that would allow a Lugar hospital that qualifies for and accepts the out-migration adjustment (through written notification to CMS within 45 days from the publication of the proposed rule) to waive its urban status for the full 3-year period for which its out-migration adjustment is effective. By doing so, such a Lugar hospital would no longer be required during the second and third years of eligibility for the out-migration adjustment to advise us annually that it prefers to continue being treated as rural and receive the out-migration adjustment. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56930), we further clarified that if a hospital wishes to reinstate its urban status for any fiscal year within this 3-year period, it must send a request to CMS within 45 days of publication of the proposed rule for that particular fiscal year. We indicated that such reinstatement requests may be sent electronically to wageindex@cms.hhs.gov. In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38147 through 38148), we finalized a policy revision to require a Lugar hospital that qualifies for and accepts the out-migration adjustment, or that no longer wishes to accept the out-migration adjustment and instead elects to return to its deemed urban status, to notify CMS within 45 days from the date of public display of the proposed rule at the Office of the Federal Register. These revised notification timeframes were effective beginning October 1, 2017. In addition, in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38148), we clarified that both requests to waive and to reinstate “Lugar” status may be sent to wageindex@cms.hhs.gov. To ensure proper accounting, we request hospitals to include their CCN, and either “waive Lugar” or “reinstate Lugar”, in the subject line of these requests.

In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42314 and 42315), we clarified that in circumstances where an eligible hospital elects to receive the outmigration adjustment within 45 days of the public display date of the proposed rule at the Office of the Federal Register in lieu of its Lugar wage index reclassification, and the county in which the hospital is located would no longer qualify for an out-migration adjustment when the final rule (or a subsequent correction notice) wage index calculations are completed, the hospital's request to accept the outmigration adjustment would be denied, and the hospital would be automatically assigned to its deemed urban status under section 1886(d)(8)(B) of the Act. We stated that final rule wage index values would be recalculated to reflect this reclassification, and in some instances, after taking into account this reclassification, the out-migration adjustment for the county in question could be restored in the final rule. However, as the hospital is assigned a Lugar reclassification under section 1886(d)(8)(B) of the Act, it would be ineligible to receive the county outmigration adjustment under section 1886(d)(13)(G) of the Act. Because the out-migration adjustment, once finalized, is locked for a 3-year period under section 1886(d)(13)(F) of the Act, the hospital would be eligible to accept its out-migration adjustment in either the second or third year.

b. Effects of Implementation of Revised OMB Labor Market Area Delineations on Redesignations Under Section 1886(d)(8)(B) of the Act

As discussed in section III.A.2. of the preamble of the proposed rule, CMS proposed to update the CBSA labor market delineations to reflect the changes made in the September 14, 2018 OMB Bulletin 18-04. In that section, consistent with the revised OMB delineations, we proposed that 47 currently rural counties be added to new or existing urban CBSAs. We stated in the proposed rule (85 FR 32722) that, of those 47 counties, 23 are currently deemed urban under section 1886(d)(8)(B) of the Act. Hospitals located in such a “Lugar” county, barring another form of wage index reclassification, are assigned the reclassified wage index of a designated urban CBSA. Section 1886(d)(8)(B) of the Act defines a deemed urban county as a “rural county adjacent to one or more urban areas” that meets certain commuting thresholds. We explained in the proposed rule that since we proposed to modify the status of these 23 counties from rural to urban, they would no longer qualify as “Lugar” counties. We further stated that hospitals located within these counties would be considered geographically urban under the revised OMB delineations. In the proposed rule, we provided the following table listing the counties that would no longer be deemed urban under section 1886(d)(8)(B) of the Act if we adopt the revised OMB delineations.

We discuss in section III.A.2.b.ii of this final rule the comments we received related to counties that would no longer be deemed urban under section 1886(d)(8)(B) of the Act. After consideration of the public comments received, for the reasons set forth in this final rule and in the FY 2021 IPPS/LTCH PPS proposed rule, we are finalizing, without modification, the proposed list of counties no longer deemed urban under section 1886(d)(8)(B) of the Act.

We noted that in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49973 through 49977), when we adopted large scale changes to the CBSA labor market delineations based on the new decennial census, we also re-evaluated the commuting data thresholds for all eligible rural counties in accordance with the methodology set forth in section 1886(d)(8)(B) of the Act. In FY 2015, the OMB bulletin we used to update the CBSA delineations was based on the results of the 2010 decennial census, and had broad ranging nationwide impacts. We stated in the proposed rule (85 FR 32724) that with some exceptions, notably the FY 2020 IPPS/LTCH final rule where we modified the CBSA assignment for some “Lugar” counties based on a revised interpretation of the statute (84 FR 42315 through 42318), it has been CMS's long-standing policy to only revise the list of qualifying counties in conjunction with the adoption of the large scale OMB delineation changes following the results of a decennial census. Typically, interim OMB bulletins (those issued between decennial censuses) have only contained minor modifications to labor market delineations. However, as we stated in the proposed rule, the April 10, 2018 OMB Bulletin No. 18-03 and the September 14, 2018 OMB Bulletin No. 18-04 included more modifications to the labor market areas than are typical for OMB bulletins issued between decennial censuses. We stated in the proposed rule that although we believe the transition wage index described in section III.B.2.e. of the preamble of this final rule would mitigate significant negative impacts on affected hospitals, and provide hospitals with adequate time to evaluate alternative wage index reclassification options, we were aware that several hospitals in counties that would be considered rural under the revised OMB delineations would qualify for “Lugar” status, were CMS to reevaluate the commuting data and new labor market delineations. We stated in the proposed rule that we believe providing Lugar status to these hospitals, as appropriate, would further mitigate any significant negative impacts on affected hospitals. We therefore proposed to reevaluate the “Lugar” status for all counties in FY 2021 using the same commuting data table used to evaluate the list of “Lugar” counties when CMS adopted new OMB delineations in FY 2015 rulemaking. The data table is the “2006-2010 5-Year American Community Survey Commuting Flows and Employment” (available on OMB's website: https://www.census.gov/data/tables/2010/demo/metro-micro/commuting-employment-2010.html ). As we explained in the proposed rule, since we are using the same data tables, any difference in the list of qualifying counties would be solely due to the effects of the updated OMB delineations. We stated in the proposed rule that we believe making the revisions to the qualifying counties using the updated OMB delineations but the same 2006-2010 commuting data tables used in the FY 2015 IPPS/LTCH PPS final rule strikes an appropriate balance between reserving comprehensive revisions to the list of qualifying counties to instances where we adopt large scale OMB delineation changes following a decennial census, and the desire to mitigate any significant negative impacts on hospitals of the updated OMB delineations (which do contain a number of material changes). We also proposed to use the same methodology discussed in the FY 2020 IPPS/LTCH final rule (84 FR 42315 through 42318) to assign the appropriate reclassified CBSA for hospitals in “Lugar” counties. That is, when assessing which CBSA to assign, we stated we would sum the total number of workers that commute from the “Lugar” county to both “central” and “outlying” urban counties (rather than just “central” county commuters).

By applying the 2010 ACS commuting data to the updated OMB labor market delineations, we proposed the following changes to the current “Lugar” county list. Most notably, we stated in the proposed rule (85 FR 32724) that, based on this commuting data and the revised OMB delineations, all 34 urban counties that became rural under the revised OMB delineations would qualify as “Lugar” counties and all hospitals located within them would be designated as “Lugar.” We noted that this would affect 10 current hospitals located in those counties. Additionally, due to the change in designation of some urban counties from “outlying” to “central” status by OMB, we proposed to add two current rural counties in NY as “Lugar” counties. Specifically, we stated that hospitals located in Columbia county, NY (FIPSCD 36021) would be deemed “Lugar” hospitals and reclassified to urban CBSA 10580 (Albany-Schenectady-Troy, NY) and hospitals located in Sullivan county, NY (FIPSCD 36105) would be deemed “Lugar” hospitals and reclassified to urban CBSA 39100 (Poughkeepsie-Newburgh-Middletown, NY). However, we noted that all hospitals in these New York counties currently have MGCRB reclassifications in place for FY 2021, which would supersede these “Lugar” reclassifications. Finally, we stated that Calhoun County, TX (FIPSCD 48057) would no longer qualify as a “Lugar” county due to the fact it is no longer adjacent to CBSA 18580 (Corpus Christi, TX). We proposed to remove Calhoun County from the list of “Lugar” counties. We noted that there are no IPPS hospitals located in Calhoun County.

In the proposed rule, we provided a table listing the proposed revised list of rural counties containing hospitals that would be redesignated as urban under section 1886(d)(8)(B) of the Act (based on the revised OMB delineations and 2010 census data) (see 85 FR 32725 through 32728). We note that this table of “Lugar” counties set forth in the proposed rule contained several alignment errors between columns. In some cases, counties were listed as being assigned to an incorrect CBSA number or name. However, the reclassification assignments were correct in the proposed rule wage index tables and those were used for wage index calculations. The final table included in this rule has been corrected.

We did not receive any comments related to the proposed revisions to the list of “Lugar” counties. Therefore, for the reasons set forth in this final rule and in the FY 2021 IPPS/LTCH PPS proposed rule, we are finalizing the proposed list of rural counties containing hospitals redesignated as urban under section 1886(d)(8)(B) of the Act with modifications to correct the errors discussed previously. The final table is set forth below.

J. Out-Migration Adjustment Based on Commuting Patterns of Hospital Employees

In accordance with section 1886(d)(13) of the Act, as added by section 505 of Public Law 108-173, beginning with FY 2005, we established a process to make adjustments to the hospital wage index based on commuting patterns of hospital employees (the “out-migration” adjustment). The process, outlined in the FY 2005 IPPS final rule (69 FR 49061), provides for an increase in the wage index for hospitals located in certain counties that have a relatively high percentage of hospital employees who reside in the county but work in a different county (or counties) with a higher wage index.

Section 1886(d)(13)(B) of the Act requires the Secretary to use data the Secretary determines to be appropriate to establish the qualifying counties. When the provision of section 1886(d)(13) of the Act was implemented for the FY 2005 wage index, we analyzed commuting data compiled by the U.S. Census Bureau that were derived from a special tabulation of the 2000 Census journey-to-work data for all industries (CMS extracted data applicable to hospitals). These data were compiled from responses to the “long-form” survey, which the Census Bureau used at that time and which contained questions on where residents in each county worked (69 FR 49062). However, the 2010 Census was “short form” only; information on where residents in each county worked was not collected as part of the 2010 Census. The Census Bureau worked with CMS to provide an alternative dataset based on the latest available data on where residents in each county worked in 2010, for use in developing a new outmigration adjustment based on new commuting patterns developed from the 2010 Census data beginning with FY 2016.

To determine the out-migration adjustments and applicable counties for FY 2016, we analyzed commuting data compiled by the Census Bureau that were derived from a custom tabulation of the American Community Survey (ACS), an official Census Bureau survey, utilizing 2008 through 2012 (5-year) Microdata. The data were compiled from responses to the ACS questions regarding the county where workers reside and the county to which workers commute. As we discussed in the FYs 2016 through 2020 IPPS/LTCH PPS final rules (80 FR 49501, 81 FR 56930, 82 FR 38150, 83 FR 41384, and 84 FR 42318 respectively), the same policies, procedures, and computation that were used for the FY 2012 out-migration adjustment were applicable for FYs 2016 through 2020, and we proposed to use them again for FY 2021. We have applied the same policies, procedures, and computations since FY 2012, and we believe they continue to be appropriate for FY 2021. We refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 49500 through 49502) for a full explanation of the revised data source.

For FY 2021, the out-migration adjustment will continue to be based on the data derived from the custom tabulation of the ACS utilizing 2008 through 2012 (5-year) Microdata. For future fiscal years, we may consider determining out-migration adjustments based on data from the next Census or other available data, as appropriate. For FY 2021, we did not propose any changes to the methodology or data source that we used for FY 2016 (81 FR 25071). (We refer readers to a full discussion of the out-migration adjustment, including rules on deeming hospitals reclassified under section 1886(d)(8) or section 1886(d)(10) of the Act to have waived the out-migration adjustment, in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51601 through 51602).) We did not receive any public comments on this proposed policy for FY 2021. Therefore, for the reasons set forth in this final rule and in the FY 2021 IPPS/LTCH PPS proposed rule, for FY 2021, we are finalizing our proposal, without modification, to continue using the same policies, procedures, and computations that were used for the FY 2012 outmigration adjustment and that were applicable for FYs 2016 through 2020.

Table 2 associated with this final rule (which is available via the internet on the CMS website) includes the out-migration adjustments for the FY 2021 wage index. In addition, Table 4A associated with this final rule, “List of Counties Eligible for the Out-Migration Adjustment under Section 1886(d)(13) of the Act” (also available via the internet on the CMS website) consists of the following: A list of counties that are eligible for the out-migration adjustment for FY 2021 identified by FIPS county code, the final FY 2021 out-migration adjustment, and the number of years the adjustment will be in effect. We believe this table makes this information more transparent and provides the public with easier access to this information.

K. Reclassification From Urban to Rural Under Section 1886(d)(8)(E) of the Act Implemented at 42 CFR 412.103

1. Application for Rural Status and Lock-in Date

Under section 1886(d)(8)(E) of the Act, a qualifying prospective payment hospital located in an urban area may apply for rural status for payment purposes separate from reclassification through the MGCRB. Specifically, section 1886(d)(8)(E) of the Act provides that, not later than 60 days after the receipt of an application (in a form and manner determined by the Secretary) from a subsection (d) hospital that satisfies certain criteria, the Secretary shall treat the hospital as being located in the rural area (as defined in paragraph (2)(D)) of the State in which the hospital is located. We refer readers to the regulations at 42 CFR 412.103 for the general criteria and application requirements for a subsection (d) hospital to reclassify from urban to rural status in accordance with section 1886(d)(8)(E) of the Act. The FY 2012 IPPS/LTCH PPS final rule (76 FR 51595 through 51596) includes our policies regarding the effect of wage data from reclassified or redesignated hospitals. We refer readers to the FY 2020 IPPS/LTCH PPS final rule (84 FR 42332 through 42336) for a discussion on our current policy to calculate the rural floor without the wage data of urban hospitals reclassifying to rural areas under 42 CFR 412.103.

Because the wage index is part of the methodology for determining the prospective payments to hospitals for each fiscal year, we stated in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56931) that we believed there should be a definitive timeframe within which a hospital should apply for rural status in order for the reclassification to be reflected in the next Federal fiscal year's wage data used for setting payment rates. Therefore, in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56931 through 56932), we revised § 412.103(b) by adding paragraph (6) to add a lock-in date by which a hospital's application for rural status must be filed in order to be treated as rural in the wage index and budget neutrality calculations for payment rates for the next Federal fiscal year. In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41384 through 41386), we changed the lock-in date to provide for additional time in the ratesetting process and to match the lock-in date with another existing deadline, the usual public comment deadline for the IPPS proposed rule. We revised § 412.103(b)(6) to specify that, in order for a hospital to be treated as rural in the wage index and budget neutrality calculations under § 412.64(e)(1)(ii), (e)(2) and (4), and (h) for payment rates for the next Federal fiscal year, the hospital's application must be approved by the CMS Regional Office in accordance with the requirements of § 412.103 no later than 60 days after the public display date at the Office of the Federal Register of the IPPS proposed rule for the next Federal fiscal year.

The lock-in date does not affect the timing of payment changes occurring at the hospital-specific level as a result of reclassification from urban to rural under § 412.103. As we discussed in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56931) and the FY 2019 IPPS/LTCH PPS final rule (83 FR 41385 through 41386), this lock-in date also does not change the current regulation that allows hospitals that qualify under § 412.103(a) to request, at any time during a cost reporting period, to reclassify from urban to rural. A hospital's rural status and claims payment reflecting its rural status continue to be effective on the filing date of its reclassification application, which is the date the CMS Regional Office receives the application, in accordance with § 412.103(d). The hospital's IPPS claims will be paid reflecting its rural status beginning on the filing date (the effective date) of the reclassification, regardless of when the hospital applies.

In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42322), we noted that if an application is approved by the CMS Regional Office after our ratesetting “lock-in date”, the final rule rural wage index value would most likely not include the data for this hospital in the ratesetting calculation. Therefore, we noted that this may incentivize relatively low wage index hospitals to time their applications to avoid reducing the State's rural wage index. These hospitals could then conceivably cancel their rural reclassifications (effective for next FY), and then reapply again after the “lock date.” We stated in the FY 2020 IPPS/LTCH PPS final rule that we plan to monitor this situation over the course of FY 2020, and determine if it is necessary to take action to prevent this type of gaming in future rulemaking.

It has come to our attention that hospitals in certain states are indeed timing their rural reclassifications and applications to exploit the rural reclassification process in order to obtain higher wage index values. For example, at least twenty-one hospitals in one state obtained § 412.103 rural reclassifications after the FY 2020 lock-in date, effectively receiving their state's rural wage index without having their wage data included, which would have lowered their State's rural wage index. These hospitals then requested to cancel their § 412.103 rural reclassifications for FY 2021, in accordance with § 412.103(g)(3). Similarly, five hospitals in another state, hospitals with wage data that would have lowered their state's FY 2021 rural wage index, requested to cancel their § 412.103 rural reclassifications for FY 2021, so that the rural wage index would be set using the data of one geographically rural hospital and two hospitals reclassified under § 412.103 that withdrew their MGCRB reclassifications for FY 2021. We will continue to monitor this situation over the course of FY 2021 and may consider proposing in future rulemaking a policy similar to the minimum waiting period at § 412.103(g)(2)(ii) or other necessary actions to prevent this type of gaming.

2. Change to the Regulations To Allow Electronic Submission of Appeals to the Administrator and Copy to CMS

The regulation at § 412.278(b)(1) addresses a hospital's request for the Administrator's review of an MGCRB decision. This regulation currently states that a request for Administrator review filed by facsimile (FAX) or other electronic means will not be accepted. In addition, § 412.278(b)(1) requires a hospital to mail a copy of its request for review to CMS's Hospital and Ambulatory Policy Group.

In the proposed rule (85 FR 32730), we stated that we believe these policies of prohibiting electronic submission of requests for Administrator review and requiring paper copies to be mailed to CMS are outdated and overly restrictive. In the interest of burden reduction and to promote ease of requests, we proposed to eliminate the prohibition on submitting a request by facsimile or other electronic means so that hospitals may also submit requests for Administrator review of MGCRB decisions electronically. In addition, we proposed to require the hospital to submit an electronic copy of its request for review to CMS's Hospital and Ambulatory Policy Group. We specified that copies to CMS' Hospital and Ambulatory Policy Group should be submitted via email to wageindex@cms.hhs.gov.

Accordingly, we proposed to revise the regulation at § 412.278(b)(1) to read: The hospital's request for review must be in writing and sent to the Administrator, in care of the Office of the Attorney Advisor. The request must be received by the Administrator within 15 days after the date the MGCRB issues its decision. The hospital must also submit an electronic copy of its request for review to CMS's Hospital and Ambulatory Policy Group.

Comment: Several commenters supported our proposed revisions to the regulation at § 412.278(b)(1).

Response: We appreciate commenters' support of our proposed revisions to § 412.278(b)(1).

After consideration of the public comments received, for the reasons discussed in this final rule and in the FY 2021 IPPS/LTCH PPS proposed rule, we are finalizing, without modification, our proposed revisions to the regulation at § 412.278(b)(1) so that hospitals may also submit requests for Administrator review of MGCRB decisions electronically, and must send an electronic copy of the request to CMS's Hospital and Ambulatory Policy Group.

3. Clarification of Applicable Rural Referral Center (RRC) Criteria for Purposes of Meeting Urban to Rural Reclassification at § 412.103(a)(3)

As discussed in section IV.D. of the preamble of this final rule, for purposes of qualifying for RRC classification, a rural hospital that does not meet the bed size requirement at § 412.96(b)(1)(ii) can qualify as an RRC if the hospital meets two mandatory prerequisites (a minimum case-mix index (CMI) and a minimum number of discharges), and at least one of three optional criteria (relating to specialty composition of medical staff, source of inpatients, or referral volume). Specifically, a hospital may demonstrate that its case-mix index is at least equal to the national case-mix index value as established by CMS or the median case-mix index value for urban hospitals located in each region, in accordance with § 412.96(c)(1), and that it has a number of discharges at least equal to 5,000 discharges or, if less, the median number of discharges for urban hospitals located in each region, in accordance with § 412.96(c)(2). CMS publishes the national and regional case-mix index values and the national and regional number of discharges for the purpose of these criteria in the annual notice of prospective payment rates published in the Federal Register.

For purposes of qualifying for urban to rural reclassification under § 412.103, a hospital can demonstrate that it would qualify as a rural referral center as set forth in § 412.96, if the hospital were located in a rural area. This condition is set forth at § 412.103(a)(3).

It has come to our attention that there is some confusion regarding which fiscal year's published case mix index (CMI) or numbers of discharges criteria would be used in the situation where a hospital is seeking to meet the urban to rural reclassification criterion at § 412.103(a)(3) by meeting the alternative criteria at § 412.96(c): (1) The criteria published in the final rule in effect on the filing date of the hospital's § 412.103 application, or (2) the criteria that would be in effect during the fiscal year that any RRC classification would become effective (that is, the beginning of the hospital's cost reporting period).

Therefore, we are clarifying that for purposes of meeting the urban to rural reclassification criterion at § 412.103(a)(3), the appropriate CMI values and numbers of discharges to demonstrate RRC eligibility are those published in the IPPS/LTCH PPS final rule in effect as of the filing date (that is, the effective date) of the hospital's application for reclassification under § 412.103. For purposes of RRC classification under § 412.96(c), the appropriate CMI values and numbers of discharges are those published in the IPPS/LTCH PPS final rule in effect when the RRC classification will be effective at the start of the hospital's next cost reporting period, consistent with § 412.96(h)(3) and (i)(3).

For example, Hospital A has a cost reporting period beginning October 1. It applies on September 1, 2020 for urban to rural reclassification under § 412.103(a)(3) and for RRC status, by meeting the alternative criteria at § 412.96(c). For Hospital A's urban to rural reclassification request, the appropriate national or regional CMI value and number of discharges that the hospital must meet or exceed are the values published in the FY 2020 IPPS/LTCH PPS Final Rule since that is the rule in effect as of the filing date (that is, effective date) of Hospital A's urban to rural reclassification application. For the RRC classification request, the appropriate national or regional CMI value and number of discharges that the hospital must meet or exceed are the values published in the FY 2021 IPPS/LTCH PPS final rule since that is the rule that will be in effect when the RRC classification will become effective at the start of the hospital's next cost reporting period. We note that this policy applies regardless of whether a hospital seeks only § 412.103 rural reclassification, or § 412.103 rural reclassification along with RRC classification.

We believe our policy is appropriate considering that a hospital may apply for rural reclassification under § 412.103 at any time, as previously discussed in section III.K.1. of the preamble of this final rule. We clarified in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38151) that while applications for RRC status must be submitted during the last quarter of a hospital's cost reporting period in accordance with section 1886(d)(5)(C)(i) of the Act, applications for rural reclassification may be submitted at any time, including applications of hospitals seeking rural reclassification under § 412.103(a)(3). A hospital is permitted at any time to submit an urban to rural reclassification request on the basis of qualifying for RRC status under § 412.103(a)(3), even before the publication of the CMI and discharge criteria in the IPPS/LTCH PPS final rule for the period in which any RRC classification would be effective (that is, the start of the hospital's next cost reporting period). We did not receive any comments on this clarification.

L. Process for Requests for Wage Index Data Corrections

1. Process for Hospitals To Request Wage Index Data Corrections

The preliminary, unaudited Worksheet S-3 wage data files and the preliminary CY 2016 occupational mix data files for the proposed FY 2021 wage index were made available on May 17, 2019 through the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2021-Wage-Index-Home-Page .

On January 31, 2020, we posted a public use file (PUF) at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2021-Wage-Index-Home-Page containing FY 2021 wage index data available as of January 30, 2020. This PUF contains a tab with the Worksheet S-3 wage data (which includes Worksheet S-3, Parts II and III wage data from cost reporting periods beginning on or after October 1, 2016 through September 30, 2017; that is, FY 2017 wage data), a tab with the occupational mix data (which includes data from the CY 2016 occupational mix survey, Form CMS-10079), a tab containing the Worksheet S-3 wage data of hospitals deleted from the January 31, 2020 wage data PUF, and a tab containing the CY 2016 occupational mix data of the hospitals deleted from the January 31, 2020 occupational mix PUF. In a memorandum dated January 29, 2020, we instructed all MACs to inform the IPPS hospitals that they service of the availability of the January 31, 2020 wage index data PUFs, and the process and timeframe for requesting revisions in accordance with the FY 2021 Wage Index Timetable.

In the interest of meeting the data needs of the public, beginning with the proposed FY 2009 wage index, we post an additional PUF on the CMS website that reflects the actual data that are used in computing the proposed wage index. The release of this file does not alter the current wage index process or schedule. We notify the hospital community of the availability of these data as we do with the current public use wage data files through our Hospital Open Door Forum. We encourage hospitals to sign up for automatic notifications of information about hospital issues and about the dates of the Hospital Open Door Forums at the CMS website at: http://www.cms.gov/Outreach-and-Education/Outreach/OpenDoorForums/index.html .

In a memorandum dated April 29, 2019, we instructed all MACs to inform the IPPS hospitals that they service of the availability of the preliminary wage index data files and the CY 2016 occupational mix survey data files posted on May 17, 2019, and the process and timeframe for requesting revisions.

If a hospital wished to request a change to its data as shown in the May 17, 2019 preliminary wage and occupational mix data files, the hospital had to submit corrections along with complete, detailed supporting documentation to its MAC so that the MAC received them by September 3, 2019. Hospitals were notified of this deadline and of all other deadlines and requirements, including the requirement to review and verify their data as posted in the preliminary wage index data files on the internet, through the letters sent to them by their MACs. November 15, 2019 was the deadline for MACs to complete all desk reviews for hospital wage and occupational mix data and transmit revised Worksheet S-3 wage data and occupational mix data to CMS.

November 5, 2019 was the date by when MACs notified State hospital associations regarding hospitals that failed to respond to issues raised during the desk reviews. Additional revisions made by the MACs were transmitted to CMS throughout January 2020. CMS published the wage index PUFs that included hospitals' revised wage index data on January 31, 2020. Hospitals had until February 14, 2020, to submit requests to the MACs to correct errors in the January 31, 2020 PUF due to CMS or MAC mishandling of the wage index data, or to revise desk review adjustments to their wage index data as included in the January 31, 2020 PUF. Hospitals also were required to submit sufficient documentation to support their requests. Hospitals' requests and supporting documentation must be received by the MAC by the February deadline (that is, by February 14, 2020 for the FY 2021 wage index).

After reviewing requested changes submitted by hospitals, MACs were required to transmit to CMS any additional revisions resulting from the hospitals' reconsideration requests by March 19, 2020. Under our current policy as adopted in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38153), the deadline for a hospital to request CMS intervention in cases where a hospital disagreed with a MAC's handling of wage data on any basis (including a policy, factual, or other dispute) was April 2, 2020. Data that were incorrect in the preliminary or January 31, 2020 wage index data PUFs, but for which no correction request was received by the February 14, 2020 deadline, are not considered for correction at this stage. In addition, April 2, 2020 was the deadline for hospitals to dispute data corrections made by CMS of which the hospital was notified after the January 31, 2020 PUF and at least 14 calendar days prior to April 2, 2020 (that is, March 19, 2020), that do not arise from a hospital's request for revisions. The hospital's request and supporting documentation must be received by CMS (and a copy received by the MAC) by the April deadline (that is, by April 2, 2020 for the FY 2021 wage index). We refer readers to the wage index timeline for complete details.

Hospitals were given the opportunity to examine Table 2 associated with the proposed rule, which was listed in section VI. of the Addendum to the proposed rule and available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2021-IPPS-Proposed-Rule-Home-Page.html . Table 2 associated with the proposed rule contained each hospital's proposed adjusted average hourly wage used to construct the wage index values for the past 3 years, including the FY 2017 data used to construct the proposed FY 2021 wage index. We noted in the proposed rule (85 FR 32731) that the proposed hospital average hourly wages shown in Table 2 only reflected changes made to a hospital's data that were transmitted to CMS by early February 2020.

We posted the final wage index data PUFs on April 30, 2020 via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2021-Wage-Index-Home-Page . The April 2020 PUFs were made available solely for the limited purpose of identifying any potential errors made by CMS or the MAC in the entry of the final wage index data that resulted from the correction process previously described (the process for disputing revisions submitted to CMS by the MACs by March 19, 2020, and the process for disputing data corrections made by CMS that did not arise from a hospital's request for wage data revisions as discussed earlier).

After the release of the April 2020 wage index data PUFs, changes to the wage and occupational mix data could only be made in those very limited situations involving an error by the MAC or CMS that the hospital could not have known about before its review of the final wage index data files. Specifically, neither the MAC nor CMS will approve the following types of requests:

• Requests for wage index data corrections that were submitted too late to be included in the data transmitted to CMS by the MACs on or before March 19, 2020.
• Requests for correction of errors that were not, but could have been, identified during the hospital's review of the January 31, 2020 wage index PUFs.
• Requests to revisit factual determinations or policy interpretations made by the MAC or CMS during the wage index data correction process.

If, after reviewing the April 2020 final wage index data PUFs, a hospital believed that its wage or occupational mix data were incorrect due to a MAC or CMS error in the entry or tabulation of the final data, the hospital was given the opportunity to notify both its MAC and CMS regarding why the hospital believed an error exists and provide all supporting information, including relevant dates (for example, when it first became aware of the error). The hospital was required to send its request to CMS and to the MAC so that it was received no later than May 29, 2020. May 29, 2020 was also the deadline for hospitals to dispute data corrections made by CMS of which the hospital was notified on or after 13 calendar days prior to April 2, 2019 (that is, March 20, 2020), and at least 14 calendar days prior to May 29, 2020 (that is, May 15, 2020), that did not arise from a hospital's request for revisions. (Data corrections made by CMS of which a hospital was notified on or after 13 calendar days prior to May 29, 2020 (that is, May 16, 2020) may be appealed to the Provider Reimbursement Review Board (PRRB)). In accordance with the FY 2021 wage index timeline posted on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Downloads/FY-2021-Hospital-Wage-Index-Development-Time-Table.pdf , the May appeals were required to be sent via mail and email to CMS and the MACs. We refer readers to the wage index timeline for complete details.

Verified corrections to the wage index data received timely (that is, by May 29, 2020) by CMS and the MACs were incorporated into the final FY 2021 wage index, which will be effective October 1, 2020.

We created the processes previously described to resolve all substantive wage index data correction disputes before we finalize the wage and occupational mix data for the FY 2021 payment rates. Accordingly, hospitals that did not meet the procedural deadlines set forth earlier will not be afforded a later opportunity to submit wage index data corrections or to dispute the MAC's decision with respect to requested changes. Specifically, our policy is that hospitals that do not meet the procedural deadlines as previously set forth (requiring requests to MACs by the specified date in February and, where such requests are unsuccessful, requests for intervention by CMS by the specified date in April) will not be permitted to challenge later, before the PRRB, the failure of CMS to make a requested data revision. We refer readers also to the FY 2000 IPPS final rule (64 FR 41513) for a discussion of the parameters for appeals to the PRRB for wage index data corrections. As finalized in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38154 through 38156), this policy also applies to a hospital disputing corrections made by CMS that do not arise from a hospital's request for a wage index data revision. That is, a hospital disputing an adjustment made by CMS that did not arise from a hospital's request for a wage index data revision is required to request a correction by the first applicable deadline. Hospitals that do not meet the procedural deadlines set forth earlier will not be afforded a later opportunity to submit wage index data corrections or to dispute CMS' decision with respect to changes.

Again, we believe the wage index data correction process described earlier provides hospitals with sufficient opportunity to bring errors in their wage and occupational mix data to the MAC's attention. Moreover, because hospitals had access to the final wage index data PUFs by late April 2020, they had the opportunity to detect any data entry or tabulation errors made by the MAC or CMS before the development and publication of the final FY 2021 wage index by September 2020, and the implementation of the FY 2021 wage index on October 1, 2020. Given these processes, the wage index implemented on October 1 should be accurate. Nevertheless, in the event that errors are identified by hospitals and brought to our attention after May 29, 2020, we retain the right to make midyear changes to the wage index under very limited circumstances.

Specifically, in accordance with 42 CFR 412.64(k)(1) of our regulations, we make midyear corrections to the wage index for an area only if a hospital can show that: (1) The MAC or CMS made an error in tabulating its data; and (2) the requesting hospital could not have known about the error or did not have an opportunity to correct the error, before the beginning of the fiscal year. For purposes of this provision, “before the beginning of the fiscal year” means by the May deadline for making corrections to the wage data for the following fiscal year's wage index (for example, May 29, 2020 for the FY 2021 wage index). This provision is not available to a hospital seeking to revise another hospital's data that may be affecting the requesting hospital's wage index for the labor market area. As indicated earlier, because CMS makes the wage index data available to hospitals on the CMS website prior to publishing both the proposed and final IPPS rules, and the MACs notify hospitals directly of any wage index data changes after completing their desk reviews, we do not expect that midyear corrections will be necessary. However, under our current policy, if the correction of a data error changes the wage index value for an area, the revised wage index value will be effective prospectively from the date the correction is made.

In the FY 2006 IPPS final rule (70 FR 47385 through 47387 and 47485), we revised 42 CFR 412.64(k)(2) to specify that, effective on October 1, 2005, that is, beginning with the FY 2006 wage index, a change to the wage index can be made retroactive to the beginning of the Federal fiscal year only when CMS determines all of the following: (1) The MAC or CMS made an error in tabulating data used for the wage index calculation; (2) the hospital knew about the error and requested that the MAC and CMS correct the error using the established process and within the established schedule for requesting corrections to the wage index data, before the beginning of the fiscal year for the applicable IPPS update (that is, by the May 29, 2020 deadline for the FY 2021 wage index); and (3) CMS agreed before October 1 that the MAC or CMS made an error in tabulating the hospital's wage index data and the wage index should be corrected.

In those circumstances where a hospital requested a correction to its wage index data before CMS calculated the final wage index (that is, by the May 29, 2020 deadline for the FY 2021 wage index), and CMS acknowledges that the error in the hospital's wage index data was caused by CMS' or the MAC's mishandling of the data, we believe that the hospital should not be penalized by our delay in publishing or implementing the correction. As with our current policy, we indicated that the provision is not available to a hospital seeking to revise another hospital's data. In addition, the provision cannot be used to correct prior years' wage index data; and it can only be used for the current Federal fiscal year. In situations where our policies would allow midyear corrections other than those specified in 42 CFR 412.64(k)(2)(ii), we continue to believe that it is appropriate to make prospective-only corrections to the wage index.

We note that, as with prospective changes to the wage index, the final retroactive correction will be made irrespective of whether the change increases or decreases a hospital's payment rate. In addition, we note that the policy of retroactive adjustment will still apply in those instances where a final judicial decision reverses a CMS denial of a hospital's wage index data revision request.

2. Process for Data Corrections by CMS After the January 31 Public Use File (PUF)

The process set forth with the wage index timeline discussed in section III.L.1. of the preamble of this final rule allows hospitals to request corrections to their wage index data within prescribed timeframes. In addition to hospitals' opportunity to request corrections of wage index data errors or MACs' mishandling of data, CMS has the authority under section 1886(d)(3)(E) of the Act to make corrections to hospital wage index and occupational mix data in order to ensure the accuracy of the wage index. As we explained in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49490 through 49491) and the FY 2017 IPPS/LTCH PPS final rule (81 FR 56914), section 1886(d)(3)(E) of the Act requires the Secretary to adjust the proportion of hospitals' costs attributable to wages and wage-related costs for area differences reflecting the relative hospital wage level in the geographic areas of the hospital compared to the national average hospital wage level. We believe that, under section 1886(d)(3)(E) of the Act, we have discretion to make corrections to hospitals' data to help ensure that the costs attributable to wages and wage-related costs in fact accurately reflect the relative hospital wage level in the hospitals' geographic areas.

We have an established multistep, 15-month process for the review and correction of the hospital wage data that is used to create the IPPS wage index for the upcoming fiscal year. Since the origin of the IPPS, the wage index has been subject to its own annual review process, first by the MACs, and then by CMS. As a standard practice, after each annual desk review, CMS reviews the results of the MACs' desk reviews and focuses on items flagged during the desk review, requiring that, if necessary, hospitals provide additional documentation, adjustments, or corrections to the data. This ongoing communication with hospitals about their wage data may result in the discovery by CMS of additional items that were reported incorrectly or other data errors, even after the posting of the January 31 PUF, and throughout the remainder of the wage index development process. In addition, the fact that CMS analyzes the data from a regional and even national level, unlike the review performed by the MACs that review a limited subset of hospitals, can facilitate additional editing of the data that may not be readily apparent to the MACs. In these occasional instances, an error may be of sufficient magnitude that the wage index of an entire CBSA is affected. Accordingly, CMS uses its authority to ensure that the wage index accurately reflects the relative hospital wage level in the geographic area of the hospital compared to the national average hospital wage level, by continuing to make corrections to hospital wage data upon discovering incorrect wage data, distinct from instances in which hospitals request data revisions.

We note that CMS corrects errors to hospital wage data as appropriate, regardless of whether that correction will raise or lower a hospital's average hourly wage. For example, as discussed in section III.C. of the preamble of the FY 2019 IPPS/LTCH PPS final rule (83 FR 41364), in situations where a hospital did not have documentable salaries, wages, and hours for housekeeping and dietary services, we imputed estimates, in accordance with policies established in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49965 through 49967). Furthermore, if CMS discovers after conclusion of the desk review, for example, that a MAC inadvertently failed to incorporate positive adjustments resulting from a prior year's wage index appeal of a hospital's wage-related costs such as pension, CMS will correct that data error and the hospital's average hourly wage will likely increase as a result.

While we maintain CMS' authority to conduct additional review and make resulting corrections at any time during the wage index development process, in accordance with the policy finalized in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38154 through 38156) and as first implemented with the FY 2019 wage index (83 FR 41389), hospitals are able to request further review of a correction made by CMS that did not arise from a hospital's request for a wage index data correction. Instances where CMS makes a correction to a hospital's data after the January 31 PUF based on a different understanding than the hospital about certain reported costs, for example, could potentially be resolved using this process before the final wage index is calculated. We believe this process and the timeline for requesting such corrections (as described earlier and in the FY 2018 IPPS/LTCH PPS final rule) promote additional transparency to instances where CMS makes data corrections after the January 31 PUF, and provide opportunities for hospitals to request further review of CMS changes in time for the most accurate data to be reflected in the final wage index calculations. These additional appeals opportunities are described earlier and in the FY 2021 Wage Index Development Time Table, as well as in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38154 through 38156).

3. Update to Wage Index Development Timetable To Include Time Zone for Deadlines

During the FY 2021 wage index development process, we received inquiries regarding the time zone for deadlines in the Wage Index Development Timetable. Specifically, hospitals asked if revision requests submitted after 11:59 p.m. Eastern Standard Time (EST) could be accepted if the deadline had not yet passed in the time zone where the hospitals are located. The current timetable does not specify time zones. To eliminate confusion and promote clear deadlines, we proposed to use Eastern Standard Time (EST) as the time zone for wage index deadlines after October 1, 2020 on the FY 2022 Wage Index Development Timetable. We stated in the proposed rule (85 FR 32733) that we believe using one time zone is important for a clear and consistent deadline for all hospitals. We further stated that we also believe that EST is an appropriate time zone for the deadline because CMS's central office headquarters are located in the EST time zone and because it is consistent with the time zone used for other CMS deadlines, such as the deadline to register to report certain quality data via the CMS Web Interface (see the Registration Guide available for download at https://qpp.cms.gov/mips/how-to-register-for-CMS-WI-and-CAHPS ) and applications for ACOs to participate in the Shared Savings Program (see deadlines outlined at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/for-acos/application-types-and-timeline,, in accordance with § 425.202). We welcomed commenters' input on which time zone is most reasonable for all hospitals and appropriate for supporting consistent, clear deadlines.

We did not receive any comments on our proposal. Therefore, for the reasons set forth in this final rule and in the FY 2021 IPPS/LTCH PPS proposed rule, we are finalizing, without modification, our proposal to use Eastern Standard Time (EST) as the time zone for wage index deadlines after October 1, 2020 on the FY 2022 Wage Index Development Timetable.

M. Labor-Related Share for the FY 2021 Wage Index

Section 1886(d)(3)(E) of the Act directs the Secretary to adjust the proportion of the national prospective payment system base payment rates that are attributable to wages and wage-related costs by a factor that reflects the relative differences in labor costs among geographic areas. It also directs the Secretary to estimate from time to time the proportion of hospital costs that are labor-related and to adjust the proportion (as estimated by the Secretary from time to time) of hospitals' costs that are attributable to wages and wage-related costs of the DRG prospective payment rates. We refer to the portion of hospital costs attributable to wages and wage-related costs as the labor-related share. The labor-related share of the prospective payment rate is adjusted by an index of relative labor costs, which is referred to as the wage index.

Section 403 of Public Law 108-173 amended section 1886(d)(3)(E) of the Act to provide that the Secretary must employ 62 percent as the labor-related share unless this would result in lower payments to a hospital than would otherwise be made. However, this provision of Public Law 108-173 did not change the legal requirement that the Secretary estimate from time to time the proportion of hospitals' costs that are attributable to wages and wage-related costs. Thus, hospitals receive payment based on either a 62-percent labor-related share, or the labor-related share estimated from time to time by the Secretary, depending on which labor-related share resulted in a higher payment.

In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38158 through 38175), we rebased and revised the hospital market basket. We established a 2014-based IPPS hospital market basket to replace the FY 2010-based IPPS hospital market basket, effective October 1, 2017. Using the 2014-based IPPS market basket, we finalized a labor-related share of 68.3 percent for discharges occurring on or after October 1, 2017. In addition, in FY 2018, we implemented this revised and rebased labor-related share in a budget neutral manner (82 FR 38522). However, consistent with section 1886(d)(3)(E) of the Act, we did not take into account the additional payments that would be made as a result of hospitals with a wage index less than or equal to 1.0000 being paid using a labor-related share lower than the labor-related share of hospitals with a wage index greater than 1.0000. In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42325), for FY 2020, we continued to use a labor-related share of 68.3 percent for discharges occurring on or after October 1, 2019.

The labor-related share is used to determine the proportion of the national IPPS base payment rate to which the area wage index is applied. We include a cost category in the labor-related share if the costs are labor intensive and vary with the local labor market. In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32734), for FY 2021, we did not propose to make any further changes to the national average proportion of operating costs that are attributable to wages and salaries, employee benefits, professional fees: Labor-related, administrative and facilities support services, installation, maintenance, and repair services, and all other labor-related services. Therefore, for FY 2021, we proposed to continue to use a labor-related share of 68.3 percent for discharges occurring on or after October 1, 2020.

As discussed in section IV.B. of the preamble of this final rule, prior to January 1, 2016, Puerto Rico hospitals were paid based on 75 percent of the national standardized amount and 25 percent of the Puerto Rico-specific standardized amount. As a result, we applied the Puerto Rico-specific labor-related share percentage and nonlabor-related share percentage to the Puerto Rico-specific standardized amount. Section 601 of the Consolidated Appropriations Act, 2016 (Pub. L. 114-113) amended section 1886(d)(9)(E) of the Act to specify that the payment calculation with respect to operating costs of inpatient hospital services of a subsection (d) Puerto Rico hospital for inpatient hospital discharges on or after January 1, 2016, shall use 100 percent of the national standardized amount. Because Puerto Rico hospitals are no longer paid with a Puerto Rico-specific standardized amount as of January 1, 2016, under section 1886(d)(9)(E) of the Act as amended by section 601 of the Consolidated Appropriations Act, 2016, there is no longer a need for us to calculate a Puerto Rico-specific labor-related share percentage and nonlabor-related share percentage for application to the Puerto Rico-specific standardized amount. Hospitals in Puerto Rico are now paid 100 percent of the national standardized amount and, therefore, are subject to the national labor-related share and nonlabor-related share percentages that are applied to the national standardized amount. Accordingly, for FY 2021, we did not propose a Puerto Rico-specific labor-related share percentage or a nonlabor-related share percentage.

We did not receive any public comments on our proposals related to the labor-related share percentage. Therefore, for the reasons set forth in this final rule and in the FY 2021 IPPS/LTCH PPS proposed rule, we are finalizing our proposals, without modification, to continue to use a labor-related share of 68.3 percent for discharges occurring on or after October 1, 2020 for all hospitals (including Puerto Rico hospitals) whose wage indexes are greater than 1.0000.

Tables 1A and 1B, which are published in section VI. of the Addendum to this FY 2021 IPPS/LTCH PPS final rule and available via the internet on the CMS website, reflect the national labor-related share, which is also applicable to Puerto Rico hospitals. For FY 2021, for all IPPS hospitals (including Puerto Rico hospitals) whose wage indexes are less than or equal to 1.0000, we are applying the wage index to a labor-related share of 62 percent of the national standardized amount. For all IPPS hospitals (including Puerto Rico hospitals) whose wage indexes are greater than 1.000, for FY 2021, we are applying the wage index to a labor-related share of 68.3 percent of the national standardized amount.

IV. Other Decisions and Changes to the IPPS for Operating System

A. Changes to MS-DRGs Subject to Postacute Care Transfer Policy and MS-DRG Special Payments Policies (§ 412.4)

1. Background

Existing regulations at 42 CFR 412.4(a) define discharges under the IPPS as situations in which a patient is formally released from an acute care hospital or dies in the hospital. Section 412.4(b) defines acute care transfers, and § 412.4(c) defines postacute care transfers. Our policy set forth in § 412.4(f) provides that when a patient is transferred and his or her length of stay is less than the geometric mean length of stay for the MS-DRG to which the case is assigned, the transferring hospital is generally paid based on a graduated per diem rate for each day of stay, not to exceed the full MS-DRG payment that would have been made if the patient had been discharged without being transferred.

The per diem rate paid to a transferring hospital is calculated by dividing the full MS-DRG payment by the geometric mean length of stay for the MS-DRG. Based on an analysis that showed that the first day of hospitalization is the most expensive (60 FR 45804), our policy generally provides for payment that is twice the per diem amount for the first day, with each subsequent day paid at the per diem amount up to the full MS-DRG payment (§ 412.4(f)(1)). Transfer cases also are eligible for outlier payments. In general, the outlier threshold for transfer cases, as described in § 412.80(b), is equal to the fixed-loss outlier threshold for nontransfer cases (adjusted for geographic variations in costs), divided by the geometric mean length of stay for the MS-DRG, and multiplied by the length of stay for the case, plus 1 day.

We established the criteria set forth in § 412.4(d) for determining which DRGs qualify for postacute care transfer payments in the FY 2006 IPPS final rule (70 FR 47419 through 47420). The determination of whether a DRG is subject to the postacute care transfer policy was initially based on the Medicare Version 23.0 GROUPER (FY 2006) and data from the FY 2004 MedPAR file. However, if a DRG did not exist in Version 23.0 or a DRG included in Version 23.0 is revised, we use the current version of the Medicare GROUPER and the most recent complete year of MedPAR data to determine if the DRG is subject to the postacute care transfer policy. Specifically, if the MS-DRG's total number of discharges to postacute care equals or exceeds the 55th percentile for all MS-DRGs and the proportion of short-stay discharges to postacute care to total discharges in the MS-DRG exceeds the 55th percentile for all MS-DRGs, CMS will apply the postacute care transfer policy to that MS-DRG and to any other MS-DRG that shares the same base MS-DRG. The statute directs us to identify MS-DRGs based on a high volume of discharges to postacute care facilities and a disproportionate use of postacute care services. As discussed in the FY 2006 IPPS final rule (70 FR 47416), we determined that the 55th percentile is an appropriate level at which to establish these thresholds. In that same final rule (70 FR 47419), we stated that we will not revise the list of DRGs subject to the postacute care transfer policy annually unless we are making a change to a specific MS-DRG.

To account for MS-DRGs subject to the postacute care policy that exhibit exceptionally higher shares of costs very early in the hospital stay, § 412.4(f) also includes a special payment methodology. For these MS-DRGs, hospitals receive 50 percent of the full MS-DRG payment, plus the single per diem payment, for the first day of the stay, as well as a per diem payment for subsequent days (up to the full MS-DRG payment (§ 412.4(f)(6)). For an MS-DRG to qualify for the special payment methodology, the geometric mean length of stay must be greater than 4 days, and the average charges of 1-day discharge cases in the MS-DRG must be at least 50 percent of the average charges for all cases within the MS-DRG. MS-DRGs that are part of an MS-DRG severity level group will qualify under the MS-DRG special payment methodology policy if any one of the MS-DRGs that share that same base MS-DRG qualifies (§ 412.4(f)(6)).

Prior to the enactment of the Bipartisan Budget Act of 2018 (Pub. L. 115-123), under section 1886(d)(5)(J) of the Act, a discharge was deemed a “qualified discharge” if the individual was discharged to one of the following postacute care settings:

• A hospital or hospital unit that is not a subsection (d) hospital.
• A skilled nursing facility.
• Related home health services provided by a home health agency provided within a timeframe established by the Secretary (beginning within 3 days after the date of discharge).

Section 53109 of the Bipartisan Budget Act of 2018 amended section 1886(d)(5)(J)(ii) of the Act to also include discharges to hospice care provided by a hospice program as a qualified discharge, effective for discharges occurring on or after October 1, 2018. Accordingly, effective for discharges occurring on or after October 1, 2018, if a discharge is assigned to one of the MS-DRGs subject to the postacute care transfer policy and the individual is transferred to hospice care by a hospice program, the discharge is subject to payment as a transfer case. In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41394), we made conforming amendments to § 412.4(c) of the regulation to include discharges to hospice care occurring on or after October 1, 2018 as qualified discharges. We specified that hospital bills with a Patient Discharge Status code of 50 (Discharged/Transferred to Hospice—Routine or Continuous Home Care) or 51 (Discharged/Transferred to Hospice, General Inpatient Care or Inpatient Respite) are subject to the postacute care transfer policy in accordance with this statutory amendment. Consistent with our policy for other qualified discharges, CMS claims processing software has been revised to identify cases in which hospice benefits were billed on the date of hospital discharge without the appropriate discharge status code. Such claims will be returned as unpayable to the hospital and may be rebilled with a corrected discharge code.

2. Changes for FY 2021

As discussed in section II.F. of the preamble of the FY 2021 IPPS/LTCH PPS final rule, based on our analysis of FY 2019 MedPAR claims data, we proposed to make changes to a number of MS-DRGs, effective for FY 2021. Specifically, we proposed to do the following:

• Reassign procedure codes from MS-DRG 16 (Autologous Bone Marrow Transplant with CC/MCC or T-Cell Immunotherapy) to create new MS-DRG 18 (Chimeric Antigen Receptor [CAR] T-cell Immunotherapy) for cases reporting the administration of CAR T-cell therapy.
• Create new MS-DRG 019 (Simultaneous Pancreas and Kidney Transplant with Hemodialysis).
• Reassign procedures involving head, face, neck, ear, nose, mouth, or throat by creating six new MS-DRGs 140-142 (Major Head and Neck Procedures with MCC, with CC, and without CC/MCC, respectively) and 143-145 (Other Ear, Nose, Mouth and Throat O.R. Procedures with MCC, with CC, and without CC/MCC, respectively) and deleting MS-DRGs 129-130 (Major Head and Neck Procedures with CC/MCC or Major Device, and without CC/MCC, respectively, MS-DRGs 131-132 (Cranial and Facial Procedures with CC/MCC and without CC/MCC, respectively) and MS-DRGs 133-134 (Other Ear, Nose, Mouth and Throat O.R. Procedures with CC/MCC and without CC/MCC, respectively).
• Reassign procedure codes from MS-DRGs 469-470 (Major Hip and Knee Joint Replacement or Reattachment of Lower Extremity with MCC or Total Ankle Replacement, and without MCC, respectively) and create two new MS-DRGs, 521 and 522 (Hip Replacement with Principal Diagnosis of Hip Fracture with MCC and without MCC, respectively) for cases reporting a hip replacement procedure with a principal diagnosis of a hip fracture.
• Reassign procedure codes from MS-DRG 652 (Kidney Transplant) into two new MS-DRGs, 650 and 651 (Kidney Transplant with Hemodialysis with MCC and without MCC, respectively) for cases reporting hemodialysis with a kidney transplant during the same admission.

As discussed in the proposed rule, in light of the proposed changes to these MS-DRGs for FY 2021, according to the regulations under § 412.4(d), we evaluated these MS-DRGs using the general postacute care transfer policy criteria and data from the FY 2019 MedPAR file. If an MS-DRG qualified for the postacute care transfer policy, we also evaluated that MS-DRG under the special payment methodology criteria according to regulations at § 412.4(f)(6). We continue to believe it is appropriate to assess new MS-DRGs and reassess revised MS-DRGs when proposing reassignment of procedure codes or diagnosis codes that would result in material changes to an MS-DRG. We noted that MS-DRGs 469 and 470 (Major Hip and Knee Joint Replacement or Reattachment of Lower Extremity with MCC or Total Ankle Replacement, and without MCC, respectively) are currently subject to the postacute care transfer policy, and as proposed to be revised, would continue to qualify to be included on the list of MS-DRGs that are subject to the postacute care transfer policy. Proposed new MS-DRGs 521 and 522 (Hip Replacement with Principal Diagnosis of Hip Fracture with MCC and without MCC, respectively) would also qualify to be included on the list of MS-DRGs that are subject to the postacute care transfer policy. We therefore proposed to add MS-DRGs 521 and 522 to the list of MS-DRGs that are subject to the postacute care transfer policy. We noted that MS-DRGs that are subject to the postacute transfer policy for FY 2020 and are not revised will continue to be subject to the policy in FY 2021. We note that, as discussed in section II. of this final rule, we are finalizing these proposed changes to the MS-DRGs.

Using the March 2020 update of the FY 2019 MedPAR file, we developed the following updated chart which sets forth the analysis of the postacute care transfer policy criteria completed for this final rule with respect to each of these new or revised MS-DRGs. We note that this chart is updated from the MedPAR file used in the proposed rule (the December 2019 update of the FY 2019 MedPAR file).

Based on our annual review of proposed new or revised MS-DRGs and analysis of the December 2019 update of the FY 2019 MedPAR file, we identified MS-DRGs that we proposed to include on the list of MS-DRGs subject to the special payment policy methodology. Based on our analysis of proposed changes to MS-DRGs included in the proposed rule, we determined that MS-DRGs 521 and 522 (Hip Replacement with Principal Diagnosis of Hip Fracture with MCC and without MCC, respectively) would meet the criteria for the MS-DRG special payment methodology. Therefore, we proposed that MS-DRGs 521 and 522 would be subject to the MS-DRG special payment methodology, effective FY 2021. The following table include updates from the March 2020 update of the FY 2019 MedPAR file.

Comments: A commenter urged CMS not include MS-DRGs 521 and 522 on the list of MS-DRGs that are subject to the postacute care transfer policy. The commenter asserted that adding these new MS-DRGs to the postacute care transfer policy will incentivize short-term acute care hospitals to keep hip replacement patients longer so that the patient does not receive care from a postacute care provider, potentially leading to adverse health impacts to vulnerable beneficiaries.

Response: We disagree that the postacute care transfer policy creates an incentive to keep patients in the hospital longer than necessary. Our longstanding view is the policy addresses the appropriate level of payment once clinical decisions about the most appropriate care in the most appropriate setting have been made. We also note that the procedure codes proposed to be assigned to MS-DRGs 521 and 522 are currently assigned to MS-DRGs 496 and 470, which currently are subject to the postacute care transfer policy.

After consideration of the comments we received, we are finalizing our proposal to add MS-DRGs 521 and 522 to the list of MS-DRGs that are subject to the postacute care transfer policy and the MS DRG special payment methodology for FY 2021.

The postacute care transfer and special payment policy status of these MS-DRGs is reflected in Table 5 associated with this final rule, which is listed in section VI. of the Addendum to this final rule and available via the internet on the CMS website.

B. Changes in the Inpatient Hospital Update for FY 2021 (§ 412.64(d))

1. FY 2021 Inpatient Hospital Update

In accordance with section 1886(b)(3)(B)(i) of the Act, each year we update the national standardized amount for inpatient hospital operating costs by a factor called the “applicable percentage increase.” For FY 2021, we are setting the applicable percentage increase by applying the adjustments listed in this section in the same sequence as we did for FY 2020. (We note that section 1886(b)(3)(B)(xii) of the Act required an additional reduction each year only for FYs 2010 through 2019.) Specifically, consistent with section 1886(b)(3)(B) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act, we are setting the applicable percentage increase by applying the following adjustments in the following sequence. The applicable percentage increase under the IPPS for FY 2021 is equal to the rate-of-increase in the hospital market basket for IPPS hospitals in all areas, subject to all of the following:

• A reduction of one-quarter of the applicable percentage increase (prior to the application of other statutory adjustments; also referred to as the market basket update or rate-of-increase (with no adjustments)) for hospitals that fail to submit quality information under rules established by the Secretary in accordance with section 1886(b)(3)(B)(viii) of the Act.
• A reduction of three-quarters of the applicable percentage increase (prior to the application of other statutory adjustments; also referred to as the market basket update or rate-of-increase (with no adjustments)) for hospitals not considered to be meaningful EHR users in accordance with section 1886(b)(3)(B)(ix) of the Act.
• An adjustment based on changes in economy-wide productivity (the multifactor productivity (MFP) adjustment).

Section 1886(b)(3)(B)(xi) of the Act, as added by section 3401(a) of the Affordable Care Act, states that application of the MFP adjustment may result in the applicable percentage increase being less than zero.

In compliance with section 404 of the MMA, in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38158 through 38175), we replaced the FY 2010-based IPPS operating market basket with the rebased and revised 2014-based IPPS operating market basket, effective with FY 2018.

We proposed to base the proposed FY 2021 market basket update used to determine the applicable percentage increase for the IPPS on IHS Global Inc.'s (IGI's) fourth quarter 2019 forecast of the 2014-based IPPS market basket rate-of-increase with historical data through third quarter 2019, which was estimated to be 3.0 percent. We also proposed that if more recent data subsequently become available (for example, a more recent estimate of the market basket and the MFP), we would use such data, if appropriate, to determine the FY 2021 market basket update and the MFP adjustment in the final rule.

For this final rule, based on IGI's second quarter 2020 forecast with historical data through the first quarter of 2020, the FY 2021 growth rate of the 2014-based IPPS market basket is estimated to be 2.4 percent. We note that the fourth quarter 2019 forecast used for the proposed market basket update was developed prior to the economic impacts of the COVID-19 pandemic. This lower update (2.4 percent) for FY 2021 relative to the proposed rule (3.0 percent) is primarily driven by slower than anticipated compensation growth for both health-related and other occupations as labor markets are expected to be significantly impacted during the recession that started in February 2020 and throughout the anticipated recovery.

For FY 2021, depending on whether a hospital submits quality data under the rules established in accordance with section 1886(b)(3)(B)(viii) of the Act (hereafter referred to as a hospital that submits quality data) and is a meaningful EHR user under section 1886(b)(3)(B)(ix) of the Act (hereafter referred to as a hospital that is a meaningful EHR user), there are four possible applicable percentage increases that can be applied to the standardized amount, as specified in the table that appears later in this section.

In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through 51692), we finalized our methodology for calculating and applying the MFP adjustment. As we explained in that rule, section 1886(b)(3)(B)(xi)(II) of the Act, as added by section 3401(a) of the Affordable Care Act, defines this productivity adjustment as equal to the 10-year moving average of changes in annual economy-wide, private nonfarm business MFP (as projected by the Secretary for the 10-year period ending with the applicable fiscal year, calendar year, cost reporting period, or other annual period). The Bureau of Labor Statistics (BLS) publishes the official measure of private nonfarm business MFP. We refer readers to the BLS website at http://www.bls.gov/mfp for the BLS historical published MFP data.

MFP is derived by subtracting the contribution of labor and capital input growth from output growth. The projections of the components of MFP are currently produced by IGI, a nationally recognized economic forecasting firm with which CMS contracts to forecast the components of the market baskets and MFP. As we discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49509), beginning with the FY 2016 rulemaking cycle, the MFP adjustment is calculated using the revised series developed by IGI to proxy the aggregate capital inputs. Specifically, in order to generate a forecast of MFP, IGI forecasts BLS aggregate capital inputs using a regression model. A complete description of the MFP projection methodology is available on the CMS website at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html .

In the FY 2021 IPPS/LTCH PPS proposed rule, we proposed an MFP adjustment of 0.4 percentage point. Similar to the market basket update, for the proposed rule, we used IGI's fourth quarter 2019 forecast of the MFP adjustment to compute the proposed FY 2021 MFP adjustment. As noted previously, we proposed that if more recent data subsequently become available, we would use such data, if appropriate, to determine the FY 2021 market basket update and the MFP for the final rule.

Based on the more recent data available for this final rule, the current estimate of the 10-year moving average growth of MFP for FY 2021 is -0.1 percentage point. This MFP is based on the most recent macroeconomic outlook from IGI at the time of rulemaking (released June 2020) in order to reflect more current historical economic data. IGI produces monthly macroeconomic forecasts, which include projections of all of the economic series used to derive MFP. In contrast, IGI only produces forecasts of the more detailed price proxies used in the 2014-based IPPS market basket on a quarterly basis. Therefore, IGI's second quarter 2020 forecast is the most recent forecast of the 2014-based IPPS market basket increase.

We note that it has typically been our practice to base the projection of the market basket price proxies and MFP in the final rule on the second quarter IGI forecast. For this final rule, we are using the IGI June 2020 macroeconomic forecast for MFP because it is a more recent forecast, and it is important to use more recent data during this period when economic trends, particularly employment and labor productivity, are notably uncertain because of the COVID-19 pandemic. Historically, the MFP adjustment based on the second quarter IGI forecast has been very similar to the MFP adjustment derived with IGI's June macroeconomic forecast. Substantial changes in the macroeconomic indicators in between monthly forecasts are atypical.

Given the unprecedented economic uncertainty as a result of the COVID-19 pandemic, the changes in the IGI macroeconomic series used to derive MFP between the IGI second quarter 2020 forecast and the IGI June 2020 macroeconomic forecast are significant. Therefore, we believe it is appropriate to use IGI's more recent June 2020 macroeconomic forecast to determine the MFP adjustment for the final rule as it reflects more recent historical data. For comparison purposes, the 10-year moving average growth of MFP for FY 2021 is projected to be -0.1 percentage point based on IGI's June 2020 macroeconomic forecast compared to the 10-year moving average growth of MFP for FY 2021 of 0.7 percentage point based on IGI's second quarter 2020 forecast. Mechanically subtracting the negative 10-year moving average growth of MFP from the hospital market basket percentage increase using the data from the IGI June 2020 macroeconomic forecast would have resulted in a 0.1 percentage point increase in the FY 2021 market basket update. However, under section 1886(b)(3)(B)(xi)(I) of the Act, the Secretary is required to reduce (not increase) the hospital market basket percentage increase by changes in economy-wide productivity. Accordingly, we are applying a 0.0 MFP adjustment to the FY 2021 market basket percentage increase.

Comment: A commenter appreciated the proposed inpatient hospital update. We also received a comment recommending that CMS not use market basket data that had been updated through March 2020, given the significant economic disruption and effects of the pandemic-driven shutdown, to ensure that the market basket update accurately reflects the higher costs incurred by hospitals during the pandemic. This same commenter urged CMS to ensure the underlying data, for market basket and other policies, is most appropriately selected to hold hospitals harmless against the unprecedented impacts of COVID-19.

Response: We appreciate the commenters' support and input on the proposal. As previously discussed, for this final rule we are using a more recent forecast available, because it is important to use more recent data during this period when economic trends, particularly employment and labor productivity, are notably uncertain because of the COVID-19 pandemic. For this final rule, we are finalizing a market basket update of 2.4 percent based on IHS Global Inc.'s second-quarter 2020 forecast (with historical data through the first-quarter 2020) and an MFP adjustment of 0.0 percentage point, as discussed earlier.

Based on these most recent data available, we have determined four applicable percentage increases to the standardized amount for FY 2021, as specified in the following table:

In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42344), we revised our regulations at 42 CFR 412.64(d) to reflect the current law for the update for FY 2020 and subsequent fiscal years. Specifically, in accordance with section 1886(b)(3)(B) of the Act, we added paragraph (d)(1)(viii) to § 412.64 to set forth the applicable percentage increase to the operating standardized amount for FY 2020 and subsequent fiscal years as the percentage increase in the market basket index, subject to the reductions specified under § 412.64(d)(2) for a hospital that does not submit quality data and § 412.64(d)(3) for a hospital that is not a meaningful EHR user, less an MFP adjustment. (As previously noted, section 1886(b)(3)(B)(xii) of the Act required an additional reduction each year only for FYs 2010 through 2019.)

Section 1886(b)(3)(B)(iv) of the Act provides that the applicable percentage increase to the hospital-specific rates for SCHs and MDHs equals the applicable percentage increase set forth in section 1886(b)(3)(B)(i) of the Act (that is, the same update factor as for all other hospitals subject to the IPPS). Therefore, the update to the hospital-specific rates for SCHs and MDHs also is subject to section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act. (Under current law, the MDH program is effective for discharges on or before September 30, 2022, as discussed in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41429 through 41430).)

For FY 2021, we proposed the following updates to the hospital-specific rates applicable to SCHs and MDHs: A proposed update of 2.6 percent for a hospital that submits quality data and is a meaningful EHR user; a proposed update of 1.85 percent for a hospital that fails to submit quality data and is a meaningful EHR user; a proposed update of 0.35 percent for a hospital that submits quality data and is not a meaningful EHR user; and a proposed update of -0.4 percent for a hospital that fails to submit quality data and is not an meaningful EHR user. As noted previously, for the FY 2021 IPPS/LTCH PPS proposed rule, we used IGI's fourth quarter 2019 forecast of the 2014-based IPPS market basket update with historical data through third quarter 2019. Similarly, we used IGI's fourth quarter 2019 forecast of the MFP adjustment. We proposed that if more recent data subsequently became available (for example, a more recent estimate of the market basket increase and the MFP), we would use such data, if appropriate, to determine the update in the final rule.

We did not receive any public comments on our proposal. Therefore, we are finalizing the proposal to determine the update to the hospital-specific rates for SCHs and MDHs in this final rule using the most recent available data, as previously discussed.

For this final rule, based on the most recent available data, we are finalizing the following updates to the hospital specific rates applicable to SCHs and MDHs: An update of 2.4 percent for a hospital that submits quality data and is a meaningful EHR user; an update of 1.8 percent for a hospital that fails to submit quality data and is a meaningful EHR user; an update of 0.6 percent for a hospital that submits quality data and is not a meaningful EHR user; and an update of 0.0 percent for a hospital that fails to submit quality data and is not a meaningful EHR user.

2. FY 2021 Puerto Rico Hospital Update

As discussed in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56937 through 56938), prior to January 1, 2016, Puerto Rico hospitals were paid based on 75 percent of the national standardized amount and 25 percent of the Puerto Rico-specific standardized amount. Section 601 of Public Law 114-113 amended section 1886(d)(9)(E) of the Act to specify that the payment calculation with respect to operating costs of inpatient hospital services of a subsection (d) Puerto Rico hospital for inpatient hospital discharges on or after January 1, 2016, shall use 100 percent of the national standardized amount. Because Puerto Rico hospitals are no longer paid with a Puerto Rico-specific standardized amount under the amendments to section 1886(d)(9)(E) of the Act, there is no longer a need for us to determine an update to the Puerto Rico standardized amount. Hospitals in Puerto Rico are now paid 100 percent of the national standardized amount and, therefore, are subject to the same update to the national standardized amount discussed under section IV.B.1. of the preamble of this final rule. Accordingly, in the FY 2021 IPPS/LTCH PPS proposed rule, for FY 2021, we proposed an applicable percentage increase of 2.6 percent to the standardized amount for hospitals located in Puerto Rico.

We did not receive any public comment on our proposal with respect to the Puerto Rico hospital update.

Based on the most recent data available for this final rule (as discussed previously in section IV.B.1. of the preamble of this final rule), we are finalizing an applicable percentage increase of 2.4 percent to the standardized amount for hospitals located in Puerto Rico. We note that section 1886(b)(3)(B)(viii) of the Act, which specifies the adjustment to the applicable percentage increase for “subsection (d)” hospitals that do not submit quality data under the rules established by the Secretary, is not applicable to hospitals located in Puerto Rico. In addition, section 602 of Public Law 114-113 amended section 1886(n)(6)(B) of the Act to specify that Puerto Rico hospitals are eligible for incentive payments for the meaningful use of certified EHR technology, effective beginning FY 2016, and also to apply the adjustments to the applicable percentage increase under section 1886(b)(3)(B)(ix) of the Act to Puerto Rico hospitals that are not meaningful EHR users, effective FY 2022. Accordingly, because the provisions of section 1886(b)(3)(B)(ix) of the Act are not applicable to hospitals located in Puerto Rico until FY 2022, the adjustments under this provision are not applicable for FY 2021.

C. Amendment To Address Short Cost Reporting Periods During Applicable Timeframe for Establishment of Service Area for Sole Community Hospitals Under § 412.92(c)(3)

Sections 1886(d)(5)(D) and (d)(5)(G) of the Act provide special payment protections under the IPPS to sole community hospitals (SCHs) and Medicare-dependent, small rural hospitals (MDHs), respectively. Section 1886(d)(5)(D)(iii) of the Act defines an SCH in part as a hospital that the Secretary determines is located more than 35 road miles from another hospital or that, by reason of factors such as isolated location, weather conditions, travel conditions, or absence of other like hospitals (as determined by the Secretary), is the sole source of inpatient hospital services reasonably available to Medicare beneficiaries. The regulations at 42 CFR 412.92 set forth the criteria that a hospital must meet to be classified as a SCH. For more information on SCHs, we refer readers to the FY 2009 IPPS/LTCH PPS final rule (74 FR 43894 through 43897).

The criteria to be classified as an SCH are set forth at 42 CFR 412.92(a). Under the criteria at 42 CFR 412.92(a)(1)(i) and (ii), CMS classifies a hospital as a sole community hospital if it is located: (1) In a rural area; and (2) between 25 and 35 miles from other like hospitals and meets one of the following criteria:

• No more than 25 percent of residents who become hospital inpatients or no more than 25 percent of the Medicare beneficiaries who become hospital inpatients in the hospital's service area are admitted to other like hospitals located within a 35-mile radius of the hospital, or, if larger, within its service area.
• The hospital has fewer than 50 beds and the MAC certifies that the hospital would have met the previously discussed criteria were it not for the fact that some beneficiaries or residents were forced to seek care outside the service area due to the unavailability of necessary specialty services at the community hospital.

The term “service area” is defined under the regulations at 42 CFR 412.92(c)(3) as the area from which a hospital draws at least 75 percent of its inpatients during the most recent 12-month cost reporting period ending before it applies for classification as a sole community hospital. For more information on service areas, we refer readers to the FY 2002 IPPS final rule (66 FR 39875).

We have become aware of some situations where a hospital's most recent cost reporting period prior to seeking SCH classification is a short cost reporting period (that is, less than a 12-month cost reporting period). Therefore, in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32740), we proposed to amend § 412.92(c)(3) to clarify our policy in this situation. Specifically, we proposed to amend § 412.92(c)(3) to reflect that where the hospital's cost reporting period ending before it applies for classification as a sole community hospital is for less than 12 months, the hospital's most recent 12-month or longer cost reporting period before the short period is used. We noted that this policy is consistent with our policy for determining Medicare utilization for purposes of MDH classification, as reflected in the regulations at 42 CFR 412.108(a)(1)(v). We invited public comment on our proposed amendment to § 412.92(c)(3).

We did not receive any public comments on our proposed amendment to § 412.92(c)(3). Therefore, we are finalizing our proposal as previously described, without modification.

D. Rural Referral Centers (RRCs)— Annual Updates to Case-Mix Index and Discharge Criteria (§ 412.96)

Under the authority of section 1886(d)(5)(C)(i) of the Act, the regulations at § 412.96 set forth the criteria that a hospital must meet in order to qualify under the IPPS as a rural referral center (RRC). RRCs receive special treatment under both the DSH payment adjustment and the criteria for geographic reclassification.

Section 402 of Public Law 108-173 raised the DSH payment adjustment for RRCs such that they are not subject to the 12-percent cap on DSH payments that is applicable to other rural hospitals. RRCs also are not subject to the proximity criteria when applying for geographic reclassification. In addition, they do not have to meet the requirement that a hospital's average hourly wage must exceed, by a certain percentage, the average hourly wage of the labor market area in which the hospital is located.

Section 4202(b) of Public Law 105-33 states, in part, that any hospital classified as an RRC by the Secretary for FY 1991 shall be classified as such an RRC for FY 1998 and each subsequent fiscal year. In the August 29, 1997 IPPS final rule with comment period (62 FR 45999), we reinstated RRC status for all hospitals that lost that status due to triennial review or MGCRB reclassification. However, we did not reinstate the status of hospitals that lost RRC status because they were now urban for all purposes because of the OMB designation of their geographic area as urban. Subsequently, in the August 1, 2000 IPPS final rule (65 FR 47089), we indicated that we were revisiting that decision. Specifically, we stated that we would permit hospitals that previously qualified as an RRC and lost their status due to OMB redesignation of the county in which they are located from rural to urban, to be reinstated as an RRC. Otherwise, a hospital seeking RRC status must satisfy all of the other applicable criteria. We use the definitions of “urban” and “rural” specified in subpart D of 42 CFR part 412. One of the criteria under which a hospital may qualify as an RRC is to have 275 or more beds available for use (§ 412.96(b)(1)(ii)). A rural hospital that does not meet the bed size requirement can qualify as an RRC if the hospital meets two mandatory prerequisites (a minimum case-mix index (CMI) and a minimum number of discharges), and at least one of three optional criteria (relating to specialty composition of medical staff, source of inpatients, or referral volume). (We refer readers to § 412.96(c)(1) through (5) and the September 30, 1988 Federal Register (53 FR 38513) for additional discussion.) With respect to the two mandatory prerequisites, a hospital may be classified as an RRC if—

• The hospital's CMI is at least equal to the lower of the median CMI for urban hospitals in its census region, excluding hospitals with approved teaching programs, or the median CMI for all urban hospitals nationally; and
• The hospital's number of discharges is at least 5,000 per year, or, if fewer, the median number of discharges for urban hospitals in the census region in which the hospital is located. The number of discharges criterion for an osteopathic hospital is at least 3,000 discharges per year, as specified in section 1886(d)(5)(C)(i) of the Act.

1. Case-Mix Index (CMI)

Section 412.96(c)(1) provides that CMS establish updated national and regional CMI values in each year's annual notice of prospective payment rates for purposes of determining RRC status. The methodology we used to determine the national and regional CMI values is set forth in the regulations at § 412.96(c)(1)(ii). The national median CMI value for FY 2021 is based on the CMI values of all urban hospitals nationwide, and the regional median CMI values for FY 2021 are based on the CMI values of all urban hospitals within each census region, excluding those hospitals with approved teaching programs (that is, those hospitals that train residents in an approved GME program as provided in § 413.75). These values are based on discharges occurring during FY 2019 (October 1, 2018 through September 30, 2019), and include bills posted to CMS' records through March 2020.

In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32741), we proposed that, in addition to meeting other criteria, if rural hospitals with fewer than 275 beds are to qualify for initial RRC status for cost reporting periods beginning on or after October 1, 2020, they must have a CMI value for FY 2019 that is at least—

• 1.70435 (national—all urban); or
• The median CMI value (not transfer-adjusted) for urban hospitals (excluding hospitals with approved teaching programs as identified in § 413.75) calculated by CMS for the census region in which the hospital is located.

The proposed median CMI values by region were set forth in a table in the proposed rule (85 FR 32741). We stated in the proposed rule that we intended to update the proposed CMI values in the FY 2021 final rule to reflect the updated FY 2019 MedPAR file, which will contain data from additional bills received through March 2020.

We did not receive any public comments on our proposals.

Based on the latest available data (FY 2019 bills received through March 2020), in addition to meeting other criteria, if rural hospitals with fewer than 275 beds are to qualify for initial RRC status for cost reporting periods beginning on or after October 1, 2020, they must have a CMI value for FY 2019 that is at least:

• 1.7049 (national—all urban); or
• The median CMI value (not transfer-adjusted) for urban hospitals (excluding hospitals with approved teaching programs as identified in § 413.75) calculated by CMS for the census region in which the hospital is located.

The final CMI values by region are set forth in the following table.

A hospital seeking to qualify as an RRC should obtain its hospital-specific CMI value (not transfer-adjusted) from its MAC. Data are available on the Provider Statistical and Reimbursement (PS&R) System. In keeping with our policy on discharges, the CMI values are computed based on all Medicare patient discharges subject to the IPPS MS-DRG-based payment.

2. Discharges

Section 412.96(c)(2)(i) provides that CMS set forth the national and regional numbers of discharges criteria in each year's annual notice of prospective payment rates for purposes of determining RRC status. As specified in section 1886(d)(5)(C)(ii) of the Act, the national standard is set at 5,000 discharges. In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32741), for FY 2021, we proposed to update the regional standards based on discharges for urban hospitals' cost reporting periods that began during FY 2018 (that is, October 1, 2017 through September 30, 2018), which were the latest cost report data available at the time the proposed rule was developed. Therefore, we proposed that, in addition to meeting other criteria, a hospital, if it is to qualify for initial RRC status for cost reporting periods beginning on or after October 1, 2020, must have, as the number of discharges for its cost reporting period that began during FY 2018, at least—

• 5,000 (3,000 for an osteopathic hospital); or
• If less, the median number of discharges for urban hospitals in the census region in which the hospital is located. (We refer readers to the table set forth in the FY 2021 IPPS/LTCH PPS proposed rule at 85 FR 32742). In the proposed rule, we stated that we intended to update these numbers in the FY 2021 final rule based on the latest available cost report data.

We did not receive any public comments on our proposals.

Based on the latest discharge data available at this time, that is, for cost reporting periods that began during FY 2018, the final median number of discharges for urban hospitals by census region are set forth in the following table.

We note that because the median number of discharges for hospitals in each census region is greater than the national standard of 5,000 discharges, under this final rule, 5,000 discharges is the minimum criterion for all hospitals, except for osteopathic hospitals for which the minimum criterion is 3,000 discharges.

a. Amendment to § 412.96(c)(2) for Hospital Cost Reporting Periods That Are Longer or Shorter Than 12 Months

As previously noted, in addition to meeting other criteria, to qualify for initial RRC status for cost reporting periods beginning on or after October 1 of a given fiscal year, under § 412.96(c)(2), a hospital must meet the minimum number of discharges during its cost reporting period that began during the same fiscal year as the cost reporting periods used to compute the regional median discharges. We typically use the cost reporting periods that are 3 years prior to the fiscal year for which a hospital is seeking RRC status to compute the regional median discharges, as these are generally the latest cost report data available at the time of the development of the proposed and final rules. For example, and as discussed previously, for FY 2021, we are updating the regional standards based on discharges for urban hospitals' cost reporting periods that began during FY 2018.

We have become aware of situations where a hospital's cost reporting period that began during the fiscal year used to compute the regional median discharge values for a given fiscal year is a short cost reporting period (that is, less than 12 months) and as a result, the provider may not meet the minimum discharges requirement. Conversely, there may also be situations where a hospital's cost reporting period that began during the fiscal year used to compute the regional median discharge values for a given fiscal year is a long cost reporting period (that is, greater than 12 months). In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32742), we proposed to amend the RRC regulations to add a new paragraph (c)(2)(iii) to § 412.96 stating that if the hospital's cost reporting period that began during the same fiscal year as the cost reporting periods used to compute the regional median discharges is for less than 12 months or longer than 12 months, the hospital's number of discharges for that cost reporting period will be annualized to estimate the total number of discharges for a 12 month cost reporting period. We stated that we believe this policy, which is generally consistent with how we have addressed short cost reporting periods for purposes of determining discharges for RRC status in the past, provides a more uniform treatment among hospitals for purposes of determining the number of discharges for those hospitals for which the applicable cost reporting period is shorter or longer than 12 months. We proposed that to annualize the discharges, the MAC would divide the discharges by the number of days in the hospital's cost reporting period and then multiply by the length of a full year (365 or 366 calendar days, as applicable) to estimate the total number of discharges for a 12-month cost reporting period. For example, a short cost reporting period beginning on January 1 and ending on October 31 that is 10 months (or 304 days) with 4,200 discharges would be annualized in a non-leap year as follows: (4,200 ÷ 304) × 365 = 5,043 discharges annualized. Under this proposal, if the hospital has multiple cost reports beginning in the same fiscal year and none of those cost reports are for 12 months, the hospital's number of discharges in the hospital's longest cost report beginning in that fiscal year would be annualized to estimate the total number of discharges for a 12 month cost reporting period. We invited public comment on our proposed annualization methodology and our proposed amendment to § 412.96(c)(2).

Comments: A few commenters supported the annualization of discharges in a long or short cost reporting period for purposes of determining a hospital's eligibility for RRC classification.

Response: We thank the commenters for their support.

After consideration of the public comments we received, we are finalizing our proposal as previously described, without modification.

E. Payment Adjustment for Low-Volume Hospitals (§ 412.101)

1. Background

Section 1886(d)(12) of the Act provides for an additional payment to each qualifying low-volume hospital under the IPPS beginning in FY 2005. The additional payment adjustment to a low-volume hospital provided for under section 1886(d)(12) of the Act is in addition to any payment calculated under section 1886 of the Act. Therefore, the additional payment adjustment is based on the per discharge amount paid to the qualifying hospital under section 1886 of the Act. In other words, the low-volume hospital payment adjustment is based on total per discharge payments made under section 1886 of the Act, including capital, DSH, IME, and outlier payments. For SCHs and MDHs, the low-volume hospital payment adjustment is based in part on either the Federal rate or the hospital-specific rate, whichever results in a greater operating IPPS payment.

As discussed in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41398 through 41399), section 50204 of the Bipartisan Budget Act of 2018 (Pub. L. 115-123) modified the definition of a low-volume hospital and the methodology for calculating the payment adjustment for low-volume hospitals for FYs 2019 through 2022. (Section 50204 also extended prior changes to the definition of a low-volume hospital and the methodology for calculating the payment adjustment for low-volume hospitals through FY 2018.) Currently, the low-volume hospital qualifying criteria provide that a hospital must have fewer 3,800 total discharges during the fiscal year, and the hospital must be located more than 15 road miles from the nearest “subsection (d)” hospital. These criteria will remain in effect through FY 2022. Beginning with FY 2023, the low-volume hospital qualifying criteria and payment adjustment will revert to the statutory requirements that were in effect prior to FY 2011. Therefore, in order for a hospital to continue to qualify as a low-volume hospital on or after October 1, 2022, it must have fewer than 200 total discharges during the fiscal year and be located more than 25 road miles from the nearest “subsection (d)” hospital (see § 412.101(b)(2)(i)). (For additional information on the low-volume hospital payment adjustment prior to FY 2018, we refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR 56941 through 56943). For additional information on the low-volume hospital payment adjustment for FY 2018, we refer readers to the FY 2018 IPPS notice (CMS-1677-N) that appeared in the Federal Register on April 26, 2018 (83 FR 18301 through 18308).)

2. Temporary Changes to the Low-Volume Hospital Definition and Payment Adjustment Methodology for FYs 2019 Through 2022

As discussed earlier, section 50204 of the Bipartisan Budget Act of 2018 further modified the definition of a low-volume hospital and the methodology for calculating the payment adjustment for low-volume hospitals for FYs 2019 through 2022. Specifically, the qualifying criteria for low-volume hospitals under section 1886(d)(12)(C)(i) of the Act were amended to specify that, for FYs 2019 through 2022, a subsection (d) hospital qualifies as a low-volume hospital if it is more than 15 road miles from another subsection (d) hospital and has less than 3,800 total discharges during the fiscal year. Section 1886(d)(12)(D) of the Act was also amended to provide that, for discharges occurring in FYs 2019 through 2022, the Secretary shall determine the applicable percentage increase using a continuous, linear sliding scale ranging from an additional 25 percent payment adjustment for low-volume hospitals with 500 or fewer discharges to a zero percent additional payment for low-volume hospitals with more than 3,800 discharges in the fiscal year. Consistent with the requirements of section 1886(d)(12)(C)(ii) of the Act, the term “discharge” for purposes of these provisions refers to total discharges, regardless of payer (that is, Medicare and non-Medicare discharges).

In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41399), to implement this requirement, we specified a continuous, linear sliding scale formula to determine the low-volume hospital payment adjustment for FYs 2019 through 2022 that is similar to the continuous, linear sliding scale formula used to determine the low-volume hospital payment adjustment originally established by the Affordable Care Act and implemented in the regulations at § 412.101(c)(2)(ii) in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50240 through 50241). Consistent with the statute, we provided that qualifying hospitals with 500 or fewer total discharges will receive a low-volume hospital payment adjustment of 25 percent. For qualifying hospitals with fewer than 3,800 discharges but more than 500 discharges, the low-volume payment adjustment is calculated by subtracting from 25 percent the proportion of payments associated with the discharges in excess of 500. As such, for qualifying hospitals with fewer than 3,800 total discharges but more than 500 total discharges, the low-volume hospital payment adjustment for FYs 2019 through 2022 is calculated using the following formula:

Low-Volume Hospital Payment Adjustment = 0.25−[0.25/3300] × (number of total discharges−500) = (95/330)−(number of total discharges/13,200).

For this purpose, we specified that the “number of total discharges” is determined as total discharges, which includes Medicare and non-Medicare discharges during the fiscal year, based on the hospital's most recently submitted cost report. The low-volume hospital payment adjustment for FYs 2019 through 2022 is set forth in the regulations at 42 CFR 412.101(c)(3).

3. Process for Requesting and Obtaining the Low-Volume Hospital Payment Adjustment

In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50238 through 50275 and 50414) and subsequent rulemaking (for example, the FY 2019 IPPS/LTCH PPS final rule (83 FR 41399 through 41401), we discussed the process for requesting and obtaining the low-volume hospital payment adjustment. Under this previously established process, a hospital makes a written request for the low-volume payment adjustment under § 412.101 to its MAC. This request must contain sufficient documentation to establish that the hospital meets the applicable mileage and discharge criteria. The MAC will determine if the hospital qualifies as a low-volume hospital by reviewing the data the hospital submits with its request for low-volume hospital status in addition to other available data. Under this approach, a hospital will know in advance whether or not it will receive a payment adjustment under the low-volume hospital policy. The MAC and CMS may review available data such as the number of discharges, in addition to the data the hospital submits with its request for low-volume hospital status, in order to determine whether or not the hospital meets the qualifying criteria. (For additional information on our existing process for requesting the low-volume hospital payment adjustment, we refer readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR 41399 through 41401).)

As explained earlier, for FY 2019 and subsequent fiscal years, the discharge determination is made based on the hospital's number of total discharges, that is, Medicare and non-Medicare discharges, as was the case for FYs 2005 through 2010. Under § 412.101(b)(2)(i) and § 412.101(b)(2)(iii), a hospital's most recently submitted cost report is used to determine if the hospital meets the discharge criterion to receive the low-volume payment adjustment in the current year. As discussed in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41399 and 41400), we use cost report data to determine if a hospital meets the discharge criterion because this is the best available data source that includes information on both Medicare and non-Medicare discharges. (For FYs 2011 through 2018, the most recently available MedPAR data were used to determine the hospital's Medicare discharges because non-Medicare discharges were not used to determine if a hospital met the discharge criterion for those years.) Therefore, a hospital should refer to its most recently submitted cost report for total discharges (Medicare and non-Medicare) in order to decide whether or not to apply for low-volume hospital status for a particular fiscal year.

As also discussed in the FY 2019 IPPS/LTCH PPS final rule, in addition to the discharge criterion, for FY 2019 and for subsequent fiscal years, eligibility for the low-volume hospital payment adjustment is also dependent upon the hospital meeting the applicable mileage criterion specified in § 412.101(b)(2)(i) or (iii) for the fiscal year. Specifically, to meet the mileage criterion to qualify for the low-volume hospital payment adjustment for FY 2021, as was the case for FYs 2019 and 2020, a hospital must be located more than 15 road miles from the nearest subsection (d) hospital. (We define in § 412.101(a) the term “road miles” to mean “miles” as defined in § 412.92(c)(1) (75 FR 50238 through 50275 and 50414).) For establishing that the hospital meets the mileage criterion, the use of a web-based mapping tool as part of the documentation is acceptable. The MAC will determine if the information submitted by the hospital, such as the name and street address of the nearest hospitals, location on a map, and distance from the hospital requesting low-volume hospital status, is sufficient to document that it meets the mileage criterion. If not, the MAC will follow up with the hospital to obtain additional necessary information to determine whether or not the hospital meets the applicable mileage criterion.

We discussed in the proposed rule that in accordance with our previously established process, a hospital must make a written request for low-volume hospital status that is received by its MAC by September 1 immediately preceding the start of the Federal fiscal year for which the hospital is applying for low-volume hospital status in order for the applicable low-volume hospital payment adjustment to be applied to payments for its discharges for the fiscal year beginning on or after October 1 immediately following the request (that is, the start of the Federal fiscal year). We stated that for a hospital whose request for low-volume hospital status is received after September 1, if the MAC determines the hospital meets the criteria to qualify as a low-volume hospital, the MAC will apply the applicable low-volume hospital payment adjustment to determine payment for the hospital's discharges for the fiscal year, effective prospectively within 30 days of the date of the MAC's low-volume status determination.

Consistent with this previously established process, for FY 2021, we proposed that a hospital must submit a written request for low-volume hospital status to its MAC that includes sufficient documentation to establish that the hospital meets the applicable mileage and discharge criteria (as described earlier). Consistent with historical practice, for FY 2021, we proposed that a hospital's written request must be received by its MAC no later than September 1, 2020 in order for the low-volume hospital payment adjustment to be applied to payments for its discharges beginning on or after October 1, 2020. If a hospital's written request for low-volume hospital status for FY 2021 is received after September 1, 2020, and if the MAC determines the hospital meets the criteria to qualify as a low-volume hospital, we stated that the MAC would apply the low-volume hospital payment adjustment to determine the payment for the hospital's FY 2021 discharges, effective prospectively within 30 days of the date of the MAC's low-volume hospital status determination. We noted in the proposed rule that this proposal was consistent with the process for requesting and obtaining the low-volume hospital payment adjustment for FY 2020 (84 FR 42348 through 42349).

Under this process, a hospital receiving the low-volume hospital payment adjustment for FY 2020 may continue to receive a low-volume hospital payment adjustment for FY 2021 without reapplying if it continues to meet the applicable mileage and discharge criteria (which, as discussed previously, are the same qualifying criteria that apply for FY 2020). In this case, a hospital's request can include a verification statement that it continues to meet the mileage criterion applicable for FY 2021. (Determination of meeting the discharge criterion is discussed earlier in this section.) We noted in the proposed rule that a hospital must continue to meet the applicable qualifying criteria as a low-volume hospital (that is, the hospital must meet the applicable discharge criterion and mileage criterion for the fiscal year) in order to receive the payment adjustment in that fiscal year; that is, low-volume hospital status is not based on a “one-time” qualification (75 FR 50238 through 50275). Consistent with historical policy, a hospital must submit its request, including this written verification, for each fiscal year for which it seeks to receive the low-volume hospital payment adjustment, and in accordance with the timeline described earlier.

Comments: We received comments expressing continued support of the low-volume hospital adjustment changes included in the Bipartisan Budget Act of 2018.

Response: While these changes are statutory, we appreciate commenters' support.

As discussed in section I.A.2 of this FY 2021 IPPS/LTCH PPS final rule, we are waiving the delayed effective date for this final rule. The proposed deadline of September 1, 2020 for receipt of a hospital's written request by its MAC in order for the low-volume hospital payment adjustment to be applied to payments for its discharges beginning on or after October 1, 2020, may occur very near or on the date of issuance of this final rule. Due to this unique circumstance, in this final rule we are modifying the proposed deadline to September 15, 2020. Accordingly, for FY 2021, we are establishing that a hospital's written request must be received by its MAC no later than September 15, 2020 in order for the low-volume hospital payment adjustment to be applied to payments for its discharges beginning on or after October 1, 2020. If a hospital's written request for low-volume hospital status for FY 2021 is received after September 15, 2020, and if the MAC determines the hospital meets the criteria to qualify as a low-volume hospital, the MAC will apply the low-volume hospital payment adjustment to determine the payment for the hospital's FY 2021 discharges, effective prospectively within 30 days of the date of the MAC's low-volume hospital status determination.

F. Indirect Medical Education (IME) Payment Adjustment Factor (§ 412.105)

Under the IPPS, an additional payment amount is made to hospitals with residents in an approved graduate medical education (GME) program in order to reflect the higher indirect patient care costs of teaching hospitals relative to nonteaching hospitals. The payment amount is determined by use of a statutorily specified adjustment factor. The regulations regarding the calculation of this additional payment, known as the IME adjustment, are located at § 412.105. We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51680) for a full discussion of the IME adjustment and IME adjustment factor. Section 1886(d)(5)(B)(ii)(XII) of the Act provides that, for discharges occurring during FY 2008 and fiscal years thereafter, the IME formula multiplier is 1.35. Accordingly, for discharges occurring during FY 2021, the formula multiplier is 1.35. We estimate that application of this formula multiplier for the FY 2021 IME adjustment will result in an increase in IPPS payment of 5.5 percent for every approximately 10 percent increase in the hospital's resident-to-bed ratio.

We did not receive any comments regarding the IME adjustment factor, which, as noted earlier, is statutorily required. Accordingly, for discharges occurring during FY 2021, the IME formula multiplier is 1.35.

G. Payment Adjustment for Medicare Disproportionate Share Hospitals (DSHs) for FY 2021 (§ 412.106)

1. General Discussion

Section 1886(d)(5)(F) of the Act provides for additional Medicare payments to subsection (d) hospitals that serve a significantly disproportionate number of low-income patients. The Act specifies two methods by which a hospital may qualify for the Medicare disproportionate share hospital (DSH) adjustment. Under the first method, hospitals that are located in an urban area and have 100 or more beds may receive a Medicare DSH payment adjustment if the hospital can demonstrate that, during its cost reporting period, more than 30 percent of its net inpatient care revenues are derived from State and local government payments for care furnished to needy patients with low incomes. This method is commonly referred to as the “Pickle method.” The second method for qualifying for the DSH payment adjustment, which is the most common, is based on a complex statutory formula under which the DSH payment adjustment is based on the hospital's geographic designation, the number of beds in the hospital, and the level of the hospital's disproportionate patient percentage (DPP). A hospital's DPP is the sum of two fractions: The “Medicare fraction” and the “Medicaid fraction.” The Medicare fraction (also known as the “SSI fraction” or “SSI ratio”) is computed by dividing the number of the hospital's inpatient days that are furnished to patients who were entitled to both Medicare Part A and Supplemental Security Income (SSI) benefits by the hospital's total number of patient days furnished to patients entitled to benefits under Medicare Part A. The Medicaid fraction is computed by dividing the hospital's number of inpatient days furnished to patients who, for such days, were eligible for Medicaid, but were not entitled to benefits under Medicare Part A, by the hospital's total number of inpatient days in the same period.

Because the DSH payment adjustment is part of the IPPS, the statutory references to “days” in section 1886(d)(5)(F) of the Act have been interpreted to apply only to hospital acute care inpatient days. Regulations located at 42 CFR 412.106 govern the Medicare DSH payment adjustment and specify how the DPP is calculated as well as how beds and patient days are counted in determining the Medicare DSH payment adjustment. Under § 412.106(a)(1)(i), the number of beds for the Medicare DSH payment adjustment is determined in accordance with bed counting rules for the IME adjustment under § 412.105(b).

Section 3133 of the Patient Protection and Affordable Care Act, as amended by section 10316 of the same Act and section 1104 of the Health Care and Education Reconciliation Act (Pub. L. 111-152), added a section 1886(r) to the Act that modifies the methodology for computing the Medicare DSH payment adjustment. (For purposes of this final rule, we refer to these provisions collectively as section 3133 of the Affordable Care Act.) Beginning with discharges in FY 2014, hospitals that qualify for Medicare DSH payments under section 1886(d)(5)(F) of the Act receive 25 percent of the amount they previously would have received under the statutory formula for Medicare DSH payments. This provision applies equally to hospitals that qualify for DSH payments under section 1886(d)(5)(F)(i)(I) of the Act and those hospitals that qualify under the Pickle method under section 1886(d)(5)(F)(i)(II) of the Act.

The remaining amount, equal to an estimate of 75 percent of what otherwise would have been paid as Medicare DSH payments, reduced to reflect changes in the percentage of individuals who are uninsured, is available to make additional payments to each hospital that qualifies for Medicare DSH payments and that has uncompensated care. The payments to each hospital for a fiscal year are based on the hospital's amount of uncompensated care for a given time period relative to the total amount of uncompensated care for that same time period reported by all hospitals that receive Medicare DSH payments for that fiscal year.

As provided by section 3133 of the Affordable Care Act, section 1886(r) of the Act requires that, for FY 2014 and each subsequent fiscal year, a subsection (d) hospital that would otherwise receive DSH payments made under section 1886(d)(5)(F) of the Act receives two separately calculated payments. Specifically, section 1886(r)(1) of the Act provides that the Secretary shall pay to such subsection (d) hospital (including a Pickle hospital) 25 percent of the amount the hospital would have received under section 1886(d)(5)(F) of the Act for DSH payments, which represents the empirically justified amount for such payment, as determined by the MedPAC in its March 2007 Report to Congress. We refer to this payment as the “empirically justified Medicare DSH payment.”

In addition to this empirically justified Medicare DSH payment, section 1886(r)(2) of the Act provides that, for FY 2014 and each subsequent fiscal year, the Secretary shall pay to such subsection (d) hospital an additional amount equal to the product of three factors. The first factor is the difference between the aggregate amount of payments that would be made to subsection (d) hospitals under section 1886(d)(5)(F) of the Act if subsection (r) did not apply and the aggregate amount of payments that are made to subsection (d) hospitals under section 1886(r)(1) of the Act for such fiscal year. Therefore, this factor amounts to 75 percent of the payments that would otherwise be made under section 1886(d)(5)(F) of the Act.

The second factor is, for FY 2018 and subsequent fiscal years, 1 minus the percent change in the percent of individuals who are uninsured, as determined by comparing the percent of individuals who were uninsured in 2013 (as estimated by the Secretary, based on data from the Census Bureau or other sources the Secretary determines appropriate, and certified by the Chief Actuary of CMS), and the percent of individuals who were uninsured in the most recent period for which data are available (as so estimated and certified), minus statutory adjustment of 0.2 percentage point for FYs 2018 and 2019.

The third factor is a percent that, for each subsection (d) hospital, represents the quotient of the amount of uncompensated care for such hospital for a period selected by the Secretary (as estimated by the Secretary, based on appropriate data), including the use of alternative data where the Secretary determines that alternative data are available which are a better proxy for the costs of subsection (d) hospitals for treating the uninsured, and the aggregate amount of uncompensated care for all subsection (d) hospitals that receive a payment under section 1886(r) of the Act. Therefore, this third factor represents a hospital's uncompensated care amount for a given time period relative to the uncompensated care amount for that same time period for all hospitals that receive Medicare DSH payments in the applicable fiscal year, expressed as a percent.

For each hospital, the product of these three factors represents its additional payment for uncompensated care for the applicable fiscal year. We refer to the additional payment determined by these factors as the “uncompensated care payment.”

Section 1886(r) of the Act applies to FY 2014 and each subsequent fiscal year. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50620 through 50647) and the FY 2014 IPPS interim final rule with comment period (78 FR 61191 through 61197), we set forth our policies for implementing the required changes to the Medicare DSH payment methodology made by section 3133 of the Affordable Care Act for FY 2014. In those rules, we noted that, because section 1886(r) of the Act modifies the payment required under section 1886(d)(5)(F) of the Act, it affects only the DSH payment under the operating IPPS. It does not revise or replace the capital IPPS DSH payment provided under the regulations at 42 CFR part 412, subpart M, which were established through the exercise of the Secretary's discretion in implementing the capital IPPS under section 1886(g)(1)(A) of the Act.

Finally, section 1886(r)(3) of the Act provides that there shall be no administrative or judicial review under section 1869, section 1878, or otherwise of any estimate of the Secretary for purposes of determining the factors described in section 1886(r)(2) of the Act or of any period selected by the Secretary for the purpose of determining those factors. Therefore, there is no administrative or judicial review of the estimates developed for purposes of applying the three factors used to determine uncompensated care payments, or the periods selected in order to develop such estimates.

2. Eligibility for Empirically Justified Medicare DSH Payments and Uncompensated Care Payments

As explained earlier, the payment methodology under section 3133 of the Affordable Care Act applies to “subsection (d) hospitals” that would otherwise receive a DSH payment made under section 1886(d)(5)(F) of the Act. Therefore, hospitals must receive empirically justified Medicare DSH payments in a fiscal year in order to receive an additional Medicare uncompensated care payment for that year. Specifically, section 1886(r)(2) of the Act states that, in addition to the payment made to a subsection (d) hospital under section 1886(r)(1) of the Act, the Secretary shall pay to such subsection (d) hospitals an additional amount. Because section 1886(r)(1) of the Act refers to empirically justified Medicare DSH payments, the additional payment under section 1886(r)(2) of the Act is limited to hospitals that receive empirically justified Medicare DSH payments in accordance with section 1886(r)(1) of the Act for the applicable fiscal year.

In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50622) and the FY 2014 IPPS interim final rule with comment period (78 FR 61193), we provided that hospitals that are not eligible to receive empirically justified Medicare DSH payments in a fiscal year will not receive uncompensated care payments for that year. We also specified that we would make a determination concerning eligibility for interim uncompensated care payments based on each hospital's estimated DSH status for the applicable fiscal year (using the most recent data that are available). We indicated that our final determination on the hospital's eligibility for uncompensated care payments will be based on the hospital's actual DSH status at cost report settlement for that payment year.

In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50622) and in the rulemaking for subsequent fiscal years, we have specified our policies for several specific classes of hospitals within the scope of section 1886(r) of the Act. In this FY 2021 IPPS/LTCH PPS final rule, we discuss our specific policies regarding eligibility to receive empirically justified Medicare DSH payments and uncompensated care payments for FY 2021 with respect to the following hospitals:

• Subsection (d) Puerto Rico hospitals that are eligible for DSH payments also are eligible to receive empirically justified Medicare DSH payments and uncompensated care payments under the payment methodology at section 1886(r) (78 FR 50623 and 79 FR 50006).
• Maryland hospitals are not eligible to receive empirically justified Medicare DSH payments and uncompensated care payments under the payment methodology of section 1886(r) of the Act because they are not paid under the IPPS. As discussed in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41402 through 41403), CMS and the State have entered into an agreement to govern payments to Maryland hospitals under a new payment model, the Maryland Total Cost of Care (TCOC) Model, which began on January 1, 2019. Under the Maryland TCOC Model, Maryland hospitals will not be paid under the IPPS in FY 2021, and will be ineligible to receive empirically justified Medicare DSH payments and uncompensated care payments under section 1886(r) of the Act.
• Sole community hospitals (SCHs) that are paid under their hospital-specific rate are not eligible for Medicare DSH payments. SCHs that are paid under the IPPS Federal rate receive interim payments based on what we estimate and project their DSH status to be prior to the beginning of the Federal fiscal year (based on the best available data at that time) subject to settlement through the cost report, and if they receive interim empirically justified Medicare DSH payments in a fiscal year, they also will receive interim uncompensated care payments for that fiscal year on a per discharge basis, subject as well to settlement through the cost report. Final eligibility determinations will be made at the end of the cost reporting period at settlement, and both interim empirically justified Medicare DSH payments and uncompensated care payments will be adjusted accordingly (78 FR 50624 and 79 FR 50007).
• Medicare-dependent, small rural hospitals (MDHs) are paid based on the IPPS Federal rate or, if higher, the IPPS Federal rate plus 75 percent of the amount by which the Federal rate is exceeded by the updated hospital-specific rate from certain specified base years (76 FR 51684). The IPPS Federal rate that is used in the MDH payment methodology is the same IPPS Federal rate that is used in the SCH payment methodology. Section 50205 of the Bipartisan Budget Act of 2018 (Pub. L. 115-123), enacted on February 9, 2018, extended the MDH program for discharges on or after October 1, 2017, through September 30, 2022. Because MDHs are paid based on the IPPS Federal rate, they continue to be eligible to receive empirically justified Medicare DSH payments and uncompensated care payments if their DPP is at least 15 percent, and we apply the same process to determine MDHs' eligibility for empirically justified Medicare DSH and uncompensated care payments as we do for all other IPPS hospitals. Due to the extension of the MDH program, MDHs will continue to be paid based on the IPPS Federal rate or, if higher, the IPPS Federal rate plus 75 percent of the amount by which the Federal rate is exceeded by the updated hospital-specific rate from certain specified base years. Accordingly, we will continue to make a determination concerning eligibility for interim uncompensated care payments based on each hospital's estimated DSH status for the applicable fiscal year (using the most recent data that are available). Our final determination on the hospital's eligibility for uncompensated care payments will be based on the hospital's actual DSH status at cost report settlement for that payment year. In addition, as we do for all IPPS hospitals, we will calculate a Factor 3 and an uncompensated care payment amount for all MDHs, regardless of whether they are projected to be eligible for Medicare DSH payments during the fiscal year, but the denominator of Factor 3 of the uncompensated care payment methodology will be based only on the uncompensated care data from the hospitals that we have projected to be eligible for Medicare DSH payments during the fiscal year.
• IPPS hospitals that elect to participate in the Bundled Payments for Care Improvement Advanced Initiative (BPCI Advanced) model starting October 1, 2018, will continue to be paid under the IPPS and, therefore, are eligible to receive empirically justified Medicare DSH payments and uncompensated care payments. For further information regarding the BPCI Advanced model, we refer readers to the CMS website at: https://innovation.cms.gov/initiatives/bpci-advanced/ .
• IPPS hospitals that are participating in the Comprehensive Care for Joint Replacement Model (80 FR 73300) continue to be paid under the IPPS and, therefore, are eligible to receive empirically justified Medicare DSH payments and uncompensated care payments.
• Hospitals participating in the Rural Community Hospital Demonstration Program are not eligible to receive empirically justified Medicare DSH payments and uncompensated care payments under section 1886(r) of the Act because they are not paid under the IPPS (78 FR 50625 and 79 FR 50008). The Rural Community Hospital Demonstration Program was originally authorized for a 5-year period by section 410A of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173), and extended for another 5-year period by sections 3123 and 10313 of the Affordable Care Act (Pub. L. 114-255). The period of performance for this 5-year extension period ended December 31, 2016. Section 15003 of the 21st Century Cures Act (Pub. L. 114-255), enacted December 13, 2016, again amended section 410A of Public Law 108-173 to require a 10-year extension period (in place of the 5-year extension required by the Affordable Care Act), therefore requiring an additional 5-year participation period for the demonstration program. Section 15003 of Public Law 114-255 also required a solicitation for applications for additional hospitals to participate in the demonstration program. At the time of issuance of this final rule, there are 22 hospitals that will be participating in the demonstration program in FY 2021. Under the payment methodology that applies during the second 5 years of the extension period under the demonstration program, participating hospitals do not receive empirically justified Medicare DSH payments, and they are also excluded from receiving interim and final uncompensated care payments.

Comment: A commenter stated that their hospital has recently submitted its fiscal year end 12/31/2019 cost report and that due to the Medicaid Expansion in their respective state, the hospital believed it would qualify for DSH and uncompensated care payments in FY 2021 based on the information reflected in this submission. However, the commenter noted that the FY 2021 NPRM DSH Public Use File lists the hospital as a “No” in the column for projected DSH eligibility because the data used in the proposed rule was based on a cost report year pre-Medicaid expansion. The commenter asks CMS to consider updating their hospital's DSH eligibility status and using its recently submitted as-filed cost report in the final rule's FY 2021 DSH PUF File for purposes of projected DSH eligibility.

Response: The regulation located at 42 CFR 412.106 governs eligibility for the Medicare DSH payment adjustment and specifies how the disproportionate patient percentage is calculated. The DSH public use file does not determine DSH eligibility. A hospital's eligibility to receive empirically justified DSH payments, can change throughout the year as the MACs receive and review updated data.

3. Empirically Justified Medicare DSH Payments

As we have discussed earlier, section 1886(r)(1) of the Act requires the Secretary to pay 25 percent of the amount of the Medicare DSH payment that would otherwise be made under section 1886(d)(5)(F) of the Act to a subsection (d) hospital. Because section 1886(r)(1) of the Act merely requires the program to pay a designated percentage of these payments, without revising the criteria governing eligibility for DSH payments or the underlying payment methodology, we stated in the FY 2014 IPPS/LTCH PPS final rule that we did not believe that it was necessary to develop any new operational mechanisms for making such payments. Therefore, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50626), we implemented this provision by advising MACs to simply adjust the interim claim payments to the requisite 25 percent of what would have otherwise been paid. We also made corresponding changes to the hospital cost report so that these empirically justified Medicare DSH payments can be settled at the appropriate level at the time of cost report settlement. We provided more detailed operational instructions and cost report instructions following issuance of the FY 2014 IPPS/LTCH PPS final rule that are available on the CMS website at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2014-Transmittals-Items/R5P240.html .

4. Uncompensated Care Payments

As we discussed earlier, section 1886(r)(2) of the Act provides that, for each eligible hospital in FY 2014 and subsequent years, the uncompensated care payment is the product of three factors. These three factors represent our estimate of 75 percent of the amount of Medicare DSH payments that would otherwise have been paid, an adjustment to this amount for the percent change in the national rate of uninsurance compared to the rate of uninsurance in 2013, and each eligible hospital's estimated uncompensated care amount relative to the estimated uncompensated care amount for all eligible hospitals. In this section of this final rule, we discuss the data sources and methodologies for computing each of these factors, our final policies for FYs 2014 through 2020, and the policies we are finalizing for FY 2021.

a. Calculation of Factor 1 for FY 2021

Section 1886(r)(2)(A) of the Act establishes Factor 1 in the calculation of the uncompensated care payment. Section 1886(r)(2)(A) of the Act states that this factor is equal to the difference between: (1) The aggregate amount of payments that would be made to subsection (d) hospitals under section 1886(d)(5)(F) of the Act if section 1886(r) of the Act did not apply for such fiscal year (as estimated by the Secretary); and (2) the aggregate amount of payments that are made to subsection (d) hospitals under section 1886(r)(1) of the Act for such fiscal year (as so estimated). Therefore, section 1886(r)(2)(A)(i) of the Act represents the estimated Medicare DSH payments that would have been made under section 1886(d)(5)(F) of the Act if section 1886(r) of the Act did not apply for such fiscal year. Under a prospective payment system, we would not know the precise aggregate Medicare DSH payment amount that would be paid for a Federal fiscal year until cost report settlement for all IPPS hospitals is completed, which occurs several years after the end of the Federal fiscal year. Therefore, section 1886(r)(2)(A)(i) of the Act provides authority to estimate this amount, by specifying that, for each fiscal year to which the provision applies, such amount is to be estimated by the Secretary. Similarly, section 1886(r)(2)(A)(ii) of the Act represents the estimated empirically justified Medicare DSH payments to be made in a fiscal year, as prescribed under section 1886(r)(1) of the Act. Again, section 1886(r)(2)(A)(ii) of the Act provides authority to estimate this amount.

Therefore, Factor 1 is the difference between our estimates of: (1) The amount that would have been paid in Medicare DSH payments for the fiscal year, in the absence of the new payment provision; and (2) the amount of empirically justified Medicare DSH payments that are made for the fiscal year, which takes into account the requirement to pay 25 percent of what would have otherwise been paid under section 1886(d)(5)(F) of the Act. In other words, this factor represents our estimate of 75 percent (100 percent minus 25 percent) of our estimate of Medicare DSH payments that would otherwise be made, in the absence of section 1886(r) of the Act, for the fiscal year.

As we did for FY 2020, in this FY 2021 IPPS/LTCH PPS final rule, in order to determine Factor 1 in the uncompensated care payment formula for FY 2021, we proposed to continue the policy established in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50628 through 50630) and in the FY 2014 IPPS interim final rule with comment period (78 FR 61194) of determining Factor 1 by developing estimates of both the aggregate amount of Medicare DSH payments that would be made in the absence of section 1886(r)(1) of the Act and the aggregate amount of empirically justified Medicare DSH payments to hospitals under 1886(r)(1) of the Act. Consistent with the policy that has applied in previous years, these estimates will not be revised or updated subsequent to the publication of our final projections in this FY 2021 IPPS/LTCH PPS final rule.

Therefore, in order to determine the two elements of Factor 1 for FY 2021 (Medicare DSH payments prior to the application of section 1886(r)(1) of the Act, and empirically justified Medicare DSH payments after application of section 1886(r)(1) of the Act), for this final rule, we used the most recently available projections of Medicare DSH payments for the fiscal year, as calculated by CMS' Office of the Actuary using the most recently filed Medicare hospital cost reports with Medicare DSH payment information and the most recent Medicare DSH patient percentages and Medicare DSH payment adjustments provided in the IPPS Impact File. The determination of the amount of DSH payments is partially based on the Office of the Actuary's Part A benefits projection model. One of the results of this model is inpatient hospital spending. Projections of DSH payments require projections for expected increases in utilization and case-mix. The assumptions that were used in making these projections and the resulting estimates of DSH payments for FY 2018 through FY 2021 are discussed in the table titled “Factors Applied for FY 2018 through FY 2021 to Estimate Medicare DSH Expenditures Using FY 2017 Baseline.”

For purposes of calculating our proposal for Factor 1 and modeling the impact of the FY 2021 IPPS/LTCH PPS proposed rule, we used the Office of the Actuary's December 2019 Medicare DSH estimates, which were based on data from the September 2019 update of the Medicare Hospital Cost Report Information System (HCRIS) and the FY 2020 IPPS/LTCH PPS final rule IPPS Impact File, published in conjunction with the publication of the FY 2020 IPPS/LTCH PPS final rule. Because SCHs that are projected to be paid under their hospital-specific rate are excluded from the application of section 1886(r) of the Act, these hospitals also were excluded from the December 2019 Medicare DSH estimates. Furthermore, because section 1886(r) of the Act specifies that the uncompensated care payment is in addition to the empirically justified Medicare DSH payment (25 percent of DSH payments that would be made without regard to section 1886(r) of the Act), Maryland hospitals, which are not eligible to receive DSH payments, were also excluded from the Office of the Actuary's December 2019 Medicare DSH estimates. The 27 hospitals that were then participating in the Rural Community Hospital Demonstration Program were also excluded from these estimates because, under the payment methodology that applies during the second 5 years of the extension period, these hospitals are not eligible to receive empirically justified Medicare DSH payments or interim and final uncompensated care payments.

For the proposed rule, using the data sources as previously discussed, the Office of the Actuary's December 2019 estimate for Medicare DSH payments for FY 2021 without regard to the application of section 1886(r)(1) of the Act, was approximately $14.004 billion. Therefore, also based on the December 2019 estimate, the estimate of empirically justified Medicare DSH payments for FY 2021, with the application of section 1886(r)(1) of the Act, was approximately $3.840 billion (or 25 percent of the total amount of estimated Medicare DSH payments for FY 2021). Under § 412.106(g)(1)(i) of the regulations, Factor 1 is the difference between these two estimates of the Office of the Actuary. Therefore, in the proposed rule, we proposed that Factor 1 for FY 2021 would be $ 11,518,901,035.84, which was equal to 75 percent of the total amount of estimated Medicare DSH payments for FY 2021 ($15,358,534,714.46 minus $3,839,633,678.61). In the FY 20201 IPPS/LTCH PPS proposed rule (85 FR 32748), we noted that consistent with our approach in previous rulemakings, OACT intended to use more recent data that may become available for purposes of projecting the final Factor 1 estimates for the FY 2021 IPPS/LTCH PPS final rule.

We noted in the FY 2021 IPPS/LTCH PPS proposed rule, that the Factor 1 estimates for final rules are generally consistent with the economic assumptions and actuarial analysis used to develop the President's Budget estimates under current law, and the Factor 1 estimates for the final rule are generally consistent with those used for the Midsession Review of the President's Budget. As we have in the past, for additional information on the development of the President's Budget, we refer readers to the OMB website at: https://www.whitehouse.gov/omb/budget . We recognized that our reliance on the economic assumptions and actuarial analysis used to develop the President's Budget in estimating Factor 1 has an impact on stakeholders who wish to replicate the Factor 1 calculation, such as modelling the relevant Medicare Part A portion of the budget, but indicated that we believe commenters are able to meaningfully comment on our estimate of Factor 1 without replicating the President's Budget.

For a general overview of the principal steps involved in projecting future inpatient costs and utilization, we referred readers to the “2019 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds” available on the CMS website at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/ index.html?redirect=/reportstrustfunds/ under “Downloads.” We noted that the annual reports of the Medicare Boards of Trustees to Congress represent the Federal Government's official evaluation of the financial status of the Medicare Program. The actuarial projections contained in these reports are based on numerous assumptions regarding future trends in program enrollment, utilization and costs of health care services covered by Medicare, as well as other factors affecting program expenditures. In addition, although the methods used to estimate future costs based on these assumptions are complex, they are subject to periodic review by independent experts to ensure their validity and reasonableness.

In the FY 2021 IPPS/LTCH PPS proposed rule, we referred readers to the 2017 Actuarial Report on the Financial Outlook for Medicaid for a discussion of general issues regarding Medicaid projections. (available at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/MedicaidReport ).

Comment: As in previous years, a common concern and/or request expressed by some commenters was the need for greater transparency in the methodology used by CMS and OACT to calculate Factor 1; several commenters specifically requested that a detailed description of the methodology be made public. In relation to this, a commenter asserted that the lack of opportunity afforded to hospitals to review the data used in rulemaking is in violation of the Administrative Procedure Act and expressed concerns about the lack of transparency in how Factor 1 is calculated, arguing that hospitals cannot meaningfully comment on the methodology given the lack of details. In particular, this commenter asserted that the proposed rule neither explained the assumption that Medicaid expansion would draw enrollees who are healthier than the average Medicaid beneficiary and, by extension, would have fewer hospital visits, nor described the data CMS used in making this assumption.

Response: We thank the commenters for their input. We disagree with commenters' assertion regarding the lack of transparency with respect to the methodology and assumptions used in the calculation of Factor 1. As explained in the FY 2021 IPPS/LTCH PPS proposed rule, and in this section of this final rule, we have been and continue to be transparent about the methodology and data used to estimate Factor 1. Regarding the commenters who reference the Administrative Procedure Act, we note that under the Administrative Procedure Act, a proposed rule is required to include either the terms or substance of the proposed rule or a description of the subjects and issues involved. In this case, the FY 2021 IPPS/LTCH PPS proposed rule did include a detailed discussion of our proposed Factor 1 methodology and the data sources that would be used in making our final estimate.

To provide context, we note that Factor 1 is not estimated in isolation from other projections made by OACT. The Factor 1 estimates for proposed rules are generally consistent with the economic assumptions and actuarial analysis used to develop the President's Budget estimates under current law, and the Factor 1 estimates in this final rule are generally consistent with those used for the “2020 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds” available on the CMS website at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/index.html under “Downloads.” For additional information on the development of the President's Budget, we refer readers to the OMB website at: https://www.whitehouse.gov/omb/budget . We recognize that our reliance on the economic assumptions and actuarial analysis used to develop the President's Budget and the Medicare Trustees Report in estimating Factor 1 has an impact on stakeholders who wish to replicate the Factor 1 calculation, such as modelling the relevant Medicare Part A portion of the budget, but we believe commenters are able to meaningfully comment on our proposed estimate of Factor 1 without replicating the budget.

For a general overview of the principal steps involved in projecting future inpatient costs and utilization, we refer readers to the 2020 Medicare Trustees Report. We note that the annual reports of the Medicare Boards of Trustees to Congress represent the Federal Government's official evaluation of the financial status of the Medicare Program. The actuarial projections contained in these reports are based on numerous assumptions regarding future trends in program enrollment, utilization and costs of health care services covered by Medicare, as well as other factors affecting program expenditures. In addition, although the methods used to estimate future costs based on these assumptions are complex, they are subject to periodic review by independent experts to ensure their validity and reasonableness.

We also refer readers to the 2018 Actuarial Report on the Financial Outlook for Medicaid which is available on the CMS website at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/Downloads/MedicaidReport2018.pdf for a discussion of general issues regarding Medicaid projections. Additionally, as described in more detail later in this section, in the FY 2021 IPPS/LTCH PPS proposed rule, we included information regarding the data sources, methods, and assumptions employed by the actuaries in determining the OACT's estimate of Factor 1. In summary, we indicated the historical HCRIS data update OACT used to identify Medicare DSH payments, we explained that the most recent Medicare DSH payment adjustments provided in the IPPS Impact File were used, and we provided the components of all update factors that were applied to the historical data to estimate the Medicare DSH payments for the upcoming fiscal year, along with the associated rationale and assumptions. This discussion also included a description of the “Other” and “Discharges” assumptions, as well as additional information regarding how we address the Medicaid and CHIP expansion.

Regarding the commenters' requests for further information on our assumptions regarding Medicaid expansion on the Medicaid population, we provide a discussion of more recent estimates and assumptions regarding Medicaid expansion as part of the discussion of the final Factor 1 for FY 2021, which also incorporates the estimated impact of the COVID-19 pandemic.

Comment: The majority of comments on Factor 1 raised concerns regarding the adverse economic effects resulting from the COVID-19 Public Health Emergency (PHE) and the impact on the estimate of Factor 1. A common concern raised by commenters was the discrepancy between the current macroeconomic conditions and the actual inputs used to estimate Factor 1 in the FY 2021 IPPS/LTCH PPS proposed rule. A commenter pointed out that the Factor 1 estimate used in the FY 2021 Final Rule would normally be generally consistent with the assumptions and projections in the Midsession Review of the President's Budget; however, the commenter noted that the Midsession Review for FY 2021 did not report updated economic assumptions and hence would not account for the impact that the COVID-19 PHE has had and will continue to have on empirically justified DSH payments. This commenter stated that even in the absence of updated Midsession Review projections, OACT remains obligated to account for COVID-19 in projecting the amount of empirically justified Medicare DSH payments by using the latest economic forecasts from reliable sources. As in years past, this commenter, as well as many others, also emphasized the importance of the “Other” factor used in the calculation of Factor 1 and highlighted the impact that the increase in Medicaid enrollment associated with the adverse economic effects of the COVID-19 PHE would have on this factor. A handful of commenters also requested that CMS clarify why the “Other” factor, as well as the case-mix and discharge factors, have decreased as compared to previous years. A commenter believed that there would be increasing Medicaid utilization due to the pandemic and referred to the funding for COVID-19 testing and treatment for uninsured individuals made available under the Families First Coronavirus Response Act and CARES Act. This same commenter also believed staggering levels of unemployment would contribute to increased Medicaid utilization until the pandemic passes and the economy stabilizes.

Commenters highlighted the proposed decrease in Factor 1 of $919 million from FY 2020 to FY 2021 and cited several data sources that they believe would indicate that such a decrease in estimated DSH payments would be inconsistent with the current economic situation. For example, several commenters pointed out that, according to the Congressional Budget Office (CBO), the unemployment rate is projected to be 9.5 percent by the end of FY 2021, which in turn would indicate an increase in Medicaid enrollment. Many commenters also cited estimates by the Urban Institute, which estimated that 12 to 21 million people would become eligible for Medicaid as a result of losing Employer-Sponsored Insurance (ESI) due to the COVID-19 PHE. Commenters also referenced a Kaiser Family Foundation estimate that 27 million would lose ESI as of May 2, 2020, with nearly half being eligible for Medicaid. A few commenters also referenced estimates generated by independent consulting firms, one of which predicted Medicaid enrollment would increase by 30 million as a result of the adverse economic effects from the COVID-19 PHE. To this end, many stakeholders urged CMS to use more recent, or alternative data sources, to account for the projected increase in Medicaid beneficiaries in the calculation of Factor 1.

A commenter also observed that due to the COVID-19 PHE, disproportionate patient percentages (DPPs) would be expected to increase nationwide in FY 2021, increasing the projected amount of traditional DSH payments above the levels originally projected based on the economic assumptions and actuarial analysis used in the President's Budget. Finally, a handful of commenters raised the issue of deferral of inpatient non-emergency services due to the COVID-19 PHE, suggesting that these services would likely be shifted to next year, and expressing concern about the impact that this shift might have on the calculation of Factor 1 for FY 2021. Some commenters suggested that the agency take into account the shift in hospital payer mix resulting from the COVID-19 PHE, as well as hospital case volume degradation, when updating its estimates of DSH payments.

Response: We have taken into consideration the concerns commenters have raised as a result of the COVID-19 PHE in making our projection of Factor 1 for this FY 2021 IPPS/LTCH PPS final rule. We thank the commenters for their input on impact projections, such as the impact on Medicaid enrollment from the COVID-19 PHE. In updating our estimate of Factor 1, we considered, as appropriate, the same set of factors that we used in the proposed rule, as updated to account for the unique economic situation presented by the COVID-19 PHE. We note that the estimated increases in new Medicaid enrollees used for Factor 1 are generally consistent with the updated Factor 2 calculation described in the next section. The updated factors for “Discharges” and ”Case Mix” incorporate the latest estimates from OACT of the impact of COVID-19 on the Medicare program. We discuss further details on the updated Factor 1 estimate and data sources in this section of the rule as part of the discussion of the final Factor 1 estimate for FY 2021.

After consideration of the public comments we received, we are finalizing, as proposed, the methodology for calculating Factor 1 for FY 2021. We discuss the resulting Factor 1 amount for FY 2021 in this section. For this final rule, the OACT used the most recently submitted Medicare cost report data from the March 31, 2020 update of HCRIS to identify Medicare DSH payments and the most recent Medicare DSH payment adjustments provided in the Impact File published in conjunction with the publication of the FY 2020 IPPS/LTCH PPS final rule and applied update factors and assumptions for future changes in utilization and case-mix to estimate Medicare DSH payments for the upcoming fiscal year. The July 2020 OACT estimate for Medicare DSH payments for FY 2021, without regard to the application of section 1886(r)(1) of the Act, was approximately $15.171 billion. This estimate excluded Maryland hospitals participating in the Maryland All-Payer Model, hospitals participating in the Rural Community Hospital Demonstration, and SCHs paid under their hospital-specific payment rate. Therefore, based on the July 2020 estimate, the estimate of empirically justified Medicare DSH payments for FY 2021, with the application of section 1886(r)(1) of the Act, was approximately $3.793 billion (or 25 percent of the total amount of estimated Medicare DSH payments for FY 2021). Under § 412.106(g)(1)(i) of the regulations, Factor 1 is the difference between these two estimates of the OACT. Therefore, in this final rule, Factor 1 for FY 2021 is $11,378,005,107.01, which is equal to 75 percent of the total amount of estimated Medicare DSH payments for FY 2021 ($15,170,673,476.01 minus $ 3,792,668,369.00). The Office of the Actuary's final estimates for FY 2021 began with a baseline of $14.004 billion in Medicare DSH expenditures for FY 2017. The following table shows the factors applied to update this baseline through the current estimate for FY 2021:

In this table, the discharges column shows the changes in the number of Medicare fee-for-service (FFS) inpatient hospital discharges. The figures for FY 2018 and FY 2019 are based on Medicare claims data that have been adjusted by a completion factor to account for incomplete claims data. The discharge figure for FY 2020 is based on preliminary data for 2020. The discharge figure for FY 2021 is an assumption based on recent trends recovering back to the long-term trend and assumptions related to how many beneficiaries will be enrolled in Medicare Advantage (MA) plans. The discharge figures for 2020 and 2021 include the estimated impact of the COVID-19 pandemic. The case-mix column shows the estimated changes in case-mix for IPPS hospitals. The case-mix figures for FY 2018 and FY 2019 are based on actual data adjusted by a completion factor. The FY 2020 increase is based on preliminary data. The FY 2021 figure is an estimate based on the recommendation of the 2010-2011 Medicare Technical Review Panel. The case-mix factor figures for 2020 and 2021 have also been adjusted for the estimated impact of the COVID-19 pandemic. The “Other” column shows the increase in other factors that contribute to the Medicare DSH estimates. These factors include the difference between the total inpatient hospital discharges and the IPPS discharges, and various adjustments to the payment rates that have been included over the years but are not reflected in the other columns (such as the change in rates for the 2-midnight stay policy and the 20 percent add on for COVID-19 discharges). In addition, the “Other” column includes a factor for the Medicaid expansion due to the Affordable Care Act. The factor for Medicaid expansion was developed using public information and statements for each State regarding its intent to implement the expansion. Based on this information, it is assumed that 55 percent of all individuals who were potentially newly eligible Medicaid enrollees in 2018 and 2019 resided in States that had elected to expand Medicaid eligibility, and 60 percent of all individuals who were potentially newly eligible Medicaid enrollees in 2020 and thereafter, resided in States that had elected to expand Medicaid eligibility. In the future, these assumptions may change based on actual participation by States. The “Other” column also includes the estimated impacts on Medicaid enrollment from the pandemic. We note that it is estimated that Medicaid enrollment increased by 4.0 percent in FY 2020 and will increase by an additional 0.3 percent in FY 2021. For a discussion of general issues regarding Medicaid projections, we refer readers to the 2018 Actuarial Report on the Financial Outlook for Medicaid, which is available on the CMS website at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/Downloads/MedicaidReport2018.pdf . We note that, in developing their estimates of the effect of Medicaid expansion on Medicare DSH expenditures, our actuaries have assumed that the new Medicaid enrollees are healthier than the average Medicaid recipient and, therefore, use fewer hospital services. Specifically, based on data from the President's Budget, the OACT assumed per capita spending for Medicaid beneficiaries who enrolled due to the expansion to be 81 percent of the average per capita expenditures for a pre-expansion Medicaid beneficiary due to the better health of these beneficiaries. We note that this is an updated assumption based on more recent data compared to the data available at the time of the proposed rule. This same assumption was used for the new Medicaid beneficiaries who enrolled in 2020 and 2021 due to the COVID-19 pandemic. This assumption is consistent with recent internal estimates of Medicaid per capita spending pre-expansion and post-expansion.

The following table shows the factors that are included in the “Update” column of the previous table:

b. Calculation of Factor 2 for FY 2021

(1) Background

Section 1886(r)(2)(B) of the Act establishes Factor 2 in the calculation of the uncompensated care payment. Section 1886(r)(2)(B)(ii) of the Act provides that, for FY 2018 and subsequent fiscal years, the second factor is 1 minus the percent change in the percent of individuals who are uninsured, as determined by comparing the percent of individuals who were uninsured in 2013 (as estimated by the Secretary, based on data from the Census Bureau or other sources the Secretary determines appropriate, and certified by the Chief Actuary of CMS) and the percent of individuals who were uninsured in the most recent period for which data are available (as so estimated and certified), minus a statutory adjustment of 0.2 percentage point for FYs 2018 and 2019. In FY 2020 and subsequent fiscal years, there is no longer a reduction. We note that, unlike section 1886(r)(2)(B)(i) of the Act, which governed the calculation of Factor 2 for FYs 2014, 2015, 2016, and 2017, section 1886(r)(2)(B)(ii) of the Act permits the use of a data source other than the CBO estimates to determine the percent change in the rate of uninsurance beginning in FY 2018. In addition, for FY 2018 and subsequent years, the statute does not require that the estimate of the percent of individuals who are uninsured be limited to individuals who are under 65 years of age.

As we discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38197), in our analysis of a potential data source for the rate of uninsurance for purposes of computing Factor 2 in FY 2018, we considered the following: (a) The extent to which the source accounted for the full U.S. population; (b) the extent to which the source comprehensively accounted for both public and private health insurance coverage in deriving its estimates of the number of uninsured; (c) the extent to which the source utilized data from the Census Bureau; (d) the timeliness of the estimates; (e) the continuity of the estimates over time; (f) the accuracy of the estimates; and (g) the availability of projections (including the availability of projections using an established estimation methodology that would allow for calculation of the rate of uninsurance for the applicable Federal fiscal year). As we explained in the FY 2018 IPPS/LTCH PPS final rule, these considerations are consistent with the statutory requirement that this estimate be based on data from the Census Bureau or other sources the Secretary determines appropriate and help to ensure the data source will provide reasonable estimates for the rate of uninsurance that are available in conjunction with the IPPS rulemaking cycle. In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32750), we proposed to use the same methodology as was used in FY 2018 through FY 2020 to determine Factor 2 for FY 2021.

In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38197 and 38198), we explained that we had determined that the source that, on balance, best meets all of these considerations is the uninsured estimates produced by CMS' Office of the Actuary (OACT) as part of the development of the National Health Expenditure Accounts (NHEA). The NHEA represents the government's official estimates of economic activity (spending) within the health sector. The information contained in the NHEA has been used to study numerous topics related to the health care sector, including, but not limited to, changes in the amount and cost of health services purchased and the payers or programs that provide or purchase these services; the economic causal factors at work in the health sector; the impact of policy changes, including major health reform; and comparisons to other countries' health spending. Of relevance to the determination of Factor 2 is that the comprehensive and integrated structure of the NHEA creates an ideal tool for evaluating changes to the health care system, such as the mix of the insured and uninsured, because this information is integral to the well-established NHEA methodology. In the FY 2021 IPPS/LTCH PPS proposed rule, we described some aspects of the methodology used to develop the NHEA that were particularly relevant in estimating the percent change in the rate of uninsurance for FY 2018 through FY 2020 that we believe continue to be relevant in developing the estimate for FY 2021. A full description of the methodology used to develop the NHEA is available on the CMS website at: https://www.cms.gov/files/document/definitions-sources-and-methods.pdf .

The NHEA estimates of U.S. population reflect the Census Bureau's definition of the resident-based population, which includes all people who usually reside in the 50 States or the District of Columbia, but excludes residents living in Puerto Rico and areas under U.S. sovereignty, members of the U.S. Armed Forces overseas, and U.S. citizens whose usual place of residence is outside of the United States, plus a small (typically less than 0.2 percent of population) adjustment to reflect Census undercounts. In past years, the estimates for Factor 2 were made using the CBO's uninsured population estimates for the under 65 population. For FY 2018 and subsequent years, the statute does not restrict the estimate to the measurement of the percent of individuals under the age of 65 who are uninsured. Accordingly, as we explained in the FY 2018 IPPS/LTCH PPS proposed and final rules, we believe it is appropriate to use an estimate that reflects the rate of uninsurance in the United States across all age groups. In addition, we continue to believe that a resident-based population estimate more fully reflects the levels of uninsurance in the United States that influence uncompensated care for hospitals than an estimate that reflects only legal residents. The NHEA estimates of uninsurance are for the total U.S. population (all ages) and not by specific age cohort, such as the population under the age of 65.

The NHEA includes comprehensive enrollment estimates for total private health insurance (PHI) (including direct and employer-sponsored plans), Medicare, Medicaid, the Children's Health Insurance Program (CHIP), and other public programs, and estimates of the number of individuals who are uninsured. Estimates of total PHI enrollment are available for 1960 through 2018, estimates of Medicaid, Medicare, and CHIP enrollment are available for the length of the respective programs, and all other estimates (including the more detailed estimates of direct-purchased and employer-sponsored insurance) are available for 1987 through 2018. The NHEA data are publicly available on the CMS website at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/index.html .

In order to compute Factor 2, the first metric that is needed is the proportion of the total U.S. population that was uninsured in 2013. In developing the estimates for the NHEA, OACT's methodology included using the number of uninsured individuals for 1987 through 2009 based on the enhanced Current Population Survey (CPS) from the State Health Access Data Assistance Center (SHADAC). The CPS, sponsored jointly by the U.S. Census Bureau and the U.S. Bureau of Labor Statistics (BLS), is the primary source of labor force statistics for the population of the United States. (We refer readers to the website at: http://www.census.gov/programs-surveys/cps.html .) The enhanced CPS, available from SHADAC (available at: http://datacenter.shadac.org ) accounts for changes in the CPS methodology over time. OACT further adjusts the enhanced CPS for an estimated undercount of Medicaid enrollees (a population that is often not fully captured in surveys that include Medicaid enrollees due to a perceived stigma associated with being enrolled in the Medicaid program or confusion about the source of their health insurance).

To estimate the number of uninsured individuals for 2010 through 2018, the OACT extrapolates from the 2009 CPS data using data from the National Health Interview Survey (NHIS). The NHIS is one of the major data collection programs of the National Center for Health Statistics (NCHS), which is part of the CDC. The U.S. Census Bureau is the data collection agent for the NHIS. The NHIS results have been instrumental over the years in providing data to track health status, health care access, and progress toward achieving national health objectives. For further information regarding the NHIS, we refer readers to the CDC website at: https://www.cdc.gov/nchs/nhis/index.htm .

The next metrics needed to compute Factor 2 are projections of the rate of uninsurance in both CY 2020 and CY 2021. On an annual basis, OACT projects enrollment and spending trends for the coming 10-year period. Those projections (currently for years 2019 through 2028) use the latest NHEA historical data, which presently run through 2018. The NHEA projection methodology accounts for expected changes in enrollment across all of the categories of insurance coverage previously listed. The sources for projected growth rates in enrollment for Medicare, Medicaid, and CHIP include the latest Medicare Trustees Report, the Medicaid Actuarial Report, or other updated estimates as produced by OACT. Projected rates of growth in enrollment for private health insurance and the uninsured are based largely on OACT's econometric models, which rely on the set of macroeconomic assumptions underlying the latest Medicare Trustees Report. Greater detail can be found in OACT's report titled “Projections of National Health Expenditure: Methodology and Model Specification,” which is available on the CMS website at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/ProjectionsMethodology.pdf .

The use of data from the NHEA to estimate the rate of uninsurance is consistent with the statute and meets the criteria we have identified for determining the appropriate data source. Section 1886(r)(2)(B)(ii) of the Act instructs the Secretary to estimate the rate of uninsurance for purposes of Factor 2 based on data from the Census Bureau or other sources the Secretary determines appropriate. The NHEA utilizes data from the Census Bureau; the estimates are available in time for the IPPS rulemaking cycle; the estimates are produced by OACT on an annual basis and are expected to continue to be produced for the foreseeable future; and projections are available for calendar year time periods that span the upcoming fiscal year. Timeliness and continuity are important considerations because of our need to be able to update this estimate annually. Accuracy is also a very important consideration and, all things being equal, we would choose the most accurate data source that sufficiently meets our other criteria.

(2) Factor 2 for FY 2021

As discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32751), using these data sources and the previously described methodologies, the OACT estimated that the uninsured rate for the historical, baseline year of 2013 was 14 percent and for CYs 2020 and 2021 is 9.5 percent and 9.5 percent, respectively. As required by section 1886(r)(2)(B)(ii) of the Act, the Chief Actuary of CMS has certified those estimates. However, for purposes of this final rule, we note that the OACT has added an addendum to the memo to reflect an updated methodology for uninsured rate projection, as discussed in our responses to comments.

As with the CBO estimates on which we based Factor 2 in prior fiscal years, the NHEA estimates are for a calendar year. In the rulemaking for FY 2014, many commenters noted that the uncompensated care payments are made for the fiscal year and not on a calendar year basis and requested that CMS normalize the CBO estimate to reflect a fiscal year basis. Specifically, commenters requested that CMS calculate a weighted average of the CBO estimate for October through December 2013 and the CBO estimate for January through September 2014 when determining Factor 2 for FY 2014. We agreed with the commenters that normalizing the estimate to cover FY 2014 rather than CY 2014 would more accurately reflect the rate of uninsurance that hospitals would experience during the FY 2014 payment year. Accordingly, we estimated the rate of uninsurance for FY 2014 by calculating a weighted average of the CBO estimates for CY 2013 and CY 2014 (78 FR 50633). We have continued this weighted average approach to rate of uninsurance projections for each Federal fiscal year since the FY 2014 IPPS/LTCH PPS final rule.

We continue to believe that, in order to estimate the rate of uninsurance during a fiscal year more accurately, Factor 2 should reflect the estimated rate of uninsurance that hospitals will experience during the fiscal year, rather than the rate of uninsurance during only one of the calendar years that the fiscal year spans. Accordingly, we proposed to continue to apply the weighted average approach used in past fiscal years in order to estimate the rate of uninsurance for FY 2021. As part of the development of the proposed Factor 2 for FY 2021, the OACT certified this estimate of the fiscal year rate of uninsurance to be reasonable and appropriate for purposes of section 1886(r)(2)(B)(ii) of the Act. However, in the proposed rule, we noted that we might also consider the use of more recent data that may become available for purposes of estimating the rates of uninsurance used in the calculation of the final Factor 2 for FY 2021.

The calculation of the proposed Factor 2 for FY 2021 using a weighted average of the OACT's projections for CY 2020 and CY 2021 was as follows:

• Percent of individuals without insurance for CY 2013: 14 percent.
• Percent of individuals without insurance for CY 2020: 9.5 percent.
• Percent of individuals without insurance for CY 2021: 9.5 percent.
• Percent of individuals without insurance for FY 2021 (0.25 times 0.095) + (0.75 times 0.095): 9.5 percent.

1−|((0.095−0.14)/0.14)| = 1−0.3214 = 0.6786 (67.86 percent).

For FY 2020 and subsequent fiscal years, section 1886(r)(2)(B)(ii) of the Act no longer includes any reduction to the previous calculation. Therefore, we proposed that Factor 2 for FY 2021 would be 67.86 percent.

The proposed FY 2021 uncompensated care amount was $11,518,901,035.84 * 0.6786 = $7,816,726,242.92. (We note that this calculation is Factor 1 * Factor 2. In the proposed rule, this sentence inadvertently referenced the total amount of estimated Medicare DSH payments before the application of § 1886(r)(1), rather than 75% of that amount, as required by § 412.106(g)(1)(i). However, the proposed total uncompensated care amount was accurately included in the FY 2021 proposed rule and is shown again below).

We invited public comments on our methodology for calculating Factor 2 for FY 2021.

Comment: As with the comments received on proposed Factor 1, a majority of commenters discussed the proposed Factor 2 in the context of the adverse economic effects resulting for the COVID-19 PHE. Stakeholders urged OACT to update its projections of the rates of uninsurance for CY 2020 and CY 2021 to reflect changes in the rate of uninsurance due to the COVID-19 PHE, and in particular, the marked increase in the number of unemployed workers. Several commentators also pointed out that, based on the OACT projections, the uninsured rate is expected to remain fairly flat (9.5% in FY 2021 as compared to 9.4% in FY 2020); however, given the proposed decrease of $534 million in the estimate of the amount available to make uncompensated care payments from the FY 2020 level, many commenters urged CMS to use more recent or alternative data sources to account for the increase in the rate of uninsurance due to the COVID-19 PHE. Several commenters highlighted CMS' statement in the proposed rule that it could consider more recent data that may become available for the calculation of the final Factor 2 for FY 2021.

Many commenters cited the substantial increase in the unemployment rate, and the likely loss of employer-sponsored health insurance, as the main factor influencing the uninsured rate since the outset of the COVID-19 PHE. Commenters referenced various sources for the unemployment rate, including estimates from the Bureau of Labor Statistics as well as from independent research groups. Several commenters also proposed updated estimates of the uninsured rate and alternative approaches on how to adjust Factor 2 and the estimated uncompensated care amount to reflect the impact of the COVID-19 PHE. A commenter raised the idea of using the correlation between the unemployment rate and the uninsured rate, which they projected to be 21.86%, by arguing that the uninsured rate is approximately 2.86 times the unemployment rate. Considering this relationship, the commenter estimated the uncompensated care amount for FY 2021 should be $18 billion. The commenter further suggested that the increase in uncompensated care payments from the proposed amount could be funded by the CARES Act.

Several different estimates of the uninsured percentage were suggested by other stakeholders. Those who cited the Kaiser Family Foundation estimated that 3.8 million of the newly unemployed would remain uninsured in January 2021. A commenter stated that this would increase the number of uninsured to 35.3 million and, therefore, would increase Factor 2. Another stakeholder, also citing the Kaiser Family Foundation estimate, added that it would be unrealistic to assume that only 3.8 million people would remain uninsured in 2021 because not everyone eligible for coverage in the Affordable Care Act (ACA) exchanges or Medicaid would actually enroll in such coverage. The commenter suggested that an optimistic estimate of those actually enrolling would be closer to 75% of the newly uninsured; given this assumption, the commenter indicated that the uninsured number would actually increase by 9.6 million or 2.6 percentage points, which would increase the uncompensated care amount by 2.3 billion dollars. Several other commenters echoed this concern, stating that there is no guarantee that individuals losing ESI would actually enroll in alternative forms of coverage, primarily Medicaid and plans available through the ACA exchanges. For example, a commenter stated that previous estimates have shown that only 43% of ACA exchange eligible enroll, adding that increased Medicaid eligibility is limited to expansion states, further limiting potential enrollment.

Other commenters provided estimates developed by consulting groups of both the uninsured rate and the uncompensated care amount. For example, a commenter referenced an estimate that the total uninsured population could increase to 40 million due to the COVID-19 PHE and indicated that inputting this number into the estimate based on the National Health Expenditure Accounts (NHEA) would result in an uninsured rate of 11% to 12%. The resulting increase in Factor 2 would translate to more than one billion dollars in additional funds for uncompensated care payments. Another commenter simulated the uncompensated care amount based on the uninsured and Medicaid enrollment estimates from the Urban Institute and the Kaiser Family Foundation and found that the uncompensated care amount would be closer to $10 billion. A handful of commenters also suggested that CMS maintain the same level of uncompensated care funding as in FY 2020.

Several commenters urged that CMS revise its methodology for estimating Factor 2 to incorporate the effects of COVID-19 on the uninsured rate in FY 2021 and the impact of any future public health emergency.

Lastly, commenters urged CMS to be transparent in the calculation of Factor 2 and stated that agency assumptions and data sources should be accurate and publicly available.

Response: We thank the commenters for their input and their recommendations regarding the estimate of Factor 2 included in the proposed rule. Considering the unprecedented impact of the COVID-19 PHE and that more recent available data regarding levels of uninsurance have become available since the proposed rule, OACT has updated the projection of the rate of uninsurance for purposes of calculating the final Factor 2 for FY 2021. We refer readers to the addendum to the OACT memo for further details on the methodology and updated assumptions used in the calculation of the projection of the uninsurance rate. In brief, using the past estimates from NHEA from earlier this year as a baseline, OACT estimated the impacts of employment changes on insurance coverage to update the estimate of rates of uninsurance. We note that this approach takes into account more recent historical data on the rate of unemployment as published by BLS, as well as updated economic projections of those data, as published in the monthly Blue Chip Economic Indicators report, to better reflect the estimated impacts of the PHE. Regarding the commenters' suggestion for revising the Factor 2 methodology more generally to reflect the impact of public health emergencies, such as the COVID-19 PHE, we may take this recommendation into consideration for future rulemaking, as appropriate.

In response to the comments concerning transparency, we reiterate that we have been and continue to be transparent with respect to the methodology and data used to estimate Factor 2. The FY 2021 IPPS/LTCH PPS proposed rule included a detailed discussion of our proposed Factor 2 methodology as well as the data sources that would be used in making our final estimate. For purposes of this final rule, we are using an updated projected rate of uninsurance to reflect the impact of the PHE for the COVID-19 pandemic. A detailed description of the methodology used to update our estimates can be found in the accompanying memo (available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh ). Section 1886(r)(2)(B)(ii) of the Act permits us to use a data source other than the CBO estimates to determine the percent change in the rate of uninsurance beginning in FY 2018. We continue to believe that the NHEA data and methodology that were used to estimate Factor 2 for this final rule are transparent and best meet all of our considerations for ensuring reasonable estimates for the rate of uninsurance that are available in conjunction with the IPPS rulemaking cycle. We further believe, given the unprecedented effects on health insurance enrollment as a result of COVID-19, that it is appropriate to update the NHEA-based projection of the FY 2021 rate of uninsurance that appeared in the proposed rule using recent relevant unemployment data from BLS, and associated projections of that metric as published in the Blue Chip Economic Indicators report, to account for these expected impacts.

After consideration of the public comments we received, we are updating the calculation of Factor 2 for FY 2021 to incorporate more recent data. The final estimates of the percent of uninsured individuals have been certified by the Chief Actuary of CMS. The calculation of the final Factor 2 for FY 2021 using a weighted average of OACT's updated projections for CY 2020 and CY 2021 is as follows:

• Percentof individuals without insurance for CY 2013: 14 percent.
• Percentof individuals without insurance for CY 2020: 10.3 percent.
• Percentof individuals without insurance for CY 2021: 10.2 percent.
• Percentof individuals without insurance for FY 2021 (0.25 times 0.103) + (0.75 times 0.102): 10.2 percent.

1−|((0.0102−0.14)/0.14)| = 1−0.2714 = 0.7286 (72.86 percent). Therefore, the final Factor 2 for FY 2021 is 72.86 percent. The final FY 2021 uncompensated care amount is $11,378,005,107.01 * 0.7286 = $8,290,014,520.96.

c. Calculation of Factor 3 for FY 2021

(1) General Background

Section 1886(r)(2)(C) of the Act defines Factor 3 in the calculation of the uncompensated care payment. As we have discussed earlier, section 1886(r)(2)(C) of the Act states that Factor 3 is equal to the percent, for each subsection (d) hospital, that represents the quotient of: (1) The amount of uncompensated care for such hospital for a period selected by the Secretary (as estimated by the Secretary, based on appropriate data (including, in the case where the Secretary determines alternative data are available that are a better proxy for the costs of subsection (d) hospitals for treating the uninsured, the use of such alternative data)); and (2) the aggregate amount of uncompensated care for all subsection (d) hospitals that receive a payment under section 1886(r) of the Act for such period (as so estimated, based on such data).

Therefore, Factor 3 is a hospital-specific value that expresses the proportion of the estimated uncompensated care amount for each subsection (d) hospital and each subsection (d) Puerto Rico hospital with the potential to receive Medicare DSH payments relative to the estimated uncompensated care amount for all hospitals estimated to receive Medicare DSH payments in the fiscal year for which the uncompensated care payment is to be made. Factor 3 is applied to the product of Factor 1 and Factor 2 to determine the amount of the uncompensated care payment that each eligible hospital will receive for FY 2014 and subsequent fiscal years. In order to implement the statutory requirements for this factor of the uncompensated care payment formula, it was necessary to determine: (1) The definition of uncompensated care or, in other words, the specific items that are to be included in the numerator (that is, the estimated uncompensated care amount for an individual hospital) and the denominator (that is, the estimated uncompensated care amount for all hospitals estimated to receive Medicare DSH payments in the applicable fiscal year); (2) the data source(s) for the estimated uncompensated care amount; and (3) the timing and manner of computing the quotient for each hospital estimated to receive Medicare DSH payments. The statute instructs the Secretary to estimate the amounts of uncompensated care for a period based on appropriate data. In addition, we note that the statute permits the Secretary to use alternative data in the case where the Secretary determines that such alternative data are available that are a better proxy for the costs of subsection (d) hospitals for treating individuals who are uninsured.

In the course of considering how to determine Factor 3 during the rulemaking process for FY 2014, the first year this provision was in effect, we considered defining the amount of uncompensated care for a hospital as the uncompensated care costs of that hospital and determined that Worksheet S-10 of the Medicare cost report potentially provides the most complete data regarding uncompensated care costs for Medicare hospitals. However, because of concerns regarding variations in the data reported on Worksheet S-10 and the completeness of these data, we did not use Worksheet S-10 data to determine Factor 3 for FY 2014, or for FYs 2015, 2016, or 2017. Instead, we believed that the utilization of insured low-income patients, as measured by patient days, would be a better proxy for the costs of hospitals in treating the uninsured and therefore appropriate to use in calculating Factor 3 for these years. Of particular importance in our decision making was the relative newness of Worksheet S-10, which went into effect on May 1, 2010. At the time of the rulemaking for FY 2014, the most recent available cost reports would have been from FYs 2010 and 2011, which were submitted on or after May 1, 2010, when the new Worksheet S-10 went into effect. We believed that concerns about the standardization and completeness of the Worksheet S-10 data could be more acute for data collected in the first year of the Worksheet's use (78 FR 50635). In addition, we believed that it would be most appropriate to use data elements that have been historically publicly available, subject to audit, and used for payment purposes (or that the public understands will be used for payment purposes) to determine the amount of uncompensated care for purposes of Factor 3 (78 FR 50635). At the time we issued the FY 2014 IPPS/LTCH PPS final rule, we did not believe that the available data regarding uncompensated care from Worksheet S-10 met these criteria and, therefore, we believed they were not reliable enough to use for determining FY 2014 uncompensated care payments. For FYs 2015, 2016, and 2017, the cost reports used for calculating uncompensated care payments (that is, FYs 2011, 2012, and 2013) were also submitted prior to the time that hospitals were on notice that Worksheet S-10 could be the data source for calculating uncompensated care payments. Therefore, we believed it was also appropriate to use proxy data to calculate Factor 3 for these years. We indicated our belief that Worksheet S-10 could ultimately serve as an appropriate source of more direct data regarding uncompensated care costs for purposes of determining Factor 3 once hospitals were submitting more accurate and consistent data through this reporting mechanism.

In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38202), we stated that we could no longer conclude that alternative data to the Worksheet S-10 are available for FY 2014 that are a better proxy for the costs of subsection (d) hospitals for treating individuals who are uninsured. Hospitals were on notice as of FY 2014 that Worksheet S-10 could eventually become the data source for CMS to calculate uncompensated care payments. Furthermore, hospitals' cost reports from FY 2014 had been publicly available for some time, and CMS had analyses of Worksheet S-10, conducted both internally and by stakeholders, demonstrating that Worksheet S-10 accuracy had improved over time. Analyses performed by MedPAC had already shown that the correlation between audited uncompensated care data from 2009 and the data from the FY 2011 Worksheet S-10 was over 0.80, as compared to a correlation of approximately 0.50 between the audited uncompensated care data and 2011 Medicare SSI and Medicaid days. Based on this analysis, MedPAC concluded that use of Worksheet S-10 data was already better than using Medicare SSI and Medicaid days as a proxy for uncompensated care costs, and that the data on Worksheet S-10 would improve over time as the data are actually used to make payments (81 FR 25090). In addition, a 2007 MedPAC analysis of data from the Government Accountability Office (GAO) and the American Hospital Association (AHA) had suggested that Medicaid days and low-income Medicare days are not an accurate proxy for uncompensated care costs (80 FR 49525).

Subsequent analyses from Dobson/DaVanzo, originally commissioned by CMS for the FY 2014 rulemaking and updated in later years, compared Worksheet S-10 and IRS Form 990 data and assessed the correlation in Factor 3s derived from each of the data sources. Our analyses on balance led us to believe that we had reached a tipping point in FY 2018 with respect to the use of the Worksheet S-10 data. We refer readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38201 through 38203) for a complete discussion of these analyses.

We found further evidence for this tipping point when we examined changes to the FY 2014 Worksheet S-10 data submitted by hospitals following the publication of the FY 2017 IPPS/LTCH PPS final rule. In the FY 2017 IPPS/LTCH PPS final rule, as part of our ongoing quality control and data improvement measures for the Worksheet S-10, we referred readers to Change Request 9648, Transmittal 1681, titled “The Supplemental Security Income (SSI)/Medicare Beneficiary Data for Fiscal Year 2014 for Inpatient Prospective Payment System (IPPS) Hospitals, Inpatient Rehabilitation Facilities (IRFs), and Long Term Care Hospitals (LTCHs),” issued on July 15, 2016 (available at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Downloads/R1681OTN.pdf ). In this transmittal, as part of the process for ensuring complete submission of Worksheet S-10 by all eligible DSH hospitals, we instructed MACs to accept amended Worksheets S-10 for FY 2014 cost reports submitted by hospitals (or initial submissions of Worksheet S-10 if none had been submitted previously) and to upload them to the Health Care Provider Cost Report Information System (HCRIS) in a timely manner. The transmittal stated that, for revisions to be considered, hospitals were required to submit their amended FY 2014 cost report containing the revised Worksheet S-10 (or a completed Worksheet S-10 if no data were included on the previously submitted cost report) to the MAC no later than September 30, 2016. For the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19949 through 19950), we examined hospitals' FY 2014 cost reports to see if the Worksheet S-10 data on those cost reports had changed as a result of the opportunity for hospitals to submit revised Worksheet S-10 data for FY 2014. Specifically, we compared hospitals' FY 2014 Worksheet S-10 data as they existed in the first quarter of CY 2016 with data from the fourth quarter of CY 2016. We found that the FY 2014 Worksheet S-10 data had changed over that time period for approximately one quarter of hospitals that receive uncompensated care payments. The fact that the Worksheet S-10 data changed for such a significant number of hospitals following a review of the cost report data they originally submitted and that the revised Worksheet S-10 information was available to be used in determining uncompensated care costs contributed to our belief that we could no longer conclude that alternative data are available that are a better proxy than the Worksheet S-10 data for the costs of subsection (d) hospitals for treating individuals who are uninsured.

We also recognized commenters' concerns that, in using Medicaid days as part of the proxy for uncompensated care, it would be possible for hospitals in States that choose to expand Medicaid to receive higher uncompensated care payments because they may have more Medicaid patient days than hospitals in a State that does not choose to expand Medicaid. Because the earliest Medicaid expansions under the Affordable Care Act began in 2014, the 2011, 2012, and 2013 Medicaid days used to calculate uncompensated care payments in FYs 2015, 2016, and 2017 are the latest available data on Medicaid utilization that do not reflect the effects of these Medicaid expansions. Accordingly, if we had used only low-income insured days to estimate uncompensated care for FY 2018, we would have needed to hold the time period of these data constant and use data on Medicaid days from 2011, 2012, and 2013 in order to avoid the risk of any redistributive effects arising from the decision to expand Medicaid in certain States. As a result, we would have been using older data that may provide a less accurate proxy for the level of uncompensated care being furnished by hospitals, contributing to our growing concerns regarding the continued use of low-income insured days as a proxy for uncompensated care costs in FY 2018.

To address concerns raised by commenters regarding a lack of clear and concise line level instructions, CMS issued Transmittal 10, which clarified and revised the instructions for reporting charity care on Worksheet S-10. For a discussion of the revisions and clarifications included in Transmittal 10, we refer the reader to the FY 2020 IPPS/LTCH PPS final rule (84 FR 42360). On September 29, 2017, we issued Transmittal 11, which clarified the definitions and instructions for uncompensated care, non-Medicare bad debt, non-reimbursed Medicare bad debt, and charity care, as well as modifying the calculations relative to uncompensated care costs and adding edits to ensure the integrity of the data reported on Worksheet S-10. Transmittal 11 is available for download on the CMS website at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2017Downloads/R11p240.pdf . We further clarified that full or partial discounts given to uninsured patients who meet the hospital's charity care policy or financial assistance policy/uninsured discount policy (hereinafter referred to as Financial Assistance Policy or FAP) may be included on Line 20, Column 1 of Worksheet S-10. These clarifications applied to cost reporting periods beginning on or after October 1, 2013. We also modified the application of the CCR. We specified that the CCR will not be applied to the deductible and coinsurance amounts for insured patients approved for charity care and non-reimbursed Medicare bad debt. The CCR will be applied to the charges for uninsured patients approved for charity care or an uninsured discount, non-Medicare bad debt, and charges for noncovered days exceeding a length of stay limit imposed on patients covered by Medicaid or other indigent care programs. As discussed in more detail in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42360 and 42361), we have also provided opportunities for hospitals to submit revisions to their Worksheet S-10 data for FY 2014 and FY 2015 cost reports.

As discussed in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41424), due to the overwhelming feedback from commenters emphasizing the importance of audits in ensuring the accuracy and consistency of data reported on the Worksheet S-10, we expected to begin audits of the Worksheet S-10 in the Fall of 2018. The audit protocol instructions were still under development at the time of the FY 2019 IPPS/LTCH PPS final rule; yet, we noted the audit protocols would be provided to the MACs in advance of the audit. Once the audit protocol instructions were complete, we began auditing the Worksheet S-10 data for selected hospitals in the Fall of 2018 so that the audited uncompensated care data from these hospitals would be available in time for use in the FY 2020 IPPS/LTCH PPS proposed rule. The audits began with 1 year of data (that is, FY 2015 cost reports) in order to maximize the available audit resources and not spread those audit resources over multiple years, potentially diluting their effectiveness. We chose to begin the audits with the FY 2015 cost reports primarily because this was the most recent year of data that we had broadly allowed to be resubmitted by hospitals, and many hospitals had already made considerable efforts to amend their FY 2015 reports in preparation for the FY 2019 rulemaking. We also considered that we had used the FY 2015 data as part of the calculation of the FY 2019 uncompensated care payments; therefore, the data had been subject to public comment and scrutiny.

(2) Background on the Methodology Used To Calculate Factor 3 for FY 2020

Section 1886(r)(2)(C) of the Act governs both the selection of the data to be used in calculating Factor 3, and also allows the Secretary the discretion to determine the time periods from which we will derive the data to estimate the numerator and the denominator of the Factor 3 quotient. Specifically, section 1886(r)(2)(C)(i) of the Act defines the numerator of the quotient as the amount of uncompensated care for such hospital for a period selected by the Secretary. Section 1886(r)(2)(C)(ii) of the Act defines the denominator as the aggregate amount of uncompensated care for all subsection (d) hospitals that receive a payment under section 1886(r) of the Act for such period. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50638), we adopted a process of making interim payments with final cost report settlement for both the empirically justified Medicare DSH payments and the uncompensated care payments required by section 3133 of the Affordable Care Act. Consistent with that process, we also determined the time period from which to calculate the numerator and denominator of the Factor 3 quotient in a way that would be consistent with making interim and final payments. Specifically, we must have Factor 3 values available for hospitals that we estimate will qualify for Medicare DSH payments and for those hospitals that we do not estimate will qualify for Medicare DSH payments but that may ultimately qualify for Medicare DSH payments at the time of cost report settlement.

In the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19418 and 19419), we proposed to use audited FY 2015 data to calculate Factor 3 for FY 2020. Given that we had conducted audits of the FY 2015 Worksheet S-10 data and had previously used the FY 2015 data to determine uncompensated care payments, and the fact that the FY 2015 data were the most recent data that we had allowed to be resubmitted to date, we believed, on balance, that the FY 2015 Worksheet S-10 data were the best available data to use for calculating Factor 3 for FY 2020.

In the FY 2020 IPPS/LTCH PPS proposed rule, we recognized that, for FY 2019, we used 3 years of data in the calculation of Factor 3 in order to smooth over anomalies between cost reporting periods and to mitigate undue fluctuations in the amount of uncompensated care payments from year to year. However, we stated that, for FY 2020, we believed mixing audited and unaudited data for individual hospitals by averaging multiple years of data could potentially lead to a less smooth result, which would be counter to our original goal in using 3 years of data. As we stated in the FY 2020 IPPS/LTCH PPS proposed rule, to the extent that the audited FY 2015 data for a hospital are relatively different from its unaudited FY 2014 data and/or its unaudited FY 2016 data, we potentially would be diluting the effect of our considerable auditing efforts and introducing unnecessary variability into the calculation if we continued to use 3 years of data to calculate Factor 3. As an example, we noted that approximately 10 percent of audited hospitals had more than a $20 million difference between their audited FY 2015 data and their unaudited FY 2016 data.

Although we proposed to use the Worksheet S-10 data from the FY 2015 cost reports to calculate Factor 3 for FY 2020, we acknowledged that some hospitals had raised concerns regarding some of the adjustments made to the FY 2015 cost reports following the audits of those cost reports (for example adjustments made to Line 22 of Worksheet S-10). In particular, hospitals had raised concerns regarding the instructions in effect for FY 2015, especially compared to the reporting instructions that were effective for cost reporting periods beginning on or after October 1, 2016, contending that some adjustments would not have been made if CMS had chosen as an alternative to audit the FY 2017 reports. Accordingly, we sought public comments on whether the changes in the reporting instructions between the FY 2015 cost reports and the FY 2017 cost reports had resulted in a better common understanding among hospitals of how to report uncompensated care costs and improved relative consistency and accuracy across hospitals in reporting these costs. We also sought public comments on whether, due to the changes in the reporting instructions, we should use a single year of uncompensated care cost data from the FY 2017 reports, instead of the FY 2015 reports, to calculate Factor 3 for FY 2020.

In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42368), we finalized our proposal to use the FY 2015 Worksheet S-10 cost report data in the methodology for determining Factor 3 for FY 2020. Although some commenters expressed support for the alternative policy of using the FY 2017 Worksheet S-10 data to determine each hospital's share of uncompensated care costs in FY 2020, given the feedback from commenters in response to both the FY 2019 and FY 2020 IPPS/LTCH PPS proposed rules, emphasizing the importance of audits in ensuring the accuracy and consistency of data reported on the Worksheet S-10, we concluded that the FY 2015 Worksheet S-10 data were the best available audited data to be used in determining Factor 3 for FY 2020. We also noted that we had begun auditing the FY 2017 data in July 2019, with the goal of having the FY 2017 audited data available for future rulemaking.

With respect to the Worksheet S-10 data, we indicated our belief that the definition of uncompensated care adopted in FY 2018 was still appropriate because it incorporates the most commonly used factors within uncompensated care as reported by stakeholders, including charity care costs and non-Medicare bad debt costs. Therefore, for purposes of calculating Factor 3 and uncompensated care costs for FY 2020, we again defined “uncompensated care” as the amount on Line 30 of Worksheet S-10, which is the cost of charity care (Line 23) and the cost of non-Medicare bad debt and non-reimbursable Medicare bad debt (Line 29).

In the FY 2020 IPPS/LTCH PPS final rule, we continued to apply the following policies as part of the Factor 3 methodology: (1) The merger policies that were initially adopted in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50020); (2) the policy for providers with multiple cost reports, beginning in the same fiscal year, of using the longest cost report and annualizing Medicaid data and uncompensated care data if a hospital's cost report does not equal 12 months of data; (3) the policy for the rare cases where a provider has multiple cost reports, beginning in the same fiscal year, but one report also spans the entirety of the following fiscal year, such that the hospital has no cost report for that fiscal year, of using the cost report that spans both fiscal years for the latter fiscal year; and (4) the policies regarding the application of statistical trim methodologies to potentially aberrant CCRs and potentially aberrant uncompensated care costs reported on the Worksheet S-10.

In the FY 2020 IPPS/LTCH PPS final rule (84 FR 19419), we finalized a modified new hospital policy for new hospitals that did not have data for the cost reporting period(s) used in the Factor 3 calculation for FY 2020. Generally, new hospitals do not yet have available data to project their eligibility for DSH payments because there is a lag until the SSI ratio and Medicaid ratio become available. However, we noted that there are some hospitals (that is, hospitals with CCNs established after October 1, 2015) that have a preliminary projection of being eligible for DSH payments based on their most recent available disproportionate patient percentages. Under the modified policy adopted for FY 2020, new hospitals that are eligible for Medicare DSH may receive interim empirically justified DSH payments. However, because these hospitals do not have a FY 2015 cost report to use in the Factor 3 calculation and the projection of eligibility for DSH payments is still preliminary, the MAC will make a final determination concerning whether the hospital is eligible to receive Medicare DSH payments at cost report settlement based on its FY 2020 cost report. If the hospital is ultimately determined to be eligible for Medicare DSH payments for FY 2020, the hospital will receive an uncompensated care payment calculated using a Factor 3, where the numerator is the uncompensated care costs reported on Worksheet S-10 of the hospital's FY 2020 cost report, and the denominator is the sum of the uncompensated care costs reported on Worksheet S-10 of the FY 2015 cost reports for all DSH-eligible hospitals. In the FY 2020 IPPS/LTCH PPS final rule, we noted that, given the time period of the data used to calculate Factor 3, any hospitals with a CCN established after October 1, 2015, would be considered new and subject to this policy in FY 2020.

For a discussion of the policy that we finalized for FY 2020 for new Puerto Rico hospitals, we refer readers to the FY 2020 IPPS/LTCH PPS final rule (84 FR 42370 and 42371). In brief, Puerto Rico hospitals that do not have a FY 2013 cost report are considered new hospitals and subject to the new hospital policy, as previously discussed. Specifically, the numerator of the Factor 3 calculation will be the uncompensated care costs reported on Worksheet S-10 of the hospital's FY 2020 cost report and the denominator is the same denominator that is determined prospectively for purposes of determining Factor 3 for all DSH-eligible hospitals. We stated that we believed the discussion in the FY 2020 IPPS/LTCH PPS proposed rule of our intent to determine Factor 3 for these hospitals using their uncompensated care costs gave new Puerto Rico hospitals sufficient time to take the steps necessary to ensure that their uncompensated care costs for FY 2020 are accurately reported on their FY 2020 Worksheet S-10. In addition, we indicated that we expect MACs to review FY 2020 reports from new hospitals, as necessary, which will address past commenters' concerns regarding the need for further review of Puerto Rico hospitals' uncompensated care data before these data are used to determine Factor 3.

In the FY 2020 IPPS/LTCH PPS final rule (83 FR 42371), for Indian Health Service and Tribal hospitals, and subsection (d) Puerto Rico hospitals that have a FY 2013 cost report, we continued the policy we first adopted for FY 2018 of substituting data regarding FY 2013 low-income insured days for the Worksheet S-10 data when determining Factor 3. As we discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38209), the use of data from Worksheet S-10 to calculate the uncompensated care amount for Indian Health Service and Tribal hospitals may jeopardize these hospitals' uncompensated care payments due to their unique funding structure. With respect to Puerto Rico hospitals that would not be subject to the new hospital policy, we indicated that we continued to agree with concerns raised by commenters that the uncompensated care data reported by these hospitals need to be further examined before the data are used to determine Factor 3. Accordingly, for these hospitals, we determined Factor 3 based on Medicaid days from FY 2013 and the most recent update of SSI days. The aggregated amount of uncompensated care that is used in the Factor 3 denominator for these hospitals continued to be based on the low-income patient proxy; that is, the aggregate amount of uncompensated care determined for all DSH-eligible hospitals using the low-income insured days proxy. We stated our belief that this approach was appropriate as the FY 2013 data reflect the most recent available information regarding these hospitals' low-income insured days before any expansion of Medicaid. In addition, because we continued to use 1 year of insured low-income patient days as a proxy for uncompensated care for Puerto Rico hospitals and residents of Puerto Rico are not eligible for SSI benefits, we continued to use a proxy for SSI days for Puerto Rico hospitals consisting of 14 percent of the hospital's Medicaid days, as finalized in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56953 through 56956).

Therefore, for FY 2020, we computed Factor 3 for each hospital by—

Step 1: Selecting the provider's longest cost report from its Federal fiscal year (FFY) 2015 cost reports. (Alternatively, in the rare case when the provider has no FFY 2015 cost report because the cost report for the previous Federal fiscal year spanned the FFY 2015 time period, the previous Federal fiscal year cost report would be used in this step.)

Step 2: Annualizing the uncompensated care costs (UCC) from Worksheet S-10 Line 30, if the cost report is more than or less than 12 months. (If applicable, use the statewide average CCR (urban or rural) to calculate uncompensated care costs.)

Step 3: Combining annualized uncompensated care costs for hospitals that merged.

Step 4: Calculating Factor 3 for Indian Health Service and Tribal hospitals and Puerto Rico hospitals that have a FY 2013 cost report using the low-income insured days proxy based on FY 2013 cost report data and the most recent available SSI ratio (or, for Puerto Rico hospitals, 14 percent of the hospital's FY 2013 Medicaid days). (Alternatively, in the rare case when the provider has no FFY applicable cost report because the cost report for the previous Federal fiscal year spanned the time period, the previous Federal fiscal year cost report would be used in this step.) The denominator is calculated using the low-income insured days proxy data from all DSH eligible hospitals. Consistent with the policy adopted in the FY 2019 IPPS/LTCH PPS final rule, if a hospital did not have both Medicaid days for FY 2013 and SSI days for FY 2017 available for use in the calculation of Factor 3 in Step 4, we considered the hospital not to have data available for Step 4.

Step 5: Calculating Factor 3 for the remaining DSH eligible hospitals using annualized uncompensated care costs (Worksheet S-10 Line 30) based on FY 2015 cost report data (from Step 3). The hospitals for which Factor 3 was calculated in Step 4 were excluded from this calculation.

We amended the regulations at § 412.106 by adding a new paragraph (g)(1)(iii)(C)(6) to reflect the methodology for computing Factor 3 for FY 2020.

(3) Methodology for Calculating Factor 3 for FY 2021 and Subsequent Fiscal Years

(a) Use of Audited FY 2017 Data To Calculate Factor 3 for FY 2021

Since the publication of the FY 2020 IPPS/LTCH PPS final rule, we have continued to monitor the reporting of Worksheet S-10 data in order to determine the most appropriate data to use in the calculation of Factor 3 for FY 2021. Audits of FY 2017 cost reports began in June 2019 and those audited reports were available in time for the development of the proposed rule. Feedback from the audits of the FY 2015 reports and lessons learned were incorporated into the audit process for the FY 2017 reports. We again chose to audit 1 year of data (that is, FY 2017) in order to maximize the available audit resources and not spread those audit resources over multiple years, potentially diluting their effectiveness.

Given that the FY 2017 Worksheet S-10 data were submitted under the revised cost reporting instructions that were effective on October 1, 2017, and we have also undertaken provider outreach regarding potentially aberrant data in FY 2017 reports and conducted audits of these data (84 FR 42371), in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32755), we stated that we believe, on balance, that the FY 2017 Worksheet S-10 data are the best available data to use for calculating Factor 3 for FY 2021. For a detailed discussion of the cost reporting instruction changes between the FY 2015 and FY 2017 reports, we refer the reader to the FY 2020 IPPS/LTCH PPS final rule (84 FR 42368 and 42369). For the reasons discussed in the FY 2020 IPPS/LTCH PPS proposed and final rules (84 FR 19419 and 84 FR 42364), we continue to believe that mixing audited and unaudited data for individual hospitals by averaging multiple years of data could potentially lead to a less smooth result. To the extent that the audited FY 2017 data for a hospital are relatively different from its FY 2015 data (whether audited or unaudited) and/or its unaudited FY 2016 data, we potentially would be diluting the effect of the revisions to the cost reporting instructions and our considerable auditing efforts, while introducing unnecessary variability into the calculation if we were to use multiple years of data to calculate Factor 3 for FY 2021. As explained in the FY 2021 IPPS/LTCH proposed rule, we recognize that the FY 2015 reports include audited data for some hospitals, however, the FY 2017 cost reports are the most recent year of audited data and, as previously discussed, reflect the revisions to the Worksheet S-10 cost report instructions that were effective on October 1, 2017.

Accordingly, we proposed to use a single year of Worksheet S-10 data from FY 2017 cost reports to calculate Factor 3 in the FY 2021 methodology for all eligible hospitals with the exception of Indian Health Service (IHS) and Tribal hospitals and Puerto Rico hospitals. As discussed in a later section, we proposed to continue to use the low-income insured days proxy to calculate Factor 3 for these hospitals for one more year. We noted that the uncompensated care payments to hospitals whose FY 2017 Worksheet S-10 data had been audited represented approximately 65 percent of the total uncompensated care payments for FY 2021. For purposes of the FY 2021 proposed rule, we used a HCRIS extract updated through February 19, 2020. We noted that we intended to use the March 2020 update of HCRIS for the FY 2021 final rule and the respective March updates for all future final rules. However, we invited the public to submit comments on this intention regarding the use of the March update of HCRIS, and indicated that we might also consider the use of more recent data that may become available after March 2020, but prior to the development of the final rule, if appropriate, for purposes of calculating the final Factor 3 for purposes of the FY 2021 IPPS/LTCH PPS final rule.

Comment: Several commenters expressed concern about the redistribution of uncompensated care payments in the context of CMS not using the most recent and accurate HCRIS data. To this end, several commenters urged CMS to use the latest HCRIS extract available for the calculation of Factor 3. Among these commenters, the majority preferred the use of a June 30 HCRIS extract, pointing out that CMS has used a June quarterly extract in both the FY 2018 and FY 2019 IPPS/LTCH PPS final rules. Commenters reasoned that using a later HCRIS extract would allow providers more flexibility to amend materials that may have been overlooked in the proposed rule, and according to commenters, this is especially important due to the effect of the COVID-19 PHE. A commenter suggested CMS use a HCRIS extract as close as possible to the close of the comment period for the FY 2021 rulemaking cycle. Another commenter suggested the agency use the February or March HCRIS data extract for future proposed rules and the June HCRIS extract for FY 2021 and future final rules, mentioning that this would allow for more time to complete the audits, to contest results, and to handle unforeseen circumstances or delays. Additionally, a commenter expressed concern that if CMS did not use the June 30 HCRIS extract in the FY 2021 final rule, then their most recent CCR would not be accounted for, placing their hospital above the proposed CCR trim ceiling.

Response: We thank commenters for sharing their concerns regarding the HCRIS extract used in the FY 2021 IPPS/LTCH final rule. We agree with commenters that recommended using the June 2020 HCRIS data for calculating Factor 3 for FY 2021, due to this year's public health emergency, which, for some hospitals, delayed the filing of amended cost report information and/or correction of report version discrepancies in time for the March HCRIS extract; therefore we are finalizing the use of the June 30 HCRIS extract to calculate Factor 3 for this FY 2021 IPPS/LTCH PPS final rule. We believe on balance this is the best available data for purposes of calculating Factor 3 for FY 2021. In the rare situations where a MAC mishandled a report in the upload process, such as by accepting an amended report, reopening a report, and/or adjusting uncompensated care cost data on a report before the June 30 cut off, but the corrected uncompensated care cost data were inadvertently omitted from the June 30, 2020 extract of the HCRIS, we used the corrected version of the report after confirming the appropriate report version with the applicable MAC.

Regarding commenters' suggestions that we use the February or March HCRIS for all future proposed rules, we note that at this time, we intend to use the most recent data available for the applicable rulemaking, which generally means the respective December HCRIS extract for purposes of Factor 3 calculations in future proposed rules. We expect that the December HCRIS extract would reflect the completed Worksheet S-10 audit results available in time for development of the respective proposed rules and the respective HCRIS extract public use files, which are posted on the CMS website quarterly, would also include the most recent audited cost report information for the applicable fiscal year, and be available for public scrutiny. Furthermore, as noted in the FY 2021 IPPS/LTCH PPS proposed rule, we continue to intend to use the respective March HCRIS for future final rules. We expect the COVID-19 PHE will not have the same impact on future rulemaking as it did for the FY 2021 rulemaking. However, we may revisit this topic of the appropriate HCRIS extract, if necessary, in future rulemaking.

Comment: A large majority of comments expressed general support for the use of Worksheet S-10 to estimate each hospital's share of uncompensated care costs in FY 2021, FY 2022, and/or in future years. Some commenters argued that audited Worksheet S-10 data are more accurate as compared to the proxy method previously used, and others commended CMS for its efforts to improve the data through revised instructions and audits. A few commenters expressed opposition to using Worksheet S-10 data and recommended that CMS reconsider using it for the calculation of uncompensated care costs, especially in the absence of auditing all DSH-eligible hospitals. A commenter expressed concern about the accuracy of Worksheet S-10 data and noted that even with the audits, hospitals are reporting charity care and defining write-offs inconsistently and suggested CMS consider alternative methods to the Worksheet S-10 in consultation with hospitals.

Another commenter asserted that using Worksheet S-10 data to calculate Factor 3 could result in an inequitable distribution because Worksheet S-10 does not “offset hospital UC [uncompensated care] losses with non-Medicare sources of subsidies such as Medicaid DSH and related Medicaid waiver [uncompensated care] pool funds.” Other commenters requested additional standardization in the reporting of uncompensated care. A commenter expressed concern that the data reported by hospitals may not be comparable across all hospitals noting, for example, a difference of opinion among hospitals about characterizing “denied claims as charity care if the hospital's financial assistance policy says the patient is not responsible for payment, even though that is a contractual or government payment requirement.” Another commenter noted a case where discounts for uninsured and underinsured patients required by state mandates were disallowed by a MAC because such mandates were not covered by their charity care policy.

Response: We appreciate the support for our proposal to use Worksheet S-10 data for the computation of Factor 3. We also appreciate the input from those commenters who are opposed to the use of data from Worksheet S-10 in the calculation of Factor 3. Regarding those comments which note that the Worksheet S-10 data are not accurate, and that the use of the Worksheet S-10 data should be reconsidered on that basis, we note that as described in the FY 2021 IPPS/LTCH PPS proposed rule, we proposed to continue to use Worksheet S-10 cost report data in FY 2021 based upon the results of analyses of Worksheet S-10 data, conducted both internally and by stakeholders, which demonstrate that Worksheet S-10 accuracy has improved over time. As part of our ongoing quality control and data improvement measures, we have revised the cost report instructions (Transmittal 11). We have conducted audits of the FY 2017 Worksheet S-10 data, and have now begun auditing the FY 2018 Worksheet S-10 data for an expanded number of hospitals to further improve provider reporting and overall accuracy. Moreover, as hospitals gain more experience with completing the Worksheet S-10 and build upon lessons learned from the audits, we believe the data obtained from these cost reports will continue to improve and become more consistent. Therefore, we have concluded that the Worksheet S-10 data is the best available source for the uncompensated care costs of subsection (d) hospitals.

Comment: Many commenters supported the use of a single year of FY 2017 Worksheet S-10 data for the calculation of Factor 3 for FY 2021. Commenters noted that the FY 2017 cost reports are the most recent reports which have been subject to audit and that these audits have continued to improve the accuracy and reliability of Worksheet S-10 data over time. Supporters of this proposal also argued that FY 2017 Worksheet S-10 data have been audited and stated that audited hospitals are expected to receive 65 percent of the proposed total uncompensated care payments for FY 2021. A handful of commenters also pointed out that it would be inappropriate to blend audited data with unaudited data, which could lead to inaccurate and non-representative uncompensated care payments for some hospitals if the unaudited cost reports contained reporting errors. In addition, several commenters indicated that the FY 2017 cost reports reflect the first year of reported data under the most recent revised Worksheet S-10 instructions, which were effective for cost reporting periods beginning on or after October 1, 2016.

Many commenters expressed opposition to using a single year of Worksheet S-10 data for the calculation of FY 2021 uncompensated care payments and for future years. The primary concern expressed by these stakeholders was the possibility that such an approach would lead to significant variation in year-to-year payments, especially in light of outside factors that may affect a hospital's finances. These commenters pointed to CMS's historical practice of using data from multiple years to determine uncompensated care payments and argued that such an approach would mitigate year-to-year fluctuations and avoid a skewed distribution of uncompensated care payments. To this end, a commenter noted that some hospitals reported extreme changes in uncompensated care costs from FY 2017 to FY 2018 and according to the commenter, in one example, the change was over 500 percent. The commenter added that less than one-third of hospitals reported changes in uncompensated care that were less than ten percent.

The most common alternative proposal among commenters who opposed the use of a single year of FY 2017 data for the calculation of Factor 3 in FY 2021 was the use of three years of historical Worksheet S-10 data. A commenter specifically suggested the use of FY 2015, FY 2016, and FY 2017 Worksheet S-10 data. Another commenter recommended that CMS use FY 2014, FY 2015, and FY 2016 data as a transition policy. Other commenters recommended a blend of FY 2015 and FY 2017 data since both years were subject to audits. Similar to this alternative, another commenter proposed that for the allocation of FY 2021 uncompensated care payments, CMS use a 50/50 blend, derived from the FY 2020 Factor 3 and a Factor 3 calculated using FY 2017 Worksheet S-10 data. There was also a commenter that requested that we maintain total national uncompensated care payments at the same level as in FY 2020.

Some stakeholders offered suggestions regarding the uncompensated care payment calculation that appear outside of the scope of the proposed methodology. Such recommendations included that CMS change the distribution of uncompensated care payments so that the allocation is based not on only uncompensated care costs but also on the disproportionate share percentage (DPP); set a cap on per discharge uncompensated care payments not to exceed 100 percent of DRG amounts; establish a transition period for hospitals facing a significant (5 percent) decrease in uncompensated care payments for a given year; and reevaluate the uncompensated care payment formula to achieve parity between rural and urban payments. In addition, some commenters requested that we consider adjusting uncompensated care costs in this FY 2021 rulemaking to reflect the impact of the COVID-19 PHE, rather than waiting until FY 2024 or FY 2025 when the current year's data (FY 2020) may be used for uncompensated care payment calculations. In relation to this recommendation, a commenter noted that, while the effect of the COVID-19 PHE would vary based upon geographic areas, they would expect a redistributional impact on future uncompensated care payments, and suggested that CMS begin to consider ways to dampen potential downward fluctuations in uncompensated care costs at the hospital level.

Response: We are grateful to those commenters who expressed their support for our proposed policy of using the FY 2017 Worksheet S-10 data to determine each hospital's share of uncompensated care costs in FY 2021. As noted in the FY 2021 IPPS/LTCH PPS proposed rule, we believe, that, on balance, mixing audited and unaudited data for individual hospitals by averaging multiple years of data could potentially lead to a less smooth result. To the extent that the audited FY 2017 data for a hospital are relatively different from its unaudited FY 2016 and/or (audited or unaudited) FY 2015 data, we potentially would be diluting the effect of our considerable auditing efforts and introducing unnecessary variability into the calculation if we were to use multiple years of data to calculate Factor 3.

We also note that if, for example, a blend of FY 2015, FY 2016, and/or FY 2017 cost report data were to be used, some hospitals in states that expanded Medicaid eligibility during this time period may have experienced significant reductions in uncompensated care costs following the expansion due to increased Medicaid coverage covering many previously uninsured individuals. In this situation, if an average that included pre-expansion uncompensated care cost data were used, the Factor 3 calculated for the hospital may be a less accurate reflection of the relative uncompensated care burden of the hospital. Thus, we believe using only the FY 2017 cost report data will result in a more accurate and more updated reflection of each hospital's proportion of uncompensated care costs. We also agree with those commenters that noted FY 2017 cost reports reflect the first year of data reported under the revised to Worksheet S-10 instructions through Transmittal 11, which further improved the data quality. Accordingly, we are finalizing without modification our proposal to use FY 2017 cost report data, which we believe is the best available data, to calculate Factor 3 for FY 2021.

For the same reasons, we also continue to have confidence that the best available data in future years will be the Worksheet S-10 data for cost reporting years for which audits have been conducted. In addition, we continue to believe that establishing a policy that would apply not only for FY 2021, but also for all subsequent fiscal years would provide greater predictability regarding the basis for determining future uncompensated care payments.